Firms that claim they can wipe out people’s debts using sections 77, 78 and 79 of the Consumer Credit Act are misleading them, the Office of Fair Trading (OFT) has said.
Many fee-charging ‘debt write-off’ firms have sprung up in recent years, claiming they can get people’s debts cancelled if lenders are unable to supply certain details or documents pertaining to the customer’s original credit agreement.
This has led to confusion and debate over what circumstances can lead to a debt becoming unenforceable, and what the implications of this are for its repayment. More recently, there has been concern over the impact refusing to pay a supposedly ‘unenforceable’ debt can have on an individual’s credit rating.
Debt write-off guidance
Now the OFT has stepped in to offer guidance on this issue, warning consumers that it isn’t possible to write off debts in the way some companies claim.
Today it has published advice on how to request information about your original credit agreement under sections 77, 78 and 79 of the Consumer Credit Act, available on the OFT website.
The OFT’s guide explains that, for a fee of £1, consumers can request a copy of their credit or hire agreement and ask for information about their account, including:
- What was originally agreed between the lender and the customer;
- What the agreement is now (if it has changed);
- How much is still owed.
If the lender fails to supply the requested information, the guide says, the credit agreement will become unenforceable. This means the lender cannot get a court judgment against the borrower, take back hired items or take anything that was used as security (for example, a car) when the credit agreement was originally made.
However, the OFT warns that just because a credit agreement becomes unenforceable, this does not mean the borrower’s debt is cancelled or written off. In fact, consumers whose debts are declared unenforceable will still owe any outstanding money to their lender.
Furthermore, interest charges can still be added to unenforceable loans, default charges can still be made and any failure to repay an unenforceable debt could still impact on a consumer’s credit report.
The OFT’s guide also explains that debts can be reclassified as enforceable as soon as the right information is supplied by the lender.
Get debt help
Ray Watson, director of the OFT’s Consumer Credit Group, said: ‘Consumers have a right to information on debts they owe, but it is important that they realise these sections of the Act cannot be used to write off legitimately owed debts.
‘Although the debt can be classified as unenforceable until the right paperwork is provided, people are encouraged to seek advice and help on how they can continue to repay the money they owe.’
Which? borrowing and debt expert Martyn Saville commented: ‘It’s good that the OFT has issued this guidance to clarify some of the questions surrounding unenforceable debts. For too long, firms have been able to market ‘debt write-off’ in a misleading way, selling a service that could ultimately do consumers, and their credit ratings, more harm than good.’
If you’re struggling with problem debts and need advice, check out the Which? Dealing with debt advice guide. It features top tips for seeking debt help, as well as the contact details of the organisation Which? would recommend you consult.
Which? Money when you need it
You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.
Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.
Or for money-saving tips, and news of how what’s going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast
For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.