Ellis Law Group


Collection on Time Barred Accounts

Recently, I was asked by an out-of-state agency owner whether sending a collection letter to a debtor whose debt appeared time barred violated the Fair Debt Collection Practices Act. Like any good attorney, my response was "it depends". Upon hearing my response, the owner groaned with frustration and mumbled something about "damned
good-for-nothing attorneys."

I laughed (having heard that line one or twice before), but I sympathized with his frustration. The fact is his question raised an issue of FDCPA compliance to which clear answers are difficult to give. Indeed, the answer depends on such variables as (1) the State in which the debt, contract, or obligation was created, (2) the State in which the debtor resides, (3) the State in which the creditor or collection agency is based and is collecting, (4) the statute of limitations law of the State in which the debt was created, and (5) the opinions of the courts interpreting the FDCPA in the State, or federal district(s), in which the agency is collecting.

Notwithstanding these variables, my motivation for writing this article is to try to provide some guidance to California agencies which are collecting on debts, obligations, or contracts created in California against debtors who reside in California. Keeping the above limitations in mind, an answer may be given to the question of whether collection activity (and, yes, even litigation) may be pursued on a time-barred debt.

Legal Malpractice AttorneyAuthor Mark E. Ellis is the managing partner of Ellis Law Group, LLP. Mr. Ellis is recognized nationally as one of the leading trial attorneys defending creditors and their representatives in federal and state litigation arising from collection practices. See Mark Ellis Profile for his detailed curriculum vitae.

To access other related articles, including updates on time-barred account case law, go to our Publications page.

In my judgment, the answer is a qualified “yes”. I explain why below.

1. The Interplay Between California Law and the FDCPA

Generally, the FDCPA does not directly regulate substantive state law, such as state law pertaining to contracts, state collection law, or when attorneys fees and costs can be obtained. Likewise, the FDCPA normally does not affect state procedural law, such as those laws relating to the filing and prosecution of a lawsuit. In other words, the FDCPA does not superimpose any federal substantive or procedural requirements that “trump” California law 1 Rather, the FDCPA merely provides that, on the one hand, if state law is not violated, then the FDCPA is not violated. On the other hand, if state law is violated because, for example, the amount sought by a debt collector is neither authorized by agreement "nor permitted by law", then the FDCPA is likewise violated. See, e.g., FDCPA, 15 U.S.C. §1692f(1); §1692e(2)(A)(5); §1692e(5); Newman v. CheckRite, 912 F.Supp. 1354, 1376 (E.D. Cal. 1995); West v. Costen, 558 F.Supp. 564, 573 (W.D. Va. 1983). Thus, Consequently, before it may be determined that the FDCPA has been violated by California collection activity, a court must first determine whether the collection agency has violated California law in its debt collection practices by seeking and obtaining amounts, through collection or litigation, to which it was not entitled. Newman, supra, 912 F.Supp. at 1376.

2. The Filing Of A Lawsuit On An Otherwise Time-Barred Account
Does Not Violate California Law

As noted above, the initial question in our analysis must be whether a California collection agency, which sues a California debtor on an obligation arising in California, violates California law by filing suit on an otherwise time barred obligation. 2 The answer is clearly “no”.

Unlike some other states, California adheres to the rule that the lapse of the statutory period within which an action can be commenced does not extinguish the obligation sued upon. Mitchell v. County Sanitation Dist., 150 Cal.App.2d 366, 370-372 (1957). This is because, the statute of limitations arises under the California law of procedure, and, thus, a statute of limitation "affects only the remedy sought, but "not the substantive right or obligation" sued upon. Adams v. Paul, 11 Cal.4th 583, 597 (1995) (Kennard, J. concurring) (emphasis added); Western Coal & Mining v. Jones, 27 Cal.2d 819, 828 (1946); Flowers v. Torrance Memorial Hospital Medical Center, 8 Cal.4th 992, 999 (1994); Nelson v. Flintkote, 172 Cal.App.3d 727, 733-734 (1985).

As recently as 1995, Justice Joyce Kennard of the California Supreme Court wrote on this subject: "In other words, a cause of action is not extinguished or impaired by the mere passage of time, and the maintenance of the claim is not precluded simply by the running of the statutory period". Adams v. Paul, supra, 11 Cal.4th at 597 (emphasis added). As noted, because the statute of limitations affects the remedy only, "it gives the debtor a personal privilege that he may or may not choose to exercise." 3 Witkin, California Procedure § 413, p. 521 (4th ed. 1996). And, since the statute of limitations is a personal privilege, it may be waived at the option of the one entitled to assert it; if the statute is not affirmatively pled or asserted by a defendant, its benefits are waived. Adams v. Paul, supra, 11 Cal.4th at 597; Bliss v. Sneath, 119 Cal. 526, 528 (1898); Mysel v. Gross, 70 Cal.App.3d Supp. 10, 15 (1977); Mitchell, supra, 150 Cal.App.2d at pp. 370-372.

