A statute barred debt in Scotland is a debt that is written off after the passage of time and is no longer recoverable by the creditor after that passage of time, providing certain conditions are met. This area of law in Scotland is known as prescription and is governed by the Prescription and Limitation (Scotland) Act 1973.
The prescribed period is the amount of time the law says must pass uninterrupted before the debt is written off.
The logic behind prescribing a debt, is that after what is known as an appropriate date a lender only has a prescribed period of time to recover the debt or it becomes unenforceable. What can interrupt this process is if the creditor makes a relevant claim, or alternatively, the debtor makes a relevant acknowledgement of the debt.
There are two periods of prescription in Scots law. The first of these is known as Short Negative Prescription and is a 5 year period; the second is Long Negative Prescription, which is for a 20 year period.
What debts are covered by which prescription period?
Most debts are covered by the five year period. This includes credit cards, loans, store cards, hire purchase debts and rent arrears. It even includes mortgage arrears and benefit over-payments owed to the Scottish Social Security Agency.
The types of debts covered by the twenty year rule includes debts constituted by court orders (so could include types of debt normally covered by the 5 year rule), Summary Warrants or by an order of a tribunal or an authority authorised by legislation to order that a debt is due, which includes benefit over-payments owed to HMRC or the Department of Works and Pension.
Some types of debt are also not extinguishable, and this means they can never be written off.
It is advisable to obtain specialist advice about whether a debt can be prescribed and what type of prescription applies to it.
When does prescription begin running?
An important question is what date does prescription begin running? This date is known as the "appropriate debt".
For credit cards, loans, and other consumer credit debts, that date is the date a default notice is served under the Consumer Credit Act 1974. This is the date the company calls up the debt as being due for payment. Or where the debt is not governed by the Consumer Credit Act 1974, when the creditors makes a demand for the sum owed.
In relation to rent arrears, it is normally when the last instalment is due or appropriate legal action commences.
In relation to debts covered by the 20 years rule, it is the date the court, tribunal or authority orders the sum due.
Establishing when prescription begins to run can be complex, depending on the type of debt and the terms of the contract entered and often may require specialist advice.
What constitutes a relevant claim or acknowledgement?
Once prescription begins running, it can be interrupted by relevant claims or acknowledgements. Both relevant claims and acknowledgements reset the running of prescription and reset the period back to the beginning again.
Relevant claims are when a lender either raises an action for, or obtains a court order or raises a petition for the sequestration of the debtor. It can also include executing recovery action such as wage arrestments, attachment orders, or serving a charge for payment or arresting the debtor’s bank account.
Every time the creditor makes a relevant claim, they interrupt the running of prescription, which begins again from the start.
A relevant acknowledgement is when the debtor acknowledges the debt and they do this by either making a payment towards the debt or acknowledging to the lender, in writing, that an obligation still exists (even if there is a dispute as to the amount owed).
Where there has been a relevant acknowledgement, the prescription period of five years begins running again.
The running of prescription can also be interrupted when a debtor includes their debt into a Debt Payment Programme under the Debt Arrangement Scheme or obtains a time to pay direction or order or a Time Order under the Consumer Credit Act 1974.
In such a situation, prescription only begins running again when the debtor comes out the programme or the time to pay (unless they have successfully paid off all their debts). Any fraud or error on the behalf of the debtor that induces a creditor to not make a relevant claim can also interrupt the running of prescription.
Where there is no relevant claim or acknowledgement , then after 5 years or 20 years, depending on the prescription period that applies, the obligation to pay the debt is extinguished, even if a subsequent payment is made. The fact a debt is prescribed can be an effective defence in court that against a claim for a debt.
Although prescription can appear straightforward, it is actually a complex area of law and advice should be sought where you believe a debt you owed has been prescribed.
A poorly worded letter to a creditor may constitute a relevant acknowledgement and may interrupt prescription running, meaning it starts again from the beginning.
The Consumer Credit Sourcebook
What the Financial Conduct Authority says about statute barred debts in their rule book for lenders.
In Scotland, a statute barred debt ceases to exist and is no longer recoverable if:
- a relevant claim on behalf of the lender or owner has not been made during the relevant limitation period; and
the debt has not been acknowledged by, or on behalf of, the customer during the relevant limitation period.- It is misleading for a firm to suggest or state that a customer may be the subject of court action for the sum of the statute barred debt when the firm knows, or reasonably ought to know, that the relevant limitation period has expired
A firm must not continue to demand payment from a customer after the customer has stated that he will not be paying the debt because it is statute barred
My debt is over 5 years old so should technically be extinguished however where do I stand if the debt has been passed to a debt collection agency and I have made payments to them within the last couple of years?
