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New York's Statute of Limitations for Debt Buyers (the "borrowing Statute")

Applying the Statute of Limitations in Consumer-Debt Cases

The Outside Counsel column in today's Law Journal was entitled, "Borrowed Time: Applying the Statute of Limitations in Consumer Debt Cases."

Debt Buyer issues

  • New York State employs a "borrowing statute" (full text below) that applies the agreed-upon venue's statute of limitations if it is shorter. CPLR §202.
  • Out-of-state bank plaintiffs may find it difficult to establish which state's statute of limitations shall apply. In a contract case, — without the contract that may state otherwise — a plaintiff's injury is assumed to have accrued in its state of incorporation or principal place of business. In debt buyer cases, the law of the original creditor will apply.
  • The reason for the scant production of evidence in debt-buyer cases is the result of electronic purchases of debt portfolios.
  • Five of the six largest credit card issuers are foreign banks: Chase Bank ( Delaware), Bank of America (Delaware), CitiBank (South Dakota),Capital One Bank (Virginia), and Discover Financial Services (Delaware). Only American Express is headquartered in New York. 
  • Caveat: the Appellate Division, Third Department in New York recently held that a statute of limitations is procedural in nature — not substantive. Therefore, it pertains to a remedy, not a right, and thus New York should apply its own statute of limitations, subject to the borrowing statute below.
  • Technological advances have made it easer to buy old debt and unlawfully sue on time-barred debt.
  • The plaintiff must submit an additional mailing upon filing a proof of service under NYCRR §208.

New York CPLR § 202 (the "borrowing statute")

CPLR § 202. Cause of action accruing without the state

An action based upon a cause of action accruing without the state cannot be commenced after the expiration of the time limited by the laws of either the state or the place without the state where the cause of action accrued, except that where the cause of action accrued in favor of a resident of the state the time limited by the laws of the state shall apply.

For a comprehensive analysis of the statute of limitations, see 15 FAQ’s about Statute of Limitations, Debt Collection, and Credit Reporting.