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Notices of sums in arrears

If you fall behind with the payments to a secured loan or second mortgage, your lender must first send you a notice of sums in arrears. They must do this before they can send you a default notice.

What does a notice of sums in arrears mean?

A notice of sums in arrears is a statement sent to you by your lender to let you know that you have fallen behind with the payments for your loan.

When should my lender send me a notice of sums in arrears?

Your lender must send you a notice of sums in arrears within 14 days of the following occurring:

  • you have been required to make at least two payments (for example, if payments are due monthly, at least two months have passed since the agreement started), and
  • the total sum you've repaid so far is less than the total sum you should have repaid by this time, and
  • the shortfall adds up to two regular payments.

If your payments are due weekly, or less frequently than weekly, your lender must send you a notice of sums in arrears within 14 days of the following occuring: 

  • you have been required to make at least four payments (for example, if payments are due weekly, at least four weeks have passed since the agreement started), and
  • the total sum you've repaid so far is less than the total sum you should have repaid by this time, and
  • the shortfall adds up to four regular payments.

If the arrears continue, your lender must send you notices every six months until the arrears are cleared or the case has gone to court. 

Your lender cannot charge you for sending out a notice of sums in arrears.

Should I get any additional information with the notice? 

Your lender should also send you an information sheet with the notice, explaining:

  • what will happen if you can't pay the arrears off
  • how you can manage your debt
  • where you can get help and advice.

You can see what the information sheet should look like at the Office of Fair Trading website.

What should I do if I'm sent a notice of sums in arrears?

If you're sent a notice of sums in arrears, don't ignore it. It's important that you pay the arrears off as soon as you can. Otherwise, your lender may take further action against you.

You may be able to work out an agreement with your lender to pay the arrears off gradually – an adviser at the National Debtline or Consumer Credit Counselling Services or at a money advice centre should be able to help you work out a payment plan and negotiate with your lender.

What if I can't pay the arrears off?

If you can't pay the arrears off, your lender may decide to end the loan agreement by sending you a default notice.

You can, however, apply for a time order. You don't need to wait for your lender to send you a default notice first. A time order can change the lending agreement to make it possible for you to repay the loan and the arrears.

What if I'm in arrears but my lender doesn't send me a notice of sums in arrears?

If your lender fails to send you a notice of sums in arrears within 14 days of the date you falling into arrears (as outlined above), or within six months of the previous notice if you are still in arrears, they won't be able to take any further steps to enforce the agreement (for example, by sending you a default notice) until they have sent you the notice. In addition, you won't have to pay any interest on the loan or the arrears which built up between the date your lender should have sent you a notice and the date when they actually send it.

However, your lender can send you a default notice without first sending you a notice of arrears if they want to end your agreement but you haven't built up enough arrears to trigger the need for them to send you a notice of arrears.

Talk to a money adviser if you're in this situation – they should be able to help you sort this out with your lender.

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The important points

  • If you miss payments to your secured loan or second mortgage, your lender must send you a notice of sum in arrears before they can send you a default notice.
  • Your lender has to send you a notice of sums in arrears within 14 days if you are behind in your payments by the equivalent of two regular payments if you pay monthly, and four regular payments if you pay weekly.
  • Your lender cannot charge you for sending you a notice of sums in arrears.

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