A Borrower's Receipt of a Billing Statement Can Start the Statute of Limitations Running

A borrower's suit against a lender might allege fraud or some other form of misrepresentation in addition to claims under the various consumer protection statutes. We also frequently see pleadings with only common-law misrepresentation claims when statutory claims become stale. But how do we know when a common-law misrepresentation claim accrues for the purpose of the statutes of limitations?

In some cases, the cause of action might accrue when the borrower gets the first billing statement. The North Carolina Court of Appeals issued an unpublished opinion today in Cascadden v. Household Realty Corp., reasoning that because the plaintiffs had discovered irregularities in their first billing statement, they were on notice of potential fraud.

North Carolina, like many states, follows the "discovery rule" for determining when a misrepresentation claim accrues. A plaintiff's claim does not accrue until the plaintiff discovers the misrepresentation. However, if the plaintiff has information that would give rise to a reasonable belief that misrepresentation has occurred, then the misrepresentation has been "discovered" for statute of limitations purposes. In other words, constructive knowledge counts, and in this particular case the irregularities in the first bill in part provided that constructive knowledge.

This opinion could help in any case in which a cause of action accrues pursuant to the "discovery rule" and constructive knowledge. Although the case's authority is limited (North Carolina restricts citation of unpublished opinions), the court's reasoning is sound, and lenders should explore this theory in appropriate circumstances.