When is a debt Statute Barred? Received a letter from AK

[huggys boss]

Hi all, not been on for a while, but here I am again.

 

Received a letter from AK this morning demanding payment for a debt which I know has had no action on the account since June 2004.

 

I decided to ring them to have a bit of fun with them and was informed that the debt was not stat barred as I thought.

 

They said that a debt becomes stat barred 6 years after the default was issued and not from the date of the last payment or written acknowledgement of the account.

 

Are they right?

 

Any info would be great.

 

thankyou.

[MONX]

This is from the insolvency service website:

 

You can argue that the creditor is out of time or “statute barred” from taking you to court for this debt:

if

• The creditor has not already obtained a judgment against you
  

and

• You, or any one else owing the money (on a debt in joint names) have not made a payment on the debt during the last six years
  

and

• You have not written to the creditor admitting you owe the debt during the last six years.
  

I always understood it to be the date the alleged debt was acknowledged in word or payment. I may be wrong but I am pretty sure it is when it was last acknowledged or paid.

[UnitedFront]

This is a common ploy by DCA's and it has consistently been shown as wrong. Statute Barring occurs after 6 years (5 in Scotland) from the date that the cause of action occurs - as in you missed a payment or acknowledged the debt. This position, as I understand it, has been consistently shown to be accurate.

 

Further, it would be absurd to suggest that the cause of action occurred when the default was issued, because then simply no creditors would ever issue a default, therefore circumnavigating the will of Parliament and the Limitation Act 1980.

 

Limitation Act 1980 S5

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.

 

Now as the CAUSE OF ACTION - as in the thing that happened that gives the company concerned the right and reason to proceed against you with an action - is that you missed a payment, then the 6 year period has to run from that date.

 

Part payment and/or acknowledgement can, obviously, have the effect of resetting this "clock":

 

Limitation Act 1980 S29

(5) Subject to subsection (6) below, where any right of action has accrued to recover—

 

(a) any debt or other liquidated pecuniary claim; or

(b) any claim to the personal estate of a deceased person or to any share or interest in any such estate;

and the person liable or accountable for the claim acknowledges the claim or makes any payment in respect of it the right shall be treated as having accrued on and not before the date of the acknowledgment or payment.

 

Personally I'd send them the stat barred letter from the template library and be done with them.

 

Hope this helps.

Cheers

UF

Edited July 21, 2010 by UnitedFront

[UnitedFront]

The above is, of course, for situations where there has been no Judgment awarded on the account - if Judgment has ever been awarded on the account then the above information would not apply.

 

Cheers

UF

[Seminole]

Usual DCA telephone lies. Best to always keep it in writing or at least record the calls.

 

If you had either a letter (although they'd never put it in writing) or a telephone recording you could make life difficult for them with Trading Standards and possibly the OFT.

 

A DCA will tell you anything it likes over the phone irrespective of whether it's true.

[Hardupnotfedup]

Guys even here when everyone is agreed there is still a difference of opinion.

Monx is stating what I always believed to be the case that the 6 years starts from the date of the last payment.

UF more in depth explanation states 6 years from date of last missed payment.

Now this Month from actually making a payment to missing a payment will make a big difference.

Can we once and for all try for a definitive answer:)

[JonCris]

A person acknowledges the debt by making a payment therefore limitation runs from that date. If it were missing a payment that would allow the creditor to exploit the act by claiming a next payment wasn't due until goodness knows when

[UnitedFront]

Sorry, I didn't mean to confuse; to clarify the situation it is as JonCris says above and what I was trying to explain, albeit somewhat hurriedly:

 

The initial "clock" for statute barring begins when you miss your first payment as this is the initial cause of action. If you make no further payment or acknowledgement of the debt then this is the date from which the 6 years will run. You surely have to have missed a payment in order for them to be chasing you for the money - if you haven't missed a payment then there would be no claim in most instances.

 

However, as shown by S29(5) Limitation Act 1980, if any acknowledgement or payment is received after this date, then the cause of action for the purposes of the Limitation Act will be deemed to run from the date of that last payment and/or acknowledgement.

 

So, effectively, it is from the last payment and/or acknowledgement of the debt in most cases. Be it the missed payment, a further payment or any other acknowledgement of the debt. To be extra clear, however, in the case of missing a payment and then not making any further payments, then it could easily, as is my understanding, be argued that the cause of action occurred when that payment was missed. In this case, I think that the missed payment would be the date from which the clock would tick and not the month before when the last payment was made.

