Consumer Debt Help 13 – Complaints and Past Debts

I am now 27 years old earning more than I have ever earned in my lifetime, living with a partner and unable to get a mortgage because of my bad history. Living in a household that earns well in excess of £37,000 per annum, paying £600 per month rent as well as standard utility bills, unable to buy ourselves a home, because of a 21 year olds mistakes. I can’t even get a credit card, not even the so called Capital One, designed for people like me, unless I put up front £50, for a £500 credit limit, I alone earned in excess of £24,000 last year and I feel that I am still being wrongfully punished for my mistakes although I’ve paid my debts in full. I would like someone to explain to me why a bankrupted business man can start a new business having not cleared his/hers debts, and yet I am still being punished. Is this really fair and just, I think not.

Reply from Ed

I have long agreed with your overall sentiments, ‘angel’ or not. The responsibility of credit is a two way thing and lenders are slowly understanding that a credit record with a court judgment 2 – 6 years back can have little relevance to a current credit application. There is still a long way to go before ‘main lenders’ will change their scoring standards, but new lenders are moving in to take up this vast area: not much use to yourself over the past few years, I know. Knowing how to apply for credit and attempting to ‘clean up’ your credit record would have made a difference. You have had years of grief and the lenders have done nothing to help rehabilitate you or those who have genuinely suffered from the lending culture… for this, they should be reproached. Some lenders have taken on the commitment to support areas of help. In an article I explain the reason for responsibility…

“…as a borrower, you should not undertake a commitment that you know you cannot afford. This does not mean that you have to know that you will always be able to pay what is due: you do not know what is round the ‘corner of life’ and if it turns out that you cannot make the repayment the lender has a responsibility to act in a human (and not business-like) way…”

As to a bankrupt, there is a price to pay for ‘not clearing debts’: six years on a credit record, no finance over £250 allowed, no directorships, personal embarrassment etc. I know many bankrupts laugh at the system, but the government is attempting to single out those that abuse the bankruptcy laws as an aid to cheat everyone. However, as I stated in an article…

“…should an entrepreneur who started a business, a sound and well run business, but lost control of the company’s survivability through bad luck – ‘just a few more sales’, ‘a bit more backing from the bank’ etc. – be allowed to try again once all matters have been explained to, and sanctioned by the trustee? This option gets my vote…”

The UK’s economy is built on the entrepreneur’s stomach for risk taking: ‘mall company becomes large employer’, unfortunately, some small businesses (say, creditors of the entrepreneur) are closed down when the risk doesn’t work out. Finally, I think you have an extremely good grasp of credit and debt, in America you would be considered as a potential successful entrepreneur: odd that!

QUESTION

I recently read an article which stated the following, in relation to settling outstanding debt. If you send one of your creditors a cheque, and write on the reverse “ACCEPTED IN FULL AND FINAL SETTLEMENT OF ACCOUNT NUMBER (insert)”, and the creditor cashed the cheque, then they are in fact accepting your cheque as a settlement of the outstanding debt, even if the cheque is lower than the outstanding amount. Apart from appearing completely ludicrous, is there any truth in the above?

Reply

Can you send a cheque for £10 to settle a debt for £4,000 and expect to clear the debt as the creditor had cashed the cheque (check) you had written with “ACCEPTED IN FULL AND FINAL SETTLEMENT OF ACCOUNT NUMBER 12345″? No. It would not be ‘reasonable’ to expect such a small payment to settle a large balance. Further, the creditor has never given written or verbal agreement to the reduction. Should a creditor return your properly due payment? I think not: I would argue, in court if necessary, that the debtor owed me money and I was not about to send it back. If I were the creditor I would say thank you for your £10, this now reduces your balance to £3,990. If the debt was £20, it would be ‘reasonable’, but the creditor should/could/would say that they did not look on the back of the cheque! And, I want the other £10. If a debtor sent a letter, accompanying the cheque, saying that the cheque should only be accepted and cashed in full and final settlement you do have to look more closely at what the circumstances are: but silly offers are still silly offers. A letter from a solicitor would never contain an unsolicited settlement amount and cheque – they will ALWAYS get a written, or as a minimum a verbal, agreement to any reduction: this is the only way to settle for less than the full debt. Finally, I have personally been to court (as a creditor) in this situation between 3 – 5 in the past 20 years and have always had the courts backing. Trying to be clever with the law, and it’s administrators, is not recommended. Picture a clever debtor being asked by a judge, “so why did you expect to pay so little, and expect the creditor accept so little?”. Embarrassing!

