The new rule, which goes into effect next November, bans lawsuits and legal threats over time-barred debt, sometimes called “zombie” debt. It also prohibits creditors from “parking” debts on a consumer’s credit report without first informing them and requires collectors to inform debtors of their rights at the start of collections. Debt is considered time-barred if it is older than the statute of limitations provided under state laws. These are usually three to six years, although longer in some places or for some types of debt. Consumer groups said the new rule doesn’t go far enough to protect the public from debt collectors because it leaves collectors free to pursue time-barred debts as long as they don’t launch or threaten lawsuits. “We are in the midst of a global pandemic with vast financial implications for American families,” Rachel Gittleman, financial services outreach manager with the Consumer Federation of America, said in a statement. “Consumers are in desperate need of more protections, and this rule simply falls short.” Consumer advocates encouraged President-elect Joe Biden, who is empowered to replace the leadership of the CFPB, to revisit the rule and strengthen the protections. The CFPB under President Donald Trump has come under fire from a myriad of groups for favoring business over consumer protection.
