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The Limitation Act 1980, old debts and statute barred debts

Sunday, 10th March 2019

This article has been revised following the recent Court of Appeal ruling in January 2019

We’re not in the industry to encourage you to avoid your debts, we're here to give you debt solutions to help you live your life and still make payments to your creditors.

However, there are occasions when a debt becomes too old and the law says you no longer need to pay it. To help you understand more we have put together some of the most popular questions with their answers.

Our Mike Thomas, the founder of Debtwizard, says: ”Knowledge is power, too many consumers just do not know their rights.” The article below aims to give you an insight as to what the Limitation Act means for you and what you can do if you are being pursued for an old debt. At the end of the article we have added a template letter that might help.

Latest Court of Appeal ruling - January 2019

In January 2019 the Court of Appeal (Doyle v PRA) clarified when the six-year period for the Limitation Act starts for some debts, often referred to as 'simple contracts', this includes credit/store cards and personal loans.

The judgement decided that the ‘cause of action’ for a creditor does not start the clock ticking until that creditor has sent you the borrower / debtor a Default notice and that notice has expired. It is no longer the date since you last made a payment or acknowledged the debt.

 

In this article we look at:

What is the Limitation Action 1980?

What can I do if a creditor or debt collector contacts me for an old debt?

What does statue barred mean?

I suspect my debt is statute barred. What can I do now?

I think my debt is NOT statute barred, what can I do?

Where to get 'not for profit and free debt advice

Debt Solutions Explained & Debt Solutions Comparison Table

How can I tell if my old debt is statue barred?

What is ‘cause of action’?

The Limitation Act 1980 / Time limits vary according to the type of debt

Latest Court of Appeal ruling - January 2019

I believe my debt is statute barred, what do I do now?

What can I do if a creditor or debt collector refuses to accept the debt is statute barred?

What is a default notice? / What if my creditor delays sending a default notice?

The debt doesn’t show on my credit file, so has it gone?

My debt has been sold on, am I now debt free?

Joint loans

County Court Judgement (CCJ) / How do I check to see if I have a County Court Judgement (CCJ) against me?

Council Tax Debt / Council tax / Liability Orders

Northern Ireland / Scotland

Council of Mortgage Lenders (CML) directive

Student loans / Old style student loan - pre-September 1998 / New style student loans - September 1998 onwards

Income Tax , VAT and National Insurance (NI) / Benefit overpayments / Social fund loans

What does the Financial Conduct Authority (FCA) regulator say on statute barred debts?

Complaints to the Financial Ombudsman Service and initiating legal proceedings

Where to get more information at no cost to you

What is the Limitation Action 1980?

The Limitation Act 1980 (applies to residents of England and Wales) outlines the time limit within which a creditor can pursue a debtor / borrower for outstanding debts and only applies when no contact has been made between the creditor and debtor within the given time limit.

What can I do if a creditor or debt collector contacts me for an old debt?

Not hearing from a creditor or debt collector can be put down to several things such as your failure to inform them of a change of address or a creditor has been slow to pursue the debt.  It is important to note that debt collectors and creditors can only use the legal system to recover the monies for up to six years for unsecured debts such as credit and store cards, personal bank loans and catalogue debt. These types of debts are often referred to as simple contracts.

What does statue barred mean?

Under the Limitation Act 1980 when a debt becomes statute barred it means the lender / creditor has run out of time and can no longer use a court to enforce payment for the debt.

I suspect my debt is statute barred. What can I do now?

•    Do not admit in writing that you owe the money
•    If you accept you owe the money then you may well be required to pay the debt back
•    If a payment is made, even after a 6-year gap, then the debt may still be unenforceable.

If you are contacted by a creditor with whom you have not had any communication with for six years or more then you should write to them quoting the Limitation Act 1980, do not admit acceptance or responsibility and send your letter recorded delivery to prove postage. You can track the signature confirming delivery here: Royal Mail – Track & Trace your item. We have a template below to help you.

I think my debt is NOT statute barred, what can I do?

If you feel it is less than 6-years since you last paid anything towards the debt then come to an arrangement with the debt collector or creditor. If you have other debts as well then it will be a good idea to see what other debt options you have.

