National Consumers League

Statute of limitations on debt not so certain


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By Sally Greenberg, NCL Executive Director It turns out that if you have credit card debt where the statute of limitations has run on collecting that debt, you can be sued again by a second company for a lot more than the original debt. Why? Because the law allows claims to be sold on debt collection Web sites where “out of statute debts” – that’s what they are called – are bought for pennies or less on the dollar. The new debt collector can’t sue or threaten to sue, but they can do everything else to collect the debt. And here’s the catch – if you pay anything toward that old expired debt – the statute of limitations starts up again. This news came as a big surprise to me – but the New York Times featured a Montana man who hasn’t had a credit card in 8 ½ years, couldn’t pay off his debt in 1999, and wrote the court to explain his circumstances. The statute of limitations has run on the debt, and now he’s being chased by a new company. As one consultant explained “It’s so cheap, if you can work it smart, you don’t need to collect that much.” Investors in old debt apparently recoup 2 ½ times what they pay for the bucket of debts. So what’s wrong with that? Because these collectors can’t sue, they are more prone to use abusive tactics to get money out of old debtors. Some firms violate the law by filing suits they are not supposed to bring. And they harass people years after a debt has been written off. The Federal Trade Commission studied the issue and recommended that states enact reforms to their rules governing these debts, including forcing collectors to prove the debt is not out of statute. That sounds like a great place to start to protect consumers.