The United States District Court for the Northern District of Alabama ruled in favor of a debt collector in Swann v. Dynamic Recovery Solutions LLC, granting a motion to dismiss regarding a statute of limitations disclosure in a collection letter.
Plaintiff Susan Swann alleged violations of Section 1692 of the FDCPA for making false, deceptive, and misleading statements regarding consumer debts regarding DRS’s attempt to collect on a debt by letter. At the time the letter was sent to Swann, the statute of limitations for filing a lawsuit to collect the debt had passed.
In the letter, DRS stated that it had been hired by the owner of the debt to collect on a past due balance on a Verizon Wireless account. The letter detailed four methods for which Swann could “resolve” the debt. Upon receipt of payments, the letter stated that the account would be considered “satisfied and closed.” The letter also contained a disclaimer regarding the time-barred nature of the debt. As part of the disclaimer, the letter stated that DRS would not sue Swann because of the age of the debt.
Swann took issue with the letter’s disclaimer which stated that the debt was time-barred and that she would not be sued. She alleged that the disclaimer was ineffective because it failed to inform her that it could not legally sue, rather than that it had simply chosen not to do so. Further, Swann argued that the terms “resolve” and “satisfaction” contained in the letter implicitly carried a threat of litigation.
The Court disagreed with Swann’s first argument regarding the disclaimer, holding that DRS was not required to include a disclaimer notifying her of the time-barred nature of the debt. Rather, the Court noted, disclaimers are intended to “offset other language in the letter which may, at least impliedly, threaten litigation.” Further, the Court found that the “will not sue” language used by the defendant is the same language that was approved by the Federal Trade Commission and the Consumer Financial Protection Bureau. As a result, the Court found that the disclaimer did not run afoul of the FDCPA.
The Court also disagreed with the plaintiff’s argument that the words “resolve” and “satisfaction” implicitly carry a threat of litigation. In her brief, Swann insisted that these terms would lead the least sophisticated consumer to believe that they might be sued if the debt was not paid off. The Court cited the Third Circuit’s decision in Tatis v. Allied Interstate, LLC which held that although words like “settlement” and “settlement offer” could potentially imply a threat of litigation, general verbs like “resolve” are less likely to do so.
Generally, the issue of whether the least sophisticated consumer would interpret a collection letter as deceptive is a question for the jury, and thus not an issue that could be resolved on a motion to dismiss. However, after drawing all reasonable inferences from the allegations in the complaint in Swann’s favor, the Court concluded that the least sophisticated consumer could not possibly view these terms as a threat of litigation. Therefore, the Court ruled that the issue could be decided on a motion to dismiss and found that the complaint failed to allege a plausible theory of relief for the jury to consider.
The claims in this case regarding whether and how to inform consumers that an account is outside the applicable statute of limitations are being brought all over the country following the Seventh Circuit’s decision in the Pantoja case. The lack of consistency in how courts are deciding this issue continues to flummox the collection industry, and this uncertainty is expected to continue into 2019 until these cases are taken up by more circuit Courts of Appeals.