Closed Rule

Consumer Debt Collection Practices (ANPRM)

Summary

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.

Discussion Old debts - 84

Select other topics

Subtopics

1|Time-barred debts - 62

Agency Proposal

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?

See what CFPB said in the ANPRM about Time-Barred Debts and Consumer Testing of Time-Barred Debt Disclosures.

Comments62

Commenting is now closed.

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.

Welcome to RegulationRoom, josephusmyer. It is already illegal to file suit on a debt the collector knows or should know is time-barred, but many consumers do not know what their rights are. Should the CFPB require collectors to say when a debt is time-barred and that the collector cannot sue to recover on it?

I'm aware of that, but I don't think many appellate courts have considered the issue. To confirm that it's the law, it should be included in a rule.

Yes, CFPB should obligate Debt Collectors (including Creditors' Attorneys) to provide such notice to consumers.

Hi MikePhxAZ, thank you for joining the discussion. What would be the most effective way for the debt collectors to provide this notice? Should standard language be used to tell consumers about time-barred debts? What do you think about LSmith's example below? Do you think that this would be clear enough?

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?

Thank you for coming to RegulationRoom, LSmith. It sounds like you are concerned that telling consumers that collectors cannot sue on a time-barred debt will limit their ability to collect. In your case, this might happen even when the collector can still report the loan to a credit bureau. Can you think of a less costly way to inform consumers of their rights?

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."

CFPB should not issue any rule that belongs to State law or under authority by the State.

CFPB is not proposing to issue a rule that belongs to state law or is under authority of the state. They plan to conduct consumer testing and other research in developing content or format requirements for any disclosures for time-barred debts they may propose, and for any model forms or clauses for these disclosures they may propose. It may be helpful for them to look at state debt collection laws related to time-barred debt. For more detail, see what CFPB said in the ANPRM on Consumer Testing of Time-Barred Debt Disclosures.

They can't be sued on in court and communications should reflect that. I have found that persons who buy old debts are not competent and rely on software and letter services to fulfill their collection obligations. Perhaps it is time to return to licensing of collectors.

I have ha many threats, and every scam out there. 7 years is long enough to leave a debt on credit bureau without action.

Hi linalex61, you’ve made several comments about your experience with loan collectors. Do you think requiring collectors to tell people that their debt is too old to be collected on the validation notice will help consumers? Would it have helped in your situation?

The problem is that companies shift credit collection from state to state. This must stop and state laws must be respected in regards to statue of limitations.

I agree. However, I believe that having a universal or national statute of limitations would alleviate this problem. The current system is too confusing.

I would just like to second LSmith'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.

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.

I agree. I've heard of this happening and it's unjust.

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!

Once a debt has reached the end of its statue 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.

I think all states should have their statute of limitations moved to 7 years to coincide with the reporting rules.

Legally, I don't believe that CFPB authority should stretch into this area since the federal laws do not include such a limitation.

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.

Consumers need to be pro-active in everything they do. If an individual had the capability to take on a debt then they should have the capability to resolve the debt. Every credit union I know goes the extra mile to help their members achieve financial success.

Welcome to RegulationRoom Aaron Racicot, and thank you for your comments. CFPB is very interested in examples of good practices by credit unions. Could you share more information about how they help out their members?

AT & T is notorious for setting up new accounts that don't have an official phone number attached. I was put in the situation of having an 800 number that AT & T customer service reps could not find in their system. I had no way to cancel it! Eventually the false 100 dollar debt went to a debt collector. I respectfully explained that the debt was not valid, in a letter. A few months later I got a letter from a different debt collector. Again I wrote a letter. A few months later another letter over the same faux debt from a third debt collector. Isn't this abuse by either AT & T or the first debt collector for reselling the faux bill after getting my letter?

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.

Old debt that is beyond the statue 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 it 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 know 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 cost money to send a certified letter to ask them to validate an alleged debt. If the collector can not validate a debt then they should not continually sell and resell such debt. And there is a problem with the CRA's because it seems to me they are in cahoots with each other. If there si 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.

CRA's and debt collectors are in cahoots. is and not si.

Welcome to RegulationRoom, MsHar. While there is no law against trying to collect time-barred or obsolete debts, it is considered a deceptive practice for a collector to submit a newly purchased debt to the CRA with a new date running from the date of purchase. The Fair Credit Reporting Act states that the date runs from the date of the first delinquency not the date the debt is sold or put into collection. In your experience, would a rule that requires collectors to disclose that a debt is time-barred and the collector can't sue to collect the debt be helpful?

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.

