Understanding Statute of Limitation

Discussion in 'Credit Talk' started by Flyingifr, Mar 19, 2004.

  1. Flyingifr

    Flyingifr Well-Known Member

    There is a lot of confusion in Consumer circles about this vital topic, so let's try to clear the air. First of all, there are TWO different Statutes of Limitations - The Statute of Limitations on Collections (SOLC) and the Statute of Limitations on Reporting (SOLR). There is ONE SOLR since it is determined by the Federal Fair Credit Reporting Act. There are 51 SOLC's (one for each state plus DC).

    FIRST SOLR:

    Fair Credit Reporting Act Section 605(a)(4) limits the reporting of derogatory information to 7 years. Before 1997 creditors could manipulate that date by deciding not to charge off an account for years, reporting it as a 1780 day account, then charging it off and starting the 7 year clock all over again. The 1996 amendments to FCRA changed that by inserting Section 623(a)(5), which sets by law the concept that FCRA reporting time must begin with the date the first payment was missed taht led to the delinquency being reported, and that the creditor must report it within 180 days of that date. The 180th date therefore becomes the Statutory Charge Off Date. That is the maximum that a creditor can extend the 7 years. Should the creditor charge the account off before the 180 days after the first missed payment, then the actual charge off date becomes the beginning of the 7 year reporting period. Should the creditor choose not to charge the account off for several years, then for FCRA reporting purposes the 7 years begins 180 days after the FIRST missed payment that led to the delinquency. I refer you to the Amason letter ( http://www.ftc.gov/os/statutes/fcra/amason.htm ) for a more complete discussion of this.

    Since Congress has determined the starting date of the 7 year reporting period by law, that date becomes a Date-Certain, meaning that no action by the creditor can legally change it. Collectors will routinely say they can change it and, taking the Lopresti letter ( http://www.ftc.gov/os/statutes/fdcpa/letters/lopresti.htm ) at face value, the collector can legally TELL you they can change the Date-Certain, but they legally cannot DO it. The Status Date (or Date-Certain) remains with the account unchaged, no matter how many times the account is bought and sold. Changing the Status Date is called re-aging, and is a FCRA violation.

    SOLC

    The Statute of Limitations on Collection is a much murkier topic, since there are really 51 different laws to examine. I will be talking in generalities here, so I encourage you to spend the time to determine the exact laws in your state. In all instances I am referring to debts taht have NOT been reduced to Judgement. Judgements have their own SOLC, which in almost all cases is MUCH longer than SOLC as discussed here.

    The purpose of SOLC is to comply with the 4th Amendment right to a speedy trial. Some states allow a very long SOLC (I believe Rhode Island can go up to 20 years), so this is problematical. Some states (like Massachusetts) toll, or suspend, SOLC while the defendant is located outside the state.

    As a general rule, consumers must be sued in the State Courts of the state in which they reside at the time of the suit. Except as allowed by specific laws like Fair Credit Reporting Act or Fair Debt Collection Practices Act), suits between citizens of different states brought in Federal Court must exceed $75,000 (28 USC 1332). Below that amount, the matter is delegated to State Courts.

    The contract you signed may state that it will be interpreted under the laws of a certain state, or that any suit or controversy must be decided in the Courts of a certain State. If that language is present, it will be honored. If it is not, then the matter will be decided in the Defendant's state of residence at the time suit is commenced. Some states have "Long Arm" statutes, similar to Arizona's, which reads: (edited to eliminate the unnecessary provisions)

    12-401. Venue

    No person shall be sued out of the county in which such person resides, except:

    1. When a defendant or all of several defendants reside without the state or their residence is unknown, the action may be brought in the county in which the plaintiff resides.

    4. Persons who have contracted a debt or obligation in one county and thereafter remove to another county may be sued in either county.

    6. Persons who have contracted a debt or obligation without the state may be sued in any county in which found.

    7. When there are several defendants residing in different counties, action may be brought in the county in which any of the defendants reside.

    This language is typical. Generally you must be sued in the county in which you reside at the time of the suit, but see #1 - this is the "Long Arm" statute, wherein the Plaintiff's County is the proper venue.

    Now that we have established that a suit CAN be brought, and where, now comes the question of "when".

