Martin Lewis’ Victory will stop Thuggish Debt Letters
Martin Lewis, the UK’s leading Consumer Credit Champion, has secured an important victory for UK Borrowers who are struggling with problem debt and living in fear of receiving threatening letters.
The victory now means the UK Government is committed to bringing forward new legislation that will change how formal debt letters are worded, some of which are nearly 50 year old, to ensure, in future, they are less threatening.
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Million Receive Threatening Debt Letters each Year
Each year millions of UK Consumers receive official letters from people they owe money to who want to legally collect the money that is owed to them.
The letters and demands are full of legal jargon, threatening language, bold print and even capitalised demands for payment. Independent research has shown, however, these letters are having a devastating effect on people’s lives and mental health.
The problem is up until now, lenders have been required to send the letters by law, and this includes Notice of Arrears and Default Notices, as they are actually provided for and contained in the Consumer Credit Act 1974.
However, fears have been raised by many working in the debt advice sector that the design of the letters and the language that is used is outdated and actually is having a damaging effect on people’s mental health.
Research has been carried out by the Money and Mental Health Policy Institute, a charity that Martin Lewis formed to help people with money issues, and has found the letters can have a catastrophic impact on people who are struggling with debt problems.
Thuggish Debt Letters to End
Martin Lewis and the Money and Mental Health Policy Institute have, therefore, persuaded the UK Government to bring forward legislation by the end of the year to change how the letters are worded, to avoid bold print and capitalisation and to tone down the language. There will also be more emphasis on directing people to places where they can get free advice and assistance.
Lenders will then get 6 months to change their practices and introduce the new letters into their systems.
Speaking about the victory, Martin Lewis has said:
“Over 100,000 in England attempt to take their lives each year due to debts, and four times that consider it. So we’re delighted the Government has agreed to back this element of our campaign and change the default demand rules.
“The last thing people struggling with debt need is a bunch of thuggish letters dropping through the letterbox, in language they can’t understand, written in shouty capitals alongside threats of court action.
“And the timing is crucial, with millions of people facing debt and distress due to the pandemic, the sooner we end these out-of-date laws which force lenders to send intimidating letters the better. Today’s changes will make the most distressing debt letters much less intimidating, and crucially will also easily and calmly point people in serious debt to get the free, non-profit, debt advice they need.”
So what is a Notice of Arrears?
Notices of Arrears are legal letters that lenders must send to their borrowers by law, ironically to try and help them.
They are sent out after someone accrues arrears of two months or more and are actually intended to warn people that they have fallen into arrears and act as a gentle reminder. They must also be accompanied by an information sheet.
If a lender does not serve a Notice of Arrears within 14 days of someone missing two instalments or more, then they cannot legally enforce their agreement or charge interest on the debt until they do.
They must also send them every six months thereafter, until the borrower is out of arrears. They can, therefore, feel threatening for borrowers.
What about Defaults Notices?
Default notices are more serious and lenders can sometimes send them out at the same time as a Notice of Arrears. It does not, therefore, follow that one has to come before the other.
Default Notices can be sent after two instalments have been missed, like Notice of Arrears, but equally Lenders don’t need to send them, like they have to send a Notice of Arrears.
When a Lender sends a Default Notice, then it is because they are giving a borrower 14 days to pay off any arrears and bring their account up to date. If the borrower doesn’t, the lender can then terminate the agreement and demand full payment of the amount owed. The borrower then loses the right to pay by instalments. They also risk seeing their cars repossessed where the agreement relates to car finance agreements.
More importantly Default Notices are registered on your Credit Reference File for Six years and can be the precursor to Court Action and ultimately your debt being handed over to Bailiffs or Sheriff Officers, if you live in Scotland, for recovery.
If you are struggling with debts and have received a Notice of Arrears or a Default Notice, call 0808 253 2966 to speak with a Creditfix Money Adviser for free, confidential advice