August 2001 - Small Business News

2. QUESTIONS & ANSWER  from Ask the Expert

The first 2 questions cover default notices, being; formal & recorded demand letters that can be - but not always - entered on your credit file for 6 years - as with a county court judgment. Bearing in mind that a totally un-supervised and extremely un-experienced clerk can send these documents to you the importance of these documents cannot be understated.

Question 1

How will default notices affect my application for a mortgage?

I foolishly got myself into approx GBP9,000 of debt 2 years ago, I have begun to turn things round this year and have about GBP3,500 to go, which should be cleared by Jan 01, 2002 (fingers crossed), my partner and I are hoping to buy our first home in a year or so, if I meet all repayments between now and then and I am completely debt free, will we still have trouble getting a mortgage? Please help, I am losing sleep worrying about this....

Answer 1

From what you say you should be able to get your mortgage, however, you may have to pay a higher rate of interest as the main 'high street' lenders MAY not give you a mortgage. But they will give you a re mortgage, say after two years, after you take out a mortgage with one of the second level lenders and prove yourself to the monthly mortgage payment amount. Mending a credit record is not a short-term thing and a bit of re grouping your finances will be painful at first but it will ease.


Question 2

Am I able to have a default notice recorded on my file, which I do not agree with, removed? Although the money was due, my circumstances leading up to the default did not allow me to continue making payments to the finance company, and I could not respond immediately to the default notice (I had to leave the family home for a period). I called the finance company when I left my home and told them I would be away for a while, but that I will pay all amounts due when I got over my short-term problem. The payments are now up to date.

Answer 2

It is unlikely that you will get this default notice removed, but you might want to consider adding a 'note of correction' describing the circumstances that caused the debt and that the debt has been dealt with. Any lender looking at your file will be able to assess your application based on the full facts. If you still get refused for future credit it could be that the lender has NOT looked close enough at your credit record: this is when you need to call the lender and ask for a personal review of your credit application.

However, if you feel that you have been unfairly treated and you wish to take this the matter further, then it might be a good idea to contact 'The Office of Fair Trading'.
LONDON EC4A 1PR


Question 33

My friend has been charged GBP110 costs for having a late payment on a credit card statement. She had actually made the payment before a court letter came, and was, according to the court letter, being charged GBP70 costs for it to go through (being GBP50 solicitor's fees and GBP20 court costs. However, she was then charged an extra GBP40 (making the GBP110) for them sending a letter saying what she now owed. The original outstanding amount on the account was GBP180, and she was paying GBP15 per month. In between all this my friend used the card to purchase some goods. There was no warning of court action and only one GBP15 monthly payment had been missed.

Answer 3

The essence of the situation is here and should serve as a guide to you.

I assume that the GBP15 per month was an agreed payment to pay/settle an account that was in arrears and not a case of missing the 'minimum monthly fee' that we all have a choice of paying. If so, the fact that goods were purchased on the card would be a simple conclusion to the speed of the credit card company's debt action - albeit heavy in my estimation. That said, there are a number of issues here that are certainly worth looking into.

First: I would have thought that the credit card company would have cancelled, or at least suspended the card and therefore stop any new debt potential, and in many cases save the card user from themselves.

Second: the store immediately resorted to a court claim when it should have contacted the debtor by letter or telephone, and given that the late payment was paid immediately it would also have been the most cost effective way for the creditor.

Third: the increase in debt - court and solicitor fees - is simply negligent. The creditor has the responsibility to take the required action, in this case a simple call or letter pointing out the default cost and action.

Fourth: the speed of the court action - if supplied dates are correct - is fast by any standard and this implies a system of obtaining court judgment as the one and only purpose of the debt agency dealing with the creditor's overdue cases.

On the creditor side, they may have felt that continuing with the court case, after they received the non serious overdue payment, was a necessary step as they believed that the debtor would continually default on payment arrangements - although I don't see that in this case.

If I am wrong with my assumption, and the store card has never been in arrears, the action of the creditor is unlawful and the debtor must apply to the court to get the judgment 'set aside': making the creditor reapply to the court for the whole debt and fees which I doubt that they would.

If no action is taken the county court judgment will be on your credit record for six-years..


Question 4

A bank is chasing me for business debts from many years ago, guaranteed by property, but property was repossessed by mortgage companies. Can they still chase me if guarantees have ceased to exist?

Answer 4

Just in case you are not familiar with debt law: if there has been NO contact from a creditor for a FULL period of 6 years or a debt has HAD a life span of 12 years regardless of any contact, then a debt is considered void.

However, it seems that contact has been made, and in that case the guarantee would only of been used as backup security behind you personally - if the debt is in your name and not a company name - then regardless of weather the guarantee exists or not you would be responsible for payment.