I talked to lawyers. Bar associations. Credit counselors. State attorney general offices. I was given different answers, wrong answers, no answers and mixed messages. After several excruciating days of research on when credit card debt expires in each state, I realized if the experts couldn’t get it straight, and I, as a reporter, had such a difficult time finding the information, consumers didn’t stand a chance.
What was I looking for?
I was on a mission to find the statute of limitations, the legal term for the maximum time in which litigation or a lawsuit can be brought forth, for credit card debt. This means after a certain period of time has passed since a crime or incident, you can no longer bring legal action against a person. There is a statute of limitations for trespassing, rape, fraud and even for not paying your credit card bills, though it differs from state to state.
I learned from Cena V. at Consumer Credit Counseling Services in Nevada that “the statute of limitations for credit cards is determined by what state the credit card issuer — meaning bank — has its company headquarters in. That is the state they are governed by and which statutes they are regulated by.” Due to lenient laws, most credit card issuers are located in a small group of states including South Dakota and Delaware, though if you have a card through a credit union in your state, your state’s statute of limitation will apply.
An open account
Credit card accounts have their own legal terminology: “Credit cards are ‘open end’ credit under the federal Truth in Lending Act since they carry balances that vary over time, unlike ‘closed end’ credit, like a mortgage loan or a retail installment contract to buy a car, which is for a fixed amount,” says John Ropiequet, an attorney with Arnstein & Lehr in Illinois.
A few states’ legal codes explicitly define their statute of limitations for open accounts. Unfortunately, most don’t, and the only seemingly appropriate statute to categorize the credit card debt under for most states is “contracts or obligations,” which is extremely vague. Some states break contracts up into written, oral, open or combinations (such as written open and oral open). Ropiequet says credit card agreements can be considered written contracts, but that the actual use of a credit card and accrual of debt is considered an open account, and many state codes do not address that differentiation. Is your head spinning yet?
Applying the statute of limitations
Here’s how the statute would potentially come into play. Say you have amassed a large amount of credit card debt and for some reason you can’t pay it off. You stop using the card and start dodging the debt collector. The credit card issuer wants its money back, so when the first debt collector can’t get the money from you, the debt is sold to another debt collector. And another. And maybe another. The last company still hasn’t retrieved the money from you, but because several years have passed since the debt originated, they decide to give up and file suit against you. The credit card you racked up the debt on comes from your credit union in Alabama, where the statute of limitation for credit card debt is three years. If you show up in court and can prove the statute of limitation has expired, you’ll likely walk away without owing a dime. The time frame in which suit can be brought against you has passed.
This does not mean you should dodge debt collection agencies and wait years for the debt to expire, especially because the bad behavior can still be reflected on your credit report for up to seven years. Additionally, the account with the debt owed must remain unused for the statute to kick in. “If you charge something else on an open account, the statute would start running from the last charge,” says Ropiequet. Furthermore, William Turner, a consumer bankruptcy lawyer in Kansas, says, “The statute of limitations for filing suit on a credit card default “begins anew after a payment or a promise to pay.”
It’s open to interpretation
I tried to find out how each state classified credit card debt under the statutes, but it’s murky, even to the experts. Susannah Lyle, assistant director of public information with the Florida Bar, says Florida has a general statute of limitations, but “it does not specifically identify credit card debt. It would be up to the person doing the research to determine which subsection applies.”
David Baker, a bankruptcy lawyer in Boston, replied similarly: “Massachusetts has a number of provisions referred to as ‘statute of limitations.'” He said I must dig through the sections for the statute that applies best. Part three, chapter 260, section six of the Massachusetts law code is about open accounts, but all it does is define an open account — there is no limitation given. I am left to assume it fits into section two, which says, “Actions of contract, other than those to recover for personal injuries, founded upon contracts or liabilities, express or implied, except actions limited by section one or actions upon judgments or decrees of courts of record of the United States or of this or of any other state of the United States, shall, except as otherwise provided, be commenced only within six years next after the cause of action accrues.”
The assistant attorney general of Alaska said she couldn’t provide the information for her state. The Georgia Bar Association said no one there could provide the information for me, and referred me to a credit counseling service that also said it couldn’t help. My colleague contacted a past source of hers, Barbara Sinsley, general counsel for the 600-member Debt Buyers Association (DBA International), a trade group of companies that buy and sell portfolios of debt from banks and other creditors. When asked for any insight in this complicated search, Sinsley replied, “Currently, there are some states in flux in the case law on choice of law issues.” This means some states are in court right now over these statutes, so they may change in the near future. This may explain why many of the current charts of the states’ statutes of limitations I found online contain varying numbers — some include only statutory law, while some include newer case law.
Why you should be worried
My research has not only been frustrating as a reporter, but incredibly bothersome as a consumer. Knowing the correct statute for credit card debt may make a huge difference in someone’s life, but it is nearly impossible to get a straight answer. The average person can’t read legal code without a law degree or get free legal advice about this without having a bankruptcy lawyer as a buddy. The average person probably doesn’t have time to make endless calls to credit counselors and bar associations, hoping to find someone who can answer their question simply or at all. There are many charts of the states’ statutes of limitations online, but most have varying figures, leaving me to wonder which are accurate. One thing is clear: Finding this information needs to be significantly easier. But my mean, old editor is making me continue my quest for the information anyway.
Do you have any suggestions for making this process easier for consumers? Do you know of any resources on credit card statutes of limitation that I may have missed?