Defaulted during Loan companies own breathing space

onedayitwillbefine

I phoned up a loan company I owed and asked for breathing space. I was not aware that you had to get a debt advisor and ask for a legal breathing space. They confirmed the 60 days and I had no contact with them within that period.

I paid off the loan in full in two separate lumpsums, 35–38 days after coming out of breathing space. It wasn't until 4 days after I paid off the loan that I got a credit alert file, which, when I logged on, said I had a default.

I rang the company; they said they sent me an email saying I had a default notice. I checked the emails while on the phone and I did not receive any. They confirmed and admitted it was probably not sent out because the default notice landed during the breathing space, but they defaulted me anyway 28 days later.

They said they would escalate this internally within 5–10 working days. I had a chat with the boss, and he explained it was unlawful and that I should send an email to make sure it is down in writing in case it has to go to the FCA or FOS.

I emailed them a day later, putting it as a proper complaint and explaining that, because of the lender's own error, I would like them to remove the default completely and expunge it with the three credit rating companies. I now know that they gave me an internal breathing space and it is not the same as the legal one you would get from a debt advisor. 

Is there wiggle room for them not removing the default even though by their own processes the default is invalid as i was not served notice?

ProcessMatters

In short: yes, there can be wiggle room if the lender argues the default was valid once the breathing space ended — but their position is weak if they can’t evidence proper service of a default notice.

The key points are:

A default must be served, not just generated

Admitting it likely wasn’t sent undermines their position

Internal “breathing space” doesn’t override consumer credit and data accuracy obligations

If they don’t remove it, this is exactly the kind of case FOS tends to side with the consumer on, particularly where the balance was later cleared and the lender accepts procedural error.

dumpster_fire2025

https://forums.moneysavingexpert.com/discussion/comment/81850175#Comment_81850175

Default notices do not need to be served in order to mark a debt as defaulted with a CRA. A default notice is only required in order to take legal action against debts regulated by the CCA. That's all.

ProcessMatters

Fair point on CCA requirements — I should have been clearer.

My point was less about CCA enforcement and more about fair and accurate reporting to CRAs. Where a lender accepts a procedural error (and can’t evidence notice), FOS often looks at whether default reporting itself was fair in the circumstances, particularly where the balance was cleared shortly after.

Ultimately it tends to turn on fairness rather than strict enforceability.

dumpster_fire2025

https://forums.moneysavingexpert.com/discussion/comment/81859445#Comment_81859445

OK, and I generally agree that something does seem off here.

What's the point of "breathing space" if they're just going to default you anyway? Might as well save yourself the time on the phone and just see what happens. And if it requires the company being approached by a debt charity or the like then they should have just refused the OPs request.

ProcessMatters

I think we’re broadly saying the same thing from different angles.

You’re right that a default marker isn’t the same as enforcement under the CCA, and I didn’t mean to suggest otherwise. My point was simply that where a lender accepts they made a procedural error and the balance was cleared shortly after, FOS tends to look at whether reporting a default was fair in the circumstances, not just whether it was technically permitted.

That’s why these cases often end up resolved on fairness rather than strict rules. Ultimately it’s for the lender or FOS to decide, but it’s not unusual for defaults to be removed in situations like this.