New Mexico Settles Case Against Debt Collection Agency

The New Mexico attorney general announced Thursday a settlement in a year-old lawsuit with an Illinois collection agency over the collection of out-of-statute debt.

Attorney General Gary King’s office said in a press release that it reached an agreement with Merchants’ Credit Guide, a 110-year old accounts receivable management firm based in Chicago.

King filed suit against Merchants’ in August 2007, alleging that the company had tried to collect on time-barred debt in New Mexico ("New Mexico AG Sues Merchants Credit Guide," Aug. 30, 2007). King’s suit additionally stated that Merchants’ was not properly licensed to collect the state when it attempted to collect some debts. Merchants’ became licensed to collect in New Mexico on April 1, 2005, according to King’s statement.

As part of the settlement, Merchants’ has agreed to stop collecting all debt that is unenforceable due to the running of the statute of limitation in New Mexico. The company will also pay a civil penalty of $30,000.

But the company admitted no wrongdoing or liability in the settlement and stated that it was settling the lawsuit to avoid further legal fees. This was underscored by the fact that Merchants’ retained the right to collect on time-barred debt in New Mexico in the future.

Collection of time-barred debt is not a violation of the Fair Debt Collection Practices Act (FDCPA) and is not illegal. King’s statement said that if Merchants’ does decide to collect on out-of-statute debt in the future, it will “make written and oral disclosures to debtors that the debt is time-barred and unenforceable through legal action.”

Calling the settlement “historic,” King said in a statement, “This is the first time in New Mexico that a large national debt collection firm has agreed to disclose this material information to consumers so that they can make informed decisions about how to respond to the debt collection demands.”