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Collection Actions: 3.6.2 Other State Notice Requirements

Iowa’s right to cure statute applies to consumer credit transactions,259 and thus also applies to credit card collections.260 Consequently, before the creditor can accelerate the amount due—i.e., demand the full balance and not just paid due minimum payments—the creditor must send the consumer a right to cure notice that follows the language and requirements of the Iowa right to cure statute.261 Where a card issuer never accelerated the debt, but s

Collection Actions: 3.7.2.1 Generally

In general, collection actions are governed by state statutes of limitations. A four-year federal statute of limitations applies to civil actions arising under an Act of Congress, unless that Act provides otherwise.273 But collection actions are invariably not brought under federal statutes, so the four-year federal limitations provision does not apply.274

Collection Actions: 3.7.2.2.1 Overview

Federal law appears to specify a two-year statute of limitations for actions to recover on cell phone charges and on interstate or foreign landline communication charges,280 but courts have ruled otherwise.281 47 U.S.C. § 415(a) states that “[a]ll actions at law by carriers for recovery of their lawful charges . . .

Collection Actions: 3.7.2.2.2 Scope of the two-year limitations provision

The federal limitations period applies to common carriers. 47 U.S.C. § 153(10) defines “common carrier” or “carrier” as “any person engaged as a common carrier for hire, in interstate or foreign communication by wire or radio or interstate or foreign radio transmission of energy, except when reference is made to common carriers not subject to this chapter.” Thus, the definition of carrier includes cell phone, interstate, and foreign communications operators.

Collection Actions: 3.7.2.2.4 Federal limitations period applies to assignees

If a court were to disagree with the Fifth Circuit (and other courts) and find that the federal limitations period applies to a cell phone carrier, the federal limitations period applies to any assignee of that carrier. The assignee steps into the shoes of the assignor and has no greater rights. The assignor cannot revive an action simply by selling it to someone else. Thus, a federal court has stated:

Collection Actions: 3.7.3.1.2 Use of the forum state’s limitations period when it is the shortest

Although not followed by all states, both the 1971 and 1988 versions of Restatement (Second) of Conflict of Laws clearly state that the forum’s limitations period will be selected when it is the shorter of the two.290 An important purpose of a state’s statute of limitations is to prevent the state’s courts from having to hear stale evidence, an interest of the forum state no matter the law specified in a contract. A private contract should not force courts to hear stale cases that the legislature has determined should not be heard.

Collection Actions: 3.7.3.1.4 States not using the shorter contractually chosen state’s limitations period

Even when the law selected in the contract has a shorter limitations period than the forum state, some courts use the forum’s longer limitations period, viewing the statute of limitations as a procedural matter for the courts, not a substantive one determined by contract.305 Some states alternatively simply rule that the forum state’s statute of limitations is always to be applied.306 These courts are generally following the same approach as the 1971 version of the Restatement (Second) of Co

Collection Actions: 3.7.3.2.1 Borrowing statutes described

Over half the states have borrowing statutes that require, when an action arose elsewhere than the forum state, that the action can only be brought if within the limitations period that applies under the law of the state where the action arose. These borrowing statutes apply where the consumer resided in one state when incurring the debt but is sued in a second state where the consumer has since moved.311 This is a fairly common situation when the debt being sued upon is a number of years old.

Collection Actions: 3.7.3.2.4 Interaction of borrowing statute and law of state chosen in the contract

Another issue is whether a forum state’s borrowing statute applies when the credit agreement chooses the law of a particular state. As described at § 3.7.3.1, supra, courts generally use the shortest limitations period of either the contractually-chosen state or the forum state. Other courts keep the forum state’s limitations period and, in that case, the interaction with the borrowing statute is straightforward.

Collection Actions: 3.7.4.1 Generally

States typically establish several statutes of limitations, of varying lengths, that are applicable to different causes of action. These statutes of limitations are often found in the state’s code section governing courts and judicial proceedings for personal actions and in the state’s version of the Uniform Commercial Code (UCC).

Collection Actions: 3.7.4.2 State-by-State Listing of Limitations Periods for Breach of Contract

Every state has a limitations period for claims based on a written contract, but the time periods vary significantly from state to state. In some states it is only three, four, or five years, while six years is more common. A handful of states have limitations periods of eight or ten years. Statutes of limitations for a claim on a non-written contract are usually shorter than those for a written contract. In a number of states, though, the limitations period is the same for non-written and written contracts. Also listed are special limitations periods for collection of consumer debt.

Collection Actions: 3.7.5 The Statute of Limitations Cannot Be Extended by Contract

It would be unusual for a consumer credit agreement to lengthen a statute of limitations, and any such attempt should be unenforceable. The statute of limitations is the legislature’s attempt to achieve a balance between protecting the courts and defendants against stale claims and providing plaintiffs a reasonable period in which to bring an action. As such, the private parties cannot waive the courts’ interest in not hearing stale claims.

Collection Actions: 3.7.6.1 Generally

As described in § 3.7.4, supra, a state may have a number of different statutes of limitations of different lengths, such as for written contracts, non-written contracts, sales of goods, leases, dishonored checks, and promissory notes.434 It may require a careful reading of each of the state’s statutes of limitations to determine which applies.

Collection Actions: 3.7.6.2 Application of UCC “Sales” Limitations Period to Credit Sales, Store Credit Cards, and Utilities

The four-year limitations period under UCC Article 2 for the sale of goods overrides a state’s limitations period for a claim based upon a written contract, which is often longer than the four-year period of UCC Article 2.437 The same is the case even if the plaintiff seeks to bring the claim for account stated, open account, or quantum meruit.438

The official comment to U.C.C. § 2-725 states:

Collection Actions: 3.7.6.3.1 Overview

A number of possible limitations periods might apply to breach of contract claims concerning a bank-issued, general purpose credit card. Typically, a state limitations period will not specifically reference credit card debt, although Arizona’s legislation is an exception.451 In other states, courts must determine the applicable period.

Collection Actions: 3.7.6.3.3 Is a written credit card agreement a “contract in writing”?

Even if the collector is able to produce the agreement and brings an action for breach of the written contract, a credit card agreement may not qualify as a written agreement for purposes of a state statute of limitations.465 Credit card agreements are subject to change unilaterally, are generally not signed by either party, and there often is not a “complete writing,” but an initial writing plus a series of standard form amendments whose enforceability is contingent on the consumer’s continued use of the credit card.

Collection Actions: 3.7.7.1 Generally

The UCC Article 3 limitations period for suit on a dishonored check begins to run from the date of dishonor.474 The UCC Article 3 limitations period for promissory notes begins on the date of acceleration.475

Collection Actions: 3.7.7.2 Date Triggering Limitations Period for Credit Card Debt

The date triggering the limitations period on credit card debt depends on the collector’s cause of action. If the collector is bringing the claim on an account stated cause of action, there may be no proof of a contract. Instead, the claim is based on the consumer’s failure to pay on an amount demanded by a statement of account.