If a consumer in Newport Beach, California, misses payments on a line of credit, they may start getting calls from collectors. Debt collectors commonly purchase debt for a small amount and pursue it on behalf of the creditor. However, there are limitations in California for pursuing debt, and collectors must abide by state and federal laws.
The Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act requires debtors to follow certain laws regarding wage garnishment, repossessions and creditor harassment. The FDCPA under federal law only applies to third-party collectors, but the Rosenthal FDCPA extends to original creditors. California passed the new law in 2019 as an extension to the 2013 Fair Debt Buying Practices Act.
In the past, lenders and collectors did not inform customers of time-barred debts, but the new law requires them to give notice. If the debt gets reported to a credit bureau, the debt collector, as defined by law, must send the debtor notice of time-barred debts.
Statute of limitations
The statute of limitations for unsecured debt in California is four years for written contracts and two years for oral contracts. The collector must send the notice with the first form of written correspondence, including email, after the time limit has passed. Three factors commonly start the clock running, which includes last payment date, last purchase date and last missed payment date.
However, some collectors trick the consumer into reviving time-barred debt in California, sometimes called “zombie debt,” to restart the time. They may extend time to pay or offer a payment arrangement, so the debtor agrees to pay and starts the clock again.
If a consumer thinks they don’t owe a debt, they may request validation in writing. Debtors in bankruptcy have the benefit of the automatic stay, which temporarily prohibits creditors from contacting the debtor. The FDCPA allows individuals to sue creditors who break the law, even if the consumer owes the debt.