Why We Need National Statutes of Limitations for Collections

by Bill on February 6, 2012

I came across a story in the Washington Post over the weekend.

Have old debts? The collector might be too late. – The Washington Post.

It was about a man and his fight with Asset Acceptance Capital, one of the largest debt collection agents in the US. I’ve come across these guys as well. They use scare tactics and coercion. The trick is in getting you to pay even though they are using the wrong state law, or just the wrong statutes in the first place. Debt collectors need to have a national statute of limitations for collections and how they collect. Yes, the FTC and the FCC both have laws in place, but you need more these days.

The reason? Every state has their own statute of limitations when it comes to the time limit a debt collector is allowed to chase after the money. But without a national statute of limitations for collections, how do you fight the likes of AAC, NCO, and all their kind?

Pay Attention to the Delinquency Date
This is the date the original debt was written off by the original creditor. This is the date the courts use as the starting point for the statute’s clock. A debt is considered time-barred once that clock runs out; meaning the debt cannot be collected upon. The common myth is seven years but that is yet another rule pertaining to debt collections and your credit report.

Pay Attention to Credit Reports
This is where the seven year rule applies. If a creditor notifies even one of the three major credit reporting agencies (TransUnion, Equifax or Experion), that report can remain on the file for up to seven years – if not reported again. Now pay attention to that last part, because that tripped me up once too. The debt collectors (like NCO who loves this rule), wait for 6 years and 11 months – then report the debt again, thus restarting the whole damn seven year clock on the credit file. And that is the way many people get caught up in the myth that the debt never goes away.

Pay Attention to the Type of Debt
Yes, the type of debt determines the time limitations as well. The story in the Washington Post mentions that Ohio has two different statutes, one for consumer debt and another for written contracts. Consumer debt is six years in Ohio, while written contracts span 15 years. This is another trick the larger debt collecting agents use. They will attempt to use the longer time frame as a way to convince you the debt is still valid.

Pay Attention to the State of Origin
And this is the main reason I say we need a national statute of limitations on debt collections. With each state having different criteria, you have to make sure the debt collectors are not using a state with a longer time frame. Like, Ohio is six years, but if the debt collector is from Pennsylvania, they might claim seven years (the limit for PA) – but just won’t tell you that. The debt must be collected according to the state of record for the debtor, not the agent. This also trips people up with national debt collectors.

Pay Attention to the Amounts and Charges
Now this one IS covered somewhat by federal law. The Fair Credit Billing Act is the actual legislation and is part of the Truth in Lending Act from back in the 70’s and 80’s. This law states that the creditor cannot come after you if you dispute the charge within 30 days of receipt of the bill. Then they must determine if the charge is legitimate or not. I wrote this post better explaining that.

Do Not Send a Dime or Sign Any Paper
If you send them anything resembling a payment or a signed document they sent you, you’re screwed. Its basically acknowledging the debt and the whole damn process starts as if the debt was made yesterday. Send them nothing. Write up a letter disputing the claim, get it certified (return receipt and all) and mail that out. Do not sign and send any paperwork they send to you first without consulting a lawyer.

Now what? After paying attention to all that, and it still doesn’t stop, now what? File a complaint with the FTC and your state Attorney General. They open a claim and start an investigation using your paper trail. Make sure you have everything saved that the debt collectors sent you.

But the most important thing to do until there is a national statute of limitations on debt collection is to pay attention. These guys thrive on laziness and fear. Stand up, look them in the eye, and don’t sit down again.

Do you think a national statute of limitations would work? Do you think we’ll ever see one? Throw some comments up and let’s talk about it!

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