On Thursday of last week, the Attorney General of Washington State filed a lawsuit against Convergent Outsourcing, Inc., which alleges that the debt collector engaged in unfair and/or deceptive practices under the state's Consumer Protection Act and Collection Agency Act. The allegations revolve around letters sent to consumers for the time-barred debts.

The complaint, which can be found here, alleges that the defendant sent over 75,000 collection letters on time-barred debts that specifcially used the terms "settlement" and "settle." The letters, the AG claims, did not include a time-barred debt disclosure. 

The reasoning behind the claim is as follows:

Because in common usage, the term “settlement” refers to an agreement to avoid or resolve a lawsuit, Convergent’s practice of offering to “settle” time-barred debts without disclosing that the debts were legally unenforceable had the capacity to deceive consumers into believing they could be sued on the debts if they did not pay, or created that deceptive net impression.


By including the terms "settlement" and "settle" in the letters without a time-barred debt disclosure, the AG accuses defendant of "impliedly threatening that consumers could be sued if they did not pay."

The complaint states that 3,000 of the consumers who received the letters sent payments on these accounts. 

insideARM Perspective

This complaint brings to light a certain issue: can debt collectors use the term "settle" on time-barred debt accounts or not? The anwer to this question seems to generally be "no," but it gets murky when you dig into what the different jurisdictions have to say. We ran a quick search of the iA Case Law Tracker for a deeper dive on this issue (literally took two clicks and a couple minutes of reading to get this info—this tool is awesome). Strap yourselves in, everyone, it's going to be a wild ride...

Here, the Wash. AG seems to imply that the term "settle" is not appropriate without a time-barred debt disclosure. The 11th Circuit and W.D. Texas seem to agree. 

But would the term "settle" be fine if a time-barred debt disclosure is provided? E.D. Missouri says yes, even if the time-barred debt disclosure doesn't provide a revival dislcosure. But that calculation gets murky, if you ask D. Maryland, depending on which state's statute of limitations laws apply, and the answer is not always clear.

And let's not forget the whole "will not sue" versus "cannot sue" conundrum. D. Utah expressed that providing a settlement offer might be fine with a time-barred debt disclosure, but they said that a time-barred debt disclosure that states "will not sue" could be an FDCPA violation because it implies that not suing is a choice. At the same time, the CFPB's proposed disclosure from its time-barred debt SNPRM includes the "will not sue" language.

What about if the term "settle" is not used to reference a settlement offer, but instead just informs the consumer that their account "will be considered Settled in Full" after a final payment is processed? C.D. California says that's fine.

N.D. Alabama kinda agrees with the Wash. AG, but found that the terms "resolve" and "satisfaction" when related to a settlement offer are a-okay. But are those terms okay in other jurisdictions? Who knows.

What a hot mess.

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