Understanding the Statute of Limitations

The statute of limitations is not something that collectors can overlook, and it’s not always something that is easy to determine. Different states have different statutes for different types of debt. It can be tough to determine which statute applies in different cases.

What is a statute of limitations and how is it applied to debt collectors?

In some ways, the statute of limitations is very simple because it has a singular focus — to prevent you from filing a lawsuit on the debt. It sets a maximum amount of time that involved parties can initiate legal proceedings from the date of an alleged offence. In the world of debt collection, it’s gotten turned around a little bit and can be used as a sword instead of a shield. 

Pro Tip: How do you protect yourself against legal issues?   Set in place policies and procedures.

Can you accept a voluntary payment from a consumer on a time-barred debt?

It depends on where and when, but as long as it’s very clear that they want to make the payment to the specific account it is typically allowed. Some states may require you to tell them that the debt is time-barred, but for the most part voluntary payments can be accepted. 

Sometimes people feel that paying a time-barred debt is a moral obligation. Although they couldn’t pay at the time, now they want to pay it and do the right thing because they can. 

If someone only pays a dollar, does it restart the statute of limitations?

It depends on the state, but there is typically no limit of what will restart a statute of limitations — even one penny could be enough to do so. Sometimes it may take a written promise and partial payment or a hand written letter explaining that the consumer will pay off the debt, even if it’s one penny at a time. It can also depend on the company or client policy, and how much risk they are willing to take on.

Watch the entire webinar replay to learn how you can get a better understanding of the statute of limitations and the best practices for collectors and agencies.

Request a demo to learn about how TCN can help you keep your organization compliant with all the changes.