Closed Rule

Consumer Debt Collection Practices (ANPRM)


The Consumer Financial Protection Bureau (CFPB) might propose new federal rules on how creditors and debt collectors can act to get consumers to pay overdue credit card, medical, student loan, auto or other loans. This decision matters to you if you

  • had an experience with debt collection (good or bad)
  • counsel consumers with overdue debts
  • have a business where you do your own account collection or
  • work in the debt collection industry

Here, you can learn what CFPB is thinking and what it needs to know. You can share information and experiences and discuss ideas with others. At the end of the discussion, CFPB will get a detailed summary and your input will help it decide what to do next. (This phase is for gathering information and brainstorming. The next phase would be where CFPB comes up with specific proposals and asks people to comment again before it decides whether to adopt those proposals as new regulations.)

Consumers and business both have a stake in effective, responsible debt collection practices. Don't be a bystander. Help CFPB make the right decisions about new consumer debt collection regulations. Share what you know and encourage family, friends and coworkers to do the same.

Draft Discussion Summary Old debts - 7

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1|Time-barred debts - 6

Draft Summary of Discussion

[NOTE that comments reported in this section may have originally been made under another subtopic. Similarly, comments originally made on this subtopic may be reported in another, more relevant section. Information in parentheses comes from commenter response to interest survey; the “servicemember” designation may apply to the commenter or someone in their family. Numbers in parentheses for industry-perspective commenters refer to number of people involved in debt collection in the firm.]

Many commenters complained about consumers being pursuing for old debts:

“I had a 19 year old debt come back to haunt me - I went to three attorney's to attempt to pay them to ‘talk’ to the company, as the information I was given, would not call me back after leaving several messages, along with an offer to settle it for slightly more than one-half of what they claimed I owed. This debt went from around $1200 up to $9,300 in those 19 years. This type of behavior must be regulated it is only out and out a scam.” (consumer)

“I was sued for an alleged debt from 1993 by NYC landlord. Judge denied him the 1600. And then his real estate/collections attorney put me into collections and the landlord got to write off a debt that was not a debt. Great for these big landlords in NYC as they play the corporate game and sue a tenant 10 times and write it off each and every time even though it’s not a valid debt. It’s a big deal in Manhattan. Additionally the landlord’s real estate attorney also had a collections agency so he continuously flipped the landlords debts into his agency and again the landlords get to keep writing it off with each and every lawsuit, in this instance it was 8 lawsuits for the same amount.” In response to moderator questioning, this commenter continued: “I think they should have to have a license to be debt collectors and at the time they did not. Additionally there should be harassment laws regarding just this matter about landlords as if someone sues you 3Xs for the same thing, they should lose their collections license. I even responded from the very beginning with a certified letter stating that I did not owe any part of the debt! Additionally what did help after almost 20 years was reporting the landlord’s real estate license for violating business practices in NYS for overcharging rent statements. This certainly got their attention however I still had to retain an attorney for a lawsuit against them and prevailed but then you have to pay the 20% of what you recoup to the attorney. I wish they would just lose their license for harassing you for 20 years.” (consumer)

“Our son ran up small debts at several stores and banks around eight years ago. Debt-collectors (debt-buyers) have contacted him and threatened him with legal action on time-barred debts (without notifying him of the status).” On questioning from the moderator, this commenter continued: “They didn't say a thing about it. They contacted him via phone since he was homeless at the time and told him they were taking him to court. They didn't even tell him which debt it was for initially.” (victim of ID theft; family member with debts in collection)

“My client needs to see a particular doctor. When she called his office she was informed that she needed to pay on her account of $278. She was not even aware that she had a balance there - she had never received a bill from this office and when she asked when this bill was from, the gal told her 1986. They claim they never turned it over to a collection agency but the client filed bankruptcy in 2005. It is listed in her bankruptcy but the doctor’s office won't forgive the bill. What is the client supposed to do? If a debt owners want to collect on debts they need to send out bills so families know they have bills due, that only makes sense. My client is disputing the bill, but with no luck so far.” (financial advisor trying to figure out problem for a client; <20)

“I have found on numerous occasions that the debt collection process allowing firms purchasing debt - for pennies on the dollar - often use intimidating tactics that can easily be considered extortion. Every time a deb t collector purchases an old, out-of-date debt, they re-file the debt with the credit bureau(s). This continues the credit report damage for years - sometimes decades. As a mortgage banker, those persons often find it impossible to secure a mortgage and realize the American dream of home ownership.” (mortgage banker)

