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  1. #1

    Consumer Credit Researcher

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    Lightbulb The Limitation Act 1980 and Statute Barred Debt

    Limitation periods are laid down in the Limitation Act 1980. The expiry of a limitation period provides a defendant with a complete defence to a claim. The primary purpose of the limitation period is to protect the defendant from having to face a claim which he never expected having to deal with. Furthermore, if a claim if brought long after the events in question, it's very likely that some evidence may have been lost and memories of any witnesses will have faded. Once the limitation period has expired, a debt becomes statute barred.

    5 Time limit for actions founded on simple contract.

    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.
    Actions to recover money secured by a mortgage or charge or to recover proceeds of the sale of land

    20 Time limit for actions to recover money secured by a mortgage or charge or to recover proceeds of the sale of land.

    (1)No action shall be brought to recover—

    (a)any principal sum of money secured by a mortgage or other charge on property (whether real or personal); or

    (b)proceeds of the sale of land;

    after the expiration of twelve years from the date on which the right to receive the money accrued.

    I am a Researcher specialising in Consumer Credit and I'm here to assist with any concerns or queries.


  2. #2

    Consumer Credit Researcher

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    Lightbulb Restarting the limitation period with payments or acknowledgment

    A debt will only become statute barred if there has been no acknowledgment of the debt or any payments made during the limitation period. The period can be restarted by a partial payment or an acknowledgment.

    Acknowledgment means that the debtor has admitted liability for the debt. The acknowledgment has to be in writing and signed by the debtor (or an agent, i.e. someone acting for him) and sent to the creditor or his agent. A typed signature is enough. Letters from a creditor to the debtor do not restart the period.

    A part payment has the effect of restarting the period. The payment must be made by the debtor, a co-debtor or someone acting for them (an agent). For the purpose of mortgage interest payments, the DWP is regarded as an agent of the debtor(s). Payments by co-debtors restart the period against both debtors. Writing off part of a debt does not constitute a part payment.

    Once a debt becomes statute barred, it cannot become live again by acknowledging it or even by making a payment.

    I am a Researcher specialising in Consumer Credit and I'm here to assist with any concerns or queries.


  3. #3

    Consumer Credit Researcher

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    Lightbulb Court claims for statute barred debts

    Limitation is a procedural defence, this means it is not up to the court to reject a claim after the limitation period has elapsed, a statute barred defence should be submitted in response to the claim. The claimant still has a cause of action but it cannot be enforced by a court.

    Once a debtor has submitted a statute barred defence, the onus passes on to the creditor to prove that the debt is not statute barred.

    If a claimant is unwilling to discontinue a claim for statute barred debt, the defendant could apply for the claim to be struck out as an abuse of process.

    The limitation period only runs until the date when the claim is brought, which is when the claimant delivers the documents to the court for issue. Once a claim is issued, the limitation period stops.

    I am a Researcher specialising in Consumer Credit and I'm here to assist with any concerns or queries.


  4. #4

    Consumer Credit Researcher

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    Lightbulb Accrual of cause of action

    Limitation periods run from the date the cause of action accrued, which is the earliest time a creditor could have taken action against a debtor. This is usually after the debtor has missed a contractual payment (defaulted) on the account, unless the debt is a loan payable on demand (such as an overdraft). The period does not run from the date the creditor issued a notice (such as a default notice), otherwise creditors could just defer the start of the period indefinitely.

    Common limitation periods are:
    • Consumer credit debts such as unsecured loans, credit cards and home shopping accounts: Six years from default (missing a contractual payment, not the default date reported to the Credit Reference Agencies).
    • Current account overdrafts: Six years from date when the creditor serves a written demand, also known as recalling the overdraft.
    • Utility and phone bills: Six years from the date on the bill.
    • Council tax: Six years from the date on the demand notice.
    • Rent arrears: Six years from the date the rent became due. Each amount of rent has its own limitation period.
    • Mortgage shortfall and secured loans: 12 years from default for the capital, six years for arrears of interest from the date interest became due.
    • Hire Purchase (HP) agreements: After the judgment in BMW v Hart, it was established that the cause of action for these agreements is the default date.

    I am a Researcher specialising in Consumer Credit and I'm here to assist with any concerns or queries.


  5. #5

    Consumer Credit Researcher

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    Lightbulb Scotland

    In Scotland, the limitation periods are set out within the Prescription and Limitation (Scotland) Act 1973. Unlike England and Wales, where a statute barred debt still exists even though it's irrecoverable through the courts, in Scotland all obligations are extinguished at the end of the limitation period, which, for most debts, is five years:
    6 Extinction of obligations by prescriptive periods of five years.

    (1)If, after the appropriate date, an obligation to which this section applies has subsisted for a continuous period of five years—

    (a)without any relevant claim having been made in relation to the obligation, and
    (b)without the subsistence of the obligation having been relevantly acknowledged,
    then as from the expiration of that period the obligation shall be extinguished:
    If the creditor has been to court and obtained a decree, they have up to 20 years to start enforcing it, and you cannot use the Prescription and Limitation (Scotland) Act to dispute it.

    Lenders have up to 20 years to recover the capital element of mortgage shortfalls and five years for the interest. Council tax arrears can also be recovered up 20 years from the date of the final demand or any time the debt was acknowledged.

    I am a Researcher specialising in Consumer Credit and I'm here to assist with any concerns or queries.


  6. #6

    Consumer Credit Researcher

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    FCA Consumer Credit Sourcebook

    CONC 7.15


    CONC 7.15 Statute barred debts

    CONC 7.15.1 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.
    CONC 7.15.2 In England, Wales and Northern Ireland, a statute barred debt still exists and is recoverable.
    CONC 7.15.3 In Scotland, a statute barred debt ceases to exist and is no longer recoverable if: (1) a relevant claim on behalf of the lender or owner has not been made during the relevant limitation period; and (2) the debt has not been acknowledged by, or on behalf of, the customer during the relevant limitation period.
    CONC 7.15.4 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.
    CONC 7.15.5 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.
    CONC 7.15.6 A firm must endeavour to ensure that it does not mislead a customer as to the customer's rights and obligations.
    CONC 7.15.7 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.
    CONC 7.15.8 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.
    CONC 7.15.9 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.

    I am a Researcher specialising in Consumer Credit and I'm here to assist with any concerns or queries.


 

 

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