Default notices – what are they and what do they mean?

posted by in Collection Process

Letters demands

You keep getting letters, but what do they mean?

Receiving a default notice through the post can be quite stressful and not knowing what this means can add to the pressure you’re already under. Let us help put your mind at ease and explain what it actually means.

A default notice is a formal letter which is usually sent after three to six missed payments. They can only be issued for debts that are regulated by the Consumer Credit Act.

There are several things that it should include:

  • The type of agreement
  • The agreement terms that have been broken
  • What you should do to put the account in order (how much you need to pay and by when)
  • What the creditor will do if you don’t comply with the request
  • How long you have to respond (this should be a minimum of 14 days)

It should also include an information sheet from the Financial Conduct Authority with guidance on what to do and how to get free debt advice. We’re listed on there.

They usually ask for a lot of money within a short period of time, something that’s impractical for most people to afford.

If you’re not able to meet the requirements of the default notice, the account is usually cancelled and you can no longer use the credit facility. Creditors will not always take further action listed in a default notice but they are legally entitled to if you don’t comply with the terms.

The creditor can also:

  • Demand the balance in full
  • Sell or pass the debt to a collection agency
  • Start court action
  • Start proceedings to repossess anything that forms part of the agreement (for example a car that is part of a hire purchase agreement)

The creditor can only carry out these actions after the account has defaulted. If you pay back the amount stated within 14 days, no further action is taken. If future payments are missed a default notice can be issued again.

We often hear from clients that haven’t received a default notice and their creditor has taken further action. It’s important to remember that the notice is considered served if the creditor has sent it by post to your last known address. It can be difficult to prove whether this was sent or received.

How will it affect you?

Default notices are recorded on credit files and usually remain there for six years. This could affect your ability to obtain credit in the future.

If the default was issued by mistake or you made the full payment within the time period, you can ask for it to be removed from your file.

To do this you would need to write to the lender including your account details and proof of why you think the information needs to be removed. You can also contact the credit reference agency but they would usually need to confirm it with the lender anyway (which can take more time).

If you don’t get a satisfactory or timely response within 28 days you can put in a complaint to the Information Commissioner.

You can read more about default notices on our website.

If you’ve received a default notice, it’s important that you contact your lender and make an affordable arrangement to repay the debt. You can use our online Debt Remedy tool to help you do this.

If you’re already on a debt management plan (DMP) with us and you receive a default notice, it’s important not to panic and stick to the agreement you have with us. If you’re unsure, just give us a call. We’ll be happy to help.

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Pavan Gata-Aura is a qualified debt advisor with 6 years of experience. She enjoys spending time with her two children, fundraising for charities, has spent time volunteering in Africa and takes part in organised races.

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Tags Collection Process
  • its not good to receive a default notice so always be alert.

    • Leon Carter

      Check the dates as it is a big grey area where creditors more often than not get it wrong and thus making the DN void

  • Josie Lewis

    I received threatening letters from my electricity supplier demanding I pay their bill in full. Their red letters made false representations – as did their debt collector – to frighten me into paying the bill in full, or more more than I could afford. I issued court profeedings for harassment and breach of the Data Protection Act (inaccurate data processings) as their were delays in recording my payments prior to them appointing debt collectors) and they settled out of court with an offer of £1500.
    The electricity supplier’s red letters inferred their debt collector their debt collector would disconnect my supply and fit a pre-payment meter if i did not pay in full. i wrote asking, since when had their debt collectors been professionally qualified to tamper with electricity / gas supplies and appliances – Never!

    Their debt collector (who couldn’t actually prove he was from the energy supplier) sent letters infering they had authority to drill and change my locks to make the premises secure if I wasn’t available when they called. i.e. lock me out of the house I own. They can’t do this and in both cases it amounts to harassment (Admin of Justice Act and Protection from Harassment Act). There only needs to be two occasions for an offence of harassment to exist as a criminal offence. It is not sufficient for the creditor to claim you owe them money, simply that they would have known, or should have known, that their actions amounted to harassment.
    I am pretty sure Default Notices can be treated in the same way. Read them carefully and highlight anything that sounds a bit dodgy.

