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Signing an agreement to borrow money

About signing an agreement to borrow money

When you borrow money you should be asked to sign a credit agreement. This is a legal document which sets out what both sides are agreeing to, including how the money you're borrowing should be paid back.

Borrowing money includes things like using a credit card, taking out a loan or a bank overdraft, buying goods on credit and taking out a mortgage.

To find out more about borrowing money, see Types of borrowing.

If you're asked to pay back money, it's important to check you're the person responsible for the debt before you agree. Otherwise you may end up paying back money when you don't have to.

To be responsible for paying back a debt, you must have signed a credit agreement. Before agreeing to repay money, take a look at the original credit agreement to make sure you signed it, check what you agreed to and to see if anyone else also took out the credit with you.

You may not be responsible for paying back the debt if:

  • you didn't sign the credit agreement
  • someone else used your name to get credit
  • you are being chased for a debt taken out by someone else with the same name as you
  • you are being chased for a debt which your partner took out in their own name only.

There may be other reasons why you might not have to pay back money you are being chased for. To find out more about these, see How to dispute a debt.

You may be responsible for paying back the debt if:

For more information about signing a credit agreement as a guarantor, see How to dispute a debt.

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Did someone else use your name to get credit

Criminals can find out your personal details and use them to open bank accounts and take out credit cards and loans in your name. This is often called identity theft.

If you think you have been a victim of identity theft, tell the lender straight away. You won't be responsible for paying back the debt.

The person who did this may be someone you know, such as a family member. Be aware that the person could get into serious trouble. If you're worried about this, you may want to get advice before reporting it.

For more information about identity theft, see Banking – security and fraud.

You can get help and advice about what to do if the signature on a credit agreement isn't yours from your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.

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You are being chased for someone else's debt

You may be asked to pay back money where you have the same name as someone who owes the money and the lender is trying to find them.

If this happens to you, get in touch with whoever is collecting the debt to tell them that you're not responsible for it.

If the company still chases you for the debt, ask them to provide proof that you owe the money. You can also point out that guidelines issued by the Office of Fair Trading (OFT) say collectors shouldn't continue to make unjustified demands for payment where a debt is disputed.

You can get a copy of the Debt collection guidance: Final guidance on unfair business practices from the OFT website. Go to: www.oft.gov.uk.

If you're still having trouble with a lender chasing you for money you don't owe, you can get advice from your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.

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You signed the credit agreement with someone else

You can be jointly responsible for a debt with someone else if you both signed the credit agreement. This is called joint and several liability. It means that you're each responsible for the whole amount of the debt even if you've agreed something different with each other, for example you've agreed to pay half. If the person who has agreed to take responsibility for the debt doesn’t pay it, the lender can still come after the other person for the money.

If you are jointly responsible for a debt with your husband, wife or civil partner and the relationship ends, it may be worth asking a lender to agree to let one of you off responsibility for the debt. You and the other person responsible both need to agree to this arrangement. This can be useful where one of you is benefiting more from a financial settlement or has more income than the other person.

Lenders don't have to agree to let one of you off.

You may need help to work out whether you owe money to a lender. You can get help from your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.

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Who's responsible for paying a debt after someone dies

If your husband, wife or civil partner dies, you will not be automatically responsible for paying back any money they borrowed. You will only be responsible if you both signed a credit agreement, or if you acted as their guarantor.

Lenders can try to recover any money owed from the estate of the person who has died. The estate is anything of value the person owned, such as savings, investments and property. If there's not enough money in the estate to pay the debt, the lender can't recover the money from you.

If you've repaid money borrowed under a credit agreement out of your own money because you thought you were responsible for it, you should write to the lender asking for the money back. If they don't agree to refund the money, you can make a complaint.

Check whether the debt is covered by an insurance policy which will pay it off if the person who has taken out the credit dies.

For more information about guarantors, see How to dispute a debt.

For more information about making a complaint to a lender, see What can you do if you don't think you should pay back a debt.

You may need help to complain to a lender who is chasing you for money you don't owe. You can get help to do this from your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.

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You're a catalogue agent

When you act as an agent for a catalogue company, you should set up a separate account for each of your customers to pay their money in.

If you don't do this, you can be held responsible for any money your customers don't pay.

Your can find information about how to set up your customer accounts in the agreement with the catalogue company or on their website.

If you haven't set up accounts and a customer doesn't pay you, give the catalogue company the customer's name and address so that they can chase the customer instead of you.

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What if you don't have a copy of the credit agreement

If you want to check what's in the credit agreement and you don't have the original, you can write to the lender and ask them to send you a copy.

You'll have to pay £1.00 to cover the lender's administration costs. You should use the following wording in your letter:

'Please send me a copy of the credit agreement and any other document mentioned in it. I am making this request under sections 77 to 79 of the Consumer Credit Act 1974. I enclose my payment of £1.'

If you ask the loan company or bank for information under sections 77 to79 of the Consumer Credit Act 1974, there is certain information they must provide you with. They must:

  • tell you what your original agreement was, and if there were any changes made to it later
  • include your name and address at the time you first signed the agreement. However, it doesn't have to include your signature, or the date you signed it. If it doesn't, they should let you know
  • include the statements about your rights that were in the agreement you signed.

You should also get:

  • copies of any other documents mentioned in your agreement, although there are some that you don't have to be given
  • a statement of your account that they have signed, with certain information on it.

There are slightly different rules about the information the loan company or bank must provide in certain circumstances. These are where:

  • your agreement was made before 19 May 1985, or
  • your agreement isn't available, for example if it was lost in a fire or a flood.

In these cases you can be given a copy of what the loan company thinks the current terms of your agreement are. You should be told if that's what they've done.

To find out more about the information a lender must provide if you ask for it under sections 77to 79 of the Consumer Credit Act 1974, go to the OFT's website at: www.oft.gov.uk.

You may need help to write to a lender who is chasing you for money. You can get help to do this from your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.

What happens if the lender doesn't respond

If you don't get a copy of your credit agreement and all the information you're entitled to after 12 working days, then your debt is called unenforceable. It will remain 'unenforceable' until you get the information you're entitled to. However, 'unenforceable' doesn't mean that your debt is wiped out or that you don't owe the money.

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Unenforceable debts

If you ask a loan company or bank for information under sections 77 to79 of the Consumer Credit Act 1974, there is certain information they must provide you with.

If they don't provide you with this information after 12 working days, then your debt is called 'unenforceable'. It will remain 'unenforceable until you get the information you're entitled to. However, 'unenforceable' doesn't mean that your debt is wiped out or that you don't owe the money.

If you don't pay what you owe the loan company or bank can still:

  • chase you for the debt
  • send you a letter called a default notice if you miss any payments
  • pass your information on to a credit reference agency, which might affect your credit record
  • pass your information on to a debt collector
  • sell your debt to someone else
  • take your case to court, although they won't be able to get a court judgment against you unless they give you the information you're entitled to.

There are some things the loan company or bank won't be able to do until they've provided you with the information you're entitled to. They won't be able to:

  • make you pay off your debt before you're supposed to
  • get a court judgment against you
  • take back anything you've hired or bought on credit, or take away anything you used as security (like your house) when you took out the agreement.

To find out more about how to challenge or dispute an 'unenforceable' debt go to the OFT's website at: www.oft.gov.uk.

You may need help to write to a lender who is chasing you for money. You can get help to do this from your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.

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Further help

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Citizens Advice

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