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Mississippi has some of the strictest debt collection laws in the U.S., making it unique for debt buyers, sellers, and collectors. Here's what you need to know:
Mississippi’s laws require careful compliance and portfolio management to avoid legal and financial risks.
Mississippi Debt Collection Statute of Limitations by Debt Type
In Mississippi, most debts - including credit card, medical, oral, and written contract debts - have a 3-year statute of limitations. This period begins 30 days after the last payment is made.
However, there’s an exception under the Uniform Commercial Code (UCC). Debts tied to the sale of goods have a longer statute of limitations, lasting 6 years under Mississippi Code § 75-2-725. If a creditor secures a court judgment, that judgment remains valid for 7 years and can be extended by filing for renewal before it expires.
| Debt Type | Statute of Limitations | Mississippi Code |
|---|---|---|
| Credit Card Debt | 3 years | § 15-1-29 & § 15-1-31 |
| Oral Contracts | 3 years | § 15-1-29 |
| Written Contracts | 3 years | § 15-1-49 |
| UCC Sale of Goods | 6 years | § 75-2-725 |
| Domestic Judgments | 7 years (renewable) | § 15-1-43 |
| Foreign Judgments | 3 years | § 15-1-45 |
For judgments issued in other states, known as foreign judgments, Mississippi allows a 3-year enforcement period.
Certain actions by the debtor can reset the statute of limitations, effectively restarting the clock. These include:
Additionally, if a debtor provides a written acknowledgment of the debt, signed by them, the statute resets. This is outlined in Mississippi Code § 15-1-73. For accounts not acknowledged in writing, creditors must file collection actions within three years, as per Mississippi Code § 15-1-29.
Some situations can pause (or toll) the statute without restarting it. These include:
Mississippi’s strict timeframes have a direct impact on debt buyers and sellers, especially when it comes to evaluating and acquiring portfolios. Debt buyers must carefully verify the breach date (30 days after the last payment) to ensure they aren’t purchasing debts that have passed the statute of limitations. Once the 3-year limit expires, debts become legally unenforceable, and pursuing them would violate both Mississippi law and the Fair Debt Collection Practices Act (FDCPA).
For judgment portfolios, the 7-year enforceability period offers more flexibility. Creditors can extend this timeframe by filing a renewal suit before the judgment expires. However, once a judgment lapses, enforcement options like wage garnishment, bank levies, and property liens are no longer available.
Debt buyers also need to comply with Mississippi’s requirement to provide written notice of assignment within 30 days of purchasing a debt. Without this notice, they risk losing their legal standing to collect in court, even if the statute of limitations is still active.
In Mississippi, collection agencies are required to secure a City-Business License from the local municipality where they operate, rather than a state-level debt collection license issued by the Department of Banking and Consumer Finance (DBCF). The cost of these licenses typically falls between $15 and $50.
Exception: If your business qualifies as a Debt Management Service Provider - meaning you provide debt liquidation or counseling services - you'll need a license from the Mississippi DBCF. This license comes with an initial fee of $750 and an annual renewal fee of $475. Additional requirements include a $50,000 surety bond and submission of a financial statement reflecting your most recent fiscal year. The DBCF Commissioner will evaluate your financial responsibility, character, and qualifications to ensure ethical and fair business practices.
Additionally, all business entities must register with the Mississippi Secretary of State and maintain "Good Standing" status. Failure to secure necessary licenses can lead to penalties of up to $25 per day for unlicensed debt management activity.
Next, let’s look at the registration rules for debt buyers and sellers.
Mississippi's regulations for debt buyers are relatively straightforward. There is no specific state-level registration required for purchasing or collecting consumer debt portfolios. While the DBCF oversees certain industries like Small Loan companies and Motor Vehicle Sales Finance, "Collection Agency" is not classified as a licensable category under its purview.
Debt buyers, however, must ensure their activities don’t overlap with areas requiring DBCF licensing. For instance, if your operations involve consumer credit counseling or distributing payments on behalf of clients, you'd need to meet the licensing, bonding, and NMLS registration requirements for Debt Management Service Providers.
With registration covered, let’s examine the compliance standards that govern collection practices.
Beyond licensing and registration, debt collection in Mississippi is shaped by strict compliance requirements. While state statutes on debt collection are limited, adherence to the federal Fair Debt Collection Practices Act (FDCPA) is mandatory. Mississippi does have one notable state-specific rule: under Mississippi Code § 15-1-3, the statute of limitations not only bars lawsuits on expired debts but also "extinguishes the right as well as the remedy." Attempting to sue over an expired debt violates both federal and state laws.
