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Arizona Supreme Court Holds Cause of Action on Credit Card Debt Accrues When Payment is Missed in Absence of Acceleration

In a case of first impression, the Arizona Supreme Court recently addressed the question of when the statute of limitations commences on credit card debt that is subject to an optional acceleration clause.

A copy of the opinion in Mertola, LLC v. Santos is available at:  Link to Opinion.

The consumer obtained a credit card subject to an agreement that provided if he missed any payment the issuer could declare the balance “immediately due and payable.”  The consumer missed a payment in February 2008, but subsequently made a $50 payment, which was less than the minimum payment due, in August 2008.  No notice of acceleration was ever issued.  The account was subsequently sold, and the purchaser filed a lawsuit to collect the debt in July 2014.

The statute of limitations for a credit card debt in Arizona is six years from accrual of the cause of action.  Ariz. Rev. Stat. § 12-548(A)(2).

The consumer moved for summary judgment, arguing the action was barred by the statute of limitations because the cause of action accrued when he missed his first payment.  The purchaser argued it could not accrue until the debt was accelerated, pursuant to the agreement.  The trial court agreed with the consumer.

The appellate court reversed, finding that the cause of action could not accrue on the entire amount owed until the consumer “failed to comply with a demand for payment in full or a notice by the lender [] that it was accelerating the debt.”  Review of the decision was granted by the Arizona Supreme Court.

The Supreme Court noted that the appellate court relied on decisions dealing with closed-end, installment contracts that have a determinable date by when the account must be paid in full.  For those accounts, it explained, a creditor cannot prevent the statute of limitations from running simply by refusing to accelerate the debt.

The Court distinguished credit card accounts where the date the entire debt will become due is not certain.  Because the purpose of the statute of limitations is “to protect defendants from stale claims and uncertainty about potential unresolved claims,” the Court declined to follow the analysis related to installment contracts.

The Court explained that allowing a creditor to prevent accrual of the cause of action on a credit card account by not accelerating the debt would “functionally eliminate the protection provided to defendants by the statute of limitations.”

Thus, the Court held “that when a credit-card contract contains an optional acceleration clause, a cause of action to collect the entire outstanding debt accrues upon default: that is, when the debtor first fails to make a full, agreed-to minimum monthly payment.”

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Eric Rosenkoetter is a principal at Maurice Wutscher LLP, where he provides counsel to businesses and consumer financial services firms nationwide. For many years, he has focused his practice on various aspects of financial services law. As a litigation attorney, he has conducted every aspect of the litigation process, including countless depositions, motion proceedings, bench and jury trials, and appeals in various courts. In addition, he has significant experience as a compliance and transactional attorney, providing strategic, business growth, legislative, compliance and regulatory advice to national corporations and trade associations. For example, he has drafted consumer contracts and disclosures designed to state-specific statutory requirements, and developed “Best Practices” guides and state-by-state compliance grids, for national financial services companies. He also conducted research and crafted a metrics report for a national trade association with analysis designed to counter the claims of advocacy groups. Eric’s experience also includes working for a national corporation as Executive Counsel, Chief Compliance and Ethics Officer, and Director of Legislative Affairs, and as a federal lobbyist and Director of Government and Public Affairs for a national financial services trade association. In the government sector, Eric presided over approximately 6,000 state administrative hearings, served as a staff attorney for the Missouri Senate, and handled litigation in 33 counties as a regional managing attorney. Eric frequently speaks to audiences on topics relevant to the financial services industry including regulatory compliance, data privacy law and related advocacy initiatives. For more information, see

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