It is widely known that California is one of the most proactive states in the country when it comes to protecting consumers against predatory debt collection tactics. And in August of 2018, they took another step in that direction by completely restructuring their approach to time-barred debt collection.
What is a Time-Barred Debt?
Before diving into the changes that are going to be made to any collection efforts regarding time-barred debts, we first have to understand exactly what a time-barred debt is. But don’t worry, it is actually a fairly straightforward concept.
A time-barred debt is any debt that is outside of the statue of limitations set forth by the state where the debtor resides. In California, those specifications are stated in the Rosenthal Act, which is California’s version of the Fair Debt Collection Practices Act (FDCPA).
Written Notice Required
The major change to the current approach to collecting time-barred debts is that debt collectors must not lead off any written collection notices with a notice explaining that they are not able to sue the consumer to collect a time-barred debt.
In some cases, depending on the length of time that has passed, the debt collector is not even able to report the debt on a consumer’s credit report.
Since those are two of the most powerful collection tactics used by agencies today, this new change will afford tremendous protections for consumers in the state of California.
No Defense Needed
Another change that will be implemented when the new law goes into effect in 2019 is that debt collectors will no longer be permitted to file any legal action regarding a time-barred debt. This might seem like an obvious derivative of the changes we have always discussed, but it is actually another layer of protection for consumers.
In the past, debt collectors were able to file charges against a consumer, and then it was the consumer’s responsibility to use the fact that the debt was time-barred as their defense in court. The new law flips that standard upside down and should eliminate a number of unnecessary court appearances.
Not Just Debt Collection Agencies
These new changes to the California debt collection laws will have a massive impact across the industry, and they will affect more than just the big commercial debt collection agencies. That is because these new changes will apply to anyone attempting to collect a time-barred debt in California, even if they are the original creditors.
So whether you are a small business owner struggling to manage your own accounts receivable, a larger corporation with your own AR department, or a commercial debt collection agency, everyone is going to be on the same playing field when it comes to time-barred debts in California.
Of course, the easiest way to avoid this situation entirely is to make sure that none of the debts you are concerned with ever make it to time-barred status.
And the easiest way to do exactly that is to partner with an experienced debt collection agency like Direct Recovery. Having that experience in your corner can save you an enormous amount of time and money in the long run.