    There are several sites on the Internet that list the various states' Statute of Limitations. The SOLC generally begins with each payment that is made. Each payment, whether timely or late, re-starts SOLC. This is the critical concept in understanding SOLC, because when you default, the last payment made is where SOLC is counted from. Here in Arizona SOLC generally is 4 years. If a creditor has not commenced suit within taht time frame, the Statute of Limitations doe not BAR a suit, but it becomes an Affirmative Defense against the suit.

    Many states have provisions in their laws that suspend (or Tolls) the SOLC while the Defendant is outside the state. Arizona's is typical:

    "12-501. Effect of absence from state

    When a person against whom there is a cause of action is without the state at the time the cause of action accrues or at any time during which the action might have been maintained, such action may be brought against the person after his return to the state. The time of such person's absence shall not be counted or taken as a part of the time limited by the provisions of this chapter. "

    This is obviously intended to protect the creditor from someone who leaves the State to avoid paying bills but has intent to return (and in fact has not relocated, just fled). Few of us do that. Most of us move from one state to another without intention to return. Arizona has a law that addresses that event:

    "12-507. Action against person removing to this state

    No demand against a person who removes to this state, incurred prior to his removal, shall be barred by the statute of limitation until he has resided in this state one year, unless barred at the time of his removal to this state by the laws of the state or country from which he migrated."

    This is why I can say, generally, that the SOLC of your resident State (or your previous resident state if time-barred in that state by SOLC) is what prevails. Remember - any payment, or in some states, even a promise of payment, re-starts SOLC.

    Another event that may re-start SOLC is filing BANKRUPTCY. While the SOLC window to file suit in this instance is small (in Indiana it's 30 days) a DISMISSED BANKRUPTCY can, in some states, give creditors whose debts were time-barred under SOLC before filing Bankruptcy another chance to sue you. Here's a link that lists SOME states and their SOL and Extenders:

    http://www.ncfsi.com/statute_of_limitations.htm

    In the event that a creditor with an Out-of-SOLC debt files suit, it is absolutely imperative that the defendant file an Answer asserting that the action is time-barred by SOLC in that state. While I am not an attorney, I would recommend wording similar to this:

    AS A FIRST AFFIRMATIVE DEFENSE, Defendant denies each and every allegation made by Plaintiff in the complaint; (this is a General Denial)

    AS A SECOND AFFIRMATIVE DEFENSE, Defendant alleages that this action is time-barred under section XXXX of the laws of the State of XXX (obvioulsy you will have to look up the section of law for your State. Most are on the Internet.)

    If you do NOT do this, the creditor will probably get a Judgement against you, even though the debt is time-barred. YOU MUST RAISE THE ISSUE - they won't and the Court doesn't know. It is highly unlikely you will be able to have the Judgement vacated later on SOLC basis if you were properly served and didn't respond.
     
  2. Butch

    Butch Well-Known Member

    You may also wish to recheck the discussion of the [extra] 180 days here;

    The New 7.5 Yr. Reporting Period!


    A [perhaps overly detailed] discussion of the Congressional history/intent, and statutory interpretation.



    :)
    .
     
  3. Flyingifr

    Flyingifr Well-Known Member

    Butch-

    I don't think we said anything different, I merely put it in a different light. I believe both posts, taken together, shed a lot of light on this murky topic.
     
  4. Why Chat

    Why Chat Well-Known Member

    Excellent post-- a few comments, however.

    The "tolling" statutes and "long arm statutes" rarely are applicable to a CONSUMER debtor.

    The same thing goes for "re-aging" of SOL.

    There are only 2 States, Ark. & Tn. that MAY allow reaging of SOL with a payment, and THAT only if it is by a signed check.

    All the rest have within their statutes prohibitions against re-aging for CONSUMERS, except by a WRITTEN CONTRACT.

    Some States, like Va. dissallow the waiver of rights for a consumer even IF there is a new signed contract.

    As to the various "SOL" date on many websites.-- many of them are either out of date, or just plin WRONG. They have repeated errors from other sites without ever trying to look them up. RI is an excellent case in point.

    I have ALL the States on my website, with the CORRECT SOL and the CORRECT statute on each. In addition , on most, I have also put the statute requiring a written contract to re-age, together with the "reverse tolling" in longer SOL States.