[responding to previous comment] “This is precisely what led to my filing bankruptcy. Debt buying and selling, made a debt that was 10 years old, reappear on my credit report. Each time I mentioned that the debt was time-barred. I was informed that the debt had been bought and that the ‘clock’ had been restarted.” (consumer)

“I have a 20 year plus debt. A couple of times I have refinanced and paid everything on my credit report. They never appear until it's over [my credit report is cleared] . Every year they get a judgment against me and freeze my bank account putting me behind on my bills.” (consumer)

There is clearly confusion about what actions may, or may not, be taken on time-barred debts. Consumers don’t necessarily distinguish between filing (or threatening to file) suit on the debt vs. other kinds of efforts to collect. E.g.,

“The CFPB should issue a rule confirming that implying that collection is possible on a time-barred debt (including by filing suit) is forbidden by the FDCPA, in order to remove any doubt about what the law is.” (law student and former intern at consumer law organization)

“[I] request forbidding any debt outside statutes be bought or sold. Further that the SOL be interpreted in the narrowest venue if multiple states are involved. When debt is bought/sold, the initial FDCPA Miranda warning is then required. The collector is asserting in the Miranda that to his best knowledge the debt is legally enforceable. When the debts are outside statutes, the collector cannot make that claim; therefore his assertion in the Miranda is false and misleading.” (consumer)

“As I frequent many of the consumer credit forums, I will tell you that most consumers do think that a debt can still be brought to court when the receive contact past the SOL. And others I have run into also still get contacted even after the 7 year mark when the debt has finally dropped from their credit report. In fact, just the debt dropping off from the reports that has otherwise been dormant will get an automatic response from debt collectors. It seems they purposely wait for it to drop off and then pounce to instill fear. As in a ‘gentle’ reminder that they are still there. They act like sharks in the water circling their prey. And the consumers bring up questions like ‘when will this end?’ and ‘I thought the debt wipes out after 7 years, why are they still contacting me?’ Something needs to be done about this. SOL are SOL for a reason. Debt collectors should not be able to harass and harass and harass.” (consumer; collectors calling looking for someone s/he doesn’t know)

“When we did it [commenter reported working as legal assistant for debt collection law firm] , it was agreed that any 3rd party communication outside SOL at any point was a potential violation of the FDCPA. Since 3rd party debt collectors are required to be truthful at all times, they cannot say 'we are attempting to collect a debt' if they are time-barred from collecting the debt. We were the meanest, nastiest, most aggressive in the multi-state area at that time, and this was the stance. [My] suggestion is clarify that time-barred debts are time-barred for the 3rd party as well, and cannot be collected, attempted to be collected, or bought/sold.”

“There are still too often abuses by debt collectors in regard to time-barred debts. Zombie debt collectors who use partial payments, acknowledgement of the debt in writing, or other tactics are effectively hard-wiring around the laws having to do with the statute of limitations. I have witnessed situations where consumers were effectively tricked into setting up a series of payments on a long time-barred debt. Collectors continue to take advantage of consumers for whom ESL and also those who are unsophisticated and possibly naive.” (commenter who described him/herself as having "a plethora of knowledge and experience on both sides of the pen; I’ve worked in the mortgage industry, debt collection and other")

“[T]here should be some laws on the books on when collectors cannot collect e.g. if the original creditor has not made an attempt to collect the debt for an extended period of time, I should not get a collection notice 20 years after the fact.” (consumer)

Similar confusion exists about the legality of a CRA maintaining time-barred debt in a credit report. E.g.,

“Once a debt has reached the end of its statute of limitations is should be removed from the consumer credit report. However, collectors use the law to refresh old debts so they effectively never leave a report. If a collector can't sue to retrieve the debt it has no business on a consumer report.” (consumer; service member)

[See also comments requesting various actions about CRAs, below.]

