In today’s credit-based society, almost all adults have at least some consumer debt: a mortgage, a car loan, student loans, credit card debt, or medical debt.
While many people have heard of the Statute of Limitations, not everybody understands what it is. The statute of limitations is the time beyond which you can no longer sue somebody.
Limits are put in place in order to ensure that records are accurate and reliable. This is true because with the passage of time, memories fade and documents disappear. As stated by Maryland’s highest court:
Statutes of limitations are enacted typically to encourage prompt resolution of claims, to suppress stale claims, and to avoid the problems associated with extended delays in bringing a cause of action, including missing witnesses, faded memories, and the loss of evidence.
It is often the case that the older the debt, the less reliable the records are. And in Maryland, it is illegal to sue on consumer debt after the expiration of the Statute of Limitations. Here is the statute passed by the Maryland Legislature and signed into law by the Governor:
A creditor or a collector may not initiate a consumer debt collection action after the expiration of the statute of limitations applicable to the consumer debt collection action.
Once a debt is past its limit, it’s known as a time-barred debt.
One of the problems with time-barred debt (and other old debt) is that it may have been bought and sold a variety of times by different debt collectors and companies.
These sales and exchanges can cause the debt to be unrecognizable by the consumer since it is often in the name of a junk debt buyer (such as Midland Funding, Portfolio Recovery Services, Cavalry Portfolio Services, CACH, or other name that the consumer never contracted with) and it is often for a different amount than the consumer remembers.
Despite the fact that it is illegal to sue on time barred consumer debt in Maryland, it can still come back to haunt consumers. Debt collectors may still try to collect time-barred debts even if they aren’t able to sue. Old debts can also appear (and negatively affect) a consumer’s credit report for up to seven years.
Old and time-barred debts are subject to complex laws and rules that can oftentimes confuse consumers. Debt collectors will often take advantage of this confusion in order to persuade Maryland consumers to make payments on time-barred debt. And despite the fact that it is against the law, some creditors still file lawsuits on time-barred debt.
All that being said, here are some issues to consider when confronted with attempts to collect time-barred debt:
Is the Debt Time-Barred?
Each state has a statute of limitations period that states when a debt has legally expired. Generally speaking, the statute of limitations for consumer debt in Maryland is 3 years (and less frequent cases, 4 years.) You can read more on Maryland debt collection laws here.
In Maryland, if a consumer debt is time-barred, the creditor is not allowed to sue you. That’s why many consumer rights attorneys recommend sending a letter to the collector to stop future communications.
If you know a debt is time-barred, you can send a certified letter informing the debt collector that you are not intending to pay (as is in your right) and ask the collector to stop all communications about the debt. Some excellent sample letters to send debt collectors are available from the Consumer Financial Protection Bureau here.
Examine the Collections Letter
You should carefully examine (and potentially have a lawyer help you examine) the collections letter you received about your time-barred debt.
The collector may send letters or messages seeking to collect payments. The letter may also include a disclosure stating that the debt is time-barred.
If not, there may be a few other clues or indicators in the letter about the age of the debt.
These collection letters can also contain false and/or misleading information, which may violate your rights. If you’re confused or are sensing some misinformation, we’d suggest speaking with a consumer protection lawyer.
Check Your Own Records
There is an old Russian saying made famous by President Ronald Reagan: “Trust But Verify.”
Similar to the idea above with the letter, you shouldn’t trust what these debt collectors have to say without verifying it for yourself. They could make false or misleading statements and in reliance you might make payments on an old or new debt you don’t owe.
Thus, you shouldn’t rely solely on the collector to provide you with accurate information about the debt, especially the age and other important details. The collection letter is a good place to start looking for information on whether it’s old, but you should also look through your own records and information.
Know Your Consumer Rights Before Paying Anything
In some states, making even a small payment or even just an agreement to make a payment on time-barred debt can restart the debt’s time limit. This would allow a collector to sue you for it again as it would no longer be considered time-barred.
BUT NOT IN MARYLAND. In Maryland, the law says that in the context of consumer debt:
any payment toward, written or oral affirmation of, or any other activity on the debt that occurs after the expiration of the statute of limitations applicable to the consumer debt collection action does not revive or extend the limitations period.
That’s why before agreeing to pay anything, you should speak to an expert and know your rights. Some unscrupulous debt collectors may try to get you to make payments on debt you aren’t obligated to pay.
While the collection letter may seem threatening or aggressive, if the debt is truly time-barred, then you cannot be sued.
Seek Legal Assistance with the Holland Law Firm
Many of the laws surrounding time-barred and old debt are confusing and complicated.
The consumer rights attorneys at the Holland Law Firm can help you understand and fight against unlawful debt collections.
Don’t give up. Give us a call here to get started.
Note: Information from this post was adapted from the National Association of Consumer Advocates’ (NACA) “Consumers Ascending” series. The Holland Law Firm’s Peter Holland sits on the board of directors at NACA.