Whilst quietly supping a pint of bitter in my local pub with a good mate of mine, he suddenly blurted out that he hadn’t slept in a week after receiving a letter from a firm of debt collectors, chasing him for a debt he had many years ago. I must admit he did look a bit knackered, and whilst us blokes don’t normally talk about such things, he knew that I knew a thing or two about debts and wanted some advice.
The letter said that he had to pay £11,003.38p within 14 days or field agents would call at his home to discuss ways of paying the money back. What should he do? Ignore it and hope it would go away again or should he pick up the phone and talk to the Debt Collection Agency (DCA)? Hmmm. harassment, intimidation… that’s for another blog, let’s focus on this one.
I asked what his Missus thought, silly question as I got the expected, ‘I daren’t tell her’. This was all before they met he said. ‘I don’t know what to do, we are struggling as it is, don’t need this’.
I knew he has been married for over six years and a further questioning established that the debt was in his name only, was on a personal loan he had many years ago and that about eight years ago he fell out of work for a year and had not paid or heard anything since. The solution then began to look quite simple as in this case the debt would have been ‘statute barred’ under the Limitations Act 1980 which applies to residents of England and Wales.
Under the Act creditors/lenders are given a fixed period of time to chase their debtors/borrowers. The time scale mainly depends on the type of debt and can be extended at the courts discretion. The time limit begins when the named individuals on the agreement last admitted owing the money or made a payment.
Should the creditor/lender fail to maintain contact with the debtor for a period of six years or more and no payment has been made, it is possible to claim that the outstanding debt is "Statute Barred" under the conditions of the Act.
After I had explained to my good friend that the letter was likely to be a ‘fishing’ exercise by an opportunist debt collection agency and that they would not be able to pursue the debt through the courts he couldn’t have been more delighted and relieved. Whether he eventually told his wife about the issue I will never know!
Thousands of people receive requests for payments on debts, mainly on credit cards and loans, from lenders and DCAs. Some demands are fair and reasonable but many are not with the firm demanding the money often having no legal basis to claim and therefore unable to take the borrower to court, even though threatening this in their communications.
What is worrying is that many people actually respond to these letters because they do not know how to deal with them, feeling guilty or frightened of the implied threat of being taken to court.
Read the letter carefully, break down the content, what do they mean, are they fishing, do they have anything at all but most of all don’t be panicked.
Just because someone has written to you demanding money ‘or else’ does not mean you have to pay them. Weed out the chancers and opportunists that have no legal basis to pursue you for the alleged debt. One way to deal with a request for payment on an old debt is just to ignore it but if they persist do not acknowledge or admit the debt.
You would do no harm in writing something similar to ‘before I can begin to understand the basis of your claim please furnish me with a breakdown of what sum is capital, interest and fees…. the date of the last payment that was made on the account…. under what authority are you writing… do you own the debt or are you an agent, if so who are you representing? You know the stuff. I write this sort of letter a dozen or so times a year for my clients and have so far been 100% successful in ending things there and then.
The key to all this is when was the last payment made on the account in question. If not within the last six years by any named person on the agreement (sole or joint names), and neither has acknowledged or made a payment in the past six years, then the debt is statute barred and the creditor/lender or agent cannot take the matter to court.
There are, as always, exceptions to this and different rules apply in Scotland and in Northern Ireland, more on this can be found on the Debtwizard guide to dealing with old debts.
I agree that we should always pay our debts, especially when we have the means to pay. However I do have an issue with lenders or DCAs that cannot get their acts together to ensure the debt is still legally recoverable through the courts as arguably they deserve to have the debt statute barred.
Rules are made to benefit both parties; lenders know these particular rules only too well; consumers now just need to wise up to their rights.
We have a template letter for you and more information at the Debtwizard guide to dealing with old debts.
