If a company that bought your debt sues you after the limitations period has run, Texas law says it should not have filed the case, and paying something on the old debt does not bring the right to sue back to life.
Added Finance Code § 392.307. A debt buyer may not directly or indirectly sue or start arbitration on a consumer debt after the limitations period in Civ. Prac. & Rem. Code § 16.004 or Bus. & Com. Code § 3.118 has run; a barred claim is not revived by payment, reaffirmation, or other activity; and a debt buyer collecting a barred debt must put a required notice in its first written communication.
- Citation
- Tex. H.B. 996, 86th Leg., R.S. (2019), Acts 2019, ch. 1055; Tex. Fin. Code § 392.307
- Court or agency
- Texas Legislature
- Date
- September 1, 2019
- Law
- TDCA, Texas law
Summary
H.B. 996, called the Fair Consumer Debt Collection Act, took effect September 1, 2019. It added § 392.307 to the Texas Debt Collection Act, aimed specifically at debt buyers. It predates our 2020-forward coverage but remains the backdrop for most debt-buyer suits filed in Texas today.
Background
Most consumer debt claims in Texas, including credit card balances, must be brought within four years under Civil Practice and Remedies Code § 16.004. Before 2019, an expired limitations period was a defense the consumer had to raise. Nothing stopped a debt buyer from filing on very old accounts, and in many states a small payment could restart the clock.
H.B. 996 was signed on June 14, 2019, and took effect September 1, 2019. Its first section names it the Fair Consumer Debt Collection Act. We include it here as background because nearly every debt-buyer case we see today is filed against this rule.
What changed
The bill added § 392.307 to the Texas Debt Collection Act (Finance Code chapter 392):
- Who it covers. A “debt buyer” is anyone who buys or otherwise acquires a consumer debt from a creditor or a later owner, whether it collects the debt itself, hires a collector, or hires a lawyer to sue. Two groups are excluded: someone who picks up defaulted debt only incidentally within a portfolio that is mostly performing debt, and check-services companies.
- No suits on barred debt. A debt buyer may not, directly or indirectly, file suit or start arbitration on a consumer debt after the limitations period in § 16.004 (or § 3.118 of the Business & Commerce Code, for negotiable instruments) has expired.
- No revival. If the claim is barred, it is not revived by a payment, an oral or written reaffirmation, or “any other activity on the consumer debt.”
- Required notice. When a debt buyer collects on a barred debt, its first written communication must say, in conspicuous type of at least 12 points, that the law limits how long you can be sued and that because of the debt’s age the buyer will not sue. The exact wording changes depending on whether the debt can still be credit-reported.
- No criminal penalty. The bill amended § 392.402 so that the chapter’s misdemeanor penalty does not apply to violations of § 392.307. Civil remedies under the chapter still apply.
The changes apply to debt-buyer collection actions taken on or after September 1, 2019.
Our take
Section 392.307 is one of the most useful consumer protections in Texas debt law, but it is not self-executing. A debt buyer can still file a stale case, and if the consumer does not answer, the court may grant a default judgment without anyone checking the dates.
The no-revival rule matters a great deal in practice. Collectors sometimes ask for a “good faith” payment on an old account. Under § 392.307(d), that payment does not give a debt buyer a new right to sue. The statute applies only to debt buyers, though. Original creditors and their own collection agencies are governed by the general limitations rules.
Limitations questions are often closer than they look. When the four years started running depends on the account and the documents, and debt buyers frequently plead the dates vaguely.
What it means if you’re sued in Texas
If you are sued by a company you never did business with, find out when the account went into default and when the suit was filed. If more than four years passed, raise limitations in a written answer filed by the deadline on your citation, because a defense you never raise cannot help you. Do not make a payment or sign a payment agreement on an old account until you understand how it affects your rights. A free case review is available if you would like us to look at the dates in your case.
Takeaway
Check the dates on any debt-buyer lawsuit. If the four-year period ran before suit was filed, limitations is a defense you must raise in your answer, and the filing itself may support a claim under the Texas Debt Collection Act.
Sources
Primary authority
- H.B. 996 enrolled bill text (Texas Legislature Online)
- H.B. 996 bill history (Texas Legislature Online)
- Texas Finance Code chapter 392, including § 392.307 (Texas Constitution and Statutes)
Secondary sources
- Committee bill analysis of H.B. 996 (Texas Legislature Online)
- Texas Amends Debt Collection Law to Add New Requirements for Debt Buyers (Consumer Finance Monitor, Ballard Spahr)
This summary and analysis are general information, not legal advice. Later decisions, amendments or agency actions may change the law; check the current status before relying on it.