If you suspect that it might be statute barred, this means the creditor or debt collector is out of the prescribed time limit to recover the debt then continue reading this article. Go to 'How can I tell if my old debt is statue barred?'

Where to get 'not for profit and free debt advice

If you need more information on how to best manage your debts then look at our list of the not for profit and free debt help / advice agencies, they will not charge you fees for debt options.

Debt Solutions Explained & Debt Solutions Comparison Table

We have detailed the six options available to you when debt problems arise, all these options, except for No.3 where you pay creditors in full, will affect your credit rating.

We also have our very own easy to read debt solutions table. This chart illustrates a summary of possible debt solutions, you can compare the options available to you. We detail which options freezes interest and those that can stop the creditors chasing you for the debts! More here Debt Solutions Explained & Debt Solutions Comparison Table

How can I tell if my old debt is statue barred?

One way to help decide is how you answer the five questions below. If you say No to all of the questions below then that is a good indication the debt is statute barred.

In the past six years;

  • Have you or anyone else named on the agreement made a payment?
  • Has the creditor obtained a County Court Judgement (CCJ), against you?
  • Have you made any contact with the creditor in writing admitting you owe the debt? A phone call is not admitting liability
  • Was the cause of action* for the creditor more than six years ago?
  • Have you claimed back any payment protection insurance (PPI)?**

*  Cause of action explained below

**If you have successfully claimed back PPI then it is possible that the creditor will argue you have acknowledged the debt and therefore try and restart the six-year time period.

What is ‘cause of action’?

The cause of action is the trigger point for when the limitation period starts running for unsecured debts, simple contracts. Within your credit agreement will be more details of the ‘cause of action’ and in light of the recent Court of Appeal ruling the Limitation period will commence after a default notice has been sent to you and then expired.

Time limits vary according to the type of debt

It is important to note that time limits vary according to the type of debt recovery. For unsecured debts such as ‘simple contracts’ these are credit and store cards, personal bank loans and catalogue debts then it is six years but with secured debts such as a mortgage then it is 12 years.

Having time limits to recover debts is important because not everyone will keep their correspondence such as credit agreements, bank statements forever, plus consumers need to know they cannot be simply chased for debts that are years and years old.

Latest Court of Appeal ruling - January 2019

In January 2019 the Court of Appeal (Doyle v PRA) clarified when the six-year period for the Limitation Act starts for ‘simple contracts’ - unsecured debts such as credit cards and personal loans.

The judgement decided that the ‘cause of action’ for a creditor does not start the clock ticking until that creditor has sent you the borrower debtor a Default notice and that notice has expired.

I believe my debt is statute barred, what do I do now?

You will need to say why you feel the debt is statue barred to the creditor or debt collector chasing you for the debt.

What can I do if a creditor or debt collector refuses to accept the debt is statute barred?

If a creditor continues to contact you after accepting that a debt is Statute Barred and you have stated that you no longer intend to pay the debt, you may be able to take legal action against them.

Initially you should first point out to the creditor or debt collector chasing you for the debt that as the debt is statute barred you do not intend to pay towards it. We have a template letter that may help at the end of this article.

In the Financial Conduct Authority (FCA’s) debt collection guidance book CONC 7.15 it says:

  • ‘Statute Barred Debts. A firm must not continue to demand payment from a customer after the customer has stated that he will not be paying the debt because it is statute barred.’

If the creditor or debt collector refuses to back down and you feel it is statute barred then you can complain to The Financial Ombudsman Service (FOS), contact details at the end of this article. They are free to use and will guide you further.

It might also be an idea to report the creditor or debt collector to the Financial Conduct Authority (FCA). Although they do not usually take up individual cases however their debt collection licensing enforcement team will collect information from you that may be used at a later date to take action against the problem creditor or debt collector. This may result in the creditor having its consumer credit licence removed.

See the list of contacts at the end of this article that can help for free.

What is a default notice?

If you miss, make reduced or stop payments altogether on a consumer regulated credit agreement then the creditor/lender will usually issue a default notice. Once issued this will give you 14 days to comply with the default notice. If after this time you have not paid the debt in full then the creditor/lender can take further action to recover the debt.

A credit agreement can only be defaulted once. The default notice will stay on your credit file for six years from the date of the notice.

What if my creditor delays sending a default notice?

