Can credit card debt expire?

By Emma Lunn

If you find yourself being chased for old credit card debt, stop and check the age of the debt before agreeing to pay the collector anything. If the debt is old enough, it may be expired. And if it is, it might be off limits for collection.

However, the rules governing old debt are quite complicated. Here's a guide.

The Limitation Act
The Limitation Act of 1980 sets out the rules on how long creditors have to collect on debt. If the debt is old enough, it becomes "statute-barred" -- and that means the creditor has run out of time to use the courts to collect it.

However, although you are no longer required to pay off the debt, that doesn't mean you're free of the debt's consequences.

 "Statute-barred does not mean the debt no longer exists," said Paul Crayston, spokesperson for National Debtline in a statement. old-debt

In England, Wales and Northern Ireland (the law differs in Scotland), collectors can still try to get you to pay up -- and it may be in your best interest to do so.

"Even if the debt is statute-barred, it may still be on your credit reference file," says Crayston. "This may make it harder for you to get further credit."

When does a debt become too old to collect?
When exactly a debt becomes statute-barred depends on the type of debt it is. Unsecured credit debts, such as credit cards or store cards, are often referred to as "simple contract debts" under the Limitations Act. The Act says that such debts become statute-barred after six years of inactivity by you and the creditor.

So, when does that six-year clock start running? As soon as the creditor is able to take court action against you -- generally after two missed payments, according to Crayston. If the creditor fails to take court action against you within six years, and you haven't made any payments on the debt in that time, the debt becomes statute-barred and immune from legal action.

What to do next
First, make sure the debt is really statute-barred. Check with the credit reference agencies to make sure you have no County Court Judgments against you regarding that debt. If you do, the Limitation Act does not apply. Also make sure that you haven't made any payments on the account in the past six years -- and that any joint holder on the account hasn't either. Whatever you do, don't make any payments, and don't send any correspondence admitting to the collector that you owe the debt, Crayston says.

You still may need to write the collector, however, Crayston advises. Without admitting responsibility for the debt, explain that you believe it falls under the Limitations Act.

"Once you have told the creditor or debt collection agency that you are disputing the debt because you think it is statute-barred, it is up to them to prove otherwise," Crayston says. "Don't be afraid to ask for evidence if they tell you a payment has been made, or a letter received."

Under the Data Protection Act 1988, you can also request a copy of any files the company has. In your letter, also request confirmation that the collection company will cease contacting you about the debt.

If a debt is statute-barred, and you made a payment on it before realizing that it was, the debt is probably unenforceable. But this can be a complicated legal area, and so it is best to seek professional debt advice, from National Debtline, for example.  

If you keep getting pursued by debt collectors for time-barred debts after you have asked them to stop, keep in mind that they are allowed to do this -- they just can't force you to pay via legal proceedings.

Still, the Office of Fair Trading (OFT) frowns upon such practices, according to its debt collection guidelines. The OFT does not accept complaints from individuals, but you can submit a complaint to the Financial Ombudsman after first attempting to resolve matters with the debt collector.

See related: How to complain about your credit card, Section 75 and what it can do for you

Published: 31 October 2012