CFPB Proposes Time-Barred Debt Supplement to Third-Party Debt Collection Rule

The Consumer Financial Protection Bureau today published a supplement to its spring 2019 notice of proposed rulemaking on third-party debt collection. The supplemental proposal addresses the collection of time-barred debt, which is debt that has run past any applicable statute of limitations.

Specifically, the proposal requires debt collectors to make certain disclosures if the collector knows or should know that a debt is time-barred. It would also require that debt collectors disclose, if applicable, that a payment made on a debt can revive the statute of limitations and enable the collector to sue to collect.

The supplemental proposal accompanies the bureau’s existing proposed rule which, if finalized, would modernize and clarify rules around third-party debt collection as governed by the Fair Debt Collection Practices Act. The FDCPA does not generally apply to creditors collecting their own debts, and thus would not generally apply to banks; however, many banks place debt with third-party debt collectors and must monitor vendor compliance with the FDCPA.

Comments are due 60 days after it is published in the Federal Register.