Does a debt collector risk violating the Fair Debt Collection Practices Act if it fails to provide an oral disclosure regarding the statute of limitations during an incoming call with a consumer? In a comprehensive opinion, a district court just issued a resounding “no.”
In Douglas v. NCC Business Services, Inc., consumer Onesha Douglas claimed that NCC Business Services violated the FDCPA by failing to tell her on the phone that the statute of limitations had expired on her debt. The court disagreed, holding that the debt collector was not obligated to provide an oral disclosure regarding the statute of limitations.
Douglas had leased an apartment but failed to pay her rent, resulting in a debt of $4,032.75. More than five years later, Douglas and Vance Dotson, a so-called “credit doctor,” called the debt collector regarding the status of the debt. Douglas stated that she had been denied a mortgage application and was calling to get more information regarding her debt.
On the phone call, the debt collector stated that he was a “professional debt collector” with NCC Business Services and informed Douglas that his communications with her were “an attempt to collect a debt.” He solicited payment and asked Douglas, “How would you like to get that closed out today?” Douglas responded by declining to close out the account because she only wanted information. Following additional discussion, Dotson told the debt collector that he should have disclosed to Douglas that payment would renew the statute of limitations and that the debt collector could not sue Douglas because of the age of the debt. The debt collector responded that he was not obligated to disclose such information on the phone.
Because the Tenth Circuit had not yet ruled on a debt collector’s obligations regarding disclosure of the effect of payment on time-barred debt, the District Court surveyed circuit court opinions from across the United States. The court looked at cases finding in favor of debt collectors, such as Mahmoud v. De Moss Owners Association, Inc., 865 F.3d 322, 333-34 (5th Cir. 2017); Huertas v. Galaxy Asset Management, 641 F.3d 28, 32-33 (3d Cir. 2011); and Freyermuth v. Credit Bureau Services, Inc., 248 F.3d 767, 771 (8th Cir. 2001). It contrasted these cases with other cases holding in favor of consumers, such as Tatis v. Allied Interstate, LLC, 882 F.3d 422, 425, 428-30 (3d Cir. 2018); Pantoja v. Portfolio Recovery Associates, LLC, 852 F.3d 679, 684, 687 (7th Cir. 2017); Daugherty v. Convergent Outsourcing, Inc., 836 F.3d 507, 509 (5th Cir. 2016); Buchanan v. Northland Group, Inc., 776 F.3d 393, 395, 399-400 (6th Cir. 2015); and McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 1020 (7th Cir. 2014).
Having surveyed the evolving state of the law, the court distinguished the Douglas case because (1) Douglas contacted the debt collector, instead of the other way around; (2) there was no explicit or implicit threat of litigation; (3) the running of the statute of limitations under the applicable state law did not extinguish Douglas’ legal obligation on the debt; and (4) the debt collector could sue on the time-barred debt because the statute of limitations is an affirmative defense that must be raised by the debtor or it is waived. Consequently, the court held that the debt collector said nothing that was actionably misleading under the FDCPA.
This is an important case in the developing law regarding a debt collector’s obligation (or lack thereof) to affirmatively warn debtors regarding partial payment on time-barred debt. This case provides a comprehensive overview of how the various circuit courts have held on this issue. It also makes the critical distinction that the statute of limitations is an affirmative defense, meaning that it must be raised by the debtor or it is waived. As such, it cannot prohibit a debt collector from suing on a time-barred debt because there is nothing inherently improper about such a suit—the debt is a legal obligation, which allows the debt collector to sue on it, but the debt collector may be unable to recover based upon the debtor raising the statute of limitations as an affirmative defense. This distinction has been overlooked by some courts, resulting in one court describing it as “illegal” for a debt collector to sue on time-barred debt instead of the statute of limitations merely providing a defense against recovery on such a suit. See Pantoja, 852 F.3d at 685. Douglas refreshingly returns to the well-established understanding that, as a procedural rule, the statute of limitations is an affirmative defense that the debtor (defendant)—not the debt collector (plaintiff)—must raise in an action to recover for debt.