The direct lending agencies have become the preferred choice of borrowers rather than to try borrowing at regular banks or Govt. sponsored financial institutions. The private loan stores don’t bother much about borrower’s repayment record, but they peep into the credit history essentially. The offered interest rate depends upon the credibility of a borrower. Each lending by a bank or direct lender is made with a high expectation of on the time repayment, but high numbers of borrowers fail to do it because of various reasons; some of which are valid also.

Foreseeing the Failure to Repay:

Whenever you expect the problem in paying back the debt as per schedule, contact the lender immediately. Most financial problems come with prior indications; and, you must acknowledge and respect these. All the lenders are always ready to alter the repayment schedule, terms and conditions but these changes cost you more. However, paying higher is good than not paying the debt at all to face severe outcomes. If you fail repeatedly, lenders initiate the process of withdrawing directly if they are powered. In parallel, they inform and warn though many routes including direct calling and through legal notice. The last step is to hand over the recovery to a debt collection agency that can take all the possible severe actions like registering a case.

How Long Can A Lender Chase The Borrower?

Limitation Act 1980 defines that a lender can chase the unsecured lent amount for a maximum of six years; the secured mortgaged loans can be chased for maximum twelve years. The ‘limitation of chasing period’ starts from the date of last payment made or the borrower’s acknowledgement of pending dues. The chasing limitation period is never counted from the date of borrowing neither it includes the period when the payments are made against the dues. There is no limitation period for CCJ. There is slight relief for Scottish borrowers because the lender can’t ask for repayment after five years unless the local court has ordered Decree before the end of five years limitation period.

When Can A Lender Act Under Limitations Act 1980?

The act clearly defines that that in case of following conditions, debt can’t be enforced:

  • The lender has not registered County Court judgment (CCJ) to sue you
  • You or any other person have not paid the dues in last 6 or 12 years
  • You didn’t accept the pending debt in writing during 6 or 12 years.
  • You didn’t sign an informatory letter from the lending agency. However, in particular cases, email can also be considered as the written acknowledgement of pending dues.

Any letter from 3rd party sent on behalf of you with your permission is considered as your written acknowledgement. The Financial Conduct Authority (FCA) says that it is not fair to pressurise the borrower to pay the statute-barred / extinguished debt in case the borrower has already told that he/she doesn’t intend to repay it. Once the borrower has shown the expiry of limitation period and says that he/she won’t be paying back the dues, FCA registered lender must stop calling or contacting the borrower. This rule applies to most of the loan types including store card debt, payday loan, personal loan, overdraft etc. The downside is that although the lender can’t legally pressurise to repay after the limitation period, the debt exists in records.

Statute Barred Debt:

Statute barred debt refers to the not enforceable debt; it is the debt with a time that a lender has to follow up. It is outlined in Limitation Act 1980. Admittedly, the act doesn’t encourage the borrowers for not paying the debt. If the debt is not statute barred, the Limitations Act is not applied. To assess since when your debt has become or will become statute-barred, look at the most recent development in your knowledge to add the stated limitation period as per particular loan category. Sometimes, non-enforceable loans are chased by registered debt collection agencies; so, knowing your debt’s status helps the plan strategically better.

  • For most of the debts and bills types in Wales England, the legal period for the follow-ups of debt is six years.
  • The recovery of tax, VAT, duty, or the interest related the taxes are not covered by Limitation Act 1980; therefore, there is no time limit to recover the dues even after ten years.
  • The National Insurance is not treated as the tax; therefore, the pending due can be recovered within six years.
  • The limitation period for social fund loans and benefit overpayments is six years.
  • The limitation period for a student loan is six years.
  • From 12 July 2006 onward, CSA – Child Support Agency or the CMS – Child Maintenance Service can be applied for liability order without any time limit.
  • If you hold a debt issued to joint names, it means the lender can follow up either of both or both for the full amount paid. You don’t owe only 50% of the total debt.
  • The limitation period for mortgage loans is twelve years for the capital amount and six years for the interest amount part.

Concluding Note:

Whatsoever you owe, you should pay it on time. If you fail to pay it on time, you should request for the change of schedule with an extended repayment period. The borrowers’ protection rules are made to protect them from undue pressures and harassing tactics by the lenders, but these laws never encourage for not paying. True most personal loans can’t be recovered after the 6 years but these remain on your credit report to make you defaulter candidate for borrowing in future.