Filing a lawsuit to collect a time-barred debt does not violate the Fair Debt Collection Practices Act according to a June 30 decision from a New Jersey state trial court.


The decision,Midland Funding v. Thiel, involved a collection action to recover the unpaid balance of a Home Depot credit card. The law firm representing the creditor filed suit under New Jersey’s six-year limitation period for contracts, which has been applied to countless credit card debts. The trial court dismissed the claim reasoning that this particular credit card could only be used to make purchases at Home Depot.

Four Year Limitations Period for “Store Branded” Credit Card Debt

A little over three months ago, this exact same issue was decided by the Appellate Division in an unpublished opinion in New Century Financial Services v. McNamara (you can read our analysis of that decision here). Although the trial court here did not rely on McNamara, it similarly reasoned that because the use of credit was limited to goods and services available only at Home Depot, the correct limitations period, according to the trial court, was New Jersey’s four-year limitations period for the sale of goods.

No FDCPA Violation

The filing of the lawsuit under the wrong statute of limitations is not the type of conduct the FDCPA prohibited, the court wrote. “While the process of debt collection may be an unhappy event for a Defendant, Plaintiff did not engage in oppressive conduct that would warrant a FDCPA violation or sanctions,” the court concluded.

The trial court departed from the reasoning of the New Jersey State Appellate Division in McNamara. There, the Appellate Division remanded the case to make findings on whether a time-barred lawsuit violates the FDCPA.

Unfortunately, the trial court’s decision has limited impact and other New Jersey state courts can choose not to follow it.

This post originally appeared on the Consumer Financial Services Blog, run by ARM defense firm Maurice & Needleman.


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