Law Offices of 

Deborah M. DeMack 

Committed to Fight for your Consumer Rights!

Debt Collection & Debt Collectors 




1.         How Old Is the Debt?  If the debt is old enough, it may be past the legal statute of limitations, meaning, the debt is legally unenforceable in a court of law.  But that won't necessarily stop debt collectors from trying to collect on a debt, even if it is YEARS past the statute of limitations. 


            In New Mexico, the statute of limitations for open accounts and revolving lines of credit such as credit card accounts is four years.*  So if it's been more than 4 years since you last paid on a credit card account, it's possible that the debt is past the statute of limitations.  Therefore, legally speaking, the debt is unenforceable.


            However, this does not mean that a debt collector won't file a lawsuit in an attempt to collect on a debt.  If you are sued by a debt collector on a debt that is past the statute of limitations,  IT IS UP TO YOU to  raise this argument or any other legal defense(s) you may have.  Further, different statutes of limitations apply to different types of debt.  To be sure, check your state statutes.  Other regulations or statutes may apply with respect to attempts to collect on "stale" debt.  


* Statutes of limitations differ depending on the type of debt, whether or not there is a written contract, and other factors.  Laws also differ state to state.


2.         Many Debt Collectors Are Not the Original Creditors. 

"Original creditors" are banks or other financial institutions that originated the loan, i.e., lent you the money in the first place.  Once you stop paying on a debt, typically after 4-6 months of trying to collect from you on a debt owed, many banks and credit unions will give up, and charge off the debt as a "bad debt."  


           However, this does NOT mean that the debt goes away.  After the original creditor charges off the account, it commonly sells the defaulted debt on the secondary market to third party debt buyers.  These debt buyers, commonly known as "junk debt buyers," purchase bundles of hundreds, even thousands, of defaulted debts for pennies on the dollar -- but they acquire rights from the original creditors to collect on the debts -- including the right to sue the debtor!  


           There are tens of thousands of junk debt buyers out there, and many aggressively pursue consumers, trying to collect on the debts they purchased.  Most have names consumers have never heard of, such as NCO Financial Group, Portfolio Recovery Associates, CACH LLC, to name just a few.

           Many of these debt buyers also buy  and resell bundles of defaulted consumer debt among themselves -- even years after the original creditor charged off the account.  So your debt lives on!  That's why consumer attorneys call this type of debt "Zombie Debt" -- it (almost) never dies! And until you do something definitive to eliminate the debt, any legal owner of a defaulted consumer debt account can continue to collect on the account.


3.         Not All Debt Collectors Are Treated The Same Under The Law.   

Both federal and state law treat different debt collectors differently when it comes to collecting debts.  Generally speaking, original creditors trying to collect monies owed to them are not subject to many of the laws regulating debt collection activities.


            However, debt collection laws, both federal and state, do apply to third-party debt collectors.  Thus, for example, under the federal law known as the Fair Debt Collection Practices Act ("FDCPA"), a debt collector cannot use obscene or profane language to abuse the person from whom the debt collector is trying to collect monies.  The FDCPA contains many protections for consumers against the abuses of debt collectors, but only third-party debt collectors.  Further, under the FDCPA, junk debt buyers and their attorneys are considered to be "debt collectors," therefore, the restrictions of the FDCPA apply. 


            4.         New Mexico Law Requires Collection Agencies to Have a License.  

Under state law known as the "Collection Agency Regulatory Act" or "CARA," third-party debt collectors fall within the definition of  a "collection agency," therefore, they must have a collection agency license in order to collect on a debt.  If the debt collector doesn't have a license to collect debts when it should, any attempt  to collect on a debt is unlawful under CARA, and is considered a fourth-degree felony.


            However, as written, the definition of a "collection agency" under New Mexico law is not precisely the same as a "debt collector" under the federal law, the FDCPA.  While many junk debt buyers are third-party debt collectors and thus, most likely fall within the definition of a "collection agency"-- in which case, they do need a license in order to collect on a debt from a New Mexico resident -- it's not always crystal clear.  It will depend on the facts and circumstances.  


5.         The Lawyer Suing on Behalf of a Debt Collector Must be Licensed to Practice Law in the State of New Mexico -- And The Lawsuit Must be Brought in a New Mexico Court. 

        The overwhelming majority of junk debt buyers and third-party debt collectors are out-of-state entities.  Many debt collectors hire out-of-state law firms who do not have attorneys licensed to practice law in the State of New Mexico. 


            However, in order to sue you on a debt in a New Mexico court, the lawyer representing the junk debt buyer or debt collector must be licensed to practice law in the State of New Mexico.  If the lawyer whose name appears at the bottom of the lawsuit is not licensed to practice law in New Mexico, he or she cannot represent the debt collector in New Mexico courts.


