Debt that comes back to life.
All states have a statute of limitations, a deadline by which a creditor has to sue you to collect a debt.
In Michigan, that limit is 6 years, from the date of the last payment.
Lots of debts are sold by the original creditor,
So, if you have not paid for 5 years and 9 months, and make any payment, the clock starts to run again.
Your payment brings that debt back to life.
The Consumer Protection Finance Bureau is being urged to outlaw the practice ofasking people to make small payments on debts on which the statute is about to run.
“Debt collectors take advantage of the confusing laws governing the collection of zombie debt to induce people, including seniors, to pay debts that have expired or may not even be theirs,” said co-author Margot Saunders, also an attorney with the National Consumer Law Center. “We hope that the CFPB will issue rules that simply ban collection of time-barred debt.”
More than 1 in 3 adults with credit reports have debt in collections, according to a 2014 report by the Urban Institute, and many of these debts are quite old. A 2013 study by the Federal Trade Commission (FTC) found that more than 30 percent of the debt purchased by the nation’s largest debt buyers from other debt buyers was over six years old. Smaller debt buyers often purchase and attempt to collect on even older debt. One-third of debt collection complaints to the CFPB also involved debts not owed by the consumer.
Another Subprime Crisis?
Yeah, mortgages were first.
Remember? Home prices could only go up. 125% loan to equity. Second mortgage to finance the down payment. No doc loans.
We know how that worked out.
Well, it seems to be happening again, with sub-prime auto loans. High interest loans to high risk borrowers, packaged into securitized trusts as collateral for bonds.
What could go wrong?
Across the country, there is a booming business in lending to the working poor — those Americans with impaired credit who need cars to get to work. But this market is as much about Wall Street’s perpetual demand for high returns as it is about used cars. An influx of investor money is making more loans possible, but all that money may also be enabling excessive risk-taking that could have repercussions throughout the financial system, analysts and regulators caution.
Now questions are being raised about whether this hot Wall Street market is contributing to a broad loosening of credit standards across the subprime auto industry. A review by The New York Times of dozens of court records, and interviews with two dozen borrowers, credit analysts, legal aid lawyers and investors, show that some of the companies, which package and sell the loans, are increasingly enabling people at the extreme financial margins to obtain loans to buy cars.
Gee, it sounds so familiar.