Debt Collection Agency Advice??

Found 20th Apr 2007
Hey need some advice

My cousin took out car finance circa 2000-2001, however he then became redundent and wasnt able to keep to his financial commitments. He had an outstanding debt of about £5000, which he could not afford to pay. This went on his credit record.

A couple of years later he needed to fix up his credit rating, so on advice from Experian he wrote to the finance company saying he was in debt to them for about £5000 that they now probably deemed as unrecoverable, and in exchange for marking the debt as settled on his credit record he would be willing to pay them half his debt, which is a lot more than they stood to gain as things stood. He didn't get a reply back from the company and so phoned them up. He spoke to an agent who basically said that also long as he paid half the debt off in a year making regular payments they would deem the debt as settled and add a note to his record to this effect. So he made monthly repayments and within a year he paid off a sum of about £2500 at which point he deemed the debt as settled as according with the verbal agreement he had made with the agent for the company he spoke to on the phone. His last payment was in November 2004.

Well last week he got a threating letter from a company who claim they have taken over the company he owed the original debt to and according to records he still owes the company half his original debt of £5000, and that if he doesn't clear up his debt as soon as possible they gonna take him to court and send bailiffs around etc etc.

It really is just out of the blue after 2 and a half years of no contact. Is this debt at all legally enforcable?

My cousin doesnt have any written confirmation of the agreement saying he could pay only half his debt, but has kept his payment receipts.

The new company seem to have genuinely taken over the old company.

Is there a time limit at which no contact between parties means a debt or contract is void?

Any help is appreciated. TIA

  1. Misc
  1. Misc

unfortunatley he is liable for the debt for upto 6 years,,and as in all cases he realy should have had the agreement in writing,he dosent have many options now,,,,not sure where he can go from here,

There is a time limit after which a debt does not become enforceable but it's 6 years after last contact, at 2.5 years they can still chase payment.

Unfortunately without anything in writing you cousin has no proof an agreement was made to clear the debt. If it came to court his proofs of regular payment being made until Nov 04 and then no contact at all until now MAY be regarded as evidence that such an agreement was made though.

I'd recommend re-posting on this site: ]http//ww…cgi it's an independant debt advice forum which I've found extremely useful in the past. Or if you prefer the CAB should be able to help too.

You can ignore the threat of bailiffs. Baillifs will only call if the case goes to court, the court makes a judgement you should pay x amount and you then default on the court order.

Original Poster

Thanks for your help so far.
Anyone had similar experiences?

"Is this debt at all legally enforcable?"

Yup part payment of a debt is never settlement of the full amount (The Rule in Pinnels case) unless extra consideration is provided such as early payment or an item in settlement of part of the money. It's a fair enough rule tbh - if I lent some cash out and someone tried a "I'll give you half back, that's all your going to get" line I'd not be a happy bunny.

He didn't get the right advice in the first place.

You can terminate a HP agreement early see here:

You can terminate an HP agreement and return the goods at any time by … You can terminate an HP agreement and return the goods at any time by writing to the lender, as long as you bring your total payments up to half the price of the goods (the exact amount will be stated in a box on the front of your contract). But you will also have to pay off any credit you took out to pay for insurance. If you have already paid half, you only have to pay for any missed payments or damage to the goods. But if you have already paid more than this amount, you will not get a refund of the difference. You should not be charged to return the goods. If under the terms of your contract you must take the goods back, this should only be to premises within a reasonable distance of your home.

He might get away with it as he has already paid half.

As per BeckyBoo's point above, it's called 'voluntary termination' and shows on Hire Purchase documentation. The figure is given on the documents that you must reach before you can return the goods in full working condition.

If your cousin had paid a deposit that figure would be taken into consideration for the termination amount (known as 'halves' in the business) so for example if the car was £6000, the half would be £3000. If he'd paid £1000 deposit then he would only need to pay £2000 worth of payments to reach the half amount.

The only time you have no termination rights is when you sign a document not protected by the CCA (consumer credit act) known as an unregulated agreement. The docs here will not show termination amounts.

I work in the motor finance field so if your cousin has access to his documents from then, then you can cross reference how much he has paid. Also, finance companies keep hold of customers records for six years after the closure of the account incase of anything coming back in the future, plus it's the law that they do. It may not be the ins and outs of the deal but it should include all the notes recorded during the time.

If you need any advice just drop me a PM. I won't be able to answer until Monday though.

Good luck.

Did he return the car to the HP company? If not, then all of the above posts (about paying off half the debt) are surely invalid?
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