If you are being chased for an old debt, you need to know about this case. A single mum paid $4,500 on a statute-barred debt. That is a debt so old the collector could not sue her for it. The court said the way they got the money was unconscionable, which means very unfair. She got her money back.

What Happened

The case is Collection House Ltd v Taylor [2004] VSC 49. In 1992 the woman took out a loan to buy a car. She fell behind, and the car was taken back and sold. The sale did not cover the whole loan, so she still owed some money.

Years later, the finance company sold that old debt to a debt collector, Collection House. With interest, it had grown to about $10,870.

In 2001 a man from Collection House rang her at home at 6:30 at night. He said he was calling from a law firm. He asked about her money and her life. He hinted that she could be taken to court if she did not pay. She was a single mum with a deaf child, and she had little money. Under that pressure she agreed to pay $5,000. She paid $4,500 on her credit card on the spot.

He did not tell her the debt was statute-barred. The time limit to sue her had run out years before. The next day she got advice and found out. When she rang back, he told her the time limit did not stop them chasing the debt.

What the Court Said

She took the collector to the Victorian Civil and Administrative Tribunal (VCAT) and won. The collector appealed to the Supreme Court of Victoria, and lost. In Collection House Ltd v Taylor [2004] VSC 49, Justice Nettle said that calling her at home at night, asking about her money, and hinting at court action could be “pressure of a very high order”. He said the deal was not fair, just or reasonable. The collector had to give back what she paid.

The corporate regulator, ASIC, used this case in its report on collecting statute-barred debts. Today, ASIC and the ACCC set out the rules in their debt collection guideline.

What “Statute-Barred” Means for You

Each state and territory has a time limit for a creditor to sue you over a debt. In most of Australia it is six years. In the Northern Territory it is three years. The clock usually starts from when you missed the payment. A part payment or a written promise to pay can restart it.

Once the time is up, the creditor can no longer win in court if you raise the time limit. In New South Wales, the ACT and the Northern Territory, the debt itself ends. In the other states the collector may still ask you to pay. But they must not say or hint that they will take you to court. They must not use fear or pressure to make you pay.

If a collector is chasing you for a debt that is more than six years old, it may be statute-barred. A default on your credit report can stay for five years from the date it was listed. If the debt is statute-barred, you can ask for the default to be removed. See the OAIC guide to credit reporting for your rights.

Do not pay an old debt under pressure until you check if it is statute-barred. Do not sign anything or make a small payment first, as in some states this can restart the clock. Get advice. You may not have to pay, and the default on your credit report may be able to come off.

FAQ

What is a statute-barred debt?

It is a debt that is too old for the creditor to sue you for. In most states and territories the time limit is six years. In the Northern Territory it is three years. The clock usually starts from when you missed the payment, or from your last payment or written promise to pay.

Can a debt collector still ask me to pay a statute-barred debt?

In some states they can still ask, but they must not say or hint that they will take you to court. In New South Wales, the ACT and the Northern Territory the debt itself ends when the time limit runs out. If you pay or sign something, it may restart the clock in some states, so get advice first.

Can a default for a statute-barred debt stay on my credit report?

A default can stay on your credit report for five years from the date it was listed. If the debt is statute-barred, you can ask for the default to be removed. We can check your file and do this for you.

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From time to time we run a Money Back Guarantee offer on listings with certain creditors. Which creditors it covers changes, so ask us if one is running.