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Posts Tagged ‘FDCPA’

U.S. Supreme Court Finds General Discovery Rule Inapplicable to the SOL for FDCPA Violations

Posted on: January 16th, 2020

By: Nicole L. Graham

In Klemm v. Rotkiske, No. 18-328, 589 U.S. ____ (2019), the United State Supreme Court unanimously agreed there is no blanket discovery rule that, as a matter of statutory interpretation, applies to all cases arising under the Fair Debt Collection Practices Act (“FDCPA”).  The majority held that the plain text of 15 U.S.C. §1692k(d) unambiguously states the date of the violation starts the clock on the one-year limitations period.  The Court declined Rotkiske’s request to read into the statute a provision that limitations period begins to run on the date on which the violation occurs or the date of discovery of such violation.  Justice Thomas, writing for the majority, found it clear from the face of the text that “[t]he FDCPA limitations period begins to run from the date the alleged FDCPA violation actually happened.”  Accordingly, the limitations period for an FDCPA claim arising from the filing of a collection action complaint begins to run from the date the action is filed and not from the date the debtor is served the complaint.  Similarly, the limitations period for an FDCPA claim based on a debt collection notice begins to run from the date of the notice and not from the date the notice is received.

The Court did, however, leave the door open to the possible application of an equitable “fraud-specific discovery rule.”  The Court declined to decide whether the text of 15 U.S.C. §1692k(d) permits the application of equitable doctrines because Rotkiske failed to preserve the issue before the Third Circuit and failed to raise the issue in his petition for certiorari.

Justice Sotomayor issued a concurring opinion to note that the Court’s decision does not prevent parties from invoking an equitable “fraud-specific discovery rule.”  Justice Ginsburg, the lone dissenter, felt Rotkiske preserved the equitable “fraud-specific discovery rule” argument in his petition for certiorari, and found the allegations of the complaint should suffice under the equitable “fraud-specific discovery rule” to permit adjudication of Rotkiske’s claim on the merits.

Because the question of the applicability of equitable exceptions to the FDCPA’s statute of limitations remains unresolved, it would not be surprising to see the issue before the Supreme Court again soon.

If you have any questions or would like more information, please contact Nicole Graham at [email protected].

Eleventh Circuit Holds That Debt Collector Did Not Violate FDCPA Even Though It Misstated Name of Creditor In Collection Letter

Posted on: November 19th, 2018

By: Bill Buechner

The Eleventh Circuit very recently affirmed a district court’s ruling that a debt collector did not violate the Fair Debt Collection Practices Act even though the collection misstated the name of the creditor to whom the consumer owed the debt.

In Lait v. Medical Data Sys., 2018 U.S. App. LEXIS 31814 (11th Cir. Nov. 9, 2018) (per curiam), the plaintiff incurred medical expenses provided to him by Enterprise Medical Center. A debt collector sent the plaintiff a letter seeking to collect on the debt. The letter indicated that the debt collector was seeking to collect on the “accounts indicated below.” After two intervening paragraphs, the letter listed “Medical Center Enterprise” next to a service date, the plaintiff’s name, and an outstanding balance of $412. The letter did not expressly refer to Medical Center Enterprise as the plaintiff’s creditor.  Id. at *2.

The plaintiff alleged that the collection letter violated 15 U.S.C. § 1692g, which requires that debt collectors provide in writing certain information to a consumer in either the initial communication or within five days thereafter, including the name of the creditor to whom the debt is owed. The plaintiff did not contend that the different word order of the hospital in the letter caused him any confusion. Instead, the plaintiff asserted that the letter failed to “meaningfully convey” the name of the creditor to whom he owed the debt.

The Eleventh Circuit assumed, without deciding, that the plaintiff’s claim was governed by the least sophisticated consumer standard. Under this standard, the court presumes that the consumer “possess[es] a rudimentary amount of information about the world and a willingness to read a collection notice with some care.” Id. at *5 (citing cases).  Applying this standard, the Eleventh Circuit concluded that, because the plaintiff acknowledged that he had received medical treatment at a hospital called “Enterprise Medical Center,” the least sophisticated consumer “could be expected to connect the dots on a collection letter that lists the name ‘Medical Center Enterprise’ next to an outstanding balance.” Id. In other words, “[a] consumer who had been a patient at a hospital would surely understand the hospital to be the creditor when its name was listed next to the amount of the debt.” Id. at *5-6. Accordingly, the Eleventh Circuit held that the letter complied with § 1692g.

