Appeals Court Defines FDCPA Suit Filing Period in Split Decision

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The Fifth Circuit Court of Appeals this week ruled that the statute of limitations on bringing a Fair Debt Collection Practices Act (FDCPA) case begins when the consumer is notified of the violating action, not when the ARM company takes the action. But the three-judge panel was split in its interpretation with one judge entering a dissenting opinion.

The case, Rolando Serna v. Law Office of Joseph Onwuteaka, et al, concerned a default on an Internet payday loan. The loan was subsequently sold to the defendants who filed a debt collection suit in the Harris County (Texas) Justice of the Peace Court on July 6, 2010, and served Serna on August 14, 2010. Onwuteaka won a default judgment in the case.

On August 12, 2011, Serna filed suit claiming that the debt collection case was brought in the wrong venue. Since he neither resided nor entered the loan agreement in Harris County, Serna argued that the defendants’ debt collection suit violated the FDCPA’s venue requirement.

Serna attached to his suit an application to proceed in forma pauperis (IFP), claiming that he didn’t have the funds to pay filing costs. The district court denied the application on August 15, 2011. On August 18, 2011, Serna refiled his complaint, which was identical to the original complaint he filed six days earlier, this time paying the required fee.

The defendants filed for summary judgment on the grounds that the suit was beyond the one-year statute of limitations for FDCPA cases, since Onwuteaka filed his suit on July 6, 2010. The district court agreed and ruled for defendants. Serna appealed to the circuit court.

The three-judge panel reversed that decision Monday, with the majority ruling that the statute of limitations on an FDCPA suit starts when the consumer is notified of the violating action (in this case, a wrong venue lawsuit filed on July 6, but served on August 14). The majority wrote that the FDCPA’s language of “bringing” an action cannot be considered synonymous with filing the original suit. Instead, “bringing” an action should mean the date at which both parties were made aware of it.

But one of the judges dissented, concluding that Serna’s action was, indeed, untimely. He wrote that the majority spent too much time on interpretations of the FDCPA’s intent rather than looking at the actual facts of the case. “Spelunking unnecessarily in the depths of legislative history, the majority loses its way,” wrote Circuit Judge Jerry Smith. He argued that Congress should not need to specifically use the word “file” rather than “bring,” that the accepted definition of the word is plain.

Continuing the Discussion

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