Judge Partially Denies MTD in FDCPA Case Over SOL Disclosure in Letter

[EDITOR’S NOTE: I didn’t realize it until I had finished writing the summary, but this ruling is from late February. While it might be a little stale, it still might present some interesting facts worth reading, and I didn’t want the time I spent writing it to go to waste. 🙂 ]

A District Court judge in Maryland has agreed to partially dismiss allegations that a defendant violated the Fair Debt Collection Practices Act by sending a letter to collect on a time-barred debt without mentioning that any form of payment would revive the statute of limitations, but sided with the plaintiff in determining the choice of law provisions require such a disclosure to be made.

A copy of the ruling in the case of Jennings v. Dynamic Recovery Solutions can be accessed by clicking here.

The plaintiff received a collection letter in regards to a credit card debt for which the statute of limitations had expired. While the letter did include a disclosure indicating that the plaintiff could not be sued for the balance because the statute of limitations had expired, it did not include a warning that accepting any of the offers in the letter would thus revive the statute. The defendant likely did not include that part of the disclosure because it was under the impression that Maryland law was governing the agreement, and under Maryland law, no form of payment is able to revive the statute of limitations. But the plaintiff argued that Delaware law should govern the agreement, and a partial payment under Delaware law does revive the statute of limitations.

Judge George Hazel of the District Court for the District of Maryland, Southern Division, did rule that omitting the revival disclosure did not rise to the level of violating Section 1692f of the FDCPA, which prohibits harassing behavior when attempting to collect on a debt. But as for the counts that the letter violated Sections 1692e, that was another story.

In examining whether Maryland or Delaware law should apply, Judge Hazel looked to the original agreement that was made when the plaintiff obtained the credit card, and in the agreement it states that Delaware law will apply.

“On one hand, revival of a debt collection action due to the acknowledgement or partial payment of a debt could be framed purely as a qualification of the statute of limitations for those actions, therefore warranting a procedural characterization,” Judge Hazel wrote. “On the other hand, whether acknowledgement or partial payment of a debt would reopen a debtor to legal liability for that debt surely affects the real-world activity of debtors; indeed, if debtors knew that they were likely to make themselves vulnerable to suit by making a payment toward a debt, they would be less likely to make that payment than if they knew they would be protected from legal action. The Court determines that the latter characterization is a more accurate and honest characterization of the potential for revival of a debt collection action, and so it concludes that it is a substantive matter. Thus, it will apply Delaware law in this case.”

From there, it was an easy step for Judge Hazel to deny the motion to dismiss on the grounds that omitting the revival disclosure was a plausible violation of the FDCPA because “[t]he least sophisticated consumer most certainly would not be aware that making a payment could make the debt judicially enforceable — particularly when the collector tells the consumer that the law limits how long she can be sued and that the collector will not sue.”

Ultimately, the case was settled.

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