When you apply for a credit card, by signing the application, you enter into a written contract with the credit card company. If you fail to make payments on the credit card balance you accrue, then the credit card company or the collector it hires has a right to pursue legal action against you for the unpaid balance. However, the credit card company must do so within the statute of limitations set forth under Pennsylvania law.
Function
The purpose of the Pennsylvania statute of limitations is to keep creditors or debt collectors from filing a lawsuit years and years after the fact. Waiting a long time often leaves the debtor believing the debt no longer exists, only to be face-to-face with a lawsuit 10 or more years down the road. Placing a limitation on how long the credit card company has to file a lawsuit protects the debtor from unfounded claims. Once the statute of limitations expires, the credit card company or collector hired can no longer attempt to collect the debt.
Time Frame
Under Pennsylvania Statutes Chapter 55, Title 42, Section 5525, in the case of written contracts, the credit card company must file a lawsuit within four years. Signing your name on a credit card application, by law, makes your credit card account a written contract with the credit card company. While it is very unlikely that the credit card company meets the requirements, should both parties sign the contract in the presence of a notary, i.e., under seal, the credit card company has up to 20 years to file a lawsuit.
Commencement
The four-year statute of limitations for credit card debt in Pennsylvania commences at the time the cause of action occurred, according to Chapter 55, Title 42, Section 5502(a) of the Pennsylvania Statutes. In other words, the credit card company or associated collector has four years to file a lawsuit against you from the date of the last credit card statement for which the credit card company received no payment.
Attorney's Fees
In all likelihood, there is a provision on the service agreement you received from the credit card company that addresses what monetary compensation it can recover in the event that it files a lawsuit against you for non-payment, including attorney's fees. For example, World Finance Capital Bank has a provision in its Blair Corporation credit card agreement that states, If you do not comply with your obligations under this Agreement, you agree to pay the reasonable attorneys' fees, expenses and court costs we incur in order to collect your Account or protect our rights.
Interest
In addition to attorney's fees and court costs, a judgment against you for the unpaid balance on the credit card will also include interest for the lifetime of the debt at the rate on the last unpaid credit card statement. Due to the fact that interest was included on your credit card statements, the court will deem the interest as part of your contractual obligation to the credit card company and will include provision for such in any judgment against you.
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