Yesterday, the Eighth Circuit Court of Appeals entered a ruling affirming a district court’s decision that a debt collector’s filing of a proof of claim in the consumer’s Chapter 13 bankruptcy case based on an out-of-statute debt was not a false, deceptive or misleading debt collection practice.
The case was Nelson v. Midland Credit Management, Inc., (Case No. 15-2984, Eighth Circuit Court of Appeals). A copy of the opinion can be found here.
Midland Credit Management, Inc. (Midland) had filed a Proof of Claim in Nelson’s bankruptcy proceeding. Nelson had objected to the filing arguing it was time-barred. The Bankruptcy Court agreed and disallowed Midland’s claim.
Nelson then sued Midland, alleging that, by filing the proof of claim on a time-barred debt, Midland had violated the Fair Debt Collection Practices Act (FDCPA). The district court dismissed the lawsuit for failure to state a claim, holding that the FDCPA is not implicated by a debt collector filing an accurate and complete claim on a time-barred debt.
Nelson appealed the district court decision.
The Opinion of the Eighth Circuit
The Eighth Circuit Court of Appeals, by a 3-0 decision, affirmed the lower court dismissal.
Nelson had urged the Court of Appeals to follow the 11th Circuit Court of Appeals in their decision in Crawford v. LVNV Funding, LLC . In that case, the 11th Circuit held that filing a proof of claim on time-barred debt is conduct that violates the Fair Debt Collection Practices Act (FDCPA). See the insideARM article on the Crawford case here.
Here the Eighth Circuit rejected the Crawford analysis. The court wrote:
“This court rejects extending the FDCPA to time-barred proofs of claim. An accurate and complete proof of claim on a time-barred debt is not false, deceptive, misleading, unfair, or unconscionable under the FDCPA. The district court properly dismissed for failure to state a claim.”
The issue of filing proofs of claim on time barred debt has received inconsistent treatment in the courts. In November 18, 2014 insideARM published an excellent article on the issue by Donald Maurice.
The Nelson decision is now precedential, authoritative law in the Eighth Circuit (Minnesota, Nebraska, Iowa, Missouri, Arkansas, North Dakota, and South Dakota). The Eleventh Circuit (which has jurisdiction over federal cases originating in the states of Alabama, Florida and Georgia) will still be subject to the Crawford analysis.
This is precisely the type of issue that should be uniform throughout the United States. The inconsistency could be addressed through the courts (a Supreme Court decision on the issue) or, perhaps some guidance on this issue could come out of the CFPB rulemaking.