Prescription (Statute of Limitations) for Credit-Card Debt in the Philippines
A comprehensive doctrinal and practical guide
Quick take-away: In most situations a bank or collection agency has ten (10) years from the moment a cardholder first defaults to sue in court. That ten-year clock, however, can be interrupted and start all over again by something as simple as a written demand letter or a partial payment. Knowing exactly when the clock starts, when it stops, and how it can be reset is therefore critical for both creditors and debtors.
1. The Legal Framework
| Source | Key Provisions | Relevance to Credit Cards |
|---|---|---|
| Civil Code of the Philippines (Arts. 1139-1155) | – Art. 1144 (10 yrs: actions on written contracts) – Art. 1145 (6 yrs: oral contracts & quasi-contracts) – Art. 1149 (5 yrs: residual clause) – Art. 1155 (Interruption by suit, written demand, or written acknowledgment) |
Sets the baseline prescriptive periods and the rules on interruption |
| Rules of Court (esp. Small-Claims Rules as amended 2023) | Venue, filing fees, and procedural shortcuts for claims ≤ ₱1 M | Gives creditors a cost-effective forum; debtors must still raise prescription as an affirmative defense |
| Republic Act No. 10870 (Credit Card Industry Regulation Law, 2016) & BSP Circular No. 1008 | Defines “credit-card issuer,” mandates fair collection practices, imposes disclosure duties | Does not create a special prescriptive period, so Civil Code rules apply |
| Special Penal Laws (B.P. 22 for bouncing cheques, R.A. 8484 for credit-card fraud) | 4-year prescriptive period for B.P. 22; 12 years for fraud under R.A. 8484 | Criminal liability is separate from civil collection; payment can extinguish the civil but not always the criminal action |
2. Written vs. Open Account: Why the Distinction Matters
Written contract (Art. 1144 = 10 years). Nearly every credit-card relationship begins with a signed application form and card-member agreement; monthly statements reference that agreement. Courts have repeatedly held this is a written contract.
Open and continuous account (Art. 1149 = 5 years). – Some obligees have argued a revolving card line is an “open account,” akin to a running merchandise account. While a few trial courts accepted that theory, the Supreme Court has not definitively classified modern credit-card debt this way.
Key jurisprudence
Case G.R. No. / Date Ruling on Prescription Citibank, N.A. v. Spouses Caballero G.R. 171615, 13 June 2012 Action deemed based on a written contract; 10-year limit applied BPI Family Savings Bank v. Velasco G.R. 195138, 18 Aug 2015 Period counted from default, not from original card issuance Philippine National Bank v. Court of Appeals G.R. 121622, 6 Oct 1999 Distinguished between open-account sales and written loan contracts
Practical result: Unless the issuer cannot produce the signed card-member agreement, expect courts to use the 10-year period.
3. When Does the Clock Start?
| Trigger Event | Cause of Action “Accrues” When… | Example |
|---|---|---|
| Minimum payment missed | Day after the due-date if the agreement treats any failure as default | ₱5 000 due 30 Jan 2019 → clock starts 31 Jan 2019 |
| Acceleration clause invoked | On the maturity date of the entire accelerated balance | Issuer accelerates on 1 Mar 2020 → clock starts 2 Mar 2020 |
| Installment plan | Separately for each unpaid installment, unless accelerated | Six missed installments may have six different start dates |
Tip for cardholders: Valid disputes (e.g., fraudulent transactions) can postpone default if promptly raised in writing.
4. How Prescription Is Interrupted (Art. 1155)
| Mode of Interruption | Requirements | Fresh 10-Year Clock? |
|---|---|---|
| Filing of a civil action | Any court suit, even if later dismissed without prejudice | Yes, from date of filing |
| Written extrajudicial demand | Must be in writing; demand letters, e-mails, even text messages if authenticated | Yes, from date debtor receives the demand |
| Written acknowledgment of debt | Partial payment, promissory note, or e-mail expressly admitting the obligation | Yes, from date of acknowledgment |
- Oral demands do not interrupt.
