How New York’s Statutes of Limitations on Debt Protect You

If you default on repaying a debt, the creditor or debt collector can sue you. But they must do so within a certain number of years. Statutes of limitations provide a time limit for creditors to bring debt collections lawsuits. This article discusses recent changes to federal and state laws that provide more protections for consumers.

New Yorkers Face a Mountain of Debt

Americans have over ^[1], and ^[2]. New Yorkers have their fair share of this debt. Many are living paycheck to paycheck and relying on credit cards to cover their expenses. With debt comes debt collection, creditor harassment, and other potential troubles. The good news is there are some new laws that help New Yorkers by limiting how long debt collectors have to sue you for past-due debt.

Debt Collectors Are Limited by Federal and State Laws

There are federal laws, New York state laws, and New York City laws that spell out what debt collectors can and can’t do when attempting to collect a debt from you. 

The Federal Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA) is the main federal law governing third-party debt collection practices. It gives New Yorkers important rights. The FDCPA prohibits third-party debt collectors from engaging in unfair or illegal practices including harassment, abuse, or false and misleading practices. The FDCPA applies only to debt buyers and collection agencies. It doesn’t apply to the original creditor unless the original creditor uses a different name when it tries to collect debts.

The Federal Trade Commission (FTC) and the federal Consumer Financial Protection Bureau (CFPB) enforce the FDCPA. You can also file a legal action against the debt collector for an FDCPA violation. The FDCPA allows you to recover actual damages plus up to $1,000 at the court’s discretion. If you think a debt collector has violated the FDCPA for one of your debts, it’s a good idea to get in touch with a New York consumer attorney as soon as possible. 

Statutes of limitations protect borrowers from being harassed for old debts. Debts that are past the statute of limitations are also called time-barred debts. On Nov. 30, 2021, a new rule went into effect stating that it’s a violation for debt collectors to sue or threaten to sue on a time-barred debt. New York courts had already determined that debt collectors that brought time-barred debt collection lawsuits were violating the FDCPA. Now, if you’re sued on a time-barred debt, not only can you have the debt collector’s claim dismissed, you could recover money for an FDCPA violation. 

You could sue the debt collector for merely threatening a lawsuit for a time-barred debt. But this could open you to being countersued. You’ll need to consult with a New York attorney to determine if suing based on the mere threat of a time-barred lawsuit is a good idea.

New York State Statute of Limitations Laws Have Recently Changed

Governor Hochul signed the New York Consumer Credit Fairness Act (CCFA) in November of 2021. Consumer credit transactions involve different types of debt like credit card debt, personal loans, and car loans. This law has two parts. The first part of the new law went into effect on April 7, 2022, and made the following changes to the statutes of limitations:

• It reduced the six-year statute of limitations from six years to three years for consumer credit transactions.

• The statute of limitations can’t be revived or extended by payment or affirmation of the debt.

So if you’re sued for a debt that’s five years old on April 1, 2022, it’s not time-barred. That means you can’t use a statute of limitations defense because the debt collector legally has six years to sue for the debt. But if you’re sued on April 8, 2022, for the same debt, it’s time-barred because the three-year period to sue to collect has lapsed. That means a statute of limitations defense should work.

Even better, you’ll be able to countersue the debt collector for violating the FDCPA. Remember the FDCPA only applies to debt buyers and collection agencies. But the statute of limitations applies in all cases — even for the original creditors such as credit card companies.

It's important to understand that the statute of limitation only stops lawsuits. That means, even if a debt is time-barred, debt collectors can still try to collect on it. Lenders or debt collectors can still call you or place derogatory marks on your credit report. You've probably heard debts can only be on your credit report for seven years. That's part of the federal Fair Credit Reporting Act (FCRA). It's different from the New York statute of limitation for consumer debts.

Other Important Provisions of the Consumer Credit Fairness Act

The second part of the CCFA goes into effect on May 7, 2022, and creates new requirements for debt collectors that bring lawsuits to collect consumer credit debts. Debt collectors, including original creditors, must provide notice to the court when filing such a lawsuit. In turn, the clerk of the court will send this notice to you. 

In the past, debt buyers, collection agencies, and original creditors didn’t always properly serve borrowers with notice of the lawsuit. If a debtor isn’t served, they can’t defend the lawsuit. Many debtors lost these lawsuits by default because they didn’t respond to the lawsuit or show up to defend themselves. This new part of the law tries to prevent that from happening by ensuring debtors know when they’re being sued.

One important goal of the second part of the CCFA is to make sure debt buyers and collection agencies actually have the right to sue you. The debt collectors have to provide sufficient documentation proving they own the debt. They have to show the full chain of custody of the debt as debts are often transferred through multiple entities. If the debt buyer can’t provide proof that they own the debt, the case will be dismissed. 

The second part of the CCFA has several other requirements for a lawsuit complaint that apply to both debt collectors and original creditors. The complaint must name the original creditor and list the date and amount of the last payment. It must also include the last four digits of the account number as listed on the most recent monthly statement that has one of the following items on it: a purchase, payment, or balance transfer. Often, when a debt is old, there will be years of statements with no transactions.

Finally, if the account is a revolving credit account like a credit card, the complaint also has to include:

• An itemization of the amount due at the time the creditor charged off the account, 

• The total amount of accrued interest since the charge off, 

• The total amount of non-interest charges since the charge off, and 

• The total amount paid on the debt since the charge off. 

Other New York State Statutes of Limitations

As with all states, the statute of limitations on consumer credit collections isn’t the only statute of limitations. As a matter of fact, there are statutes of limitations throughout the law. 

• There’s no statute of limitations for residential tenants to bring a lawsuit to recover overcharges on rent by a landlord. But if you want to recover damages or penalties beyond the overcharge, you must file a lawsuit within six years.

• To enforce child support, alimony, or maintenance orders, you must bring a lawsuit  within 20 years of the date of default.

• Hospitals or healthcare professionals must file lawsuits to collect on medical debt within three years of treatment. This is new as of April 3, 2020.

• There’s a three-year statute of limitation for the recovery of property, damages for detaining property, property damage, most personal injuries, and malpractice except for medical and dental malpractice.

• If you want to collect damages for medical malpractice, dental malpractice, or podiatric malpractice, there’s a two-and-a-half-year statute of limitations.

Let’s Summarize…

Anytime you’re sued, you should file an answer to the complaint. You lose the debt collection case if you don’t file your answer. It’s especially important to file an answer if you’re sued for a time-barred debt. Not only can you have the lawsuit dismissed, but you may be able to recover money from the debt collector for an FDCPA violation.

If a debt collector merely threatens you with a lawsuit on a time-barred debt, it’s an FDCPA violation. It’s a good idea to seek legal advice from a New York attorney before filing an FDCPA lawsuit. You also have the option of filing a complaint with the CFPB and/or the New York attorney general.