Additional confusion exists about the operation of statutes of limitations, the operation of "tolling" rules, permissibility of forum shopping, and the role of federal vs. state law. E.g.,

“The problem is that companies shift credit collection from state to state. This must stop and state laws must be respected in regards to statute of limitations.” (collector collecting on debts; <20)

“If there already isn't a law or rule at the fed level for when what happens to time barred debts when a debtor leaves the purview of one states SOL and now resides in another states SOL, there needs to be. It should be clear that if a debtor changes states, which SOL should come into play.” (consumer being contacted by collectors about someone s/he doesn’t know)

“I live in Georgia which seems to have laws that are very biased toward the debt owner. An example is the statutes of limitations for Mortgage debt. For instance, if the 1st lienholder forecloses, and you have a 2nd mortgage also, the 2nd remains in effect The OCGA states that the statute of limitations for any ‘debt instrument under seal’, is 20 years from the date of foreclosure. The 2nd lien can be sold over and over and the last one holding it can come after you for up to 20 years. In these times when houses are lost due to catastrophic illness, job loss and other situations that not due to the irresponsibility of the homeowner, legislation should be drafted to protect the consumer from financial ruin.” (consumer)

One consumer commenter urged creation of a single, uniform federal limitations period:

"There needs to be a universal Statute of Limitations. The current system is an absolute mess. 17 states maintain a SOL of three to four years, while 19 others have the six years SOL time limit. The rest all have diverse SOL limits with some extending for even up to 10 years. Tolling provisions make it even more confusing. Simplify it. Have a single NATIONAL Statute of Limitations. Make it fair for everyone (debt collectors and debtors) 5 years seems reasonable. Having a universal Statute of Limitations will eliminate confusion and ambiguity as to when and where a debtor can be sued.... Collectors would be able to file suit no matter where the debtor lived based on a single set of federal laws. It also makes things less confusing for debtors (they know that they can be sued within X amount of years no matter where they go, hence they can't "run" from debt) and debt collectors don't have to go from state to state, wading through murky laws."

When asked by the moderator about the reference to tolling, this commenter responded that "[t]olling simply keeps zombie debt going and going" and that there would be no need for tolling if there were a "universal statute of limitations." S/he recounted a personal story:

"I had a medical crisis while living in Illinois for college. Despite having insurance, I still ended up deeply in debt. I attempted to work with the debt collectors, but I just couldn't keep up due to the massive amounts. I moved back to Wisconsin where I'm from. The debt has since become time-barred in Wisconsin due to the statute of limitations. It's not on my credit report and I can't be sued for it here. However, should I ever wish to return to Illinois again, it's like I never left and I can be raked over the coals by debt collectors all over again, including being sued. This doesn't make any sense. Either I get sued or I don't. Why does a debt collector get the safety blanket of debt tolling? It's been over 10 years, and it's not like I skipped the country and 'hid' from them. I'd like to return to Illinois, but doing so would kill my credit. They had 10 years to sue me. Isn't that enough?"

Consumer commenters universally favored requiring notice to consumers that a debt is time-barred and cannot be sued on. However, commenters from the collector/creditor perspective pointed out that the issue is much more complicated. Some commenters recommended specific language to use in educating consumers:

“I should know if a debt is time-barred, so that I can make an informed decision regarding the debt in question. The information should be in the validation notice. If the debt becomes time-barred after the validation notice is sent, I should be informed of the new status of the debt IMMEDIATELY!” (consumer)

“Unless and until debt collection practices have greater transparency for consumers there will be abuses and misunderstandings regarding legal liability. It's too much a pat answer to say consumers should seek legal advice. Collectors should be required to say with a certain level of supported certainty whether the debt is valid or not. Collectors should not be allowed to rely merely on a borrower's ‘moral obligation’ to repay the debt. Financially disadvantaged, naive, and gullible consumers, and specifically those individuals on fixed, limited incomes, i.e., older Americans, ESL citizens, etc. are especially vulnerable.” (commenter who described him/herself as having ”a plethora of knowledge and experience on both sides of the pen; I’ve worked in the mortgage industry, debt collection and other”0

“I work at a private university and we do not sue for collections. Since the debt can be reported to the credit bureau for 7 years, we like to keep our accounts at collection agencies during that entire time. With the language now being offered due to time-barred states, our collection agencies do not want any of our accounts older than 4 years (TX). Is there a way of notifying debtors of the statute of ‘able to be sued’ without negating the ability to collect for 7 years?” In response to questioning from the moderator, this commenter suggested, “Perhaps wording such as, ‘Although it is past the statute of limitations in which you can be sued, the debt is still valid, can be subject to calls from collection entities, and can still be reported to the credit bureau which may impact your credit rating.’" (works at university which hires collectors)

