New York Shortens Statute of Limitations on Consumer Credit Transactions

The law is now in effect, here are some tips and case law to help you break down compliance with the new requirements.

04/07/2022 2:45 P.M.

4 minute read

Last year, New York state enacted legislation to reduce the statute of limitations to three years for legal actions aimed at recovering debt from consumers. As ACA International previously reported, the measure is part of the Consumer Credit Fairness Act (CCFA), and reduces the statute of limitations from six to three years, “compelling creditors to file claims in a timely manner and protecting consumers from excessive interest charges and late fees,” according to a news release from the Gov. Kathy Hochul’s office.

The new section on statute of limitations, Section 214-i, reads as follows:

Certain actions arising out of consumer credit transactions to be commenced within three years. An action arising out of a consumer credit transaction where a purchaser, borrower or debtor is a defendant must be commenced within three years, except as provided in Section 213-a of this article or article two of the uniform commercial code or article 36-B of the general business law. Notwithstanding any other provision of law, when the applicable limitations period expires, any subsequent payment toward, written or oral affirmation of or other activity on the debt does not revive or extend the limitations period.

Section 214-i took effect on April 7, 2022.

The Big Question: Is it Retroactive?

Many ACA members have asked about whether Section 214-i will be applied retroactively now that the law is in effect. The short answer is: While it’s unclear from the face of the law, decisional law in federal courts located in New York suggests that the new limitations period will not be construed to have retroactive effect.

Case Law Analysis

Case law has determined that “[f]ederal courts addressing the issue, while disagreeing as to whether the legislature intended the 1996 amendment of [a different limitations period] to apply retroactively, have nonetheless found that it should be applied only prospectively.” See Bovi v. United Parcel Serv., Inc., 992 F. Supp. 540, 543 (E.D.N.Y. 1997) citing FDIC v. Pelletreau & Pelletreau, 965 F. Supp. 381, 386 (E.D.N.Y. 1997) (“1996 amendment should not be applied retroactively”; Mason Tenders District Council Pension Fund v. Messera, 958 F. Supp. 869 (S.D.N.Y.1997) (applying the six year statute of limitations to malpractice claims); Durkin v. Shea, 957 F. Supp. 1360 (S.D.N.Y.1997) (finding that no clear legislative intent that amendment should apply retroactively and that amendment should not apply to previously commenced case); Estate of Re v. Kornstein Veisz & Wexler, 958 F. Supp. 907 (S.D.N.Y.1997), which found that the legislature intended the amendment to apply retroactively but that it could not apply in cases where it would extinguish claims filed within a limitations period that would then be applicable.

Additionally, case law has found that “N.Y. Stat. Law [Section] 51 provides that statutes are generally construed as prospective unless the language of the statute expressly or by necessary implication requires that it be given a retroactive construction. A statute is retroactive, under [Section] 51 if it takes away or impairs vested rights, affecting acts occurring or rights accruing before the law came into force.” See Bovi v. United Parcel Serv., Inc., 992 F. Supp. 540, 543 (E.D.N.Y. 1997).

Members should note, however, that the above case law may not stop plaintiff’s attorneys from suing on the theory that the statute is retroactive in an effort to test the waters.

Aside from the new three-year statute of limitations for consumer credit transactions, the CCFA also has notice and filing requirements for legal actions in New York, including:

  • Requiring a notice to be mailed to the defendants in consumer credit actions by the clerk of the court, ensuring that defendants are given notice of the lawsuit.
  • Requiring court filings to include more information about the debt targeted in a lawsuit, such as identifying the debt or account and providing proof that the debt is owed to the plaintiff.
  • Establishing specific requirements for applications for default judgments in consumer credit actions to prevent debt buyers from suing on expired debt.

For more information on all sections of the CCFA, members should review the text of the law and see ACA’s previous report on the CCFA.

Members should know that both ACA  and the New York State Collectors Association have been extensively involved in advocating with industry and industry-adjacent partners for industry priorities in Albany, New York. While ACA and its partners were ultimately not able to stop the enactment of the CCFA during 2021 legislative session, the association has been extraordinarily successful in amending or stopping numerous other proposed bills that would have impacted the accounts receivable management industry.

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