State senators in Arizona recently voted to allow banks and collections agencies to pursue defaulted credit card debt for up to six years, according to a report from the Yuma Sun. However, critics say the bill only helps collections agencies and not the actual lenders that extended the credit in the first place.
“The institution ends writing them off and then selling the debt for pennies on the dollar to these out-of-state debt buyers,” State Sen. Paula Aboud of Tucson told the newspaper. “Some years later this debt buyer jumps on them for a $2,000 debt that is now $8,000 to $10,000 because of the six-year extended period of time where the interest and fees has accumulated.”
Many collections agencies may pursue debts even after the existing window in a state expires because if they can convince the debtor to pay down even part of the defaulted loan, the cycle starts all over again.