  • John

    How long do creditors get to mark an account with a default? I believe there is a limited time that a default should be recorded. Thanks

    • moneyaware

      Hi John,

      The details of when a debt will default should be outlined in the original terms and conditions of the contract. It’s only possible to default on a debt once, and it’s usually after a number of missed payments.

      Things can get a little more complicated with overdrafts because of the way that they work, but with most unsecured debts the account will default according to the original contract.

      I hope this helps,

      Rory

      • John

        Thanks for your reply Rory!

        I entered a DMP back in July 2011 with Egg at the time and the account was purchased by Barclays. The DMP was a agreed by Egg and I have an letter stating so and also making a point that a default would be marked against my account.

        Barclays continued to receive payments from me according to the terms and conditions of my DMP for the net 4 1/2 years until the debt was again sold on to the PRA group. At the time of selling they recorded a default against my account some 48 months later thus penalising me further. i thought they had to mark a file with default within 6 months of default letter.

        I cant tell you how much stress this has caused, I work for a financial institution, planned to get myself back on the mortgage etc, etc but as it it stands this will be on my record until 2021, some 10 years after I defaulted (under the guidance of a DMP company)

        Thanks

        John

      • moneyaware

        Hi John,

        It does sound like this has caused difficulties, the creditor shouldn’t be adding a further default onto your account if there has already been one issued. It should also be added according to the terms of the original contract.

        We’d suggest contacting the creditor to discuss this, and you could also seek advice from one of main credit reference agencies (Experian, Equifax and Call Credit) about what to do in this situation as they should be able to provide more help and advice.

        I hope you manage to resolve the situation.

        Kind regards

        Rory

  • Tania Irwin

    I got a debt relief order out on a number of catalogues. I went to check my credit file and those catalogues have “this account has been defaulted” and in red with a red exclamation mark next to it.
    What does that mean?

    • moneyaware

      Hi Tania,

      Your credit file contains any information about your debts, such as your payment history, balance and the status of the account. Hopefully after reading the article you’ll have an understanding of what a default and a default notice is.

      The defaults for the debts can still appear on your credit file for 6 years, even if you’ve entered into a debt relief order (DRO) as they form part of the history of the accounts.

      I hope this helps,

      Rory

  • Matt Eustace

    Hello, I am currently paying off my debt to a number of collection agencies. When looking at my credit file it still states I owe the amount of the full amount as if I have not made any payments? Does the debt need to be cleared before it shows as paid or am I paying the debt collectors my money and its not actually going towards my debt? My accounts are in default as well which I am unsure of. One particular account states on my file that it was updated on 09/02/16 but states I haven’t made any payments at all but I have?? Sorry for the long one, just worried ive paid 1000s to Debt collectors and it doesn’t actually effect my credit file

    • moneyaware

      Hi there Matt, thanks for getting in touch.

      I can see how this situation must be quite frustrating, especially as you’ve been doing your best to make payments.

      If you get in touch with the companies you’re making payments to you can ask them to update the balances for these debts on your credit file. It sounds like they’re sending updates to the credit reference agencies but for some reason not changing the balance.

      Kind regards,

      Rachel

  • Incras

    Great article.. !!

    What happens if a default notice(letter) was sent to a wrong address(Which they already confirmed) ,but the creditor already put a defult mark on your credit file,with the right address. Meaning as the person owing ,you never recieved such letter.

    In such case what happens ? Or what can you advice ? Especially when d loan(£281) has been paid back more than a year ago.

  • James

    Me and my dad have the same name and lived at the same address until i moved out. A defaulted water account has appeared on my credit report when it is my dads account and not mine. Both the credit report company and myself have contacted Southern Water to get it taken off but they are resisting, asking me to prove its not me which i can’t do as there is not date of birth linked to the account and all they have is a name and an address.

    I would of thought Southern Water would legally have to prove the account is mine if they are to put it permanently on my credit report.

    Any advice on how to sort this out?

    • moneyaware

      Hi there,

      Thanks for your message and I’m sorry to hear about your situation. This is a tricky situation, but if the debt isn’t yours then it shouldn’t be appearing on your credit file and there are ways you could escalate the complaint.

