California Governor Jerry Brown has signed into law a bill that will require debt collectors to provide notification to individuals when attempting to collect a debt where the statute of limitations has expired.
The law will go into effect on Jan. 1, 2019.
The state legislature had passed the bill, Assembly Bill 1526, in late August.
When attempting to collect on a time-barred debt in California, where the debt has not passed its date of obsolescence under Section 605(a) of the Fair Credit Reporting Act, a collector must include the following information in its first written communication with an individual:
“The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it. If you do not pay the debt, [insert name of debt collector] may [continue to] report it to the credit reporting agencies as unpaid for as long as the law permits this reporting.”
If the time-barred debt is passed its date of obsolescence under Section 605(a) of the FCRA, the following disclaimer must be included in the first written communication with an individual:
“The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it, and we will not report it to any credit reporting agency.”
The law also specifies when the four-year statute of limitations starts in order to be eligible to file a lawsuit as a means of attempting to collect on a unpaid debt. An action must be brought within four years in cases in order to recover:
- upon a book account whether consisting of one or more entries;
- upon an account stated based upon an account in writing, but the acknowledgment of the account stated need not be in writing; or
- a balance due upon a mutual, open and current account, the items of which are in writing. Existing law provides, however, that where an account stated is based upon an account of one item, the time shall begin to run from the date of the item, and where an account stated is based upon an account of more than one item, the time shall begin to run from the date of the last item.
