Debt Collectors Cannot Sue After Three Years

Wednesday, November 10, 2010, 11:59 AM | 4 Comments

There is a three-year window for the lawsuit to be filed against a person who cancels his or her credit card. Canceling card is done for the obvious reason that the card holder can no longer pay the debt. In April 2010 ruling, New York’s Court of Appeals decided that one defendant was right when he canceled his credit card six years before he was sued by a debt collection agency.

Here is how the story goes…

A guy who goes by the name Jared King opened a credit card account with Discover in 1989 and canceled the card 10 years later in 1999. What he did was, like many other folks, cut his card in half and sent it to Discover Bank. Along with the cut-in-half card, he sent a note asking the bank as to how he could pay off his $8,514 balance and requested that his account be closed.

Discover did not advise him what to do. Six years passed during which time, he received no phone call or letter from the bank. After 6 years, Mr. King was sued by Portfolio Recovery Associates LLC which had purchased the defendant’s debt from Discover Bank.

Without a lawyer, King argued that Portfolio had waited too long to file the lawsuit. A trial court disagreed with King. The case went to intermediate appeals court. It said the same thing. Apparently, King knew something about the law. He kept saying Portfolio could not sue him. The case went to New York’s Court of Appeals. Finally in April 2010, the Court decided that King was right. He was right all along but that does not matter until the court said there was a three-year window for the lawsuit to be filed against King and Portfolio had missed it.

Debt buyers and collectors…

With new technology, the $11 billion a year debt collection industry has exploded in recent reasons, especially in the courts. Debt buyers pay pennies on the dollar for old debts. They use databases to file automated lawsuits. In the process, they make huge profits when they collect balances inflated by interest, penalties and fees.

Debt collection is the Federal Trade Commission’s second highest consumer complaint. Last year, the commission received an average of 327 debt collection complaints a day. Some experts say it is unfair to collect interest and fees which are not owed. It is certainly unfair and highly unethical to file lawsuits after it is too late to do so. And the New York’s court has confirmed it by its decision in favor of King.

Debt collection abuses have been going on for sometime especially now in these hard times of huge credit card and other debts. Most of the time,, debt collectors overreach and in the process, it puts a lot of people’s financial security at a high risk.

In a Nutshell
If you are sued for an old debt, the New York’s Court of Appeals decision suggests you may have a good defense. We learn from its decision that Debt collection lawsuits must be timely, accurate and fair. However, there can be a huge OOPS! and may be created from fear inflicted by debt collectors. If you make a partial payment, you may reaffirm the debt and extend the time for a collector to file a lawsuit.

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  1. 4 Responses to “Debt Collectors Cannot Sue After Three Years”

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