 

As for definitive answers; unfortunately in law there is often certain degrees of ambiguity surrounding matters. There are no doubt people who take different views and interpretations on these things. But the above posts are my understanding of the currently and most widely accepted interpretation of the relevant statute.

 

Hope this clarifies things.

 

Cheers

UF

Edited July 21, 2010 by UnitedFront

[Hardupnotfedup]

Great point Jon, well explained! UF thanks for clarifacation

[JonCris]

UF re-read your 3rd para

 

"then the cause of action for the purposes of the Limitation Act will be deemed to run from the date of that last payment and/or acknowledgement"

 

Note it states LAST payment & NOT default

 

This means that when the creditor considers litigation they, should for limitation purposes, diary their file from the date of the LAST payment

[UnitedFront]

In most cases it will be the last payment - where a payment has been made after the initial cause of action occurred.

 

In the case of a payment simply being missed and then no further payments being made, then it could very well be argued that this is the date concerned and in this case S29 would not be relevant because there would not have been any further payment or acknowledgement of the debt after the initial cause of action occurred.

 

When DCA's commonly make reference to defaults, they are not talking about when the payment was missed, but rather when they issued a default notice pursuant to the Consumer Credit Act. Their claims that this is the date are obviously obsurred; as they could simply delay issuing one massively.

[JonCris]

In most cases it will be the last payment - where a payment has been made after the initial cause of action occurred.

 

In the case of a payment simply being missed and then no further payments being made, then it could very well be argued that this is the date concerned and in this case S29 would not be relevant because there would not have been any further payment or acknowledgement of the debt after the initial cause of action occurred.

 

When DCA's commonly make reference to defaults, they are not talking about when the payment was missed, but rather when they issued a default notice pursuant to the Consumer Credit Act. Their claims that this is the date are obviously obsurred; as they could simply delay issuing one massively.

 

 

Some disingenuous creditors & their DCA's do make such arguments as do some CC Judges in what has regrettably become a Judicial lottery but they are ALL wrong the act clearly states "the last payment". For goodness sake if a creditor can't get their act together in the following 6 years then they don't deserve to get paid

[fuzzybobble]

It's up to the DCA to prove the debt isn't Statute Barred. By the time they have sorted that bit out, it would be Statute Barred anyway, as another month has passed. So wether it runs from last payment, or first missed payment is irrelavent.

 

A DCA trick is to try and say you made a payment on such a date. This is when you file a formal complaint and ask for proof. Some DCA's like to make £1 payments to reset the SB clock,but the payment has to be made by you, and they have to have proof it was you who paid it.

 

If I was in your situation. I'd send them a letter saying, "Prove it's not SB and feel free to take me to court if you want. I prefer a judge settle this matter once and for all." Then watch the DCA come up with all kinds of bluff and crap when they realise they won't see a penny from you. If they hassle you for money once you've informed them it's SB then you can happily complain to the OFT for breach of guidelines.

 

Also check your credit file, as it's not unknown for DCA's to do loads of searches or add a new default to your file.

[UnitedFront]

Some disingenuous creditors & their DCA's do make such arguments as do some CC Judges in what has regrettably become a Judicial lottery but they are ALL wrong the act clearly states "the last payment". For goodness sake if a creditor can't get their act together in the following 6 years then they don't deserve to get paid

 

I'm simply playing devil's advocate here so please don't shoot me down, I post what I understand to be the most accurate information I can. At the end of the day if, like you say, we know that we're up against a Judicial lottery, then why on earth would we choose to ignore any of these pieces of information.

 

Could you please point me towards the section of the Act that says that it runs from the date of the last payment?

 

S5 refers only to the cause of action; which is when you breach the contract by failing to make the payment. How can the payment that you made the previous month be considered as a cause of action?

 

S29 refers simply to what can be considered to reset the clock once the initial cause of action has occurred.

 

Take for example the following:

 

Date A --> Open credit account / take out loan etc

 

Date B --> Fail to make payment --> This is the initial cause of action.

 

* If no further payment or acknowledgement was made, then this could be seen as the starting point of the 6 years pursuant to S5.

 

Date C --> Part-payment or acknowledgement made --> S29 considers this to reset the clock and thus this would make date C the date from which the 6 years runs.

 

Cheers

UF

[UnitedFront]

Also as always I agree entirely with fuzzybobble's post!! Also I entirely agree that they should be able to get themselves in order within 6 years, but it's still important to ascertain exactly when this 6 years could be deemed to run from.

