It can be challenging to understand credit agreements. Contracts are often printed in tiny text and use complicated language. One look can be enough to put most people off. But if you are clear about your situation, it puts you in a good position to decide on the best way to tackle your debt.
You can get more information about each type of debt.
What to check first
The first important thing to check is:
- If you owe the debt
- If you do, if you can be legally pursued for it
Check who signed the contract
Look at the original contract and check if you signed for it.
Often in MABS, we see clients continuing to pay the debts of partners after they have separated or when someone dies. If you did not sign the agreement and you are being pursued for it, contact MABS for further advice.
If you signed jointly with someone else
People often think if they co-signed a credit agreement that they owe half of it. This is not the case. If you signed jointly with someone else, for example, a partner, husband or wife, you are both responsible individually and together for the full amount.
You can both can be pursued separately for it until it is paid in full.
Guarantors will only be pursued as a last resort
As a guarantor, you will generally be pursued for payment only if the named person:
- Fails to pay
- Chooses an insolvency option
The terms and conditions will tell you in what circumstances you will be pursued for any debt. Under the Consumer Protection Code 2012, you must receive a document showing your obligations before you agree to be the guarantor. It should also contain a warning statement about your responsibility and about getting legal advice.
Ask us if you are not clear what your agreement means, or follow this link to view sections 4.26, 6.8 and 8.6 of the Central Bank-Consumer Protection Code 2012.
Your creditor has a time limit to go to court
A creditor must meet certain time limits to bring court action to enforce a debt. The law in relation to time limits is complex, but in general, the time limit for taking actions for debt judgments and for non-payment of charges (like rent) is 6 years. If your creditor does not start the court action within 6 years of the debt being due, the action can be held to be ‘statute-barred’ by the court. But you must raise the fact that the creditor’s action is statute barred and win. If you win, this means that you cannot be forced by the court to pay the debt even though the debt still exists. These general time limit rules do not apply to taxes.
If your creditor gets a court judgment, then, in general, they have 12 years in which to enforce that judgment.
Check if you have payment protection insurance
‘Payment protection insurance’ is an insurance policy that covers the monthly debt repayment, for a limited period, on a lending product if you lose your income.
Under the Consumer Protection Code 2012, the person selling you the original mortgage should not also sell you mortgage protection insurance.
Generally, your insurance can cover you for events like redundancy or ill health. However, your insurance policy will cover only certain situations. You need to get a copy of the terms and conditions attached to your payment protection insurance policy. This will explain what cover you have.
If you meet the conditions, your policy provider may pay the cost of your repayments for a set time, like 12 months or more.
Under the Consumer Protection Code, account holders in arrears who have payment protection insurance must be told that they have bought it. They must also be given the policy number and a copy of the policy on request.
Call Insurance Ireland (the industry representative) on 01 676 1914, if you are not clear about your policy. But as a general rule – If in doubt, claim!
Mis-sold payment protection insurance
If you find you are not eligible to claim on your policy, check if it was mis-sold. An example would be if you were sold redundancy cover, but you could never claim it because you were self-employed at the time. You need to get more information about making a complaint to the financial ombudsman if you think it was mis-sold.
Security provided for the loan
Is the debt secured on land or property?
The terms and conditions of your contract will show if there is any security attached to your agreement. A security is something you or someone else owns that has been attached to your debt. It means that if the debt is not paid the creditor can use that asset to cover some or all of the debt.
You need to know exactly what powers the creditor has so you can pick the best way to tackle your debt.
There may be a guarantor for the loan
If someone else has signed the contract with you, check whether they have signed as a guarantor or as a joint borrower.
Check your creditor’s information
Contracts sometimes contain ‘unfair terms’
By law, consumers are protected against companies and organisations which use ‘unfair terms’ in consumer contracts.
An ‘unfair term’ in a standard consumer contract is a condition in the contract that puts the consumer at a disadvantage. Only the High Court can judge what is considered an unfair term.
Creditors sometimes get the figures wrong
Check interest and other charges
Check your statements to make sure you are being correctly billed on your account for any:
- Interest
- Charges
- Penalties
These charges should follow the terms and conditions of your contract. Calculations can sometimes be confusing, so ask for clarification if you do not understand the way you have been charged.
Check your repayments have been counted
A statement of your account or a bill should show exactly how much:
- You have paid
- You owe
Check that all the payments you have made show up on your statements.
Mistakes can easily be made so always keep payment receipts or records.
Watch out for some account statements that show payments as being made on the day they were due, but then show the payment was not made when the money did not come through. This can be confusing.
Another common mistake in calculating a bill can be when an agreement has ended. For example, after:
- You trade in a vehicle
- Goods are repossessed
You may think you have been overcharged or are unclear about how your bill has been worked out. If so, ask for a breakdown of how the amount has been arrived at and get further advice if needed.
Tip when contacting creditors: You may have a good payment history up to when you had a change in circumstances. If you do, refer to your good payment history when you propose how you plan to make your repayments.
Check your overpayments and entitlements
You may need further advice if your debt arose due to an:
- Underpayment of tax
- Overpayment of social welfare
Advice will help you to calculate whether or not you owe some or all of the debt being claimed.
Read more on:
- The Recovery of social welfare overpayments
- Guide to Social Welfare Overpayments
- Short Guide to Social Welfare Overpayments
Checking entitlements
Sometimes you can lower an ongoing cost or debt by claiming an entitlement. For example:
- Rent supplement
- Housing assistance payment
- Medical card
- Free television licence
- Electricity units under the household benefits package
- Income tax credits and reliefs If you did not claim tax credits or reliefs, or you have paid taxes that it turns out you didn’t owe, you have just 4 years to seek a refund.
More advice and support
If you want free and confidential advice and non-judgmental support contact MABS.
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