Secured Loan, Statute Barred?

Kipski

Hello all, I have been reading many of your threads whilst researching these issues and found them very informative so I decided to join up and ask you for some much needed help and advice.

This is a bit complicated so please bear with me...

I got married last year (hurray) but my wife had major financial issues (boo) which I knew about before hand and we have been working hard to resolve (DMP, etc). We have managed to clear most of her debt now, but a few months ago during one of our regular reviews of her credit file we discovered a reference to a new (old) debt.

A secured loan with Citi Financial is suddenly listed, which was taken out in 2002 against a property she used to own (now sold). We believe this to be a fraudulently obtained loan as it appears to have been taken out against the property after it was sold which is quite bizarre. We haven't contacted the company to get the exact start date, but the loan did not show up in any searches carried out by the solicitors involved in the sale which occurred between late 2001 and early 2002...

My wife knows nothing about the loan, and we think that her ex partner may have had a hand in this, obtaining it fraudulently, as they split up around the time of the sale and this loan being taken out.

It is now Jan'13, no payments have ever been made as far as we can tell (again, we have not contacted the company to get payment details), my wife has never paid it and we cannot imagine anyone else doing so.

Her credit file shows the loan as U, indicating that everything is fine although the payment history as far back as we can see shows a debt increase of around £150 pcm, indicating that no payments are being made and they are simply allowing the interest to build up.

To be 100% clear: My wife has never sent/received any correspondence or payment to/from Citi, or admitted liability in any way for this loan. The account is not showing as defaulted even though it is 11 years old. She is not currently being pursued in any way for the money and no court proceedings have been initiated in any way (no court letters, or rulings on her credit file), the debt is simply listed on her credit file as current.

I am unsure what we should do about it.

As it is a secured loan in Scotland, I am expecting that it will be treated as a mortgage?, however, the loan is apparently not secured against her own asset, the property was sold :silenced:

That said, my interpretation is that as the 5 year period has lapsed, it will be statute barred anyway?. However, if it is treated as a mortgage, this means that the interest accrued will be extinguished but not the original capital amount which has a 20 year statute period? "The Prescription and Limitation (Scotland) Act 1973"

The current loan amount is over £20,000 so we are guessing that the original loan amount would have been £5,000 to £10,000 11 years ago.

This means that if she contacts Citi to enquire about the loan now, we could potentially have to pay up to £10,000 if we cannot prove the loan was fraudulently obtained? (her ex may well have had access to her passport, etc).

We have a number of properties, one of which is in her name solely. Although the equity is only £3,500 at present (recently valued), we are currently redeveloping it so that will change soon. Can Citi re-secure the debt against this property?

If we simply do not contact Citi and hope they do not come looking, am I right in thinking that they will never be able to claim more than the capital payment anyway, i.e. it can never get any worse than it is now (upto £10,000)? On the basis that if we can dodge them for another 9 years the whole debt will be extinguished... i.e. it costs us nothing to keep our mouths shut and could cost us £10,000 if we don't?

We are planning on moving to England in a year or so and do not want Citi blocking the sale of the property...

Which leads me to my final question, if we move to England, how will this affect the status of the debt?

Sorry about the length of this post, but you can see it is an unusual and fairly complicated situation. We do not want to remove the lid on this can of worms until we know all our options and have our reaction strategies planned out for each possible outcome.

If you have any questions, or need any clarification please feel free to ask. We have been advised to seek professional advice by a number of debt charities, but after paying down my wife's debt we have little money left.

Thank you in advance for any information, suggestions and reference materials/contacts.

RAS

Secure debts do not become statute barred after 6 years ........

But a debt secured on a property not owned by the debtor is not secure???

If you think it was fraudulently taken out, use that tack not the SB one.

Unfortunately have seen more than one instance of this sort of thing (at least one where the OP thought ex got her to sign a form for another matter and the last page actually belonged to documentation for a £30K secure loan.).

fermi

As RAS said, the most prudent thing for now would be to pursue the matter of the actual legitimacy of the loan and dispute that she ever took it out and that it was invalid.

Failing that.....

The matter of whether it might be statute barred could be complicated. It is not always 20 years in Scotland, even on mortgages or secured loans

http://www.nationaldebtline.co.uk/scotland/factsheet.php?page=14_mortgage_shortfalls

If your home has been repossessed and sold, mortgage shortfall debts can be pursued against you. If the lender obtained a sheriff court decree for repayment of the debt against you they are likely to have up to 20 years to pursue you.

If on the other hand there is no court order, e.g. you gave up the house before the court date, the lender may be restricted to trying to recover the debt within five years of the date of your repossession.

But in this case it is (a) a secured loan not a mortgage, and they are not always treated the same in all cases. (b) There was no repossession OR court order as was never really secured.

