What Statute of Limitations Must Collection Agencies Adhere to?
- An open account is a bill with an unpaid balance. Utility bills are an example of this type of debt. Another example would be if you ordered a product and had the provider send you a bill rather than paying in advance. In most states, credit card debts are categorized as open accounts although creditors may argue that they are written contracts. Rhode Island has the longest SoL on open accounts, setting the limit at 10 years. Wyoming is a close second at 8 years. The statutes of the other 48 states all fall within a 3 to 6-year time frame.
- You enter into an oral agreement, also called an oral contract, when you verbally commit to pay a certain amount. If you are contacted by a collection agency and agree that you do owe the money or will pay when you are able, they will construe this as an oral contract. Even if the SoL has run out on the original debt, you will now be bound by this new agreement. Although oral agreements are hard to prove, the statute of limitations in most states lasts as long or longer than for open accounts. The range varies from 15 years in Rhode Island down to 2 years in California.
- Written contracts include any written agreement, formal or informal, where you agree to pay a specified amount. Because written contracts are generally easy to prove and imply that the debtors knew into what they were entering, the law gives them extra weight. The SoL in Kentucky, Rhode Island and Ohio lasts 15 years. On the other end of the spectrum, with a limit of only 3 years, are Delaware, Washington D.C., Maryland, Mississippi, New Hampshire and North Carolina.
- A promissory note is a type of written contract that usually includes a payment schedule. With this type of debt, you can default by not making payments even though the time frame of the loan has not expired. For instance, although you have 30 years to pay off a 30-year mortgage, missing even a single payment violates the terms of the loan. In most states, the SoL for promissory notes is the same as for written contracts, but there is some variation. The range remains the same: 3 to 15 years.