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4th Cir. Holds Each FDCPA Violation Subject to New Statute of Limitations

Joining similar rulings by the Eighth and Tenth Circuits, the U.S. Court of Appeals for the Fourth Circuit recently held that each violation of the FDCPA gives rise to a separate claim governed by its own statute of limitations period.

A copy of the opinion in Bender v. Elmore & Throop, P.C. is available at:  Link to Opinion.

On April 16, 2016, the homeowner plaintiffs received a notice from a law firm retained by their homeowners association (HOA) stating the homeowners failed to pay $77.09 in HOA assessments and a demand for $1,000 to satisfy both the HOA assessments and the costs and attorneys’ fees.

The homeowners disputed the debt and mailed a letter to the law firm with copies of cancelled checks. The law firm acknowledged that the disputed payments had been received, but asserted that the homeowners still owed the costs and attorneys’ fees.

The homeowners and law firm exchanged several letters with the homeowners denying making any late payments and the law firm insisting that late fees, costs, interest, and attorneys’ fees were owed.

On May 18, 2016, following another demand for payment, the homeowners delivered a letter to the law firm “requesting that [it] stop contacting us about this claim” and stating that the [homeowners] would consider “any further attempt to collect a debt against us or record a lien on our property [as] harassment[.]”

In January 2017, the homeowner hand-delivered a payment at the annual HOA meeting and was told to leave. The homeowner later received a notice that he had been banned from the HOA’s premises for one year.

In February 2017, the homeowners received another letter from the law firm acknowledging receipt of the January 2017 payment, but noted as outstanding the accumulated fees and costs associated with the original disputed payment from 2016.

On March 10, 2017, the homeowners responded to the February letter, writing that “in our correspondence to you on this matter, we had requested that you stop contacting us about that claim . . . As both my wife and I dispute the debt referenced in your most recent letter, I am now requesting once again that you stop all communications with my wife and myself concerning this debt.” The homeowners received additional correspondence from the law firm on March 14, 2017, including an updated ledger of the homeowners’ account showing that a fee had been added for preparation of the February letter.

In January 2018, the homeowners requested to attend the annual meeting and was told by the law firm that the homeowner would not be allowed to attend, and that “this whole thing would not have happened if you would just pay your bills.”

On Feb. 6, 2018, the homeowners received an updated ledger from the law firm and although this correspondence purported to provide the homeowners with “verification of your account as you requested,” the homeowners deny having made any such request for verification.

On April 5, 2018, the homeowners filed a complaint against the law firm brought under the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.  In their complaint, the homeowners alleged that the law firm violated various provisions of the FDCPA by engaging in unfair debt collection practices and by improperly communicating with the homeowners after they had disputed the debt and had made a written request that the law firm cease further communications. The law firm responded by seeking dismissal of the complaint as untimely or, in the alternative, for summary judgment.

The trial court granted the law firm’s motion to dismiss the complaint based on the statute of limitations holding that the entire complaint was time-barred because the more recent violations that the homeowners alleged were of the “same type” as other violations that occurred outside the one-year limitations period.

The homeowners appealed.

The sole question on appeal was whether the trial court erred in concluding that all the homeowners’ claims were barred by the FDCPA’s statute of limitations.

The homeowners argued that the trial court erred in dismissing all their claims as time-barred because two of the alleged violations occurred less than one year from the date they filed suit. According to the homeowners, under the language of 15 U.S.C. § 1692k(d), a new statute of limitations arose with each “violation” of the FDCPA.

In response, the law firm argued that the first alleged violation of the FDCPA occurred outside the limitations period and all later communications by the law firm arose from its attempt to collect the same debt.

The Fourth Circuit first acknowledged that under the FDCPA, claims must be brought “within one year from the date on which the violation occurs.” 15 U.S.C. § 1692k(d). Moreover, the Court noted, nothing in the FDCPA suggests that “similar” violations should be grouped together and treated as a single claim for purposes of the FDCPA’s statute of limitations. To the contrary, the Court has long held that a “separate violation” of the FDCPA occurs “every time” an improper communication, threat, or misrepresentation is made. United States v. Nat’l Fin. Servs., Inc., 98 F.3d 131, 141 (4th Cir. 1996). Accordingly, the Court concluded that Section 1692k(d) establishes a separate one-year limitations period for each violation of the FDCPA.

In coming to its ruling, the Fourth Circuit noted this interpretation avoids creating a safe harbor for unlawful debt collection activity where no matter how frequent or abusive such collection efforts became, the debtor would be left entirely without a remedy simply because the debtor did not timely pursue the first violation.

Finally, the Court observed that two other federal appellate courts have also concluded that the FDCPA’s limitations period runs anew from the date of each violation. See Demarais v. Gurstel Chargo, P.A., 869 F.3d 685, 694 (8th Cir. 2017); Llewellyn v. Allstate Home Loans, Inc., 711 F.3d 1173, 1188 (10th Cir. 2013). As these courts have recognized, it simply “does not matter that the debt collector’s violation restates earlier assertions — if the plaintiff sues within one year of the violation, [the suit] is not barred by § 1692k(d).” Demarais, 869 F.3d at 694; see also Llewellyn, 711 F.3d at 1188.

Accordingly, the Fourth Circuit vacated the trial court’s judgment and remanded the case for further proceedings.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

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