      I’d suggest you get in touch with the Information Commissioner’s Office (ICO) and ask them to look into this for you. You can find out how to get in touch with them here: https://ico.org.uk/concerns/

      As a temporary measure, you may be able to ask the credit reference agency to add a ‘Notice of Correction’ to your file. Although this wouldn’t necessarily impact on your credit rating, it’d make it clear to any lenders looking at your credit file that this isn’t your debt and you’re working to resolve it.

      I hope this helps, but please let me know if you have any further questions.

      Kind regards,

      Laura

  • Mickgordon Chapelhow

    i missed one payment on my credit agreement for my car and as expected a default notice was issued however,when i contacted the finance co and told them i would pay a little extra each month to clear off that one missed payment

    they wanted an extra 60 a month i told them it was not possible so i got it down to 30 extra a month,which i told them would be a struggle.
    i made two payments at that extra rate then i felt it was not possible to maintain that much o i contacted them and told them i would pay my monthly payment and add a little extra and by the time the agreement ends it will be paid in full.
    then a month or so later i got another default notice,then a phone call to say i had not made my payment for the month. i told them that my payment had been made online through there payment portal she checked this up and apologized i explained again what i was doing and she put a note on my file with regards to this.
    yet they still issue default notices every other month?
    i think i have about four of these up to now?
    there is nine more payments left on the car
    your advice please.
    michael.

    • moneyaware

      Hi Michael,

      If there are arrears on the account it’s fairly standard for the company to use their debt collection process to try and get the money back from you. It sounds like this is what’s happening here.

      You mention that they’re sending default notices but it’s not clear if they are adding defaults to your credit file. It may be worth checking your credit history to see what information they’ve been reporting. You can look for free using noddle: https://www.noddle.co.uk/.

      If you feel like they’re dealing with you unfairly then it may be worth making a complaint to the company. They’ll have to investigate and give you a response.

      Kind regards

      James

  • Ian Sheridan

    Hi, I wonder if anyone can help me please. I received a default on my credit file about 8 years ago due to defaulting on a loan agreement with a bank. I struggled to get credit due to the default ( as you can imagine) and was in no position to pay it off (£10k) so i let it run its course and agreed with the company that bought the debt to pay them £35 per month. It has now been removed from my credit file after staying on there for 6 years and my credit file is now fine.
    My new problem is that a new company has bought the debt and they want £200 per month from me to clear the agreement and are threatening to add a default to my credit file. Can they do this ? I have already served a default notice for this debt, this surely cannot be correct !! any help greatly appreciated.

    • moneyaware

      Hi there,

      Thanks for posting.

      A default can only added to a debt once. If a debt is sold to a different company, then the new creditor should use the original default date.

      If the company that has bought your debt adds a later default date, you should get in touch with them to let them know it’s incorrect.

      I hope this helps,

      Jen

  • Lorna

    Hiya,

    I am in the process of trying to have a Default removed from my credit file on the basis that required paperwork was not served.

    The debt is now held with Lowell and I have been making payments each month to reduce the balance.

    If I am successful in having the Default removed, can the creditor or Lowell register another Default against me, even if I continue making the reduced payments, or are they only able to Default me if I stop paying altogether?

    Thanks

    • moneyaware

      Hi Lorna,

      Thanks for your message.

      Your creditor can only default a debt once, so if it’s decided that the default notice was wrongly issued it’s likely to take you back to the position you were in before the default notice was issued, meaning they could again issue a default notice.

      However a creditor doesn’t need to “serve” paperwork in order to default an account. They should send a letter containing certain information, as described in the article, and this can be sent to your last known address. However it doesn’t need to be “served” in the sense that you need to be present to receive the letter.

      I hope this answers your question.

      Kind regards,

      Laura

  • Emma

    Hi I’ve been on a DMP for approx. 4 years. All of my accounts have been defaulted apart from my Very catalogue account that shows to only be in arrears. Should this account have been defaulted due to non payment at the time and should I request the account be defaulted back to when I started the DMP? Thanks

    • moneyaware

      Hi Emma,

      The normal process is for accounts to default according to the terms and conditions of the original contract. Usually this is after a few missed payments.

