The Eleventh Circuit Court of Appeals recently ruled that a debt buyer violated the Fair Debt Collection Practices Act (“FDCPA”) by filing a proof of claim in a bankruptcy on a time-barred debt. In Crawford v. LVNV Funding, LLC, et al, the Eleventh Circuit held that the filing of the proof of claim on the stale debt created a misleading impression to the debtor that the debt buyer could legally enforce the debt and that this was in violation of Sections 1692e and 1692f of the FDCPA for using false, deceptive and misleading means in connection with the collection of a debt.
The debt at issue originated in 2001, and the three-year statute of limitations expired on the enforcement of the debt in 2004. When the consumer filed for Chapter 13 bankruptcy in 2008, the debt buyer filed a proof of claim of the expired debt in an effort to receive distributions during the case. In 2012, after the debt buyer had collected funds for the out-of-statute debt, the consumer filed an adversary proceeding, alleging the debt collector violated the FDCPA by enforcing an expired debt, which the bankruptcy judge dismissed and the U.S. District Court affirmed. The district court held that filing a proof of claim is not considered an effort to collect on a debt and this abusive practice is not what the FDCPA is intended to protect.
The consumer then appealed to the Eleventh Circuit Court of Appeals, which disagreed with the district court stating that the filing of a proof of claim is an attempt to collect a debt covered by the FDCPA, which covers direct and indirect collection actions including the one at hand. The court also concluded that the least sophisticated consumer could fail to object to a collection attempt as they may not know that a debt is out-of-statute and, therefore, uncollectable.
While the Eleventh Circuit acknowledged that the Second, Third, Seventh and Ninth Circuits hold that the Bankruptcy Code preempts the FDCPA, it declined to make the same determination.
To learn more about this decision or the FDCPA in general, contact Joseph Messer at firstname.lastname@example.org or call (312) 334-3440.