The Eleventh Circuit has applied the least sophisticated consumer standard to other sections of the FDCPA, including 15 U.S.C. §§ 1692e and 1692f.  Other circuits, including the Third, Sixth and Ninth Circuit have applied the least sophisticated consumer standard to claims brought pursuant to § 1692g as well. The Eleventh Circuit has suggested in at least one previous unpublished decision that it did not disagree with these other circuit decisions. The panel in Lait, however, suggested that concerns about obscuring information required to be disclosed under § 1692g could be addressed in other sections of the FDCPA. Lait, 2018 U.S. App. LEXIS 31814, at *4 n.2.

Thus, it remains an open question in the Eleventh Circuit as to whether the least sophisticated consumer standard applies to claims under § 1692g, or whether courts should simply consider whether the collection letter contains the information required by § 1692g without considering whether the least sophisticated consumer would understand it.

If you have any questions or would like more information, please contact Bill Buechner at [email protected].

Repaying Old Debts – The Supreme Court Limits FDCPA Liability for Scheduling Time-Barred Claims in Bankruptcy

Posted on: October 9th, 2017

By: Matthew M. Weiss

Earlier this year, the Supreme Court handed a victory to debt collectors when it held that the scheduling of a time-barred claim in bankruptcy was not a violation of the Fair Debt Collection Practices Act (FDCPA).

In Midland Funding, LLC v. Johnson, Aleida Johnson filed for personal bankruptcy under Chapter 13 of the Bankruptcy Code in the Southern District of Alabama. Midland Funding, LLC (Midland) filed a proof of claim asserting a credit card debt of $1,879.71. Johnson’s last charge on the account was in 2003, more than 10 years before Johnson’s bankruptcy filing, even though Alabama’s statute of limitations on the collection of debts was six years. Johnson objected to the claim and it was disallowed. Johnson then brought suit against Midland seeking actual damages, statutory damages, attorneys’ fees, and costs for a violation of the FDCPA, 15 U.S.C. § 1692k. After the district court determined that the FDCPA was inapplicable and dismissed the lawsuit, the Eleventh Circuit Court of Appeals reversed the decision, and Midland appealed to the Supreme Court.

In a 5-3 decision (with Justice Gorsuch abstaining), Justice Breyer, writing for the majority, first determined that a claim under the Bankruptcy Code was a “right of payment”, and that a creditor has the right to payment of a debt even after the limitations period expires. The Court also noted that a claim does not automatically have to be enforceable. Further, the definition of claim under the Bankruptcy Code provided that the claim could be “contingent” or “disputed”. Additionally, the Court found that the running of the statute of limitations was meant to be asserted as an affirmative defense by the debtor after the creditor asserted a claim.

Turning to whether the filing of a time-barred claim was “unfair” or “unconscionable” under the FDCPA, the court distinguished bankruptcy from civil cases in which creditors were subject to FDCPA liability for bringing suit on time-barred claims because “a consumer might unwittingly repay a time-barred debt” in a civil case. The Court reasoned that unlike civil cases, the consumer initiates bankruptcy proceedings, and are unlikely to pay a stale claim just to avoid going to court. Additionally, the Court said that the presence of knowledgeable trustees and procedural rules provided additional protection to debtors. The Court also noted that by filing a stale claim that was subsequently disallowed, that claim would be forever discharged, removing the debt from the debtor’s credit report and “potentially affecting an individual’s ability to borrow money, buy a home, and perhaps secure employment.” For all of these reasons, the Court concluded that the filing of a stale claim in bankruptcy was not “unfair” or “unconscionable” under the FDCPA.

