How long does a company have to inform you of an error

[safari]

I had a secured loan where there were arrears, which led to extra costs and interest. The arrears were paid off and I received a letter detailing the outstanding amounts and showing that all the costs and interest had been paid. Then six years later they contacted me to say that there had been an error and wanted an extra £1,000 in costs and interest. I have taken this to the ombudsman who seems to think that it is ok for them to ask for this. I feel it is wrong that they can wait so long before informing me of the error. Am I fair in thinking this?

This is the first stage with the ombudsman so I can still appeal this, which I will.

 

I also believe that the interest is statute barred, but the ombudsman says that they have 12 years to chase it. The limitation Act 1980, section 20 states:

“(5)Subject to subsections (6) and (7) below, no action to recover arrears of interest payable in respect of any sum of money secured by a mortgage or other charge or payable in respect of proceeds of the sale of land, or to recover damages in respect of such arrears shall be brought after the expiration of six years from the date on which the interest became due.”

Am I reading this wrong?

[DonkeyB]

Was it just a normal loan, and was it the subject of a CCJ?

[safari]

Just a normal secured loan, no defaults, CCJ's etc, just a few months arrears which were paid off with an agreed plan.

[DonkeyB]

Has it been a full six years since you made what you believed to be the final payment? If so, I believe the FOS is wrong, and the debt is SB. The 12 year exception normally applies to mortgages etc.

 

The FOS is right in that they CAN ask for it – but you can refuse to pay on SB grounds. SB debts do not disappear – they just cannot be collected and, by the very fact that they are over six years old, cannot be recorded on your credit file.

[DonkeyB]

Also, did the T&Cs in the loan allow for costs to be added to the account?

[nicklea]

safari,

 

Your understanding is correct. Probably the reason why the ombudsman said 12 years is that they can come after the principle sum for upto 12 years but, as you correctly say, they can only claim any arrears of interest for 6 years.

[safari]

Thanks DonkeyB and Nicklea. I'll have to inform the fos of their error and hope they correct it. I just assumed that the fos knew what the law was regarding statute barred!!

 

The T&C did allow for costs to be added.

 

The FOS is right in that they CAN ask for it – but you can refuse to pay on SB grounds. SB debts do not disappear – they just cannot be collected and, by the very fact that they are over six years old, cannot be recorded on your credit file.

 

The fos said that they believed that the company could ask for the money because the fos didn't feel that it was statute barred.

[safari]

Update

 

I received a reply from the ombudsman who, despite me having sent them a copy of the limitation act and highlighting the appropriate section, still feels that a company has 12 years to chase you for arrears of interest. What other evidence can I send them as they apparently do not know the law, or what can I tell them to convince them that they only have 6 years?

 

It amazes me that with the evidence in front of them in black and white, they still chose to either ignore it or haven’t got a clue about what the limitations act says.

 

Any ideas appreciated.

[watchinginvestigation2011]

I had a horrible feeling when I read this and the 12 years. I thought that was right too though a nasty side efffect of it being linked to a mortgage, as chasing linked to mortgage I was told my money advice years ago was indeed 12 years re mortgage or loans secured on it xx

 

Though to be fair I bet it is a little known fact.

 

Definately unfair if it was their error, you would hope they would be as a company too embaressed to chase such an error after such a long time.

 

If its a bank would watchdog help to raise the issue re such glaring errors can slap someone in the face years later when tax payers are expected to promptly help the banks out for theirs xx

Edited May 19, 2011 by watchinginvestigation2011

[DonkeyB]

Indeed, we know about 12 years for a mortgage... but this is not a mortgage!