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Debt collectors must be aware of time-barred rules

May 07, 2012 Philip Burgess

Debt collectors must be aware of time-barred rules
While some companies may be hiring third-party debt collection agencies to recover a years-old payment, agents must be aware that the actions they are able to take may be limited. Some institutions still want to collect old debts, though because of the Federal Trade Commission time-barred rule, that may no longer be possible.
 Recently, the Associated Press reported, Massachusetts resident Alice Mainville was contacted by officials from the state of New Jersey to pay a $73 dollar debt they claim they have been owed for 35 years. Mainville worked at a bakery in New Jersey when she was 17, and the New Jersey Department of Labor is making the claim that they overpaid her. Mainville told the source that she does not plan on paying off her debt, because the officials did not explain how she owes the money now. However, New Jersey Department of Labor spokeswoman Kerri Gatling said this type of debt cannot be written off under insurance law. The statute of limitations for debt collections differs by state, and agent can consult information published by the FTC detailing the laws of each government. The FTC noted that the majority of states abide by a period of three to six years, though some states allow debts to be collected up to 10 years after they are owed. In many cases, recovery agents can still attempt to collect the past due amount, but usually the consumer can no longer be sued for failure to pay. However, The Washington Post reported debt recovery services should make sure no partial payments on old debts were made before abandoning the attempt to gather the owed sum. If a consumer made a later payment, that may have extended the time an amount owed could be collected legally. Older debts have the potential to send consumers into financial ruin by adversely affecting their credit histories. Yet there are a number of people who still chose not to make such payments for an extended amount of time. Researching older debts can also drain time and money from collection agents. According to The Washington Post, information concerning overdue payments can be lost as it changes hands during attempts made to recover the sum. This can cause confusion and result in outdated consumer information. While spending the time to investigate the current debts owed, the statute of limitations could run out, and the debt agencies and institutions could lose out.