Tuesday, February 13, 2018

debt collection - FDCPA - tine-barred debts - settlement offer "could" violated FDCPA

Tatis v. Allied Interstate, LLC – 3d Cir. – February 12, 2018

A collection letter sent to collect a time-barred debt that makes a “settlement offer” to accept payment “in settlement of” the debt may violate the FDCPA general prohibition against “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e.

The collection letter stated as follows: “[The creditor] is willing to accept payment in the amount of $128.99 in settlement of this debt. You can take advantage of this settlement offer if we receive payment of this amount or if you make another mutually acceptable payment arrangement within 40 days . . . .”

Huertas v. Galaxy Asset Management, 641 F.3d 28, 32–33 (3d Cir. 2011) (per curian) stands for the proposition that debt collectors do not violate 15 U.S.C. § 1692e(2)(A) when they seek voluntary repayment of stale debts, so long as they do not threaten or take legal action. But the FDCPA sweeps far more broadly than the specific provision found in § 1692e(2)(A). It prohibits “any false, deceptive, or misleading representation” associated with debt-collection practices. 15 U.S.C. § 1692e (emphasis added). Accordingly, this appeal requires us to decide whether collection letters may run afoul of the FDCPA by misleading or deceiving debtors into believing they have a legal obligation to repay time-barred debts even when the letters do not threaten legal action.

Since Huertas, three other United States Courts of Appeals have addressed the question presented in this appeal. All three have determined that, even absent threats of litigation, it is plausible that offers to “settle” time-barred debts could mislead the least-sophisticated debtor.  McMahon v. LVNV Funding, LLC, 744 F.3d 1010 (7th Cir. 2014);  Buchanan v. Northland Group, Inc. held that a settlement offer could “plausibly mislead an unsophisticated consumer into thinking her lender could enforce the debt in court.” 776 F.3d 393, 395 10 (6th Cir. 2015);  Daugherty v. Convergent Outsourcing, Inc., 836 F.3d 507, 513 (5th Cir. 2016).  The court was persuaded that these decisions offer the best interpretation of the FDCPA.

The court reiterated what it said in Huertas and elsewhere: standing alone, settlement offers and attempts to obtain voluntary repayments of stale debts do not necessarily constitute deceptive or misleading practices. See Huertas, 641 F.3d at 32–33; see also Campuzano-Burgos, 550 F.3d at 299 (noting that “[t]here is nothing improper about making a settlement offer”).   Nor did the court impose any specific mandates on the language debt collectors must use, such as requiring them to explicitly disclose that the statute of limitations has run. 

  The court did not, therefore, hold that the use of the word “settlement” is “misleading as a matter of federal law.” Buchanan, 776 F.3d at 400 (Kethledge, J., dissenting). Rather, in keeping with the text and purpose of the FDCPA, “we merely reiterate that any such letters, when read in their entirety, must not deceive or mislead the least-sophisticated debtor into believing that she has a legal obligation to pay the time-barred debt.”  See, e.g., Caprio, 709 F.3d at 149 (noting that “even the ‘least sophisticated debtor’ is expected to read any notice in its entirety”); Huertas, 641 F.3d at 33 (examining the specific language used in the letter from the perspective of the least-sophisticated debtor); Campuzano-Burgos, 550 F.3d at 300 (analyzing letters “as a whole”).