The Limitation Act 1980

The Limitations Act 1980 sets out the time limit within which a creditor can pursue a debtor for outstanding debts. The Limitations Act 1980 only applies when no contact has been made between the creditor and debtor within the given time limit and only applies to residents of England and Wales.

For more information please complete our priority call me back form below or call us on 08448 247 260.

Know your rights

The time scale mainly depends on the type of debt and can be extended at the court’s discretion if they feel this is appropriate. The time limit begins when you last admitted (acknowledged) owing the money or made a payment.

Should the creditor fail to maintain contact with the debtor for a period of 6 years or more, it is possible to claim that the outstanding debt is “Statute Barred” under the conditions of the Limitations Act 1980.

How might this affect me?

The Limitations Act 1980 also has further impacts, depending on the type of debt:

Unsecured debt

This would include credit cards, store cards, bank and building society personal loans, catalogues, finance company loans etc. If you have not heard from your creditor for a long period it is easy to assume that they have “written-off” the debt. In reality, that is unlikely and in many cases, it could be down to your failure to inform them of a change of address. The debt will still exist and creditors are entitled to chase the debt indefinitely (even after the debt has become ‘Statute Barred’), but they can only use the legal system to recover the outstanding funds for up to 6 years after the last payment was made to the account.

Creditors can still pursue an unsecured debt if:

• You have made a payment to the account within the last 6 years (this includes anyone else named on the credit agreement – care re debts in joint names)
• You have established any contact with the creditor for any reason – this can be a phone call or letter to request a balance or change your details – except to deny that the debt exists.
• They have previously obtained a judgement against you (a CCJ)

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 claim harassment contrary to section 40 (1) of the Administration of Justice Act 1970.

County Court Judgement

If the creditor has previously taken you to court and you have received a County Court Judgement (CCJ) you will not be able to use the Limitations Act 1980 to dispute the debt. However, if the judgement is over 6 years old the creditor may need the permission of the Court to enforce the debt.

If you think the creditor has been to court and obtained a County Court Judgment against you after the debt is out of the six year limitation period, then you can ask the court to “set aside” or remove the County Court Judgment so you can put in a Limitation Act defence.

The debt may be unenforceable but it is still a legal debt and non-payment is likely to have been entered on your credit reference file. A default will stay on your credit file for 6 years. We have a fact sheet on ‘credit reference agencies’ – please contact us for advice.

Council Tax

If outstanding Council Tax was due more than 6 years ago the council is unable to ask the Court for a Liability Order – the same as an Attachment of Earnings Order. In reality councils will have taken action before the 6 years are up!

You can also complain to the Local Government Ombudsman if the demand was not sent out “as soon as practicable” after the rate was set.

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Mortgage shortfalls

Your mortgage lender may pursue you for a mortgage shortfall, which was the result of repossession, being the amount of debt outstanding once the house has been sold. Because this amount arises from a secured debt, the time limit is slightly different for the mortgage lenders as they have 12 years before the debt becomes Statute Barred.

Income Tax and VAT

There is no time limit for these debts to be chased.

Benefit overpayments

The Department of Work & Pensions (DWP) can chase debts after 6 years without going to court. In reality this situation would be rare, as they reclaim the overpayments by deducting them from current benefits.

This applies to overpayments of benefits such as income support, job seekers allowance, pension credit, housing benefit, council tax benefit and paying back social fund loans.

Student loans

Student loan agreements are simple contracts and this gives the Student Loans Company (SLC) 6 years from the date you last paid or acknowledged the debt to go to court to enforce the agreement.

