The limitation period for an action to reopen a consumer credit agreement as an extortionate credit bargain is 12 years from the date of the agreement.

In Nolan v Wright, the defendant sought to reopen a consumer credit agreement as an extortionate credit bargain. The annual rate of interest concerned was 42.5%. The defendant had missed repayments and two days short of 12 years after the earliest date for repayment under the agreement, the claimant began a claim for recover of monies due. By this stage the claim exceeded £1 million on a £16,000 loan. The defendant sought, among other things, to have the agreement set aside or reopened under s139 Consumer Credit Act 1974 as an extortionate credit bargain. He argued that a claim to reopen an extortionate credit bargain was not a claim for substantive relief to which any period of limitation applied.

The court did not agree. A claim to reopen a consumer credit agreement as an extortionate credit bargain is an action upon a specialty to which a limitation period of 12 years from the date of entry into the agreement applies in principle (s8 Limitation Act 1980) (the LA). It was not accepted here that the fact that the application was made as part of the defence meant that the LA did not apply. It was the substance of the application that was relevant and a debtor seeking in his defence to reopen an agreement was necessarily making a claim for relief pursuant to the jurisdiction conferred on the court by the relevant provisions of the 1974 Act. The application here was statute barred.

Things to consider

The other issues to remember is that as a result of Rahman v Sterling Credit, while there is a 12 year period to re-open there is only a six year period for any refund of monies which might arise following a court re-writing an unfair term.