- Routine monthly statements are not demands unless they unequivocally require payment and set consequences for non-payment.
- If the creditor sues, then withdraws or the case is dismissed with prejudice, prescription resumes from where it left off—it does not restart.
5. Common Scenarios Illustrated
| Timeline | Effect on Prescription |
|---|---|
| 1 Jan 2018 – Last payment received | Default begins 2 Jan 2018 |
| 10 Dec 2019 – Bank sends written demand | Clock pauses and restarts → new expiry 10 Dec 2029 |
| 5 Mar 2021 – Debtor pays ₱1 000 “goodwill” | Written receipt serves as acknowledgment → new expiry 5 Mar 2031 |
| 2 Apr 2024 – Bank files small-claims case | Suit filed within period; limitation no longer an issue |
6. Special Issues & Edge Cases
Solidary vs. Supplementary Cardholders – The principal and supplementary cardholder are usually solidarily liable; the same 10-year period applies to each.
Co-makers and Guarantors – The cause of action against a guarantor normally arises only after the creditor has demanded payment from the principal debtor and been refused or after a judicial ruling against the principal debtor, unless the guaranty contract says otherwise.
Bankruptcy, Rehabilitation, or Insolvency Proceedings – Filing a petition under the Financial Rehabilitation and Insolvency Act (FRIA) stays collection suits but does not erase the debt or the prescriptive clock. The period merely pauses during the stay.
Death of the Debtor – Claims must be filed in the settlement of estate within the period fixed in the probate court’s notice (generally six months). Failure bars the claim—even if the 10-year Civil Code period has not lapsed.
Credit Bureau Records vs. Prescription – Negative information can remain in the CIC (Credit Information Corporation) database for longer than the prescriptive period, but lenders still lose the right to sue after prescription; reporting ≠ enforceability.
Criminal Prosecution – Using a credit card with intent to defraud (R.A. 8484) or issuing a post-dated cheque that bounces (B.P. 22) carries separate 4-year/12-year criminal prescriptive periods. Acquittal on the criminal case does not automatically extinguish the civil liability, but the civil suit must still beat the 10-year clock.
7. Defending (or Enforcing) Based on Prescription
Debtors must raise prescription explicitly (it is a waivable defense). Failure to do so at answer stage generally forfeits the defense.
Creditors should keep originals (or at least authenticated copies) of:
- Signed application & terms and conditions
- Demand letters and courier proofs of delivery
- Card statements and ledger print-outs
- Any written acknowledgments or payment receipts
Digital copies are now admissible under the Rules on Electronic Evidence, provided authentication requirements are met.
8. Policy Rationale
- The 10-year period strikes a balance: long enough for banks to trace skip-accounts across several jurisdictions, yet finite so debtors are not exposed to in perpetuo liability.
- Interruption mechanisms reward creditors who diligently pursue claims, and debtors who act in good faith to restructure or partially settle.
- Strict prescription rules also unclog court dockets by encouraging prompt litigation or settlement.
9. Practical Checklist
For Creditors
- Diary the earliest possible default date.
- Send a written demand within a year to reset the clock.
- Document every partial payment.
- Sue before the 10-year window closes; consider small-claims if ≤ ₱1 M.
For Debtors
- Check the date of last payment or written demand—that is when the clock likely restarted.
- Keep copies of all letters and receipts (they may show demands were never made).
- If prescription has run, raise it immediately in the Answer or Motion to Dismiss.
- Beware that any written promise—an email, SMS, or even a Facebook message—can reset the clock.
10. Conclusion
- Default rule: Ten years from default, interrupted by the mechanisms in Art. 1155.
- Key variable: Whether the creditor can produce a signed agreement.
- Strategic takeaway: Both sides should track dates meticulously; the difference between a valid suit and a time-barred claim can hinge on a single demand letter.
This article is for informational and educational purposes only and does not constitute legal advice. For advice on a specific situation, consult a Philippine lawyer specializing in banking or consumer protection law.