Hi Mark
The general rule is any relevant acknowledgement or claim interrupts the running of the 5 years and it can begin again every time you make a payment (a relevant acknowledgement).
I would think there is a possibility your debt may not be statute Barred if you have made a recent payment
Is that the same if the payment was made through the debt agency rather than the original creditor?
Hi Mark.
Yes it wouldn’t matter. When the debt is sold the purchasing creditors has the same rights and privileges as the creditor who sold the debt. Any payment to the original creditor would count as a payment to the debt when calculating prescription.
Hi
I have received a letter from solicitors regarding a debt outstanding from a credit card company that was sold on to a debt company that was sold on to another debt company.
I managed to find out that the last payment that I am supposed to have made was in 2016.
I have since been told that debt can be timed barred after 5 years is this true?
Hi John
You are correct in that in Scotland debts become Statute Barred, or prescribed, after 5 years.
This, however, is providing in those 5 years there is no relevant claim of acknowledgement. A relevant claim would be like the Creditor getting a Court Order.
A relevant acknowledgement is you making a payment to the Debt, or confirming in writing to the Creditor that you accept you owe a debt.
Everytime there is a relevant claim or acknowledgement the five years begins again.
However it is more complex than that as some creditors may try and argue its 6 years, because in English Law its six years and they say the agreements they have with their customers are governed by the Law of England.
There has been a case in Scotland where this argument has been accepted by this Court(Pra Group v MacPherson .
You need to be careful therefore.
My question would be when was what it you last made a payment? If you do respond to the solicitor make sure you write Without Prejudice in your heading and make it clear your letter does not constitute an admission of liability for the debt.
Also ask them to provide proof of the debt and when the last payment was made to it. If they acknowledge it was more than 5/6 years ago, I would make it clear to them you are of the view the debt is Statute Barred and not recoverable.
If they raise a Court action against you I would seek to defend the debt on the basis you think it is prescribed. You can ask your local advice agency or law centre for advice and assistance with this.
Hi,
I had a visit from a sheriff officer today who handed me a charge certificate on behalf of Glasgow City Council because I had mistakenly driven in a bus lane in Glassford Street in April 2013.
They had been trying to contact me at an old address so I was unaware of this at the time.
I paid the £90 fine in March 2019 when they had posted a letter through my letterbox at my correct address.
I never paid the £81.16 expenses of charge fee as this looked like it was handwritten on the letter and not printed so thought I didn’t need to pay this provided I paid the money owed to the council within the specified period.
I’ve now been hit with another charge of £81.16 on top of the original charge. I’m I liable for both charges ?
Hi Angela
The Fee is the Sheriff Officers expenses for serving the Charge.
The fact it is handwritten and not printed doesn’t stop you being liable. Its common for things to be handwritten at the time they are served.
I am disappointed they have served you a further charge on top of the original, as the initial Charge would be effective for 2 years. However, I cannot think of any reason they cannot do it and reapply another fee.
They could also now arrest your wages or attempt to freeze your bank account (which themselves can incur additional fees).
I would seek to repay this debt, even by instalments if you cannot pay all at once.
If you are worried you are going to be hit with further fees before you can pay it off, speak to the Sheriff Officers and see If they will enter a repayment plan.
You can also use a Statutory Moratorium, which you can register for free online and gives you 6 months protection from Sheriff Officers.
Hi – I’m looking for some info about the potential of defending a Simple Procedures claim in Scotland. The debt is from 2008, last acknowledged November 2014. I’m struggling to figure out if I have grounds to defend. I was pretty confident that it is time barred in Scotland but just read here about a sheriff finding for the claimant because the original agreement was governed by English law. I’m now really unsure. Is this standard that English law would be considered relevant??? Thank you for any advice you can offer.
Hi Jane
Unfortunately, there was a case called PRA Group v Reilly, where Mike Dailly represented the Consumer, where Sheriff Reid held the English Limitation Act 1980 could apply in Scotland in a Consumer contract, where the contract said the Governing law was English Law. So the six not five year rule applied.
However, you should maybe seek advice from your Local Advice Agency before you present your case.
There may also be an argument made under the Consumer Rights Act 2015 (see here).
You can read an article about Mike’s case here.
Thanks, your site has been really helpful. I thought at first, it was a very straightforward defence but realise from reading here and looking at the case you refer to that I basically have to decide whether ‘m going to take my chances. I feel that on principle I will defend it. Thanks for your help.
