A hearing has been scheduled for today for the Pensions, Investments, and Financial Services Committee of the Texas House of Representatives to discuss a slate of bills, including House Bill 996, which seeks to limit the period of time in which a debt buyer may initiate a legal action or force arbitration as well as provide additional disclosures that must be made to individuals when collecting on debts.
The bill, known as the Fair Consumer Debt Collection Act, was introduced in January by Rep. Nicole Collier, a Democrat.
It’s interesting to note that in a mainstream media report about the bill and today’s hearing, debts where the statute of limitations had expired were referred to as zombie debts, “which are so old they no longer legally need to be paid.”
The bill would define a debt buyer 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.” The definition would exclude:
- a person who acquires a charged-off debt incidental to the purchase of a portfolio that predominantly consists of consumer debt that has not been charged off
- a check services company that acquires the right to collect on a paper or electronic negotiable instrument, including an Automated Clearing House (ACH) authorization to debit an account that has not been processed.
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 a payment is made on an unpaid debt where the statute of limitations has expired, the payment would not restart the statute of limitations, under the proposed legislation.
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.
