Submit Your Comment to the CFPB if Debt Collectors Should Not Collect on Debt Outside the Statute of Limitations

The Consumer Financial Protection Bureau (CFPB) has extended the time for people to submit public comments on time-barred debt disclosures.

The CFPB proposes to prohibit collectors from using non-litigation means (such as calls) to collect on time-barred debt unless collectors disclose to consumers during the initial contact and on any required validation notice that the debt is time-barred. Consumer research conducted by the Bureau found that a time-barred debt disclosure helps consumers understand that they cannot be sued if they do not pay. That can help consumers make better-informed decisions on whether to pay the debt or not.

The CFPB would like to hear from people about this issue. To research the exact questions the CFPB would like your feedback on, you can read the documentation online.

Here is the summary of the issue in question.

“Statutes of limitations establish time limits for bringing suit on legal claims. They serve several purposes. First, statutes of limitations advance a defendant’s interest in repose. That is, they reflect the legislative judgment that it is “unjust to fail to put the adversary on notice to defend within a specified period of time.” Second, statutes of limitations eliminate stale claims. That is, they protect defendants and the courts from having to deal with cases in which “the search for truth may be seriously impaired by the loss of evidence, whether by death or disappearance of witnesses, fading memories, disappearance of documents, or otherwise.”  Third, statutes of limitations provide “certainty about a plaintiff’s opportunity for recovery and a defendant’s potential liabilities.”

A time-barred debt is a debt for which the applicable statute of limitations has expired. For most debts, State law supplies the applicable statute of limitations. The length of the limitations period varies by State and debt type. Most statutes of limitations applicable to debt collection claims are between three and six years, although some are as long as 15 years.

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Currently, in most States, expiration of the statute of limitations, if raised by the consumer as an affirmative defense, precludes the debt collector from recovering on the debt through litigation, but it does not extinguish the debt itself. In these jurisdictions, a debt collector may use non-litigation means, such as letters and telephone calls, to collect a time-barred debt, as long as those means do not violate the FDCPA or other laws. As courts have recognized, a consumer who cannot be sued on a debt may still feel a moral obligation to pay. In addition, a consumer may pay a time-barred debt believing that doing so will improve the consumer’s credit report.

In many States, a debt collector’s right to sue on a time-barred debt can be “revived” if certain conditions are met. Revival extinguishes the consumer’s right to raise expiration of the statute of limitations as an affirmative defense to litigation; that is, it revives the debt collector’s right to sue to collect the debt. There are generally two circumstances in which State laws permit revival. First, in some States, a consumer’s partial payment on a time-barred debt revives the debt collector’s right to sue. One possible theory underlying these laws is that a partial payment “is an acknowledgement of the existence of the indebtedness, which raises an implied promise to continue the obligation and to pay the balance.”  Second, in some States, a consumer’s written acknowledgement of a time-barred debt revives the debt collector’s right to sue. One possible theory underlying these laws is that a written acknowledgement “raises a new promise by the debtor to pay [the] existing debt” and is “enforceable because it is supported by the existing legal duty of the promisor.”

Do You Want to Comment?

If you would like to submit a comment you can do so online here.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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