8. Default notices
If a client’s credit agreement is regulated by the Consumer Credit Act 1974 (CCA 1974), the creditor must issue a default notice before any legal action can be taken. This notice is in the form of a formal letter explaining how the terms of the agreement have been broken and should include:1s87 CCA 1974 •the client’s and the creditor’s name and address;
•details of the credit agreement and how it was broken;
•what action must be taken to repay the arrears;
•what action will be taken if the default notice is not complied with.
It must state that it is served under section 87(1) of the CCA 1974.
The default notice can be issued on most types of credit agreement for any amount of money owed. It instructs the client that they have 14 days to repay the amount they owe before a default is added to their credit file and that the creditor will take further action including court action to recover monies.
If the client pays the money owed under the default notice before the 14 days have passed, the default notice is not added to their credit reference file.
The default notice is only issued by a creditor when the client has missed between three- and six months’ worth of payments towards the debt. Default notices must be sent with an FCA information sheet about defaults.2s88(4A) CCA 1974;