Arizona (finally) Clarifies Statute of Limitations on Credit Cards

For years Arizona law as it relates to the statute of limitations on credit cards has been murky at best. Recently the Arizona Supreme Court provided a lot of clarity when it comes to calculating when the statute of limitations starts ticking on credit card debt.

But before I get into what the Arizona Supreme Court said, let’s discuss what the statute of limitations is and how it is applied to credit card debt in Arizona.

The statute of limitations is the amount of time that the credit card company has to file a lawsuit against you. In Arizona, the law states that creditors have six (6) years to file a lawsuit against you. If they don’t file a lawsuit against you within that six (6) year period they are barred from ever filing a lawsuit against you.

The big question is when does that six-year period start ticking?

 

The Statue of Limitations Starts When The First Full Payment Is Not Made

In the case Mertola, LLC v. Santos ¹⁾No. CV-17-0109-PR (July 27, 2018), the Arizona Supreme Court held that the statute of limitations on a credit card starts “when the debtor first fails to make a full, agreed-to minimum monthly payment.”

The reason why this is so helpful to consumers is that prior to this ruling most debt collectors took the position that the statute of limitations started when the credit card account was charged off. Charge-off occurs six months after a consumer stops making payments on the credit card account.

Now, with this new Arizona Supreme Court decision, there is clarity when the statute begins, and in most cases, it will begin a full five months before charge-off.

 

What If I Make a Partial Payment or Bring My Credit Card Current?

A big concern of most consumers is if they make a minimal payment years after the account goes into default if that minimal payment re-starts the statute of limitations.

In fact, many creditors took the position that if they could get you to make a small payment that they could re-start the statute of limitations and have a much longer period to try and collect on the credit card.

The Arizona Supreme Court provided some guidance here as well. The Court held that if the consumer makes a payment that brings the past due amounts current, then the statute of limitations does, in fact, start again. However, “partial repayment does not cure the default or reset the limitations period.”

For example, if you have a minimum monthly payment of $250.00 and you don’t pay it, the statute of limitations period begins. However, if you are able to make a payment that brings the account current, then the statute of limitations period starts over.

However, if you only make a partial payment of $20.00, then the limitations period would not reset.

The limitations period is not reset by a partial payment.

 

How to Determine if the Statute of Limitations Has Expired in Your Case

In Arizona, you can determine if the statute of limitations has expired on your credit card account by looking over the history of the account and determine when the first time you fell behind occurred. Then you need to look and see if you ever brought the account current.

If not, then you count out six (6) years. If the creditor has not filed a lawsuit within six (6) years then they can never do so. If you they have filed a lawsuit during that six (6) year period then the lawsuit will likely be permitted to move forward.

If you are being sued by a debt collector and need help to evaluate your options don’t hesitate to contact us (480) 420-4028.