We recently wrote about a new report from the National Consumer Law Center that urges the CFPB to ban the collection of debts on which the statute of limitations has run. In a blog post published last Sunday on the Consumer Law & Policy Blog, Peter A. Holland, a lawyer and consumer advocate, argues that while “banning the sale of time-barred debt is an excellent start,” the CFPB should go even further “and mandate that banks sell only legitimate accounts, and institute an outright ban on the sale of the bogus, “dirty” accounts.” More specifically, Mr. Holland wants the CFPB to consider ” an outright ban on the sale of any debt which is not accompanied by [the seller’s] affirmative representations and warranties of completeness, accuracy, reliability and enforceability.”
Mr. Holland also wants Forward Flow Agreements between debt sellers and debt buyers to “be made publicly available on a website, so that consumers, consumer attorneys and judges can decide for themselves just how accurate and reliable are the claims of the debt buyers [regarding the validity of the debts].”
We have considerable difficulty with Mr. Holland’s position. First, his position appears to be based on the assumption that any “as is” sale of debts in which the seller does not make or disclaims any representations or warranties as to the validity and enforceability of the debts sold indicates that such debts are necessarily invalid or unenforceable. That assumption ignores the reality that a buyer entering into such a an agreement is simply agreeing to accept the risks related to the debts as they exist on the seller’s system and to make its own assessment of validity and enforceability. It does not mean that the buyer will attempt to collect any debts it determines are invalid or unenforceable.
Second, Mr. Holland fails to provide any principled reason for why someone who has incurred a debt through the sustained use of a bank credit card or by obtaining a loan but fails to make payments should be able to avoid paying the debt because of the possibility there may be an error, no matter how slight, in the bank’s account records.