Can Consumers Reinstate a Credit Agreement After Debt Acceleration?

A credit agreement is a contractual agreement between a credit provider and a consumer and applies for all kinds of credit services. Under the agreement, the consumer is liable to pay for installments either set out in the contract or on a monthly cycle. When a consumer does not pay by the expected date of payment, this is called a default in payment.

Defaults and Debt Acceleration 

When a consumer defaults, the credit provider has two options available as per the credit agreement. The first is to allow the consumer to pay the default amount and then resume their agreed payment according to the credit agreement. The credit provider may also be able to ‘accelerate’ the payment vis-a-vis an acceleration clause often contained within the contract.

This means that any outstanding amount is immediately payable by the consumer, including the payment of immediate services and not just debts in arrears. When the debt acceleration clause has been invoked, credit providers and consumers usually terminate the credit agreement going forward after what has usually been a distasteful business relationship.

Reinstated Credit Agreement 

However, can a credit provider discontinue a credit agreement once debt acceleration has been invoked? Legally, a contractual agreement can be canceled after a consumer has repaid their outstanding debts in the occurrence that an item/property has been bought and sold by the consumer during the time whereby payments were expected. However, during instances whereby a service or agreement has been entered into without limitations as those described above, a credit provider is under no obligation and has no right to cancel or end the contractual credit agreement without the approval of the consumer.

This was found out the hard way for a business that was involved with a consumer regarding mortgage repayments. As the consumer in question had not sold the property before the time of acceleration, the credit provider could not end the credit agreement. Make sure that you understand the limitations regarding credit debt acceleration and the termination of credit agreements as a registered credit provider.

If you require the services of debt collection attorneys, don’t hesitate to contact Joselowitz & Andrews Attorneys as soon as possible.

2018-07-19T10:50:13+00:00June 26th, 2018|Commercial Law, Debt Collection|0 Comments