My parents took out loans in my name and ruined my credit
Welcome to the latest instalment of Metro's Money Problem, from award-winning personal finance journalist and consumer champion, Sarah Davidson.
Every Monday, she investigates a reader's money dilemma, offering a no-nonsense perspective on what's gone wrong along with guidance and advocacy to help make things right.
This week, we hear from 25-year-old Lily, who's torn between family and her financial future.
After her parents borrowed money under her name and then defaulted on the loans, Lily's credit rating has plummeted. And even though this could stop her getting a mortgage, she just can't bring herself to report them for fraud.
Have you been ripped off by a romance scammer? Fighting with family or friends over who should pay for what? Struggling to get by despite a decent income? Or simply want to vent about how you've been treated by a major company?
If you've got a money problem you'd like Sarah to look into, fill in this form or email sarah.davidson@metro.co.uk, providing as much detail about your situation as possible.
No issue is too big or small, and all submissions will be treated with the strictest confidence.
Before I start, I know people will judge my mum and dad for what I'm about to tell you – or call me stupid for letting it happen – but we all feel terrible already and really just need advice. About two years ago, my parents' rent went up at the same time as their car broke down, and they needed some money but had been refused credit. I was at uni and only working part-time, which barely covered my own rent and living expenses. I did have a good credit score though, and when I asked how I could help out, my mum suggested I could take out a payday loan of a few hundred pounds.
I'm of the opinion that you do what you can for your family, so I agreed – and as promised, they paid it back on time. The issue is that they then kept borrowing small amounts each month (which the company seemed to allow without any additional checks). The high interest rate got them further and further into debt and it snowballed into the thousands, which they couldn't afford so ended up defaulting on.
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I didn't find out until I checked my credit report recently, as I've now graduated and started saving to buy a house. Even though I'm angry at them (mostly for not telling me) I could see how ashamed my mum and dad were about what they did. Is there any way I can fix this without getting them into trouble?
Oh Lily. The road to hell is paved with good intentions.
I don't think you're stupid for 'letting' this happen. It's a bitter pill to swallow, but in the eyes of the law, your parents stole from you. That's a criminal offence and you're a victim.
If you're not okay with that, you need to report it to the police. If you are okay with that, then covering the cost of that theft is on you. It's also up to you to work out how to deal with what your mum and dad did.
If you had lost money as a result of another person taking a loan out in your name without your knowledge, you would normally take the following steps: Report it to Action Fraud, the police department that deals with financial crimes. You can do this online, by calling 101, or by calling their fraud or cybercrime specialists on 0300 123 2040. When you submit a report you will receive a police crime reference number.
Report the incident to the payday lender, including the amounts and dates of the additional advances taken without your knowledge and your crime reference number. The company will either agree to reimburse you for the money taken, agree to a part payment or refuse to cover your losses.
If you're unhappy with this outcome, you can make a complaint to the company.
If you're still unhappy, you can wait eight weeks (usually) and then make a further complaint to the Financial Ombudsman Service.
However, your question is whether there is any way you can 'fix this without getting them into trouble', which I'm guessing means getting your money back and/or getting this black mark struck from your credit record.
Sorry, Lily. No can do. The bottom line is that unless you report the crime to the police, you are accepting that 'you' took the loans and failed to repay them. That gives you no recourse to get your money back and no grounds to challenge the damage it's done to your credit score.
If you don't want to dob your mum and dad in, then you need to forgive the past and focus on mending the future. To have any hope of that happening, you need to be comfortable accepting that – in the eyes of the law and of the lender – this is your problem to fix.
You haven't said whether you've had any letters or contact about the default, other than that you saw it on your credit file. You need to talk to your parents to find out why not – have they changed the contact details on your account with the payday lender? Have they had emails, calls or letters?
Once you've got all the facts and paperwork from your parents, here's what I'd suggest: Contact the payday lender to find out how much debt you owe and ask them if it's possible to agree a repayment plan with smaller monthly amounts that you can afford. Just be aware, they don't have to agree to this. Also make sure they have your correct contact details.
If you have savings (you mention you're saving for a house), you could use them to clear the debt and then start rebuilding your credit score. Be realistic: the first will be a labour of love and the second will take time.
Don't be tempted to use a credit card or another expensive loan to pay off this debt. However, if you can afford to take a fixed term loan and pay it off monthly at a lower interest rate, this could keep interest costs down. There are lenders that offer responsible loans for this type of situation – try searching credit unions and community finance in your area. Campaign group Fair4all Finance invests money into responsible lenders across the UK – you can find a list on their website.
Your payday lender may already have referred you to a debt collection agency. If this is the case, the lender can give you their details – or your parents might have these already. Contact the debt collector to ask for your repayment options. Some will allow you to make smaller payments you can afford over a longer time. Others won't. Whatever you do, do not ignore letters. You could end up facing court action, which will make everything much worse.
ignore letters. You could end up facing court action, which will make everything much worse. If you can't afford to repay the debt, contact one of the organisations listed on the Government's website for free and confidential help. They will be able to guide you on your best options and are not financially incentivised to advise you take out expensive debt relief orders or declare bankruptcy. Try to avoid those routes if you can.
Finally, you and your parents need to make this right between you or it will fester. Where there is money involved, feelings can become bitter over time. I'd suggest you sit down with them over a cup of tea at a pre-agreed time to discuss it. Have all the paperwork in front of you and let them know beforehand that you'd like to consider how they could help you with the repayments so they aren't blindsided.
You might decide to write off some of what they borrowed in your name – it sounds like you're sympathetic to their financial situation and want to help if you can. I wouldn't recommend letting them off scot-free though. That's not fair on you and, frankly, if there are no consequences for them, what's to stop it happening again? After all, they seem to have been using your credit pretty freely to pay for more than just their rent and fixing the car. More Trending
Use the meeting to work out what you and your parents can realistically afford each month. Add up all their income and subtract all their bills, allowing for some extra cash each month to cover unforeseen expenses. You should do the same. Anything left should go towards repaying the debt. Ask your parents to set up a standing order with their bank to transfer their share to you on a fixed date every month.
Once that's done, contact the lender or debt collection agency and – perhaps with the help of one of the charities above – agree a repayment plan that you can afford to maintain until the loan is paid off. It might be worth agreeing an amount you can afford even if your parents stop contributing. I'm sure you don't need telling twice that, even with the best of intentions, things can go awry.
Sarah Davidson is an award-winning financial editor and head of research at WPB
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Got a money worry or dilemma? Email sarah.davidson@metro.co.uk
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