No problem Jane and thank you for getting back to me.
It may be worth contacting your local advice agency and seeing if they can provide you with any assistance.
If you can find the time, it really helps if people can also provide feedback through Trust Pilot.
Sorry – a final quick question. Is the decision of one sheriff binding in Scotland? Happy to review via Trust Pilot! Thanks. Jane
Hi Jane
A Sheriff’s decision is not binding on another Sheriff. So you can get two conflicting decisions.
Generally, however, a written decision by one Sheriff, where they have taken the time to give a well considered reasoned opinion can be highly persuasive on another Sheriff. This is more the case if the Judge is know to have some expertise in the area. So Sheriff Reid, in the PRA case is a well thought of Judge with specialist, Commercial Law experience, so this is possibly why he got the case. However, another Judge can say, I disagree.
Sheriff Appeal Court Decisions and Inner House of the Court of Session decisions are binding on Sheriffs.
The PRA Case was just a Sheriff Court Decision, I believe.
What is more likely, is if you can distinguish your case from the PRA case by showing your case is so different on the facts that another approach is warranted. That may be hard to do here. However, if you could make a different legal argument based on say the Consumer Rights Act 2015 (as discussed in my article Old Debt Create Debt Sewers) a Judge can come to a different decision based on a different legal argument, without saying the other Judge was wrong.
Again, wait and see they may not try to rely on English Law. You need to see what their pleadings are. They may claim the debt has been relevantly acknowledged or claimed within the last 5 years, so prescription doesn’t apply.
I would also caution getting caught up on a matter of principle. If this case drags on, they can argue a different procedure is required (Ordinary Cause) as it involves complex areas of law. This can mean if you are unsuccesful you can be held liable for their legal expenses (this can happen in Simple Procedure too, but expenses can be higher in Ordinary Cause). This may mean if unsuccesful you can end up owing a lot more.
Thats why its important to Get Advice from you Local Advice Agency.
There may be other courses of action, such as negotiation that are less risky.
From Scotland: I had an old debt with a bank, but to my knowledge, the bank has not demanded full payment or served a Notice of Default. Can they now, after nine years take the money out of my account, or by any other means force me to pay the money: bailiffs etc.?
Hi Mark
Sorry in not getting back to you sooner.
Basically, prescription does not start running until after they have demanded full payment, so the debt cannot be statute barred until then.
However, just cause you have no recollection of them demanding payment, doesn’t mean they didn’t put the debt into default. It may be possible to find this out by obtaining a Statutory Credit Report and seeing if the debt is on your file and if it has a default date.
Just note, cause it is not on your file, doesn’t mean it may still not be owed, as debts can drop off after 6 years.
If it is on and a default has been put on, then prescription runs from that date and providing you don’t acknowledge the debt within 5 years or make any payments to it, it should be expired. If your do, the 5 years begins again.
Some Creditors may argue the period is 6 years as English Law applies to their debts, so best giving it another year to be on the safe side.
If they have already obtained a court order they could still do a bank arrestment by serving the paperwork to Sheriff Officers (if you are in England now visit the National Debtline for English Law Advice on Bailiffs).
One last thing, banks don’t need to do a bank arrestment if you owe them a debt and you have money in another account they hold. This is called a right of Set Off.
Hi
I have a small loan I took out in January 2014. I have made no contact with the company and the last email they sent me was in January 2015. Can I advise them this debt is now statute barred and should be written off?
Do they have to remove the debt from my credit file?
Hi Rachel
You need to be careful when arguing a debt has become statute barred. The reason being is the prescription period (5 years in Scotland), only begins running after the firm has demanded full payment or served a Notice of Default.
Prescription can also be interrupted and begin running again if you make a payment within the 5 years.
It could be the debt has become Statute Barred if full payment was demanded before August 2015 and you have made no payments and not acknowledged to them in writing you still owe the debt in that time; and they have not taken you to Court.
However,even if it is statute barred you cannot demand they remove details of your loan from your credit reference file. Details of the debt can be kept on there for up to six years from the last payment or default, even if the debt was statute barred. You can ask for information to be removed by the Credit Reference Agency after it is more than 6 years old.
Arguing a debt is Statute Barred is best done only if the firm contacts you and tries to recover payment,otherwise sometimes its best to let sleeping dogs lie.
If you have time I would appreciate if you can give me a Trust Pilot Review. Thanks
Hi
I have received a Lawyers letter claiming I owe my now deceased ex father in laws estate £15,000 from june 2004. I do not remember much as this was 16 years ago and was still legally married to my then husband.
