Thursday, January 31, 2008

consumer protection - credit card - statute of limitations

Richburg v. Palisades Collection LLC and Wolpoff & Abramson LLP- ED Pa. - January 28, 2008

Plaintiff sued defendants -- a collection agency and a law firm -- under various consumer statutes for bringing suit to collect a debt on which the statute of limitations had run. Defendants moved for summary judgment, claiming that the statute of limitations for such actions was 6 years and that their suit against plaintiff was filed within that period.

The court rejected this argument, holding that the statute of limitations on an alleged credit card debt is four (4) years under the standard contract provision in 42 Pa. C.S. 5525(a).

account stated - The court rejected the defendants' claim that they had sued plaintiff within the proper limitations period, which they said was six years, under 42 Pa. C.S. 5527(b), which covers cases which do not come under any other specified limit. The defendants claimed that the debt was on an "account stated." After a thorough review of the law of "account stated," the court said the it was "just a variety of contract" and came under the 4-year statute covering contracts.

letter from attorney was attempt to collect debt - The court also rejected the claim that the debt collector's attorneys were not themselves acting as debt collectors, noting a pre-suit letter to plaintiff stating that "this is an attempt by a debt collector to collect a debt," with no reference to an impending legal action or any suggestion that it was part of an attempt to prosecute a lawsuit. The court said that the letter created attorney liability under the state debt collection law, 73 Pa. C.S. 2270.1 et seq., which in turn established per se liability under the state consumer protection law, 73 P.S. 201-1 et seq.

bona fide error defense - The court refused summary judgment on defendants' claim under the bona fide error defense, 15 USC 1992k(c) and 72 P.S. 2270.5(d), holding that under the facts, there was a jury question as to whether defendant Palisades national survey of statutes of limitations was, as a matter of law, a measure that was reasonably adapted to avoid the error that occurred here.

The bona fide error defense involves three prongs: 1) a (subjective) determination of whether the violation was unintentional; and objective determinations of 2) whether the error leading to FDCPA violation was bona fide, and 3) whether defendants maintained reasonable procedures to avoid such an error. When the error involves an alleged mistake of law, these last two elements "merge with one inquiry driving the other." Noting a split of authority on the issue, the court said that it was siding with a "'growing minority of courts' that finding mistakes of law can satisfy the FDCPA's bona fide error defense."

The court noted that there is a difference between a debt collector relying on the interpretation of a disinterested third party, such as a regulator, e.g. Kort v. Diversified Collection Services, 394 F.3d 530, 533-4 (7th Cir. 2005), from one relying on "their own expansive statutory interpretations that theoretically would have the effect of insulating them from liability under the FDCPA, e.g., Johnson v. Riddle, 443 F.3d 7213, 727-8 (10th Cir. 2006).