The statute of limitations for credit-card debt _ a time limit within which the bank must sue the debtor _ is two years from the date following the debtor's default on payment. Failure by the bank to sue past the expiration date will end its right to enforce the debt and free the debtor from the debt burden. A number of debtors, however, continue to pay bills after debts expire, unknowingly bringing their accounts back to life and exposing themselves to the risk of lawsuits once again.
Debt-collection practices in the banking industry will ensure that, expired or not, the debt will be pursued and the debtor will receive persistent phone calls, demand letters and other pressure until full settlement is made. Succumbing to the pressure, some debtors agree to pay small amounts just for the calls to go away, not realising the dire legal consequences of doing so.
In Thailand, there is no law requiring the bank to tell the borrower that he is not legally obliged to pay the credit-card debt after the two-year limitation period expires. The Bank of Thailand's guidelines on debt collection practices, currently in force, are silent on this rule, and the banks as well as debt-collection companies have a free hand in withholding this vital information when demanding debt payments from consumers.
Statutes of limitations are fixed by legislation, hence the title "statute". The time limit is there to encourage creditors to decide whether they want to exercise their right of action in court and, if they do, they have to exercise that right within the time limit. Beyond that stated timeframe, the creditor's right becomes stale and is extinguished, with the debtor enjoying the benefit of getting off the hook. Thai law, however, says that the debtor can waive this benefit of an expired statute of limitations.
A recent case _ Supreme Court Judgement No. 7912/2553, reported in the most recent publication of court precedents _ illustrates how this provision of law applies to a real situation.
According to the Supreme Court decision, the credit-card payment in question was due on Nov 9, 1994 but the debtor failed to pay on that date. This triggered the right of action of the bank from the next day on Nov 10, 1994, the date the two-year statute of limitations began to run. The limitation period kept running until it expired on Nov 10, 1996. For some reason, the bank did not sue the debtor within the time limit and as a result lost the right to sue. The debt came to an end and the borrower was legally expunged and freed.
After the expiration date and notwithstanding its claim having been wiped out, the bank didn't give up pursuing the debt and continued its collection efforts. It is not revealed in the judgement report what sophisticated collection techniques the bank was employing, but the strategy worked. The debtor finally relented and resumed making payments over the next several years, the last payment being made on Oct 8, 2001.
The Supreme Court ruled that once the partial payments were made after the limitation period was over, the debtor had waived the benefit of the time limit and the bank's cause of action had sprung back to life, with the new limitation period beginning to run from the date of the last payment, Oct 8, 2001 and ending two years later on Oct 8, 2003. Any lawsuit by the bank must be filed during this revived period.
When the borrower stopped paying after the last payment in October 2001, the bank brought an action on May 22, 2003.
In fighting the case, the borrower apparently was not aware that his making partial payments after the expiration of the original statute of limitations would legally be deemed a waiver of his benefit offered by the time limit. He argued that the bank didn't have the right to file its claim nearly seven years after the time limit to sue had expired on Nov 10, 1996.
The debtor overlooked the legal ramifications that indeed his partial payments reactivated a second two-year statute of limitations on the very day he made the last payment on Oct 8, 2001. The lawsuit filed on May 22, 2003, was thus well within the new statute of limitations, four-and-a-half months before the renewed limitation period would expire on Oct 8, 2003. The right of the bank to sue was upheld by the court, and needless to say, the debtor lost the case and had to pay the remaining credit-card debt with interest.
There was a bit of a question as to why the court picked the last payment date as the start of a renewed time limit as there had been a series of partial payments to choose from. The solution might be that each payment after the expiration of the first limitation period could be seen as a single, separate waiver by the debtor. The last payment date was when the last waiver emerged, giving birth to the new time limit.
Wirot Poonsuwan is an independent lawyer. Contact him at wirotp@loxinfo.co.th