On March 5, 2014, the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) filed a joint amicus brief in Buchanan v. Northland Group Inc., No. 13–2523 (6th Cir. Mar. 5, 2014), a putative consumer FDCPA class action challenging collection practices related to debts that were time barred (i.e., for which the statute of limitations had expired). In their joint brief, the agencies stated that, “actual or threatened litigation is not a necessary predicate for an FDCPA violation in the context of a time-barred debt.” The agencies argue that under certain circumstances, a settlement offer (and other collection activity) on an out-of-state account can mislead the consumer to believe a debt is enforceable in court, and thus violate the FDCPA, even if the offer is unaccompanied by any clearly implied threat of litigation.
In Buchanan, the debt collector had sent Plaintiff a dunning letter with a proposed offer to settle a debt for which the statute of limitations had expired. Buchanan filed an FDCPA putative class action asserting the letter violated the FDCPA’s prohibition on the use of deceptive representations in connection with the collection of any debt. See 15 U.S.C. § 1692e. On defendant’s motion, the district court dismissed the complaint, holding as matter of law the dunning letter could not have violated the FDCPA.
In their joint amici briefs, the FTC and CFPB argue that the dismissal should be overturned, but take no position on the ultimate merits of plaintiff’s claims.
The agencies’ position on time-barred debt in this brief echoes their earlier amici filing in another FDCPA action, still pending, captioned Delgado v. Capital Management Services, LP, et al., No. 13-2030 (7th Cir. Aug. 13, 2014), which they filed in the Seventh Circuit and asserted virtually identical arguments. Delgado likewise involved a settlement offer in a letter from a debt collector on a time-barred debt. The cases are distinct in their procedural posture, however, as the Seventh Circuit case involved a defendant’s appeal of the district court’s denial of its motion to dismiss, whereas in Buchanan, the district court granted the Defendant’s motion.
Although it is too early to predict the outcome of these appeals, it is apparent that the CFPB and FTC are taking a hard look at debt collection practices, and particularly, communications with consumers regarding time-barred debt. The agencies’ concern is likely spurred by the fact that neither the primary federal debt collection statute, the FDCPA, nor the Dodd-Frank Act, directly address the issue of time-barred debt. The CFPB’s amicus program allows the agency an opportunity to offer courts the CFPB’s views on significant consumer financial protection issues and assist in the interpretation of relevant regulations and statutes. In addition, the CFPB’s focus on this issue was highlighted in its Advance Notice of Proposed Rulemaking, which dedicated an entire section to debt collection. Indeed, it is likely that the CFPB will address issues related to time-barred debts in its FDCPA rulemaking process, which is currently underway.