• ARTICLES
• TOOLS OF
  THE DEBT
  COLLECTION LAWYER

July's Top Compliance Question: Can a Debt Collector Continue to Pursue Collection Upon the Expiration of State Statute of Limitations?

Published: Monday, August 21, 2006

The top compliance question received by ACA's Compliance Department in July was whether a debt collector may continue to pursue collection of an account upon the expiration of the state statute of limitations.

Statutes of limitation concern the amount of time within which a legal remedy may be brought to assist with the collection of a debt. They are set by individual states and vary considerably based upon the type of contract involved. A statute of limitations typically begins to run on an account's last activity, and can be revived, depending on state law, with a partial payment or a written promise to repay the debt. In addition, the statute of limitations is often suspended if a consumer leaves the state, resides within the state under an assumed name or is incarcerated.

Generally, a debt collector is not bound by a statute of limitations when seeking payment on a debt. He or she may violate provisions of the federal Fair Debt Collection Practices Act (FDCPA), however, by threatening to take legal action once the debt has gone beyond the statutory time limit. Section 807(5) of the FDCPA provides that collectors may not threaten action they are not legally allowed to take or do not intend to take. Thus, collection agencies should flag accounts that are out of statute to avoid mentioning legal action when attempting to collect them.

Collectors, nevertheless, must examine state law before automatically assuming they can engage in collection activities after the statute of limitations has expired. In some states, including Mississippi and Wisconsin, the expiration of the statue of limitations may also extinguish the right to collect on the debt.