So if you end up having to pursue that tack, then I would give National Debtline who wrote that factsheet a call.

Kipski

Thank you for the replies so far...

I agree that my first course of action is to argue that my wife is not liable for the loan as she did not take it out and that my fall back position will be the legal status of the loan.

In relation to the status of the loan, and determining whether it is legally classified as a secured or unsecured, I am communicating with "The National DebtLine" in order to seek clarification on that point.

I see a number of possible interpretations on how the loan could be viewed depending on how the situation is interpreted.

a) If it is not "legally" a secured loan:

5 years have passed it should be statute barred? It is not secured on an asset in the eyes of the law, regardless of the lenders intention or understanding.

b) It is legally determined to be a secured loan:

I see a number of interpretations of how the loan could be viewed.

i) As pointed out by fermi:

"The matter of whether it might be statute barred could be complicated. It is not always 20 years in Scotland, even on mortgages or secured loans

www. nationaldebtline. co. uk/sc...age_shortfalls

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Quote:
If your home has been repossessed and sold, mortgage shortfall debts can be pursued against you. If the lender obtained a sheriff court decree for repayment of the debt against you they are likely to have up to 20 years to pursue you.

If on the other hand there is no court order, e.g. you gave up the house before the court date, the lender may be restricted to trying to recover the debt within five years of the date of your repossession.

But in this case it is (a) a secured loan not a mortgage, and they are not always treated the same in all cases. (b) There was no repossession OR court order as was never really secured."

ii) According to another of The National Debtline's factsheets:

www. nationaldebtline. co. uk/ scotland/ factsheet.php?page=23_prescription_and_limitation_act#chapter1

(please ignore spaces <--- New User Account)

This is the section which I was referring to in my original assessment of the situation above as the house was sold, not repossessed, and no outstanding court action was in place at the time of the sale. Although the lender is not chasing my wife at present...

Quote:
MORTGAGE SHORTFALLS
If your mortgage lender is chasing you for a debt left over when your house was repossessed or sold, there are time limits on claiming money owed, which vary according to the nature of the debt.

When the money owed is a mixture of the ‘capital’ part of the mortgage and the ‘interest’ part, the time limits for each are different. There is a 20 year limit to recover the capital part and a five year limit to recover the interest part.

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On a final point:

Are there no statutory regulations governing how a delinquent account should be managed by a creditor? I have tried to determine whether there are a specific number of months in which an account can remain delinquent (i.e. unpaid) before the creditor must begin the defaulting process.

I have found vague references to "3-6 months after the cause of action". being voiced in a number of forums, loosely associated with reference to quidelines presented by the Information Commisioners Office (ICO).

Surely there must be some mechanism?

Had the account been made delinquent as a result of non-payment at an early stage, it would have been much easier to address.

11 years have passed without my wife being aware that this loan had been taken out, 11 years without the opportunity to query/rectify the situation, and 11 years of interest being applied which I expect now constitutes the lions share of this debt.

If we had not been actively trying to deal with her financial situation, we may have missed it, it could have been 30 years and £200,000

If there are no regulations specifically laid out in this way, does a lender have a duty of care towards its borrowers?

Surely the Consumer Credit Act'1974, the ICO, FSA or other legislative document/organisation must deal with this or the general issue of fairness.

Kipski

A final note on the legal status of the loan, as previously stated, at the time the loan was taken out the property did not belong to my wife as far as we can tell at this point.

Surely this would make the whole secured/unsecured loan issue mute as my wife would have no legal standing to secure anything against it. In this case, it would surely be the creditors responsibility (with its vast resources) to perform adequate checks to protect their interests? A mistake on their part would be simply that, and their tough luck...

If it turns out that the property was still in my wife's name, and the searches performed were insufficient to identify this loan during the sale transaction process, would the solicitor be at fault and liable in some way?

Surely this would be similar to purchasing a car with an outstanding HP agreement on it?

Finally, I am having great difficulty identifying a legal representative with the knowledge and expertise in this area of law should I need representation for my wife at some point down the road (quite likely I think). If anyone can offer suggestions on that I would be very grateful...

ValHaller

There is another scenario you need to think about. That it is a fraudulent loan and your wife is a party to the fraud. I am not suggesting that this is the case - but there is a doomsday scenario in which a lender takes offence that the loan is not settled, cries 'fraud' and implicates your wife.

No suggestions, I am afraid, but I suggest that this is worse than anything you are looking at.

ladybez

I'm afraid I cannot answer your main points but as far as legal advice goes, are either of you in any sort of emlpoyment which has legal advice as part of a "benefits" package? The NHS, local authorities and other public bodies do. Otherwise the CAB, or Scottish equivelant may be able to point you in the direction of a suitably experienced lawyer.