In a case with substantial repercussions for purchasers of credit card debt in Illinois and elsewhere, the Appellate Court of Illinois, First District, has ruled in Portfolio Acquisitions, L.L.C. v. Feltman, 1-07-3004 (May 20, 2009) that a shorter 5-year limitations period applies to credit card debts if any essential element of the contract must be proven by parol evidence. The ruling impacts numerous federal lawsuits brought under the Fair Debt Collection Practices Act.
In Feltman, the issue in the appeal was whether the plaintiff, a debt buyer and collector, had timely filed an action against the defendant for failure to pay amounts owed on a credit card. Plaintiff filed its action in 2005 to seek payment on the credit card charges. The last activity on the account was in 1999. Defendant claimed that the credit card application, agreement and statements of account attached to the complaint did not evidence a written contract. Defendant claimed that the action was therefore untimely as it was filed beyond the 5-year statute of limitations for bringing an action based on an oral contract. Under Illinois law, a 10-year statute of limitations applies to written contracts. The trial court agreed with the debtor and the debt buyer appealed.
The appellate court affirmed the dismissal. Critical to the court's conclusion that the contract for credit card debt was not a written contract subject to a longer (10-year) statute of limitations was that not all of the terms of the contract were contained in a single document provided by the plaintiff. Rather, the appellate court determined that the documents submitted-credit card application, credit card agreement and account statements-individually did not contain the elements of a written contract. The court concluded that (i) the credit card application was not a contract but merely a request to extend credit, (ii) the credit card agreement constituted an offer to extend credit which could be revoked at any time, and (iii) the account statements were merely account summaries and did not constitute indebtedness. Because all of the elements of a written contract, including mutual assent and a promise to pay, were not integrated into a single set of documents, the court determined that the shorter 5-year period applied. Troublingly, the court declined to adopt a "composite document" theory to craft a single written contract from the various documents presented. Since no single written contract existed, the court concluded that the applicable statute of limitations for bringing an action for collection of credit card debt was five years under 735 ILCS 5/13-205 and affirmed the trial court's dismissal.