Atlas Consumer Law Obtains Successful Result Against One of Nation's Largest Debt Collectors Over Time-Barred Debt Collection

Atlas Consumer Law is pleased to announce that our Chicago consumer lawyers have secured an important victory against Portfolio Recovery Associates for deliberately using ambiguous collection letters in an attempt to compel our client to pay a legally unenforceable debt. The decision was issued by a three-judge panel of the 7th U.S. Circuit Court of Appeals on Wednesday, March 29th.

In its ruling, the 7th Circuit Court upheld a ruling from a lower court that Portfolio Recovery, one of the nation’s largest debt collectors, violated the Fair Debt Collection Practices Act (FDCPA) when it attempted to collect on debt without informing the consumer that it was time-barred.

Our legal team believes this decision was a significant victory for consumer rights, as time-barred debt collection has become a common, and often deceptive, tactic employed by many lenders and collection agencies across the country. Time-barred debt collection occurs when banks and debt collection companies attempt to collect debt that they can no longer legally report on a credit report or file lawsuits over.

Among the many concerning issues inherent to time-barred debt collection is the fact that lenders and collectors are commonly intentionally vague about the status of debt, and often omit key information when informing consumers that they owe money. What’s more, once a borrower pays even a penny toward the time-barred debt, it restarts the clock, and opens the door to a debt collector filing suit for the full amount of debt owed, including interest and fees.

While the decision can help raise awareness about time-barred debt and set a precedent for holding lenders and debt collectors accountable when their collection practices violate the law, it is still important for consumers to understand their rights when it comes to debt collection. Here are few points to remember:

• When it comes to older debts, collection agencies might not have the legal ability to collect them or file lawsuits against you. This is because debt collectors have a limited amount of time – the statute of limitations – to file suit against consumers in order to collect debt.
• After the statute of limitations runs out, unpaid debts are referred to as “time-barred.” Under federal law, debt collectors cannot file a lawsuit against you for not paying a time-barred debt. However, a new statute of limitations can be started on old debts under certain circumstances, such as when a consumer makes a payment. When this is the case, collectors can sue.
• The statute of limitations may vary from state to state and for various types of debts. In Illinois, for example, the statute of limitation for credit card debt may be 5 or 10 years, depending on whether there was a written contract.

It is important to note that debt collectors are able to contact you about old debts that are time-barred, and they may inform you that a debt is past the statute of limitations and that they cannot file a lawsuit if you do not pay. If the collection agency does not inform you an old debt is now time-barred, but you have reason to believe it could be, you have the right to ask if the statute of limitations has run out. Debt collectors are legally obligated to tell you the truth if they answer, but some may avoid answering. To protect yourself, ask when the last payment was made, which can help you in determining when the clock started for the statute of limitations. You can also tell them you would like to verify and dispute the debt, which prevents them from engaging in collection activities until they verify whether the debt is not time-barred and they can legally enforce collection.

Whether or not you choose to pay a time-barred debt is your decision, and you do have options. However, these options may come with consequences. For example, you can choose to not pay a time-barred debt, but may face credit consequences. Collection agencies will still be able to contact you regarding the time-barred debt. However, you can send a demand letter to stop communication. You may also choose to make a partial payment toward a time-barred debt, but this will restart the statute of limitations and allow collectors to sue you for the full amount of debt, including interest and fees.

In addition to these two options, you can also choose to pay off the debt completely, or even negotiate a payment amount that is less than what you owe. If you choose this option, be sure that you have a signed agreement from the collection agency that paying the debt or negotiated amount will relieve you from further obligations before you pay. Our legal team can assist you in exploring the most appropriate option for your situation, take the necessary steps toward addressing debt and other related issues, and also help you take legal action when debt collectors violate your rights under the Fair Debt Collection Practices Act.