Proposed Bill in Texas Would Set Timeframe on Starting Legal Action, Require Debt Buyers to Make Additional Disclosures

Eric Rosenkoetter from Maurice Wutscher is the first to alert the industry to another new proposed state law, this time in Texas. This time, the newly introduced bill — the Fair Consumer Debt Collection Act — is intended to limit the period of time in which a debt buyer may initiate a legal action of force arbitration as well as provide additional disclosures that must be made to individuals.

The bill — House Bill 996 — was introduced last month by state Rep. Nicole Collier, a Democrat who is the first woman to represent her district in the state legislature.

Under the bill, debt buyers would be defined as “a person who purchases or otherwise acquires a consumer debt from a creditor or other subsequent owner of the consumer debt, regardless of whether the person collects the consumer debt, hires a third party to collect the consumer debt, or hires an attorney to pursue collection litigation in connection with the consumer debt.” Debt buyers would be barred from commencing an action or initiating arbitration on an unpaid debt by the “fourth anniversary of the date of the consumer’s last activity on the consumer debt” or if the statute of limitations has otherwise expired.

If either of the two time period mentioned above have expired, a debt may not be revived through either a payment on the debt or an oral or written promise to pay, according to the bill.

Debt buyers would also be required to provide one of three different disclosures to individuals, based on the age of the debt and whether the buyer reports unpaid debts to a credit bureau.

If the debt buyer does report and the credit reporting period has not expired, the initial communication would need to include:

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. IF YOU DO NOT PAY THE DEBT, [INSERT NAME OF DEBT BUYER] MAY CONTINUE TO REPORT IT TO CREDIT REPORTING AGENCIES AS UNPAID FOR AS LONG AS THE LAW PERMITS THIS REPORTING. THIS NOTICE IS REQUIRED BY LAW.

If the debt buyer does not report and the credit reporting period has not expired, the initial communication would need to include:

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. THIS NOTICE IS REQUIRED BY LAW.

If the credit reporting period has expired, then the debt buyer would be required to include the following disclosure in the initial communication:

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, AND WE
WILL NOT REPORT IT TO ANY CREDIT REPORTING AGENCY. THIS NOTICE IS REQUIRED BY LAW.