CREDIT – Statute of Limitations

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About once a week a potential credit customer calls in asking about a statute of limitations defense.  The consumer has not made a payment in a long time and is sure that the statute of limitations has expired.  If proven, the statue of limitations is a complete defense to any case .... tempting, isn't it?

Compared to the myriad of other defenses available, the statute of limitations is a poor defense to a credit suit.  In Pennsylvania the statute of limitations on a contract action (which is what a credit card case is) is four (4) years.  This means that the creditor has four years from the date of default to either settle with you or file suit.  

The four years run from the date of your first default, not your last payment.  If you made your June payment, the four years doesn't start to run until you miss your July payment.

If, during those four years, you made a single payment, of even one dollar, the four years starts again when you miss the next month's payment.   This would still be the case if you had authorized the creditor to automatically deduct payments from your checking account and the creditor had been able to get one payment during the four years, even a partial payment.

It is extremely rare for a creditor to "blow" a statute of limitations, even more rare for a law firm representing the creditor to do so.  All of these cases have been tracked on computerized calendaring systems since the mid 80's.  Do you have a computerized record keeping system and record keeping department whose jobs depend on keeping accurate records?

Importantly, when you assert a Statute of Limitations defense, you really expose yourself to a lot of risk.  Most credit card cases are defended based on inability of the creditor to prove that you are in a contract with them, inability to prove what the contract says, or inability to prove what happened and why they are entitled to the amount sought in the complaint.  

The Statute of Limitations is an affirmative defense.  You will have to affirmatively assert that you did in fact make payments, but the last one was more than four years and one month ago. When you admit making payments, the courts can, and likely will, take that as proof that you were in the account, that the statements were correct, and that the terms were being observed.

Part and parcel of putting on a Statute of Limitations defense involves you affirmatively claiming facts that admit a whole bunch of things the creditor likely can't prove, and losing a whole lot of very strong defenses in the process

You can really "shoot yourself in the foot" with a Statute of Limitations Defense.  Once you have made all the above described potentially damning admissions, all the creditor has to do is claim that "Whoops! my records show you made a payment of $5, two years ago, just after Christmas,"  and the case is over.  And you would have to have affirmative proof that you did not make that payment.  Good luck proving that a giant corporation's computerized records are wrong out of whatever records you have.

The only time we at JMF ever put on a Statute of Limitations defense is after the creditor has set forth a date of default in a pleading, and that date is more than 49 months ago -- and we don't always do it, even then.

One other interesting tidbit is the issue of "tolling" the statute.  If your case started in a lower court and the creditor lost in that lower court the statute certainly stopped running during the time the case was active.

A little advice here:  don't play Russian Roulette with a Statute of Limitations Defense.  --JMF