In an opinion filed on October 28th, a federal judge for the United States District Court for the Southern District of Florida ruled that a settlement offer in a letter sent to a consumer on time-barred debt did not violate the Fair Debt Collection Practices Act (FDCPA).
The case, Ehrich v. Convergent Outsourcing, Inc. involves the following language in a letter to the consumer:
Dear David Ehrich:
This account was placed with our office to recover the amount due, Convergent Outsourcing will be handling the account on behalf of LVNV Funding LLC. The records of LVNV Funding LLC show that your account has a past due balance of $[REDACTED].
Our client has advised us that they are willing to settle your account for 50% of your total balance due to settle your past balance. The full settlement must be received in our office by an agreed upon date. If you are interested in taking advantage of this offer, call our office within 45 days of this letter. Your settlement amount would be $[REDACTED] to clear this account in full. Even if you are unable to take advantage of this offer, please contact our office to see what terms can be worked out on your account. We are not required to make this offer to you in the future.
Plaintiff alleged that the letter violated the FDCPA in two ways:
- By failing to advise of the time-barred status of the outstanding debt; and
- By making an offer to settle the debt on a discounted basis, which could be construed as a threat to sue if an agreement is not reached.
Convergent moved to dismiss the case for failure to state a claim under which relief could be granted, while Plaintiff moved the court to amend the complaint to add Convergent’s client, LVNV Funding, LLC (“LVNV”) as a defendant.
The court granted Convergent’s motion to dismiss and denied the plaintiff’s motion. The opinion is here. The court’s rationale was divided into 3 segments.
1) Convergent Was Under No Obligation to Advise Plaintiff of the Time-Barred Status of the Debt
On this issue, the court concluded:
“Convergent was under no obligation to advise Ehrich that the debt was time-barred by the applicable statute of limitations. Nor did Convergent threaten legal action in any way, even from the point of view of the least sophisticated consumer. The November 2014 letter from Convergent to Ehrich contained no indication or threat that Convergent would be seeking to enforce the debt in court. No lawsuit is mentioned or threatened-either explicitly or implicitly. Because Convergent did not initiate or threaten legal action in connection with its debt collection efforts, it was entitled to seek voluntary repayment of the time-barred debt. Accordingly, Ehrich fails to state a claim under the FDCPA.”
2) Convergent’s Offer to Settle Did Not Constitute a Threat to Sue
On this issue the court concluded:
“The Court rejects plaintiff’s argument that Convergent’s settlement offer could be construed as a threat to sue. A debt collector’s offer to settle a debt does not in and of itself constitute a threat to bring legal action. Here, the letter states, in part, that the current creditor of the debt is “willing to settle [the] account for 50% of [the] total balance due.” The letter contains no threat of any future action, litigation or otherwise. It lacks language the least sophisticated consumer could reasonably construe as a threat, such as negative consequences in the event of non-payment. In short, Convergent’s use of the word “settle,” without more, cannot be taken as a threat, even by the least sophisticated consumer.”
3) The Complaint As Amended Would Still Be Subject to Dismissal
On this issue the court concluded:
“Given the fatal flaws in Ehrich’s case, permitting him to amend the Complaint at this juncture would be futile. Ehrich’s proposed amended complaint advances the same legal theory as his initial complaint, and the addition of LVNV as a defendant does nothing to cure the deficiencies discussed above. That Ehrich could establish Convergent knew the debt was unenforceable under the applicable statute of limitations is beside the point. The real issue is whether Convergent engaged in unlawful debt collection by seeking the voluntary settlement of a time-barred debt. Because Convergent neither initiated nor threatened legal action in its collection efforts, the answer is quite simply, no. Therefore, because the complaint as amended is still subject to dismissal, it would be futile to give Ehrich leave to amend. Ehrich’s request to amend the Complaint is denied.”
This is a well-reasoned opinion on a volatile issue that is in flux in courts throughout the country. In January of this year insideARM published an extensive article on the issue. That article discussed the joint FTC, CFPB amicus brief filed in a similar case. Consumer advocates continue to call for an outright ban on the collection of time-barred debt. Unless and until the issue is definitively resolved, either through CFPB rulemaking or a Supreme Court opinion on the issue, there will continue to be lawsuits filed and conflicting opinions issued.