Welcome J. Lowe and thank you for your comments. FDCPA requires in the collector’s initial communication what is often called a “mini-Miranda” warning, in which the collectors state that they are attempting to collect a debt and any information obtained will be used for that purpose. Is your suggestion that the mini-Miranda warning also include a statement by the collector that the debt is not older than the statute of limitations?

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.

Hello Roseybike, thank you for joining us on Regulation Room. CFPB is thinking about whether to make a new rule about time-barred debts and other collection issues, and would like to know more about consumers’ experiences. This sounds like a situation where a collector tried to collect on a time-barred debt. Could you say a little more about your communication with the debt collector? What sort of information did they give you and what sort of information were you looking for when you left those messages?

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.

Several courts have held—and the [FTC] and the [CFPB] agree—that a collector who sues or threatens suit on a time-barred debt violates the FDCPA. The FDCPA prohibits, among other things, the use of “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” These include making a false representation of “the character, amount, or legal status of any debt,” threatening “to take any action that cannot legally be taken or that is not intended to be taken,” and “using any false or deceptive means to collect or attempt to collect any debt.”
http://files.consumerfinance.gov/f/201309_cfpb_agency-brief_12-cv-04057.pdf

It is in fact your gross distortion of the law and misunderstanding to claim that SOL are a defensive mechanism to allow a plaintiff "to avoid being disadvantaged" for not filing a lawful suit within a lawful time frame.

Hello, RickJack, and welcome to RegulationRoom. Other commentors have been worried about protecting debtors, who oftentimes are not sophisticated parties who would raise such an affirmative defense without representation, which they often cannot afford. Do you have any suggestions on how to strike a proper balance between respecting existing regimes, such as the Federal Rules of Civil Procedure, and providing a baseline of protection to debtors who might not otherwise protect themselves?

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?

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.

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 its not a valid debt. Its a big deal in Manhattan.

Additionally the landlords 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.

Hi Lauren Schmitt, welcome to RegulationRoom. Because individual experiences are important to CFPB, can you tell us more about what happened after this encounter? Can you think of anything CFPB could do to address this kind of problem in the future?

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 landlords 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. It is disgusting that no one in NYC has done anything about it but then I don't need to tell you how corrupt everyone there is and that includes the legal system. NYC government and housing system is like dealing with the mob and I say that after having to deal with them aggressively for the past 3 years after being attacked for almost 20

thanks for listening!

If you put an article about landlords and illegal lawsuits and collections, you would be flooded with responses. It is an area of collections that is hidden from you but very prevalent in NYC.

Apologies, unknown how to use 'reply' with moderator.

When we did it, 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.

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.

Thanks for doing this important work.

I agree with josephusmyer. 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).

Thank you for sharing your story, netwaregal. Welcome to RegulationRoom. Did your son learn elsewhere that the debts were time-barred? If not, would it have been helpful if this information was included in the validation notice?

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.

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 www.optoutprescreen.com 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.www.optoutprescreen.com

I agree 100% with this statement. Creditors should not simply be able to pull your credit report at their fancy. I had so many soft pulls (this was before I realized I needed to opt out of marketing) that my credit report from Equifax got "split." Basically, this means that my report got chopped in half and trade lines disappeared. Also, a legitimate creditor attempted to pull my credit and was told by Equifax that I didn't exist. Everything was GONE. After numerous fruitless attempts at reaching someone at Equifax, I finally got a real person. I was informed of the split and told that the burden was on me to provide them with the correct information to "put my report back together." I had to fax them my driver's license, social security card, and a utility bill, all because their software cracked due to too many inquiries that I didn't even authorize. It's still not resolved, and I've filed a report with the CFPB.

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.

Thank you for your comments dbently. Right now, CFPB is considering whether and how to regulate the debt collection industry. Mortgages are covered by a separate and complicated mix of state law and federal law. However, CFPB will carefully consider what you and other commenters say here.

I would like to comment on the predatory practices of debt collectors in regards to their purchasing bad debt for pennies on the dollar and then attempting to collect the full amount of the balance of the original loan. State regulations should preempt them from collecting exorbitant returns on such minimal investment (usury!!!). Other items to consider pertaining to this issue are : The bad debt
buyer does not disclose what he/she purchased the bad debt for. This should be disclosed and transparent as they have the original debt information, including SSN, phone and financial information. I don't begrudge them making a profit , but
their predatory practices need to be regulated. A superior court judge should be able to examine the original transaction, (for instance a 2nd mortgage in default) , all the documents concerning the purchase of this debt by a third party
and determine a fair and equitable payment to resolve the problem, avoiding bankruptcy .

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.

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.

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.”

