Form what date will limitation run for breach of a consumer credit agreement? (UK law only)?

Question

Assuming that the loan is unsecured, and the consumer ceases making payments to his lender, does limitation run from:

1. When a cause of action accrues by which the lender could make a claim to recover the any part of the debt (i.e. the first time the consumer is sufficiently in arrears to allow a court action under the agreement)

2. When a cause of action accrues by which the lender could make a claim to recover all the debt remaining on the loan (i.e. in a fixed term loan the date of the final payment, if the borrower does not pay, or the date on which the lender terminates or could terminate the agreement)

3. Whenever the debt is acknowledged (can't see how this can be the case given that section 29 of the Limitation Act wouldn't apply to an unsecured debt, but have often heard it stated with confidence).

4. From some other date.

Note that this neither a university work nor a request for legal advice on which I intend to rely.

old.holly265 · Accepted Answer

Right, my friend, let's see if I can point you at something.

The agreement is, although the requirements of CCA 1974 and CCA 2006 specifically apply, still governed by the normal law of contract (unless otherwise excepted).  That means that our normal limitation period is 6 years.  The fact that the agreement is unsecured does not affect my reasoning on this or subsequent points.

The start date for that 6 years does (assuming that this is a proper agreement from someone holding a licence) differ depending upon what right is being enforced.  If the agreement provides, as usual, for payments to be on certain dates, then an individual right of action arises - in respect of that payment only - as soon as the date has passed and there has been default.  There could, in consequence, be many limitation periods for sums falling due.

Where things crystallise is if the creditor serves a Default Notice under the Act rendering the whole sum due immediately.  The right of action does not then arise until the statutory time for the notice to take effect.  But once it has, the limitation period runs from then.

I am one of those that would rely on s.29 with confidence.  Agreements under CCA are not excepted from its operation generally, and the effect of s.29(5) quite clearly applies to any debt or liquidated pecuniary claim.  Any acknowledgement of the periodic debts would start the time running again.

I would not be so confident about an acknowledgement after a default notice has been served - but that could simply be because my citator is acting up at the moment.

Feel free to contact me if you need more.

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Form what date will limitation run for breach of a consumer credit agreement? (UK law only)?

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