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Suit filed after statute of limitations end

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The Indiana Court of Appeals reversed summary judgment for a company that purchases and collects charged-off credit card debt, ruling the statute of limitations prevented the company from going after a delinquent consumer.

Jason Smither obtained a Mastercard account from Providian Bank in 1999. On Feb. 9, 2000, he had made a payment toward his $1,700 debt on the card but never made another payment or charge on the card. Providian "charged off" the debt Sept. 18, 2000, but kept sending monthly statements to Smither, eventually requesting a minimum payment of $670 on the outstanding balance in December 2000. Asset Acceptance purchased Smither's account in December 2001 from Providian Bank. On May 30, 2006, Asset sued Smither seeking damages of $2,157.62 plus interest.

Asset tried serving Smither twice at an incorrect address, and the trial court granted default judgment for the company. The court later ordered the case closed for failure to prosecute but noted the case could be redocketed in the future. Around this time, Smither discovered the default judgment by looking at his credit report and contested the judgment saying the statute of limitations had passed. The trial court granted summary judgment for Asset.

Even though Asset didn't introduce the account agreement applicable to Smither's card, the appellate court in Jason Smither v. Asset Acceptance LLC, No. 55A04-0902-CV-70, used the boiler plate language regarding default and acceleration to decide the appeal. Using Portfolio Acquisitions LLC v. Feltman, 909 N.E.2d 876, 881 (Ill. App. Ct. 2009), the judges decided that Indiana Code Section 34-11-2-7(1), which governs actions on accounts and unwritten contracts and has a six-year statute of limitations, is appropriate to use when ruling on attempts to collect credit card debt.

Feltman established credit card accounts aren't like promissory notes or installment loans because the amount of debt a consumer has may be in flux, wrote Judge Michael Barnes. He also noted that credit card accounts closely resemble the common law definition of an "open account." The general rule is that the statute of limitations for an action on an open account "commences from the date the account is due."

"Whether we consider the statute of limitations to have begun running on the date of Smither's last payment or the next payment due date thereafter, Asset's lawsuit filed on May 30, 2006, was more than six years after both dates," wrote Judge Barnes.

Asset argued it was entitled to delay the running of the statute of limitations because the credit card agreement governing Smither's account had an optional acceleration clause that it used when it "charged off" his account in 2000.

Even if the Court of Appeals assumed that a credit card company could delay the running of the statute of limitations by waiting to invoke an optional acceleration clause, Providian never invoked it and Asset had no evidence equating a debt "charge off" with the exercise of an optional acceleration clause. Even if Providian believed it was invoking the clause, it never took any affirmative action to notify Smither of that fact, wrote Judge Barnes. The first time Asset or Providian requested immediate and full payment from Smither was after the lawsuit was filed in 2006. Thus, the suit is time-barred.

The judges remanded for summary judgment to be entered for Smither.

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  1. Hail to our Constitutional Law Expert in the Executive Office! “What you’re not paying attention to is the fact that I just took an action to change the law,” Obama said.

  2. What is this, the Ind Supreme Court thinking that there is a separation of powers and limited enumerated powers as delegated by a dusty old document? Such eighteen century thinking, so rare and unwanted by the elites in this modern age. Dictate to us, dictate over us, the massess are chanting! George Soros agrees. Time to change with times Ind Supreme Court, says all President Snows. Rule by executive decree is the new black.

  3. I made the same argument before a commission of the Indiana Supreme Court and then to the fedeal district and federal appellate courts. Fell flat. So very glad to read that some judges still beleive that evidentiary foundations matter.

  4. KUDOS to the Indiana Supreme Court for realizing that some bureacracies need to go to the stake. Recall what RWR said: "No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!" NOW ... what next to this rare and inspiring chopping block? Well, the Commission on Gender and Race (but not religion!?!) is way overdue. And some other Board's could be cut with a positive for State and the reputation of the Indiana judiciary.

  5. During a visit where an informant with police wears audio and video, does the video necessary have to show hand to hand transaction of money and narcotics?

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