The National Consumer Law Center is urging the CFPB to ban the collection of debts on which the statute of limitations has run.
The recommendation is made in a new NCLC report titled “Zombie Debt: What the CFPB Should Do about Attempts to Collect Old Debt.” The NCLC argues that “in light of the serious harm to consumers caused by time-barred collections, we urge the CFPB to prohibit all collections of time-barred debt-whether through litigation or non-litigation means-as unfair, deceptive, or abusive acts or practices.” The NCLC wants the ban to apply to creditors, debt collectors and debt buyers. According to the NCLC, even well-crafted disclosures are insufficient to protect consumers because “disclosures about the potential consequences of making a payment would be complex and also would be unlikely to adequately apprise the least sophisticated consumer of the risk from making the requested payment.”
As a fall back, the NCLC argues that should the CFPB permit some collection efforts of time-barred debt, those efforts must be “strictly controlled.” In the NCLC’s view, such controls should include prohibiting suits on time-barred debt even if a payment or acknowledgment has restarted the statue of limitations and prohibiting the sale of debt once the statute has run.
The NCLC’s position makes little sense given that by prohibiting all collection of time-barred debt, the CFPB would effectively be extinguishing debts that continue to be valid under state law. Such a prohibition would raise serious constitutional concerns.