Historic Credit Card Debt
If credit card debt becomes unmanageable, tackling it can seem overwhelming and you might feel as though there’s no way out. According to the Financial Conduct Authority (FCA), over three million people in the UK struggle with persistent credit card debt, meaning that over the last 18 months, they have spent more on interest and fees than they have on repaying the outstanding debt.
Unfortunately, it’s a myth that credit card debt will simply be written off after a certain number of years. However, when facing significant and persistent debt of this kind, there are a number of options open to you. It is important that you understand what your options are, and to make sure that you are asserting your rights as a consumer. If you believe that you have been treated unfairly or harassed by creditors, your rights might have been infringed. At Consumer Law Barristers, we can help you make sure your rights are protected and we may also be able to help you clear, or at least reduce, your historic credit card debt.
FCA rules relating to persistent debt
If you have paid more in charges, fees and interest than you have repaid on your credit card balance over an 18-month period, you’re classified as being in persistent debt. If you fit this description, your creditor has to get in touch with you to inform you of this and to offer help. Under FCA rules, lenders are required to take a series of escalating steps in order to assist customers who are in persistent credit card debt. This means you have the best possible chance of clearing your debt.
After 18 months, these companies must contact customers, encouraging them to change their repayment patterns and warning them that their cards may be suspended if they don’t take steps to tackle their debt. But don’t worry, your lenders will never take steps which may mean you are unable to pay essential bills or living costs. If customers have been in persistent debt for 36 months, lenders have to offer them a way to repay what they owe over a reasonable period of time. Credit card companies must also show forbearance (in other words, be patient); this could include lowering, waiving or cancelling charges, fees and interest.
If you believe you are in persistent debt, you do not need to wait for your lender to contact you, you can call them yourself and explain that you are struggling. The FCA makes it very clear that firms are expected to take steps to identify and protect vulnerable consumers. If you are in debt then you are classed as ‘vulnerable’ and lenders must take extra steps to make sure that they are treating you fairly.
Understanding your rights
Being aware of your consumer rights, and therefore knowing what lenders can and can’t do, is really important if you’re facing historic credit card debt. It can help to remove much of the uncertainty and stress.
If you are not making your minimum payment each month, creditors and debt collection agencies can:
- Add interest and charges to your account (as long as this is in line with the original agreement and does not exceed certain limits)
- Chase you for repayment by phone calls or letters
- Send doorstep collectors (it is important to note that these people are not bailiffs and they have no more power than someone contacting you by phone)
- Issue a default notice if you have missed payment setting out that your account is about to default (usually, these notices are sent after three to six missed payments)
- Terminate, or default, your agreement if you have broken the terms of the agreement (for example by not making payments) – they can only do this if they have followed due process
- Take steps towards getting a County Court Judgment against you (this is not a simple process and you will have a chance to defend yourself)
- Issue a statutory demand (the first step towards applying to make you bankrupt, this action is very rare and is only possible with debts over £5,000).
Banks also have the right to take money from connected accounts. So, if you have a credit card debt with a bank, in exceptional circumstances, the lender can take money paid into your current account to cover missed payments. This is referred to as the ‘right of offset’ or ‘right of set-off’. However, banks can only do this if they meet various conditions. For example, the money they transfer must be for debt that is in arrears and they must have clearly warned you in advance that they may use the right of offset if you don’t pay back your arrears. In practice, it’s rare for banks to take this action and they will always give you plenty of notice. If you are worried about your money being used to offset your debt, make sure you speak with your lender – this will only happen if you ignore debt.
In contrast, creditors and debt collection agencies cannot:
- Harass you (for example, by calling you multiple times a day. If you wish, you can request that creditors only contact you in writing only)
- Break data protection laws (for example, by speaking to your employer, family or friends without your permission, even if they answer the phone)
- Increase your rate of interest because you have missed payments (or add collection charges that exceed the costs to them of chasing the debt)
- Pretend to possess legal powers that they don’t have
- Threaten to take action which they are not allowed to take
- Be threatening or abusive to you.
Your options when facing historic credit card debt
There are a number of options available to you if you’re facing credit card debt. For example, you may wish to arrange a repayment plan with your lender that allows you to pay down your debt in a manageable way.
Another possibility is to refinance your debt, for instance by moving it to another credit card with a reduced or zero interest rate, or taking a debt consolidation loan. However, you should think very carefully before taking on more debt to clear an existing credit card. If you’re not careful, this can lead to higher repayments and a cycle of borrowing. Bear in mind that you may find it difficult to access new credit agreements if you have a poor credit history, and if you can get a new loan, you may be charged high rates of interest. As far as possible, it is always best to avoid taking on any new credit commitments.
A third approach is to challenge your lender and the amount they say you owe. If you’re successful in doing this, your debt may be reduced or even written off. The process of challenging a lender can be technical and is often difficult, but it is important to make sure that you have taken steps to establish what, if anything, you actually owe. We would always suggest that you get expert help if you decide on this path.
How we can help
At Consumer Law Barristers, we can provide you with specialist legal advice if you wish to challenge a lender. We’re here to make you aware of your rights as a consumer and to defend these rights against creditors who may try to exploit you. We have already helped our clients to escape more than £3 million worth of unsecured debt and may be perfectly placed to assist you.
We offer a free, no-obligation consultation if you are concerned about credit card debt, so don’t hesitate to contact us today. You can get in touch by email at email@example.com or by phone on 0330 124 4252.