    In those States like RI where there is a blatant error in ALL the websites I have seen, I have carefully explained the correct statute and the reason for the errors on the other website.

    In addition, I keep a current file for any changes that come up, and adjust the data (with the new effective dates)
     
  5. Butch

    Butch Well-Known Member


    Absolutely Flying.


    You framed the issue exactly right.

    I was talkin to others who might have read your nicely done lesson.

    :)

    .
     
  6. blazerguy

    blazerguy Member

    If my CC agreement say "governed by the laws of Arizona", my home state of Oregon applies?

    Is the AZ SOL tolled for non-residents as Judge Haggerty found in the Avery decision with NH SOL toll provision? Any caselaw with regard to non-residents and absence from state toll?


    Attorney has simply put SOL as an affirmative defense with naming AZ statute. Shouldn't he raise the issue of agreement governed by AZ law and AZ SOL statute at the arbitration hearing?
     
  7. flacorps

    flacorps Well-Known Member

    I view choice-of-law provisions as actually creating debtor's choice by virtue of being an ambiguity in the contract that must be resolved against the drafter ... the trend is to treat statutes of limitation as substantive rather than procedural law, but this distinction is one that a consumer cannot be expected to know or understand, so a consumer can assume that the SOL of the state where he is sued applies. Or the consumer can assume that he could take advantage of a shorter SOL in the choice-of-law state.

    Meanwhile, the question of whether the attorney has appropriately invoked SOL is one of pleading rules in the relevant state, which I assume he knows how to follow.

    And I don't believe SOL has anything to do with 4th amendment speedy trial rights. SOL laws long predated the Bill of Rights, and the 4th amendment was designed to protect the rights of people who had been charged criminally ... and those rights must be specifically invoked to start a clock by a criminal defendant who is already in court, not one who is not yet in court.
     
  8. blazerguy

    blazerguy Member


    Can I assume AZ SOL law, stated in cc agreement, in light of the Avery decision?

    websupp.com/data/DOR/3:06-cv-01812-47-DOR.pdf
     
  9. flacorps

    flacorps Well-Known Member

    I have some problems with the analysis in that decision, but I think you can look to AZ law ... I hope its tolling provisions aren't a problem.
     
  10. blazerguy

    blazerguy Member

    In acknowledgment of my paranoid feelings, this decision smells like racketeering and extortion.

    What I mean is, the debt collection industry had a conference and local attorney attends. Learn of a new theory to twist the law their favor.

    Attorney returns home includes new found theory in complaint/answer/reply and Judge Haggerty buys it hook, line and sinker.

    What would an appeal of the Avery decision look like?
     
  11. flacorps

    flacorps Well-Known Member

    I think there's a strong argument that a tolling provision that causes the SOL with respect to a nonresident to be forever denies equal protection and is unconstitutional as applied. Also, a federal court applies the law of the state where it sits as interpreted by the state's appellate courts ... it's called the Erie doctrine. But the federal court in the Avery decision wasn't sitting in NH but still took an Erie-esque approach to NH's laws. I don't think it was bound by those obviously quite parochial decisions about the SOL's tolling provision.
     
  12. blazerguy

    blazerguy Member

    In the decision, when the N.H. toll to non-resident meant the SOL never ran and the toll would continue forever, the judge looked toward OR statute for relief, found it and used it.

    What caselaw would be used to appeal Avery? Shouldn't my case include citations to counter Avery?

    Why don't I have a attachment button?
    websupp.com/data/DOR/3:06-cv-01812-47-DOR.pdf
     
  13. flacorps

    flacorps Well-Known Member

    My take would be that the correct approach would be to sever the part of the statutes that was causing the problem, keeping the rest so that the contract language could be carried out as much as possible.

    In other words, the contract called for a 3 year statute of limitations per NH law. NH's law had an unconstitutional tolling provision. That was different than if NH's SOL law was somehow to trigger the savings clause in OR law ... so the court should have gone 3 years under NH rather than 4 under oregon. Also, that's what an unsophisticated consumer could expect ... all ambiguities should be resolved against the drafter.

    The court was result oriented, they wanted the creditor to win. Plenty of grounds existed to handle it the correct way ... constitutional, rules of statutory construction, contract interpretation rules, etc.

