The Texas state legislature has provided consumers with additional protection from debt collectors in the passage of the Fair Consumer Protection Act earlier this month.
Specifically, the act serves to clarify and expand the definition of a debt buyer beyond the Consumer Financial Protection Bureau’s definition of “a person or a company that regularly collects debts owed to others.”
Per the legislation, a debt buyer is a person or entity “who purchases or otherwise acquires a consumer debt from a creditor or other subsequent owner of the consumer debt, regardless of whether the person collects the consumer debt, hires a third party to collect the consumer debt or hires an attorney to pursue collection litigation in connection with the consumer debt.”
One exception, however, is a person or entity “who acquires in-default or charged-off debt that is incidental to the purchase of a portfolio that predominantly consists of consumer debt that has not been charged off,” according to the FCPA.
Further, the legislation will bar debt collectors from commencing legal action or initiating arbitration against a consumer once the statute of limitations has passed, which is four years in Texas.
Debt buyers will also be required to communicate to consumers in plain language the debt buyer’s rights as they relate to suing to collect debt or reporting debt to credit reporting agencies.
For example, if the four-year statute of limitations has passed, but debt still falls within the allotted seven-year reporting period, the debt buyer will have to send a notice to the consumer stating:
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. If you do not pay the debt, [insert name of debt buyer] may continue to report it to credit reporting agencies as unpaid for as long as the law permits this reporting. This notice is required by law.
Similarly, debt buyers will have to notify consumers if the age of their debt bars debt buyers from reporting the debt to any credit reporting agency.
The law, which has been signed into law by Gov. Greg Abbott, goes into effect on Sept. 1.
