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ICM welcomes government retreat on limitations

25 November 2009

The Institute of Credit Management (ICM) has praised the actions of the Ministry of Justice in retreating from planned changes to the Civil Law Reform Bill* that could have seen hundreds of businesses forced to write off millions of pounds of debt.

The climb down, the ICM believes, is in no small part down to the successful lobbying of those working within the credit industry, and the Institute in particular, according to Philip King, the ICM’s Chief Executive:

“The draft Bill proposed reforms that would reduce the period within which a debt could be collected from six years to three,” explains Philip, “but it was clearly not workable. We feared that the potential consequence of reducing the limitation period would be to force creditors into early action with shorter tolerances and timescales, and the government accepted this point.

“The government also accepted that a change to the limitation period would in fact restrict the amount of credit available, and therefore stifle business. Establishing liability in commercial cases can be a long and protracted affair, and reducing the timescales would make recovering a debt more difficult. This in turn could leave hundreds of businesses out of pocket, perhaps terminally so.”

 The ICM’s lobbying included a detailed written submission to the MoJ by Glen Bullivant, Chair of the ICM’s Technical Committee.

The majority of the current law on limitation in England and Wales is contained in the Limitation Act 1980. It provides that different rights of action have different limitation periods. The periods often have different starting points and some (notably claims involving personal injury) allow the court to exercise the discretion to ‘dis-apply’ the limitation period.

“Technically, the expiry of the relevant limitation period does not prevent a claim being brought to court,” Mr Bullivant says. “However it does create a defence to a claim that can be used if the defendant wishes.”