When a catalogue account becomes a problem

What happens after a missed payment

A catalogue account that falls behind does not go straight to court. It moves through a fixed sequence set out in the Consumer Credit Act 1974, and each stage gives you a right or a window to act before the next one begins. This section sets out that sequence in order, from the first arrears letter to the point a debt is passed on for collection. It is general information about how the process works; for guidance on your situation, MoneyHelper (moneyhelper.org.uk) is free and independent.

1. 1

   The arrears letter

   When you miss a payment, the lender writes to tell you what is owed and asks you to bring the account up to date. This letter is not yet a formal default, so it does not by itself appear on your credit file as anything more serious than a missed payment. Most lenders allow this stage to run for a payment cycle or two before moving further, though the timing is set by the lender's own arrears policy. The minimum payment on a catalogue account can make this stage easy to miss without noticing, because paying only the minimum keeps the account technically current while the balance barely moves. See the minimum payment trap on catalogue accounts (/blog/catalogue-minimum-payment-trap.html) for how that works.

   You pay the arrears

   The account returns to normal running order, and the record shows a missed payment.

   The arrears go unpaid

   The lender moves to a formal default notice, the next stage in the process.

2. 2

   The default notice, and the 14 days it must give you

   If the arrears remain unpaid, the lender must serve a formal notice under the Consumer Credit Act 1974 before it can treat the agreement as in default. This default notice sets out what you owe, what you need to do to put it right, and the date by which you need to do it, which by law must be at least 14 days from the date the notice is served. This is a legal requirement, and a notice that does not give you the full 14 days is not valid.

   You pay or agree a plan within the 14 days

   The default is avoided and the account continues, subject to whatever arrangement you have made with the lender.

   The deadline passes unpaid

   The lender can now register a formal default and take further recovery action.

3. 3

   The default reaches your credit file

   Once the notice period passes without payment, the lender records a formal default with the credit reference agencies, the organisations, Equifax, Experian and TransUnion among them, that hold your credit history and share it with other lenders. A default is a distinct mark from a missed payment: it signals that the lender has given up trying to collect the debt on the original terms, and it stays on your file for six years from the date of default, whether or not you pay the debt off in the meantime. What this means for your credit file, and how a default differs from a missed payment, is covered on catalogue accounts and your credit file (/catalogue-accounts-credit-file.html).

   Credit reference agencies do not make lending decisions themselves; they hold data that other lenders use to make their own decisions.

4. 4

   Collection: who deals with the debt after default

   After default, the lender may collect the debt itself through an internal team, hand it to an external debt collection agency to collect on its behalf, or sell the debt outright to a third party. Selling the debt changes who you owe money to but not what you owe, and the new owner has the same obligation to treat you fairly and to accept a reasonable repayment plan. If the debt remains unresolved, the lender or collector can apply to the county court for a judgment, known as a CCJ, which is recorded on your credit file separately from the original default.

   A debt collection agency contacts you

   Your rights do not change: you can still ask for a breakdown of the debt, propose an affordable payment plan, and query anything you do not recognise.

   Court action follows

   You will receive a claim form before any judgment is made, and responding to it, even to say you cannot pay in full, keeps you part of the process.

If any stage of this sequence has already started on one of your accounts, free and regulated help is available before the next stage begins, from StepChange, National Debtline or Citizens Advice. Breathing Space (the Debt Respite Scheme) can also pause interest, fees and enforcement action for a fixed period while you get advice; see how it works at /blog/breathing-space-scheme-explained.html.