How To Deal With Late Payment Letters
Getting a late payment letter can be a scary experience. However, as long as you keep a clear head, you can deal with the situation. There’s always help available if you need it. So let us take you through what you need to do to deal with a letter of late payment.
Late Payment Letters: The Basics
A late payment letter is exactly what it sounds like: a letter that says you’re late in making a payment. This letter can come from anyone that you owe money to, whether that’s a credit card company, a mobile network operator, a car financing company, even the water board or electric company. There are two main things that you need to remember initially when you receive a late payment letter:
- DON’T Panic: Dealing with this might not be easy for you, but it’s very possible. Panicking will only make the situation worse.
- DON’T Ignore It: Ignoring a late payment letter can have serious consequences. This is a problem that won’t go away on its own, so you’ll need to be proactive.
What Happens If I Ignore a Late Payment Letter?
There are several consequences to ignoring a late payment letter, none of which are good. It’s in your own best interest not to pretend that you didn’t receive the letter, or to bury the problem and hope it goes away.
In the short term, the consequences of ignoring a late payment letter are that you may add to your debt. If you do not respond to the letter then the company may start adding more fees and further interest, thus increasing your debt even further. Plus, your credit score will be harmed, and this will make it more difficult to borrow money in the future if you need it (as well as more difficult to do things like apply for a mobile phone contract).
In the long term, ignoring a late payment letter can result in getting your utilities cut off, court judgements, having your house or possessions repossessed, or being declared bankrupt. Obviously, these are very undesirable consequences.
Kinds of Late Payment Letters
There are three kinds of late payment letters that you might receive. All of these letters are required to include an information sheet from the Financial Conduct Authority (FCA) which explains the letter and tells you where to go to get advice and help. The three kinds of letter are:
- A missed payment letter (which is exactly what it says, you have missed one payment on a debt).
- A letter informing you that you have 7 days to respond or else court action will be taken.
- A letter telling you that you are in arrears or default (you have missed many payments, not just one).
Other than the second kind of letter having a time frame there is really no difference in the way you should deal with these letters.
Step One: Prioritise Your Debts
If you are in debt then the chances are that you owe money to more than one person or company. This means that it’s likely that you’ll receive late payment letters from more than one source. Before you do anything else, you’ll need to prioritise your debts, deciding which are the most important. The most important debts should be those that effect your living situation or those that are most likely to result in court action.
High Priority Debts
The highest priority debts (i.e. the ones you should deal with first) should be the following things:
- court fines
- mortgage payments or rent payments
- child maintenance
- gas and electricity bills
- council tax, income tax, national insurance, VAT
- any hire purchase agreements where what is being brought is a necessity (such as car payments if you must have a vehicle to get to work).
Low Priority Debts
Low priority debts should not be ignored, but it is less important that you pay these than the high priority debts. These are debts that won’t have a huge impact on your daily living if they go unpaid. Examples of low priority debts are:
- credit card, store card, and debit card debts
- phone, gym, TV company, internet company or catalogue company bills
- water bills
- personal loans, money borrowed from family or friends
Once you have prioritised your debts you should have a better idea of which letters of late payment you need to act on first.
Step Two: Contact Your Creditors
Even if there is absolutely no way you can pay your debt you should still contact your creditors. This shows that you have received the letter of late payment and you are not ignoring it. Most companies are willing to help people in debt, but they can’t help you if they don’t know that you’re having financial issues. It is better for a company to help resolve your debt problems by, for example, setting up a new payment plan, than it is for them to end up taking you to court. Basically, they’d rather get the money slowly over time than spend lots of money on legal proceedings against you.
Be polite on the phone and explain your issues. The company may decide to help you out. There are a few ways in which they can do this:
- By arranging for a new payment plan, perhaps a lower amount over a longer amount of time
- By arranging a payment holiday, where you get a period of respite from paying bills (usually around three months) and time to arrange your finances before going back to your regular payment schedule
- By reducing or even freezing interest owed, meaning the debt will not increase as much over time
- By agreeing to stop sending late payment letters and reminders or threatening court action until you’ve had a chance to speak to a debt advisor and get help
You may find that speaking to your creditors is enough to give you the time and space you need to sort out your financial situation alone. If it’s not, you still don’t need to panic. You have spoken to your creditors and informed them that you’re in debt, so the next thing you need to do is get some advice on how to deal with that debt.
Step Three: Get Debt Advice
There are many different options for dealing with debt, and understanding them all is complicated. Fortunately, there are free advice centres that will help you decide what kind of debt solution is best for you. Once you have spoken to your creditors you will need to contact one of the following centres to help get yourself back on your feet:
- The Citizen’s Advice Service
- The Debt Advice Foundation
- StepChange Debt Charity
- National Debtline
All of these services are absolutely free, you should NOT have to pay someone to help you when you have financial problems. After getting advice you should know what to do next, you’ll get a clear step by step outline of the necessary actions to help solve your problem.
Help, I Ignored the First Letter!
If you ignored the first late payment letter, it’s not too late to act. You should still follow the above advice. Be aware that there is a strict procedure that companies must follow, and a late payment letter is only the first stage. After the initial letter this is what could happen:
- You continue to get late payment letters or calls from your creditor
- You receive a notice of default (meaning you haven’t paid your debt)
- Your debt may be sold to a debt collection agency (in which case you will need to deal with them rather than the original creditor) and you receive letters from them instead
- You receive a County Court Judgement (or CCJ- in Scotland this is known as a Decree) ordering you to pay the debt or face legal consequences.
All of these are an attempt to collect your debt. By contacting your creditors (or debt collecting agency) you should be able to stop these things happening so that you have time to get debt advice.
Dealing with debt can be difficult, but much of that is because of either embarrassment or lack of information about the resources available to you. If you receive a letter of late payment there is plenty of help out there. All you need to do is face the problem head-on. Don’t ignore letters of late payment, and don’t panic. There is help out there for you!