A default notice is a formal letter sent by a creditor to a borrower to inform them that they are behind on their repayments and that they are in default on their loan or credit agreement. The notice is usually sent after three to six months of missed payments. The notice of default is a legal requirement for credit agreements regulated by the Consumer Credit Act 1974. The notice should include the following information:

• The borrowers name and address and the name and address of the creditor issuing the notice
• The type of agreement and details of how the agreement was broken
• The action the borrower needs to take to pay the arrears in full by a certain date
• The action the creditor intends to take if the borrower is unable to comply with the default notice, such as referring the account to debt collectors or starting court action

The notice of default is usually the first step towards foreclosure or legal action to recover the debt. The notice gives the borrower at least 14 days to comply with the action required. If the borrower pays the full amount stated in the notice of default within the specified period, the creditor cannot take any legal action against them. A default notice will appear on the borrowers credit file for six years, even if they pay off the debt in full.