If the creditor delays or never sends you a default notice then the debt can never be statue barred. Should this happen you could counter claim that this is unfair. See our list of free agencies that may help you further with this at the end of the article.

The debt doesn’t show on my credit file, so has it gone?

If after doing a credit search on yourself you notice that a debt you thought might be statute barred is not there then be very careful. A credit report relies on creditors adding information about you to a Credit Reference Agency (CRA). A creditor or debt collector may simply not have added the details. It is unwise to rely on your credit report to confirm if a debt is statue barred.

My debt has been sold on, am I now debt free?

No. If the debt has been sold correctly to a licensed debt collector then this will make no change to your situation. You will instead be dealing with a debt collector and no longer the creditor/lender. That said the debt collector has to abide by industry set rules. See more below on Financial Conduct Authority (FCA) Stature barred rules.

Joint loans

A debt in the name of more than one person - typically a mortgage held in two names or a joint personal loan. Each named person is liable for the whole debt.
A credit card can only be in one name with additional persons named to use the card. The only person liable for that credit card debt is the one named on the credit agreement.

County Court Judgement (CCJ)
A CCJ is issued by the Court requiring payment of debt within 28 days. Circulated to Credit Reference Agencies if this deadline is missed.
If the creditor has previously taken you to court and you have received a County Court Judgement, CCJ, then you will be unable to use the Limitation Act 1980 as a defence and to dispute the debt. If the judgement is over 6 years old then the creditor will need to go back to court and seek permission to continue with recovery of the debt.

How do I check to see if I have a County Court Judgement (CCJ) against me?

You can do this on line at TrustOnline which is operated by Registry Trust and provides access to the Official Statutory Register of Judgments, Orders and Fines for England and Wales on behalf of the Ministry of Justice. Registry Trust also provides access to the Registers for Scotland, Northern Ireland, Isle of Man, Jersey and the Republic of Ireland by agreement with the authorities in those jurisdictions.

TrustOnline is the only service which provides members of the public and businesses with immediate access to search the complete Register. You can visit their website here  Search for County Court Judgements, CCJs

Council Tax Debt

If a council tax debt is more than six years old then then under Regulation 34(3) Council Tax (Administration and Enforcement) Regulations 1992 the council should not apply to the Magistrates Court for a liability order.

Council tax / Liability Orders

A Liability Order allows the Council to deduct the money due from your wages or benefits. The Council will be granted the liability order unless you defend the debt.
Upon the court issuing a liability order there is no time limit for the council to consider when enforcing it, however there may be time limits with older liability orders.

If you think you have been issued with an older style liability order then seek advice on this from National Debtline, contact details at the end of this article.

Interestingly the cause of action to start the six years to recover council tax debt is when you first receive your council tax bill.

If you feel the council delayed sending you the council tax bill then this might be grounds to make a complaint to your local council, if this gets unresolved then you can go to the Local Government Ombudsman (LGO) contact details at the end of this article.

Northern Ireland / Scotland

In Northern Ireland, statue barred debts are governed by the Limitation (Northern Ireland) Order 1989. In Scotland, statute barred debts are governed by the Prescription and Limitation (Scotland) Act 1973 which states that the debt itself ceases to exist after five years providing that it has not been acknowledged and that no relevant claim against it has been made by the creditor.

Mortgage shortfalls debts following house repossession

Your mortgage lender may begin chasing you for a mortgage shortfall following a house repossession because the house sale proceeds failed to clear the amount owing to the mortgage lender. Their claim will include mortgage arrears, interest, locksmith and ancillary fees plus legal costs.

The time limit is different for the mortgage lenders as they have six years to recover the interest element of the debt and 12 years for the capital sum borrowed. Usually the interest element is cleared upon the sale of the property and it is the capital sum that is subject to 12 years recovery time before the debt becomes Statue Barred.

However, like the unsecured debts, simple contracts, the 12-year rule can be reset if either named individual on the mortgage agreement or guarantor makes a payment within that time, unless that payment is made with all parties concerned agreeing it is in full and final settlement of the named payee.

Council of Mortgage Lenders (CML) directive

The Council of Mortgage Lenders (CML) announced a directive which came in to force on the 11 Feb 2000. Under this directive those that have not been contacted by the lender for more than 6 years from the date of the sale of the property will now not have to repay their mortgage shortfall debt. Great, but remember this is a voluntary code.