The Supreme Court’s decision in Midland Funding legitimizes a major tool of debt collectors, who now can freely assert time-barred claims in bankruptcy proceedings with the hope that both the debtor and the bankruptcy trustee fail to assert a statute of limitations defense. As Justice Sotomayor wrote in her dissent, because debt buyers assume that a certain percentage of old debt will be written off as uncollectible, the Supreme Court’s decision will likely make consumer debt a more valuable commodity based on the assumption that a greater percentage of that debt will be collected in bankruptcy proceedings. Sotomayor had specifically predicted that “debtor collectors may file claims in bankruptcy proceedings for stale debts and hope that no one notices that they are too old to be enforced.”

In light of the Supreme Court’s decision, bankruptcy debtors should be extra vigilant about reviewing claims filed in their bankruptcy cases to determine whether a statute of limitations affirmative defense can be asserted. Conversely, creditors should not become too comfortable because, even though the Supreme Court’s decision precludes FDCPA liability for filing time-barred bankruptcy claims, the Supreme Court expressly declined to extend its holding to creditors who assert time-barred claims outside of bankruptcy.

If you have any questions or would like more information, please contact Matthew Weiss at [email protected].

 

Eleventh Circuit Holds That Voicemail Message Is “Communication” Under FDCPA, But Does Not Need To Include Name Of Individual Leaving Message

Posted on: September 29th, 2017

By: William H. Buechner, Jr.

The Eleventh Circuit has ruled that a voicemail message left by a debt collector constitutes a “communication” under the Fair Debt Collection Practices Act.  However, the Eleventh Circuit also ruled that a debt collector is not required to disclose the identity of the individual leaving the voicemail message.

In Hart v. Credit Control, LLC, 2017 U.S. App. LEXIS 18375 (11th Cir. 9/22/17), the debt collector left the following voicemail message:

This is Credit Control calling with a message.  This call is from a debt collector.  Please call us at 866-784-1160.  Thank you.

The Eleventh Circuit held, as an issue of first impression, that this voicemail message constituted a “communication” under the FDCPA because the FDCPA broadly defines a “communication” as “the conveying of information regarding a debt directly or indirectly to any person through any medium.” 15 U.S.C. § 1692a(2).   The Court explained that the voicemail, although short, satisfied this broad definition because it was regarding the plaintiff’s debt.  The Court then held that, because the voicemail message was the debt collector’s initial communication with the plaintiff, the debt collector was required to provide what is known as the “mini Miranda” warning — that the debt collector is “attempting to collect a debt and that any information obtained will be used for that purpose.” 15 U.S.C. § 1692e(11).

However, the Eleventh Circuit held (also as an issue of first impression) that the debt collector did not violate the FDCPA by failing to disclose the name of the individual leaving the voicemail message.  Although the FDCPA prohibits “the placement of telephone calls without meaningful disclosure of the caller’s identity,” 15 U.S.C. § 1692d(6), the Eleventh Circuit held that the debt collector did not violate this provision because the voicemail message disclosed the name of the debt collection company and the nature of its business.  The Court concluded that identifying the individual leaving the message was unimportant because identifying the name of the debt collection company and the nature of its business is sufficient to enable the consumer to vindicate his or her rights under the FDCPA.

In light of the Eleventh Circuit’s ruling in Hart, debt collectors should be mindful that voicemail messages left with debtors likely will be considered a “communication” and thus subject to the disclosure requirements set forth in the FDCPA.   Also, debt collectors should identify the name of their company and the nature of their business when leaving a voicemail message with a debtor.

If you have any questions or would like more information, please contact William H. Buechner at [email protected].

 

Ninth Circuit Issues Two Significant FDCPA Rulings To Debt Collector Law Firms

Posted on: August 18th, 2016

By: Bill Buechner

The Fair Debt Collection Practices Act requires that debt collectors send a notice to the consumer containing certain required disclosures, either in the “initial communication” with the consumer in connection with the collection of a debt or within 5 days thereafter. 15 U.S.C. § 1692g.  In this validation notice, the debt collector must provide several disclosures, including the amount of the debt owed, the name of the creditor to whom the debt is owed, and the debt collector’s obligation to provide a verification of the debt if the consumer disputes in writing all or part of the debt within 30 days of receiving the notice.    Federal courts throughout the country have been divided as to whether these disclosure requirements apply only to the initial debt collector, or whether subsequent debt collectors must also comply with these disclosure requirements.   For example, unpublished decisions issued by the Third Circuit and Tenth Circuit previously have held that the disclosure requirements set forth in § 1692g only apply to the initial debt collector.

