UPDATED - Defaults, The Law & Removal

[Never-In-Doubt]

[SIZE=5][COLOR=#ff8000][CENTER]Defaults, The Law & Default Removal.....[/CENTER]
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This section will explain in detail, with examples, of how to get defaults removed. After the recent McGuffick v RBS case things have changed somewhat so the templates linked within this section have been amended to reflect this judgment.[INDENT][B][COLOR=#ff8000]
What is a Default Notice?..... [/COLOR][/B]
A Default notice is a record placed on your credit file by lenders (creditors) stating that you have been in default in some way. Usually these are issued when a credit account becomes in arrears, due to non payment of specified agreement, or the minimum monthly repayment. They must be issued by the lender if it wishes to enforce a regulated agreement under the Consumer Credit Act 1974 where the borrower is in default. It has to set out the nature of the breach of the terms of the contract and how (and by when) this can be remedied by the borrower.

Whenever you take out a loan or hire purchase agreement you sign a declaration stating that you agree that should you not keep up your payments in any way then the bank or other financial institution has the right to inform the credit reference agencies of your default (on account); this could be due to late payment or a query over the payment.

[COLOR=#ff8000][B]What is this thread about?..... [/B][/COLOR]
This thread is about Default Notices, Termination Notices, the processes involved in the issuance of such notices and the law(s) surrounding and governing them. Put simply, this thread is a beginners guide to default notices with the relevant templates, to argue/appeal your own defaults, included. Particular attention should be borne on the Consumer Credit Act (s.87 & s.88) and the Consumer Credit (Enforcement, Default & Termination Notices) Regulations 1983, which govern Defaults.

[COLOR=#ff8000][B]What will the advice on thread do for me?..... [/B][/COLOR]
This thread will assist you in establishing exactly what a default notice is and what to look for when you get yours. It will also help you to learn how to appeal and have them removed either directly or via a county court but the main thing is, by reading this thread you'll learn a lot of things that you probably never knew beforehand.

[COLOR=#ff8000][B]What about the positives??..... [/B][/COLOR]
The positives? You could have your defaults removed, if they were improperly executed (called Defective Notices). As they stay on your credit file for a period of 6 years (from date of default), removal could allow you more financial freedom, for instance to change mortgage products or obtain additional credit.

[COLOR=#ff8000][B]What about the negatives?..... [/B][/COLOR]
There really isn't any; the only downside is the arguing - you will have to argue and argue hard to win your fight. Most lenders do not remove a default notice unless you haggle it with them, as part of a F&F offer, however there are tricks to this; for instance threatening the CRA with Libel unless they (as data processor) remove it. But in general, the only negatives are the timescales involved and the frustration at non compliance by lenders. Court is usually the final straw which is daunting, to say the least![/INDENT]

[Never-In-Doubt]

Default Notice Additional & Useful Links

[CENTER][SIZE=5][COLOR=#ff8000]Default Notice Additional & Useful Links[/COLOR][/SIZE][/CENTER]

The links below will take you to useful publications and guidance, all noted within this thread, as abbreviated for clarity and layman. If there is an area you are unsure of, let us know and we'll try to explain it to you the best we can...

[COLOR=#ff8000]* All the links below open onto a 3rd party website and allaboutFORUMS takes no responsibility for the content within. [/COLOR][INDENT][LIST=1][*][URL="http://www.johnpughschambers.co.uk/Consumer%20Credit%20%28Enforcement,%20Default%20and%20Termination%20Notices%29%20Regulations%201983.pdf"]The Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1983

[/URL][*][URL="http://www.statutelaw.gov.uk/content.aspx?LegType=All+Legislation&title=credit&Year=2006&searchEnacted=0&extentMatchOnly=0&confersPower=0&blanketAmendment=0&sortAlpha=0&TYPE=QS&PageNumber=1&NavFrom=0&parentActiveTextDocId=2964959&activetextdocid=2964963"]Consumer Credit (Enforcement, Default and Termination Notices) Amendment Regulations 2006

[/URL][*][URL="http://webarchive.nationalarchives.gov.uk/tna/+/http://www.berr.gov.uk/files/file42400.pdf/"]The Consumer Credit Act 1974 (Electronic Communications) Order 2004 (“the Order”)

