‘Obligation’ Trips Up Defendant in FDCPA Case Over Time-Barred Debt

One word. Sometimes, that’s all it takes in a collection letter. One word can make the difference between a letter that is permissible under the Fair Debt Collection Practices Act and one that isn’t. A District Court judge in New Jersey has denied a defendant’s motion for judgment on the pleadings, ruling that the word “obligation” in a letter suggested that a time-barred debt was legally enforceable.

A copy of the ruling in the case of Waggett v. MRS BPO can be accessed by clicking here.

The plaintiff received a letter from the defendant, seeking to recover an unpaid debt that had been in default for more than four years — which is the statute of limitations in New Jersey. The letter, which included a number of settlement options, started by saying:

We recognize that a possible hardship or pitfall may have prevented you from satisfying your obligation. We are presenting three options to resolve your balance. We are not obligated to renew this offer.

The plaintiff filed suit, alleging the letter violated Sections 162e(2)(A), 1692e(5), and 1602e(10) of the FDCPA because the letter never mentioned that the debt was time-barred and that the statute of limitations had expired.

In analyzing whether the letter would confuse the least sophisticated debtor, Judge Noel L. Hillman of the District Court for the District of New Jersey focused on one phrase — “satisfying your obligation.”

Ultimately, having consulted six different dictionaries, Judge Hillman decided that the word “obligation” — even if not used in conjunction with the word “settlement” — meant a duty that could be compelled by law. “It is more than plausible, and even likely, that the least sophisticated debtor would understand that their ‘obligation’ is a duty to pay that a creditor could enforce in court through the commencement of litigation,” Judge Hillman wrote.

Even the FDCPA itself uses the word “obligation” in defining a debt, including one that may be “susceptible to judgment.”

“In sum, on its face and without the benefit of discovery, the letter when viewed in its entirety appears to be a document carefully crafted to push the envelope of acceptable language under the FDCPA while maximizing the chance of collecting from debtors,” Judge Hillman wrote.

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