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

[Wolf]

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?

[leclerc]

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

Hang on, how long exactly did they contact you?
Do you have paperwork with regards to the fact that the matter is closed?

You are 100% correct re the Limitations Act

[Wolf]

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

Hi Leclerc,

The letter was in 2003 and they next contacted me in 2010.

I have a letter giving the details of the amounts at that date, which included costs and interest and overpayments, which balanced each other out. The only outstanding amount was the legal & documentation fee, which is non interest bearing and we were told we could pay at any time, but we haven't yet but will pay this once this is sorted out.

[WendyB]

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

Was this a mortgage? If so, they do have 12 years to chase it, I believe, but I can't find the reference to back this up....I'm sure someone will oblige and put it it here.

[leclerc]

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

Was this a mortgage? If so, they do have 12 years to chase it, I believe, but I can't find the reference to back this up....I'm sure someone will oblige and put it it here.

Limitation Act 1980
Section 1 part 15

[Wolf]

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

Was this a mortgage? If so, they do have 12 years to chase it, I believe, but I can't find the reference to back this up....I'm sure someone will oblige and put it it here.

It was a secured loan, not a mortgage.

[WendyB]

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

As a secured loan is a second charge on the property, could it not be construed as a "mortgage", or that they are taking it as a mortgage for the purpose of making sure it's not counted as time-barred in this instance? No doubt someone will come along who can clarify this.

[Wolf]

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

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.

[CleverClogs]

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

Perhaps the company could claim an extension under section 28, the relevant disability being cephalo-proctal intromission?

The only sensible suggestion I can make is to send the putative ombudsperson at the Fobbing Off Service a copy of the Limitation Act 1980 with sections 20 (1) and 20 (5) highlighted and the comment in the accompanying letter that the costs and interest allegedly still owed are not and never were part of the principal sum of money borrowed.

[Wolf]

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

The only sensible suggestion I can make is to send the putative ombudsperson at the Fobbing Off Service a copy of the Limitation Act 1980 with sections 20 (1) and 20 (5) highlighted and the comment in the accompanying letter that the costs and interest allegedly still owed are not and never were part of the principal sum of money borrowed.

I did send them a copy highlighting the relevant sections but they either ignored it or don't understand it.

[TUTTSI]

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

Fom a site called debt advisors direct - I thought it explained it rather well.



Diamonds are forever, but debts can become unenforceable

29/02/2008

Everyone knows: when someone borrows money, they have a responsibility to make sure it is repaid. But not everyone knows that the creditor shares that responsibility.

The Limitation Act 1980 states that most debts can become ‘statute barred’ after 6 years (12 years for mortgages and secured loans). This means they become unenforceable – you still owe the money, but the creditor can no longer take action to recover it.

This can only happen if:

• the creditor hasn’t contacted you (at your last known address) or taken action (e.g. court action) in that time
  and
• you haven’t made payments or acknowledged the debt in that time.

The Debt Collection guidance from the Office of Fair Trading (OFT) states that it is unfair for creditors to tell you the debt is still legally recoverable if it isn’t – or to push for payment if you’ve already disputed the debt and cited the Limitation Act. If a creditor does either of these, you should complain to the local Trading Standards Department or to the OFT.

However, please note that the Limitation Act 1980 contains various exceptions and a great deal of complicated legal terminology. If you think it might apply to one of your debts, it’s essential you seek advice from a debt specialist, so you can be sure you’re saying the right things and staying within the law.

6 years for most debts
Most debts can be declared statute barred if they’re left ‘untouched’ for 6 years. You may be surprised to hear that this includes Community Charge or Council Tax debts.

An example:
Imagine you took out a personal loan 10 years ago, but stopped making repayments after 3 years. Since then, you’ve not contacted them and they’ve not contacted you, even though you’ve not moved house. Then, yesterday, a letter arrived on your doormat requesting payment.

Since they’ve left it for 7 years, the debt is probably unenforceable – but you can’t simply ignore it. It’s up to you to seek debt advice and dispute the debt on the grounds that the Limitation Act 1980 means you no longer owe the money.

Note that the 6-year period can ‘reset’. In this example, if you’d contacted your creditor in 2006 and admitted the debt, the Limitation Act 1980 would not apply until 2012.

Exceptions to the rule
If a creditor has been granted a County Court Judgment (CCJ), the debt will still be enforceable, with the court’s permission, even if it’s more than 6 years old. But if the creditor got the CCJ after the debt itself had become statute barred, you can ask the court to set it aside.

The Department of Work & Pensions (DWP) has just 6 years to recover benefit overpayments and social fund loans through the court. But they don’t have to go to court to deduct money from benefit payments they make to you, so they can do this even if the debt is over 6 years old.

Student Loans are an unusual case, as they changed in September 1998. Any Student Loan taken out before this date was a consumer credit agreement, which means the Limitation Act 1980 applies. But any Student Loan taken since then is an ‘income contingent’ loan – so repayments can be deducted from your wages without any court involvement, regardless of how old the debt is.

Income Tax and VAT (Value Added Tax) debts never become unenforceable, however old they are.

A real-life mortgage story
Mortgages and secured loans cannot become statute barred until 12 years have passed – but this can happen, as illustrated by the following real-life story.

A Stockport man hadn’t paid anything to his mortgage since 1993 and was later declared bankrupt. His bank had not taken any action since 1992, and in March 2007 a judge accepted that his mortgage was ‘extinguished’.

The Limitation Act 1980 meant that the bank’s right to enforce the mortgage was ‘barred’. The bank had allowed more than 12 years to pass without taking legal action, so the property became legally his.

[WendyB]

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

Have the FOS actually explained why they think it's 12 years? Under what section of the Limitation Act are they deeming it 12 years?

[Caspar]

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

I hadn't read this thread before, but I wonder if the apparent conflict of the legal position arises from us mis-reading what was quoted in post one.

That post quotes the Limitiation Act as stating:

"no action to recover arrears of interest payable shall be taken....."

Note arrears of interest. It does not mention anything about the actual capital borrowed. I suspect for the interest it is 6 years, and for the actual capital sum it is 12 years.

Read more at: How long does a company have to inform you of an error - Legal Beagles Consumer Forum

[Garlok]

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

I understood from our solicitors that it is irrelevant about them contacting you about a debt. As long as you have not paid anything towards the debt nor made any form of payment nor acknowledged the debt then the debt becomes Statute barred after 6 years in England and Wales, after 5years in Scotland and under the Lisbon Treaty after three years in many EU countries.

If the issue of contacting you (the alleged debtor) applies as stated above then no debt would ever become Statute barred in the UK.

The exceptions are mortgages on property, certain secured loans and debts on which a county court judgement has been obtained. which pushes it all out to 10 and 12 years.

There is a grey area compounding the issue which is where a personal guarantee on for example a business loan or overdraft and the question being is that secured or unsecured?

My limited and non extensive reading of the Limitations Act 1980 seems to confirm this.

regards
Garlok

[Wolf]

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

Have the FOS actually explained why they think it's 12 years? Under what section of the Limitation Act are they deeming it 12 years?

That's a good question and they never gave any reason for their answer. I will definitely have to ask them.

Someone has suggested quoting section 29 of the limitations act with regard to what is required to make it statute barred to show that the letter sent is irrelevant.

Thanks for all your input.