When Dan Herda had a mix up over car payments back in the 80's, his car ended up being repossessed and sold at auction. "I thought once the car was auctioned off it was pretty much over and done with," says Dan Herda. Recently, he was shocked when seventeen years later he got a call from a collector. Turns out there was a leftover loan on the car. "She asked me for a credit card and wanted me to make a payment by phone. It was very aggressive, very uncomfortable," Herda.
It's a new trick of the collection trade: buying old loans that are written off as delinquent, and then trying to collect on them. The Association of Credit and Collection Professionals, also known as ACA International, says there's billions in old debt out there. "Approximately 4 to 6 percent of all credit cards and loans granted will be charged off for non-payment over the course of time," says Jeff Bovarnick with ACA International. A lot of that is "time-barred debt"-meaning it's past the statute of limitations for collection. And it may no longer show up on your credit report, either. "So consumers need to be aware that they do have those rights," says Tyler attorney Howard Tagg. He says that's what puts you a step ahead of the game, because debt collectors routinely mislead consumers. "They'll call and tell consumers that police are coming over there to arrest them. They call and tell them they're coming to garnish their wages, when in fact that's not legal in Texas except for very limited circumstances," says Tagg. The Federal Trade Commission says while the companies can ask you to pay back the money courts will not require you to repay debt that's beyond the statute of limitations! Thomas Kane with the Federal Trade Commission adds, "It's illegal for a debt collector to threaten to sue on a debt or to actually sue on it." Meaning if you are approached to pay time-barred debt you can refuse to pay. If the collection tactics are legal be careful before repaying even the smallest amount on an old debt. It may restart the statute of limitations or worse. "If you breathe new life into a note that would otherwise be barred by limitations by making payments on it which can happen in some circumstances, then that debt will now be a legal, enforceable debt," says Tagg. There are ways to work out a payment plan with collectors to make sure you protect your credit.
Dan is not paying back his old debt. In fact, the FTC took action against the collection company that contacted him and it's no longer in business. "Companies like this are predatory. People don't understand their rights and don't understand the options that are available to them," says Herda.
Christine Nelson reporting. firstname.lastname@example.org