The Texas House of Representatives recently introduced new legislation, H.B. No. 996, to amend the Texas Fair Consumer Debt Collection Act (“TFCDCA”) to require debt buyers to provide additional written disclosures to consumers regarding debt that could be subject to a statute of limitations defense in a collection action.
The proposed bill comes as courts across the country continue to wrestle with the language of the statute of limitations disclaimer in debt collection letters – specifically, whether debt collectors should use the phrase “will not sue” or “cannot sue” regarding debt that is past the limitations period to maintain a lawsuit.
The proposed bill defines “debt buyer” to mean a person who purchases consumer debt from a creditor or subsequent owner, regardless of whether the person collects the debt or hires a third party or attorney to collect the debt. Excluded from this definition are (a) persons who acquire charged-off debt as part of a portfolio that predominantly consists of debt that has not been charged off, and (b) check services companies that acquire the right to collect on paper or electronic negotiable instruments.
The legislation would require debt buyers to provide the following notice in the “initial written communication with the consumer relating to debt collection:”
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. … THIS NOTICE IS REQUIRED BY LAW.”
Also, debt buyers would be required to include additional language in the notice regarding whether the account could still be included in a consumer report prepared by a consumer reporting agency, with the required verbiage dependent on whether the reporting period has expired or not.
The notice language would be required to be “boldfaced, capitalized, underlined or otherwise conspicuously set out from the surrounding written” content of the letter.
By proposing this language, the Texas Legislature implicitly found that “will not sue” is sufficient to notify consumers as to their rights regarding the collection of debt past the applicable limitations period.
The proposed bill sets the statute of limitations on actions by a debt buyer to collect on a debt as follows: (1) four years from the consumer’s last activity on the debt, or (2) upon the expiration of any other applicable statute of limitation, whichever occurs first. It also codifies Texas common law regarding revival of the statute of limitations, providing that a “cause of action is not revived by a payment of the consumer debt” and further provides that revival will not occur upon “oral or written affirmation of the consumer debt, or any other activity.”
Troutman Sanders will continue to track H.B. 996 as it moves through the legislative process.