The Federal Trade Commission (FTC) recently settled with a large debt collection company over its collection practices. One area of particular concern related to the recovery of old debts.
Debtors typically do not know their rights regarding time-barred debts, such as credit card debt. Collectors have been known to use deceptive practices to collect on these old debts, even getting debtors to pay small amounts to extend a debt’s statute of limitations. While there are multiple problems that can occur when debt transfers hands, debtors should know their rights regarding collections and bankruptcy.
Collection agencies cannot sue debtors for time-barred debts. Time-barred debts are old unpaid debts incurred outside a state’s statute of limitations. However, many debtors are unaware they have time-barred debt, especially if collectors fail to disclose this information. For example, the general statute of limitations to collect credit card debt in Florida is five years. However, a time-barred debt may be revived if a debtor makes a payment.
Recent FTC Investigation of Collection Practices
The FTC recently settled a claim against Asset Acceptance Capital – a company who buys and collects on large amounts of consumer debt – related to its poor debt collection practices. The company will pay a hefty fine to settle FTC allegations, which included purported violations under the Fair Debt Collection Practices and Fair Credit Reporting Acts.
Going forward, Asset Acceptance Capital must tell debtors it cannot sue to collect time-barred debts, even if they make partial payments. If consumers challenge debts, the company must also investigate their claims.
Problems With Debt Transfer
Collection agencies purchase defaulted debts, like consumer unsecured debt, for pennies on the dollar. This practice is lawful, but the quality of debtor information and proof of debt claims can become flimsier each time debts change hands. Legal issues can arise when collectors try to sue to recover time-barred debt.
Efforts to collect on old debts are legal. However, if debtors are sued for such debts, they should defend themselves in court, assert their rights under the Fair Debt Collection Practices Act and file a claim with the FTC.
If collectors are trying to recover either active or time-barred debt from you, contact an experienced bankruptcy attorney in your area about the legal rights and options that apply to you based on your type of debt and your state’s collection laws. In the end, filing for bankruptcy and including all debts on the bankruptcy petition may be your best option to stop constant collections calls.