So close to getting it right

Article: What’s the Statute of Limitations on Credit Card Debt?

A lot of articles get debt collection wrong in some way or another. I’ve yet to find an article that gets the facts completely correct that I didn’t also write. And so too is that the case with the article above discussing the statute of limitations. Which is a topic even the United States Federal government, specifically the Consumer Financial Protection Bureau, got horribly wrong.

Why do these writers insist on telling debtors to ask debt collectors whether a debt is still within the statute of limitations?

First the statute of limitations is the maximum amount of time a creditor has to pursue a debt through the Court. That is all. It doesn’t mean they cannot come after you outside Court for the debt. The only way to stop that is to send them a letter – yes, it must be in writing – telling them to stop contacting you.

So how long is the statute of limitations? Well, that depends. I’ve typically said the statute of limitations depends on the resident State of the debtor. That is… not entirely true. And the article linked above reminded me of one particular concept in contract law that slipped from my mind because it typically isn’t something we need to worry about.

The duration of the statute depends on which state is identified in the contract or the state you live in, and the type of debt in question.

“depends on which state is defined in the contract” brings up the concept of contract jurisdiction and the jurisdiction clause. This clause provides for which State’s laws shall control the contract terms along with the specific Court that shall have original jurisdiction for any claims arising under it. As an example, here’s a jursidiction clause from a photography agreement I’ve written:

This agreement shall be governed by the laws of the State of Kansas and Johnson County therein, and the laws of the United States of America where applicable. The Parties submit to the jurisdiction of the Johnson County District Court, Tenth Judicial District of Kansas, for adjudication of any disputes and/or claims arising under this agreement.

The Parties submit to the jurisdiction of the United States District Court for the District of Kansas for any claims arising under any statute of the United States Code, including, but not limited to, any claims regarding copyright.

Most of the time, the jurisdiction of the contract will be the Court of competent jurisdiction over the party accepting the offer in the contract. When I lived in Clarke County, Iowa, for example, any contracts I signed to which I was accepting an offer would likely state such. It tends to make things much easier on both parties. For example if you sign a contract for any kind of remodeling or construction on a home, that work must abide by the building codes for where the work is taking place, so that will generally be the stated jurisdiction of the contract.

But any jurisdiction statement is still subject to the law where the contract was enacted.

For credit contracts, however, any jurisdiction statement is overridden by Federal law, specifically 15 USC § 1692i(a), which provides that any legal action – again, the jurisdiction for enforcing the contract – must be brought in the Court over which the contract was signed (where you lived when you opened the credit account), or the Court over which the debtor resides at the time of the lawsuit.

So if you live in New Hampshire and the credit contract tries to stipulate that all actions under that contract shall be enforced by a Court in Hawaii, that clause is unenforceable under Federal law unless you lived in Hawaii when you signed the credit contract. Not to mention that clause would likely also be unenforceable under Hawaii law since you live in New Hampshire, so Hawaii wouldn’t have jurisdiction over you with regard to the ongoing enforcement of the contract.

Not saying such doesn’t happen. There’ve likely been shady creditors who’ve tried to do that. But the vast, vast, vast majority of debt collection lawsuits are filed where the debtor lives, since having the judgment through that Court opens up enforcement options. As an example from my history, I used to have a credit card with CapitalOne. I lived in Polk County, Iowa, when I opened the account. And it fell into collections while living there as well. But I lived in Clay County, Missouri, when they sued me, and they sued me through the Missouri 7th Judicial District Court in Clay County.

But with regard to the statute of limitations, which laws control? That depends on where the creditor seeks to enforce the contract. Again Federal law gives them only two options: where you lived when you opened the credit account, and where you live when they file the lawsuit. So when it comes to the statute of limitations, those are the only two controlling options, contrary to the article:

Check your original agreement for language specifying a choice of state law or “governing law” that might apply to your debt. Although courts are not bound to this choice, it may impact which statute of limitations that courts may consider in their decision.

“Governing law” is another name for the jurisdiction clause I mentioned earlier.

A Court cannot enforce laws outside its jurisdiction. The contract cannot override that. A contract legally cannot state that the parties will seek to enforce the contract in Kansas while its “governing law” will be Florida, for example, since Kansas Courts cannot apply Florida’s laws. They can only enforce and apply Kansas law since it is under Kansas law the Kansas Courts are established.

The article goes on to talk about debt re-aging and how to avoid it. This is where my earlier question comes in: why do these writers insist on the debtor asking the creditor if a debt is time-barred?

The Federal Trade Commission’s Fair Debt Collection Practices Act requires a debt collector to respond honestly when asked whether a debt is time-barred. A debt collector can contact you about the debt but might not mention that the debt is time-barred or might choose not to answer you.

Or they may choose to say “I don’t know” since they likely can’t really know. Answering that question would require knowing the entire payment history of the debt, something the collector may not have readily available.

Beyond that, an expired statute of limitations is an affirmative defense to a lawsuit, to be raised by the defendant to the lawsuit at Court. It means literally nothing outside of Court. No, seriously, it doesn’t. As the above-linked article states, correctly, nothing in law stops a debt collector from continuing to pursue a time-barred debt outside Court. Nothing, that is, except you telling them in writing to stop contacting you.

So let’s say you have a time-barred debt, and the collector is threatening to sue you. The article writer suggests… filing a complaint with the FTC.

You can submit a complaint to the FTC regarding unfair debt collection practices, such as if the collector threatens to sue you for a time-barred debt.


Here’s the thing about filing a complaint with the Federal government: nothing will come of it unless they get a lot of complaints about one company. So there really isn’t much of a point. They won’t act on singular complaints, and likely won’t act on any complaints if they all come from one State with the company also being located within that State since that may fall outside their jurisdiction. Remember the Constitution grants the Federal government only the power to regulate interstate commerce.

Instead you’re better off just telling the debt collector to stop contacting you. Don’t tell them you think the debt is time-barred. Don’t tell them you know the debt is time-barred. Just tell them only to stop contacting you without any reason. Once you’re certain the debt is time-barred, that is. Since the burden will be on you if you’re sued to prove it to the Court. Meaning if the creditor can show the debt has been re-aged or that your records aren’t accurate and the debt isn’t time-barred due to a payment you forgot you made, you’re sunk, and you’ve got a judgment against you now as well.

Navigate the waters of the statute of limitations carefully. If you’re absolutely certain the debt is time-barred, then proceed forth in telling the debt collectors to go away, as you’ll have your legal defense ready should they sue. Otherwise, proceed carefully by exercising your legal right to debt validation.