What is a default notice?

A default notice is a formal letter a lender is generally required to send before taking certain further steps on a regulated credit agreement, such as ending it, demanding the full balance, or starting court action. It’s a warning, not the default itself, and it’s meant to give you a real chance to put things right before anything more serious happens.

Receiving one can feel alarming, but it’s also an opportunity: what you do in response often decides whether a default actually gets registered on your credit file.

What a default notice usually has to include

Default notices for regulated consumer credit agreements are governed by the Consumer Credit Act 1974. A compliant notice should set out:

• The agreement it relates to and what has gone wrong, such as missed payments
• The amount you need to pay, or the action you need to take, to put things right
• A date by which you need to act, which under the Act must be at least 14 days after the notice is served
• What the lender can do if you don’t act in time

If a notice doesn’t give at least the legal minimum period, or is missing required information, that can be worth raising with the lender or a free debt adviser, since a defectively served notice can affect what the lender is entitled to do next.

Default notice or letter before claim: what’s the difference?

These two letters are easy to confuse, but they usually come at different stages.

A default notice often comes first, followed later by a letter before claim if the debt still isn’t resolved. Our guide on what to do if you get a letter before claim covers that later stage.

Does everyone get a default notice?

Most regulated consumer credit agreements, such as credit cards, personal loans and hire purchase agreements, require a default notice before the lender can take the further steps listed above. Some agreements fall outside the regulated regime, for example certain types of business lending, and utility or mobile phone accounts are sometimes handled under separate industry rules rather than the Consumer Credit Act itself. If you’re not sure whether your agreement should have triggered a default notice, a free debt adviser can help you check.

A mortgage is different again. Serious mortgage arrears involve their own process, including a requirement for the lender to consider forbearance and treat you fairly before any court action, which our mortgage arrears page covers separately.

What to do if you receive a default notice

1. Read the deadline carefully. Note the exact date you need to respond by, not just roughly how long you have.
2. Contact the lender before the deadline, even if you can’t pay in full. Explain your circumstances and ask what options are available, such as a payment plan.
3. Check the notice looks correct, including that the agreement, amount and dates match your own records.
4. Get free advice if you’re struggling. MoneyHelper, StepChange and National Debtline can help you work out a realistic plan before the deadline passes.
5. Don’t ignore it. Doing nothing is the option most likely to lead to a registered default, and potentially further recovery action.

Can you challenge a default notice?

If you think a default notice was sent in error, doesn’t give the correct notice period, or relates to an amount you dispute, you can raise this with the lender directly. Explaining your position in writing, and asking for confirmation of how the figures were calculated, is a reasonable first step. If the lender doesn’t engage, or you’re not sure whether the notice is valid, free debt advisers can help you check it against the requirements, rather than assuming everything in the letter must be correct simply because it was sent.

What happens if the deadline passes without action

If you don’t remedy the default notice in time, the lender may go on to register a default on your credit file, demand the outstanding balance in full, end the agreement, or in some cases pursue the debt through the courts. Our guide on what a default is explains what that entry means once it’s added, and how long it stays on your file.

Acting before the deadline, even to negotiate rather than pay in full, can sometimes prevent a default being registered at all, so it’s worth contacting the lender as early as possible rather than waiting to see what happens.

What this means if you’re remortgaging

If you’re dealing with a default notice now, sorting it out, or at least agreeing a plan with the lender, before it turns into a registered default is usually the better outcome for a future mortgage application, since a default that never gets recorded won’t need explaining later. If a default has already been registered, our main page on remortgaging with defaults explains what an adviser is likely to ask, and our page on mortgage arrears covers the position if the notice relates to your actual mortgage rather than other credit.