Texas Gov. Greg Abbott has signed House Bill 996, the Fair Consumer Debt Collection Act, into law and it will go into effect on Sept. 1.
The new law limits how long debt buyers have to sue individuals for an unpaid debt and requires additional disclosures to be sent to individuals, depending on the age of the debt. The legislation passed in the state Senate by a vote of 133 to seven and in the state House by a vote of 120 to 20.
The bill first sets forth a definition of debt buyer to mean “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 term does not include a person who acquires in-default or charged-off debt that is incidental to the purchase of a portfolio that predominantly consists of consumer debt that has not been charged off; or 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 are prohibited from initiating a legal action or arbitration once the applicable statute of limitations has expired, and the debt may not be revived after the statute of limitations has expired.
Debt buyers must also provide additional disclosures to individuals, based on the age of the debt. If the credit reporting period has not expired under the Fair Credit Reporting Act, and the debt buyer reports the unpaid debts to the credit bureaus, the debt buyers must include the following statement: “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 credit reporting period has not expired and the debt buyer does not report to the credit bureaus, this disclosure must be included: “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, the following disclosure must be made: “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.”
The disclosures must be in at least 12-point type that is boldfaced, underlined, or capitalized.