A recently-passed New Mexico law requires debt collectors to tell consumers when the debt they are collecting is past the statute of limitations. The statute of limitations, of course, is the time limit for bringing in a lawsuit. In Minnesota, for example, most collection lawsuits must be brought within 6 years of the date the consumer defaulted on the account.
In general, the FDCPA doesn’t prevent a debt collector from attempting to collect a debt that is past the statute of limitations. But they bring a lawsuit (or even threaten to bring one) if their voluntary collection efforts fail. If they do, they’ve violated the Fair Debt Collection Practices Act and can be sued. But it’s not uncommon for debt collectors to imply, or outright mislead, people into believing that they can still be sued even though the debt collector knows the SOL has passed. They get away with this because many consumers either don’t know what the statute of limitations is, or don’t know how long it is in their state. With its new law, New Mexico became the first state to level the playing field created by this knowledge imbalance. It would be great if other states, including Minnesota, follow New Mexico’s lead.
New Rule Requires that Collectors Disclose that a Debt is Time-Barred | Credit Slips | December 17, 2010