The Limitation Act 1980 sets out the rules on how long a creditor has to take action against you for a debt. This Article describes the types of debts it can be used against, and contains an example letter to creditors.
This would include credit cards, store cards, bank and building society personal loans, catalogues, finance company loans etc. You may have had a debt with an ordinary unsecured creditor that you have not heard about for a very long time. You may have moved address or thought the debt had been written off.
Out of the blue a letter arrives from the original creditor or a debt collection agency asking you to make a payment.
You can argue that the creditor is out of time or “statute barred” from taking you to court for this debt:
* The creditor has not already obtained a judgment against you
* 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
* You have not written to the creditor admitting you owe the debt during the last six years.
What you Can Do
You can use the sample letter below to write back to the creditor telling them about the Limitation Act and disputing that you owe the debt. Keep a copy of any letter you send. 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.
Note: 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.
If you have started to make payments on a debt where there was more than a 6 year gap then it is probably unenforceable.
OFT Debt Collection Guidance
The Office of Fair Trading (OFT) has issued Debt Collection guidance which looks at whether a debt is being collected fairly. It 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 be 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 this happening then you can complain to your local Trading Standards Department in the council. They can take up your case for you. You can also complain to the OFT. 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.
County Court Judgements
If the creditor has been to court and there is a County Court Judgment outstanding, then you cannot use the Limitation Act to dispute you owe the debt. It does not matter how many years ago the creditor went to court, the County Court Judgment will still exist. However, the creditor may not be able to enforce the Judgment without the court’s permission if the Judgment is over six years old.
If you think the creditor has been to court and got 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. We have a factsheet on “Setting Aside a Court Judgment in the County Court”.
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. We have a factsheet on “credit reference agencies”
If your mortgage lender is chasing you for a debt left over when your house was repossessed or sold the situation is rather different. Mortgage lenders have 12 years to pursue you rather than 6 years.
Income Tax and VAT
There is no limitation period on debts to the Crown. You can always be pursued for tax and VAT.
Benefit Overpayments & Social Fund Loans.
The Department of Work & Pensions (DWP) are still allowed to make deductions from your benefit for a debt over 6 years old as they don’t need to go to court to do this. This applies to overpayments of benefits such as Income Support, Job Seekers Allowance, Housing Benefit, Council Tax Benefit and paying back Social Fund Loans.
Office of Fair Trading
The Office of the Information Commissioner
Sample Letter invoking Limitation Act
Name of Creditor
Address of Creditor
Account No/Reference 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.”
The last correspondence / payment / acknowledgement 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.
(Optional – add details of your circumstances and financial situation)
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.