He never asked in all those years for any money to be repaid even though his son and I seperated in 2005.
They claim I was given this as a loan.
Hi Eileen
I am sorry to hear this. It must have come as a shock to you after all this time.
Unfortunately, in Scotland there is what they call a presumption against gift. What this means is there is a presumption in law that when someone gives you money, even an inlaw or a parent, that the money is a loan not a gift.
The evidential burden is on you to prove it was a gift, not for the person adminisitering your ex Father in Law’s Estate, to show it was actually a loan. It is presumed to have been.
The fact he never asked for the money back when alive, doesn’t support the argument it was a gift, although some have previously argued it does. Courts have generally held its for the person or their Executor to decide when to recover the money and unless its specified in writing they had do it by a certain date, its basically their choice.
The fact they haven’t demanded the money back at any point, would also work in the Executor’s favour as it will have meant that prescription has not started running, which is when debts can be written off through old age.
You may wanted to take legal advice as it may be the Executor may raise legal action to recover the debt.
Lindsay’s the Scottish Solicitors have written a good article on this problem. (When the Bank of Mum and Dad Calls Up)
Hi
When does the clock start regarding a time barred loan, is it when you receive the demand or when the alleged loan was made?
I have a situation where an ex business partner is alleging he loaned me money over three payments, one in 2010 then 2011 and finally in 2012. I received a demand from him to repay early 2019.
Lawyers are now involved and now the Sheriff is indicating that the time bar starts from the date the demand was made (early 2019).
I suppose I am looking for a second opinion, goalposts seem to be shifting and the money was never a loan.
Any advice would be appreciated.
Hi Ewan
The position is generally accepted to be that prescription begins running when the demand for payment is made. There is a Scottish Sheriff Court decision on this (which you can read here: PRA Group v Macpherson).
There is an English case that follows the same line.
In relation to the suggestion you make that the money was not given as a loan, generally speaking the position in Scots Law is there is a presumption against gift, so the onus is on you to show why the money was given if your argument is it was not a loan.
You may want to seek legal advice if it is in Court.
Hi
I had an Argos card, which I had forgot about and have not paid anything since 4th October 2014.
I have just received an annual statement and a letter from a collection company.
As I have not acknowledged the debt or answered the letters, would I be right that I can write to them in October using a sample letter stating that time has run out to recover the debt?
Hi Richard
I would probably advise against that.
Although Short Negative prescription is five years in Scotland, there are a number of factors you need to take into consideration.
The first is when did the prescription begin running? There has been a recent case in Scotland (PRA Group Ltd v MacPherson) where it was held prescription didn’t begin running until a Default Notice was served.
You may want to find out when this happened first, by doing a credit check.
Also, you may be better giving it six years to be on the safe side, as there has been a recent court decision where Sheriff Reid in Glasgow held a creditor could rely on the six year English Law Limitation rule in a Scottish Court, even when it involved a consumer debt.
It was an extremely complex case, where Govan Law Centre argued, the lender couldn’t rely on the Limitation Act 1980 (6 years), as it was English Law and Scots Law on Prescription (5 years) had to apply.
The Sheriff disagreed and held as the difference was so slight and the contract said the governing law was English Law, it could apply.
So a belt and braces approach may be waiting 6 years from the date the account went into default.
Hi
Thank you so much for the advice, I will wait until next year just to be sure.
Hi
I have had a letter through the door from the sheriff court for a council tax bill I knew nothing about.
It was originally for a low amount, but because it’s been left unpaid since 2009, I think it’s now sitting at £600.
Is there anything I can do about this?
I knew nothing about it as it was an old address and what I don’t understand is I’ve had a few addresses since then and paid council tax as normal and never been made aware of this bill.
It was passed to this debt agency.
How could they not have informed me when I’ve been paying council tax for years under the same name?
I don’t understand it.
Hi Heather
This may sound strange, but I think the reason they have not approached you before about this debt is because after you left your old address, you have been diligently paying your council tax.
They won’t have known where the Heather who lived at your old address moved to and basically they have not linked the accounts. If you had got into arrears with other council tax bills after you moved, and entered into a repayment plan with them, they would have asked for your previous addresses and linked your accounts.
It now appears they may have done a trawl and realised you are the same person.
Council Tax Arrears unfortunately don’t become statute barred in Scotland for 20 years (written off), so they can still pursue you for it.
