The typical credit card agreement requires that you make a minimum monthly payment. If you miss a monthly payment, the issuer can declare a default and demand immediate payment of the full balance (legal jargon: “accelerate”) with fees, etc. But what if the bank just lets it slide?
In Arizona, the bank has six years to sue on credit card debt (A.R.S. § 12-548(A)(2)). In a case decided Thursday, the Arizona Court of Appeals said that the six-years do not start to run until the bank notifies the consumer that it has elected to accelerate.
The consumers missed a payment in 2007, made their last payment in 2008, and the balance was charged off. The bank eventually assigned the debt to a company that sued the consumers in 2014. The consumers argued that that the six years started to run when they first missed a payment in 2007. The Arizona Court of Appeals said the clock does not start until a demand for payment in full is issued.
The court said that this rule is not bad for consumers because it gives space to work things out if the consumer falls behind. The court said banks are unlikely to ignore dormant accounts just to allow interest to pile up. The court mentioned that the consumers might have “equitable” defenses (laches) if unreasonable delay by the bank is prejudicial. The burden of proving an equitable defense would be on the consumer and I would not count on it.
So just because you haven’t heard anything for a few years does not mean you’re off the hook.
Mertola v Santos (3/2/2017)