Collecting Time Barred Debt is not a Per Se Violation of the FDCPA Third Circuit Holds

A debt collector who attempted to collect a debt barred by a New Jersey statute of limitation did not violate the FDCPA by simply demanding payment of the debt, as held by the Third Circuit’s decision in Huertas v. Galaxy Asset Management.

The court noted that New Jersey’s statute of limitation was procedural and did not extinguish the debt only the means by which it can be enforced.  Thus, the court wrote, “the FDCPA permits a debt collector to seek voluntary repayment of the time-barred debt so long as the debt collector does not initiate or threaten legal action in connection with its debt collection efforts.” Clearly, this rationale will have limited impact in states, Wisconsin and Mississippi notably, which have substantive statute of limitations that extinguish debt.

The decision also holds that the New Jersey Consumer Fraud Act does not regulate debt collection activity absent evidence of the sale or marketing of merchandise or services.

A copy of the decision is available here: Huertas

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Donald Maurice provides counsel to the financial services industry, successfully litigating matters in the state and federal courts in individual and class actions. He has successfully argued before the Third, Fourth and Eighth Circuit U.S. Courts of Appeals, and has represented the financial services industry before several courts including as counsel for amicus curiae before the United States Supreme Court. He counsels clients in regulatory actions before the CFPB, and other federal and state regulators and in the development and testing of debt collection compliance systems. Don is peer-rated AV by Martindale-Hubbell, the worldwide guide to lawyers. In addition to being a frequent speaker and author on consumer financial services law, he serves as legal counsel to DBA International and as chair of the ABA's Bankruptcy and Debt Collection Subcommittee. He serves on the governing Board of Regents of the American College of Consumer Financial Services Lawyers and on the Governing Committee of the Conference on Consumer Finance Law .