“I would just like to second [the previous commenter’s] suggested text that collectors would be required to use in the case of time-barred debts ("Although it is past the statute of limitations in which you can be sued, the debt is still valid, can be subject to calls from collection entities, and can still be reported to the credit bureau which may impact your credit rating.") or something similar. The amount of effort a consumer must go through to get a creditor to acknowledge that a debt has become time-barred is needlessly long - and usually goes unacknowledged. This kind of statement would go far to clear up the mutual understanding of a debt. Furthermore, a statement from the collector on when a debt will become time barred would be even more useful (so consumers can contest if an error detected) but less likely, I imagine, to be something that CFPB might additionally propose.” (consumer)

“Notification to a consumer that a debt is beyond statute is problematic since that date is not permanent. Partial payment on an account restarts the statute of limitations. How do you then inform the consumer that your prior letter is no longer correct? How does the CFPB protect the rights of the collector in court from their required notification? I don't believe that a rule issued by the CFPB can help here. Education of consumers is the only pro-active method that I see as available here. However, this education should include notification to the legal profession that the CFPB will bring violations in this area to the attention of the Attorney General in their state.” (debt collector; <20)

“Statutes of limitations are state-dependent. What if the debt is out of statute in the debtor's original state of residence, but not in their new location?” (debt collection law firm;>50)

“In fact, it is a gross distortion of the law for the CFPB to claim that suit on a debt outside of the statute of limitations period is per se unfair, deceptive or misleading. Under the Federal Rules of Civil Procedure (and most state civil rules), the statute of limitations is an affirmative defense which must be pleaded by the defendant; if it is not, the defense is considered to have been waived. The purpose of the defense is to enable a party to avoid being disadvantaged by the long delay, loss of evidentiary documents, memory fading, etc.; if the debtor doesn't claim that they are disadvantaged by the delay, then the delay clearly isn't so long as to preclude a vigorous defense.” (debt collection law firm;>50)

Other remedies suggested:

  1. Log of collection activities. “I believe that some collection agencies attempt to coerce payment in order to reset the clock on debts that would otherwise be time-barred. The real issue here however is one of proper record keeping. The collection agencies may not be fully sure if the debt is time barred or not simply because it has passed hands several times. A transcript or log should be available to consumers upon request (at a minimum) showing when, where and who held the collection” (consumer; adverse action taken for another person’s debt)

  2. Software to ID time-barredness, and other steps. “In my opinion, collection companies, credit bureaus, and everyone in between should be made to have some type of software that could identify time-barred debt. Plus, regulation that will not allow creditors/buyers to reactivate an old debt. If a given state has its own statute of limitation regarding a legitimate time line to collect a debt, so be it. The Validation Notice should identify the true facts of the debt in question. After complete due process has been exhausted, the record should be completely removed from the consumer file.” (consumer)

A set of complaints focused on old debt, multiple buyers or collectors, and CRAs. [For more complaints about CRAs, see “When the consumer disputes the debt”]:

“Debt collectors continuously resell the debt to other debt collectors who start the clock all over again. Then that debt collector resells the debt and the 3rd debt collector restarts the clock again, and so on. The burden of proof is put on the consumer to prove it is an old debt. The credit reporting agencies don't automatically remove old debts nor do they check to see if a newly reported debt is in fact a 9 year old debt that has been resold numerous times. The credit agencies (CRA) are more of a problem for consumers than the debt collectors. The CRAs are paid by the credit card companies and the credit card companies have bigger profits when they can charge higher rates based on poor credit scores. So there is inherently a huge conflict of interest here. If the CRAs can keep our credit scores down the card companies can make more money and don't mind paying the CRAs a piece of the action. Seems like unspoken collusion to me.” (consumer; victim of ID theft)

“Old debt that is beyond the statute of limitation should indicate the original creditor in the initial contact letter. I think the collector does not know this information or they deliberately refuse to disclose it because they know that the debt has run its course through the CRA's for seven years. So why is it that a collector can rename themselves as the merchant because they bought an old debt and proceed to collect and to report it to the CRA's? Once your credit has taken a hit the debt collector should not be able to continually harass you for the rest of your existence. Portfolio Recovery is the culprit and they should not be able to look at your credit report and send letters to collect as if you entered into a legal and binding contract with them. Why should you reactivate an old debt that is over 16 years old? Everyone knows and remember the hard patches in their lives, such as medical issues, divorces, death etc. Once the fear of being sued is removed, the chances of a collector to collect is very minute. So it becomes time consuming and it costs money to send a certified letter to ask them to validate an alleged debt. If the collector cannot validate a debt then they should not continually sell and resell such debt. And there is a problem with the CRA's and collectors because it seems to me they are in cahoots with each other. If there is not any active business with a particular account on a credit report, then the CRA's should make the collector prove that a debt is valid.” (consumer)

