Default Notices and your Trust Deed
Updated: 7th October 2016
About Default Notices
If you have entered a protected trust deed, or are thinking about doing so, you may be curious about how your credit record will be affected by Default Notices. This type of “credit event” is typically issued to you in written form and also recorded on your credit file.
Default notices are issued when a borrower fails to meet the contractual terms of their original credit agreement. This will usually occur once you start a trust deed and stop paying your debts directly. It may have happened prior to starting your trust deed if you were already in arrears.
Information regarding individuals is recorded with credit reference agencies so that lenders can make commercial and responsible lending decisions, trace overdue debts, and help prevent fraud and money laundering. Starting a trust deed will affect your credit rating. A record of your trust deed will show on your credit file for around six years from signing the trust deed.
Any type of credit event, such as Default Notices being issued, will also appear on your credit file for a total of six years.
Issues That Can Arise
When you start a trust deed lenders are notified that a debt owed to them is to be included in the insolvency. Often a lender will file Default Notices relating to that account as soon as they receive notification of the trust deed; however this is not always the case.
Sometimes a lender that is included as a trust deed creditor will delay issuing a Default Notice. This may result in the default notices being registered on your credit file after the trust deed has become a protected trust deed. Technically, if the delay is more than a few days the lender should backdate the Default Notice to the date the trust deed became protected. This is only likely to happen if you make a request for this to happen.
Under the principles of data protection (which are used to interpret the Data Protection Act and adherence to this by companies) your credit file should hold accurate information about you, including about your default notices. You can check the information by keeping an eye on your credit file.
If you notice that something is inaccurate, during or after your trust deed, you can write to the lender, or the debt collection agency, that made the entry to request they correct the mistake.
If a lender or other agency fails or refuses to make the requested amendment to your credit file, you can write to the Information Commissioners Office and ask them to look at whether the entry is correct and has been made lawfully. We advise that this is done only after using the complaints process of the company issuing the Default Notices first. We advise sending a letter explaining the circumstances surrounding the entry along with evidence of correspondence with the lender and a copy of your trust deed “statement of affairs” to prove the debt as being included in your trust deed.
Some lenders will mark your Default Notices as being “settled” or “satisfied” once you have completed your trust deed, however it is important to note that lenders are under no obligation to mark your credit file as settled or satisfied as this might not be considered to be an accurate reflection of the situation, even once the trust deed has been completed. The reason for this is that when you enter into a trust deed lenders often have no option but to accept less than they were owed under the terms of the original credit agreement.
For this reason it is also acceptable for them to mark your credit file as “partially paid” or “partially satisfied”, even though no further monies are due towards the debt. This is information about which we have sought the views of the Information Commissioner’s Office and reflects their comments to us.
Action You Can Take
So what does this mean for your default notices and your trust deed? Here are some tips to help you ensure that you’re treated fairly:
Check on your credit report that any Default Notices are backdated to the starting point of your trust deed. This may be helpful in re-establishing your credit rating in the future (because they’ll disappear from your credit file at the same time as your trust deed does).
After you’ve been discharged, ensure all lenders mark any Default Notices issued as being “partially paid” or “partially satisfied”.
Even if your trust deed has resulted in some debt write-off, many lenders will still be prepared to mark your credit file Default Notices as being “satisfied”. This is probably more helpful to your credit rating than “partially satisified”.
Still got a question? Visit our forum where you can get help from experts and members of the public who have already dealt with this issue for themselves.
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