Not upheld: statute barred debt / fairness of enforcement after extended period of non-contact complaint against Pepper (UK) Limited trading as Engage Credit

Decision detail

Summary

Mr and Mrs E complained that Engage Credit was unfairly pursuing repayment of a secured loan taken in 2005 on which they stopped paying in 2013, arguing the debt was statute barred. The loan had been transferred multiple times and there was a long period of no contact from lenders. Engage had agreed a partial write-off of interest and the borrowers resumed payments in 2022-2023. The ombudsman rejected the complaint, finding that while only a court can declare a debt unenforceable under the Limitation Act, the borrowers' resumed payments reset the twelve-year limitation period, and it was not unfair for Engage to seek repayment of funds originally borrowed.

The Ombudsman's reasoning

The ombudsman applied the Limitation Act 1980, which provides a twelve-year period for lenders to pursue debt through courts. The period resets if the borrower acknowledges the debt through payment. Although less than twelve years had passed between cessation of payments in 2013 and Engage's contact in 2022, the borrowers' resumption of payments in 2023 reset the limitation clock. Only a court can declare a debt unenforceable; the Limitation Act does not prevent a lender from seeking repayment or maintaining a charge over property. The ombudsman found it fair for Engage to seek repayment given the borrowers had the benefit of the funds borrowed and were never led to believe the debt was written off. Engage's refund of interest since 2022 was noted as a mitigating factor.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website