How to Prevent Old Debts from Coming Back to Life

The following is presented for informational purposes only and is not intended as legal advice.

In 2019, Texas state legislators passed a bill intended to make it more difficult for debt collectors to trick consumers into reviving old debts. The Fair Consumer Debt Collection Act is aimed at doing two things for Texas consumers:

1. Prevent collectors from suing for a debt after four years, once the statute of limitations has expired, and
2. Require that, following the expiration of the statute of limitations, the initial written communication from the collector to the consumer include the following text: THE LAW LIMITS HOW LONG YOU CAN BE SUED ON A DEBT. BECAUSE OF THE AGE OF YOUR DEBT, WE WILL NOT SUE YOU FOR IT.

The protections offered by this bill are valuable, but the fact that the bill needs to exist at all speaks to the current state of debt collections. While many collection companies and most major creditors are more than happy to follow state and Federal guidelines, debt collection is a lucrative industry, and there will always be individuals and organizations willing to bend the rules.

In 2018 alone, the Federal Trade Commission (FTC) received 84,500 complaints about debt collectors. It’s important to remember that whether or not bills like the one in Texas are passed in other states, the first line of defense against debt collection fraud is knowledge and caution. You will always be your own best advocate and defender.

How old debts are "revived"

The Fair Consumer Debt Collection Act in Texas seeks to address the practice of using threats of legal action to prompt consumers to make payments on debts they may no longer be legally obligated to pay.

Each state maintains its own statutes of limitations on debt. Once the appropriate statute has expired, then, theoretically, you can no longer be sued for the debt in question. (Should you be sued anyway, you would need to prove in court that the statute had expired.)

If a debt collector can get you to make a payment on the debt, or even simply claim responsibility for the debt, then the debt can be “revived” and the clock on the statute of limitations reset. In other words, a collector may threaten to sue you – even though you are no longer legally responsible for the debt – and if you comply, suddenly you are legally responsible once again.

How to protect yourself

The more you know, the easier it is to avoid making a costly mistake and reviving an old debt where your legal obligation has otherwise expired. Consider these steps to protect yourself from unethical debt collectors.

Find out the statutes of limitations on debt in your state

Statutes of limitations on debt vary wildly from state to state. If you default on a credit card debt in Texas, the risk of getting hit with a lawsuit generally ends after four years when the statute runs out. Default on a credit card in Ohio, on the other hand, and the statute doesn’t expire for 15 years.

Try to stay apprised of the statutes in your state, as well as any other applicable consumer protection laws. A dishonest collector is going to be banking on the fact that you don’t know your rights.

Have the debt verified

If you’re unsure about a debt, you have the right to receive verification of the debt from the collector. You should request this verification in writing within 30 days of the initial contact. The verification should include the amount of the debt, where it came from (the original creditor), and information on your right to dispute the debt.

Meanwhile, it’s a good idea to pull a copy of your credit report and see what it says about the debt in question. And if you’re a little suspicious about the debt collector’s credibility, a quick internet search may be able to help you confirm if they’re legitimate or not.

Be Alert for Signs of Fraud

As noted by the Consumer Financial Protection Bureau, there are usually some telltale signs that a debt collector isn’t acting in good faith. Some of the most common signs include:

Not providing full details of the debt

If a collector doesn’t comply with your right to have the debt verified, or is especially evasive about key details of the debt (including where it came from), that’s a red flag.

Threatening jail or other legal repercussions

It is very unlikely that an unpaid debt will land you in jail. A debt collector may choose to sue you in an effort to collect the debt, but usually as a last resort. If the debt collector makes overly aggressive threats, consider reporting them to the FTC.

Asking for payment by money transfer

Beware of any collector asking for payment in a method that makes it difficult to reclaim the money should you discover you’ve been scammed.

Generally speaking, any collector that doesn’t abide by the rules laid out in the Fair Debt Collection Practices Act (FDCPA) is breaking the law and may be acting fraudulently.

Legal Responsibility vs. Financial Responsibility

Finally, it’s important to remember that the question of whether or not you can be sued for a debt is not the same as the question of whether or not you are responsible for the debt. For each debt, there are three things to consider:

• Statute of Limitations – When this expires, you cannot technically be sued for the debt in question.
• Credit Report – Most debts will remain on your credit report for seven years from the date of the last payment. Even after the statute of limitation expires, the debt may still remain on your credit report and factor into your credit score.
• Collection Status – Debt itself never expires. The statute of limitations may expire and it may fall off of your credit report, but if the debt is never paid, it never goes away. As long as they follow the rules of the FDCPA, a collector may attempt to collect on a debt for the rest of recorded time. They probably won’t, of course, but it would be within their rights to do so. If you’d prefer they didn’t, you can always pay the debt (either in full or for less than the full balance), or you can send a written request asking the collector to not contact you again.

Laws and consumer protections are great, but they can only do so much for you if you don’t know what they are. When it comes to old debts, be cautious and know your rights.

If you’re struggling to balance old debts or find yourself dealing with more collection calls than you know what to do with, consider connecting with an NFCC-certified debt and budget counselor from MMI. We can review your finances and help create a plan to get you back to where you want to be.