[harrassed senior]

Just to 'muddy the water'. When a Default is Registered on 'your' Credit File it runs for 6 years from that date on 'your' credit file, so in assuming that SB also runs from then as a general time line, we can actually assume that it (the last payment) was well before (by weeks if not months) the Default Date, so, is it safe to assume that when the date of the last payment is not clear (ie can't remember) it would be definitely prior to the date of the Default?

[JonCris]

I'm simply playing devil's advocate here so please don't shoot me down, I post what I understand to be the most accurate information I can. At the end of the day if, like you say, we know that we're up against a Judicial lottery, then why on earth would we choose to ignore any of these pieces of information.

 

Could you please point me towards the section of the Act that says that it runs from the date of the last payment?

 

S5 refers only to the cause of action; which is when you breach the contract by failing to make the payment. How can the payment that you made the previous month be considered as a cause of action?

 

S29 refers simply to what can be considered to reset the clock once the initial cause of action has occurred.

 

Take for example the following:

 

Date A --> Open credit account / take out loan etc

 

Date B --> Fail to make payment --> This is the initial cause of action.

 

* If no further payment or acknowledgement was made, then this could be seen as the starting point of the 6 years pursuant to S5.

 

Date C --> Part-payment or acknowledgement made --> S29 considers this to reset the clock and thus this would make date C the date from which the 6 years runs.

 

Cheers

UF

 

Your post 8

 

"However, as shown by S29(5) limitation act 1980, if any acknowledgement or payment is received after this date, then the cause of action for the purposes of the Limitation Act will be deemed to run from the date of that last payment and/or acknowledgement".

 

There is no ambiguity if you don't admit the debt pre 6 years its the LAST payment NOT default.

 

As another has already stated if it were a default which triggers limitation creditors would never issue defaults

[JonCris]

Just to 'muddy the water'. When a Default is Registered on 'your' Credit File it runs for 6 years from that date on 'your' credit file, so in assuming that SB also runs from then as a general time line, we can actually assume that it (the last payment) was well before (by weeks if not months) the Default Date, so, is it safe to assume that when the date of the last payment is not clear (ie can't remember) it would be definitely prior to the date of the Default?

 

Defaults have been registered after 6 years because the courts do not consider a default as enforcement and the fact that the money is still owed just not enforceable

[JonCris]

However there is an argument that to place a default on file after 6 years does amount to defamation &/or harassment

[UnitedFront]

JonCris, I'm sorry but can I respectfully point out that you are reading parts of my posts in isolation and not in the posts entirety. You're assumption that it is always from the last payment or written acknowledgement is wrong, and is not substantiated in the text of the Limitation Act.

 

I note also that you have still failed to point me in the direction of any part of the Act that agrees with you that it is the last payment always. Please do point me in that direction. If you can then I shall gladly admit that I am mistaken.

 

Please look at the part of my post that you have quoted - it is regarding S29 - i.e. what can RESET the clock and NOT what can be considered as the initial cause of action.

 

Just to simplify this:

 

When we say that a debt is Statute Barred, this is by virtue of section 5 Limitation Act 1980. This section is clear that it is the cause of action that the date begins from.

 

Now if we fast-forward to section 29, this deals with situations that can be considered to effectively reset the date of this cause of action.

 

For a debt to be Stat Barred, 6 years from the legal cause of action has to have elapsed. This, as far as the Act is concerned, is either from the initial cause of action or, more often, from the date of a payment or acknowledgement that (by virtue of S29) are considered to be the new date of the cause of action.

 

If a payment is missed and no further payments or acknowledgements are made, can you explain how the previous payment that was actually made can be considered a cause of action?

 

You keep talking about defaults etc and I can only assume that you are talking about defaults being issued on an account. The date that a Default Notice was issued on the account has no bearing on the status of a debt as far as S5 is concerned. A default notice being issued is not a cause of action insomuch as it is not a breach of contract giving rise to the right to litigate and, therefore, cannot be considered to reset the clock. Hopefully this clarifies the point raised by Harrassed Senior as well. I know many DCA's try this ruse, but it is utterly false.

 

Cheers

UF

Edited July 21, 2010 by UnitedFront

[UnitedFront]

Also please read the piece of my post #8 that you have quoted again, and note the entire line, namely "if any acknowledment or payment is received after this date ...... "

 

As in, after the date of the initial cause of action.

[JonCris]

The statute of limitations clock starts running on the date of last activity on your account. Typically this is the date you last made payment, a promise to pay, entered a payment agreement, or even acknowledged liability for the debt.

