Collecting After the Expiration of the Statute of Limitations

Published: Thursday, December 21, 2006

A great deal of confusion surrounds whether a debt collector may attempt to collect an account once the statute of limitations has expired.

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. Generally, a debt collector is not bound by a statute of limitations when seeking payment on a debt. However, a collector may violate provisions of the Fair Debt Collection Practices Act (FDCPA) or state law by threatening to take legal action once the debt has gone beyond the statutory time limit.

Numerous courts have adopted the position that in the absence of a threat of litigation or actual litigation, no violation of the FDCPA occurs when a debt collector attempts to collect on a potentially time-barred debt that is otherwise valid. See Freyermuth v. Credit Bureau Servs., Inc., 248 F.3d 767 (8th Cir. 2001); Walker v. Cash Flow Consultants, Inc., 200 F.R.D. 613 (N.D. Ill. 2001). However, a debt collector must assure his collection activities do not run afoul of the FDCPA. In Kimber v. Fed. Fin. Corp., 668 F. Supp. 1480 (M.D. Ala. 1987), the court held that by threatening the consumer with a lawsuit which the debt collector knew was time-barred, the collector falsely represented the status of the debt.

Importantly, Kimber only addressed the subject of threatening to file a lawsuit on an account where the statute of limitations has expired. The case did not hold that attempting to collect a time-barred debt was a violation of the FDCPA. Similarly, the vast majority of the court decisions finding a collector violated the FDCPA by pursuing collection of a time-barred debt are limited to instances where the collector threatened litigation of the time-barred debt.

A collector does not have to use the terms "legal action" or "litigation" in order to violate the FDCPA. Some courts have held the statement "further collection efforts" could be construed as an express threat of litigation, and thus, represents a deceptive collection practice in violation of the Act. See Stepney v. Outsourcing Solutions, Inc., No. 97 C 5288, 1997 WL 722972 (N.D. Ill. Nov. 13, 1997); Perretta v. Capital Acquisitions & Mgmt. Co ., No. C-02-05561 RMW, 2003 WL 21383757 (N.D. Cal. May 5, 2003). When collecting on a time-barred debt, a debt collector must exercise caution to avoid implicitly or explicitly threatening legal action.

Further, collectors 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.

For more information about statutes of limitation requirements, ACA members may access E-Compliance documents #63 and #64.

This article is provided as a service of ACA International's Legal and Government Affairs Department .