QUESTION

I have a current account with Barclays which I left dormant with -£146 (using a -£150 overdraft limit after finishing as a student). In January 1999 a statement was returned to Barclays marked gone away, yet I continued to live at my address. I received no information about my current account till I moved house and reported my change of address. My current account had been marked ‘gone away’ by Barclays. Barclays have now issued a termination of overdraft notice for £320. During this time interest had been charged on the account taking me over the agreed limit and incurring automatic monthly charges of £20. I have received statements for a loan I have with Barclays, as well as information outlining the expiry of my student status, moving me from a graduate account to a standard account. I received no notice of any charges or interest during this time, and no statements for my current account. Do I still have to pay the charges and interest incurred if I was not sufficiently informed of my accounts status? Or, do I have to take responsibility for not monitoring my account?

Reply

I’ll deal with your last point first. You do have to take responsibility at all times. Barclays only have to send you a statement as agreed. If the last statement was returned ‘gone away’ and they stopped sending further statements, they acted correctly. As to the status of your account, if you were AWOL as far as Barclays were concerned it is difficult to understand why they looked at your account as a live account. After all, how many accounts have banks frozen over the years because they seem abandoned and accumulate interest to the detriment of the banks annual profits! The question of interest is not so straight forward. In this type of situation, common sense is more important than who is right or wrong. A £146 overdraft escalating to £320, an increase of £174, is ridiculous and should have been frozen at some early stage. What is the true damage to Barclays? They have every right to interest say £30 and an administration charge of £24, a round £200. Offer them this figure in ‘full and final’ settlement. ‘Most’ lenders would accept this. A vast number of you are requesting information as to your credit reference record and in particular, what effect are lender searches having on your record in response to applying on-line for personal loans and mortgages. Beyond doubt, on-line loan/ mortgage applications are logged on your credit record with every enquiry. The credit report agencies say that application information is a way of monitoring fraud say, someone applies for 10 loans in one week and you are the tenth loan provider, are you going to pass this person for a loan? Probably not! In some cases reported to me the application is only “out of interest” with no real intent to actually take the loan. In such circumstances you will still have this application on your record should the search only be logged if finance is provided? I think so. For the record all enquiries are held for 1 year on your credit file. There are two types of searches

1. General Enquiry

This type of enquiry produces a report on your voters role details, county court judgments (CCJs), but not credit information. This type of enquiry is used by everyone who does NOT fit the profile of a Credit Enquiry (below).

2. Credit Enquiry

Credit enquiries are ONLY available to companies that provide two-way information being, a company that offers credit to its customers, and then provides the credit reference agency with the finance details, and any payment defaults or further finance provided. This creates a self perpetuating database of credit that cannot be accessed by any company that does not share two-way information. The nasty taste of the two-way arrangement is that the credit companies, banks, finance houses etc. refuse to allow access to this database which means that, say, a small business wants to search on a customer for a big deal, they will not get more than the voters role and CCJs to help them assess a credit risk little wonder some appalling credit deals are sinking businesses every day. Ask your bank manager the next time you meet why their bank insists on withholding prime information yes, cartels are alive and well in our own back yard!

Article Index

1. Consumer Debt Help 1 - Immediate Action and Payment Order
2. Consumer Debt Help 2 - Control and Taking Action
3. Consumer Debt Help 3 - Income Expenditure and Offers to Creditors
4. Consumer Debt Help 4 - Loans and Credit Repair
5. Consumer Debt Help 5 - Check Your Credit File
6. Consumer Debt Help 6 - Bankruptcy - How do I Get My Credit Card Back?
7. Consumer Debt Help 7 - Utilities and Credit for Poor Credit Records
8. Consumer Debt Help 8 - Insurance and Letters to Creditors
9. Consumer Debt Help 9 - Letters to Creditors Continued
10. Consumer Debt Help 10 - Affording Payments
11. Consumer Debt Help 11 - Hire Purchase Payments
12. Consumer Debt Help 12 - Debt Management and Business Credit
13. Complaints and Past Debts
14. Consumer Debt Help 14 - Bank Accounts With Poor Credit Records
15. Consumer Debt Help 14 - Bank Accounts With Poor Credit Records
16. Consumer Debt Help 15 - Old Debt - New Demand
17. Consumer Debt Help 15 - Old Debt - New Demand
18. Consumer Debt Help 16 - Tenancy Agreements