There are two sorts of student loans and different rules apply depending upon when you took out the loan:

• Old style student loans (pre 1998) are consumer credit agreements, regulated by the Consumer Credit Act. Payments cannot be automatically deducted from your wages. The SLC has to go to court before they can enforce the debt against you. This means that the Limitations Act can apply if you have not paid or acknowledged the debt for over 6 years. NB: Asking for the loan to be deferred could count as acknowledging the debt and start time running again.
• From September 1998 new style or “income contingent” student loans include rules to say that repayments are automatically deducted directly from your wages or through your tax return if you are self employed. This means that the SLC is still allowed to take money from your wages for a loan over 6 years old as they do not have to go to court to do so.

OFT Debt collection guidance

The Office of Fair Trading (OFT) has issued specific guidance about Debt Collection which looks at whether a debt is being collected fairly. This Guidance states:

• It is unfair to pursue the debt if you have heard nothing from the creditor for 6 years.
• The OFT thinks it is fair to keep trying to recover the debt if the creditor has been in regular contact with you during this time.
• It is unfair to mislead you by saying the debt is still legally recoverable when it isn’t.
• It is unfair to keep pressing for payment after you have told them you won’t be paying the debt because it is statute barred.

If you find that the debt collector or creditor is not complying with this Guidance, you can complain to your local Trading Standards Department in the council, who will investigate and possibly take up your case for you. You can also complain directly to the OFT whose address is detailed at the end of this fact sheet. The OFT does not usually take up individual cases but their Debt Collection Licensing Enforcement Team collects information that can be used to take action against problem creditors, who can even lose their Consumer Credit licence where non compliance is proven.

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What should I do if a creditor contacts me after six years?

Don’t admit to owing the money!

Once you agree that you owe the outstanding amount within 6 years of the debt being due, the time limit starts again, and you are required to pay the debt back. The creditor can take steps to have the collection of the debt legally enforced by a court (see above County Court Judgement).

If a payment is made after a 6 year gap, the Limitations Act 1980 is still enforceable and the debt remains Statute Barred. However, in this instance, it is unlikely that you will be able to claim back any payments made after the 6 years from the creditor because you still owe them the money.

If a creditor contacts you about the debt, having had no contact with you for 6 years, you should write to them quoting the Limitations Act 1980.

You are entitled to a copy of any files the creditor has containing the history of your account under the Data Protection Act 1998. A request for the file would not mean you were admitting the debt.

Remember: If the creditor can prove you wrote to them admitting the debt, or you or anyone else owing the debt made a payment then the six years limitation period would start running from the date you last made contact or made a payment.

For immediate and free debt advice please call National Money on 08448 247 260 or email us on: enquiries@nationalmoney.co.uk

Useful addresses

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SAMPLE LETTER – Response where creditors contact after 6 years

• Your Name
  Your Address
  Date

  To: WITHOUT PREJUDICE

  Dear Sir/Madam

  Account No:

  You have contacted me/us regarding the account with the above reference number, which you claim is owed by myself/ourselves.

  I/we would point out that under the Limitation Act 1980 Section 5 “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 point out that the OFT say under their Debt Collection Guidance on 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”.

  The last correspondence/payment/acknowledgement or payment of this debt was made over six years ago and no further acknowledgement or payment has been made since that time. Unless you can provide evidence of payment or written contact from me/us in the relevant period under Section 5 of the Limitation Act, I/we suggest that you are no longer able to take any court action against me/us to recover the alleged amount claimed.

  The OFT Debt Collection Guidance states further that “continuing to press for payment after a debtor has stated that they will not be paying a debt because it is statue barred could amount to harassment contrary to section 40 (1) of the Administration of Justice Act 1970″. I/we await your written confirmation that no further contact will be made concerning the above account and confirmation that this matter is now closed. I/we look forward to your reply.

  Yours faithfully

  (Your signature)

  Click to download this sample letter

REMEMBER KEEP A COPY OF ALL LETTERS YOU SEND TO YOUR CREDITORS

Finally – Remember: You can always Phone us for advice about any difficulty you are having in dealing with your debts on 08448 247 260

For immediate and free debt advice please call National Money on 08448 247 260 or email us on: enquiries@nationalmoney.co.uk

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