The Ninth Circuit, however, recently issued a decision holding that subsequent debt collectors must comply with the notice provisions of § 1692g. Hernandez v. Williams, Zinman & Parham, — F.3d —, 2016 WL 3913445 (9th Cir. July 20, 2016).  The Ninth Circuit held that the language of § 1692g was ambiguous as to whether it applies to just the initial debt collector or whether it also applies to subsequent debt collectors.  However, the Ninth Circuit concluded that the overall structure and purpose of the FDCPA demonstrates that Congress intended § 1692g to apply akso to subsequent debt collectors. Id. at *3.   In particular, the Ninth Circuit expressed concern that a contrary ruling would create significant loopholes that could hinder consumers’ efforts to dispute their debts or obtain verification of their debts. Id. at *5-8.  The Ninth Circuit also concluded that requiring subsequent debt collectors to comply with § 1692g would further the remedial purpose of the FDCPA by giving consumers updated information concerning their debts and additional opportunities to verify their debts after they have changed hands. Id. at *8-9.  Significantly, the Federal Trade Commission and the Consumer Financial Protection Bureau, which have regulatory and enforcement authority under the FDCPA, submitted amicus briefs arguing that subsequent debt collectors must comply with the notice provisions of § 1692g.

The Ninth Circuit’s ruling abrogates several district court decisions within the Ninth Circuit that held that only the initial debt collector was required to comply with the notice provisions of § 1692g. Accordingly, debt collectors that contact consumers who reside within the Ninth Circuit should send notices that comply with § 1692g even if they are not the first debt collector attempting to collect on the debt at issue.

Debt collectors who contact consumers in other jurisdictions (even those where there is favorable case law) should re-assess whether they should send notices to consumers that comply with § 1692g even if they are not the first debt collector that has attempted to collect on the debt.    To the extent that the FTC and/or the CFPB decide to file amicus briefs in other cases, courts in other jurisdictions may be persuaded to follow Hernandez and hold that subsequent debt collectors must comply with the notice provisions of § 1692g.

Another Ninth Circuit panel very recently addressed the FDCPA’s requirement that debt collectors “disclose in subsequent communications that the communication is from a “debt collector.” 15 U.S.C. § 1692e(11).   In Davis v. Hollins Law, — F.3d —, 2016 WL 4174747 (9th Cir. August 8, 2016), the debt collector and the consumer had been negotiating a possible resolution of the debt in a series of phone calls and email exchanges over the course of approximately two weeks.   At that point, the debt collector left a voicemail message with the consumer that did not expressly state that the call was from a debt collector.   Instead, the voicemail message stated, “Hello, this is a call for Michael Davis from Gregory at Hollins Law.   Please call sir, it is important, my number is 866-513-5033.”

The consumer filed suit, asserting that this voicemail message violated § 1692e(11) because it did not reveal that the voicemail message was from a debt collector. The Ninth Circuit reversed the district court’s grant of summary judgment in favor of the consumer and held that the voicemail message did not violate § 1692e(11).  The Ninth Circuit held that, given the extent of prior communications between the consumer and the debt collector (and its employee in particular), the voicemail message was sufficient to disclose that the communication was from a debt collector. Id. at *4. Thus, the Ninth Circuit reiterated that § 1692e(11) does not require the debt collector to use any specific language as long as it is sufficient to disclose that the communication is from a debt collector. Id.

Davis reached a commonsense conclusion under the facts of the case.  However, the safest course of action for debt collectors is to include an explicit statement in any voicemail message left with the consumer that the communication is from a debt collector, even if the debt collector has had an ongoing dialogue with the consumer regarding the debt.