PA Statute of Limitations on Credit Card Debt

Whenever a new potential client calls my office, one of the first things that they want to talk about is Statute of Limitations (SOL) on Credit Card debt. “When does it run?” “When does it start?” “The judgment is 8 years old, isn’t that past the Statute?”. I hear these questions, and others that are related, every single day, over and over. Other than Wage Garnishment, this is the most talked about issue that I discuss with people. So let’s talk about Statute of Limitations…

The Statute of Limitations on Credit Card Debt in Pennsylvania is four (4) years from the date of default for most cases. For Capital One, and some Discover cases, the SOL can be 3 years. This is because some of those cardmember agreements have clauses in them that state how long the SOL is, or in the alternative, which state’s SOL to use when making the calculation (Capital One uses Virginia law, which is 3 years).

So When is the Date of Default?

The date of default is 30 days after you last made a payment…kind of. If you make a payment intending to acknowledge the debt, because you agree that money is owed, and then you stop, then that is the last payment for purposes of determining the default date. If that was confusing, let me explain what I mean. You receive monthly statements from the credit card company, so you send in payments, right? You pay and pay and pay, until something bad happens… maybe its a job loss/salary reduction, maybe its a health issue, maybe you get divorced. These things happen all the time. So you stop paying on the credit card, which is understandable. Thirty days after the date of that last payment is the date of default. But wait, a debt collector calls you a year later, threatening wage garnishment or jail time if you don’t pay on that account right now. You get scared and you send in a $25 payment because that is all that you can spare. Did the default date just change because you made a payment under duress? Absolutely NOT. This $25 payment wasn’t necessarily an acknowledgement of the debt or the amount, it was an attempt to avoid immediate harm from the debt collector. Under this scenario, the SOL begins and continues to run not from this most recent payment, but, from the payment that was made one year earlier.

So do I automatically Win/Lose?

Nothing in law is automatic. Having said that, let’s start with “Do I automatically Win?”. If a lawsuit is filed beyond the statute of limitations, then there is a very good chance that you are going to win. The issue is that you need to prove the SOL and when it has run. That’s why the “win” is not “automatic”. The court does not know the SOL date, you have to tell it what the default date is through means of a writing, often by filing what is called an “Answer”. (An Answer is not the appropriate document to file on a credit card case in most instances… more on that below). If you advise the court as to what the default date is, and if you are correct, then the court should rule in your favor. So in that respect, an SOL claim is most often a Win. The problem is that many people ignore the lawsuit just because they “know” that it is beyond the SOL. You simply cannot ignore a lawsuit. Again, the court doesn’t know that its filed beyond the SOL, you need to tell the court, in writing.

On to the other side of this…”Do I automatically lose if they filed within the SOL?”. NO NO NO. The Statute of Limitations is but one of over 20 defenses that we use when defending a credit card case. Frankly, we use the SOL on less than 10 percent of the cases that we handle. The reason that it is used so infrequently is because we never get to that point to even argue it.

In most cases that are filed at the Court of Common Pleas, Preliminary Objections are the proper response. These Objections are a signal to the court that we believe that the lawsuit is defective. If the court agrees, the lawsuit will not move forward until the collector “cures” the defects…in most instances by producing additional documentation. If you file an Answer instead of Preliminary Objections, then the Objections are waived. This is why its almost always wrong to file an Answer to a credit card case.

The Statute of Limitations BONUS

If a collection claim is filed against you and it is proven to be beyond the SOL then you now have a lawsuit AGAINST the collector. Great right? Well, it gets even better. The lawsuit that you file against the collector is completely FREE. It will cost you NOTHING out of pocket. (When I am explaining this to clients, you wouldn’t believe how many times I have to repeat it… I guess it sounds too good to be true!). So again, it costs you nothing out of pocket to sue the debt collector. They are required to pay our reasonable attorney fees for suing them. They are also required to pay you up to $1000 in what are called “statutory damages”. This means that you are entitled to money simply because they broke the law, you don’t have to show that you were damaged in any way. Of course, if you actually are damaged, then you may be able to recover those damages as well.