American consumers owned about 609.8 million credit cards, according to The 2008 Survey of Consumer Payment Choice developed by the Federal Reserve Bank of Boston, which is enough for about two cards for every man, woman and child in the country. Credit cards, as a form of credit, are subject to various state and federal laws, some of which are based on the categorization of credit cards as open accounts and not as written contracts.
Credit Card Agreements
Whenever you apply for a credit card, the card company sends you a written agreement that details all the credit card's terms and conditions. This card agreement is a contract between you and the lender; and when you sign up for the card, you agree to abide by the terms of the contract. However, for the purposes of determining when creditors can sue on credit card agreements, states don not classify cards as written contracts.
Written Contract or Open Account
When you and a lender enter into a debt agreement, the lender has a limited amount of time to sue you if you ever default on the loan. This time limit is known as the statute of limitations and is based on two factors: the kind of debt and the state in which you entered into the debt. There are four main kinds of debt: oral agreements, written contracts, open accounts and promissory notes. Credit cards are classified as open accounts because the amount of debt at issue changes over time.
Importance
Whether states consider a credit card a written agreement or an open account has little impact on the average consumer's day-to-day life. It is important, however, if you are ever sued by a credit card company for your failure to pay back the debt. State statutes of limitations treat different debts differently. For example, according to Bankrate.com, the state of Alaska's statute of limitations on open accounts is three years, while the limit on written contracts is twice that -- six years.
Details
In general, credit card companies cannot determine that a credit card agreement is a written agreement instead of an open account, but they can determine which laws apply. Credit card agreements typically come with a choice-of-law clause in the agreement that details which state's laws apply to the agreement. It should be no surprise to you that the company typically chooses a state whose laws extend the statute of limitations on open accounts, such as Rhode Island's 10-year limit.
0 comments:
Post a Comment