Debt collections on time-barred debt would be clarified under bureau proposal

Debt collectors would be banned from making calls or taking other “non-litigation means” to collect on debt that is beyond the statute of limitations unless it is disclosed during an initial contact that the debt is, in fact, past the time limit under a proposal issued Friday.

In a Supplemental Notice of Proposed Rulemaking (Supplemental NPRM), the Consumer Financial Protection Bureau (CFPB) stated that its proposal on “time-barred debt” (that is, debt beyond the statute of limitations) also requires the debt collector to inform the consumer that the statute of limitations on the debt has expired during any required validation.

“Consumer research conducted by the Bureau found that a time-barred debt disclosure helps consumers understand that they cannot be sued if they do not pay,” CFPB stated in a release. “That can help consumers make better informed decisions whether to pay the debt or not.”

The latest proposal is a supplement to a proposal issued last spring (May 2019) to implement the Fair Debt Collection Practices Act (FDCPA), the CFPB said. Under that proposal, debt collectors would be allowed up to seven telephone-contact attempts a week with consumers about a specific debt. That proposal would also establish that once a phone conversation between a consumer and a debt collector takes place, the collector must wait “at least a week” before calling the consumer again.

The bureau last year also proposed to prohibit debt collectors from suing or threatening to sue on debts they know or should know are time barred. A standard of “know or should know” was included in the in the proposal to, the bureau said, recognize the concern that in some instances debt collectors may be genuinely uncertain whether the statute of limitations has expired even after undertaking a reasonable investigation.

CFPB said it received more than 14,000 public comments on the May 2019 proposal. “A large number of comments addressed time-barred debt, including the proposed ‘know or should know’ standard,” CFPB said. “The Bureau is analyzing those comments as part of the process of taking final action on the May 2019 NPRM. Given that the analysis is ongoing, the supplemental NPRM also proposes that standard.”

The bureau also noted that the Supplemental NPRM proposes model language and forms that debt collectors could use to comply with the proposed disclosure requirements.

The proposal will be out for public comment for a 60-day period once it is published in the Federal Register.

CFPB supplemental notice of proposed rulemaking: Debt Collection Practices (Regulation F)