Bedard: Breaking Down Regulation F’s Provision on Time-Barred Debt Collection

The Consumer Financial Protection Bureau made a small, but important change from the proposed debt collection rule to the final version of Regulation F with respect to the liability that debt collectors face when attempting to collect on time-barred debts. The CFPB opted not to use a “knows or should have known” standard — which it originally proposed — and instead opted to remove any subjectivity from the equation. In the latest episode of “You Wanted a Rule, You Got a Rule,” John Bedard of Bedard Law Group discusses this change and how it “makes the stakes even higher in terms of getting it wrong” should collectors bring a lawsuit or threaten to bring a lawsuit when collecting on a debt for which the relevant statute of limitations has expired.

The problem for collectors, as Bedard notes in the episode, is that determining which statute of limitations applies to a certain debt is not always straightforward. Between the choice of law provisions included in the underlying contract between a consumer and creditor and the fact that some states don’t even have a specific deadline declared for when the statute of limitations expires on certain kinds of debt, Bedard notes that determining the relevant applicable law — which Regulation F requires collectors to follow — “is not always an easy question to answer.”

The segment of the accounts receivable management industry that faces the greatest risk with respect to this section of the rule are collection attorneys, Bedard says. Those men and women who are the ones filing collection lawsuits against consumers are the ones who will “have to tackle what is often a very difficult question to answer.”

Why determining the statute of limitations is so important is because, under this section, collectors may not threaten to bring or bring a lawsuit against a consumer when the applicable statute of limitations has expired, even if a state says it does not violate the law to do so.

Check out all the episodes in the series here: You Wanted a Rule, You Got a Rule. You will also find links on that page to subscribe to the audio version of the series through Apple Podcasts, Google Podcasts, and Spotify.

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