Congressman Cohen Reintroduces the Fair Debt Collection Improvement Act

WASHINGTON -- Congressman Steve Cohen (TN-9) today reintroduced the Fair Debt Collection Improvement Act that would bar debt collectors from bringing legal actions involving a consumer debt for which the statute of limitations has expired. 

Congressman Cohen made the following statement:

“Consumers must be protected from overzealous debt collectors who are bending the rules to collect. When the original creditor sells a time-barred debt to new collectors, consumers should be informed of the rules and not be misled.  My legislation helps consumers recognize and understand the rules of debt collection and avoid being victimized.”

When debts fall outside the statute of limitations (generally 10 years), many creditors write these debts off their own balance sheets but sell the debts for a fraction of their value to debt collection services.  Even though most courts hold that a creditor, or successor creditor, may not sue to collect a debt that is time-barred, it is not illegal to pursue these debts through other means.  Moreover, many states hold that, if a consumer makes even partial payment in satisfaction of a time-barred debt, the entire debt is revived for a new statute of limitations period and the consumer then becomes obligated to pay that entire debt again.

The Fair Debt Collection Improvement Act would clarify that lawsuits to collect on time-barred debt constitute a violation of the Fair Debt Collection Practices Act (FDCPA). The bill would also ensure that any debt collector that purchases time-barred debt on the secondary market informs the debtor that:

• the new debt collector now holds the debt, not the original creditor;
• because the debt falls outside the statute of limitations, the debt collector may not sue to collect the debt; and
• if applicable under state law, any payment towards the debt may revive the entire debt. 

The measure is not intended to relieve consumers of their responsibilities of paying their debts but to provide improvements to the law that governs out of statute debt and prevent abusive tactics in the debt collection industry

# # #