I just got a call from a debt collector regarding a 16 year old debt. I live in the state of Texas. They called using a number I thought might be from a job prospect. They then verified my name and address and once confirmed, passed me to the debt collector. The debt collector then told me who they were and what they were trying to do and I immediately hung up. Did I reset the debt to where it can now be resubmitted to my credit report?
Add a comment
|
1 Answer
The common law rule in the U.S. is that there are two things that reset the statute of limitations to collect a debt:
A payment of any amount owed towards the debt; and
A confirmation (sometimes required to be in writing) from the debtor that the debt is owed.
Otherwise, a debt that was last due sixteen years ago would be barred by the four year statute of limitations for the collection of debts in Texas law. See Texas Civil Practice and Remedies Code § 16.004.
You can, if contacted by a debt collector, dispute that the debt is owed, assert that it is barred by the statute of limitations, and ask the debt collector to confirm the validity of the debt.
If the debt collect continues to attempt to collect the debt after learning that it is barred by the statute of limitations, and no receiving any factual information from the debt collector's client that would indicate that the statute of limitations on the debt was restarted, the debt collector may be violating the Federal Fair Debt Collection Practices Act and possibly also parallel Texas statutes.
Liability for penalties under the federal statute, however, depends upon how the transaction between the debt collector and the original creditor was structured. If the debt collector is collecting a debt for a fee when the debt is still owned by the original creditor, then the Fair Debt Collection Practices Act applies. But if the original creditor sold the "zombie debt" to the debt collector at a discount from the full amount with no further right to compensation from the debt collector, then the Federal Fair Debt Collection Practices Act does not apply, as the U.S. Supreme Court held in Henson v. Santander, 137 S. Ct. 1718 (2017). But, as noted below, under the parallel Texas statute, some protections also apply to "Debt Buyers" which is not available under the Federal Fair Debt Collection Practices Act.
If the debt were reported to a credit reporting agency, you could probably have the report stricken on the ground that the debt is more than seven years old. Under federal law, credit reporting agencies are not allowed to report debts more than seven years old, except for bankruptcies.
Notwithstanding the foregoing general statements of the common law rule, the Texas statute of limitations for the collection of debts, and the federal law, there is a Texas specific law that was passed in 2019 specifically designed to address cases like this one where debt collectors seek to collect a zombie debt and also a new regulation passed by the federal Consumer Finance Protection Board. The Texas State Law Library explains that:
Texas law gives someone a certain amount of time to bring a lawsuit for an unpaid debt. This time period is often commonly referred to as the statute of limitations.
Once the time period set out by the statute of limitations is up, a person is prohibited from filing suit to recover the debt. This means the debt is time-barred.
In the past, taking certain actions such as making a payment or verbally acknowledging that you owe the debt could restart the clock on the limitations period. This created a problem called zombie debt where the time period set out by the statute of limitations could be constantly restarted.
A new state law introduced in 2019 aims to protect people from zombie debt. This law prevents debt buyers from suing to try to collect the debt even if a payment is made on the debt after the statute of limitations has expired. It also requires debt buyers to provide written notice if they are taking action past the limitations period. Debt buyers are defined by Section 392.307 of the Texas Finance Code as a person who purchases a consumer’s debt from a creditor. Please see the statute for a full definition.
You still owe time-barred debts, but creditors and debt buyers lose their most powerful way of collecting — a lawsuit.
Texas and Federal Law
Section 16.004 of the Texas Civil Practice and Remedies Code
The statute of limitations on debt in Texas is four years.
Section 392.307 of the Texas Finance Code
This section of the law, introduced in 2019, states that a payment on the debt (or any other activity) does not restart the clock on the statute of limitations for debt buyers. It also requires that debt buyers provide written notice to a consumer if the limitations period has expired.
Title 12, Section 1006.26 of the Code of Federal Regulations
New rules from the federal Consumer Financial Protection Bureau prevent debt collectors from suing or threatening to sue over time-barred debts. “Debt collectors” in this code are defined in section 1006.2(i) and can include the original creditor if they are using a different name.
