Are two defaults (from the same company) worse than one?

nearlydebtfree123_2 · 11 October 2016 at 6:46PM

Hi

Around three months ago I received a letter from my bank stating they not longer wished to do business with me and advising me I'd have 60 days to repay all overdrafts before my accounts were closed. I had 5 accounts with them and two overdrafts, it couldn't have come at a worse time as I had just started a 6 month course, meaning I'd have no income until January, and I wouldn't be able to pay the overdrafts.

Fast forward to now and all my other accounts have been closed, and I am currently in dispute with the bank about the two overdrafts. It's a long story but the jist of it is that I was in contact with them numerous times and was told by multiple employees that I wouldn't receive a default and I would be able to pay back the overdrafts via payment plans (which I even got as far as setting up) before they changed their minds (due to a 'clerical error' which apparently let them setup payment plans for me in error) and told me I'd be defaulted and accounts sent to recoveries. Anyway I escalated my complaint to the ombudsman who is currently dealing with it.

One of the things he asked me was if there was a possibility of me paying the overdrafts off now to avoid default. I told him this was not possible, however I may be able to borrow money to pay back the smaller of the two (one is ~600 the other ~2600). He replied saying that he had asked them to increase the hold on my accounts whilst he dealt with the case (they haven't been passed to recoveries / defaulted yet) and said that if I pay the smaller overdraft back they may be inclined to give me some leeway with the hold.

My question is, does it make any difference if I were to get two defaults from them rather than one? I know both are terrible and I won't be able to get credit for six years, but I would have to borrow money to repay even the 600£ overdraft and I don't want to do this unless it will make my situation significantly better. Basically I feel like if I pay off the smaller overdraft then lose the case and end up getting defaulted on the bigger account and I have made no improvement to my situation then I'm in a worse of position, if that makes sense.

nearlydebtfree123_2 · 13 October 2016 at 7:52PM

Bump to try and get a response

sourcrates · 13 October 2016 at 8:02PM

Hi,

In this situation I would not worry about your credit file too much, just agree an affordable repayment plan with the banks concerned.

It is enevitable you may be defaulted here, I doubt you can avoid it to be honest, it only makes a difference if you want to borrow more money, which again, in your current financial situation, would not be a good idea.

National_Debtline · 14 October 2016 at 5:40PM

Hi there,

Unfortunately, banks reserve the rights to recall overdrafts with very little notice and would normally be outlined in terms and conditions of the bank account. So, in this instance, I am afraid, it would seem as though a default would be correct. However, I would leave the complaint with the Ombudsman and see what they say.

In reality, because the banks have to record accurate data and you were unable to repay the full overdraft when requested, I think each account can be defaulted. If you clear one of these debts in full then you would reduce your debt level, so it would be positive. But, if you are asking what it would do in the immediate future, from a credit reference point of view, 2 defaults would be reasonably similar to 1.

I agree with sourcrates, at this stage, your credit file would be secondary to setting a repayment plan and clearing the debts.

Laura
@natdebtline

Are two defaults (from the same company) worse than one?

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