“I would like to see a rule prohibiting debt collectors, debt owners/debt buyers, and other related affiliates from being able to pull a debtor’s credit report once the debt is officially time-barred and out of SOL. I would also like there to be a rule that specifically distinguishes between a ‘hard pull’ and a ‘soft pull’ credit inquiry. I have been opted out of promotional marketing via the website for years. I do not have debt and have never had debt. What I do have is a common name, and so from time to time I will have various debt collectors and debt buyers ‘soft pulling’ my credit reports while they are trying to locate whomever they are trying to locate. This should not be allowed even if the debt is still collectable and within the SOL. No debt collector has a ‘permissible purpose’ to just randomly ‘soft pull’ my credit reports just because I have a common name. As far as being outside the SOL and time-barred debts: no debt collector and debt owners/debt buyers should be allowed to pull someone’s credit report since they can’t legally sue the debtor outside of the SOL. So there is no need to continue pulling someone’s credit report. As far as the ‘hard pull’ ‘soft pull’ is concerned: There needs to be specific language that prohibits any debt collectors, debt owners/debt buyers, and other related affiliates from performing ‘hard pull’ credit report inquiries. The FCRA makes it clear what ‘permissible purposes’ are but it does not specifically state or distinguish between a ‘hard pull’ and a ‘soft pull’ credit inquiry. A ‘hard pull’ is a consumer-initiated request for an extension of credit. Anything other than a consumer-initiated request is a ‘soft pull.’ But time and time again, I have friends, family members, and online forum members, tell me and show me that a debt collector or a debt owner/debt buyer has ‘hard pulled’ their credit report. And some of these times are when the debt is time-barred from being outside the SOL and also from the Credit Reporting Time Period. This is unacceptable. A ‘hard pull’ will decrease a consumers credit score and will be visible for up to 25 months to anyone who does have a legitimate permissible purpose to view that consumer’s credit report i.e. employers and potential employers, creditors, etc. Making a ‘hard pull’ on a debtor’s credit report could be a violation of the FDCPA in the privacy of the debtor. Any debt collectors, debt owners/debt buyers, and other related affiliates should be prohibited from doing ‘hard pulls’ and the CFPB should make it absolutely clear.” (consumer; debt collectors calling looking for someone s/he doesn’t know)

Other stories:

“Recently I received an ‘offer’ from a firm indicating it would approve a new Visa or MasterCard account if I agreed to assume responsibility for a debt allegedly owed to another credit card firm. The first firm, which apparently was the original creditor, apparently sold the alleged debt to a third party. It was this third party that was making the ‘offer’ to open a new credit account. Of course, there was a ‘hook.’ If I agreed to assume financial responsibility for the alleged debt and if the third party opened the new account, the credit limit would be for the alleged debt plus a significant ‘service charge’ for the transaction. The finance charge was listed at 29%. Another questionable aspect of the matter was no guarantee a credit line would remain open as the account was paid down. Thus, if the initial ‘credit line’ was $500 to cover the outstanding debt and service fee, as the balance were paid down and/or off, the credit limit could be decreased so as to prevent it from being used for new purchases. Obviously, I shredded the ‘offer’ package as I did not owe the initial debt. I wonder how many people will consider this a relief of some type and agree to the ‘offer." (consumer)

