Updated - Statute Barred Debt - A guide and letters to use.

[Curlyben]

Main Players

Well the main players in this game that purposefully buy blocks of Statute Barred debts are:

• Lowells (who tend to use their RED debt arm)
• Mackenzie Hall (who buy alot of unenforceable debt)
• Thames Credit

Others also buy or are passed SB'd debts, but not in the same manner of the above.
Now bear in mind these debts are bought in large blocks for absolutely peanuts, normally without any supporting paperwork, simply names, addresses and amounts due.


The Law

Time limit for actions founded on simple contract
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.

Law relating to debts: statute-barred debts

If a lender allows time to pass without receiving any payment an action for recovery may become barred.

Under the Limitations Act 1980 s5 the time limits are

• simple contracts (credit cards, loans, etc.), 6 years
• contracts under seal (mortgages), 12 years.

If the debtor acknowledges the debt in writing or makes a part payment within the original limitation period, then the time limits start to run again from the date of acknowledgement or the date of payment.

Even though the lender may be barred from pursuing recovery, a debtor may decide to pay the debt after the expiry of the time limits. Because of this you should allow a debt which is otherwise statute-barred if the personal representatives pay the debt and you receive evidence that the payment has been made.

The above instructions do not apply to debts in Scotland. Under Scottish law, if a lender allows time to pass without receiving any payment an action for recovery may become barred under the Prescription and Limitation (Scotland) Act 1973. (For details of this Act see Gloag and Henderson 10th edition at Chapter 15.). These debts are completely extinguished and cannot be enforced. Once the prescriptive period expires the debt cannot be allowed as a deduction.

To sum up, basically once a debt becomes statute barred it is up to the debtor whether or not they wish to pay the debt. A debt can not become unstatute barred.

Now you may notice that this only covers credit cards, loans, etc (CCA s77-79) and mortgages, any government debts, eg council tax, VAT, income tax or benefit overpayments are NOT covered. Also NOT included are any court judgements, although it could be argued that as the creditor or government department hasn't contacted you to demand payment in this time then it does apply. Of course this assumes that you haven't be simply avoiding the debt in the first place. If that can be proven beyond doubt then protection from this Act evaporates, similar to the angle we use to claim prior 6 year charges.

The whole Act can be found here: Limitations Act 1980

The Limitation Act stops any legal action being taken after the time limit expires.
It doesn't stop DCA's requesting payment for as long as they want, although once the debts status and your decision NOT to pay has been established then they MUST back off.
This is outlined in the OFT Debt Collection Guidelines sections 2.13 and 2.14here: OFT Debt Collection Guidelines

[Curlyben]

Re: Right time for a new write up ....

The Approach

Now DCA's use various different approaches with Zombie debts, but the most wide spread is the Phishing letter.

I have attached a Lowells example of these.

Basically they ask you to confirm that you lived at a certain address. Now it is NOT your job to give the DCA's ammunition to use against you.
In fact this type of approach breaches the OFT collection guidelines, under the heading of Deceptive and/or unfair methods.

The main part is

sending demands for payment to an individual when it is uncertain that
they are the debtor in question, for example, threatening debt recovery
action to 'the occupier' or sending a payment demand to all people sharing
the same name/date of birth as a debtor in the hope that contact with the
correct debtor will be made.

[Curlyben]

Re: Right time for a new write up ....

First Response

Now there are a number of opener letters available to deal with these zombie debts, for example

Your Address

Date

Company Name
Address


Dear Sir/Madam

Ref: Your Reference

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

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.”

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 payment of this alleged 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 us in the relevant period under Section 5 of the Limitation Act, we suggest that you are no longer able to take any court action against 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 statute barred could amount to harassment contrary to section 40 (1) of the Administration of Justice Act 1970”.

We await your written confirmation that this matter is now closed and that no further contact will be made concerning the above account after that last letter.

We look forward to your reply.

