Is old debt coming back to haunt you? Why you may no longer have to worry about it

State Rep. Nicole Collier has had enough of the zombies.

Zombie debt, that is.

Collier, a Fort Worth Democrat, filed a bill to stop debt collectors from tricking Texans into reviving so-called “zombie debts,” which are so old they no longer legally need to be paid.

Many businesses write off old debts and sell them, generally for pennies on the dollar. The companies that buy them then try to collect for those debts.

But many of those collectors never tell debtors that they no longer are required to pay the money owed.

They generally target elderly or low-income residents who might not remember the debt — or might not owe it at all but are on the hook for it because they have the same name as the person who does.

Currently, if a third-party debt collector convinces someone to admit it’s their debt or to make even a small payment on it, then the statute of limitations restarts — even if the debt had been dead.

Collier’s House Bill 996, known as the Fair Consumer Debt Collection Act, would put an end to that.

The act says that debt collectors can’t sue consumers for debt after the four-year statute of limitations has passed and any paperwork given to debtors after the statute of limitations expires must include this message in at least 12-point type that is boldfaced, capitalized or underlined: “The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it.”

“We are trying to offer more transparency, more information about their rights,” Collier said.

The bill has been scheduled for a public hearing Tuesday before the House Pensions, Investments and Financial Services Committee. If the Legislature approves this measure before the session ends May 27, and the governor signs off on it, it could go into effect Sept. 1.

Zombie debt

In Texas, creditors have four years after the last payment is made on a debt to take action, such as filing a lawsuit, against a consumer.

After that, debts are considered dead, even though the Fair Credit Reporting Act lets those debts show up on credit reports for seven years. But even when a debt is out of statute, that doesn’t mean it has been forgiven.

These zombie debts can be big business for third-party collectors.

“In recent years, the debt buying industry has expanded dramatically and attempts to collect ‘zombie debts’ — meaning debts not owed, debts that were already paid or discharged, debts owed by someone else or (are) due to identity theft — have reached epidemic scale,” according to a RewardExpert report released last year that reviewed zombie debt complaints filed since 2011.

That report noted that reports of “illegal debt collection attempts” went up more than 65 percent in the first part of 2017, when compared with the same time period the year before.

Texas ranked sixth — behind Delaware, Florida, Georgia, Nevada and Maryland — in a list of the top 10 states where efforts to illegally collect debts such as “zombie debts” were most common.

“In Texas once again we see a pattern similar to that which we have already observed: cities and their surrounding metropolitan areas report an elevated rate of illegal collection attempts,” the report stated.

In Texas, there were 32.12 complaints per 100,000 efforts to collect zombie debts. The top offender was listed as Encore Capital Group and the runner up was listed as ERC, the report shows.

Collier said her bill is not geared to prevent people from paying their debts.

“In fact, it encourages people to pay what they owe,” she said. “But it’s without the repercussions of facing a lawsuit.”

Debt collectors

Here’s what RewardExpert recommends if a debt collector reaches you:

Don’t admit that you owe the debt. This can be used to breathe life into zombie debts.

Ask for the contact information of the agency that reached out to you. Then write that company, disputing the claim, and ask for verification of the debt within the next 30 days. When you receive that information, check it for errors.

Be alert. Sometimes more than one company will be working to collect the same debt.

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Anna M. Tinsley grew up in a journalism family and has been a reporter for the Star-Telegram since 2001. She has covered the Texas Legislature and politics for more than two decades and has won multiple awards for political reporting, most recently a third place from APME for deadline writing. She is a Baylor University graduate.