Collectors must also observe Mississippi's wage garnishment limits. In most cases, judgment-creditors can garnish up to 25% of a debtor’s wages, but there’s a mandatory 30-day waiting period after a court issues the garnishment order before enforcement can begin. For bank account levies, financial institutions are required to freeze the account for 30 days upon receiving the garnishment order. Additionally, residents aged 70 or older can exempt up to $50,000 in financial accounts from garnishment.
Debt Management Service Providers are subject to additional requirements. They must submit a copy of their consumer agreement, a complete fee schedule, and a detailed explanation of how client payments are processed to the DBCF. Applications and renewals must be filed through the Nationwide Multistate Licensing System (NMLS). Licenses are valid from January 1 to December 31, with no pro-rating for mid-year applications.
In Mississippi, debt collectors have access to certain legal tools to recover debts, but many of these require a court judgment first. For instance, creditors can garnish wages once a judgment is obtained - up to 25% of a debtor's earnings, or as much as 65% for child support. However, wage garnishment cannot begin until a 30-day waiting period has passed. Similarly, bank account levies enable financial institutions to freeze accounts for 30 days after receiving a garnishment order. Judgment liens can also be placed on real estate or personal property for up to seven years. In more severe cases, creditors may seize personal property or initiate non-judicial foreclosure on real estate, but only after a minimum of 90 days.
Once the statute of limitations expires, collectors lose their legal authority to pursue the debt.
Mississippi adheres to the federal Fair Debt Collection Practices Act (FDCPA) for prohibited practices, as the state has no specific laws in this area. Collectors are strictly barred from impersonating law enforcement, using or threatening violence, or contacting a debtor's employer without written permission or a final judgment. They are also prohibited from reaching out to debtors between 9 p.m. and 8 a.m. in the debtor's time zone.
These regulations ensure that debt collection practices are transparent and that consumers are safeguarded from harassment.
Debt management service providers in Mississippi must secure a written agreement from the consumer before offering services. This agreement must include essential details such as the names and addresses of both parties, a detailed description of the services, a breakdown of fees, and a payment schedule showing how funds will be allocated to creditors.
The agreement must also feature a clear warning:
"NOTICE TO CONSUMER: Do not sign this agreement before you read it. You must be given a copy of this agreement".
Additionally, the agreement must disclose the existence of a surety bond and provide contact details for the Mississippi Department of Banking and Consumer Finance (P.O. Box 23729, Jackson, MS 39225-3729 or 1-800-844-2499) for filing complaints.
Both the consumer and the service provider retain the right to cancel the contract by giving written notice, and this cancellation option must be explicitly stated in the agreement. The contract must also identify the federally insured institution where consumer funds are held and authorize the commissioner to access financial records during examinations.
Mississippi enforces strict penalties to ensure compliance with these laws. Operating without a valid debt management license can result in fines of up to $25 per day for unauthorized activity. Additionally, the commissioner can impose civil penalties of up to $500 per violation on licensees or employees who violate the Debt Management Services Act.
Consumers who experience harm from illegal debt collection practices have the right to file lawsuits to recover actual damages, along with court costs and reasonable attorney's fees. Creditors who attempt to garnish more than 25% of wages or act before the 30-day waiting period may face legal challenges and objections from debtors. Furthermore, Mississippi residents aged 70 and older are entitled to extra protections, with up to $50,000 in financial assets exempt from bank garnishment.
Mississippi's legal structure plays a major role in shaping how debt portfolios are valued and managed. One of the standout aspects of the state's laws is the extinguishment rule outlined in MCA § 15-1-3. Once the statute of limitations expires, the debt doesn’t just become unenforceable - it legally ceases to exist. This is a sharp contrast to most states, where the debt remains but cannot be collected through legal means. For debt buyers, this means any accounts past the three-year statute of limitations for credit cards or verbal agreements are essentially worthless.
Additionally, portfolios missing signed written agreements or complete assignment notifications are considered high-risk. These gaps increase the chances of non-compliance, further reducing the portfolio's value. During due diligence, it's also critical to ensure communication logs comply with restrictions, such as avoiding contact between 9 p.m. and 8 a.m., as violations can lead to litigation and diminish portfolio worth.
