Statute of Limitations Defense to Debt Collection? Not So Fast

In May 2006 a debt collector sued an Oregon consumer–in Oregon–for a credit card debt. The consumer had made her last payment in November 2001 before she defaulted. The credit card agreement said that New Hampshire law would apply to the agreement. In New Hampshire, the statute of limitations for an action on a credit card is three years.

So the consumer has a statute of limitations defense to the 2006 lawsuit, right? Wrong, according to today’s opinion by the Ninth Circuit Court of Appeals in Avery v. First Resolution Management Corp. New Hampshire law also provides that the statute of limitations is tolled if a defendant is “absent from and residing out of the state at the time the cause of action accrued.”

The consumer reasoned that since she had lived in Oregon the whole time, she would have to be absent from Oregon, not New Hampshire, for the limitations period to toll. No, said the court. Because the consumer was “absent from New Hampshire at all relevant times,” the debt collector’s claim was tolled and had not run by the time it brought the lawsuit.

The obvious import of this opinion is that when New Hampshire law applies, the statute of limitations for credit card actions will never run if the consumer lives outside New Hampshire!

The court stepped around that issue by observing that the Oregon limitations period for contract claims is six years, so even if Oregon law were to apply, the debt collector’s action could go forward.

We won’t be at all surprised if, based on Avery, credit card companies will line up to change their choice-of-law provisions to New Hampshire. Then the only time they will have to worry about a statute of limitations defense is if the consumer happens to live there.


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