Section 213 (2) of the CPLR states that the statute of limitations to commence an action upon a

contractual obligation or liability, express or implied, except for residential rent overcharge, certain
transactions described in the Uniform Commercial Code, or warranties on new homes, must be brought
within 6 years after the cause of action accrued. This statute of limitations includes all “consumer credit
transactions,” such as credit cards, and is calculated to run from the date of the last transaction (either
the last credit purchase, or the last payment made, whichever occurs last in time).

3 YEARS

New York’s highest court, the Court Appeals, has recently held that in a debt-collection law suit, if the
creditor to which you originally owed the debt is located in another state, then the place where the
injury occurred to the creditor is that other state. In such cases, New York’s borrowing statute, CPLR
202, is invoked and the statute of limitations of the creditor’s home state will apply. Major creditors,
such as Citibank, American Express, and Discover Bank are almost always based outside of New
York. As such, these creditors, and the third-party debt collectors that purchase their delinquent
accounts, are subject to the statute of limitations of the home state of the creditor.

The most common state in which creditors incorporate is Delaware, which has a 3-year statute of
limitations for debt-collection lawsuits (10 Del. C. § 8106). So, for example, if you had a Discover Bank
credit card that you stopped paying on January 1, 2012, and Discover Bank transferred your delinquent
account to a third-party debt buyer, such as Portfolio Recovery Associates, LLC, then since Discover Bank
is a Delaware Corporation, Portfolio Recovery Associates, LLC, would have until January 1, 2015 to sue
you for the debt. Since Discover Bank is a Delaware Corporation, a 3 year statute of limitations would
apply to your New York Discover Bank credit card debt, even if your credit card debt is transferred to a
local third party debt collector, such as Portfolio Recovery Associates, LLC.

Both creditors and debtors are frequently uninformed as to this rule, and often proceed to litigation
under the assumption that New York’s 6-year statute of limitations applies, when, in fact, it might not.

LONGER THAN 6 YEARS

If a debt collector has convinced you to make any payment at any time after you first stopped paying the
debt, the plaintiff’s time to sue you starts to run again. For example, if your last payment was made in
December 2008, but you agreed in December 2011 to start making partial payments and, in fact, made a
payment to the debt collector, the statute of limitations will now be renewed, starting from that 2011
payment, which means the creditor can have up to January 2018 to sue you. There is also something
called “tolling,” which means suspending or pausing the statute of limitations. This can occur during any
time in which you are not within the state. In other words, if you leave the State of New York for a
period of time and then return, the statute of limitation does not run during the time you are out of
state. It begins again from where it left off when you return.

FAILURE TO FILE SUIT WITHIN THE STATUTORY TIME PERIOD

If the court finds that the statute of limitations has run and the action is time barred, the case will be
dismissed, and the creditor will be prohibited from ever suing you again to collect the debt.