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In New York, creditors have limited time to sue for unpaid debts. Here's what you need to know:
Key updates from the 2022 law:
What does this mean for you? If a debt is older than its statute of limitations, it becomes "time-barred", and creditors can't sue you. However, they can still attempt non-judicial collection methods, but must disclose the debt's status to avoid violating the law.
For debt buyers and collectors, compliance is critical. Ensure all accounts are properly tracked and documented to avoid legal challenges.
On April 7, 2022, New York introduced major reforms to debt collection practices through the Consumer Credit Fairness Act (CCFA). This legislation imposed stricter requirements for enforcing debts and offered stronger protections for consumers involved in debt lawsuits.
One of the most impactful changes was the reduction of the statute of limitations for consumer credit transactions from 6 years to 3 years. This shift applies retroactively, meaning debts that were still within the 6-year limit but older than 3 years when the law took effect became immediately unenforceable. For instance, a debt that was 4 years old on the effective date of the law was instantly time-barred.
Senator Kevin Thomas, Chair of the Senate Committee on Consumer Protection, highlighted the significance of this reform:
"The Consumer Credit Fairness Act will stop these abusive and often illegal debt collection practices in their tracks."
The CCFA also introduced a rule preventing expired debts from being revived by partial payments. The New York Department of Financial Services clarified:
"Under the new law, if the time to sue has expired, admitting to owing the debt, promising to pay the debt, or making a payment on the debt will not restart the time period during which you can be sued for the debt."
Additionally, filing a debt collection complaint now requires more detailed documentation. Plaintiffs are mandated to include either the original contract or a charge-off statement, alongside specific account details like the original creditor’s name, the last four digits of the account number, and the date and amount of the last payment. For default judgments, debt buyers must provide affidavits from the original creditor and every subsequent debt holder to establish an unbroken chain of title.
Another notable change is the reduction of the annual interest rate on money judgments in consumer debt cases. Effective April 30, 2022, the rate dropped from 9% to 2%. For judgments entered before this date, the 2% rate applies to any unpaid balance starting April 30, 2022.
These reforms significantly alter the landscape for debt buyers and collectors, requiring adjustments to their enforcement strategies.
The CCFA’s changes force debt buyers and collectors to reevaluate their portfolios. Debts purchased before April 2022 may now be time-barred, leaving voluntary payments as the only recovery option. Portfolios without a complete chain of title face additional hurdles, as incomplete documentation can prevent enforcement. Moreover, the reduced judgment interest rate lowers the total recoverable amount over time, pushing collectors to act swiftly within the shortened 3-year statute of limitations to secure their legal remedies.
New York Debt Collection Statute of Limitations by Debt Type
New York's statute of limitations on debt collection varies depending on the type of debt, and understanding these distinctions is essential for debt buyers and collectors. The Consumer Credit Fairness Act (CCFA) introduced significant changes, most notably reducing the timeframe for consumer credit transactions from six years to three years. However, other types of debt continue to follow their own rules.
Under CPLR §214-i, the statute of limitations for consumer credit transactions, such as credit card debt and personal loans, is now 3 years. This change, as highlighted by the New York City Bar, also means:
"The law changes the statute of limitations on lawsuits filed by creditors from six years to three years. Also, making payments on the debt does not restart the statute of limitations".
For debt buyers, this adjustment is critical. Portfolios purchased before April 7, 2022, may contain accounts that became time-barred when the CCFA took effect. It's important to note that business or commercial debts still follow the standard 6-year limitation.
Medical debt also falls under the 3-year statute of limitations outlined in CPLR §214-i. This applies to bills from hospitals, clinics, and healthcare providers for services rendered for personal or family use. Debt buyers handling medical debt portfolios must carefully verify the age of accounts and ensure compliance with the documentation requirements established by the CCFA.
Auto loans and retail installment contracts tied to the purchase of goods, such as vehicles, are governed by a 4-year statute of limitations under UCC §2‑725. This timeframe is distinct, sitting between the 3-year limit for consumer credit and the 6-year period applied to most other written contracts. Debt buyers managing these types of accounts need to account for this variation when organizing their portfolios.
