Debts where the statute of limitations have expired are a tricky business. Companies are reluctant to just write off the debt as uncollectible, but the labyrinth of state laws make the collection of such unpaid debts a potential minefield of legal problems.
The Washington Post tries to shed some light on the issue, referring to the topic by a more common, yet less-flattering name, zombie debts. The article cites “consumer advocates and financial experts” who say that companies are “accelerating” their attempts at collecting on time-barred debts and the lengths that they will go to in order to try and revive the statute of limitations.
Looking at some of the fines and regulatory actions that have put companies in the crosshairs for trying to get individuals to make payments on time-barred debts while also saying that the industry is “fighting legislation across the country to rein in efforts to collect old debts, calling them misguided,” makes it appear as though the industry is doing nothing more than trying to bend the laws wherever it can to get people to pay their debts. Thankfully, there are comments from both Rick Perr and a statement from Manny Newburger to present the industry’s side of the debate. Meanwhile, there are many consumer advocates who say that once the statute of limitations has passed, the debts should be expired and companies should be barred from trying to collect on them — an argument that is not mentioned in the article.
What is the difference between trying to collect on a time-barred debt and getting someone to revive an old debt by making a payment on it? Isn’t that a distinction without a difference? Some states have enacted laws that say a payment is not enough to revive the statute of limitations on an old debt.
Time-barred debt is a complex issue, and is incredibly difficult to understand, even to the most-seasoned industry professional. To only use one specific case and a handful of regulatory actions as the paint with which to color an entire industry is as unfair as some of the practices referenced in the article.