What would you do if you received a court summons indicating that you were being sued for thousands of dollars in debt on a credit card you had no recollection ever applying for or using?
Many people would ignore the court notice. And many of those people would probably end up with a default judgment and be forced to pay the debt, some by having wages garnisheed or money snatched from their bank accounts.
In 2010, a unit of Asset Acceptance Capital, one of the nation’s largest buyers of consumer debt, sued Tim Bond to collect $7,247.09 for charges and accrued interest on a credit card he says he can’t remember ever applying for.
“I just freaked out,” the Cincinnati resident said.
Asset Acceptance bought the rights to collect the past-due money in 1999. In a document it sent to Bond, the company said the date of delinquency for the debt was Aug. 9, 1996. That date was key to his case.
Debt collectors have a limited number of years in which they can sue someone to collect. After the time runs out, unpaid debts are considered “time-barred.” Collectors are allowed to contact you about time-barred debts. However, under the federal Fair Debt Collection Practices Act, they cannot sue you for a debt that’s time-barred.
The problem is that the statute of limitations varies from state to state. And it can also vary depending on the type of debt. Bond believed that Asset Acceptance was trying to collect on time-barred debt that he did not owe — and that it was long past the six-year limit in Ohio for credit card debt. But Asset Acceptance said it was within its rights to collect because the statute of limitations in Ohio for a written contract is 15 years, according to Edwin “Skip” Herbert, the company’s general counsel.
Last week, Asset Acceptance got a big slap on the wrist from the Federal Trade Commission. The FTC claimed the company used deceptive practices to collect old debts from consumers. The FTC alleged that the Michigan-based company violated both the Fair Debt Collection Practices Act and the Fair Credit Reporting Act by, among other things, failing to disclose to consumers that their debts were too old to be legally enforceable, misrepresenting that people were liable when the company couldn’t substantiate they owned the debt and providing inaccurate information to credit-reporting agencies.
Without admitting any guilt, Asset Acceptance agreed to a $2.5 million settlement with the FTC. As part of the settlement, the company also agreed to change how it collects on old debts, including disclosing to consumers when it cannot sue to collect old debts that are past the statute of limitations.
What needs to happen is the establishment of a nationwide, uniform and clear statute of limitations for time-barred debts.
“There can be 50 different [state] laws involved, and different judges can view the law differently,” Herbert said.
So short of a national standard for old debts, do what Bond did.
With a trial date looming in 2011, Bond researched his rights. He learned what a time-barred debt was and that it was against the law for a collector to sue him or threaten to sue him on a time-barred debt.
Bond believed the debt Asset Acceptance said he owed fell under the six-year statute of limitations in Ohio because the date of default was listed as 1996. He sent a certified letter, return receipt requested, disputing Asset Acceptance’s claim.
The company repeatedly sent him paperwork asking him to admit that he used the credit card and acknowledge he had signed the credit card application. Bond refused.
Had Bond made even a small payment on the debt, he could have restarted the clock on the debt. Admitting the old debt was his could also have extended the time the debt collector could file a lawsuit to collect the old debt.
Bond filed a complaint with the FTC and the Ohio attorney general’s office arguing that the company was illegally trying to collect on a time-barred debt.
After he filed the complaints, Asset Acceptance dropped the case.
“We made the business decision we weren’t going to pursue the account,” Herbert said. “When we sued Mr. Bond in late 2010, we were using the 15-year statute. We have since gone to six years for credit card obligations.”
Because the documentation is often so skimpy or nonexistent after debt is sold and resold, don’t freak out if you don’t believe the debt is yours. Find out your rights, and don’t back down.
Readers can write to Michelle Singletary c/o The Washington Post, 1150 15th St., N.W., Washington, D.C. 20071. Or e-mail: email@example.com. Personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer’s name, unless a request to do otherwise is indicated.