Pricing models must account for civil liability risks. Violations of Mississippi debt collection laws can lead to lawsuits with penalties that include actual damages or a minimum statutory fine of $500.00, plus attorney's fees. Unregistered out-of-state collectors face administrative fines of $1,000.00 per violation, while operating without proper licensing incurs daily fines of $25.00. These risks make careful pricing adjustments essential when acquiring portfolios.
Given these challenges, robust compliance systems are a must. The next section dives into strategies for maintaining compliance.
Compliance in Mississippi starts with meticulous data management. Debt buyers need to ensure accounts where the statute of limitations has expired are identified and removed, as these debts are legally extinguished and cannot be pursued. Automated systems are invaluable for tracking assignment notifications, ensuring timely updates to maintain legal standing.
Monitoring complaint levels is another key compliance measure. If a company receives five or more written complaints within a 12-month period, it triggers investigations by the Department of Banking and Consumer Finance or the Attorney General's Office of Consumer Protection. To avoid this, portfolio managers should use technology to monitor accounts and maintain detailed compliance records.
These steps are essential for navigating Mississippi's strict legal environment while protecting portfolio value.
Beyond compliance, buyers need to adapt their acquisition strategies to reduce legal risk.
First, confirm that all third-party providers involved in the process hold valid licenses. Operating with unlicensed providers can lead to costly penalties. Ensuring that these licenses are up to date is a straightforward but critical step in avoiding unnecessary fines.
When evaluating portfolios for purchase, buyers must audit for original written agreements that meet Mississippi’s specific requirements. These agreements should include details like mandatory warning notices, surety bond disclosures, and cancellation rights. Portfolios containing accounts tied to illegal practices - such as using "deadbeat lists" or contacting employers without authorization - pose significant legal risks and should be heavily discounted.
Sellers looking to maximize portfolio value should ensure all garnishment actions comply with Mississippi’s rules, including the 30-day waiting period and wage garnishment limits of 25% (or 65% for child support). These measures not only reduce legal exposure but also make portfolios more attractive to buyers.
Mississippi's legal framework for debt management is unique and requires careful attention. One standout element is the extinguishment rule, which renders debts older than three years legally nonexistent. This rule, shared only with Wisconsin, directly affects how portfolios are valued since time-barred debts hold no collectible worth.
Compliance with registration and licensing requirements is another critical area. Non-compliance can lead to heavy fines, including daily penalties, making due diligence in portfolio management essential. Additionally, assignment notices must be issued within 30 days, and creditors must wait 30 days before initiating garnishment actions. Wage garnishments are also capped at 25% of a debtor's disposable earnings.
Violators of these regulations face serious consequences, such as actual damages, a minimum penalty of $500, and attorney's fees. Companies receiving five or more written complaints within a year may prompt further investigations. To navigate these complexities, robust compliance systems are not just helpful - they're necessary.
Technology offers practical ways to tackle these regulatory challenges while improving efficiency. Automated tools can simplify processes like tracking statute of limitations deadlines, flagging accounts nearing the three-year mark, and ensuring expired debts are removed from portfolios.
Debexpert provides tailored tools to assist debt buyers and sellers in managing these complexities. With features like compliance tracking, portfolio evaluation, and automated alerts for judgment renewals or garnishment requirements, Debexpert helps reduce the risk of violations. By centralizing compliance data and transaction records, technology turns Mississippi's intricate legal landscape into a more manageable and efficient process, protecting portfolio value and minimizing legal risks.
To figure out if a debt is time-barred in Mississippi, you’ll need to look at the statute of limitations. For nonnegotiable promissory notes, the limit is six years from the due date or the accelerated date. For demand promissory notes, it’s six years from the date a demand for payment is made. However, if no payment or demand has been made on a demand note for ten years, it’s also considered barred. Be sure to confirm the timeline based on the specific type of debt you’re dealing with.
Once a debt has been resolved or is no longer legally enforceable, debt collectors are not allowed to contact you or report it. When the statute of limitations expires, it usually removes both the ability to collect the debt and any legal options to enforce payment.
A debt buyer must provide written documentation to verify the debt. This should include:
Having this information ensures transparency and confirms the legitimacy of the debt collection process.
More than a decade of Ivan's career has been dedicated to Finance, Banking and Digital Solutions. From these three areas, the idea of a fintech solution called Debepxert was born. He started his career in Big Four consulting and continued in the industry, working as a CFO for publicly traded and digital companies. Ivan came into the debt industry in 2019, when company Debexpert started its first operations. Over the past few years the company, following his lead, has become a technological leader in the US, opened its offices in 10 countries and achieved a record level of sales - 700 debt portfolios per year.
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