New Jersey Appellate Division Holds That Four-Year Statute of Limitations Applies to Actions to Collect Debts from Retail Store Credit Cards

New Jersey Appellate Division Holds That Four-Year Statute of Limitations Applies to Actions to Collect Debts from Retail Store Credit Cards
Riker Danzig Banking Alert September 6, 2016

The New Jersey Appellate Division recently held that the six-year breach of contract statute of limitations does not apply to actions to collect debts arising from the use of a retail store’s credit card when the use of the card is restricted to that store and, instead, the Uniform Commercial Code’s four-year sale of goods statute of limitations applies.  See Midland Funding LLC v. Thiel, 2016 WL 4506119 (N.J. Super. Ct. App. Div. Aug. 29, 2016).  In the case, which was approved for publication, the Appellate Division addressed three lawsuits brought by Midland Funding, LLC (“Midland”) against three consumers.  In each case, the consumers obtained credit cards “from specific stores, issued by unaffiliated financial institutions, that limited the cards’ use to purchases from the specific store.”  Midland, who was assigned the accounts from the original creditors, initiated its actions against each consumer between four and six years after default. 

The trial courts granted the defendants’ motions for summary judgment, holding that the Uniform Commercial Code’s four-year statute of limitations for the sale of goods applied.  See N.J.S.A. 12A:2-725.  Two of the courts further found that Midland had violated the Fair Debt Collection Practices Act (“FDCPA”) by seeking debts after the limitations period had run, and awarded the consumers $1,000 statutory penalties plus attorneys’ fees.  See 15 USC 1692e.  Midland appealed the grant of summary judgment, and the third consumer appealed the denial of his motion for summary judgment for his FDCPA claim.

On appeal, the Appellate Division affirmed the grant of summary judgment and reversed the denial of the third consumers’ motion for summary judgment under the FDCPA.  First, it reaffirmed that a court must examine the entire transaction between parties “and look to the essence or main objective” of the agreement to determine whether a contract is for a sale of goods.  With regard to these store-issued credit cards, it held that the New Jersey Supreme Court already found them to be a sale of goods.  See Sliger v. R. H. Macy & Co., 59 N.J. 465 (1971) (“the transactions were sales rather than loans or forbearances of money”).  Moreover, the fact that a third-party creditor provided the financing did not affect the nature of the underlying transaction.  Second, it held that Midland’s commencement of a lawsuit that it “knows or should know is unavailable or unwinnable by reason of a legal bar such as the statute of limitations” is a violation of the FDCPA, and Midland’s mistaken belief as to which statute of limitations applied did not affect this determination.  Therefore, it held that all three cases should be dismissed and all three consumers should prevail on their FDCPA claims.

For a copy of the decision, please contact Michael O’Donnell at or Michael Crowley at