When you are past due on a credit card debt, it’s easy to believe that the creditor gets only a certain amount of time to begin legal proceedings. That’s called the statute of limitations, and each state has a different one.
The question, however, is how long the creditor has to sue you. Most people assume it’s based on the statute of limitations in your home state. Those people are wrong.
In the recent case of Capital One Bank USA, NA v Gregorich, one court in Florida has hit the nail on the head by saying that the statute of limitations is governed by the Cardmember Agreement between the consumer and the credit card company.
In the Gregorich case, Capital One began a lawsuit about 3 1/2 years after the date of default. The Customer Agreement (Capital One’s term for Cardmember Agreement) specifically stated that it would be governed by Federal and Virginia law. The relevant statute of limitations in Virginia was deemed to be 3 years because the Agreement did not qualify as a “written contract” governed by the 5 year Virginia Statute of Limitations.
End result? Capital One loses.
Your lesson? Always check the Cardmember Agreement to determine the appropriate statute of limitations.
A copy of the court decision can be found here.
What does a debt collector need to prove when it sues for a past due debt? The recent New Jersey case of Columbia Recovery Corp. v. Menchaca answers this question in a decision dealing with the consumer’s attempt to vacate a default judgment.
The consumer in the case contends that the debt is not hers and that it was erroneously charged to her. While she was searching for an attorney to represent her, the time to file an answer lapsed and a default judgment was ultimately entered. After the trial court denied her motion to vacate the default judgment she appealed.
The Superior Court of New Jersey, in deciding in favor of the consumer, noted
[The debt collector] has not produced any proofs whatsoever as to when the debt was purportedly incurred, the signature of the person who opened the account or who incurred the debt. Nor has [the debt collector] demonstrated that defendant was ever given notice of the past due debt. In other words, plaintiff has presented no proofs that defendant is the actual debtor beyond its bare allegations in the complaint.
Though this is a New Jersey case and, therefore, not binding in New York, it shows that debt collectors who sue - even if they get a default judgment - must be prepared to prove their case. Consumers who are sued for past due debts should not roll over and accept a judgment; rather, they should stand up for their rights and fight back.
A copy of the decision can be found here.
