A debt collector who brings or threatens to bring a state court foreclosure action to collect a time-barred mortgage debt may be violating federal law, the Consumer Financial Protection Bureau said today in an advisory opinion. The agency announced it was implementing regulation to clarify that the Fair Debt Collection Practices Act prevents certain debt collectors from threatening to foreclose on homes with mortgages past the statute of limitation, known as time-barred debt. The move comes in response to what the agency claims have been a series of actions by debt collectors attempting to foreclose on silent second mortgages that consumers thought were satisfied long ago and that may be unenforceable in court.
According to CFPB, the FDCPA and its implementing regulation, Regulation F, prohibit a debt collector from suing or threatening to sue to collect a time-barred debt. The prohibition applies even if the debt collector does not know that the debt is time barred. The agency added that it will monitor the debt collection market for violations related to time-barred mortgages as well as to time-barred non-mortgage debt.