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National Consumer Law Center to CFPB: Ban The Collection Of Time-Barred Debt


The National Consumer Law Center has issued a policy paper entitled, "Zombie Debt: What the CFPB Should Do About Attempts To Collect Old Debt." The NCLC's main recommendation is that the CFPB should prohibit the collection of time-barred debts.

"In light of the inherent unfairness, deceptiveness and abusiveness that occur when collectors pursue time-barred debt and the inability of disclosures to adequately protect consumers, the CFPB should ban all efforts to collect out-of-statute debt--whether by litigation or other means."

THe NCLC notes that disclosures about time-barred debts are insufficient to protect consumers because of the complexity of explaining the effect of paying on a time-barred debt. "A disclosure stuck in the midst of these threats and demands about the consequences of making a payment is highly unlikely to provide adequate protection to the least sophisticated consumer."

The NCLC notes that if the CFPB allows any collection on time-barred debts, it should prohibit any type of lawsuits, threats of lawsuits, or offers to "settle" time-barred debts. It also suggest that the CFPB prohibit the sale of time-barred debts.

One of the most interesting pieces of the NCLC paper is the proposed disclosure regarding time-barred debt. The NCLC suggests that the following language be required on all collection letters seeking to collect time-barred debts:


We cannot sue you to collect this debt because it is too old.

But if you pay us anything or agree that you owe the debt, we may be able to sue you for the entire debt.

Having recently won a favorable ruling about these kinds of letters, I think the NCLC's proposed disclosure is a great idea.