Debt Management Companies and Defaults

rebecca123_2

Hi, I'm after a bit of advice....

In September 2005, I entered into a debt management scheme with a company who I won't name! I paid almost £1000 upfront for them to set this up (looking back this was stupid - as I know now there are companies that do it for free!). They fiddled my outgoings so it showed I could pay back around £70 a month (via direct debit), to 4 creditors, total debt being around £11,000. Of this £70, the company took £30 for their fees. The idea was that I was meant to save £100+ a month, then be in a position to offer them a lump sum in a few years time.

After 5-6 months, the scheme was finally set up and creditors had accepted the proposed payment reschedule from the company. The £1000 was paid in 3 monthly installments prior to this. The company told me to stop payments to creditors immediately (obviously, I could not have afforded the £330 for them in addition to £400+ in creditor repayments!), and as a result Defaults were registered on 3 of the 4 accounts.

Repayments continued for approx 18 months, up until November 2007 when I became in a position to repay the debts. At this time I obtained a copy of my equifax credit report, which revealed one creditor had registered a Default in July 2007. Payments had been made without fail, so I was unsure why this Default been registered. After speaking to a different people on several occasions, I had two differents answers:

1) because I was on a payment scheme they had the right to register a default if they became unhappy with my payments. They said they had contacted my Debt Management company numerous times about this. I had heard nothing what so ever from the company. As no one got back to them, the default was registered.
2) they had no idea. Payments had been made in line with the arrangement, so there was no reason. This was when I was calling to make the payment. They also said it should automatically remove the default now I've paid on the next credit report update cycle. I was a little dubious, but accepted it with a pinch of salt.

It's now February, and I still have the default registered, along with the 3 others registered in 2005/6 from when the scheme was getting set up. All the balances has been cleared, and 3 of the 4 are showing as settled (the July 2007 default one included). One account is still showing in default (they accepted 80% of the total debt in full and final settlement) which I am querying with them.

Obviously, I regret going down the route of the debt management scheme - as a result I have 4 defaults registered and it's impossible to get any sort of credit. I paid them over £1500 in total - money which would have been far better spent on paying back my debt. I'm 24 and will be considering a mortgage etc in the near future, but can't see that happening as my credit is wrecked. I now have no debt what so ever, but no lender will touch me.

There have been various issues with the debt management company, without going into details. I have put in a complaint to the Financial Ombudsman about them to try and reclaim some of my money back (I am unable to get in touch with them direct).

What I need to try and do now is get my credit back on track. I am considering writing to my creditors asking them to remove the Defaults, as the debts have been paid. Is this likely to work? I'm not sure how the tackle the July 2007 default though - are lenders allowed just to register the default because they became unhappy with my payments (the company was regularly late paying them, they wanted a income review and no one got back to them etc)? And they never notified me, but the debt mgmt company instead.

Any advice would be appreciated - I am desperate to get my credit status back to a reasonable level! Apologies for the long posting - want to get all the facts in!

Many thanks

Rebecca

lxpeanut

Sorry can't really give you a definitive answer. I'm in a similar position had an agreement in place and the bank registered a default despite me sticking to the agreement. I wasn't sure that this was right because I had never missed a payment but they said it was done because I wasn't paying the full amount each month and was behind on the original contract. I'm sure they just make up the rules as they go along I would love to know what the actual rules on registering a default are.

hooby_groovy

I'm not an expert on this, but my understanding is that as a minimum you can ask for your credit file to have the defaults marked as 'satisfied'.

I think you can then apply for them to be removed, if you google HMCS (the courts website) it is all listed there in their help section.

In terms of a mortgage, it won't be impossible but you will be classified as sub-prime at the moment, so the choice of lender is more limited and the rates higher.

CCCS_Matthew

Hi there Rebecca,

If you make any sort of reduced payment to your creditors, whether it's through a DMP or a self admin plan, your creditors are within their rights to issue you with a default notice.

Unfortunately, your creditors can still default you even if they accept your reduced plan - simply because it's less than the original agreement when you first signed for the credit.

The defaults will stay on your credit file for 6 years, and you won't be able to get them removed. It is important to ensure that now the debts have been paid you need to ask the creditors to contact the credit reference agencies to mark the default as 'satisfied'. This will show to any potential lenders that although you have defaulted in the past, you have paid the debt off in full.

Hope this helps,
CCCS

rebecca123_2

Hi Matthew

Regarding the July 2007 default, I've been doing a bit of reading on the internet, and don't creditors have to send you a copy of the default notice? They tell me they wrote to the Debt Mgmt Company, but not to me personally. I can't even get hold of the mgmt company to verify this (bunch of cowboys!). They were previously accepting payments (and obviously continued to do so after the default), are they allowed to just change their minds without notifying me? Fair enough, they say they contacted the mgmt company, but received no response and never contacted me directly.

Rebecca

CCCS_Matthew

Hi Rebecca,

Yes that's correct. Officially you should be notified in writing that the they are issuing a default notice, as they will normally give you 14 days to pay the debt off in full in order to stop the default. Obviously most people aren't in the position to do this, so the letter acts as a notification that they will contact one of the credit reference agencies to lodge a default.

If they have never confirmed this in writing, I would be inclined to include this within your complaint to the Financial Ombudsman to see what their stance on the matter is.

Regards
CCCS