 

Generally, you can check your credit report for the last date of activity to figure out when the statute of limitations clock started.

Amongst mortgage lenders, there used to be considerable confusion as to how long they have to sue for the shortfall.

 

It was commonly thought that a mortgage, usually being by Deed, once the property is sold leaving a shortfall debt (cause of action) the lender had a further twelve years within which to claim the outstanding balance.

In two important cases, the courts have now confirmed that this is not the case: Bristol & West plc v Bartlett 2002 EWCA Civ 1181 and West Bromwich Building Society v Wilkinson 2005 1 WLR 2303.

Mortgage lenders have twelve years to sue for the outstanding principal under s20(1) Limitation Act 1980 and six years to sue for outstanding interest under s20(5). Time begins to run on the date to which the right to receive the money accrued and the fact that the property had sold and the mortgage discharged does not disapply s20.

In practice, time begins to run from the date of the last payment (bearing in mind that any part or full payment starts time running afresh).

 

The Society argued that it had commenced proceedings just inside the twelve years from the date of sale. The House of Lords held that the claim was out of time, and it should have commenced within twelve years of the date of the last payment.

 

Furthermore, if the borrower enters into communication with the lender in which, as a matter of constructions, he acknowledges the debt, (this could include a CCA request or even a SAR) he then extends the time for the lender to sue. Therefore very importantly all communication should be in writing and must be marked “Without Prejudice”. Bradford & Bingley plc v Rashid 2006 1WLR.

 

Important note: Any payment made by, say, the Benefits Agency, even if not expressly authorised by the borrower, revives the right for the lender to sue. Bradford & Bingley plc v Cutler 2008 EWCA Civ 74.

Edited July 21, 2010 by JonCris

[straftat]

Not to complicate things further but am I right in saying that if a DCA starts a court claim against you .... Let's say 4 years after your last payment then until the case is decided the Debt cannot become statute barred even if the Case took 10 years to reach a final verdict ?

[UnitedFront]

The statute of limitations clock starts running on the date of last activity on your account. Typically this is the date you last made payment, a promise to pay, entered a payment agreement, or even acknowledged liability for the debt.

 

Generally, you can check your credit report for the last date of activity to figure out when the statute of limitations clock started.

Amongst mortgage lenders, there used to be considerable confusion as to how long they have to sue for the shortfall.

 

It was commonly thought that a mortgage, usually being by Deed, once the property is sold leaving a shortfall debt (cause of action) the lender had a further twelve years within which to claim the outstanding balance.

In two important cases, the courts have now confirmed that this is not the case: Bristol & West plc v Bartlett 2002 EWCA Civ 1181 and West Bromwich Building Society v Wilkinson 2005 1 WLR 2303.

Mortgage lenders have twelve years to sue for the outstanding principal under s20(1) Limitation Act 1980 and six years to sue for outstanding interest under s20(5). Time begins to run on the date to which the right to receive the money accrued and the fact that the property had sold and the mortgage discharged does not disapply s20.

In practice, time begins to run from the date of the last paymen[/u]t (bearing in mind that any part or full payment starts time running afresh).

 

The Society argued that it had commenced proceedings just inside the twelve years from the date of sale. The House of Lords held that the claim was out of time, and it should have commenced within twelve years of the date of the last payment.

 

 

JonCris, have you actually read the Wilkinson Judgment as reported?

 

Please allow me to quote Lord Scott of Foscote at para 29:

It follows that, in my opinion, the mortgage money outstanding became due and payable by Mr and Mrs Wilkinson one month after they had made default in paying a monthly instalment. For the purposes of the Limitation Act 1980, whether section 8 (an action on a specialty) or section 20 (an action to recover a principal sum secured by a mortgage) time, therefore, had begun to run well before 9 October 1989 when the society took possession of the house with a view to its sale. It follows, also, that the building society's claim in this action, which was commenced on 12 November 2002, is statute-barred.

 

I note that the reference to the one month after the couple defaulted on payments is not a general rule, but rather a part of the clause of the charge on property brought about as part of the mortgage concerned.

 

Further I point out again that there is a difference between the couple defaulting on their payments, and a default notice being issued.

 

I'm really quite intrigued as to where you gathered your perception that their Lordships had deemed the time limit to run from the date of the last payment? I've read this Judgment many times previously and at no point do their Lordships make any such statement.

 

Cheers

UF

[UnitedFront]

Straftat, that's the situation as I understand it also.

 

Cheers

UF