The patchwork of statutes of limitations for consumer debt covering the United States often causes confusion for not only consumers, but also for creditors and debt collectors.
In a feature article on CreditCards.com, writer Fred Williams explores the issue of multiple statute of limitations laws across the 50 states and District of Columbia.
The piece notes that 17 states have statutes of limitations for credit card debts of three or four years, while 19 other states set the limit at six years. Other states have various limitations, with some extending to 10 years. (see: insideARM Statute of Limitations table)
The statute of limitations (SoL) is extremely important for both consumers and debt collectors. Per the Fair Debt Collection Practices Act (FDCPA), a debt that is beyond the SoL is not legally enforceable, meaning a creditor or debt collector cannot file suit to collect on the account. But determining which state’s SoL governs a particular account can be maddening.
Banks have argued that the state in which they are incorporated governs the credit they extend to customers. Consumer advocates argue that the state in which a consumer lives when a suit is filed (not when the account is opened) is the correct standard. Some even take a position that if there is a question, the shorter SoL should be applied.
Calls for a universal statute of limitations in the U.S. have become more common in recent years.
Debt collection industry trade association ACA International proposed a universal statute of limitations for the U.S. in its 2011 plan “The Path Forward: ACA International’s Blueprint for Modernizing America’s Consumer Debt Collection System.” ACA argued that the universal SoL should be seven years to align with the standard set by private credit reporting agencies.
The FTC also mentioned a universal statute of limitations in its 2010 report on the legal collections channel, “Repairing A Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration.” Although a specific recommendation on duration was not mentioned, the topic came up at a series of discussions held by the FTC the previous year. Consumer advocates suggested a shorter timeframe (three years), while ARM and bank industry representatives wanted a universal SoL closer to seven years.
The CreditCards.com article contains numerous examples of case law on the subject, including consumer attorneys that actively try to redefine the statutes through court cases.