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Use of FTC ‘Approved’ Disclosure No Safe Harbor Against FDCPA Claim

A recent decision from a trial court sitting in Illinois calls into question whether debt collectors can rely on a widely used disclosure when collecting debt that may be subject to an expired limitations period.

A copy of the opinion in Richardson v. LVNV Funding, LLC is available at:  Link to Opinion.

In 2012 the Federal Trade Commission and Asset Acceptance, LLC entered into a consent decree to resolve an enforcement action that included allegations that Asset’s debt collection activities violated the federal Fair Debt Collection Practices Act. The consent decree provided that when collecting “time-barred” debt not subject to credit reporting, Asset would provide the consumer with the following disclosure:

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, and we will not report it to any credit reporting agency.

In Richardson, a debt collection letter contained the same disclosure. The plaintiff’s complaint alleged that the disclosure itself is misleading because it gives the impression that the debt collector chose not to sue him instead of stating that it was barred from filing a lawsuit. In denying the debt collector’s motion to dismiss, the court held that a debt collector’s use of the disclosure has “the potential to mislead the unsophisticated consumer” into believing that the debt was “legally enforceable.”

The plaintiff is permitted to move forward with his case and it remains to be seen whether the use of the disclosure is ultimately decided to be an FDCPA violation. But for most debt collectors, just the possibility that a suit can be maintained is an unacceptable result.

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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 outside counsel to RMA International, 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. From 2014 to 2017, he chaired the ABA's Bankruptcy and Debt Collection Subcommittee.

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