Which state’s debt collection statutes of limitation apply?

September 16, 2012 | By

NY Supreme Court Smacks Down Debt Collector

Previously I wrote an article which outlined the Debt Collection Statutes of Limitation by state. But many debtors often ask, “Which state’s debt collection statutes apply in my case?” The answer is now clearer than ever, since the New York Supreme Court has now weighed in on the matter in Portfolio Recovery Associates, LLC v . King.

Jared King was a resident of Connecticut when he opened a Discover credit card account, which he admits he didn’t pay. He resided in New York, when the Plaintiff, Portfolio Recovery Associates, LLC. PRS, an assignee of Discover Card, sued him in NY for the amount owed, $8514.77. King claimed that PRS was unable to bring a suit in NY for the amount he owed since the statute of limitations for Delaware is three years and it had expired. PRS claimed that they could use NY’s Statute of Limitation, which was six years. The case was initially ruled in PRS’s favor by the lower level courts, including the Appellate Division of the NY Supreme Court. However, on April 29, 2010, the NY Supreme Court reversed this decision and found in favor of King:

“Portfolio, as the assignee of Discover, is not entitled to stand in a better position than that of its assignor. We must therefore first ascertain where the cause of action accrued in favor of Discover. Here, it is evident that the contract causes of action accrued in Delaware, the place where Discover sustained the economic injury in 1999 when King allegedly breached the contract. Discover is incorporated in Delaware and is not a New York resident. Therefore, the borrowing statute applies and the Delaware three-year statute of limitations governs.”

The ironic thing here is that Discover Card and other banks have used Delaware’s unfavorable and anti-consumer laws to stick it to consumers nationwide when setting outrageous and unconscionable interest rates under the Marquette decision. Now debtors can give a little back, using the very tactics that Banks use to screw them.

Score one for the little guy.

When determining which state’s statute of limitations apply, look at where the creditor is headquartered. For credit card issuers, in many cases that state will be Delaware and North Dakota, two state’s that don’t have limits on the interest rates they can charge (based on the Marquette Decision).

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