            Generally speaking, if you are a New Mexico resident, you must be sued in a New Mexico court of law (unless you have knowingly waived that right and consented to be sued elsewhere).  Many out-of-state debt collectors and junk debt buyers file debt collection lawsuits against New Mexico consumers in other state courts.  With some exceptions, other courts in other states do not have jurisdiction over you or the lawsuit.  Therefore, if you are a New Mexico resident but you are being sued in an out-of-state court or by an attorney who is not licensed to practice law in the State of New Mexico, you may have a legal defense to the lawsuit.  Consult attorney if you have questions about any lawsuit.  


Debt Collectors and Your Rights Under the Law

  Consumers do have rights under the law.  The largest and most important body of law that regulates the debt collection industry and provides important protections to consumers is the federal Fair Debt Collections Practices Act (“FDCPA”).  Although the FDCPA applies only to third-party debt collectors and debt collection attorneys, it serves as a model of “best practices” for the entire debt collection industry, in-house collection departments included. 

Under the FDCPA, debt collectors cannot call you before 8 a.m. (local time) or after 9 p.m.  They cannot call you repeatedly during the course of a day, use profanity or racial epithets, or otherwise harass, humiliate or embarrass you.  While they can call other individuals to request contact information or inquire about a debtor’s whereabouts, they cannot discuss the debt with anyone other than the debtor, a co-debtor, or a debtor’s authorized representative.

 Other Things Debt Collectors Cannot Legally Do:

*Threaten you with arrest, imprisonment, or charges of fraud if you do not pay a  debt.

*Call or threaten to call your employer and have your wages garnished.

*Falsely represent that it he or she is a lawyer, affiliated with a law firm and/or that the caller is a fraud investigator.

 *Continue to call you, after you have told the debt collector to stop calling.

 *Continue to call you at work, if they know or have been informed that your employer prohibits such calls.

 *Call family members, relatives, friends or neighbors and speak with them about your debt.


In addition, other laws may apply to debt collection activities, to include New Mexico’s Unfair Practices Act, the federal Telephone Consumer Protection Act, and New Mexico's Collection Agency Regulatory Act.  The first two of these laws apply both to third-party debt collectors and attorneys as well as to in-house collection departments.  

Find out more about your legal rights by clicking on one of the hyperlinks listed below for the National Consumer Law Center, the Federal Trade Commission, or one of the articles about the FDCPA and debt collection.  If you’ve been sued by a debt collector or are being harassed, call the Law Offices of Deborah M. DeMack.    


Junk Debt Buyers & Other Third Party Debt Collectors

If you have been harassed by debt collectors, oftentimes, they are junk debt buyers.  Junk debt buyers purchase defaulted debt -- credit card debt, auto loans, medical bills, student loans, even debts discharged in bankruptcy -- for pennies on the dollar. They purchase debt in portfolios either from the original creditors or from the junk debt buyers and debt brokers. Many junk debt buyers, from outside New Mexico, operate illegally without a license.* They then attempt to collect the debts using a variety of methods, ranging from telephone calls to lawsuits.

Filing for bankruptcy puts an end to these collection efforts -- or it should. Nevertheless, you may still be a victim of of abuse and harassment by debt collectors who have overstepped the limits of the law.

*Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq. states: “
a debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt."

** Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq.(“a debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.” § 1692d); see also Unfair Practices Act, NMSA 1978, §§ 57-12-1 et seq.(“an unfair or deceptive trade practice means any false or misleading oral or written statement, visual description or other representation of any kind knowingly made in connection with the sale, lease, rental or loan of goods or services or in the extension of credit or in the collection of debts by a person in the regular course of his trade or commerce which may, tends to, or does deceive or mislead any person.” §57-12-2(D)).



Under FTC Settlement, Debt Buyer Agrees to Pay $2.5 Million for Alleged Consumer Deception

Firm Also Will Notify Consumers with "Time-Barred" Debt That It Will Not Sue to Collect 

One of the nation's largest consumer debt buyers has agreed to pay a $2.5 million civil penalty to settle Federal Trade Commission charges that it made a range of misrepresentations when trying to collect old debts. In addition, the company, Asset Acceptance, LLC, has agreed to tell consumers whose debt may be too old to be legally enforceable that it will not sue to collect on that debt.

The proposed settlement order resolving the agency's charges also requires that when consumers dispute the accuracy of a debt, Asset Acceptance must investigate the dispute, ensuring that it has a reasonable basis for its claims the consumer owes the debt, before continuing its collection efforts. The proposed order also bars the company from placing debt on consumers' credit reports without notifying them about the negative report.

The U.S. Department of Justice filed the proposed settlement order this week at the FTC's request. “Most consumers do not know their legal rights with respect to collection of old debts past the statute of limitations,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection. “When a collector tells a consumer that she owes money and demands payment, it may create the misleading impression that the collector can sue the consumer in court to collect that debt. This FTC settlement signals that, even with old debt, the prohibitions against deceptive and unfair collection methods apply.”