[/URL][*][URL="http://www.statutelaw.gov.uk/content.aspx?LegType=All&searchEnacted=0&extentMatchOnly=0&confersPower=0&blanketAmendment=0&sortAlpha=0&PageNumber=0&NavFrom=0&parentActiveTextDocId=436535&ActiveTextDocId=436535&filesize=11011"]Consumer Credit Act 1974 (c.39) - s.87 & s.88 Guidance

[/URL][*][URL="http://www.legislation.gov.uk/ukpga/2006/14/pdfs/ukpgaen_20060014_en.pdf"]The Consumer Credit Act 2006 (amendments)

[/URL][*][URL="http://www.oft.gov.uk/shared_oft/business_leaflets/consumer_credit/oft1002.pdf"]Consumer Credit Act 1974 Post-contract information requirements[/URL][/LIST]
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[Never-In-Doubt]

The Default Process & Life-Cycle

[CENTER][SIZE=5][COLOR=#ff8000]The Default Process & Life-Cycle[/COLOR][/SIZE][/CENTER]

When you're late with repaying your account, you'll usually receive various letters from the lender and/or their appointed assignees (or agents). Now, these documents should be respected and treasured as they are the lifeline to whether your default is defective, or properly executed. So, the main principles of default, are shown below, using the common "3 stages of default";
[B][COLOR=#ff8000]
[/COLOR][/B][INDENT][B][COLOR=DarkOrange]Stage 1[/COLOR][/B][COLOR=DarkOrange] - Pre Default Notice[/COLOR]
[COLOR=#000000]This is the letter you'll be sent telling you that the lender isn't happy and they are planning to default you. This should only be sent after you are at least one whole monthly payment in arrears. Any earlier, it will be defective (you have to actually be in arrears prior to being serviced with default papers).[/COLOR]

[COLOR=#ff8000][B]Stage 2[/B] - Default Notice [/COLOR]
[COLOR=#000000]This is the actual Default Notice which means the lender is going to place a default against your credit file and demand full repayment [B]UNLESS[/B] you are able to clear the arrears within 14 days. The dates on this document are paramount. They have to give you at least 14 days to "remedy the breach". [/COLOR]

[COLOR=#ff8000][B]Stage 3[/B] - Termination Notice [/COLOR]
[COLOR=#000000]This is the end of the road. The lender will have already defaulted you and placed an entry with the Credit Reference Agency's - the account is now in default and you have limited resources to get it taken off, assuming it was served in the correct form. If so, you'd have to consider a full and final offer or similar.[/COLOR][/INDENT]

So, how would each letter look and how would you know whether it is defective or properly executed? The key is the dates, and the content - you need to work with the actual crieria laid out, as shown Here. But, you need to pay attention to the dates - this is the first thing you should be looking out for, and checking.

An example of how each letter should look, is found below ::

[SIZE=5][CENTER][COLOR=#ff8000][B]Notice of Intended Action - Pre Default[/B][/COLOR]
[IMG]http://img687.imageshack.us/img687/9674/1107predn.png[/IMG]

[COLOR=#ff8000][B]Default Notice (s.87(1)[/B][/COLOR]
[IMG]http://img39.imageshack.us/img39/6430/1107dn.png[/IMG]

[COLOR=#ff8000][B]Termination Notice - Post Default[/B][/COLOR]
[IMG]http://img806.imageshack.us/img806/3101/1107tn.png[/IMG][/CENTER]
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[COLOR=#000000]So what would happen if you receive these letters? Well you'd have to compare them, moreso the actual Default Notice, with the terms and acts, as shown here: [URL="http://forums.all-about-debt.co.uk/showpost.php?p=38&postcount=4"][B]Check My Default[/B][/URL]. Dependant upon what is missing (if anything), depends on your next course of action.[/COLOR]

[Never-In-Doubt]

Default Notice Facts & Laws

[CENTER][SIZE=5][COLOR=#ff8000]Default Notice Facts & Laws[/COLOR][/SIZE][/CENTER]

Default notices are governed under various acts, particularly The Consumer Credit Act 1974, The Consumer Credit (Enforcement, Default & Termination Notices) Regulations 1983 and The Consumer Credit Act 2006 (Amended). s.87(1) of the CCA1974 states that a "default notice must be served before the creditor or owner can become entitled, by reason of any breach by the debtor". What this means is that if you fall into arrears, then the lender can issue a default notice to you, giving you 14 days to remedy the breach (i.e. bring the arrears up-to-date) before they can issue a Termination Notice, which allows them to then register a default against you with the CRA's.