Several other categories of debt have their own specific time limits:
The table below summarizes these key timeframes:
| Debt Type | Statute of Limitations | Legal Reference |
|---|---|---|
| Consumer Credit Debt (credit cards, loans) | 3 years | CPLR §214-i |
| Medical Debt | 3 years | CPLR §214-i |
| Auto Loans / Installment Contracts | 4 years | UCC §2‑725 |
| Promissory Notes | 6 years | CPLR §213 |
| Written Contracts (Non-consumer) | 6 years | CPLR §213 |
| Mortgage Foreclosure | 6 years | CPLR §213 |
| Court Judgments | 20 years (renewable) | CPLR §211(b) |
| State Tax Debt | 20 years | Various |
Additionally, if the original creditor is based outside New York, the statute of limitations may be shorter if the creditor’s home state enforces a shorter period. Debt buyers should confirm the original creditor's location when assessing portfolios.
Next, we'll explore how the statute's countdown begins, pauses, or resets, which has a direct impact on collection strategies.
The clock for the statute of limitations starts ticking from the date of default. Attorney Amy Loftsgordon clarifies:
"Typically, this means three years from when the debtor defaults on the obligation".
For most consumer credit accounts, this default date is either when the last payment was made or when a scheduled payment was missed and never brought up to date. This is a critical detail for debt buyers, as it helps determine the age of a portfolio and its potential for collection. Now, let’s look at the factors that can influence this timeline.
Before the Consumer Credit Fairness Act (effective April 7, 2022), actions like making a partial payment or acknowledging the debt in writing could reset the six-year statute of limitations. However, under the updated rules in CPLR §214-i, once the three-year limit is reached, no further payments, acknowledgments, or activities can restart the clock.
That said, certain legal events - such as bankruptcy proceedings - can still pause (or "toll") the limitations period. But for debts governed by the Consumer Credit Fairness Act, once the three years are up, the debt cannot be reactivated for litigation, even if payments are made or the debt is acknowledged.
Even after the statute of limitations expires, debt collectors can still pursue collection through non-judicial methods, like phone calls or written notices. However, they must follow strict rules. If they know - or have reason to believe - a debt is time-barred, they must inform the debtor before accepting any payment. This includes notifying the debtor that the debt may be time-barred and that suing to collect it would violate the Fair Debt Collection Practices Act.
The New York State Department of Financial Services emphasizes:
"Under the new law, if the time to sue has expired, admitting to owing the debt, promising to pay the debt, or making a payment on the debt will not restart the time period during which you can be sued for the debt".
Debt collectors are also required to have robust systems in place to verify whether the statute of limitations has expired before attempting to collect. Any threats - explicit or implied - of legal action on a time-barred debt are illegal under federal law. These compliance measures are vital for debt buyers to ensure their portfolios remain legally enforceable and properly managed.
New York law mandates that debt collectors follow standardized procedures to confirm whether the statute of limitations has expired for each account (N.Y. Comp. Codes R. & Regs. Tit. 23 § 1.3). To stay compliant, it's essential to categorize portfolios by debt type. For instance:
Each category requires tailored documentation and tracking systems.
The key is to monitor the date of the last payment or account activity to determine when the 3-year window begins. Under the Consumer Credit Fairness Act, partial payments or written acknowledgments made after April 7, 2022, no longer reset this timeline. For debts originating outside New York, apply the statute of limitations from the creditor's state, as required. Before initiating litigation, ensure you have a complete chain-of-title, as courts now require affidavits from the original creditor and all prior holders. Regularly auditing these documents upon acquisition is critical.
Accurate tracking also opens the door to leveraging analytics tools for streamlining compliance efforts.
Analytics tools like those provided by Debexpert can help streamline portfolio management. These tools allow you to filter accounts by age and assess their litigation potential, with alerts for debts approaching the 3-year threshold. They also help classify accounts by type while securely storing essential documents for potential litigation.
Another factor to monitor is changes in debtor residency. If a debtor moves out of New York for an extended period (typically four months or more), the statute of limitations may be tolled, effectively pausing the clock and extending the collection period.
