Some debts are no longer collectible and the consumer shouldn't be forced to deal with scare tactics from debt collectors and collection agencies to pay these zombie debts.
No, this isn’t the latest horror movie, this is something that has been going on and is now becoming a real problem for consumers. This expanding new industry has prompted a flood of complaints to state and federal agencies.
We all know what a debt collector is, this is about debt collectors who are attempting to collect zombie debts. Basically a zombie debt is a debt that is old and maybe you have forgotten about it. So you suddenly get this call out of the blue from a debt collector stating you owe this money. What usually happens is another debt collection agency buys an old debt from another agency for pennies on the dollar, and this new collection agency starts aggressively trying to collect.
Many times these debts weren’t even valid debts or for other reasons such as identity theft aren’t valid debts. The consumer with a lot of work finally gets it cleared up years ago, but somehow these new debt collectors get a hold of this debt and start trying to collect on it starting the whole mess over again.
Other times these collection agencies will buy old debts that were charged off a long time ago and then use a credit scoring search to determine who would be the most likely to pay these old debts. And if you are one of the lucky ones your phone will start ringing. Many of these debts are past the statute of limitations that they can even try and collect the debt. There is a statute of limitations (SOL) when past a certain amount of time it is too late to try and collect on a debt. Each state has their own statute of limitations for certain types of debts. Consumers are getting harassing calls now for debts as far back as the early 1990s.
Here are some of the worst abuses of these debt collectors at this time.
- Constantly calling and badgering consumers about a debt that has already been paid or has been legally erased through a bankruptcy.
- Illegally re-aging the debt on credit reports. What the collection agency does here is report to the credit reporting companies that this old debt is really a new debt, which extends the limit of reporting debts past the 7-year limit.
- Threatening to sue or actually suing you for a debt that is past the statute of limitations.
- They promise to delete the negative remarks on your credit report if you pay just a small portion of the debt. Be aware of this especially. If you only pay a part of the debt this resets the statute of limitations all over again. If you are going to negotiate a lower payment for the full amount, get this in writing first before paying anything if you owe the debt. Make sure it says full amount paid.
Know these Laws about Collections
When does the clock start ticking on a debt, usually it is 180 days after the account first goes delinquent or after you’ve missed your first payment. A negative report cannot stay on your credit report after 7 years (10 years for a bankruptcy).
On your credit report the clock should start ticking when it says date of last activity. But in some states you can restart the clock if you start making payments, agree to a payment plan or even acknowledge the debt is yours. You do not want to restart the clock unless you agree that the debt is yours, is not past your states SOL and the amount is correct. And you have all of this in writing from the collection agency.
Being threatened or actually being sued for a debt that is past your states statute of limitations is a violation of the federal Fair Debt Collections Practices Act (FDCPA). If sued you will have to go to court and show this. Never miss a court date. If you’ve moved to a different state, the rule of thumb is to go with your current states SOL. A credit card is usually considered an open-ended account established under the Truth-In-Lending Act.
Should You Pay These Old Debts?
You realize you owe this debt but the statute of limitations has run out, it is still a debt but under your state laws you don’t owe it anymore, but you would like to pay it. Be very careful about this. If you agree to pay and then suddenly you find you can’t pay, you have restarted the clock again and the collection agency can come after you legally and report it on your credit report.
Also, if you pay it can possibly be reported for the next 7 years on your credit report where if you don’t pay it, if would drop off much sooner if not already. And this of course can lower your credit score. You have little to gain and a lot to lose if you continue contact with these debt collectors and they know the SOL has run out. Paying an old debt can play havoc with your credit score.
If your conscious bothers you about never paying this debt than pay it. But make sure you get everything in writing. Do not deal over the phone. If your conscious is bothering you but you don’t want to risk your credit score by paying or talking to these debt collectors you could give the money to your favorite charity.
If you do owe this debt, you know it is yours and the amount is correct and your states statute of limitations is not up, don’t ignore the collection agency, they have a right to collect this debt. They are bound under the FDPCA of your state and the federal government.
If you continue to have problems with these zombie debt collectors and you either don’t owe the money and or the SOL has run out, contact an attorney.
© 2009 Sam Montana
National Association of Consumer Advocates legal referrals
Rights and laws for consumers concerning debts
Statute of limitations for all debts listed by state
Fair Debt Collections Practices Act
Fair Credit Reporting Act
Calculating the time frame for a debt
Money Troubles: Legal Strategies to Cope with Your Debts by Robin Leonard
What collection agencies can and cannot do
How to get your free credit report
Credit Info Center collections help forum