Asset Acceptance, one of the largest consumer debt buyers in the U.S., will pay a $2.5 million civil penalty to settle Federal Trade Commission charges that it made a range of misrepresentations in attempts to collect old debts.

As part of the settlement, Asset Acceptance has also agreed to tell consumers whose debt may be too old to be legally enforceable, that it will not sue to collect that debt.

The U.S. Department of Justice filed the proposed settlement order this week at the FTC's request. The proposed order bars Asset Acceptance from putting debt on consumers' credit reports without notifying them, and that when consumers dispute the accuracy of a debt, Asset Acceptance must investigate the dispute, before continuing to collect. The proposed consent decree is subject to court approval.

In a statement, David Vladeck, Director of the FTC’s Bureau of Consumer Protection said the following:

When a collector tells a consumer that she owes money and demands payment, it may create the misleading impression that the collector can sue the consumer in court to collect that debt. This FTC settlement signals that, even with old debt, the prohibitions against deceptive and unfair collection methods apply.

Asset Acceptance buys unpaid debts from credit originators (credit card companies, health clubs, telecommunications and utilities providers), as well as other debt buyers. According to the FTC, Asset Acceptance has purchased tens of millions of consumer accounts for pennies on the dollar, and targets accounts that other collectors have pursued and are more than a year past due—In some cases more than 10 years old. Some of this debt is too old to be legally enforceable because depending on the state and the type of debt, statutes of limitations cut off the right to sue to collect the debt after a certain period of time has passed.

"Most consumers do not know their legal rights with respect to collection of old debts past the statute of limitations," Vladeck said. Many consumers don't know that making a partial payment can reset the state law's clock on the collector's ability to take legal action. The FTC today also came out with a publication for consumers, Time-Barred Debts: Understanding Your Rights When It Comes to Old Debts.

Under FTC Settlement, Debt Buyer Agrees to Pay $2.5 Million for Alleged Consumer Deception [FTC]