For some people being hounded or even sued for credit card debt,  whether or not a credit card is considered to be a written or open account by state statutes is crucial.  Why?  Because of the statute of limitations on the debt.  If a debt is past the statutue of limitations, a consumer can not be sued for the debt. Most states’ statute of limitations are much longer for written accounts than open accounts, so determining which statute the debt falls under matters.

In some states (Arkansas, California,  District of Columbia, Maine, Massachusetts, Michigan, Minnesota, Mississippi, North Dakota, New York, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee and Texas), the statute of limitations is the same for open and written accounts, so for consumers living in these states, the point is moot.

The statutue of limitations laws in most states were either written or revised before the creation of credit cards, so none of them specifically call out credit cards in their legal definitions.  Depending on how well an “open account” definition is written in a statue, a credit card may clearly fall into the state defined open account.  California’s legal definition of an open account is very specific and the only fit for a credit card.

What if a statute is vague or nebulous?  In Ohio, an open account is not mentioned at all.  In these situations, case law is all you have to determine which statute to use when considering credit card accounts.  One state in particular which has case law establishing a credit card as a written account is Georgia (Hill v. American Express, January 24, 2008).

The state statutue of limitations on a credit card may come down to whether the agreement or application is in writing or not to determine whether it meets the required elements of a written contract. For instance, in Missouri, The written account statute of limitations is 10 years; the open account statute is 5 years.  If the creditor is able to produce a written credit card contract, then the 10 year statute applies. If the creditor cannot show the existence of a written contract, then the 5 year statute would apply – credit card or not.  Here is case law in Missouri to illustrate this point:

In Capital One Bank v. Creed, 220 S.W.3d 874 (S.D. Mo.2000), the company alleged the parties entered into a contract, whereby the company would extend credit to the customer. The company alleged that the customer breached the terms of her contract by failing to pay the amounts for which credit was extended. The customer denied the allegations and asserted the affirmative defense that the action was barred by the statute of limitations. The appellate court ruled that the action was barred by the five year statute of limitations under Mo. Rev. Stat. § 516.120 (2000). The customer made a partial payment on December 2, 1999, and the company’s petition was not filed until January 3, 2005. The ten year statute of limitations under Mo. Rev. Stat. § 516.110 was not applicable because the company did not produce a written promise by the customer to pay money.

These days, the majority of credit card applications are done over the internet – which is not legally defined as a written contract.   Future case law may establish that an online application will be considered a written contract, but right now it is not.

As in any case, sometimes it’s not the truth which matters, but what you can prove.

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