Questions about which statute of limitations can apply to different types of debt can plague a collection operation. Take retail-branded credit cards, for example. In the case below, there is a genuine issue whether the statute of limitations on retail-branded credit cards is four years, or six years. A District Court judge in Oregon has granted a defendant’s motion for summary judgment, ruling it is entitled to the Fair Debt Collection Practices Act’s bona fide error defense because it did everything it could to try and figure out which statute of limitations applied before sending collection letters to the plaintiff — letters that did not include a disclosure that the debts were time-barred.
A copy of the ruling in the case of Sprayberry v. Portfolio Recovery Associates can be accessed by clicking here.
The plaintiff defaulted on two credit cards — one that was opened at Target and the other that was opened at Walmart. While the nature of the relationship between the company issuing the credit card and the retailer was not the same, both debts were charged off and purchased by the defendant. For each debt, the defendant sent two letters to the plaintiff, offering to settle the balance for less than the full amount owed. None of the letters mentioned that the debts were time-barred, because the defendant’s research indicated that a six-year statute of limitations applied.
The plaintiff filed suit, alleging the letters violated Sections 1692e, 1692e(2)(A), 1692e(5), 1692e(10), 1692f, and 1692f(1) of the FDCPA because a four-year statute of limitations should be applied and that more than four years had passed.
Admitting that it wasn’t clear — even to herself — whether the applicable statute of limitations was four years or six years, Judge Stacie F. Beckerman of the District Court for the District of Oregon turned her attention to the defendant’s claim that it was entitled to the FDCPA’s bona fide error defense.
The defendant submitted evidence of the process through which its Oregon counsel researched which statute of limitations should be applied and that the defendant’s compliance department and general counsel reviewed that research. Ultimately, “the Court cannot point to any additional research or analysis PRA could have performed or any additional resources it could have invested to determine which statute of limitations applied, because it was an open question under state law and therefore unknowable,” Judge Beckerman wrote. “The undisputed evidence demonstrates that even if the four-year statute of limitations applies to PRA’s efforts to collect Sprayberry’s debts, any FDCPA violation for collecting on the time-barred debt resulted from a bona fide error.”