Reversing the Eleventh Circuit Court of Appeals decision in Midland Funding, LLC v. Johnson, No. 16-348, the U.S. Supreme Court ruled 5-3 on May 15, 2017, that a debt collector does not violate the FDCPA by filing a proof of claim on a debt that is barred from collection by the statute of limitations. The question in Midland Funding was whether a debt collector’s filing of a proof of claim indicating the limitations period has run out is a prohibited act under the Fair Debt Collection Practices Act. The high court concluded it is not, holding “[t]he filing of a proof of claim that is obviously time barred is not a false, deceptive, misleading, unfair, or unconscionable debt collection practice within the meaning of the Fair Debt Collection Practices Act.”
Justice Stephen Breyer, writing for the Court’s majority, explained that, “[t]he law has long treated unenforceability of a claim (due to the expiration of the limitations period) as an affirmative defense.” Accordingly, the court concluded that there is “nothing misleading or deceptive in the filing of a proof of claim” that follows the structural features of the bankruptcy claims resolution process, including the trustee’s objection for a claim’s untimeliness as an affirmative defense. The Court also pointed out that the filing a time-barred claim is not “unfair” or “unconscionable” under the FDCPA because the protections in a bankruptcy proceeding serve to minimize risk to debtors.
Justices Sotomayor, Ginsburg and Kagan, filed a dissenting opinion. Justice Neil Gorsuch did not participate in the decision because he was not on the Supreme Court when oral arguments were held in January.