Account Stated Resurrected: The Fiction of Implied Assent in Consumer Debt Collection
46 Pages Posted: 12 Jul 2013 Last revised: 14 Jan 2014
Date Written: December 20, 2013
When are modern American consumers like 17th century merchants? The answer is “now”. Often, in collection lawsuits, creditors allege that consumers in debt are liable for an “account stated.” This “account stated” is a theory of liability that dates back to the medieval period. Today it is used precisely because it offers to treat consumers in debt like Renaissance merchants. The core rule of an account stated claim today is that if a debtor receives a statement of what he owes and he does not object to the statement, he is assumed to have agreed that the statement is correct and to have promised to pay the debt. This rule began as a custom between merchants in the 17th century. It became part of English law and was received into American law with the rest of English common law. The rule, which I will call “implied account stated”, was extended to non-merchants in the United States in the 19th century. In the 20th century, account stated began to fall into obscurity.
Surprisingly, account stated has been resurrected in recent years by debt-collectors, for the purpose of collecting consumer debt. Today, the primary function of account stated is to reduce the evidence plaintiffs must provide to obtain a judgment. Implied account stated, at its worst, requires no more than evidence that the plaintiff sent the debtor a bill and the debtor failed to object to the bill. Account stated is particularly attractive to businesses which purchase defaulted consumer debts: “debt buyers” because it allows them to collect with little evidence in hand.
This article will trace the history of account stated, from its medieval origins to the implication of accounts stated from the trade practices of merchants in the 17th and 18th centuries, and extension of implied account stated from merchants, to any person with legal capacity. Analysis of the current position of account stated claims in New York, Maryland and West Virginia will follow, showing how New York has accepted the extension, Maryland has no definitive case and West Virginia explicitly rejected the extension.
After establishing the history and current use of account stated, this article will argue for reform, on grounds of both policy and principle. Account stated is generally justified as a consensual relationship. Yet the implication of account stated violates one of the simplest rules of contract law: that silence does not amount to assent. Thus the consensual nature of account stated in modern consumer collection actions is no more than a legal fiction. To consumers, it is merely a harsh and archaic technicality, which allows collection actions to proceed on scant evidence.
These problems call for a change to account stated doctrine. I argue that account stated must be brought back to conformity with the normal principles of contract law. Account stated should be implied only where there is evidence sufficient to imply, as a matter of fact, that real assent was given by the consumer. Significantly, these changes would remove a theoretical inconsistency from the law. More importantly, they would prevent the abuse of account stated as a vehicle for collection when the plaintiff cannot or will not present adequate evidence to succeed upon a breach of contract claim. By narrowing account stated, whether it is through regulation or through judicial rediscovery of its origins and its relationship to ordinary contract law, consumers can be further protected, courts can be relieved of the burden of grappling with this ancient cause of action and the broken collection system, at least in one aspect, can be mended.
Keywords: account stated, debt collection, debt buyer, FDCPA, fair debt collection practices act, common law, New York, Maryland, West Virginia, debt, consumer protection, consumer law, litigation, pleading, implied assent, legal fiction, implied in fact, implied in law, quasi contract
Suggested Citation: Suggested Citation