Author Topic: Advice on < £500 credit card debt  (Read 1392 times)

timgj

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Advice on < £500 credit card debt
« on: Jun 18, 2011, 05:12:19 PM »
 I would like advice on how to deal with a small credit card debt. My nephew has just received a telephone call from FTC – a debt collection agency working for CapitalOne with whom he has a credit card. They are seeking to recover a relatively small amount (£409) and he tells me he has been bounced in to verbally agreeing a Direct Debit (DD) payment plan of £105 per month which he tells me he can’t afford and wants to know what to do next.
He’s 22 years old, has no real possessions (i.e. no house, car etc.) and earns very little money. He genuinely wants to pay the money off but not at the rate suggested by FTC. He is unsure of his rights and I presume that companies like FTC rely on this combined with bullying and bluster on many people.
So my initial advice to him so far is as follows.
1.       Don’t panic. He doesn’t own or earn enough for it to be worth being taken to court over the debt and so if he really wanted to he could just tell Capital One and FTC to get lost; if he were taken to court he could offer to pay some paltry sum – e.g. £1 per week – back and probably be allowed to. But that would be a bad idea long-term.
2.       Much better is to keep a dialogue going but negotiate a payment plan on his terms.
3.       He should write to FTC asking for a breakdown of the £409 and explaining he was browbeaten in to taking out a DD which he couldn’t afford and offering to repay at a more sensible rate.
4.       He should also contact his bank immediately and get the DD mandate cancelled.
5.       He should ask that interest be frozen on the debt or at least reduced to a sensible level – i.e. not credit-card APR
6.       If FTC harass him he has a lot of law on his side including the Protection from Harassment Act and Administration of Justice Act.
So to the questions.
1.       Having been passed along to a debt-management company can he continue to deal with Capital One or does everything now go through FTC?
2.       I presume he can demand a breakdown of the £409 and challenge any management fees or similar which are unreasonable?
3.       Can he ask that interest payments be suspended on the debt and, if so, is there any Code of Practice or similar instrument he should quote?
4.       Will refusing to pay back at £105 per month but instead at (say) £20 further damage his credit rating?
5.       For someone working part-time for minimum-wage what would a sensible payment be to offer?
6.       How should he proceed?

James Falla

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Re: Advice on < £500 credit card debt
« Reply #1 on: Jun 23, 2011, 11:49:13 AM »
Hi there timgj
 
The most important thing for your nephew to do is to go through his personal income and expenditure budget and then calculate what he feels he can afford to pay back each month. He should then make this offer to FTC and stick to his guns. If they turn the offer down, the most important thing for him to do is make the payments anyway. Under the OFT debt collection guidence, a creditor or collector cannot refuse to accept a payment.
 
If he makes an offer which is refused and then he does not pay it, he could waste months arguing with FTC by which time he could have paid a good amount of the debt anyway.
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