Debt Collectors Who Sue You After The Statute Of Limitations Expires Violate The FDCPA
HAVE YOU BEEN SUED BY A DEBT COLLECTOR (DEBT BUYER) AND WONDER WHAT THE STATUTE OF LIMITATIONS CAN DO FOR YOU?
Learn about your five options when sued by a debt buyer as you need to discover what you should do next.
[Important note — one of those options is NOT to use Ferry & Nicholas who will write you the day after you are sued. I think anyone who uses them is asking for a disaster to happen — you can handle the lawsuit on your own or hire a lawyer but don’t hire these guys.]
Being sued not a pleasant experience, particularly if the debt is so old that you cannot remember the details of it. The law recognizes this and requires that suits be brought within a certain time period – the statute of limitations.
And if the suit against you is filed after the statute of limitations has expired, several good things should happen.
First, you should be successful in the collection suit as the case should end in victory for you.
Second, if the debt collector knew or should have known that the suit was “time-barred” – that is outside the statute of limitations – then the act of filing the suit is a violation of the Fair Debt Collection Practices Act (FDCPA), the federal law that governs collectors. This can entitle you to money damages.
So you may not only be able to beat the collection lawsuit filed by the debt buyer (LVNV, Midland, Portfolio Recovery, Velocity Investments, LLC, etc) — but you may also be able to sue for money damages if the FDCPA was violated as it often is by these debt buyers.
WHAT IS THE STATUTE OF LIMITATIONS IN ALABAMA?
This is a matter of much controversy but there are four basic ideas.
1. The Alabama statute of limitations for credit cards and similar debts is three years which is an “open account” as there was no payment schedule with your credit card — you just charge on it and then make at least the minimum payment.
2. The statute is six years under a stated account (or account stated) theory. This is what the debt collectors argue applies when they buy an old credit card debt. We disagree.
3. On a car loan, if you are sued for a deficiency, then normally the statute of limitation is 4 years. This is because the vehicle is considered a “sale of goods” under the UCC and anything being sued on as far as the debt is 4 years. Companies like Velocity, Cascade, Autovest, etc. don’t seem to grasp this and violate this all the time.
4. Finally, the laws of the state that control the credit card agreement may give us the statute of limitations. For example, if you have a Capital One card, the laws of Virginia normally will give us the statute of limitations. Often the card is so old that no one knows what the terms were and if they were ever modified so normally we use the laws of Alabama to give us the statute of limitations.
(Bonus) — understand that the debt buyer who sues you will normally lie about the date of the last payment. Especially certain of the debt buyers — we can predict almost word for word what they will say in court about some made up payment. They lie about this to claim that you restarted the statute of limitations when you sent them an envelope with cash (yes — they really argue this in court, almost with a straight face!) that magically appeared. And the date will always make the lawsuit just in time.
So a company like Velocity or Cascade who sues on a car loan (4 year statute of limitations) will say you made a cash payment 3 years, 11 months, and 27 days before they sued. Well, isn’t that convenient? Amazing but you must be prepared for this type of non sense.
IF I THINK THE STATUTE OF LIMITATIONS HAS EXPIRED WHAT DO I NEED TO DO IN THE COLLECTION LAWSUIT?
Make sure you respond to the complaint! Sometimes this is done as an “Answer” and sometimes as a “Motion To Dismiss”. But whichever approach is most appropriate, just make sure you do respond so there is no default judgment. You should tell the court in your response that the statute of limitations has expired on this case.
In Alabama your time limit is 14 days in Small Claims, 14 days in District Court, and 30 days in Circuit Court in Alabama. All from the time you were served. (You can see an overview of how the whole process works in District or Small Claims Court.)
CAN I SUE THE COLLECTOR FOR SUING ME WHEN THE STATUTE OF LIMITATIONS HAS EXPIRED?
The FDCPA says that if a collector sues you after the statute of limitations has expired and the collector knew it or should have known it, this violates the law. Depending on the circumstances, suing you after the statute of limitations has expired may also violate various Alabama laws which give you the possibility of punitive damages which is something the FDCPA does not give.
This law is called “Malicious Prosecution” and normally when we sue a debt collector after suing us, we are using this law.
SHOULD I FILE A COUNTERCLAIM OR FILE A SEPERATE LAWSUIT IN FEDERAL COURT AGAINST THE COLLECTOR?
We do not recommend filing a counterclaim as it often confuses the issues. If you have a good enough case to file, then our experience is that the case should be filed in federal court on its own and not as a counterclaim to a collection case.
When we represent someone in a lawsuit, our goal is to defend the lawsuit and then sue the debt collector/debt buyer in federal court. We don’t mix the two.
WHAT BENEFIT DOES THE FDCPA GIVE ME IN MY SUIT – WHAT DO I GET OUT OF IT?
The FDCPA provides four basic benefits:
1. You receive up to $1000 in statutory damages even if you have no actual damages;
2. You receive all of your actual (compensatory) damages if you can show the violation of the FDCPA harmed you;
3. You receive your legal fees paid for by the abusive debt collector; and
4. Your litigation expenses can also be paid for by the collector that you are suing.
(Bonus — if you can sue under Malicious Prosecution, you can get punitive damages to punish the debt collector for filing a bogus suit against you. This is definitely something to look at doing….)
WHAT ACTION SHOULD I TAKE RIGHT NOW IF I HAVE BEEN SUED AFTER THE STATUTE OF LIMITATIONS HAS EXPIRED?
Contact us to schedule a call or in office appointment. Or you can call us at 205-879-2447 and we will be glad to help you understand whether we think you have a valid statute of limitations defense and if you have a valid lawsuit to file against the collector who sued you.
(Be sure and read the comments as there is additional information about the statute of limitations in the questions and answers below).
Thanks for reading!