The Washington Post: Zombie debt: CFPB proposal could trick consumers into bringing dead debts back to life

The Washington Post, February 25, 2020: Zombie debt: CFPB proposal could trick consumers into bringing dead debts back to life

A proposal from the Consumer Financial Protection Bureau (CFPB) could spark a fight about what should happen to consumers’ old debt.

Debt collectors lose the right in many states to sue consumers after their debt reaches its statute of limitations, typically three or more years. But there’s a loophole: If the consumer makes a payment or acknowledges the debt in writing, that can be used to try to revive the life of the debt, creating what some consumer advocates call “zombie debt.”

The CFPB estimates millions of consumers are contacted about such time-barred debt every year. In a new proposal, the bureau says debt collectors could continue to try to collect on those old debts but would have to tell consumers upfront they are outside their statutes of limitations and the consumer can no longer be sued to recoup the money.

The collection of time-barred debt “can pose consumer protection concerns,” the CFPB says in its most recent proposal. Reached by a debt collector, a consumer may prioritize that old debt, leaving them with “less money to pay another debt.”

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