Put another way, if the defendant does not affirmatively invoke the procedural defense of the statute of limitations, the defense is waived or forfeited. Minton v. Cavaney, 56 Cal.2d 576, 581 (1961). Under such circumstances, a plaintiff has every right to pursue the claim on the merits, regardless of whether the action is otherwise untimely. Adams, supra, 11 Cal.4th at 597. "Thus, unless the defendant properly invokes the statute of limitations as a defense, the expiration of the statute of limitations does not affect even the remedy". Ibid.

Clearly, given the foregoing authority, in California, a party may legally file and prosecute on a claim or debt that may otherwise be time barred under the applicable statute of limitations. See, e.g., Nelson v. Flinkote Co., supra, 172 Cal.App.3d at 731-733. While the "remedy" (i.e. right to collect damages) may be impaired procedurally, the right to sue, in and of itself, is not affected. Furthermore, unless the procedural defense of the statute of limitations is properly invoked, it is "forfeited" and the statutory period does “not affect even the remedy”. Adams, supra, 11 Cal.4th at 597.

To my knowledge, no exception to these rules exist as to lawsuits filed by collection agencies against consumers/debtors under California law.

3. Federal District Courts Outside Of California Have Ruled The FDCPA is Violated When A Debt Collector Knowingly Sues A Consumer On An Obviously Time-Barred Claim

Even though controlling California law appears clear, Federal Courts outside of California have ruled to the contrary. In these decisions, the courts have agreed that attempting to collect on a debt as to which the statute has run is a misrepresentation of the legal status of the debt, in violation of the FDCPA. These decisions are not controlling on California state courts, or even other Federal district courts located in California. However, California courts could conceivably find the decisions persuasive in some sense, and they have, of course, the ability to follow their reasoning. Thus, a brief examination of those cases is warranted here.

The leading case is Kimber v. Federal Financial Corp., 668 F.Supp. 1480 (M.D Ala. 1987). 3 In Kimber, the debtor incurred a debt to a retail store that became overdue in September of 1975. In 1976, the debt was purchased by the Federal Financial Corporation ("FFC"). In 1984, FFC assigned the account to an attorney for collection. In 1985, during a telephone call with the attorney's office, the debtor was informed the now 10-year-old debt needed to be paid or she would be sued. She refused to pay, and suit was actually filed by FFC in Alabama state court.

The debtor answered the complaint and actually raised the statute of limitations as a defense. The state court dismissed the case as untimely because the longest possible limitations period (6 years) had long expired by the time the action was filed in 1985. Subsequently, the debtor filed an action under the FDCPA claiming that FFC's filing of a clearly time-barred lawsuit violated § 1692e and § 1692f as an unfair, unconscionable, and deceptive means of collecting the debt. The court agreed. Kimber, supra, 668 F.Supp. at 1487. The court wrote, in pertinent part:

The court agrees with Kimber that a debt collector's filing of a lawsuit on a debt that appears time barred without the debt collector having first determined after reasonable inquiry that the limitations period has been or should be tolled, is an unfair and unconscionable means of collecting the debt . . ." (Kimber, supra, 668 F.Supp. at 1487).

The court explained its reasoning as follows:

[T]ime barred lawsuits are, absent tolling, unjust and unfair as a matter of public policy, and this is no less true in the consumer context.As with any defendant sued on a stale claim, the passage of time, not only dulls the consumers memory of the circumstances and validity of the debt, but heightens the probability that she will no longer have personal records detailing the status of the debt. Ibid.

Significantly, the Kimber court rejected the argument I made above that "the statute of limitations is an affirmative defense which is waived if not raised [and] a plaintiff may not be penalized for knowingly 4 a time barred suit". Id. at 1488. The court's wholly unconvincing rationale for rejecting this argument was that Rule 11 of the Federal Rules of Civil Procedure permitted the imposition of sanctions against an attorney who knowingly filed a time barred suit in federal court. Ibid.

The court's conclusion, based on this reasoning, is, in my judgment, a non sequitur. After all, the original action had been filed in state court, pursuant to state procedural rules. Any analysis concluding that liability under the FDCPA could be premised on Rule 11 sanctions under Federal procedural rules is legally incoherent and unconvincing. Such rules simply were inapplicable in the context of the state court collection suit filed against the debtor, Ms. Kimber.

