On April 29, 2010, New York’s highest court issued its decision in Portfolio Recover Associates, LLC v. King. The Court’s decision, which potentially impacts thousands of debt collection lawsuits involving old credit card debt, New York’s Court of Appeals held that a consumer was entitled to the shorter of New York’s statute of limitations (six years for breach of contract) and Delaware’s statute of limitations (three years for breach of contract).
In coming to this conclusion, the Court did not rely upon the Delaware choice of law provision in the consumer’s credit card agreement. Rather, the Court held that even though the credit card agreement’s “standard” choice of law provision only applied to “substantive” legal issues and not to “procedural” issues , such as the statute of limitations, the consumer, a pro se litigant, was entitled to Delaware’s shorter statute of limitations pursuant to CPLR § 202 (i.e. New York’s “borrowing statute”). Specifically, the Court held that defendant was entitled to choose the shorter of the statute of limitations available in a the original creditor’s home state of Delaware, and the six year statute of limitations generally applicable to credit card cases under New York law.
The Court explicitly held that it was the original creditor’s home state that was at issue, and not the home state of the debt buyer, who had purchased the account after default.
Our office routinely sees pleadings filed by debt buyers in which, even according to the debt buyer’s own allegations, default occurred more than three years prior to the filing of the collection suit. Many of these suits involve debts originally owed to a company whose “home” state has a three year statute of limitations. In particular, many banks that issue credit cards (for example, Discover and Chase) are either incorporated and/or headquartered in Delaware, which has a three year statute of limitations. Other banks, such as Providian National Bank, are based in New Hampshire, which also has a three year statute of limitations.
In addition to providing a significant and strong defense to many credit card lawsuits, the Court’s decision opens the door to consumer lawsuits against debt buyers under the Fair Debt Collection Practice Act (FDCPA) for bringing claims that were time barred or “stale” pursuant to CPLR §202.