The FTC's action – alleging that Asset Acceptance violated the FTC Act, the Fair Debt Collection Practices Act, and the Fair Credit Reporting Act – is part of the FTC's continuing efforts to protect consumers adversely affected by the struggling economy. The agency today also issued a new publication for consumers, "Time-Barred Debts: Understanding Your Rights When It Comes to Old Debts". Michigan-based Asset Acceptance buys unpaid debts from credit originators such as credit card companies, health clubs, and telecommunications and utilities providers, as well as other debt buyers, and attempts to collect them. Asset Acceptance has purchased tens of millions of consumer accounts for pennies on the dollar. It targets accounts that other collectors have pursued and are more than a year past due, and in some cases attempts to collect debt that is more than 10 years old.

Some of this debt is too old to be legally enforceable – state statutes of limitations cut off the right to sue to collect the debt after some period of time has passed, depending on the state and the type of debt. And many consumers do not know that making a partial payment of a debt may reset the state law's clock on the collector's ability to take legal action. The FTC's nine-count complaint charged Asset Acceptance with:

·      misrepresenting that consumers owed a debt when it could not substantiate its representations;

·      failing to disclose that debts are too old to be legally enforceable or that a partial payment would extend the time a debt could be legally enforceable;

·      providing information to credit reporting agencies, while knowing or having reasonable cause to believe that the information was inaccurate;

·      failing to notify consumers in writing that it provided negative information to a credit reporting agency;

·      failing to conduct a reasonable investigation when it received a notice of dispute from a credit reporting agency;

·      repeatedly calling third parties who do not owe a debt;

·      informing third parties about a debt;

·      using illegal debt-collection practices, including misrepresenting the character, amount, or legal status of a debt; providing inaccurate information to credit reporting agencies; and making false representations to collect a debt; and

·      failing to provide verification of the debt and continuing to attempt to collect a debt when it is disputed by the consumer.

The proposed settlement requires that when Asset Acceptance knows or should know debt may not be legally enforceable under state law – often referred to as "time-barred" debt – it must disclose to the consumer that it will not sue on the debt and, if true, that it may report nonpayment to the credit reporting agencies. Once it has made that disclosure, it may not sue the consumer, even if the consumer makes a partial payment that otherwise would make the debt no longer time-barred. The order also prohibits the company from:

·      Making any material misrepresentation to consumers and making any representation that a consumer owes a particular debt, or as to the amount of the debt, unless it has a reasonable basis for the representation. To ensure it has such a basis, the order requires Asset Acceptance to investigate consumer disputes before continuing collection efforts;

·      "Parking" – or placing – debt on a consumer's credit report when it has failed to notify the consumer in writing about the negative report, and;

·      Violating the Fair Credit Reporting Act and the Fair Debt Collection Practices Act, in the ways alleged in the complaint. 

The FTC has issued a new publication to help consumers understand how debt collectors attempt to collect old debts, along with their rights in these cases. "Time-Barred Debts: Understanding Your Rights When It Comes to Old Debts" provides information on when a debt is too old for a collector to sue, what consumers should do if a debt collector calls about a time-barred debt, and whether a consumer should pay a debt that's considered time-barred. It also provides advice on what consumers should do if they are sued for a time-barred debt, including defending themselves in court and asserting their rights under the Fair Debt Collection Practices Act. Finally, it has links to other FTC publications and videos about dealing with debt.

The Commission vote authorizing the staff to refer the complaint to the Department of Justice was 4-1, and the vote to approve the proposed consent decree, was 3-1, with Commissioner J. Thomas Rosch voting no for both. The DOJ filed the complaint and proposed consent decree on behalf of the Commission in U.S. District Court for the Middle District of Florida today. The proposed consent decree is subject to court approval. NOTE: The Commission authorizes the filing of a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest.

The complaint is not a finding or ruling that the defendant has actually violated the law. This consent decree is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent decrees have the force of law when signed by the District Court judge. The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.

Find out more about your legal rights by clicking on one of the hyperlinks listed below for the Consumer Financial Protection Bureau, the Federal Trade Commission or the National Consumer Law Center, or by clicking on one of the articles about the FDCPA and debt collection.

National Consumer Law Center

Consumer Financial Protection Bureau

Consumer Protection Division, Office of the  Attorney General, State of New Mexico

More Articles about the FDCPA and Debt Collection

Fair Debt Collection, a Guide for Consumers from the Federal Trade Commission

Article on the government's crackdown on debt collection

Under a Federal Trade Commission settlement, debt buyer "Asset Acceptance" (a junk debt buyer) agrees to pay $2.5 million for alleged Consumer Deception