Hi chris30546, welcome to RegulationRoom and thank you for telling us about your experience. Because you did not owe the initial debt, you might find our post, When Consumers Dispute a Debt, interesting. You can comment more on consumer disputes there.

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.

In my opinion,collection companies,credit bureaus, and every one in between should be made to have some type of soft ware 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 statue 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.

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.

Hi Esok, welcome to RegulationRoom and thanks for your comment! I see that you are suggesting a federal statute of limitations instead of letting the individual states set their own statutes of limitation. How would this impact what you mentioned in your other comment about debt tolling? Do you think that this would be an effective way to end debt tolling?

Hello- I believe that a universal statute of limitations would be an effective way to end debt tolling. If there was a universal statute of limitations, there would be no need for debt tolling. 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. Furthermore, debt collectors should not have the privilege of hiding behind tolling laws. Either they sue or they don't within a federally mandated set of time. Tolling simply keeps zombie debt going and going.

2|Partial payments and reviving the debt - 22

Agency Proposal

It’s not illegal for a creditor to try to get a consumer to make payments on a time-barred debt, as long as the creditor doesn’t mislead the consumer about the legal status of the debt. Still, debts that are too old to be enforced in court might still show up on the consumer’s credit report. But in most states, the law is that a consumer who makes any payment on a time-barred debt “revives” the debt (that is, part payment gives the debt owner or collector time to sue for the whole amount again).

To avoid misleading consumers, the FTC has said that before collectors request or accept partial payment of a time-barred debt, they would need to disclose to the consumer that payment will revive the whole debt. (See the 2010 FTC Litigation and Arbitration Report.) Some states and even local governments now require collectors to do this.

CFPB is looking for any data on what consumers think the consequences are of partial payments on a time-barred debt. Should new federal rules require collectors to tell consumers that the whole debt will be revived? Suppose that the debt owner and the collector don’t plan to sue for the balance of the debt. Could the language of the warning disclosure be different? How should federal law handle the fact that the debt owner could still sell the debt or transfer the right to sue to someone else who could enforce the balance?

Are there other actions the consumer might take without realizing that the consequence would be reviving the debt? (For example, by confirming in writing that he/she owes the debt.) Should a new federal rule require the collector to warn consumers about these actions as well?

When, where and how often should any of these warning disclosures be made?

Read what CFPB said in the ANPRM about Revival of Statute of Limitations with Partial Payment of Debt.

Comments22

Commenting is now closed.

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.

Thank you for sharing your story MikeKHudson. Welcome to RegulationRoom. Over the years when your debt was passed from entity to entity, did you make any partial payments on the debt? Would it have made a difference if you had received the notice talked about in the agency proposal?

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.

Thank you for your comment, mlme254, and welcome to RegulationRoom. Although this proposal doesn’t address how consumers can negotiate settlement, you may want to look at CFPB’s webpage on "what is the best way to negotiate a settlement with debt collectors." In regards to your concern over the statute of limitations, do you think there should be a rule requiring the collector to warn consumers about how partial payments could affect the SOL? Do you have suggestions for what that warning notice should include?

If a make an offer to repay the creditor and it's refused, then the debt becomes time-barred, why should the creditor still be to sue?

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.

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 relevent.

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 repying 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.

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.

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.

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. http://www.myfico.com/CreditEducation/ImproveYourScore.aspx

Welcome to RegulationRoom, hjsthomas. Thank you for sharing your concerns and suggestions. Given your experience with identify theft and credit reports, we hope you will comment on the topic, When consumers dispute a debt – What should count as a dispute. CFPB is asking whether new federal rules should require consumers to provide specific information or documentation to dispute a debt in all situations, not just where the problem is with information reported to a CRA (as currently required under FCRA).

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 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 a 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 make favor in 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.

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.

Welcome to RegulationRoom, TomU. In your experience, are collectors re-filing debts that are already past the Fair Credit Reporting Act limit for retaining them on a credit report (generally, 7 years)? If so, do you have ideas for how new federal rules might handle this problem-- or is that problem that existing law against unfair or abusive practices aren’t being enforced?

This is precisely what lead 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.

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 mutiple 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 mtg, 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, acknowlege customer letters and work with customers on charged off debts that are willing but cannot make lupm sum settlements?

Welcome back mlme254. You can file a complaint with CFPB. They will forward your complaint to the company and work to get a response from them.

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.

Welcome to RegulationRoom, Di. I’m sorry to hear about your situation. If you're having trouble getting this problem fixed, you may be interested in filing a complaint with CFPB.

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.

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 bubble 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 ones 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.

I don't believe that debt tolling should be legal. For instance, 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? This is unfair and I believe the issue of debt tolling should be explored. It's just not right.

All topics