A debt purchasing company has been sued by Illinois’ Attorney General — Lisa Madigan. The suit alleges use of illegal collection tactics by the firm. A detailed press release on this latest enforcement action against the collection industry is available here.
Financial Credit Service, Inc. has allegedly been using intimidation tactics to pressure people into making payments on debts that would otherwise be uncollectible. Why are some of the debts uncollectible? Because the debts in question are “time-barred,” meaning the statute of limitations has expired. Beyond this period of time the creditor (either the original creditor or the firm that has purchased the account and become the new owner) can no longer pursue legal remedies to collect on the debt. Over the last 10 years, the business of debt purchasing has grown into a multi-billion dollar industry, with dozens of major players and hundreds of smaller firms getting in on the action. The game? Buy old debts for pennies on the dollar, hammer people for payment using high-pressure collection tactics, and make a profit on the investment.
Since it’s very difficult to collect on debts that are past the statute of limitations, a favorite tactic of such firms is to trick consumers into making a small payment through intimidation and pressure. This resets the clock on the statute of limitations and makes the debt fair game again for regular collection procedures.
In this particular case, the AG’s suit alleges that the company had even tried to collect on debts that had already been discharged in bankruptcy. Also, when consumers requested verification of the disputed debts in accordance with the Fair Debt Collection Practices Act, the firm refused to respond to such requests or claimed that a fee would be required to provide such information. There is a laundry list of other violations alleged in the AG’s complaint.
It all reads like “business as usual” in the world of zombie debt collection. This is a growing problem that will only get worse as the debt purchasing industry grows in size.
My advice to consumers dealing with collection activity on old debts: First, look up the statute of limitations for your state. Be sure to account for differences in the statute between credit card debt (open-ended accounts) or financial contracts (written contracts), so you know which category your account falls into. Second, look up the date of last payment you made or the last transaction activity on the account. Third, add 30 days to that date to be on the safe side. Then count forward from there to see where you stand on the statute of limitations.
If the debt is time-barred, then you can safely ignore any threats made by collectors. Be aware, however, that such a firm might still bring a frivolous lawsuit. In that event, you will need to answer the suit and show that the debt is time-barred. The absolute wrong thing to do is to make a small payment. This will only remove the protection of the statute of limitations and leave you open to further collection activity.