Sneaky Debt Collectors Beware! Sixth Circuit Says Collection Letter Offering To Settle Time-Barred Debt Could Be Misleading and Violate FDCPA
On January 13, 2015, the Sixth Circuit Court of Appeals decided the case of Buchanan v. Northland Group, Inc. holding that a collection letter offering to settle a debt without advising the debtor that the debt could not lawfully be collected because it was time barred could be misleading and therefore violate the FDCPA.
In 2011, the defendant, a debt collector called Northland Group, collecting for LVNV Funding, LLC, wrote a letter to Esther Buchanan claiming she owed $4,768.43. The letter offered to settle the debt for $1,668.96. At that time, the applicable Michigan statute of limitations on collecting such debts - six years - had run. Ms. Buchanan sued Northland claiming that the letter violated the FDCPA because it misleadingly indicated that the debt was valid and collectible, when, in fact, Northland was barred from filing a lawsuit to collect the debt because the statute of limitations had run. The federal district court for the Western District of Michigan dismissed Ms. Buchanan's lawsuit finding that the letter was not misleading as a matter of law.
The Sixth Circuit, which sits in Cincinnati and oversees federal courts in Michigan, Ohio, Kentucky and Tennessee, reversed. The Sixth Circuit reaffirmed that questions about whether a debt collector's communications are potentially misleading must be considered under the "least sophisticated consumer" standard, and reasoned that Ms. Buchanan should be able to present evidence to support her arguments that the letter would be confusing to such individuals, including possible expert testimony on the perceptions of unsophisticated debtors. The Court also noted that the federal Consumer Financial Protection Board (CFPB), is actively studying the problems created by debt buyers that buy time-barred debt and discharged debt, which cannot lawfully be collected, for as little as a fraction of a cent on the dollar, in order to try to collect from vulnerable and unwitting debtors even though the debt could not be legally enforced.
This decision is major blow to one of the most abusive elements of the debt collection industry. The debt collectors in this case apparently believed that by couching their collection letter in terms of an offer to settle, they were not overtly threatening Ms. Buchanan with a collection lawsuit, which they could not lawfully file, and therefore even though they were in fact trying to collect a time-barred they could avoid liability. This is precisely the kind of deceptive and manipulative behavior that the FDCPA was designed to prevent and punish.
So what should you do if you get a debt collection letter about an old debt that could be time barred. First, gather information. Keep copies of all correspondence from debt collectors and courts. Take notes about collection calls (the date and time of each call, the caller ID information, the name of the caller, etc.). Take cell phone pictures of the caller ID information if you can. Record calls, but only if it is clearly permitted under the applicable law (get qualified legal advice on this issue if you have any doubts). Save voicemails from debt collectors. Ask debt collectors to identify themselves, the company they work for and the creditor they are representing. And DON'T SIT ON YOUR RIGHTS! Get qualified legal advice about whether you have a claim and pursue it on time. Remember, statutes of limitations apply to most claims, so if you think your rights have been violated, don't delay.
At Minnillo & Jenkins we sue abusive debt collectors. We have successfully pursued debt collectors on behalf of individuals and large groups victimized by deceptive collection practices. We are a full service law firm representing real people with real legal problems. We employ ten lawyers at five locations in greater Cincinnati and Dayton (Hyde Park, Eastgate, Mason, Fairfield, Dayton). We have experienced attorneys who focus on bankruptcy, labor and employment, divorce and custody, DUI and criminal defense, small business matters, consumer law and class actions. Call us at 513-723-1600 to make an appointment.