Overdraft on DMP not defaulting

Mallowman87

Hi all,

I'm in a bit of Limbo between Stepchange who are managing my Debt Management Plan (DMP) and Lloyds (who I have an overdraft with) and neither are able to advise in way that feels helpful (though those

Background:

Started a DMP a few years ago with Stepchange, which included a loan, 4 credit cards, and an overdraft (as advised by Stepchange). Loan and cards have all gone through the process of defaulting and being passed to a debt collection agency with no issue, and repayments are being made successfully.

The Overdraft is in an odd limbo. Because it is within my arranged overdraft limit, Lloyds keep saying they'll start interest on it again. However, the repayment of £5.38 a month is less than the interest accrued on the account daily (68-70p * 28-30 days is between £19.14 and £21).

When Lloyds write to me saying they'll start interest again, I call them up to advise them that the repayments won't cover the interest, forwarding Stepchange's advice that I cannot be seen to be favouring one creditor over another. They agree to stop the interest for a period of time and refund interest recently accrued. This cycle has happened a handful of times over months since the DMP begain.

Relative to my other debts it is small (£750 compared to the loan/CCs which range from between £1,000 to £5,000), but I am unsure what to do to get Lloyds to close the account (ideally without applying a default to my credit file since it would remain on my file for longer than the other defaults will as they have been applied for a couple of years at this point).

Some options I am considering
1 - Just continuing to call Lloyds when this happens for the entire period of my DMP
2 - Requesting a payment holiday for my mortgage to pay off just the overdraft only (and also build an emergency fund/pre-empt an expensive MOT/house emergency, I have remained up to date with my mortgage payments throughout)
3 - Lower the threshold on my arranged overdraft, let the account go into unarranged overdraft to force Lloyds to close and default the account and just take the hit to my credit file.

Any advice welcomed.

ManyWays

If you have not used this account since your DMP started, i suggest sending Lloyds a written complaint by email. Say you do not want to use this account which was why you included it in the DMP. point out their monthly charges come to more than the StepChange payment. Ask them to refund all the interest they have charged since the account opened and add a default date that is 3 months into the DMP. Say what they are currently doing is stressful and unfair, and in breach of the consumer duty when it is clear you want the account closed

sourcrates

Agree with the above, time to shake things up a bit with them.