In California, consumer debt is not collectible after 4 years
Some businesses and debt collectors may want you to think your financial obligations will bother you forever, unless you can find some cash.
What they usually don’t tell you is that there are laws that limit how long you can actually be sued for any unpaid bills.
In California, the limitation period for consumer debt is four years. This means that a creditor cannot succeed in court after four years, making the debt essentially uncollectible.
But there are tips that can jumpstart the debt clock.
I bring this up in light of a strangely menacing letter from cable giant Spectrum to former customers in which the company offers to neglect past debts as long as the ex-customer agrees to return to service.
Spectrum insists that renewing service will wipe out your old debt. Legal experts tell me, however, that consumers should be careful with such offers.
They say if a former customer has past debt and that debt is more than four years old, it could be subject to legal action again after an account is reopened and payments resumed.
As soon as the old debt is reactivated, a creditor has an additional four years to request payment.
“I think Spectrum would have a good legal argument that, yes, once the account becomes active again and once the money changes hands, whatever is left over in that account becomes fair play again,” said Pamela Foohey, professor of law at Yeshiva University in New York.
Mary Spector, professor of consumer law at Southern Methodist University in Dallas, came to the same conclusion.
“It’s called reviving an old debt,” she said. “If you make a payment to a reopened account, it could be a assumption of the old debt, and that means the old debt could be collected again.”
Reviving old debts is a common ploy among unscrupulous debt collectors. They can buy debts that are over the statute of limitations for pennies on the dollar and then try to trick the debtor into making even a small payment.
Once a payment of any size is made, the debt is reactivated and the collector is free to sue (or threaten to sue).
It’s hard to see why Spectrum would find any advantage in playing such games with old customers. But his letter is vague enough to raise questions.
He Says The Company “Will Take Off Your Debt And Stop Reporting It To A Credit Bureau” – if the former customer agrees to re-register for the TV, Internet or telephone service.
In a previous column, I looked at the implicit threat of the offer: renew your service or we’ll destroy your credit rating by reporting you as a bad debtor to the credit bureaus.
From a debt stimulus perspective, the issue is the promise to “remove” old debts from a former customer’s account. What exactly does this mean?
Does this mean Spectrum is forgiving the debt? Or does it mean that the business is removing debt from your active account while keeping it somewhere on the books?
Dennis Johnson, a spokesperson for Spectrum, confirmed to me that “that means the debt is gone for good.”
He said that “customers who received this offer are currently in the process of collection and are eligible because they have a balance outstanding for at least two years.”
(Spectrum is teaming up with the Los Angeles Times on a evening tv show.)
At the very least, this episode serves as a good learning time for all consumers to be mindful not only of accumulating debt, but also of their rights under each state’s statute of limitations.
“In most statutes of limitations, making even a partial payment resets the clock,” said Angela K. Littwin, professor of law at the University of Texas at Austin. “That’s why debt collectors often encourage consumers to pay as little as they can. “
Just because the statute of limitations has passed doesn’t mean your debt has been forgiven. A creditor or collector can still turn the screws when playing with your credit score, even if you are out of the reach of legal action.
My advice: Pay your bills. But also remember that safeguards exist.
Section 807 of the Federal Law Fair Debt Collection Practices Act says that “a debt collector may not use any false, misleading or deceptive representation or means in connection with the collection of any debt.”
California has his own version of the law. It prohibits “unfair or deceptive acts or practices in the collection of consumer debts”.
Altadena resident Steve Schklair recently received one of the Spectrum Letters. It just so happens that it ended its cable service in the fall of 2017, meaning the statute of limitations on outstanding obligations would take effect overnight.
Schklair, who says he owes Spectrum no money, likened the company’s offer to “corporate blackmail.” Spectrum declined to comment on the status of Schklair’s account.
Ted Mermin, executive director of the Center for Consumer Law & Economic Justice at UC Berkeley, said that “if a former subscriber made having debt and later replenished with Spectrum, the company might theoretically be able to revive the statute of limitations of the old debt – for example, by earmarking some or all of the new monthly subscription payment to the old debt. “
Once again, Spectrum claims that renewing the service will make any past debt go away for good – although I had to rely on the company to point it out in plain language.
They now officially say that your old debt will be gone if you renew the service. Keep this in mind if you experience any heartache related to it.
Consumers should regularly question any offers to cancel past debts. Make sure you get it in writing, and make sure what’s going on with the statute of limitations is absolutely clear.
“Telling former clients that you will give up your debts if the client returns to service could be an empty promise,” Foohey told Yeshiva University.
“Customers will want to make sure their account balance is reset to zero when they resume service,” she advised. “Make sure the forgiveness shows up on their account statement. “
It would be highly unusual for a large company like Spectrum (owned by even larger Charter Communications) to try to get a quick fix on ex-indebted customers. But as I noted above, these types of ploys are all too common among debt collectors.
Never, ever make even a partial payment to a collector until you have determined whether the debt is within the statute of limitations or if any threat of collection is worthless.
Always ask a collector for written proof of your obligation, which by law they must provide. This is the easiest way to see if you are legally in the clear.
And if the terms of a marketing offer are ambiguous, seek clarification, in writing if necessary, before agreeing to a new deal.
The last thing we need is more financial problems.