Statute barred debt
For a debt to become statute barred, there should have been no payments made and no written acknowledgment of the debt during the period.
For most unsecured debts, the period is six years in England and Wales, five years in Scotland.
It is a common misconception that there has to be no contact whatsoever between the debtor and the creditor, leading some people to ignore their creditors to avoid resetting the clock. Unless you specifically write something that constitutes acknowledgment of the debt (or make a payment), maintaining contact with your creditors does not reset the clock.
The period starts to run from the cause of action. This means when the creditor would be able to take you to court for not paying, and is usually after at least one missed payment.
It is often thought that the period starts from the date of the last payment made (provided there’s been no written acknowledgment), however, a creditor would have no cause to take action during the first few days or weeks following your last payment as they would have no way of knowing you would miss the next payment. This means the period may start a little later than you’d thought.
As a general rule, if your last payment was a contractual payment before you defaulted on the account, the clock would start to run from the day after your next missed payment. However, if your last payment was after you defaulted, such as a DMP, token or reduced payment, in that case it could be argued the clock would start from the date of your last payment.
For overdrafts, the cause of action is when the bank recalls the overdraft, which can be several months after the last payment into the current account was made. You will know when this happens because the bank will issue a final demand for the repayment of the overdraft. For small overdrafts made largely of charges, it can take a very long time for the bank to decide to close the account and recall the overdrawn amount, sometimes even years.
For short-term loans such as payday loans, the cause of action could be right after the repayment was due.
These are the most common and include things like credit cards, bank loans, payday loans, catalogue accounts, overdrafts, utility bills from previous addresses, old mobile contracts and debts for services. The limitation period is 6 years in England and Wales and 5 years in Scotland, provided they haven’t obtained a CCJ or decree against you. In England and Wales, the debt still exists after 6 years, while in Scotland the obligation becomes extinguished.
The cause of action would normally be after 2 or 3 missed payments. As a general rule, the limitation period would be:
Section 7.15 of The FCA Handbook states that a firm should not carry on pursuing a debtor after he has stated that he will not be paying a debt because it is statute barred.
If you are being pursued for a debt you think it’s statute barred, you should write to the creditor stating this fact.
The onus is on the creditor to prove otherwise, for example, by showing proof of payment less than 6 years ago (5 in Scotland).
The time limit for actions based on simple contract applies to most consumer credit products except secured loans and mortgages.
S.6 of the Act applies to bank account overdrafts because, unlike most other forms of credit, they don’t have set repayment dates.
In Scotland, debts subject to the Act are extinguished after five years, that means that, unlike in England and Wales where he debts still exist despite being non-recoverable through the courts, in Scotland they no longer exist.
If you are being pursued for a debt you think it’s statute barred due to not having been paid or acknowledged during the relevant limitation period, you should write to the creditor saying so.