“As a college grad since 1979 and a first-time homebuyer, I have found widespread violations of the FDCPA among the creditors and their outsourced private collections agencies. I've also found and been a victim of deception in the debt collection practice observing poor record keeping on the part of all parties. We must first examine debt collection from a derivative and forensic viewpoint; corporate finance, federally/state funded institutions and their debt obligations. GAAP allows for the write-off of old debts. Yet and still the creditors outsource collection agencies to collect debts the creditor has written off of their balance sheet. So what happens when the debt has been written off and the collection agency has established a payment file from the debtor? The debtor is always subject to the debt because the collection agency takes a percentage (who knows what?) of that payment for their collection fee (commission). Then comes the finance charge (interest) and late payment charges. In essence, the original debt remains the same because the debtor is only paying commission, interest and late charges. I attended a Texas private college (state funded) that lost its accreditation for mismanagement of funds. My financial aid consisted of the BEOG, NDSL, Stafford Loan and the Merit Scholarship. The school policy was to clear the balance of my bill before my grades were released. Each grade period, whatever the balance was, my Mom used the funds she had left from our Social Security Income (father deceased 1972) after paying monthly expenses to send to me for my grades to be released. After my marriage, the Dept of Ed (Higher Ed) offset two years of joint tax returns, private collection agencies constantly called. When I was employed, I voluntarily paid $50/mo. for two years on this debt of which the principle was $4,650. Even after over 30 yrs., the debt was recorded as a Federal Abstract of Judgement at the county registrar (filed by private attorneys) as if I still owe the debt. I wasn't properly served. The process server (whomever it was) left a large manila envelope. Now the debt has been turned over to the Dept. of Justice in the State of Michigan. My point is that there is a widespread conflict of interest among the creditor and those outsourced by the creditor for debt collection. Most, if not all of these organizations are operated by taxpayer funding. The taxpayers are the ultimate creditors.” (consumer and income beneficiary of original creditor)


Commenting is now closed.

Just a reminder that the only question at this point is whether the draft summary missed, or misstated, something relevant in the comments that RegulationRoom participants made before CFPB’s public comment period closed on Friday, Feb. 28.

This Draft Summary of Discussion fails to address the issues of confusion about the statute of limitations and how they vary among states. This is a big source of confusion in terms of collection of a debt and jurisdiction. Creating a more stanadrized set of rules would alleviate these problems. In 2010, the FTC released a report, "Repairing A Broken System," which made mention of the need a universal statute of limitations. Additionally, in 2011 ACA's plan, “The Path Forward: ACA International’s Blueprint for Modernizing America’s Consumer Debt Collection System" also advocated for a national statute of limitations. This is something that both sides of the industry actually agree upon. Why is it not being considered or discussed more? 50 different states and 50 different statutes make it too confusing for consumers. I also reiterate that a compromise in terms of years can be reached. Also, debt tolling needs to be done away with. It only adds to the confusion of when a debt becomes time-barred. We live in a transient society. A debt should not legally follow a person for the rest of their life:

For additional reading:

Repairing A Broken System - Federal Trade Commission:

InsideArm: Statutes of Limitations Frustrate Debt Collectors and Consumers

The Path Forward: ACA International’s Blueprint for Modernizing America’s Consumer Debt Collection System:

I would disagree that there is confusion among consumers about SOL which would, as you suggest, require the need for a national SOL. The only time I have personally seen SOL straddle a line is when a consumer moves to another state with a different SOL. The clarity needs to be in these such cases. Because once a debtor moves, both parties claim the SOL where it benefits them for their desired outcome. A national SOL only benefits the debt collectors and not the consumers. The focus should remain on creating, as best as possible, a win-win solution that benefits the debt collectors the consumers. Having a national SOL of 7 years as ACA International wants compromises state laws wherein some states of SOL of 3 years (and otherwise less than 7). A SOL is meant to bring resolve. And in reality, if a debt collector/debt owner can not resolve their clients issues within the already established SOL of each state, then extending the SOL or having a national SOL under which to bring suit does nothing but allow debt collectors to continue to harass consumers. Three years really is more than enough time to sue. Just as criminal defendants are entitled to a quick and speedy trail, so should consumers who may/may not be aware they have an outstanding debt. That is to say: having a national SOL is a guise to prolong resolution rather than a more quick a final resolve in when to bring suit.

I respectfully disagree with your assessment. If anything, I believe that a national statute of limitations would actually stop the process of zombie debt. We live in a transient society. Assume that a national SOL were to be adapted… If it were three years, would your argument be the same? Also, you did not address the issue of tolling. Again, we live in a transient society. People move from place to place. For example, I had a medical crisis in Illinois. I was not able to keep up with the debt. I moved back to my home state of Wisconsin in a town 25 miles away from the Illinois border. Now, because I live in Wisconsin, the SOL has passed and I can no longer be sued here. However, should I ever choose to move back to Illinois (which I can’t unless I want my credit destroyed and want to get sued) it’s as though the debt never went away due to their tolling laws and longer SOL. It seems that the rationale behind your argument is to solely protect those people who live in states with short SOLs (3-4 years). That’s not even 50 %. A reasonable universal statute of limitations would make things more clear. At the very least, tolling provisions should be eliminated should states have their own statute of limitations. At what point does the debt finally die?