The relevant Acts are detailed below, to offer guidance and clarity to what the above means;

[SIZE=4][COLOR=#ff8000]s.87 Consumer Credit Act 1974 - Need for Default Notice[/COLOR][/SIZE][INDENT][B](1)[/B] Service of a notice on the debtor or hirer in accordance with section 88 (a “default notice”) is necessary before the creditor or owner can become entitled, by reason of any breach by the debtor or hirer of a regulated agreement;[INDENT][B](a)[/B] to terminate the agreement, or
[B](b)[/B] to demand earlier payment of any sum, or
[B](c)[/B] to recover possession of any goods or land, or
[B](d)[/B] to treat any right conferred on the debtor or hirer by the agreement as terminated, restricted or deferred, or
[B](e)[/B] to enforce any security.

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[B](2)[/B] Subsection (1) does not prevent the creditor from treating the right to draw upon any credit as restricted or deferred, and taking such steps as may be necessary to make the restriction or deferment effective.

[B](3)[/B] The doing of an act by which a floating charge becomes fixed is not enforcement of a security.

[B](4)[/B] Regulations may provide that subsection (1) is not to apply to agreements described by the regulations.

[/INDENT]
[SIZE=4][COLOR=#ff8000]s.88 Consumer Credit Act 1974 - Contents and effect of Default Notice[/COLOR][/SIZE][INDENT][B]
(1)[/B] The default notice must be in the prescribed form and specify;[/INDENT][INDENT][INDENT][B](a)[/B] the nature of the alleged breach;
[B](b)[/B] if the breach is capable of remedy, what action is required to remedy it and the date before which that action is to be taken;
[B](c)[/B] if the breach is not capable of remedy, the sum (if any) required to be paid as compensation for the breach, and the date before which it is to be paid.[/INDENT]
[/INDENT][INDENT][B]
(2)[/B] A date specified under subsection (1) must not be less than fourteen days after the date of service of the default notice, and the creditor or owner shall not take action such as is mentioned in section 87(1) before the date so specified or (if no requirement is made under subsection (1)) before those seven days have elapsed.

[B](3)[/B] The default notice must not treat as a breach failure to comply with a provision of the agreement which becomes operative only on breach of some other provision, but if the breach of that other provision is not duly remedied or compensation demanded under subsection (1) is not duly paid, or (where no requirement is made under subsection (1)) if the fourteen days mentioned in subsection (2) have elapsed, the creditor or owner may treat the failure as a breach and section 87(1) shall not apply to it.

[B](4)[/B] The default notice must contain information in the prescribed terms about the consequences of failure to comply with it.

[B](5)[/B] A default notice making a requirement under subsection (1) may include a provision for the taking of action such as is mentioned in section 87(1) at any time after the restriction imposed by subsection (2) will cease, together with a statement that the provision will be ineffective if the breach is duly remedied or the compensation duly paid.

[/INDENT]
[SIZE=4][COLOR=#ff8000]Consumer Credit (Enforcement, Default and Termination Notices) Regs[/COLOR][/SIZE]

Section 87(1) of the Consumer Credit Act 1974 allows the creditor to send you a default notice giving you fourteen days from the date you receive it to pay the arrears. The default notice must contain all of the necessary information under the Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1983 ('the 1983 Regulations'), which includes;[INDENT][B]
a)[/B] a statement saying the notice is a default notice served under section 87(1) of the 1974 Act

[B]b)[/B] a description of the agreement

[B]c)[/B] the name and address of both the debtor and the creditor

[B]d)[/B] details of the breach (i.e. late payment) and, if the breach can be remedied, the date by which it must be remedied or, if the breach is not capable of remedy, the amount required to be paid after the expiry of the specified date;

[B]e)[/B] a statement saying: if the action required by this notice is taken before the date shown no further enforcement action will be taken in respect of that breach

[B]f)[/B] a statement saying: if you do not take the action required by this notice before the date shown then the further action set out below may be taken against you

[B]g)[/B] a clear and unambiguous statement saying that if the action is not taken by the date specified, what it will do (for example, if will it terminate the agreement)

[B]h)[/B] If the agreement is one of hire purchase or conditional sale, a statement saying: but if you have paid at least one third of the total amount payable under the agreement set out below (or any installation charge plus one third of the rest of the amount payable). The creditor may not take back the goods against your wishes unless he gets a court order. (In Scotland, he may need to get a court order at any time.) If he does take them back without your consent or a court order, you have the right to get back all of the money you have paid under the agreement set out below