Student loans

Basically, there are two sorts of student loans and different rules apply depending upon when you took out the loan.

The first type is called the 'old style' or commonly known as ‘mortgage’ loan and were taken out before a university course commencing September 1998.

The second type is the ‘new’ style are for those which commenced their course from September 1998.

The Limitation Act says that the limitation period for student loans is six years.

Old style student loan - pre-September 1998

Student loans under the old style (mortgage loan) are seen as simple contracts and like other unsecured debts the lender has six years from the date of the last payment or acknowledge of the debt to issue proceedings for court. The date for the first payment is usually the April at the conclusion of your course.

However, if you have previously asked to defer the payments then this could be seen as acknowledgement of the debt which would start the six-year time limit once more from the date of the acknowledgement.

New style student loans - September 1998 onwards

If your loan commenced after September 1998 then this type is referred to as an 'income contingent' student loans. This means that the repayments can be deducted from your monthly wages once you earn a certain amount salary. This time would then be the ‘cause of action’ for Student Loan Company (SLC).

The repercussions of this means that the Student Loan Company (SLC) can still deduct the loan repayments after the six-year rule and this will therefore make it more difficult to cite the Limitation Act as a defence in not paying. If this is you then seek advice from National Debtline, full contact details at the end of this article.

Income Tax , VAT and National Insurance (NI)

You can always be pursued for debts owing to HM Revenue and Customs, VAT and any related interest, no matter how old they are. However, with National Insurance there is a six-year limitation period.

Benefit over-payments

For benefit overpayments the limitation period is six-years and will start when a ‘final decision’ is made about the over payment from either your council, a tribunal or the Department for Work and Pensions (DWP). This final decision date is the date for the ‘cause of action’.

Social fund loans

For benefit overpayments the limitation period is six-years and will start when the loan becomes due for payment. This is the date for the ‘cause of action’.

What does the Financial Conduct Authority (FCA) regulator say on statute barred debts?

A debt is statute barred where the prescribed period within which a claim in relation to the debt may be brought expires. In England, Wales and Northern Ireland, the limitation period is generally six years in relation to debt. In Scotland, the prescriptive period is five years in relation to debt.'

In the FCA's guidance book CONC 7.15 Statute Barred Debts it says;

  • Notwithstanding that a debt may be recoverable, a firm must not attempt to recover a statute barred debt in England, Wales or Northern Ireland if the lender or owner has not been in contact with the customer during the limitation period
  • If the lender or owner has been in regular contact with the customer during the limitation period, the firm may continue to attempt to recover the debt
  • A firm must endeavour to ensure that it does not mislead a customer as to the customer's rights and obligations
  • It is misleading for a firm to suggest or state that a customer may be the subject of court action for the sum of the statute barred debt when the firm knows, or reasonably ought to know, that the relevant limitation period has expired
  • A firm must not continue to demand payment from a customer after the customer has stated that he will not be paying the debt because it is statute barred
  • A firm must identify for prospective purchasers of debts arising under credit agreements or consumer hire agreements or P2P agreements those debts which it knows or ought reasonably to know are statute barred, so as to avoid a firm taking inappropriate action against customers in relation to such debts

Complaints to the Financial Ombudsman Service and initiating legal proceedings

A lender must not initiate legal proceedings in relation to a regulated credit agreement where the lender is aware that the customer has submitted a valid complaint or what appears to the firm may be a valid complaint relating to the agreement in question that is being considered by the Financial Ombudsman Service (FOS).

Where to get more information at no cost to you

If it's general debt advice you need then we can be contacted on 03339 870 180  Monday to Thursday: 9.00am - 8.00pm, Friday 9.00am - 5.30pm

Simple debt advice - with no up-front costs

National Debtline

National Debtline is a national telephone helpline for people with debt problems in England, Wales and Scotland. Their service is free, confidential and independent.
Their opening times are: Monday - Friday 9am-9pm and Saturday 9.30am - 1pm

Helpline: 0808 808 4000 

National Debtline

Citizens Advice Bureau

The Citizens Advice Bureau provide free, confidential and independent advice from over 3,200 locations including in bureau, GP surgeries, hospitals, colleges, prisons and courts. Advice is available face-to-face and by telephone. Some bureaux offer home visits and some also provide email advice.

