An Important Change to the New Jersey Law on Credit Card Debt
Updated: Jul 3, 2019
Most people gloss over the pages and pages of fine print when applying for a credit card. But once you sign your name, you’re entering into an agreement – essentially a contract – with the credit card company. And what that fine print boils down to is this: if you default on your payment, you are in violation of that agreement.
Creditors and collection agencies have always had six years in which to collect debts from delinquent customers. But in late August, the Appellate Division of the Superior Court of New Jersey made an important decision to reduce that timeframe in certain cases. It’s a ruling that many consumers – especially those with credit card debt – are applauding.
To understand what the new law means and whether you’re affected, let’s take a brief look at some of that fine print. We’ll first consider two legal concepts that you’re probably familiar with: statute of limitations and breach of contract.
Statute of limitations refers to the window of opportunity in which a civil lawsuit may be filed. Every state has its own time limit for legal action. Under the new ruling, New Jersey’s statute of limitations on some retail credit card debt collections is now four (4) years instead of six (6). These time limits are set from the most recent point of activity on the card, payment or charges.
It’s most important to note that the new four-year ruling applies only to store credit cards (think Macy’s charge card). General-purpose cards like American Express, MasterCard, or Visa are unaffected. The distinction is that retail cards are used strictly to purchase goods from the store and the statute of limitations on disputes over such goods is four years.
Unpaid debt on all credit cards, store-issued or otherwise, is considered a breach of contract or violation of the terms of agreement. Breach of contract laws define the appropriate legal actions one party may take should the other party fail to hold up its end of the agreement. These actions typically involve remediation of some kind, usually in the form of payment.
Breach of contract rules work both ways. It gives the consumer the right to dispute the charges when, for example, a retailer sells defective merchandise or sends the wrong item. And it gives the retailer or credit card company the right to sue you if you fall behind on your payments within the agreed-upon timeframe.
If you are within the 4 or 6-year period and have fallen behind on your debt and stopped paying, it is very important to understand the concept of “resetting the clock.” Virtually any interaction with the retailer or debt collection agency can reset the statute of limitations time period. In fact, if you so much as acknowledge your debt, even verbally, you are reaffirming your debt and resetting the clock.
Collection agencies are skilled at getting you to do this. One misstep and you could wind up back where you started from giving the collection agencies more time to collect the debt. If you are facing debt collect it is important to discuss your situation with a lawyer before you talk to the collection agency.
It is always advisable to pay off your debts in a timely manner or you risk destroying your credit rating, but once the statute of limitation expires, creditors can no longer force you to pay your debt. However, it is important to note that credit reports follow a different set of rules, one that is independent of the statute of limitations. In some cases, debts may still be on your credit report after the statute of limitations has expired. It’s up to you to stay on top of your credit score and know exactly when your debt clock started and stopped.
If you suspect a creditor is unlawfully harassing you, or if you’re legally served after the clock stops ticking, you may need to go to court. But the burden of proof may be on you to demonstrate that the statute of limitation has passed. If you have any questions about credit card debt or would like to discuss your case, I can help. Please call me at 973-509-8500 x213 or email me at: LFarber@LFarberLaw.com.
The contents of this writing are intended for general information purposes only and should not be construed as legal advice or opinion in any specific facts or circumstances.