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A fee charging debt management company is a firm that will charge you for debt advice and debt service. They usually take the first two months’ payments into your plan as upfront costs followed by 15% of your monthly payment plus VAT. The New Protocol launched in February 2013 will mean that the up front fees will be taken over six months. See Debt Management Protocol
There are some good fee charging firms operating in the debt industry and if you are happy with your firm then fine. However there are some shockers out there and we have the following guide to help you spot them, see our 7 point guide to spotting a dodgy debt advice website!
If you are thinking of starting a debt management plan or wish to transfer to a 'non' fee debt management plan and not pay fees then see how much we can save you by using the slide bars on our unique fee saving calculator above.
The Limitation Act 1980 outlines the time limit within which a creditor can pursue a debtor for outstanding debts and only applies when no contact has been made between the creditor and debtor within the given time limit. This Act applies to residents of England and Wales.
Creditors are given a fixed period of time to chase their debtors, which is outlined in the Limitation Act 1980. The time scale mainly depends on the type of debt and can be extended at the courts discretion. The time limit begins when you last admitted owing the money or made a payment.
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.
Depending on the type of debt in question The Limitation Act 1980 has additional effects:
You may have assumed that your creditor has "written-off" a debt if you have not heard from them for a long period. In many cases, it could be down to your failure to inform them of a change of address, but the debt will still exist and creditors are entitled to chase the debt indefinitely (even after the debt has become Statute Barred), however they can only use the legal system to recover the monies for up to 6 years after the last payment was made to the account.
Creditors are still able to pursue an unsecured debt if:
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.
County Court Judgement (CCJ)
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 the creditor may need to go back to the Court to enforce the debt.
If the Council tax was due more than 6 years ago then the Council can go to Court and request a Liability Order. The 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.
Your mortgage lender may begin chasing you for a mortgage shortfall, which was the result of repossession. The time limit is slightly different for the mortgage lenders as they have 12 years before the debt becomes Statue Barred. See House Repossession Debt for further information on this.
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 the second type is the ‘new’ style which commenced 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. If however you have previously asked to defer the payments then this could be seen as acknowledgement of the debt which will start the six year time limit once more.
New style - 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. The repercussions of this means that the Student Loan Company (SLC) can still deduct the loan repayments after the six year rule and this does not come under the Limitation Act.
In April of 2009 the SLC changed the way they recovered what they call the ‘mortgage style’ student loan, under this new change they decided to contact borrowers by letter giving 28 days to respond. If after this period you fail to make contact or bring your account up to date then they can register your loan as a default with the credit reference agencies.
Even though the debt may be ‘statute barred’ they are entitled to register the non payment and default on your credit file for six years.
Income Tax and VAT
You can always be pursued for debts owing to HM Revenue and Customs no matter how old they are.
The case was brought by the Child Poverty Action Group, CPAG, after the government wrote to over 65,000 claimants telling them it could take them to court at common law if they did not pay back overpayments.
The government letter acknowledged that the money was paid owing to a DWP error and was not recoverable under social security law. The benefits include many of those that cost the taxpayer the most, including income support, incapacity benefit, housing benefit, pension credit and the state pension.
What to do if a creditor contacts you after six years
If you are contacted by a creditor with whom you have not had any communication with for 6 years or more then you should write to them quoting the Limitation Act 1980, do not admit acceptance or responsibility, send it recorded delivery to prove postage. See template letter below.
Office of Fair Trading (OFT) Debt Collection Guidance - Now adopted by The Financial Conduct Authority (FCA)
The OFT has issued debt collection guidance which looks at whether a debt is being collected fairly.
If the creditor refuses to back down and you feel it is statute barred then you can complain to your local Trading Standards Department who should take up your case for you. You can also complain 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. This may result in the creditor having its consumer credit licence removed.
You could consider the following;
Protection from Harassment Act 1997
It is a criminal offence to harass people and put them in fear of violence. It will need to occur on at least two separate occasions and you would need the police to prosecute for this offence.
Malicious Communications Act 1988
This covers sending letters or articles for the purpose of causing distress or anxiety to the recipient. The letter or article sent would have to contain:
Section (4) (a) of the Criminal Justice Act & Public Order Act 1994
It is a criminal offence to deliberately cause harassment, alarm or distress using threatening or insulting words or abusive behaviour. It will need to have occurred in a public place and not in your own home. The police would have to be willing to prosecute for this offence.
The Limitation Act
DebtWizard has created a template letter to download, change and send to the creditor. Updated April 2014
When you have finished remember to keep all the text the same colour and post the letter recorded delivery - you can print off proof of postage on the Royal Mail Website.
If you need more information about taking a claim to the Ombudsman then click here to visit their website: http://www.financial-ombudsman.org.uk/consumer/form/complaint_form.doc