Debt collection statute of limitations

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Helene Mueller
eCollect support team

A statute of limitations on debt collection serves as an attribute for the default collection of time-framed debts and the acts, defining the same frames. The laws, controlling DCA’s (Debt Collection Agency) recovery process of time-barred debts, are called statutory laws and determine different expiry dates, depending on the country. The statute of limitations for debt collection generally represents a specific deadline for filing legal procedures by the creditor or the DCA (Debt Collection Agency), hired by him. Debt recovery statute of limitations refers to recovery attempts of debts, which are out of date. These debts are called statute barred or time-barred.


Debt collection statute of limitations- general information

A statute-barred debt is considered as unenforceable when its limitation period has passed and the amount has become too old to collect. Although such debts are considered uncollectible, the creditor or the debt recovery agency acting on his behalf, have the right to call the debtor and remind him of the outstanding payment, but they cannot proceed with legal or court actions.

Debt recovery statute of limitations is strictly regulated and controlled by government legislation acts and laws, which set a specific limitation period for each type of debt (individual, commercial, unsecured and secured). Within this period the first party (creditor) has to make attempts to recover the amount due from the second party (debtor). Before the period has passed the same lender has the legal right to enforce fair collection process, even to seek court assistance. If, however, the creditor hasn’t tried to contact the subject of debt in any way, regarding the amount due, and the time-frame for debt collection statute of limitation has expired, the creditor or the DCA, hired by him have no legal right to prosecute further debt collection. When statute barred debt’s limitation period elapses, all court claims filed by the creditor after this time-frame, are considered as invalid and the debt- as uncollectible or unenforceable. If they try to collect the debt amount after the limitation period has passed, it will be considered as an unfair and harassing practice. However, even if the time limit for collection the debt has expired, the case is still visible in debtor’s credit report file.

Statute of limitations on debt collection for the UK, Wales, Scotland & Ireland

In UK and Wales, the Limitation Act 1980 (ext. link 2) controls and determines debt recovery statute of limitations of different time-barred debts. It determines the exact period, in which the creditor has to undertake debt recovery actions in order to collect the delinquent amount from the indebted subject. According to the Limitation Act, the time-frame for standard and simple unsecured debts is six years, starting from the date of breaching the contract between creditor and debtor on behalf of the indebted subject. The same act states that a debt is generally considered as uncollectible when the lender hasn’t attended any CCJ- Country Court Judgement, against the debtor; or hasn’t tried to contact the consumer (in writing or orally) during the allowed time frame. Verification of different debt collection issues and fair debt collection practices can also be found in the Financial Conduct Authority’s documentation. Secured debts (mortgages, secured loans or any type of debt, followed by a collateral) turn into unenforceable twelve years after the violation date of the contract between the two parties (creditor and debtor).

The statute of debts’ limitation in Scotland is set by the Prescription and Limitation (Scotland) Act 1973 (ext. link 3). Unsecured debts like credit card purchases, student loans, unpaid memberships, and other debts, not followed by a collateral, become unenforceable after five years. After this period the statute of limitations is considered as passed and debt collection cannot be legally enforced anymore. Council taxes debts in Scotland can be pursued for up to 20 years.

For residents and debtors of Ireland, the Statute of Limitations (Amendment) Act 1991, and the Statute of Limitations 1957 apply (ext. link 4 and ext. link 5). According to these acts, unsecured debts become void by prescription after six years, and debt collection company’s interest rate cannot be requested from the DCA after these six years as well. Secured debts and court judgments are valid for up to 12 years.

Statute of limitations on debt collection U.S.

In the United States, there are different limitation periods for time-barred debts, depending on different states. All U.S. collection agencies, however, act and collect in compliance with the FDCPA- Fair Debt Collection Practices Act (ext. link 6). Any violation of debtor’s rights regarding harassing recovery attempts after the limitation period of a default is considered as a law violation of the FDCPA.

The limitation statute of debts for U.S. states according to the Fair Debt Collection Practices Act (source:
http://www.fair-debt-collection.com/sol-by-state.html#11
) are as following:

4 years from the time of contract’s disaffirmation (for written contracts) and 2 years (for oral contracts) in California; 8 years in Montana and three years in North Carolina, both for secured debts; 10 years for secured and 3 years for unsecured debts in Alaska, etc. debt collection statute of limitations


Used literature & external links

http://books.google.co.uk/books?hl=de&lr=&id=7-YOAwAAQBAJ&oi=fnd&pg=PA1&dq=debt+statute+of+limitations&ots=ZhPHwYU7RX&sig=IuNQSrrChc-ENUA5MQUGxMw93rM#v=onepage&q=debt%20statute%20of%20limitations&f=false
 

http://www.legislation.gov.uk/ukpga/1980/58/contents
 

http://www.legislation.gov.uk/ukpga/1973/52/contents
 

http://www.irishstatutebook.ie/1991/en/act/pub/0018/index.html
 

http://www.irishstatutebook.ie/1957/en/act/pub/0006/index.html
 

http://www.business.ftc.gov/documents/fair-debt-collection-practices-act
 

http://www.leginfo.ca.gov/cgi-bin/displaycode?section=ccp&group=00001-01000&file=335-349.4