Some Citizens Advice Bureau can only give advice to people living or working in a certain area.

Search for your nearest Citizens Advice to see if they can help you. Helpline: 0207 833 2181.

Financial Ombudsman Service (FOS)

The official independent body in settling complaints between consumers and businesses providing financial services.

Consumer helpline open 8am to 8pm, Monday to Friday, Saturday 9 to1pm

•    0800 023 4567 calls to this number are now free on mobile phones and landlines
•    0300 123 9 123 calls to this number cost no more than calls to 01 and 02 numbers.

These numbers may not be available from outside the UK – so please call them from abroad on +44 20 7964 0500. They will be happy to phone you back, if you're worried about the cost of calling them.

Financial Ombudsman Service (FOS) contact

Financial Conduct Authority (FCA)

Regulator for financial services such as mortgages, insurance, credit / store cards, banks and credit companies.

Financial Conduct Authority (FCA) contact

Local Government Ombudsman (LGO)

LGO are the final stage for complaints about councils, all adult social care providers (including care homes and home care agencies) and some other organisations providing local public services. They are a free service and investigate complaints in a fair and independent way – and do not take sides.

Local Government Ombudsman (LGO) contact details

Template letter below, updated 14 February 2019

Letter responding to a creditor’s claim that you feel your debt is statute barred.

Just copy and paste the body of the text then make any alterations such as delete any unwanted text, add any words you think necessary, keep a copy and post recorded delivery.Don't forget to amend the I / We & me / us to suit you.

_________________________________________________________________________________________________________

                                                                                                                                                                                                                                                                                                                                               (Your name & address)

                                                                                                                                                  (Date)
(Insert name & address of the company that has written or called you)



Dear Sir /Madam

Reference:  (insert account number and name of lender pursuing)

This letter does not admit liability nor does it acknowledge the alleged debt.

I / We write following your recent contact with myself /us regarding a debt that you claim I / we owe.

I / We would point out that under the Section 5 of The Limitation Act 1980 whereby ‘an action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.

I /We would also refer you to the Financial Conduct Authority (FCA) Debt Collection Guidelines whereby it states under ‘statute barred debt’ that ‘it is unfair to pursue the debt if the debtor has heard nothing from the creditor during the relevant limitation period’.

Furthermore, in the FCA's guidance book CONC 7.15 Statute Barred Debts it says;

  • Notwithstanding that a debt may be recoverable, a firm must not attempt to recover a statute barred debt in England, Wales or Northern Ireland if the lender or owner has not been in contact with the customer during the limitation period
  • A firm must endeavour to ensure that it does not mislead a customer as to the customer's rights and obligations
  • It is misleading for a firm to suggest or state that a customer may be the subject of court action for the sum of the statute barred debt when the firm knows, or reasonably ought to know, that the relevant limitation period has expired
  • A firm must not continue to demand payment from a customer after the customer has stated that he will not be paying the debt because it is statute barred
Unless you can provide evidence of payment or written contact from me in the relevant period under Section 5 of the Limitation Act, then you are unable to take any court action against me / us to recover the amount you allege I owe.

If you subsequently cannot prove I /we owe this debt and if you continue to act in this irresponsible and unprofessional way then I / we will have no other alternative than to report you to the Financial Conduct Authority (FCA) for your consumer credit licence monitoring.

I/we will then lodge a complaint with the Financial Ombudsman Service (FOS) and your trade association, if appropriate, the Credit Services Association.

If I / we receive any communication from another debt collection agency then it will be evident that you have sold this debt on with the knowledge that it is statute barred.  Should this occur then I / we will report you to the government bodies and trade association detailed above.

I / We now await written confirmation that this matter is now closed, you are not to contact me / us by telephone, instead by letter only.

I / We look forward to your reply by return.

Yours faithfully


(Insert your signature(s)
(Insert your name(s)

_________________________________________________________________________________________________________

Notes

You now need to post this letter, we suggest you send it recorded delivery to guarantee postage, then go to the link below a few days later to track the delivery and print the signature receipt.

This is your evidence you have responded to this claim.  Royal Mail - Track & Trace

Remember to delete anything that is not needed and correct the I / We & me / us before printing and sending.

 

 

 

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