Watch out for this quick fix for repaying debt

What would you do if someone offered to clear all your existing debts overnight? Here's why you shouldn't be tempted to accept...

We’ve all experienced the annoyance of a withheld number cold calling in the evening. However, it can sound very appealing if they offer, as they did to one CCCS staff member recently, to clear all your existing debts in one fell swoop. Wouldn’t it be wonderful if you could wave a magic wand and suddenly become debt free overnight?

It sounds too good to be true, because it is. If only it was as simple as writing off all your debt so that you wouldn't have to worry about making single repayment ever again!

Worrying statistics

According to Credit Action, the average household debt in the UK (including mortgages) stands at £57,737 and banks and building societies currently write off the equivalent of £38.1m of bad debt every day.

Creditors only consider writing off debts in extreme cases such as insolvency or settlement offers. For the majority of struggling debtors it’s going to take a very long time to clear their debts, especially if they’re only making the minimum monthly repayment.

Most people who take out debt have the intention of repaying it, and the majority of borrowers do repay their debts in full. But in the current economic climate, more and more people are struggling with their commitments.

As a result, there are a lot of companies cashing in on people’s vulnerability at this time. They tend to target those who are unable to meet their payments or who are only making minimum payments, as these people are most likely to use their services.

These companies – who allege to be claims management companies, solicitors or debt management firms - offer to “write off debt” for a substantial fee. They offer to buy the debts from the consumer, misleadingly promising that they can use Sections 77, 78 and 79 of the Consumer Credit Act (CCA) 1974 to write off debts.

How can they do this?

Well, the Act stipulates that consumers can request an original copy of their credit or hire agreement. If the lender doesn’t provide this information, the debt becomes unenforceable.

OFT warning

However, the Office of Fair Trading has warned against using these companies because, although the debt could be unenforceable if the lender doesn’t provide this information in a timely manner (usually 12 working days), it still exists and is not actually written off. The money is still owed to the lender and they can continue to add interest and charges to the debt. This will also continue to affect the debtor’s credit score.

So, in most cases, these companies charge an extortionate amount of money upfront with no guarantee of success. As a result, you're much better off steering well clear.

If you do think you have a case where you feel your creditors have breached the Consumer Credit Act, speak to someone who can offer free independent advice such as Consumer Direct, instead of entertaining fanciful ideas of writing off debts.

And if you’re struggling with debts, you can use the CCCS online debt advice tool, Debt Remedy. Otherwise, you could always look at other ways to get out of debt.