We talked in this post about the recent round table held by the FTC on the collection of old debt. It was universally agreed that it is unethical and possibly illegal to sue on time-barred debt, or debt which is past the statute of limitations.

There was extensive discussion on the case Kimber v. Fed. Fin. Corp., 668 F.Supp. 1480 (M.D. Ala. 1987), in which the 8th Circuit Court of Appeals court held that the debt collector’s filing of a lawsuit on an apparently time-barred debt, without having first determined after a reasonable inquiry that the limitations period had been tolled, was a violation of the FDCPA.

Some of the debt collection attorneys present maintained that collection on out of statute (OOS) debt was legal as long as it didn’t go to litigation. Most of the consumer attorneys disagreed. So what’s is the real answer? I did a little internet searching to see if I could come up with a legal consensus of opinion:

According to an opinion by the Texas Attorney General on the Texas State AG’s website, it is not illegal for a collection agency to go after old debt:

Many consumers are under the impression that after a certain number of years, they are no longer responsible for an unpaid debt…

The fact that a creditor is barred from collecting a debt through a lawsuit due to the statute of limitations does not mean the debt is erased – the debt remains in effect, and the creditor can still use other means to try to collect it. And the debt will remain on your credit report.

An opinion issued (in 1991) by Teresa Williams, Assistant Attorney General of Alaska states:

The general rule is that a statute of limitations bars the remedy, but will not discharge the debt. See generally 54 C.J.S • 11 (1987). In other words, the debt continues to exist even if the creditor couldn’t bring an action in court to obtain payment.

When State Attorney General Andrew M. Cuomo shut down Emanee and Dial Tech collectors, one of the charges was:

Sought collection of debts beyond the six year statute of limitations;

Bill Cloud at the Georgia state consumer office had the following quote:

“A lot of debt firms are buying up ‘zombie debt.’ It’s old debt you cannot collect anymore by normal means. It’s essentially debt renewal. To get you back on the hook they try to intimidate and try to berate you.”

The FTC hasn’t issued an opinion on whether or not they think collecting on old debt is legal or illegal. Since opinions vary by state, there is case law arguing for and against old debt collection and the FTC hasn’t taken an official stance, I would say that collecting on debt past the statute of limitations is legal depending on where you live. Maybe. Yeah, I know that’s not exactly a definitive statement.

The one thing that is clear: the debt collector is breaking the law if he sues you over the debt or threatens to sue you once the statute of limitations is up. (It’s a violation of the Fair Debt Collection Practices Act for taking or threatening to take action which cannot legally be taken.)

Do you have any insight into this question? We’d love to hear from you if you want to leave a comment!

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