1 Dealing with Debt
2. Rent or mortgage payment problems
3. Council Tax bill problems
4. Hire Purchase (HP) problems
5. Gas, electricity and phone bills
6. Water bills
7. Loan and credit problems
8. What creditors can do to get their money
9. Going to court
10. Dealing with many debts
11. Dealing with bailiffs
12. Other legal protection if you are in debt
There are several laws and regulations designed to make sure that any credit deals you sign up to are fair, and any organisations you owe money to behave reasonably.
Unfair credit agreements
Parts of the Consumer Credit Act allow a court to rewrite any credit agreement (including a mortgage) if it thinks the agreement is an 'extortionate credit bargain'.
This means that it:
- has payments which are 'grossly exorbitant' (too high compared with similar agreements); or
- 'grossly contravenes the ordinary principles of fair dealing', for example, where you have been a victim of sharp practice.
Courts have used this law to reduce very high interest loans, especially in cases where the person signing the agreement was pressured into signing. But this is not easy to prove, and if you think you have a case, you should get expert advice from an adviser or the trading standards department at your local council.
Unfair contract terms
When you sign a contract for credit, or to buy something, it should spell out all the terms and conditions of the deal. The law says that a company can't enforce any part of a contract if it is not in plain English or if it is unfair (but this doesn't mean a price that you think is unfair).
These regulations prevent lenders from:
- charging much higher interest to customers who have missed payments; and
- taking customers by surprise with unexpected or hidden small print or unclear wording in agreements.
If you think that there was a term in a credit agreement which you weren't aware of when you took it out, contact an adviser or the trading standards department at your local council.
Anyone who offers credit or collects debts must have a licence from the Office of Fair Trading. Credit providers and debt collectors can legally enforce the terms of their credit agreements only if they had a licence when you signed the agreement.
Most credit agreements that consumers sign are 'regulated agreements' under the Consumer Credit Act. This means that they must be in writing and also explain, among other things:
- the amount of money you are borrowing;
- the interest rate; and
- how long you will be paying the debt back.
Creditors who arrange credit using regulated agreements can take court action against you only if you have signed such an agreement. Creditors cannot enforce payment if they haven't given you an agreement to sign. You can get advice on other details of the Consumer Credit Act from:
- an adviser or solicitor;
- the trading standards department at your local council; or
- a Citizens Advice Bureau or advice centre.
Pressure to sign
A creditor may not be able to make you repay a loan if you have been put under a lot of pressure from someone you know to sign up for it. The most likely situation is if your husband or wife or partner persuaded you to sign a secured loan agreement (a mortgage, for example) which was entirely for their business. But you must also show that the lender didn't explain to you how the loan worked, and that they should have told you to get independent advice before signing.
This law is complicated, so if you are in this situation, you will need to get specialist legal advice.
The Limitations Act 1980 gives creditors a maximum amount of time to start legal proceedings after the last payment or written acknowledgement (note or letter) from the debtor. For most debts, this is six years, or 12 years for mortgages. If you have not paid anything towards a debt or 'acknowledged the debt' in writing (for example, by writing to the creditor about the debt) for more than six years, you should get specialist advice before you speak to the creditor about an arrangement to pay what you owe.
Harassment to repay
It is a criminal offence for a creditor to harass you (bully or repeatedly annoy) to get you to repay. Harassment includes:
- threatening you with a criminal prosecution when you can't be prosecuted;
- pretending to be a court official;
- sending letters which look like court forms; and
- telling other people, such as neighbours and your employer, about your debt to force you to pay.
If you are being harassed, keep a record of exactly what has happened and when, and report it to your local trading standards department at your local council. A creditor or debt collection agency could have its credit licence taken away if it is found guilty of harassing you (see 'Credit Licence' ).
If a creditor take court action against you without taking resonable steps to come to a realistic payment arrangement with you, you could defend (argue that you should not have to pay) the part of the creditor's claim that is for the court fee and costs.
13. When you can be sent to prison for your debts
14. Terms used when dealing with debt
15. Further help
16. About this leaflet
This leaflet is published by the Legal Services Commission (LSC). It was written in association with Birmingham Settlement.
The leaflets are regularly updated but the law may have changed since they were printed so the information in them may be incorrect or out of date.
Leaflet Version: October 2019