Justification, if any, for finding a violation of the FDCPA in this context appears to require state law authority prohibiting the filing of a time barred account. In California, as noted above, no such authority appears to exist. Such a filing cannot be deemed malicious prosecution under California law or even an abuse of process. Warren, supra, 220 Cal.App.2d at 1301-1303. And, while California public policy does indeed discourage the filing of so-called "stale" claims , public policy, as articulated by the California Supreme Court, also recognizes that statutes of limitations are:

. . .technical defenses which should be strictly construed to avoid the forfeiture of a plaintiff's rights. . .Such limitations are obstacles to just claims and the courts should not indulge in a strained construction to apply these statutes to the facts of a particular case. . .[T]here is a 'strong public policy' that litigation be disposed of on the merits whenever possible. (Steketee v. Lintz, Williams & Rothberg, 38 Cal.3d 46, 56 (1985).)

4. Can These Two Views Be Reconciled?

Frankly, in my judgment, it is virtually impossible to reconcile the conflicting views expressed in California case law with the holding in Kimber, supra, to the effect that the knowing pursuit by collection lawsuit of an otherwise time-barred account violates the FDCPA. This concern is more acute today because, effective January 1, 2001, a violation of the FDCPA (with certain exceptions) is ipso facto also a violation of California's Rosenthal Fair Debt Collection Practices Act. See, e.g., Cal. Civil Code § 1788.17. Hence, a violation of the FDCPA may likewise lead to liability under California's Rosenthal Act.

Of course, the filing of lawsuits affects not only collection agencies under the FDCPA, but also their attorneys, who necessarily file and prosecute the action. Unlike the federal FDCPA, the Rosenthal FDCPA ostensibly does not include attorneys in the definition of debt collector. (See, e.g., Civil Code § 1788.2(c).) Nonetheless, that exception has effectively been eliminated by California Business & Professions Code § 6077.5. , which provides that attorneys who collect on “consumer” debts have the same legal obligation under the Rosenthal FDCPA as other California debt collectors.

Kimber, and its progeny are not directly controlling or binding on any court in California. However, until my analysis is confirmed by a published court decision that squarely addresses the issue under California law, obviously some level of uncertainty exists. After all, a state or federal court in California that addresses the issue could find a violation of the FDCPA (and hence, the Rosenthal FDCPA) notwithstanding the California law set forth in Section 2 above. In any event, until we get a published California decision, agencies and attorneys should proceed cautiously in filing suit on otherwise time-barred accounts.

In this regard, the American Collectors Association has advised that collectors take a “middle” position which permits “collection”, but not litigation on time-barred accounts:

ACA maintains the position that collectors can contact consumers about accounts after the statute of limitations has expired, as long as no legal remedies, such as a lawsuit or wage garnishment are taken or threatened. (American Collectors Assoc., A Guide To The Fair Debt Collection Practices Act 137 (1999).

The ACA's view is supported by several courts. Freyermuth v. Credit Bureau Services, Inc., 248 F.3d 767, 771 (8th Cir. 2001) (“In the absence of a threat of litigation or actual litigation, no violation of the FDCPA has occurred when a debt collector attempts to collect on a potentially time-barred debt that is otherwise valid.”); Shorty v. Capital One Bank, 90 F. Supp.2d 1330, 1332 (D. N.M. 2000) (same); Walker v. Cash Flow Consultants, Inc., 200 F.R.D. 613, 616 (N.D. Ill. 2001).

Of course, even this approach has its risks, particularly for collection attorneys and/or agencies who send collection demands using attorney letterhead. A few decisions have held the mere use of attorney letterhead may give rise to an implied representation (“to the least sophisticated debtor”) that an attorney is actively involved and that a suit may be filed. See, e.g., Avila v. Rubin, 84 F.3d 222, 228-230 (7th Cir. 1996). Following Kimber's unfortunate reasoning, if an attorney cannot legally sue on a time-barred account, then the attorney can have no "meaningful involvement" in the collection process, since suit is not permitted. The use of the attorney's letterhead would solely be for the “coercive” purpose of implying a (false) threat of litigation. This would violate, among other sections, §§ 1692e(2)(A), (5) and (10) of the FDCPA. Compare Shorty, supra, 90 F.Supp.2d at 1332 (where the court compared the contradictory reasoning and holdings of various cases and ultimately found no FDCPA violation) with Stepney v. Outsourcing Solutions, Inc., 1997 U.S. Dist. LEXIS 18264 at *14 (N.D. Ill. 1997) (any collection on time-barred accounts violates the FDCPA).

