FDCPA Reform Bill Introduced in House; Focuses on Time-Barred Debt

U.S. Representative Steve Cohen (D-Tenn.) late last week introduced a bill that would amend the Fair Debt Collection Practices Act (FDCPA) to specifically outlaw nationwide the filing of collection lawsuits on accounts that are beyond the statute of limitations. The bill also places new requirements on disclosures collectors must provide regarding out of statute debt.

The proposal, HR 3402 — titled the Fair Debt Collection Improvement Act – was introduced on October 30 and referred to the House Committee on Financial Services. The bill has three additional Democrat co-sponsors: John Conyers (Mich.), Gwen Moore (Wis.), and Del. Eleanor Holmes Norton (DC). Moore is a member of the Financial Services Committee.

“Just like the United States government, consumers should pay the debts they owe, but they still deserve protection from harassment and the abusive and predatory tactics used by some debt collectors,” said Congressman Cohen in a press release.

The bill would explicitly bar debt collectors from bringing legal action against consumers on a debt for which the statute of limitations has expired. Cohen notes that while this practice is not currently illegal, most courts and state laws hold that creditors may not sue to collect such debts.

In addition, HR 3402 would require collectors who have purchased time-barred debt on the secondary market to inform debtors that: the debt collector (not the original creditor) now holds the debt, the debt collector cannot sue for the debt, and that—if applicable under state law—any payment made towards the debt by the consumer could restart the statute of limitations on the entire debt.

The full text of the bill was not yet available on Monday morning. The bill does, however, share the exact title as one introduced by Cohen in the last Congress. The previous Fair Debt Collection Improvement Act (HR 2361), introduced in July 2011, died in the House Financial Services Committee after attracting four additional sponsors.

That bill sought to amend Section 811 of the FDCPA (15 U.S.C. 1692i) by inserting the following language:

‘(c) A debt collector may not bring, or threaten to bring, legal action against any consumer on a debt in which the statute of limitations has expired.’

HR 2361 also proposed to add explicit language requirements for collectors’ communications with consumers regarding a time-barred account. It would have amended Section 805 (15 U.S.C. 1692c) to add:

‘(d) Communication With Consumers With Time-Barred Debt- In connection with the collection of debt in which the statute of limitations has expired, a debt collector shall disclose to a consumer the following:

‘(1) The debt has been transferred to the debt collector.

‘(2) The creditor no longer holds the debt.

‘(3) As a result of the expiration of the statute of limitations with respect to such debt, the debt collector may not bring legal action against the consumer to collect such debt.

‘(4) Any payment by the consumer towards the debt may cause the statute of limitations for such debt to reset.’