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Seventh Circuit Finds a Dunning Letter Attempting to Collect a Time-Barred Debt Violated the FDCPA

On March 29, 2017, a three-judge panel of the U.S. Court of Appeals for the Seventh Circuit held that the language in a letter from a debt collector, attempting to collect a time-barred 20 year old debt, was misleading and deceptive, and violated the Fair Debt Collection Practices Act (“FDCPA”).

As background, the plaintiff incurred a debt for a credit card that he applied for but never actually used.  Twenty years later, long after the statute of limitations had expired, the defendant debt collector purchased the debt and sent the plaintiff a dunning letter—which is a letter of collection—attempting to collect the debt.  The dunning letter, which is the focal point of this litigation, reads in part:  “Because of the age of your debt, we will not sue you for it and we will not report it to any credit reporting agency.”

On appeal, the Seventh Circuit affirmed the district court’s ruling, which granted the plaintiff’s summary judgment motion and found the dunning letter to be misleading and deceptive under the FDCPA for two independent reasons: (1) the dunning letter failed to warn the plaintiff that if he accepted any of the settlement offers, whether by making a partial payment or even by just agreeing to make a payment, he would lose the protection of the statute of limitations; and (2) the letter deceptively said that the defendant had chosen not to sue the plaintiff, rather than saying that the debt was so old that the defendant could not sue for the alleged debt.

The FDCPA prohibits a debt collector from using false, deceptive, or misleading representations or means to collect any debt.  The Seventh Circuit explained that taking or threatening to take legal action after the statute of limitations has run violates the FDCPA and, while the dunning letter in this case did not expressly threaten to sue the plaintiff over the time-barred debt, the court concluded that the letter was carefully crafted to be misleading and deceptive.  An unsophisticated reader of such a letter may conclude that the defendant was seeking to collect on a legally enforceable debt even though the defendant indicated that it has chosen not to sue.  Furthermore, if the plaintiff made even a partial payment on the debt, the statute of limitations would restart and put him in a significantly worse legal position.  The Seventh Circuit explained that the FDCPA prohibits a debt collector from luring an unsophisticated consumer away from the protection provided by the statute of limitations without providing a warning that the consumer can understand.

The case is Pantoja v. Portfolio Recovery Associates, LLC, and the opinion is available here: http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2017/D03-29/C:15-1567:J:Hamilton:aut:T:fnOp:N:1937594:S:0.