Collector - March 2018 - 46
Beyond the Limit
What you need to know about
collecting debts after the statute
of limitations expires.
enerally, when the statute of
limitations for a debt expires it
extinguishes the right to pursue
legal action on the debt. In most instances,
expiration of the statute of limitations does
not preclude non-legal collection activity,
such as sending letters or placing phone
calls-provided that such activities do not
threaten legal action.
When collecting this type of debt,
collectors must understand applicable
federal law, state law and case law to avoid
the possibility of misleading consumers
about their rights concerning out-ofstatute debts.
The statute of limitations typically
begins to run when the "cause of action
accrues." In the context of debt collection,
this generally equates to the date of
the account's last activity. The statute
of limitations can be revived or reset,
depending on state law, with a partial
payment or a written promise to repay
the debt. The possible revival of statute
of limitations due to partial payment or a
promise to pay can make collecting this
type of debt complex.
The Fair Debt Collection Practices Act
does not specifically prohibit the collection
of out-of-statute debts. However, some
uncertainty remains as to whether or not
debt collectors are required to provide
consumers notice that the statute of
limitations for the specific debt has expired.
Some courts have found that a debt
collector may violate the FDCPA by failing
to note a debt's out-of-statute status. Several
courts have also found that settlement offers
on out-of-statute debts may be problematic
depending on the specific language used in
the letters. Because of these court decisions,
debt collectors need to carefully consider if
disclosure of the debt's out-of-statute status
should accompany any collection attempts or
settlement offers made in connection with a
debt that is out of statute.
In light of the FDCPA's ambiguity on this
issue, some states have enacted disclosure
requirements that must accompany
collection attempts related to out-of-statute
debts. The requirements vary by state,
but all share the same goal of notifying
the consumer that the debt is beyond the
applicable timeframe for filing suit. It's also
important to note that a couple of states have
laws that prevent the collection of out-ofstatute debts entirely.
For an in-depth analysis of the federal and
state law issues related to collecting debts
that are beyond the statute of limitations,
ACA International members can review
ACA SearchPoint™ document #1119, Statutes
of Limitation: Collecting Out-of-Statute
Debt. For general information on state
statutes of limitation, see ACA SearchPoint™
document #1122, Statutes of Limitations. For
information on settlement offers, including
offers on out-of-statue debts, members can
access ACA SearchPoint™ document #1142,
Have you checked out the member-only ACA
SearchPoint™ library? This valuable resource
is filled with documents that put important
compliance information related to the FDCPA,
FCRA, TCPA, state laws and many other
topics at your fingertips. To access it, visit www.
Flexible. Scalable. Comprehensive.
Modular. Now with Microsoft SQL
Server based options. Software
for first party, third party and
specialized portfolio collections.
Best value with the functionality
that your agency needs.
Call us for a free consultation
1-800-661-6722 | Collect.org