Laws dealing with consumer finance and debt collection can be an ever changing landscape. Lawmakers spend a great deal of time trying to strike a balance between protecting citizens and helping businesses stay profitable. Last Summer, Governor Greg Abbott signed HB 996, which is an amendment to Chapter 392 of the Texas Finance Code. This bill, which went into effect on September 1, 2019, made significant changes to how collectors deal with old debts. Here are some details about what this bill means for your business and how we’re complying with these changes.
Current Statutes of Limitations on Dead Debts
In Texas, creditors have four years from the last payment to take action against the debtor to collect the debt. After this time, the consumer is no longer legally obligated to pay the debt. Creditors and collectors could still work to collect these debts, but they couldn’t take legal action such as filing a lawsuit. Even though these debts are considered “dead”, The Fair Credit Reporting Act allows them to still appear on credit reports for seven years after the last payment is made. Until now, the law has allowed creditors and collectors to still collect on these dead debts without informing consumers that they are no longer legally obligated to pay. If the consumer acknowledges that the debt is theirs or makes a payment of any amount, the statute of limitations starts over and the creditor has another 4 years to collect.
Changes Under HB 996
This new bill made many changes to how creditors can interact with consumers who owe debts that have surpassed the statute of limitations. Collectors can no longer sue or tell a consumer that they plan to sue them for the outstanding debt. Any paperwork we send to the consumer regarding the debt must include a disclaimer that informs the consumer that the statute of limitations has passed and they are not legally required to pay the debt. Any acknowledgment of the debt by the consumer, including payment, no longer restarts the clock on the debt. Perhaps most importantly, the creditor must notify consumers in writing at the beginning of their communication that the debt is legally dead.
Collection on Dead Debts
Many business owners are understandably concerned about how HB 996 affects their ability to collect outstanding debt. This is one more good reason that businesses should not wait to assign their outstanding debts to a qualified debt collector. HB 996 shows us that laws can change quickly, and sometimes the “someday” you were waiting for to get around to those old debts can disappear in a few short months. Additionally, the law does not state that creditors can’t collect on dead debts. It only states that we must keep consumers properly informed of their rights. While they may not legally owe the debt any longer, they still received goods and/or services they did not pay for. At Southwest Recovery, we have always relied on building good rapport with debtors and appealing to their sense of doing what’s right. We can still let them know that paying their debt is the right thing to do.
Southwest Recovery Can Collect For You Today!
If you have old outstanding debt that you need help collecting, we can help. We can look at the condition of all of your outstanding debts and find the best solution to get you paid as soon as possible. Since we are a contingency collection agency, there is no risk to you. We don’t get paid unless you do. We work hard for your business, and there is no risk for you. Give us a call today to get started!