The Consumer Credit Fairness Act (CCFA) has introduced sweeping changes to compliance protocols. Here's a breakdown of how key requirements have shifted:
| Feature | Before CCFA (Pre-April 2022) | After CCFA (Current) |
|---|---|---|
| Statute of Limitations | 6 Years | 3 Years |
| Effect of Partial Payment | Could restart the clock | Does not restart the clock |
| Written Affirmation | Could restart the clock | Does not restart the clock |
| Required Filing Documents | Basic complaint | Contract and charge-off statement |
| Default Judgment Requirements | Standard affidavits | Affidavits verifying chain of title and SOL non-expiration |
Attorney Arthur Lebedin captured the impact of these changes, stating:
"Ultimately this will put pressure on creditors to sue consumers quickly before their time runs out."
For debt buyers, the shortened statute of limitations means litigation efforts need to be expedited. Older portfolios may lose litigation value, which could influence both purchase prices and expected returns. Update your disclosure templates to reflect these changes immediately. When collecting debts that may be time-barred, include clear notices that pursuing litigation on such debts is prohibited by current regulations. Additionally, implement quarterly accounting for consumers on payment plans to ensure accurate reporting of interest, fees, and payments in compliance with the law.
The Consumer Credit Fairness Act brought significant changes to debt collection practices in New York. Perhaps the most impactful shift was reducing the statute of limitations for consumer credit transactions from six years to just three years. This change applies retroactively, affecting all consumer credit debts, no matter when they were originally incurred.
Another major update is the elimination of "reviving" expired debts. The New York Department of Financial Services explained:
"Under the new law, if the time to sue has expired, admitting to owing the debt, promising to pay the debt, or making a payment on the debt will not restart the time period during which you can be sued for the debt".
Additionally, debt collectors now face stricter documentation requirements. They must provide an unbroken chain of title through affidavits from the original creditor and all subsequent holders. On top of that, the interest rate on consumer debt judgments has been reduced from 9% to 2% annually.
These updates demand careful attention to compliance from all parties involved in debt collection.
Given these legal changes, debt buyers must rethink their strategies to ensure compliance and maintain portfolio value. Start by verifying the chain of title documentation for every account before pursuing litigation. Without proper documentation, portfolios could become unenforceable in court.
Act promptly on newer accounts, keeping the three-year statute of limitations in mind. As attorney Arthur Lebedin pointed out:
"Ultimately this will put pressure on creditors to sue consumers quickly before their time runs out".
Review and update all disclosure templates to reflect that payments no longer restart the statute of limitations. This is especially important for debts that may already be time-barred.
Regularly audit payment plans - at least quarterly - to ensure accurate records. Keep an eye on debtor residency changes, as leaving New York for four months or more can pause the statute of limitations clock. For debts originating outside New York, CPLR Section 202 requires applying the shorter limitations period between the two states. Lastly, remember that suing over time-barred debt not only violates the Fair Debt Collection Practices Act but also opens the door to legal consequences.
To figure out your debt’s default date in New York, start by identifying when the debt initially went unpaid or when the last activity on the account - like a payment or acknowledgment - took place. This date is crucial because it marks the beginning of the statute of limitations, which is generally three years in New York. If you're uncertain about the default date, review your account statements, payment records, or reach out to the original creditor or the debt collector for clarification.
Yes, a time-barred debt can still show up on your credit report. While the statute of limitations stops creditors from suing you to collect the debt, it doesn’t necessarily mean the debt disappears from your credit history. Whether it stays on your report depends on how long the credit reporting agency keeps such records, which is typically up to seven years from the date of the first missed payment.
If you're facing a lawsuit over a time-barred debt in New York, it's crucial to respond to the lawsuit and assert the statute of limitations as your defense. Once the statute of limitations has expired, the debt cannot be legally enforced. To ensure you're handling this correctly, consult the court or explore legal resources for detailed instructions on filing your response properly.
More than a decade of Ivan's career has been dedicated to Finance, Banking and Digital Solutions. From these three areas, the idea of a fintech solution called Debepxert was born. He started his career in Big Four consulting and continued in the industry, working as a CFO for publicly traded and digital companies. Ivan came into the debt industry in 2019, when company Debexpert started its first operations. Over the past few years the company, following his lead, has become a technological leader in the US, opened its offices in 10 countries and achieved a record level of sales - 700 debt portfolios per year.
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