      You could first speak to the creditor and explain this situation to them, as they are responsible for making sure the data on your credit file is accurate.

      If you do need any further help we’d suggest speaking to or contacting one of the three main credit reference agencies in the UK: Experian, Equifax or Call Credit as they are the experts when it comes to dealing with your credit file.

      I hope this helps,

      Rory

  • John

    hi there, i have a barclaycard account opened in 2008, and i fell behind with payments,.i entered an arrangement to pay with them in august 2010.in the months previous to that there are red markers on the credit file (2 of which , june and july 2010 ) state 6 months late. ever since august 2010 the credit report states AP (arrangement to pay) which is still on going now. my question is, should they have defaulted my account in june 2010? and where do i stand with getting this changed. thanks for any help.

    • moneyaware

      Hi John,

      Thanks for posting.

      A default notice is normally applied to a debt when you’ve missed or paid less than the full amount for 3 to 6 months. However, this could vary and you should check the terms of your credit agreement to see if there’s more specific information about this time frame for you.

      A default for an account should only appear on your credit file once. However if you’re making reduced payments towards the debt, this could appear on there as well.

      Most things will stay on your credit file for six years before dropping off.

      If you think something on your credit file is wrong, you can get in touch with the creditor to let them know or contact a credit reference agency like Experian, for advice on how to change it.

      I hope this has helped,

      Jen

  • Hayley

    Hi I took out a £250 payday loan in December 2010 with Payday UK, I was in a spiral of debt at that time taking out payday loans to pay off other payday loans, I have never made a payment towards this debt. My problem is that they have never registered a default on my credit file but rather it just shows as an ongoing late payment, the account now shows on my file as delinquent. Is this fair as I’m assuming that this will never drop off my credit file like a dafaulted account. This is the last remaining debt showing on my credit file I would like to get a mortgage next year but don’t think that I could with this on there.

    • moneyaware

      Hi there,

      Your credit file should be a reflection of how you’ve dealt with your debts in the past few years.

      If you’re unhappy because your credit file doesn’t reflect your payments towards a debt, you could get in touch with the creditor
      so they can amend this for you.

      As a charity, we’d always encourage you to deal with your debts. If you’d like to do this and are worried about the impact this could have on your finances we’d be happy to help. If you give our Helpline a call our advisors will be happy to chat through your situation with you. You can find out how to get in touch with us here:

      http://www.stepchange.org/Contactus.aspx

      I hope this helps,

      Jen

  • Stevie Nikkola Jones

    Hi I have 3 defaults on my account, I am currently in the process of asking for proof from these creditors of the letters of when they informed me of the default and a copy of the default notice. My original debt was with catologs who then have sold it on to the creditors am dealing with now could u tell me do I need to send me letters off to who am dealing with now (which is Lowell) or to the original company as this is who I signed the original credit agreements too ect. Also do companies have to issue a default within 6 months or can they do this at any time? Thanks in advance

    • moneyaware

      Hi Stevie,

      When dealing with a debt it’s usually best to go to the most recent company that’s dealt with the account, so in this situation I’d suggest sending correspondence ot the current debt collector.

      I’m not aware of any time limit for when a default can be issued for a debt. I’ve spoken to people that have received them quite a long time after they’ve started to make reduced payments.

      Kind regards

      James

  • Hassan

    Does a default have an expiry date, where it is then removed from your credit file? I took a phone contract when I was 18 and O2 claim I made a £250 and issued various letters over time. Now residing with Lowell after 4 and a half years, I’m not sure what my options are nor if I can get it removed. Have been told I can wait it out but researching it only found that CCJs are removed after 6 years.

    Any advice would be appreciated.

  • lawh

    hi, i have a default which was recorded 3 days after the payment due date which i believe was way to soon to default, never received a notice of default have complained and company has basically admitted they cannot provide proof of issuing one but they say its not required by law so it doesnt matter… can anyone give me any advice?

  • Karen

    Hi, my credit report shows default against accounts that I have payment arrangements with, is it possible to get this changed and if not why? I was in a terrible financial position due to a relationship breakdown which resulted in debt until then I had always enjoyed an excellent credit rating, it seems unfair that this shows as a default month after month when I am managing my debts and paying them monthly.

