U.S. Representative Steve Cohen (D-Tenn.) is looking to amend the Fair Debt Collection Practices Act (FDCPA) to bar “debt collectors from bringing legal action on a debt in which the statute of limitations has expired against any consumer, and for other purposes.”
Cohen introduced a bill on June 24 (H.R. 2361:
Fair Debt Collection Improvement Act) and it has been referred to the House Committee on Financial Services. (“The majority of bills and resolutions never make it out of committee.” There’s your silver lining, debt buyers.)
The big changes Cohen is introducing to the FDCPA are the following:
(1) Adding language to Section 811 of the FDCPA (Legal Actions on Time-Barred Debt) that reads “(c) A debt collector may not bring, or threaten to bring, legal action against any consumer on a debt in which the statute of limitations has expired.”
(2) Adding language to section 805 of the FDCPA (Communication With Consumers With Time-Barred Debt) that reads “In connection with the collection of debt in which the statute of limitations has expired, a debt collector shall disclose to a consumer the following: (1) The debt has been transferred to the debt collector; (2) The creditor no longer holds the debt; (3) As a result of the expiration of the statute of limitations with respect to such debt, the debt collector may not bring legal action against the consumer to collect such debt; and (4) Any payment by the consumer towards the debt may cause the statute of limitations for such debt to reset.”
(Aaaaand that’s the gray cloud that could potentially spoil the aforementioned silver lining for you debt buyers.)
Passage of the bill — and, a reminder: that’s not necessarily a when it’s passed but an if it’s passed — would primarily effect debt buyers, who would no longer have the same incentives for purchasing debt that had run the limit of its statute of limitations. Adding additional language to communications that essentially tells a debtor that he’s actually not on the hook at all for an out-of-stat debt basically renders those types of communications to the same level as junk mail and those weird postcards with those kids with horribly deformed palates.
The ACA’s Mark Schiffman is quoted in this story running on the Memphis Commercial Appeal: “We need clarity to remind the consumer that, because the debt can’t be sued on, it still can be collected on, and it still can be put on your credit report.” He goes on to say, “We want to make sure that whatever information is getting in the hands of the consumer, it’s not giving them the impression that, because we can’t sue, that debt has gone away.”
insideARM will keep an eye on the bill and report any developments as we learn about them.