OLYMPIA – Washington residents struggling with consumer debt could get some help, including lower interest rates and restrictions on collection agencies, from a series of bills the Senate passed Monday.
Lawmakers voted to repeal a law that dates to 1881 – some eight years before Washington became a state – that allowed creditors to revive debts no longer legally enforceable by tricking debtors into making a payment.
The statute of limitations on a debt based on a written contract is six years, so a lawsuit to collect on the unpaid portion of that debt must be filed within six years after the last payment made. But the 1881 law allows the calendar on a new statute of limitations to start if another payment was made after that six-year period.
Senate Law and Justice Committee Chairman Jamie Pedersen, D-Seattle, called it the “Zombie Act” because some collection agencies had been able to convince debtors into making small payments on expired debts without telling them they had no legal obligation to do so.
“If you make a payment, you revive that debt,” he said.
Sen. Mike Padden, the ranking Republican on the committee, said he would see cases like that when he was a Spokane County District Court judge and they always bothered him.
“But you do have to follow the law,” Padden, of Spokane Valley, said. Removing the legal obligation doesn’t mean a person would be prevented from repaying the debt if they felt a moral obligation to do so, he added.
The Senate also passed a bill reducing the maximum interest on a court judgment against a debtor to 9%, down from 12%, and allowing the debtor to protect more assets from garnishment. A separate bill lowered the rate on medical debt to 9% and required a medical facility to wait 180 days before turning an unpaid bill over to a collection agency.
Another bill would prohibit collection agencies from serving a debtor with a summons in a debt collection lawsuit unless the court documents have been filed.
Pedersen said the package of bills, which all passed by significant margins, would protect Washington consumers by allowing them to responsibly pay down debt.
Padden countered that the help from some, such as the waiting period on medical debts, may be limited. Many hospitals already wait that long, or even longer, to avoid the fees that come from turning a debt over to a collection agency, he said.
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