Some decisions have even gone further than Kimber and held that merely attempting to collect on time-barred accounts, even without litigation, or the threat of litigation, may violate the FDCPA's prohibitions against false or misleading communications. Taylor v. Unifund, 1999 U.S. Dist. LEXIS 13651 (N.D. Ill. 1999). Indeed, the ACA Guide notes:

"Of course the safest approach is to not attempt to collect on debts after the statute has expired. Since this controversy has not been settled, collectors should consult with their own attorneys and exercise due diligence in collecting on accounts where the statute of limitations has expired." Ibid.

Fortunately, however, most courts that have considered the issue have rejected the Stepney and Taylor holdings that any collection activity on an otherwise time-barred account is deceptive as a matter of law. See, e.g., Freyermuth, supra, 248 F.3d at 771; Shorty, supra, 90 F.Supp.2d at 1332-1333.

5. Conclusion

Notwithstanding Kimber and the ACA's position, well-established California law makes clear that filing suit on time-barred obligations is not, in and of itself, against California law. To the contrary, the decisions make clear that such suits are proper, and any statute of limitations defense is forfeited if not properly asserted by the defendant debtor. The restrictions of the Rosenthal FDCPA do not expressly provide otherwise.

In my judgment, given the absence of a California case holding otherwise, the filing of a collection action on a time-barred account is permissible in California. Necessarily, given my opinion, collection activity which falls short of litigation is also permissible. Nonetheless, if you decide to sue or collect on time-barred accounts, be judicious. The wholesale collection or litigation on really old accounts is likely to draw unwanted attention and perhaps trouble. Moreover, do not threaten action which you do not actually intend to take, as this is a violation of the FDCPA regardless of whether the debt is time barred or not. Use common sense, follow California law, and seek and heed the advice of your personal attorney. Recognize also that my personal legal opinion on this issue is likely to be controversial.


1. The one exception appears to be under section 1692i of the FDCPA which provides that the proper venue of a collection action is only in the judicial district where (a) the consumer signed the contract sued upon or (b) where the consumer resides at the time the action is commenced. FDCPA, 15 USC § 1692i. This provision has been held to preempt inconsistent state law venue provisions. Martinez v. Albuquerque Collection Services, Inc. , 867 F.Supp 1495, 1501-1502 (D. N.M. 1994); Zortman v. Shapiro & Meinhold, 811 P.2d 409, 413 (Colo. App. 1990). In any event, California collection law is essentially in accord with the FDCPA on this point. See, e.g., Rosenthal Fair Debt Collection Practices Act; Cal. Civ. Code § 1788.15(b) ("No debt collector shall collect or attempt to collect a consumer debt, other than one reduced to judgment, by means of judicial proceedings in a county other than the county in which the debtor has incurred the consumer debt or the county in which the debtor resides at the time such proceedings are instituted or resided at the time the debt was incurred".) Unlike the FDCPA, Civil Code § 1785.15(b) additionally provides that venue is proper in the county wherein the debtor resided when the debt was created; otherwise, the two statutes are similar in scope.)

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2. While a malicious prosecution cause of action may exist for filing a frivolous lawsuit which is not substantively supported by probable cause (Sheldon Appel v. Albert & Oliker Co., 47 Cal.3d 867, 875 (1989)), the dismissal of a time barred lawsuit based upon the procedural defense of the statute of limitations does not give rise to liability under California law for either malicious prosecution or abuse of process. Warren v. Wasserman, Comden, & Casselman, 220 Cal.App.3d 1297, 1301-1303 (1990). Sanctions may be available, however, for filing a clearly time-barred lawsuit which is subsequently dismissed.

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3. See also Martinez v. Albuquerque Collection Services, Inc., 867 F.Supp. 1495 (D. NM 1994), a decision relying upon New Mexico law; Beattie v. D.M. Collections, 754 F.Supp.383, 393 (D. Del. 1991).

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4. It is worth noting that the Kimber's holding arose from a situation where the debt collector indisputably knew the statute of limitations barred the claim, but intentionally proceeded to file the lawsuit anyway. Id. at 1488. However, other courts have held the FDCPA is not violated where a reasonable doubt exists as to whether the statute of limitations is expired or where the collector does not knowingly and intentionally sue on a time-barred account. See Simmons v. Miller, 970 F.Supp. 661, 664-667 (S.D. Ind. 1997).

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This article is not to be considered legal advice by the author or Ellis Law Group, LLP. Any person or agency with specific legal questions must consult with the legal counsel of their choice.

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