Is It Time For Regulators To Stab Zombie Debt Through The Brain?

by Chris Morran, Consumerist

SalFalko / Creative Commons

SalFalko / Creative Commons

What a lot of people don’t know — and what debt collectors rarely mention — is that most unpaid debt has an expiration date after which you can’t be sued for repayment. And even fewer consumers are aware that this dead debt can be sparked back to life by making a payment after it’s already passed on to the debt afterlife. A new report calls on federal regulators to make sure that debt doesn’t rise from the dead in zombie form.

A 2013 study from the Federal Trade Commission estimated that more than 30% of debts purchased by debt buyers — who generally pay pennies on the dollar for the right to collect on money owed to businesses — were at least six years old, putting them beyond or near the end of the statute of limitations in many states.

But a new report [PDF] from the National Consumer Law Center believes that the percentage of zombie debt being purchased by collectors is even larger, as the FTC did not include information from the many smaller debt-buying operations that are the biggest purchasers of the oldest debts.

Additionally, the FTC study doesn’t look at the age of the debt when the debt-buyer makes its first attempt to actually collect.

Continue reading on

Tags: , ,