What is a Default Notice?
All credit applications (e.g. personal loans, credit cards or store cards) taken out in the UK are regulated by the Consumer Credit Act 2006. This legislation requires that creditors must send a Default Notice to any customer who has fallen behind with payments to their account, before legal action can be taken to recover the monies owed.
What Information Required On a Default Notice?
- Name and addresses of both the creditor and the borrower.
- Agreement type and the agreement breach details.
- Settlement figure (Fixed sums only).
- The action required by the borrower to remedy the situation and comply with the agreement.
- Intended action of the creditor should the borrower fail to comply with the agreement
Will Legal Action Be Taken?
The borrower has 7 days from the issue of the Default Notice to comply, before this time a creditor cannot take the borrower to court. If the borrower does not comply, it does not mean that a creditor will take the borrower to court. Often, communication by the borrower with the creditor to find a mutually acceptable repayment amount will avoid further legal action being taken against the borrower. The creditor may also pass the debt onto a debt collection company. Borrowers with serious debt problems may find that this is unworkable, as different creditors to which money is owed will ask for unrealistic high amounts. In a situation like this, the borrower should seek professional debt advice to enable them to negotiate with their creditors and establish a realistic and regular repayment plan. This is where a debt management plan could be the solution.