State Legislature 2013 session

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12. Protect Washington from Zombie Debt: SUPPORT HB1069

Poverty Action has made protecting consumers from predatory debt practices, like zombie debt and debt settlement, one of its top priorities in the 2013 legislative session. After building on our successes passing landmark consumer protection bills, we are mobilizing our network to support HB 1069, which will help regulate an alarming new predatory industry that deals with “Zombie Debt.” The Zombie Debt industry is largely unregulated and profits off deceptive practices that intimidate people into paying on old debt or “debt” that they might not even owe.

Like a zombie coming back from the dead, old debt comes back to haunt consumers.
Zombie debt (also known as time-barred debt) occurs when companies sell their old debts for pennies on the dollar to third-party debt buyers. Debt buyers then try to collect on old debts or debts that have already been paid (and sometimes never even owed in the first place). Once a consumer makes a partial payment, the clock restarts on the statute of limitations. The burden of proof lands on consumers, many of whom do not have documentation to prove that the debt is not owed anymore or that they never owed it.

Debt buyers are flooding our court systems.

Debt buyers are increasingly taking advantage of overwhelmed state courts and loopholes in the law by filing lawsuits to collect on the debt they purchase. Debt buyer cases typically result in default judgments, meaning that consumers are not appearing in court to defend against the suits. This is often because consumers aren’t getting notice of the suits, they might not know why they are being sued, or they lack representation. Many consumers first learn that there is a judgment against them when wages are garnished, property is seized, or bank accounts are seized.

Low- and moderate-income consumers are disproportionately affected.

One study found that 91% of people sued and 95% of people with default judgments entered against them lived in low and moderate-income communities. At a time when struggling families need every penny to survive, zombie debt is threatening Washingtonians’ well-being and economic security.

HB 1069 is being considered by the legislature right now. This legislation would prevent debt buyers from:

•Suing debtors for time-barred debt (outside the statute of limitations);
•Suing debtors without sufficient proof that the debt buyer actually owns the debt;
•Not having proof of assignments of the debt to indicate a chain of title for the debt.