The Supreme Court of the United States (SCOTUS) on Tuesday agreed to consider an appeal in a case that should provide legal clarity for the ARM industry. The case, Johnson v. Midland Funding, LLC, considers whether knowingly filing a proof of claim on out-of-statute debt is a violation of the Fair Debt Collection Practices Act (FDCPA).

The case involves a dispute between Aleida Johnson and Midland Funding, LLC. Midland filed a proof of claim on an account of Johnson’s that was outside the applicable statute of limitations. Attorneys on both sides of the case had filed petitions for a writ of certiorari seeking SCOTUS review.

SCOTUS, in granting certiorari, says it will consider two specific questions:

  1. Whether the filing of an accurate proof of claim for an un-extinguished time-barred debt in a bankruptcy proceeding violates the FDCPA.
  2. Whether the Bankruptcy Code precludes the application of the FDCPA to the filing of an accurate proof of claim for an unextinguished time-barred debt.

SCOTUS will hear arguments and is expected to rule on the case by the end of June 2017.

insideARM Perspective

SCOTUS agreeing to review this case is a good development, and their eventual ruling should provide clarity to the ARM industry and consumers alike. insideARM has written recently about Johnson and similar cases, which have led to varying opinions in Courts of Appeals.

Before the Johnson case was taken up by SCOTUS, the Eleventh Circuit Court of Appeals determined that filing a bankruptcy court proof of claim on a time-barred account was an FDCPA violation.

In a similar case, Owens v. LVNV Funding, LLC, the Seventh Circuit joined with the Eighth Circuit Court of Appeals in rejecting the notion that filing such proofs of claim violated the FDCPA.

insideARM provides an FDCPA case law grid that highlights many significant FDCPA cases. The grid can be found here. The grid is updated on a monthly basis, courtesy of Joann Needleman from the Clark Hill law firm. A cursory review of the grid will show several cases relating to the filing of proofs of claim, with inconsistent decisions from the courts.

The lesson? Until SCOTUS provides clarity, any debt collector filing proofs of claim on accounts that may be outside the applicable statutes of limitation is engaging in risky conduct.


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