Legislation set to be introduced in Minnesota this month would ban the "re-aging" of delinquent consumer debts, making them harder to collect — particularly when the amounts owed cannot be verified.
The bill would require debt buyers filing collection lawsuits to produce documents that prove the borrowers being sued actually owe the debts.
That paperwork includes a copy of the contract or written evidence of the original debt, an affidavit stating the date and amount of last payment and written proof that the collection company does, indeed, own the account.
Failure to do so could result in fines reaching $2,500 per violation and consumers would have the right to sue for damages.
Under current state law, collectors can renew long-delinquent debts even when the statute of limitations has expired by convincing consumers to make small payments, which renews the default date.
The bill set to be introduced would make it impossible for debt buyers to do this.
Any legal action also would have to include a signed affidavit stating the debt has not passed the statute of limitations.
Minnesota is one of just a handful of states that enable collection agencies to initiate a lawsuit against a debtor simply by serving a summons, and without filing documents with the court.
Many consumers are unaware they have been sued until it's too late, and the collection firm has won a default judgment. Other states have passed legislation requiring greater disclosure by debt buyers.