How to challenge a default notice

[Smasher]

As with unfair charges claims, this process can take a few months, but if you have bad data, especially default notices, it might be worth persuing.

If you miss payments and do not respond to correspondence from your creditor over a period of months, you will likely end up with late payment markers and eventually a default entered onto your credit file.
A default on your credit file is pretty much as bad as a CCJ in the eyes of most financial institutions. Obtaining credit & finance or even opening a bank account could be very difficult if you have a default on your credit file.

First of all, a default notice should really be a pre-cursor to legal action against you by your creditor. In many ways, entering a default on your credit file is kind of like the creditor entering judgement against you without having to take you to court. If you end up with 2 or even 3 defaults for the same account, the very legality of the 2nd & 3rd is questionable because many believe that only legal action should follow the first.

Now, assuming after a while you manage to get back on your feet financially and get back up to date with your account, it is often the case that the default will be marked as satisfied. This doesn't really do much for your credit rating. The word 'default' pretty much defeats the word satisfied in the eyes of the lender. It still tells him that you've been mis-managing your account!

Finally, in order for a creditor to register a default on your credit file, they must have a valid credit agreement for the account and have followed the correct procedure in issuing & registering the default with the credit reference agencies.

To follow is a step by step guide with some template letters..

[Smasher]

First thing's first, get a copy of your credit file to see who has registered any defaults and what they were for. You can do this by either ordering a statutory £2 credit report, or signing up for a trial subscription with any of the credit reference agencies.
For the subscriptions, you will have to pay a monthly fee, but you do get a free trial for 30 days in most cases which you can cancel at no cost (this may be subject to change by whichever agency you subscribe to, please check their latest terms & conditions).

Now you need to find out whether your credit agreement is valid. You can do this by sending a Consumer Credit Agreement request.

It is possible that right at this very first hurdle, you could find out for definite whether or not the default was lawfully entered or not.
In order for it to be even necessary to proceed to the next step, the agreement you receive must be valid. Check it against the checklist on the Consumer Credit Agreement thread.
In order for a creditor to store, process and share data (for example with credit reference agencies) relating to you and your account, they must have your permission. In a nutshell, this permission is contained within the consumer credit agreement.
If the agreement is invalid or if no agreement exists, then neither does the permission to store, process and share data relating to you and the account in question, therefore you could demand that all data relating to the account, including defaults and internal data be removed entirely.

Now, assuming that you receive a valid agreement, lets move on to the next step.
You need to write a letter to the creditor questioning the the default. Up until the recent consumer revolt against financial institutions and their disputed practices, default notices were being dished out quite regularly and often without following strict guidelines put in place by regulators. By not following the proper guidelines, defaults entered against you can now be challenged.
So, let's start the ball rolling, we're going to start writing some letters to the creditor.
As ever, remember to keep everything in order.

Print & keep copies of all correspondence.
Send all letters registered post (recorded or special delivery for proof of receipt).


Step 1
With this letter we're going to raise the issue with the creditor and get the ball rolling. This letter asks for copies of notices sent to you by the creditor regarding the default in question.
Click the link below to download the letter.
Letter 1 - Questioning the default notice

Its quite possible that the first response you get to this letter will be a complete fob-off from the creditor. Something like:
Dear consumer,
With reference to your recent letter, I can confirm that a default was issued on DATE for the amount of £XYZ. This default has been marked satisfied as the account has since been settled.

I trust this answers your question.

Yours faithfully
A. Creditor




Step 2
Well, it doesn't answer anything you don't already know from examining your credit file does it? Even if the default has been marked as satisfied, you want to know how & why there is a default there in the first place, which is very bad for your credit file whether or not it is marked satisfied.
So, lets get a little more serious.

Letter 2 - Request for documentation


At this stage, the creditor is firmly against the clock, but may still try to delay or fob you off. It is important that you stick to your timeline as set out in the letter templates.




Step 3
If you have not received the notices requested to substantiate the default in question, its time to write one final letter before action.

Letter 3 - Final letter before action


The responses you receive to these letters will of course vary so start a thread (You Vs Creditor) in the Credit Reference Agencies & Credit Files forum and get help through each step.