[B]i)[/B] if an amount of money is required to be paid, the amount before deducting any rebate on early settlement

[B]j)[/B] statements saying:[/INDENT][INDENT][LIST][*]if you have difficulty in paying any sum owing under the agreement or taking any other action required by this notice, you can apply to the court which may make an order allowing you more time[*]if you are not sure what to do, you should get help as soon as possible. For example you should contact a solicitor, your local trading standards department or your nearest citizens' advice bureau[*]important - you should read this carefully[/LIST]
[/INDENT]

If the default notice fails to include all of the necessary information, it is likely to be classed as a defective Default and can be challenged for removal.

[Never-In-Doubt]

CCA (Amendments) 2006 - Sypnosis of Facts

[COLOR=#ff8000][SIZE=5][CENTER]CCA (Amendments) 2006 - Sypnosis of Facts[/CENTER]
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A new amendment has been added in case of failure to give notice of sums in arrears in CCA 1974. s.11 (CCA2006) inserts a new section - 86D - that sets out the consequences for a creditor or owner if he fails to give a notice as required by sections 86B or 86C.

If the creditor or owner fails to provide a notice of sums in arrears when required to do so, then during the period of his failure to provide the notice (i.e. from the date that it was required to be given until the end of the day on which it is eventually provided), he is not entitled to enforce the agreement. In addition, the debtor or hirer is not liable to pay any interest that relates to the period of the creditor or owner’s failure.

[B][COLOR=#ff8000]Minimum 14 days after Default notices[/COLOR][/B]
The new minimum period after which a creditor or owner may take action (in respect of the agreement after having issued a default notice) is now 14 days. It used to be only 7 days. s.14 CCA 2006 amends s.88 of the 1974 Act to create this extension. Additionally, under s.87, a creditor or owner must give the debtor or hirer a default notice in the prescribed form if he wishes to: [INDENT][LIST][*]terminate the agreement;[*]demand earlier payment of a sum;[*]recover possession of any goods or land;[*]treat any right conferred on the debtor or hirer by the agreement as terminated, restricted or deferred; or to[*] enforce any security[/LIST]
[/INDENT]s.88 is also amended to allow the Secretary of State to prescribe information in the default notice to include any matters relating to the agreement (i.e. information about whether the agreement includes a term providing for the charging of post-judgment interest).

[B][COLOR=#ff8000]Notice of default sums[/COLOR][/B]
s.12 CCA(2006) applies to situations where a debtor or hirer under a regulated agreement incurs a default sum. A creditor or owner must give the debtor or hirer a notice in the specified form when a default sum becomes payable as a consequence of a breach of the agreement.

For example assume you hire a car for the duration of your holiday, there will often be a penalty sum payable if you incur a fine from using the car. The car-hire company might say this is to cover, for example, administration charges. Either way, certain sums are payable if you breach the agreement. Where this applies, the creditor must provide notice to the debtor, of the amount they must pay. This only applies where the default sum exceeds a specified amount.

Additionally, a creditor may only require a debtor to pay interest (in connection with a default sum) 28 days after the day the notice was given to the debtor. So if the creditor fails to give notice to the debtor then he can not enforce the agreement until notice is given.

[B][COLOR=#ff8000]Default Sum[/COLOR][/B]
The term ‘default sum’ has been redefined in s.18 CCA 2006. “Default sum” now means: a sum payable by a debtor or hirer in connection with his breach of a regulated agreement (e.g. a charge imposed for late payment of an installment due under the agreement or a fee imposed for exceeding a credit limit on a credit card). A default sum does not include sums that, as a consequence of a breach of the agreement, become payable earlier than they otherwise would have done. Nor does it include interest.

[B][COLOR=#ff8000]Interest on default sums[/COLOR][/B]
s.13 has been amended so that a creditor or owner may only require simple interest to be paid in respect of default sums payable by the debtor or hirer. This includes sums payable under noncommercial or small agreements. [INDENT][INDENT][B][COLOR=#ff8000]---> [/COLOR][URL="http://www.legislation.gov.uk/ukpga/2006/14/notes/contents"]Click Here for full details of the 2006 Amendments[/URL][/B][/INDENT][/INDENT]