TLP: Don't Forget To Read The Fine Print
Not that it's a good thing to walk away from your debts, but when people don't pay their credit card bills, there's a process. And in some cases, things drag on so long that the statute of limitations runs out and the debt becomes noncollectable.
Not that some "industrious" people don't try.
In most states, it is legal for collectors to pursue out-of-statute debt, as long as they do not file a lawsuit or threaten to do so.Sounds pretty fucking sleazy. You can just imagine the back-and-forth as the collector tries to schmooze the former card-holder into making a small payment. "It'll help your credit rating ... You don't want to be a deadbeat, do you? ... It's not like you have to pay the whole thing." And then it gets ugly once the debt is "live" again.
But some lawsuits are filed anyway, and consumer groups and even some industry consultants argue that collectors routinely harass debtors for unpaid balances that have exceeded the statute of limitations. In some cases, collectors have unlawfully added fees and interest.
“It’s so cheap, if you can work it smart, you don’t need to collect that much,” said John Pratt, a consultant to the debt-buying industry and an author of “Debt Purchasing: An Investor’s Guide to Buying Debt” (Morris Publishing, 2005). He said investors in old debt generally hoped to recoup two and half times what they paid for a group of claims.
Because collectors cannot sue on old debt, he said, they are more likely to resort to abusive tactics. “Time-barred debt is where the worst abuse has occurred towards the debtor,” he said.
In a report issued July 12, the Federal Trade Commission called for “significant reforms” in the debt collection industry and recommended that states change the murky laws that govern out-of-statute debt.
The statute of limitations for debt varies by state, generally from three to 10 years. In many states, collectors can restart the clock if they can persuade the consumer to make even a tiny payment toward the old debt. Debt collectors generally do not tell consumers that making a payment will revive the debt so it can be legally pursued.
“The point of the payments is not so much to get the money” as it is to restart the clock, said Daniel Schlanger, a New York lawyer who represents consumers in cases against debt collectors.
Of course, this is one more reason people should either understand what it means to have a credit card or just say no.