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  • Arizona Supreme Court holds statute of limitations for credit cards begins to accrue upon first missed payment

    Courts

    On July 27, the Arizona Supreme Court held that a cause of action to collect a credit card debt subject to an acceleration clause begins to accrue as of the date of the consumer’s first uncured missed payment. According to the opinion, the consumer was sued in 2014 by a debt collector for an unpaid balance of over $17,000 on a credit card issued in 2007. Throughout 2007 and 2008 the consumer routinely made late payments and completely missed the February 2008 payment. The consumer moved for summary judgment, arguing that the claim was barred by Arizona’s six-year statute of limitations, which began to accrue at the time of the first missed payment in February 2008. The motion was granted by the trial court. The appellate court reversed, agreeing with the debt collector that the cause of action for the entire debt does not accrue until the creditor accelerates the debt. Disagreeing with the appeals court, and affirming the trial court’s decision, the Arizona Supreme Court distinguished revolving credit card accounts from closed-end installment contracts, which have a set date that the debt must be paid in full. The court explained that with installment contracts, the accrual date can be no later than the date in which the entire balance must be paid, as compared to credit card accounts, which have no end date. On that basis, the court held that allowing a creditor to delay accrual by not accelerating the debt, would “functionally eliminate the protection provided to defendants by the statute of limitations.”

    Courts State Issues Credit Cards Statute of Limitations Acceleration

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