State to Require Collectors to Give More Disclosure on Time-Barred Debt

New Mexico Attorney General Gary King announced late Wednesday that debt collectors operating in the state will now be required to disclose to consumers that their debt is not enforceable by lawsuit if it is beyond the debt statute of limitations, in addition to other compulsory language.

King’s office published the new rule — “Collection of Time-Barred Debt” – December 15, making that the effective date for the rule as well. It requires debt collectors operating in New Mexico to “make a good faith determination of whether a debt is time-barred.” If the debt is beyond the state’s statute of limitations, the collection agency must communicate that fact to the consumer in both written and oral communications (initial and subsequent), while informing the debtor that the account may not be enforceable in court.

In addition, collectors must use language that informs consumers that any payment – or a written promise to pay — will “restart the clock” on the statute of limitations.

Although King said that the rule is effective Dec. 15, he noted that his office will not begin enforcing the rule until March 15, 2011, giving ARM professionals a 90 day grace period to bring their operations into compliance.

But ACA International cautions that consumers may start enforcing the rule immediately, and that the debt collection trade association is still currently evaluating the rule for civil lawsuit liability. In the meantime, ACA recommends that all members immediately begin investigating their compliance procedures for work done in New Mexico.

The rule included specific language that King said would be compliant under the new rule. According to the text of the rule, a debt collector who makes the following disclosure shall be deemed to have complied with the requirements:

We are required by New Mexico Attorney General Rule to notify you of the following information.  This information is not legal advice:

This debt may be too old for you to be sued on it in court.  If it is too old, you can’t be required to pay it through a lawsuit.

You can renew the debt and start the time for the filing of a lawsuit against you to collect the debt if you do any of the following: make any payment of the debt;  sign a paper in which you admit that you owe the debt or in which you make a new promise to pay; sign a paper in which you give up (“waive”) your right to stop the debt collector from suing you in court to collect the debt.