Yours faithfully

Your Name

as well as another here: Legal Beagles

I would head any of these letters in a similar way to a CCA request: I DO NOT ACKNOWLEDGE ANY DEBT TO YOUR COMPANY. This makes your position clear from the outset.
Now personally I can't see any reason to mark these letters WITHOUT PREJUDICE, as if it went to court, due to the DCA being overzealous, you would want to present this for the courts attention.

Now from here on in it is the DCA's duty to prove that this debt is indeed valid and enforceable with court action. Now there is nothing to stop them requesting payment, but once you have made your position clear they should back off.

[Curlyben]

Re: Right time for a new write up ....

Oooops that double posted.
No matter, swift edit will fix that.

So what happens next ?

Well this really depends on the DCA and also whose desk it lands on.
Some act correctly and cease all collect activities, even though they may not acknowledge your letter. Some may even acknowledge your letter and inform you they are ceasing collection activities on financial grounds, nothing to do with the law. Either way, Happy days

Others continue to press for payment and normally try to bluff with some pseudo legal jargin, normally concerning the Law of Property 1925.
This has absolutely NO bearing on these debts at all. How the DCA purchased the debt is not your concern as it is Statute Barred. If they are silly enough to but old zombie debt, then that's their look out.

So IF they do come back time to hit them with a stronger LBA.

I DO NOT ACKNOWLEDGE ANY DEBT TO YOUR COMPANY

Dear sir/madam,

Thank you for your letter of the DATE, the contents of which have been noted.

I refer you to my letter of DATE, in which my position was clearly described. To reiterate, you were informed that this alleged debt is Barred under Statute in accordance with Section 5 of the Limitation Act 1980. I have included a copy of this original correspondence for your perusal and ease of reference.


As your letter contests that this is the case, it is now your legal obligation to substantiate your claims and to prove that this alleged debt is indeed enforceable and not barred by statute.

You should be aware that I am fully familiar with the Office of Fair Trading Debt Collection Guidance, which states that it is unfair to mislead debtors as to their rights and obligations by falsely stating or implying that the debt is still legally recoverable and continuing to press for payment after a debtor has stated that they will not be paying a debt because it is statute barred.

Furthermore that if you are unable to substantiate your claims then your behaviour will be considered harassment contrary to section 40 (1) of the Administration of Justice Act 1970, and may result in my choosing to pursue action against you.
As was stated in my last letter, any attempt to contact me by telephone regarding an alleged debt is an offence under section 127 of the Telecommunications Act 2003.

In addition, I hereby demand that you now supply me with information regarding your complaints procedure. Failure to comply will result in the complaint being escalated to the Financial Ombudsman Service, who will charge you for investigating my complaint.

Finally, I expect no further contact be made concerning the above account unless you can provide clear evidence as to my liability for the debt in question, or your written confirmation, within 14 days, that this matter is now closed.

It should also be noted that we will be contacting Trading Standards concerning this matter.

Ignoring this letter and continuing to press for payment will not resolve this matter.

We will not hesitate to pursue this matter with Trading Standards and the OFT, additionally we will seek immediate legal advice should you continue to press for payment, as we feel this may constitute harassment contrary to section 40 (1) of the Administration of Justice Act 1970, as well as the Protection from Harassment Act 1997.

I would appreciate your due diligence in this matter.

I look forward to hearing from you in writing.

Yours faithfully,

and the Scottish version

Letter Before Action

Dear Sir/Madam


Account reference: XXXX


Thank you for your letter of the DATE, the contents of which have been noted.

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

We would like to point out that under the Prescription and Limitation (Scotland) Act 1973 Part I, Section 6,
“If (an appropriate debt) has subsisted for a continuous period of five years -
a) without any relevant claim having been made in relation to the obligation, and
b) without the subsistence of the obligation having been relevantly acknowledged,
then as from the expiration of that period the obligation shall be extinguished…”

Unless you can provide evidence of payment or written contact from us in the relevant period under Part I, Section 6 of the Act, I suggest that you are no longer able to take any court action against us to recover the alleged amount claimed.

