Do Not Let the New CFPB Rule “Trick” You Into Renewing Time-Barred Debt

If you have consumer debt in Illinois and do not make payments on it, there is only a certain amount of time under Illinois law that creditors can continue to take legal action against you according to the statute of limitations. Once the debt becomes time-barred, a debtor no longer has to worry about being sued over that debt. However, it is essential for debtors in Oak Park to know that there are actions they can take (often without even knowing it) that can revive their time-barred debt. In other words, if a debtor makes a particular kind of statement or performs a certain action, the clock on the statute of limitations might start all over again, and the creditor may be allowed to seek compensation through a civil lawsuit.

According to a recent report in The Washington Post, a new rule from the Consumer Financial Protection Bureau (CFPB) actually could result in debtors getting “tricked” into reviving those debts.

Understanding How the Statute of Limitations Affects Creditor Claims Against Debtors
Before we get to the new CFPB rule, we want to make sure you understand how the statute of limitations affects consumer debts. As we mentioned above, creditors have only a limited amount of time to take legal action for a consumer debt.

Different types of debt have different “clocks,” or different time windows in which a creditor can take legal action against the debtor. For unwritten contracts, the statute of limitations is five years. Most types of credit card debt and medical debt are considered unwritten contracts, so the statute of limitations is five years. For written contracts, the statute of limitations is 10 years. For secured transactions, like auto loans, the statute of limitations is four years. If a creditor does file a lawsuit against you and the clock on the statute of limitations has run out, you can have the lawsuit dismissed due to the statute of limitations.

Now, how can the recent CFPB rule result in consumers unknowingly reviving time-barred, or “zombie,” debts?

CFPB and Time-Barred Debt
According to the article in The Washington Post, the CFPB “estimates millions of consumers are contacted about such time-barred debt every year.” Now, a new proposal from the CFPB “says debt collectors could continue to try to collect on those old debts but would have to tell consumers up front that they are outside their statutes of limitations and the consumer can no longer be sued to recoup the money.” Why would this rule be a problem? In short, it would give debt collectors clear permission to continue trying to collect on time-barred debts, and ultimately could lead to many consumers being “tricked” into reviving that time-barred debt and resetting the clock on the statute of limitations.

The proposal has not been finalized, and many consumer protection advocates are pushing back against it. Even if consumers are informed that the statute of limitations has run out, it is more than possible that consumers could revive the debts without realizing it. There are a variety of ways that a time-barred debt can be revived, including making a payment on the debt, agreeing to a payment plan, and sometimes even making an agreement to make a payment at a later date.

Seek Advice from an Oak Park Consumer Protection Lawyer
Do you need advice about time-barred debt and your rights as a consumer? An experienced Oak Park consumer protection lawyer can help. Contact the Emerson Law Firm to learn more.



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