The fact also it has been sitting for ten years shouldn’t have affected the amount owed though, as normally Councils use the Summary Warrant procedure to recover a debt and, therefore only add a 10% surcharge onto it. Interest is not normally added unless a different procedure is used, which it rarely is.
However, if the council has previously instructed Sheriff Officers to try and recover it using attachments, Bank Arrestments, Earning Arrestments or a Charge for Payment, their fees may have been added.
You may want to check you were liable to pay council tax at the time: were you a student? You may have been able to apply for an exemption. Or if you lived on your own, you may have been entitled to a single person discount.
Some council may allow these discounts and exemptions to be backdated, but may have time limits as to how far they will allow a backdate to go. You can find out by visiting your local authority website.
If you are liable for it, you will have to pay it. However, you want to avoid the types of enforcement action I have mentioned above.
I would normally recommend you contact the Council first and verify you owe the money and ask them if they will enter a repayment arrangement with you, where you pay your current council tax and an amount on top of that to the arrears.
They may tell you that you have to speak to the debt management company, who could in actual fact be Sheriff Officers. You may want to read my page on them.
If you do have to contact them they may ask for ridiculous amounts and tell you that you need to pay it all immediately.
Tell them you cannot afford this if this is the case. Tell them you will also have to pay your current council tax also (this should always be your priorty, otherwise your arrears will just increase).
If you feel they are being unreasonable and you are getting nowhere, tell them you will need to seek advice from a money adviser and get an income and expenditure done to see what you can reasonably afford.
Ask they put the account on hold to allow you time to get an appointment.
You can go back to the Council and ask them to do this also, and ask whilst you are doing so, that they give you the contact details for your local free money advice service. They should help you.
Alternatively, you can find your local Citizen Advice Bureau here.
Be careful not to disclose too much information until you have agreed an arrangement, such as where you bank, where you are employed or if you have a car.
If they come to an agreement, they may want this information, so if you stop paying they can use the above types of recovery action against you.
However, do not volunteer it at this stage until they agree to enter a reasonable repayment plan with you.
The important thing is don’t feel intimidated by them. If you feel you are getting nowhere, just ask they give you time to speak to a money adviser.
If you think they are going to use any of the above recovery actions against you, you can apply for a Statutory Moratorium, which gives you six week protection to allow you to seek advice.
You can only use this once a year, so before you do so, I always recommend you speak to a money adviser first, in case it is not necessary at this stage, but may be later.
I hope this helps you out. Please don’t hesitate to come back on if I can be of more assistance.
Hi
I have had £875 arrested from my bank account.
I am on benefits and this money was taken from a backdated Personal Independence Payment claim.
Are they able they do this when you are on benefits?
Hi Jacqueline
They are allowed to arrest your bank account, but if it is possible to show the only funds in that account are social security benefits, you can argue the arrestment is incompetent as the law protects social security benefits.
If the funds have been mixed in with other funds, then this argument may not be available as the argument is that the mixing of benefit income with other income means it loses the protections.
However, as is always the case, it may not be straightforward as the lender who has arrested the funds may argue the protection for benefits no longer applies in Scotland in relation to bank arrestments.
If this is the case it may be necessary to raise a court action to release the funds. Your local authority money advice agency will help with this (even if it was the council that arrested the funds) or your local Citizen Advice Bureau (you can find them here).
I am aware of cases in recent months in different parts of Scotland where this has happened and the creditor has refused to release the funds. However, they have been challenged in court and backed down because I understand a legal opinion has been written saying they cannot arrest benefits. It is a strong but complicated legal argument.
I would suggest you contact your local money advice agency (see above) and get advice. Hopefully they can get your money back without it going to court. If they are having problems, you may want to suggest they contact me as I can help with the legal arguments if they need it.
Can a commercial landlord who increased the rent by rent review in November 2010, but never processed collection, now demand arrears from 2010?
Hi Gary
Rent arrears are generally covered by the five year prescription rule, so after five years, providing no relevant claim has been made by the landlord and no relevant acknowledgement has been made by the tenant, the debt can prescribe.
However, without knowing the details of your case it’s not possible to say whether there has been an interruption in the running of prescription, because there has been a relevant claim or acknowledgment.
If there has been, the five years begins running again.
Hi Gary
Further to my comments above, I have become aware today of a recent decision of the Scottish Sheriff Appeals Court, which addresses the question of when the five year prescriptive period begins to run. You can see my post about this here.
This case concerned a consumer credit debt, but in terms of rent owed to a commercial lease, it will depend not only on the terms of the lease, but also when the court would consider the money to be payable.
I would recommend speaking with a solicitor who specialises in commercial leases.