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 payment of this alleged 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 us in the relevant period under Section 6 of the Prescription and Limitation (Scotland) Act 1973, we suggest that you are no longer able to take any court action against 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 statute barred could amount to harassment contrary to section 40 (1) of the Administration of Justice Act 1970”.

We await your written confirmation, within 14 days, that this matter is now closed and that no further contact will be made concerning the above account after that last letter.

We also insist that you supply a full written copy of your complaints procedure..

It should also be noted that we will be contacting Trading Standards concerning this matter.

Ignoring this letter and continuing to press for payment will not resolve this matter.

We will not hesitate to pursue this matter with Trading Standards and the OFT, additionally we will seek immediate legal advice should you continue to press for payment, as we feel this may constitute harassment contrary to section 40 (1) of the Administration of Justice Act 1970, as well as the Protection from Harassment Act 1997.

I would appreciate your due diligence in this matter.

I look forward to hearing from you in writing.

Yours faithfully,

So that should put paid to these zombie.
IF they continue without supporting evidence, then cease all communications and take this matter up with Trading Standards, OFT, FOS and Auntie Mable

[Celestine]

Re: Statute Barred Debt - A guide and letters to use.

Just wanted to add this from the DCA's horses mouth so to speak!

http://www.csa-uk.com/media/editor/f...red%20debt.pdf

So helpfully provided by the Credit Services Association!



Statute Barred Debt... To collect or not to collect, that is the question?!
Lets set aside the issue of the proposed reduction to the limitation period for a moment and give a little focus on the actual collection of Statute Barred debt.
Thanks to my nemesis, the Consumer Action Group website, there is a lot of misinterpretation of statute barred debt, what can and cant be done and the rights of the consumer and DCA.

And to make matters worse the Office of Fair Trading seem to have misinterpreted the law also...
If you are in the process of renewing or varying your Consumer Credit Licence you will be aware that part of the process is to complete a Credit Competency Plan (CCP1).
Question 41 of the CCP1 form states:

Do you have systems in place to ensure that you do not collect statute barred debt?
You can imagine the kind of feedback I am receiving from members regarding this, a few even taking the step not to touch statute barred accounts to avoid action by the OFT!
So, to set at ease those members, and to provide a clear picture on the misinterpretations, below is some important clarification:
The OFT have confirmed that the wording of this part of the CCP is inaccurate. The wording will be updated when the CCP as a whole is revised and we will be updated on timings in due course.

Under the Limitation Act 1980, which applies to England and Wales, a debt is considered to be statute barred when no payments have been made against it or where it has not been acknowledged* for six years. In Northern Ireland, statue barred debts are governed by the Limitation (Northern Ireland) Order 1989. In Scotland, statute barred debts are governed by the Prescription and Limitation (Scotland) Act 1973 which states that the debt itself ceases to exist after five years providing that it has not been acknowledged and that no relevant claim against it has been made by the creditor.
*For clarification purposes, acknowledgement is either acknowledgement made in writing or a payment received against the debt. Once acknowledgement is received, this re-sets the limitation period.

Whilst the OFT accepts that the debt still exists, the OFT considers that it can be unfair to pursue the debt in the circumstances set out in their Debt Collection Guidance (section 2.13 and 2.14a and b), and it is the methods in which the debt is attempted to be collected that can cause concern to the OFT.

In essence, providing you work within legislation and guidance, collection of statute barred accounts is a legitimate activity. However, if your debtor has stated that they will not be paying a debt because it is statute barred, these accounts should be closed and your records updated appropriately. This will reduce the number of accounts that could be placed back out for collection or sale, which in turn could lead to complaint and create further issues for the industry in this area.

If you have any queries regarding this, please contact Claire Aynsley, Head of Membership & Compliance on 0191 2718043 or claire@csa-uk.com


Thanks Claire