All states have laws (“statutes of limitation”) that prevent the owner of a debt from waiting too long before bringing a lawsuit to collect it. Debts older than the statute of limitations that haven’t been sued on are called “time-barred.” In general, if a creditor or collector tries to sue on a time-barred debt, the court will dismiss the case.
It’s illegal for a collector to sue on a debt it knows or should know is time-barred. The collector may not even threaten or imply that it will sue. But consumers may not know a particular debt is time-barred, or what their legal rights are.
If a collector tries to collect a time-barred debt, do consumers believe this means the debt is enforceable in court, even if the collector doesn’t say anything about suing? Should a new federal rule require collectors to disclose that a debt is time-barred and the collector can't sue to collect the debt? Should this information be in the validation notice? (See The "validation notice" sent to the consumer.) What if the debt becomes time-barred after the validation notice is sent?
Some states already require collectors to tell consumers about time-barred debts. Has anyone developed a model notice or a summary of consumer rights for this? What language would be best? Is there any consumer testing or other research about consumer understanding that CFPB should know about?