NO DEBT LOOPHOLE

Sometimes the best way to save money is not to spend it in the first place. And if you get a text on your phone or see an advert offering to wipe out your debts the best way to save money is to ignore it.

Say ‘yes’ and you will pay out hundreds – sometimes thousands – of pounds. Your debts will not be written off. And your credit record could be ruined.

Say ‘no’ and it will cost you nothing. Of course, your debts will not be written off. But at least your credit record will not be damaged further.

Put like that it’s an easy decision. But tens of thousands of people are being fooled into paying out good money to try to get credit card debts and other loans written off.

They are being fooled by a clever mix of half truths and false promises. The pitch is this:-

• Credit agreements almost always contain errors.
• These mistakes mean that they do not conform to strict consumer credit laws which lay down exactly what credit agreements should contain.
• Faulty credit agreements which were made before April 2007 cannot be enforced.
• So borrowers can safely stop repaying the debt.
• The lender cannot report this breach to credit reference agencies.
• When the lender realises that the debt cannot be enforced it will write it off.

As far as anyone knows this chain of events has never happened. Yes, credit agreements can contain errors. Yes, those mistakes may not be in accordance with the rules set down in the Consumer Credit Act. Some errors – but not all – can make it hard to enforce a credit agreement. But normally the courts can put right any mistakes. Lenders can report any unpaid debts to credit reference agencies – a right recently upheld by the courts. Borrowers who stop repaying a debt can find their credit record ruined for years.

Banks seldom write off debts. They are much more likely to go to court to try to enforce them. And recent test cases have found in favour of the banks and against the claims companies that are encouraging people to stop paying their debts because of errors in their agreement.

By then of course the debtors have paid out hundreds if not thousands of pounds to the companies concerned. Money which would have been better used repaying their loans.

The Ministry of Justice, which regulates these firms, has closed down more than 100 in the last year. But more are springing up all the time. So the safest way to protect yourself is never to begin this process. That will save you hundreds of pounds and a lot of anguish.

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