Section 1006.26 Collection of Time-Barred Debts
The following perspective was provided by Brit Suttell of Barron & Newburger.
Part II of the CFPB’s Final Rule on Debt Collection, Regulation F (“Reg. F”) did not finalize the Bureau’s proposed time-barred debt disclosures. In recent years, time-barred debt disclosures have come under scrutiny both by consumer attorneys, and states or local jurisdictions. The Bureau declined to finalize the proposed disclosures (proposed § 1006.26(c)) citing to “industry commenters’ concerns about the burden on debt collectors of the Bureau’s specific proposal, and consumer advocate commenters’ concerns about whether the Bureau’s specific proposal would effectively cure consumer deception.” So, what does this mean for debt collectors?
In short, it means nothing has changed. Although the Bureau declined to require a particular disclosure, it also clearly stated that commencing legal action or threatening legal action on a debt is prohibited by the FDCPA. Furthermore, the Bureau included time-barred debt disclosures as a disclosure to be included on the front Model Validation Form, just below the current amount due. See § 1006.34(d)(3)(iv)(B). While the Bureau was clear that a debt collector must include that disclosure if “applicable State law” requires it, that does leave open the question about jurisdictions where there is only case law.
Whether required by the applicable State law or the relevant case law, the Final Rule makes it clear that debt collectors who collect time-barred debt need to engage in a full analysis of the applicable statute of limitations on the debt to make sure that (a) the correct disclosure is being given, and (b) any revival language regarding the debt is also explained. Consumer attorneys are already on the prowl to determine whether such disclosures are accurate and it is likely that this attention will only be heightened as a result of the Bureau’s failure to require a specific time-barred debt disclosure.