Can a Credit Card Company Come After You for Old Accounts?
One of the maxims of the collection industry is that the longer a delinquent account ages, the less likely the prospects for recovering the default balance. Despite this general rule, there is no legal prohibition that precludes a credit card company from attempting to collect an old account long after it first went into default. However, the statute of limitations would bar a credit card company from filing suit against a debtor after a specified period of time has elapsed from the date the account initially defaulted.
Other People Are Reading
-
Statute Of Limitations
-
The statute of limitations is a legal principle that precludes a plaintiff (credit card company) from filing a civil action against a defendant (card holder) after a specified period of time has elapsed from the date the legal cause of action accrued. An action filed in court that is beyond the specified statute of limitations period is characterized as "time-barred" and is subject to dismissal.
Established by Each State
-
Each state establishes its own statute of limitations period for each distinct legal cause of action, whether it is fraud, negligence or breach of contract. The statute of limitations period for the same cause of action may vary from state to state. For example, the limitations for a breach of contract action may be six years in one state and three years in another.
-
Breach Of Contract
-
Since credit card debt arises from the existence of a legally binding written contract with the credit card company, the limitations period applicable for suits to recover a default balance would in most cases be that established by each state for breach of contract actions. Some states have a specific limitations period for revolving credit card agreements, which are denoted in the statutory language as "open" accounts. The designated limitations period for open accounts may be different from that specified for other breach of written contract actions.
Considerations
-
If a card company files suit against a debtor after the statute of limitations period has expired, it is incumbent upon the defendant cardholder to affirmatively raise the statute of limitations defense when the complaint is filed in court. For purposes of computation, the statute of limitations period commences upon "accrual of the cause of action," which for credit cards, would be the date on which the account first went into default. In most cases, if a debtor makes a payment prior to the expiration of the designated limitations period, the statute of limitations clock gets reset.
Misconceptions
-
If a debtor successfully raises the statute of limitations defense to an action for repayment, the court must dismiss the creditor's lawsuit. A dismissal of an action pursuant to the statute of limitations does not extinguish the debt. It merely means that the creditor cannot use the legal system to enforce payment. If a creditor chooses, he may still attempt to collect by traditional methods such as dunning letters or collection calls.
-
