When is your debt time-barred (past the statute of limitations)?
- Peter Schneider
- 5 days ago
- 5 min read
If you fall behind on paying your debts, the people you owe have a certain amount of time to pursue it in court, or the debt becomes what is called time-barred, or past the statute of limitations.
But if your debts include national banks and credit cards, this can become more complicated than just looking up the statute of limitations in just your state. The true statue of limitations that governs your situation can be one of the more complicated areas of the law as case Pazymino v. Portfolio. Recovery Associates, LLC, No. 19-12259, 2022 WL 17668024, at *5 (D.N.J. Dec. 14, 2022) demonstrates.
In 2014, plaintiff Paola Pazymino apparently fell behind on an Ann Taylor branded credit card, eventually resulting in four years later Portfolio mailing multiple letters to Ms. Pazymino letters attempting to collect the debt. The lawsuit turned into a fight over the applicable statute of limitations. Was it Delaware's three years, or the six years of New Jersey state law? If the statute of limitations was three years, Portfolio likely ran afoul of the fair debt collection practices act.
Ms. Pazymino's argument was pretty simple. Although she lived in New Jersey, the credit card agreement chose Delaware law to govern, and “Delaware law provides that no action shall be brought after the expiration of 3 years from the accruing of the cause of action.”
Ms. Pazymino’s FDCPA claim turns on a single threshold issue: whether PRA’s ability to enforce Ms. Pazymino’s debt was subject to Delaware’s three-year statute of limitations or New Jersey’s six-year statute of limitations.
Portfolio moved for summary judgment saying the six year SOL applied and the court ultimately punted the issue.
whether the underlying contract contained a choice-of-law provision selecting Delaware law to govern the transaction is a genuine, disputed issue of material fact. Therefore, summary judgment is inappropriate, and PRA’s motion must be denied.
Apparently neither Portfolio nor Ms. Pazymino could produce the card holder agreement, but many similar card holder agreements in the government's repository had the Delaware language:
During discovery, Ms. Pazymino directed PRA to a publicly available repository of credit card agreements issued by Comenity Bank for Ann Taylor-branded credit cards. This repository is maintained by the Consumer Financial Protection Bureau (“CFPB”) pursuant to the Truth in Lending Act, as amended by the Credit CARD Act of 2009, 15 U.S.C. § 1632(d). Following a good-faith review of the repository, Ms. Pazymino identified a set of 130 similar credit card agreements spanning from 2011 to 2021, all of which contained the following Delaware choice-of-law provision
And some of Portfolio's letters themselves acknowledged she wouldn't be sued for the debt due to 'age'. Portfolio argued that Delaware choice of law not withstanding, it should prevail regardless because the Delaware provision did not expressly reference Delaware's statute of limitations.
To support this argument, PRA relies on the Third Circuit’s holding in Gluck v. Unisys Corporation—reiterated in this Court’s opinion in Greene v. Midland Credit Management, Inc.—that “choice of law provisions in contracts do not apply to statutes of limitations, unless the reference is express . . . In both of these [cited] cases, however, the Court employed the federal conflicts rule for determining an applicable statute of limitations . . . To resolve a conflict as to the applicable statute of limitations on a contract claim—i.e. to determine whether a debt pursuant to a credit card agreement was enforceable—a court, whether federal or state, would look to the conflicts rules of the state in which it sits (here, assumed by all parties to be New Jersey) . . . In New Jersey, “section 142 of the [Restatement (Second) of Conflicts of Law] is now the operative choice-of-law rule for resolving statute-of-limitations conflicts”
In this dispute, New Jersey's choice of law statute boiled down to New Jersey's statute of limitations should apply unless the claim would be barred under the statute of limitations of a state having a more significant relationship to the parties and the occurrence. Thus the court's punt:
the record is too thin to render an opinion regarding how significant the State of Delaware’s relationship is to the parties and to the enforcement of Ms. Pazymino’s debt relative to New Jersey’s, should the inquiry reach that point.
Earlier in the opinion the court made a very interesting observation of the relationship between Portfolio and the original creditor Comenity Bank. Portforio steps into the shoes of Comenity Bank and had no more rights or privilege than Comenity Bank's agreement with Ms. Pazymino.
It is curious that PRA has not itself produced a copy of the underlying contract. Indeed, as Ms. Pazymino points out in her Responses and Objections to PRA’s First Set of Discovery Requests, the “written terms” of Ms. Pazymino’s agreement with Comenity Bank are likely to be found in documents “that are already in Defendant’s possession, custody, and/or control, or to which Defendant has greater access than that of Plaintiff.” (Mot. Ex. E at 7.) Because an assignee steps into the shoes of the assignor and seeks to collect a debt based on a contract, the Court will not lightly indulge a claim of ignorance of the contractual terms. As PRA acknowledges in its papers, following its purchase of Ms. Pazymino’s account, it remained bound by the terms of her original agreement with Comenity Bank. However, at oral argument, counsel for PRA stated that it does not have access to a copy of Ms. Pazymino’s contract. This is difficult to accept. As a sophisticated financial services entity, it is probable that PRA possesses or at least has access to the “written terms” at issue here. Even on the doubtful assumption that PRA cannot informally obtain the documents from Comenity, it is just as capable of pursuing third-party discovery as Ms. Pazymino is.
So where does this leave you? If a federal judge can't easily figure out the applicable statute of limitations, it might be difficult for most consumers to know it unless the debt is past all possible applicable statutes of limitations.
Many federal courts are working overtime to strip consumers of the ability to pursue telemarketers and debt collectors for abusive practices, and ultimately this case was dismissed because supposedly receiving multiple letters for a debt possibly past the statute of limitations was just a "statutory violation" and not a concrete hard. I'm not kidding. If you get letters like Ms. Pazymino received, it is imperative that you consult with a properly experienced attorney in how to build your case. There were methods to get Ms. Pazymino past this artificial barrier and either her attorney didn't counsel her properly, or she didn't consult her counsel when she needed to jump through an additional hoop to protect her claim.
The thoughts, opinions and musings of this blog are those of Peter Schneider, a consumer advocate attorney at Northwest Debt Resolution, LLC. They are just that, his thoughts, opinions and musings and should be treated as such. They are not legal advice. Do you have more questions? We would be happy to answer your questions:
Bankruptcy and debt questions:
Peter Schneider
206-800-6000
Robocalls and Telephone Consumer Protection Act questions:
Nathen Barton
206-800-6000
Fair Debt Collection Practices Act (FDCPA) questions:
Peter Schneider
206-800-6000
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