NEW MEXICO AG REVISES PROPOSED RULES ON THE COLLECTION OF TIME-BARRED DEBT
In response to comments from industry and consumer groups, the New Mexico Attorney General has revised proposed rules under the New Mexico Unfair Practices Act concerning the collection of time-barred debt. The proposed rules would require debt collectors (including original creditors, assignees and third-party collectors) to make a good faith determination of whether each debt it is attempting to collect is or is not time-barred. The proposed rules also would require debt collectors to make disclosures regarding the time-barred nature of a debt and the impact of reviving the statute of limitations. When collecting in writing or orally, debt collectors would be required to disclose:
- That the debt is or may be unenforceable through a lawsuit because the time for filing has or may have expired;
- If the debt is or may be time-barred, the person cannot be forced or required to pay the debt:
- The person is not required by the law to admit, affirm or acknowledge the debt, or to make any payment on the debt, and is not required to waive any of his or her rights with regard to the statute of limitation; and
- An explanation of the consequences of any payment on the debt, and of any admission, affirmation, acknowledgment or waiver of the debt with regard to the applicable statute of limitation under Section 37-1-16 (Revival of Causes of Action).
The proposed rules establish certain formatting and language requirements and provide language that debt collectors could use to comply. The proposed rules would become effective as of the date of final publication in the New Mexico Register.
The Attorney General specifically noted that no commentators disputed the fundamental premise of the new rules: that the time-barred status of a debt is a “material” fact worthy of disclosure (ignoring the morality of paying just debts). In addressing various comments challenging the availability of information to determine the legal status of debt, the Attorney General cited the Federal Trade Commission’s February 2009 report on collection practices in concluding that necessary information is “readily available.”
If promulgated, New Mexico would not be the only jurisdiction that has heightened restrictions with respect to the collection of time-barred debt. See our Alert of March 17, 2009 regarding a similar New York City ordinance. Similar restrictions are expected elsewhere.
- Michael Tomkies and Charles Gall
DEALING WITH MULTISTATE DEBT COLLECTION COMPLIANCE? We routinely advise on collection-related activities and the regulated activities of creditors, third party debt collectors, debt buyers and loan servicers. We also publish an easy-to-use reference that compiles state and federal laws governing debt collection practices. The Debt Collection Digest is organized topically, includes the federal Fair Debt Collection Practices Act and Commentary for easy cross-reference, and covers ADAD and monitoring and recording statutes. Contact us for details.