If you’ve ever received a phone call from a debt collector asking about an old debt you barely remember, then perhaps you’ve wondered: Is debt ever too old to collect?
The simple answer is no. While debt collectors have a limited number of years (called a statute of limitations) to sue you in court for repayment, there’s nothing in the law to stop them from continuing to try to collect.
“Collectors can try to collect on old debt forever,” says Donald E. Petersen, a Florida consumer protection attorney who defends credit card cases. “I’ve had consumers contact me who are getting calls about debt that’s 14, 15 or 16 years old. The record so far is 21 years.”
Those cases are becoming more common, attorneys say, because lenders are increasingly selling off debts they’ve removed from their books for pennies on the dollar to third-party collection agencies. Those agencies try to collect even though the statute of limitations has run out. Because the debt was cheap, they have nothing to lose.
“Once debt moves out of statute, it moves out to the secondary market and gets sold and resold and resold again,” says Eric Ridley, a consumer protection attorney in Ventura, California. “They eventually get bought by these bottom-dwelling collection agencies who sign up a ton of people to make calls to see what they can shake down.”
While collectors have the right to contact you, they can’t harass you. They still must follow the laws outlined in the Fair Debt Collection Practices Act. That means they can’t lie about a debt, for example, or threaten to sue you if they don’t have the law on their side or the means to do so.
Here are three steps you should take — and what you need to know — if you are getting calls about an old debt.
Step 1: Gather the facts
If you get a call about an old debt, don’t acknowledge that the debt is yours or agree to make any payments, even a partial one, until you have more information. If you do, you could inadvertently reset the statute of limitations, so you could be sued for the debt after all.
Instead, collect information by asking questions, Ridley says. Ask for the name, address and phone number of the company contacting you. Ask what their records show as the original debt holder and the date of the last payment. You can even ask if the debt is beyond the statute of limitations.
Take notes during the conversation and be wary if the collector is not willing to share information about his company, Petersen says: “There are all kinds of debt collection scams out there and that’s a sure sign of one.”
Debt collectors are required to provide you with a written notice within five days after first contacting you. If you don’t receive that letter or if you still need more information about the debt, you can send your own letter requesting the company validate the debt. Under the law, the company then has to cease all communication until it provides you with some basic information: the name of the original creditor, the amount owed and the charge-off date.
Step 2: Is the debt past the statute of limitations?
Use the information you collect to try to figure out if the debt is past the statute of limitations. The clock usually starts when the account goes into default. Debt that is past the statute is called time-barred debt.
Figuring out the statute of limitations can be tricky because it varies by state and for different kinds of debt, ranging from three years to as long as 15. In addition, card issuers sometimes argue in court that the law in their home state — not yours — is what should apply.
Don’t be afraid to call a consumer protection lawyer or bankruptcy attorney if you need help, says Jonathan Ginsburg, an Atlanta bankruptcy attorney. “Lawyers like me, we’ll talk to anyone,” he says. “A lot of times you learn enough in a 10-minute conversation to empower you to handle the situation yourself.”
Step 3: Decide on a course of action
If the debt is out of statute, you’ll have to decide what you want to do. Here are your options:
- Dispute the debt.
If you determine that the debt isn’t yours or that you already paid it off, write to the creditor to say you’re disputing the debt. If you send the letter within 30 days of the collector’s first contact with you, by law the collector has to stop contacting you for payment while your dispute is being investigated.
- Pay off the debt.
Even though the collector can’t sue you to collect, you may want to pay off the debt to get it out of your life for good. The collector may be willing to settle for less than what you owe. Just make sure you get a signed form or letter before you make the payment stating that the entire debt has been paid and that the payment will release you from any further obligation. Pay by check rather than electronically, and keep a record of your payment.
- Pay nothing on the debt.
You may decide not to pay the debt since the collector can’t legally force you to pay. If the collector tries to sue you, you may need to go to court with proof that the debt is too old to collect. To stop the phone calls, you can send a “cease communication” letter to the collection agency demanding that it stop contacting you. Send your letter by certified mail and pay for a “return receipt” so you’ll have proof it the letter was received. Keep in mind that if your debt is resold, you may be contacted again about the same debt by a different collection agency.
If the calls don’t stop after you’ve sent a cease communication letter, if the collector is making threats or if you think the collector has violated some other aspect of the Fair Debt Collection Practices Act, the law gives you the right to sue. Contact a consumer rights attorney to talk about your case. (The National Association of Consumer Advocates provides an attorney look-up page on its website). Debt collectors who break the rules face a $1,000 penalty, plus they have to pay reasonable attorney fees.
Editor’s note: This story, “Is your card debt ever too old to collect?” originally was posted on CreditCards.com.