    Some of those arguments do not seem to have been raised by the debtor, and the court didn't think of them on its own ... so in the appropriate case, a court could be urged to distinguish (brush aside as not relevant to what the debtor is arguing) the Avery case.
     
  14. flacorps

    flacorps Well-Known Member

    A further gloss on the matter:

    Remember this thread?
    http://consumers.creditnet.com/Disc...-equal-protection-clause-violation-67065.html

    If you argue equal protection, they might go back to arguing that Arizona law doesn't give equal protection by having a bifurcated SOL for executed within/executed without contracts at 6 and 3 years. Oops. Maybe not so oops.

    Remember, they chose AZ law knowing full well that it had that provision. Also knowing that any consumer who looked at that provision would believe the SOL to be 3 years. Abiguity goes against the drafter, once again... They could have immunized against that provision by simply saying the contract would be treated as having been executed in AZ and in-state SOL would apply. But that wasn't in the choice-of-law provision, was it?
     
  15. blazerguy

    blazerguy Member

    First of all, thank you for the conversation.... I do have an attorney but want to be proactive.

    background: JDB who is fourth owner (titles do not reference account), has last six months billing statements with charges and payments (no history from zero balance), no signed contract, and the Avery decision (websupp.com/data/DOR/3:06-cv-01812-47-DOR.pdf)

    how do I "sever the part...causing the problem"

    Basically, your opinion is when the N.H. SOL and TOLL law applies when toll provision is unconstitutional N.H. SOL still applies. Why would the Judge refer to OR statute? Perhaps, he did not find the N.H. toll provision unconstitutional but RATHER found it to be overly burdensome which the OR statute addresses.

    Is this the way to "sever the part... causing the problem"?
    Present the case, toll provision is overly burdensome therefore unconstitutional and the parties agreed that N.H. law governed the contract.

    Oregon is six years. :(

    Can I convince my arbitration attorney / judge of the correct orientation?

    I want to overturn this caselaw.

    The attorney who agrued this claim is Oregon's biggest debt collection attorney with many bar complaints, bar investigation, and many federal lawsuits.

    Can anyone check if Avery is being appealed?
     
  16. flacorps

    flacorps Well-Known Member

    You are not the one who severs anything, you argue to the court that it's severable. And if something is unconstitutional, it doesn't matter whether it's overly burdensome or not. Unconstitutionality is the end of the inquiry. If it were constitutional and overly burdensome, then the OR court would be right to apply OR law. But by being unconstitutional, we can sever it, drop it from the analysis, and the remaining NH law is not O.B. to the debtor because it's shorter, and it's not O.B. for them because they chose it. And the same should apply to AZ ... you dump what doesn't work for you, and if something doesn't work for them, tough noogies, they chose it--even if it is unconstitutional--and you had a right to believe it would apply because that's how the contract was written.

    I wouldn't worry about overturning Avery. That could happen in time, but distinguishing it is your immediate solution. Your attorney wants to win, not make the best possible precedent for debtors. The latter is not his job, nor yours either.
     
  17. flacorps

    flacorps Well-Known Member

    P.S. -- The unconstitutionality of the statute may not be on its face, it may be as applied ... meaning that the courts that have construed it in its home state have construed it in a way that is unconstitutional ... the solution may be to construe it in a way that is constitutional.

    If the federal court were sitting in AZ and the constitution was not part of the analysis (because the law was clearly constitutional on its face and as the AZ court had applied it, then the Erie doctrine would require the federal court to accept the state court's interpretation.

    A federal court sitting in OR need not do so ... it can make its own interpretation even in the absence of a constitutional issue.
     
  18. blazerguy

    blazerguy Member

    You answer seems to apply to federal court; this is in state court in Oregon.

    What is the analysis in state court?
     
  19. flacorps

    flacorps Well-Known Member

    A state court doesn't face the same strictures that a federal court can face (because of federalism concerns--hence the Erie doctrine).

    The principles that a state court follows when construing the laws of another state are the restatement of conflicts of law and the principles of judicial comity, as well as the U.S. constitution and the state constitution if it is more restrictive. Stare Decisis does not come into play, everything over in that other state is merely persuasive ... however, the other principles I mentioned tend to mean that it will be respected.
     

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