The Fair Debt Collection Practices Act (FDCPA) provides that debt collectors “may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” Nor may a debt collector “use unfair or unconscionable means to collect or attempt to collect any debt.” In determining whether a debt collector’s conduct was deceptive, misleading, unfair or unconscionable, courts apply a “least-sophisticated consumer” standard.
In Crawford v. LVNV Funding, LLC, the plaintiff owed roughly $2,000 to a furniture company, which assigned the debt to the defendant, LVNV Funding, LLC. The last transaction on the plaintiff’s account occurred in 2001, and so, under Alabama’s three-year statute of limitations, the debt became unenforceable in 2004. In 2008, the plaintiff filed a Chapter 13 bankruptcy petition. During the bankruptcy proceeding, LVNV filed a proof of claim to collect on the time-barred debt. The plaintiff filed a counterclaim via an adversary proceeding, alleging that LVNV’s conduct violated the FDCPA.
The Eleventh Circuit held that a debt collector engages in deceptive, misleading, unfair, and/or unconscionable conduct (and therefore, violates the FDCPA) when it files a proof of claim in a bankruptcy proceeding to collect a time-barred debt. The Court reasoned that the “least-sophisticated” debtor may be unaware that the debt is unenforceable, and thus, fail to object (as the plaintiff did in this case). And if the debtor fails to object, under the Bankruptcy Code, the otherwise unenforceable debt is resurrected and will be paid from the debtor’s future wages, thereby reducing the funds available to satisfy creditors with legitimate and enforceable claims.
Prior to Crawford, several circuits had held that lawsuits to collect time-barred debts violate the FDCPA. Crawford is significant because it extends the holdings of those cases to the bankruptcy context.