A debt collection company contacted Jay even though he thought he’d covered off his debt with an insurance policy.
What happened
After Jay lost his job, his house was repossessed and sold, leaving a £40,000 shortfall. A shortfall is when the proceeds from the sale of a property don’t cover the mortgage or secured loans, leading to remaining debt.
Eight years later, a debt collection company contacted Jay and asked him to pay. Jay thought it was wrong to be asked for the money. He’d paid for an insurance policy when he took out the mortgage, which he thought covered him against having to repay the shortfall.
What we said
We reviewed Jay’s situation and noted that the insurance policy meant the mortgage lender got paid. But it then gave the insurer the right to seek repayment from Jay. It later sold the shortfall debt to the debt collection company.
The company explained they’d waited several years to contact Jay to allow time for his financial situation to improve. But we concluded that eight years without contact was too long, given the law and rules on taking recovery action. Although the law allows up to 12 years to recover mortgage debt, the FCA’s rules say that lenders should notify borrowers that they intend to recover shortfalls within 6 years, and that hadn’t happened in Jay’s case.
So, we determined it was unreasonable for them to ask Jay to repay the shortfall after that length of time and upheld his complaint.