    • moneyaware

      Hi Karen,

      Thanks for getting in touch.

      It can be frustrating when you’re making payments towards a debt and a creditor adds a default to your account. However this is a normal part of the debt collection process and if your payments are less than the originally agreed amount, then your creditors are entitled to add a default to your account.

      The default will only be applied to your account once and it’ll usually stay on your account for six years from the date it was first applied. You can read more about default notices here:

      https://www.stepchange.org/debt-info/debt-collection/default-notices-and-missed-payments.aspx

      If you want to give some context to the reason as to why something is on your credit file, you can add a notice of correction to your account. You can find out more about this here:

      http://www.experian.co.uk/consumer/faq/AR5.html

      Kind regards,

      Jen

  • Ben

    Hi I have a default registered against me at another address 2 and half years ago, the debt is with an energy supplier, when moving I contacted them to give my new address and new meter readings. I received no further contact from them so I assumed everything was paid off. However having just checked my credit file and found the default at the previous address, I was not living at the address when and if any default papers were served? If I were to pay the default, is it possible for the energy supplier to remove the default under the basis that I was not served any paperwork at the correct address, and having given them my new forwarding address at the time.
    Any Advice please?

    • moneyaware

      Hi Ben,

      If the energy company received your new address details but didn’t update their records then it could be seen as their fault that this debt hasn’t been paid. In that situation it would be reasonable to ask them to remove the default notice from your credit history as they hadn’t correctly served you the right paperwork.

      The difficulty may be proving that they received your new details but didn’t send correspondence to the right place. If they say they didn’t receive your details it might be hard to prove otherwise.

      You may find it useful to make a complaint to the energy company, particularly if you find it difficult to get them to look into this issue. They’ll have to investigate a complaint and will come back with a response.

      Kind regards

      James

  • Richard Manning

    Hi
    I used your money cliam for ppi but couldn’t afford to pay them untill 28th they have applied for a ccj but I never received a letter they state and now I have read it in small print that it sayshould about default in there and the 14 days to pay and that is all they need before ccj.
    Rich

    • moneyaware

      Hi Rich,

      The requirement to send a default notice prior to a CCJ is for debts regulated Consumer Credit Act, so it may not cover this particular debt.

      If you’d like some debt advice and help with your CCJ form I would recommend giving us a call. Here’s the contact details: https://www.stepchange.org/Contactus.aspx

      Kind regards

      James

  • Alison Bassett

    i had an original debt with a credit card company and they sold the debt to lowells. I have written to lowells disputing I owe them the debt, but lowells have a put a default on my credit file as well as the orginal debtor. can they do this

    • moneyaware

      Hi Alison,

      Thanks for getting in touch.

      A creditor should only apply a default to a debt once, so a second default showing could be an error. You can find out more about defaults and default notices here:

      https://www.stepchange.org/debt-info/debt-collection/default-notices-and-missed-payments.aspx

      If you’re concerned that something is incorrect on your credit file it’d be worth getting in touch with one of the credit reference agencies, such as Experian, Equifax or Call Credit and ask for advice on what to do next.

      I hope this helps,

      Jen

  • Liam

    Hi. I have just read read my report for this month and it has dropped by 70 points due to Citroen Finance putting a Default on my file. I had an £866 debt in march due to giving the car back without a service and minor scratches, which I had on a lease plan. I couldn’t afford the whole £866 so I got in contact with Citroen and decided on a £50 per month payment plan. It is now September, I have paid on time, every month through Direct Debit since March but they have registered a default on my file. I only thought they could do this if I hadn’t kept up with payments. I contacted Citroen today and they advised me that they register a default on all accounts over 6 months. Everyone I have spoken to thinks this is wrong and I shouldn’t be punished for keeping up with my plan. can anyone please tell me where I stand with this?

    • moneyaware

      Hi there,

      Thanks for posting.

      If you miss, or make reduced payments towards a debt, your creditor may default your account.

      Information about when your account can default should be detailed in the original agreement you took out with the creditor. So if you’re unsure about anything, you should check your agreement for more information.

