11th Circuit: Letter Offering to “Resolve” Time-Barred Debt Violates FDCPA

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The U.S. Court of Appeals for the Eleventh Circuit ruled that a collection letter seeking payment on a time-barred debt does not require an express threat of litigation to violate the FDCPA.

In the case at hand, the debt collectors sent a collection letter to the debtor, eight years after the debt had been charged off by the original creditor, informing the debtor that the debt collectors “[wanted] to help… resolve…[the] delinquent account.”  The debt collectors informed the borrower that they would accept a reduced payment if the payment was made by a certain date and that the debt collector was not obligated to renew the offer after the date had passed.  The letter did not contain a disclosure that the debt was time-barred. 

The debtor brought an action against the debt collectors alleging violations of the FDCPA because (1) the letter was “false, deceptive, and misleading” under §1692e and (2) the general practice of attempting to collect time-barred consumer debt was per se “unfair or unconscionable” under §1692f.  The debt collectors filed a motion to dismiss and the district court granted the motion, agreeing that the collection efforts did not violate either of the relevant provisions of the FDCPA because there was no express threat of litigation.  The debtor appealed.

The Eleventh Circuit applied the “least-sophisticated consumer” standard, which holds that a debt collector violates the FDCPA by making a representation in a collection letter that would be deceptive or misleading to the “least sophisticated” recipient of the letter.  Additionally, the letter would violate the FDCPA if it would be unfair or unconscionable as applied to the “least sophisticated” debtor subjected to the practice.  Under the standard, the “least-sophisticated consumer” is presumed to have only a “rudimentary amount of information about the world,” but would be assumed to “be willing to read a collection notice with some care.” 

The Eleventh Circuit, addressing the debtor’s §1692e claim, concluded that a collection letter—containing an offer to “resolve” a time-barred debt, combined with a deadline to accept the reduced-payment offer, and a warning that the offer might not be renewed if payment is not timely made–could plausibly deceive or mislead an unsophisticated consumer as to the legal status of the debt, even in the absence of an express threat of litigation.  The court reasoned that an unsophisticated reader might conclude from the language of the letter that he was being presented with an ultimatum, and that failure to make payment within the required time frame would result in negative consequences, such as legal action. 

By taking such a stance, the Eleventh Circuit now joins the Third, Fifth, Sixth, and Seventh Circuits in holding that a collection letter referencing a time-barred debt can plausibly violate the FDCPA even if there is not an express threat of litigation.  This differs from the Eighth Circuit which holds that a collection letter referencing a time-barred debt cannot violate the FDCPA absent an express threat of litigation.

As for the debtor’s §1692f claim, the Eleventh Circuit affirmed the district court’s dismissal of this claim.  The court rejected the plaintiff’s argument “that the general practice of attempting to collect on time-barred debt is per se unfair or unconscionable.”  The court explained that the FDCPA does not impose a bright-line rule prohibiting debt collectors from attempting to collect time-barred debts.  The Eleventh Circuit remanded the case to the district court for further proceedings consistent with its opinion. 

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