Social Security Halts Collection of Debts Older than 10 Years

The Social Security Administration announced Monday that it will immediately stop efforts to collect on taxpayers’ debts to the government that are more than 10 years old. This means the SSA will no longer seize state and federal refunds from people who had relatives who owed money to the agency.

The Washington Post reported that the SSA’s practice impacted the refunds of 400,000 Americans. In many cases, the people whose refunds were intercepted had never heard of any debt, and the debts dated as far back as the middle of the past century.

In 2008, the farm bill lifted the statute of limitations on government debts that are more than 10 years old. Next, the U.S. Treasury Department set up rules for the government to settle these old debts with taxpayers’ refunds. Altogether, the department has collected about $2 billion in intercepted tax refunds this year, $75 million of which was for debts beyond the 10 year statute of limitations.

While the SSA will no longer seize federal and/or state refunds to pay for government debts past the federal statute of limitations,  this does not have any impact on other time-barred debts on a state-by-state basis. Also, there’s still a complicated federal knot to untangle when it comes to time-barred debt. The Consumer Financial Protection Bureau and the Federal Trade Commission both took a stance on the issue in March when the agencies filed a joint amicus brief with the Sixth Circuit Court of Appeals in the case of Buchanan v. Northland Group, where a collector sent a debtor a dunning letter with an offer to settle a debt upon which the statute of limitations had expired. The FTC and CFPB claim that “actual or threatened litigation is not a necessary predicate for an FDCPA violation in the context of time-barred debt.”

In Time is Running Out: Statute of Limitations for Debt Collection, insideARM.com breaks down how all 50 states view oral, written, promissory and open-ended account debt. Also, learn how each state handles credit card debt; it’s not as cut and dry as you’d think!