Most consumer debts are subject to a statute of limitations. This means that after a certain length of time has elapsed, the creditor can no longer sue the consumer for the debt and the debt can no longer be reported to credit reporting agencies. The exact length of time that must elapse before the debt becomes “stale” differs from state to state. The complaint for this New York class action claims that debt collector Ditech Financial, LLC violated state and federal laws by threatening to report stale debts to credit reporting agencies.
The class for this action is
An Eastern District of New York Subclass has also been proposed.
Ralph and Rosemary Perez allegedly owed money for a defaulted promissory note, for a loan from Household Finance Corporation that they incurred for personal, family, or household purposes. The last payment date on the note was no later than October 29, 2010.
On or around June 7, 2018, Ditech sent substantially identical collection letters to both persons, attempting to collect the debt. The complaint quotes each letter as saying, “We may report information about your account to credit bureaus. Late payments, missed payments, or other defaults on your account may be reflected in your credit report.”
According to the complaint, this violates the federal Fair Debt Collection Practices Act (FDCPA) because the statute of limitations for reporting the debt has already expired. It would therefore not be legal for Ditech to report the debt to credit reporting agencies.
The complaint claims that the statement is deceptive and misleading under the law, but that it causes recipients of such a letter to fear that their credit rating would be lowered because of the debt. By giving this false impression, the complaint says, it pressures the recipients to pay under false pretenses.
The letter also violates New York’s General Business Law, the complaint says, which forbids deceptive and misleading acts and practices committed in the conduct of a business.