      You can read more about default notices on our website here:

      https://www.stepchange.org/debt-info/debt-collection/default-notices-and-missed-payments.aspx

      I hope this helps but if you have any more questions please let us know.

      Kind regards,

      Jen

  • Nick

    Hi, a few years ago I had problems with my employer going into administration which led to me missing 3 payments on a credit card, I have since been on a payment plan with them and now make the payments without any problems. Having phoned them today to make this months payment I was offered the option of moving my debt to a 0% interest plan but by doing this they would place a new default against my credit history and my debt would then be managed by a third party debt management company.

    For the moment I have said I would like to consider the option, the 0% interest is very tempting but having a default put against my account and having the debt taken over by another company I am not so sure on, especially as my history is now almost clear for the last 6 years of missed payments etc.

    What would you advise?

    • moneyaware

      Hi Nick,

      Apologies for the delay in replying, we’ve had some problems with our notification emails lately.

      A debt can only default once, so if you’ve had a default for this account in the past then they can’t default it again or change the date of the original default. It may be that your account wasn’t defaulted back when you missed those three payments, in which case they could potentially default your account now.

      It sounds like the decision is whether a reduction in interest is worth taking a hit on your credit history. It’s hard to give a straight answer without knowing how you’ll save by reducing the interest and how important your credit history is to you.

      For example, if you save £10 on interest but you then can’t get a mortgage you really need then it wouldn’t be a good deal. If you can save hundreds or even thousands on interest and you don’t care about your credit history, then it’s a different situation.

      One thing to add, dealing with a third party debt collector could mean having to renegotiate your payment for this debt. They don’t have any extra power compared to a credit card company, but it adds some uncertainty to the situation.

      I hope this helps, and apologies again for the delay in getting back to you.

      Kind regards

      James

  • Fiona

    Hi I’ve just received a default notice for a £4.31 direct debit I must have accidentally cancelled online along with something else. Before I received this notice I had already rung the company on 13th Nov and made a card payment for the outstanding amount (which is equivalent to one month’s missed payment in October) and re-setup the direct debit. I was told everything was now sorted and up to date on my account. However I have since received a letter dated the 10th Nov with an attached ‘default notice’ I’ve rung the company again and been told everything’s settled and up to date.

    I’m confused as to why I’ve been sent a default notice for one missed payment (I’ve checked my online banking and a payment definitely went out on 19th Sept). Reading online it seems these are sent after 3-6 missed payments or months. I’m also concerned a ‘default notice’ will appear on my credit file. Do default notices appear on credit files or would something only appear if the account ‘defaulted’ and was cancelled?

    If it does appear on my credit file then can I complain and get it removed? To be honest I didn’t realise the direct debit counted as a credit agreement and I’m really worried this will affect my mortgage renewal in 4years time. I otherwise seemed to have a pretty good credit rating before and had no issues with getting my current mortgage.

  • Diana

    Hello could i please get some advice, i had an account with Vanquis and i was put on a payment plan which they were taking the money from my card on a continuous card payment, however they sold my account to Capquest and registered a default and against the account despite the fact that the payment plan was still active with Vanquis and they never told me that they had registered it. I only found out in 2016 when it showed on my credit file, Vanquis say it was Capquest say it was vanquis and they keep passing form pillar to post no-one answering why they done this, What do i do?

    • moneyaware

      Hi Diana,

      It wasn’t made clear in your comment, but I presume that you’d fallen behind with payments to the debt at some point and had set up a repayment plan with the creditor. You usually default when you miss a number of payments, and this is registered on your credit file for six years. If this is the case, then passing debts on to a third party debt collection company is a very common and the responsibility for the payments and anything on your credit file from there on is the responsibility of the new company.

      The default on your credit file should also show as the date you defaulted, not the date it was handed to Capquest (assuming you were in default). If there’s any inaccuracies with the dates or what is showing, you can either get in touch with the creditors or contact a credit reference agency and register a dispute with them. The 3 most common agencies in the UK are Experian, Equifax and Call Credit.

      If you were never in default, and were up to date with payments and haven’t missed any at all, then it’s likely you’ll need to investigate further and make a formal, written complaint to the creditor explaining the situation and what you’d like them to do about it.

      I hope this helps,

      Rory