Stating Intent Not to Sue in Letter Collecting ‘Time-Barred’ Debt Violates FDCPA Without Proper Disclosures, Says 7th Cir.

A debt buying company’s letter to collect a debt subject to the defense of an expired limitations period was found to violate the federal Fair Debt Collection Practices Act because it failed to disclose that 1) a payment or promise can revive the limitations period; and, 2) the law limits or prohibits the debt collector from suing to collect the debt.

The U.S. Court of Appeals for the Seventh Circuit reached this decision even though the letter stated: “Because of the age of your debt, we will not sue you for it and we will not report it to any credit reporting agency.”

A copy of the opinion in Pantoja v. Portfolio Recovery Associates, LLC is available at: Link to Opinion.

Affirming the district court’s decision in favor of the plaintiff, the Seventh Circuit found the letter to be deceptive because it did not inform the consumer that a payment (or promise to pay) may restart the limitations period.

As a result, the Court reasoned, had the letter’s recipient made a payment or promise to pay, he could have been sued to collect the debt, putting the debtor “in a much worse legal position than he would have been in before taking the step.”

Because the letter did not disclose the “significant risk of losing the protection of the statute of limitations,” the letter was “deceptive as a matter of law.”

The Court also found that the letter’s statement, “we will not sue you,” was deceptive because it gave “the impression” that the debt collector chose not to sue, and not that it is prohibited by law from doing so.

The Seventh Circuit pointed out that the debt collector’s verbiage was taken from a “2012 consent decree.” Although the decision does not cite to the consent decree, it is believed the court was referring to the 2012 consent decree made between the Federal Trade Commission and Asset Acceptance, LLC.

Under that consent decree, letters sent by Asset Acceptance to collect debt subject to an expired limitations period were required to state: “The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it.”

But the letter at issue in this case omitted the first sentence of the disclosure. The Court determined that the omission created a “deliberate ambiguity,” concealing from the debtor that law prohibited the collector “from suing to collect this debt or even from threatening to do so.”

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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 .