Can an Assignee of a Creditor Sue in Texas?

At common law, rights under a contract can be freely assigned to a third party with some narrow exceptions that are inapplicable in most creditor/debtor relationships. An assignee is an individual to whom a creditor, or assignor, has transferred his rights and duties under the terms of an existing contract with the debtor. Credit card companies frequently sell or assign their delinquent or poorly performing accounts to third-party purchasers of bad debt, often for pennies on the dollar. Under Texas law, it is perfectly legal for an assignee of a creditor to sue a delinquent debtor for breach of the contract.

Effects

Legally, the purchaser of the bad debt stands in the shoes of the original creditor and acquires all of the rights and obligations under the terms of the original loan contract. Thus, in the event the debtor has defaulted pursuant to the terms of repayment of the loan or revolving credit agreement, the assignee, if it chooses, can file suit against the debtor for payment of the remaining balance due. If contained in the original card agreement, the assignee is also entitled to recover reasonable attorney's fees and court costs it incurs in collecting the default balance.

Original Terms Can't be Changed

The assignee acquires no greater rights nor can he impose any additional duties on the debtor other than those stipulated in the original credit agreement. In the context of credit card accounts, an assignee would be prohibited from assessing any additional late fees or penalties that go beyond the scope of the terms and conditions of the original credit card agreement signed by the debtor. Any such changes or additional duties imposed by the assignee are legally unenforceable.

Statute of Limitations

Since the assignee stands in the shoes of the assignor, any suit filed by the assignee must comply with the applicable statute of limitations period established by Texas law. Assignment of the account by the creditor does not toll the running of the statute of limitations. The clock commences from the date the credit account first went into default.

Fair Debt Collection Practices Act

The assignee must comply with the provisions of the Fair Debt Collection Practices Act in all of its communications with the debtor. The assignee cannot threaten to sue the debtor if it has no intention of carrying through on the threat. In addition, it is a violation of the FDCPA for the assignee to threaten suit if he knows that any civil action would be barred by the Texas statute of limitations.