For further reference on debt tolling:

So, again, it seems as though the SOL matters very little in these cases. Perhaps the bigger question is whether or not eliminating debt tolling should be considered as a new rule.

Thanks Esok. Because CFPB’s public comment period closed on February 28, the only changes we can make in the draft summary are to correct something that we missed or got wrong from what RegulationRoom commenters said before that date. In addition to what this summary says about statute of limitation confusion, concerns about varying state laws were also raised in the “Debt Collection Litigation” discussion and are reflected in the summary there.

2|Partial payments and reviving the debt - 1

Draft Summary of Discussion

[NOTE that comments reported in this section may have originally been made under another subtopic. Similarly, comments originally made on this subtopic may be reported in another, more relevant section. Information in parentheses comes from commenter response to interest survey; the “servicemember” designation may apply to the commenter or someone in their family. Numbers in parentheses for industry-perspective commenters refer to number of people involved in debt collection in the firm.]

An interesting exchange between a commenter who works for an organization that assists victims of identity theft and a creditor who collects its own debts (<20) revealed the complexities of this issue:

“I am concerned about the perception consumers have concerning older debts. With the knowledge that this legislation is both to improve debt collection practices (helping the credit industry) and to educate and protect consumers (to increase confidence and enforce their rights), this is especially relevant. Many consumers appear to be under the impression, if they haven't managed to pay off the debt within the first initial years, they should *ignore* it until it falls off their credit report. Reviving the debt is the issue. Yet these consumers are not concerned about paying the debt off in full - they might be in much better financial standing now. They're concerned about how paying a debt affects their credit score. I believe this should be concerning. If a debt is outstanding, and repaying part (or all) of this debt actually would *worsen* a consumer's credit, it seems counter-intuitive. It works both against the interests of creditors and debt collectors - and the interest of consumers who owe money on a debt. I don't know of a viable solution, but I'm certain this is a concern which should be addressed.”

(creditor): “Paying a debt in full will always improve a credit score unless the debt is over 7 years old. If that is the case, I'm sure you can make a request to the financial institution to not report the payment.”

(commenter 1): “Thank you. Please do not misunderstand me, however; I was talking about the
general perception of debt in the eyes of consumers. (I have no personal experiences with debt to speak of, only my experiences working with victims of identity theft who have fraudulent debts; which is a horse of a different color.) Consumers are not educated about how debt collection and revival works. The issue in the end isn't the mechanics, or if they can request the debt not be reported. The issue is that, the way things stand now, it is not clear how repaying a debt will improve their score. It is not clear that they can ask for the collector not to report the debt payment if the debt is older than seven years. Consumers are confused and have these inaccurate perceptions because things are not clear. Again, it is the perception which concerns me - it would benefit both creditors and consumers if it was plain and clear, in language the average consumer could understand, that paying off a debt is a good thing.”

At this point, another consumer entered the discussion: “A debt that is paid in full doesn't improve a credit score at all. A debt that is settled for less or paid in full is the exact same. Once the damage is done to a credit score, the damage will remain. The only slight (very small) improvement on a credit score is when a bad debt was a credit card account and had over 100% utilization. Once the utilization goes down below 100% (and that occurs when the credit card debt was either settled for less or paid in full) does the credit score improve only very slightly. But the damage is still done and will take years to recover from.”

Other commenters recounted experiences that underscore how difficult it can be for consumers to navigate this issue successfully:

“I currently have a charged off debt and cannot get the original creditor (still owns debt) or collection agency to work with me on a repayment plan. They each point to the other about who can authorize a repayment plan. So I sit here waiting for them to sue me for the debt when I contact them every month for a plan. I am afraid to make a payment because i do not know how it will affect the SOL on the debt. My frustration is that they will not work with me or acknowledge my requests to repay them.” (consumer) [For other comments about debtors being shuttled between creditor and collector on repayment efforts, “When consumers dispute a debt: What should count as a dispute?”]

“My husband called a creditor about payments to an old account and wanted to make the account current after missed payments, due to job loss. The account was reopened under a new account number. Now I have 2 accounts on my credit report with the same amount.” (consumer)

"The Collection company is not required to be truthful about the process. When the collection company calls, they seek to pressure the individual into providing information to legitimize their case and pressuring the individual to pay even just a small amount, claiming that will erase the debt, but in reality, such an action will 'restart the clock' on the debt and they will pursue full payment even harder. [From this consumer's personal experience, fully set out in Making sure debt collectors and buyers have information: What's happening now?"]..." About 2 years ago, I tried talking to the person who picked up after the computer detected that someone was on the line. He would not offer ANY information about who owed money, what the purported debt was from or when it was incurred. All he wanted was to get some form of payment – he claimed that if I paid $40, that would close it out. I believe, from things I have read that this is just a trick to gain current legitimacy of the debt...."

