The United States Court of Appeals for the Fifth Circuit recently held that certain letters seeking collection of time-barred debt by using “ambiguous offers and threats with no indication that the debt is old, much less that the limitations period has run, misrepresent the legal enforceability of the underlying debt in violation of” the Fair Debt Collection Practices Act.
In Manuel v. Merchants and Professional Bureau, Inc., Sylvia Manuel incurred a $250 debt in December 2010 and January 2011 that became delinquent and was transferred to Merchants for collection. Merchants sent Manuel six collection letters in 2011 and then, “after six years with seemingly no collection effort, it sent four more in 2017.” By the time Merchants sent the 2017 letters, Texas’s four-year statute of limitations barred a lawsuit to collect the debt.
Manuel sued Merchants in the United States District Court for the Western District of Texas under two sections of the FDCPA: section 1692e for false or misleading debt collection activities, and section 1692f for unfair and unconscionable debt collection activities. Manuel alleged the 2017 letters were “false or misleading” and “unfair and unconscionable” because they “did not disclose (1) that a lawsuit seeking payment of the debt was time-barred or (2) that any partial payment might defeat a statute-of-limitations defense.”
At the district court level, Judge David Alan Ezra concluded that the debt collection letters were false or misleading and, therefore, granted Manuel’s motion for partial summary judgment on her section 1692e claims. Specifically, Judge Ezra wrote:
[There is] no support for Defendant’s conclusion that a settlement offer that is silent as to the time-barred nature of the debt or as to the fact that any partial payment might revive the judicial enforceability of the debt cannot be misleading under the FDCPA unless it includes an explicit offer to settle the debt for less than the amount owed.
On appeal, the Fifth Circuit affirmed the partial grant of summary judgment. In a unanimous published opinion written by Circuit Judge Patrick E. Higginbotham, the Fifth Circuit held that “the sum effect of the 2017 letters” rendered them unlawfully misleading. Specifically, the Fifth Circuit concluded that the 2017 letters were misleading due to their:
- failure to warn that Texas has a statute of limitations that covers debt collection;
- failure to state when the debt was incurred;
- hints at additional collections efforts if the plaintiff did not pay off his debt; and
- many instances of urgent language indicating “a soon-to-expire special deal or offer[.]”
The Fifth Circuit concluded, “these letters seeking collection of time-barred debt, filled with ambiguous offers and threats with no indication that the debt is old, much less that the limitations period has run, misrepresent the legal enforceability of the underlying debt in violation of” section 1692e, and affirmed the district court’s grant of summary judgment in favor of Manuel.
Although it affirmed Judge Ezra’s ultimate holding, the Fifth Circuit’s opinion “le[ft] for another day” whether silence regarding the time-barred nature of the debt, without more, is misleading under the FDCPA as a matter of law.
In contrast, that question has been addressed head-on by at least three circuit courts of appeals, two of which have held that debt collection letters which fail to mention that the debt is time-barred are not misleading as a matter of law. See Huertas v. Galaxy Asset Mgmt., 641 F.3d 28, 33 (3d Cir. 2011) (holding the plaintiff’s FDCPA claim “hinge[d] on whether [the collection] letter threatened litigation”); Freyermuth v. Credit Bureau Servs., Inc., 248 F.3d 767, 771 (8th Cir. 2001) (“[I]n the absence of a threat of litigation or actual litigation, no violation of the FDCPA has occurred when a debt collector attempts to collect on a potentially time-barred debt that is otherwise valid.”). On the other hand, the Seventh Circuit has stated, “Whether a debt is legally enforceable is a central fact about the character and legal status of that debt. A misrepresentation about that fact thus violates the FDCPA.” McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 1020 (7th Cir. 2014). Accordingly, collection letters sent to consumers residing within the geographic boundaries of the Seventh Circuit that did not give even “a hint that the debts that they were trying to collect were vulnerable to an ironclad defense . . . misrepresented the legal status of the debts, in violation of the FDCPA.” Id. at 1021.
For now, at least, the Fifth Circuit has elected to stay out of the circuit split. Time will tell when another circuit court of appeals decides that it is time to address the question of whether silence as to the statute of limitations in and of itself can amount to an unlawful misrepresentation under the FDCPA.