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Asset Acceptance, one of the country's largest debt collection companies, has agreed to pay the Federal Trade Commission $2.5 million in civil fines. The FTC had accused the company of deceiving debtors and failing to inform them of their rights under a debt's statute of limitations.
The company is known for buying "charged-off" debt, explains MSNBC. For just pennies, it acquires the right to collect old debts that creditors no longer want to pursue.
But many states have a statute of limitations -- normally between 3 and 6 years -- that bars creditors from suing over an unpaid debt. At that point, it is up to the debtor to make voluntary payments.
However, those voluntary payments may revive what is called a "time-barred debt." A partial payment resets the statute of limitations, again giving the creditor a right to sue.
Federal law requires collectors to explain a debt's statute of limitations and revival when trying to collect a time-barred debt. Asset Acceptance failed to do so.
You should be aware of this issue if a collector is trying to collect an old debt. In fact, you should ask whether he is calling about a time-barred debt.
The collector must answer truthfully, according to the Federal Trade Commission. But if he declines to respond, you should ask for the date of your last payment. Once you find your state's debt statute of limitations, you will be able to determine whether your debt is time-barred.
At this point, you will need to decide what to do. A partial payment may make you liable, but an unpaid debt will continue to adorn your credit report. If you have enough money, you could call the company and make a deal.
The decision is yours, but be sure to make an informed one.