In general, consumer commenters favored new notice requirements; some commenters urged CFPB to go even further in regulating behavior around time-barred debts. No industry-perspective commenter commented on this question:

“In my experience, simply contacting a person to collect a debt, time-barred or otherwise, implies litigation is possible and/or impending. It shoud be clearly stated in any communication if the debt is time-barred and these types of debts should not be discussed by a phone call initiated by the collector.”

“I think there should be a fed law that should clearly state that any partial payment might revive the SOL for suit. How [many] consumers get a phone call/letter telling them they have a debt and they just blindly pay it or make partial payments in order to just stop getting the phone calls? Lots. And the debt might not even be theirs, but they pay it anyways thinking that they might have an old debt that they forgot to take care of. The problem with that is, that the debt then is revived, the debt collector sues, and the judge tells the debtor ‘well, if this wasn't your debt then why did you agree to make partial payments?’ Then the judge will [rule in] favor [of] the debt collector for a revived debt that the debtor was not even responsible for in the first place. This scenario happens every day of the week. And the consumer had thought they were doing the right thing, but the debt collector is actually taking advantage.” (consumer; collectors call looking for a person s/he doesn’t know)

“Partial payments should NOT revive the debt. 1 - The original lender or the agencies working on their behalf have more than reasonable time to collect on an outstanding amount owed. 2 - We have rules in place on both collecting debts and on reporting them and partial payment on a debt should not circumvent those rules.” (consumer; adverse action taken for debt of another person)

“Yes...the CFPB should require debt collectors/debt owners to notify consumers in writing, that a payment plan or partial plan will revive the time-barred debt. However, the debt owner or debt collection company should not be allowed to have a second chance to sue you for the old debt. This in itself would be double jeopardy in a criminal case of law. If anything a second seven year listing of the agreed balance you are willing to repay will be listed on one’s credit bureau report would be allowed. Note: A collection company that purchased the account for pennies on the dollar should "ONLY" be allowed to collect the amount of monies they purchased the account for plus any regulated reasonable fee amount .Because they were not the original lender in the first place. The original debt owners should "ONLY" be allowed to list the agreed pay off amount of the time-barred account, the consumer agreed to pay. Example: debt owner original time-barred account $1.000.00 dollars. Debt owner accepts $500.00 and consumer agrees to pay back. The only amount to report is the $500.00 dollars.” [For other comments on what consumers perceive as unfairness of being fully liable to a subsequent buyer of discounted debt, see “Notice of when the debt is sold”]

Other suggested remedies:

“If the creditor is offered a repayment plan, turns it down, then sues after an extended period of time, the consumer should not have to pay that debt. Period.” (consumer)

Other stories:

(consumer) “I have an old military debt I tried to resolve over many years but it just got passed from Gvt entity to Gvt entity with no resolution. But once I owed some back pay, they have pounced on me as if I was a criminal. I am disgusted by effort I've put into resolving what senior officials have acknowledged as an error by the military pay system but has failed to address it properly. I have written Congress with concurrence that it was an error but still DFAS has failed to process a reimbursement. As far as I can tell, they could care less about me as a client or citizen.”

(consumer) “I have a charged off debt I want to pay off. I cannot afford a lump sum and asked the debt collector and original lender in writing multiple times to work with me on a settlement. They refuse to answer my letters and I keep writing every month. I think they should be made to at least respond to a customer requests for repayment. They keep asking for my employer name and bank account number because I know they want to use it to garnish my wages and bank account. Of course I do not have $32k to settle. It was a 2nd mortg, I lost home due to loss of job, they refused to modify because they said investor wanted to foreclose instead. Can you guys get them to respond to customer repayment requests, acknowledge customer letters and work with customers on charged off debts that are willing but cannot make lump sum settlements?” [Moderator referred commenter to CFPB complaint process]


Commenting is now closed.

Just a reminder that the only question at this point is whether the draft summary missed, or misstated, something relevant in the comments that RegulationRoom participants made before CFPB’s public comment period closed on Friday, Feb. 28.

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