The Consumer Financial Protection Bureau (CFPB) recently joined the Federal Trade Commission (FTC) in an amicus brief filed on behalf of a plaintiff in a Fair Debt Collection Practices Act (FDCPA) case before a federal appeals court. The case concerns language used in collection letters sent on time-barred accounts.
In Delgado v. Capital Management Services, LP, et al., before the Seventh Circuit Court of Appeals, a consumer filed a class action lawsuit against the debt collection agency after receiving a settlement offer in a letter with a 45-day deadline for response. The statute of limitations on the account had expired. While the letter did not threaten or allude to legal action, the fact that there was not language disclosing that the account was time-barred prompted the suit.
A district court agreed with the plaintiff and rejected the defendant’s motion to dismiss the case. The collection agency then appealed to the Seventh Circuit.
Relying in part on language from the FTC’s 2012 settlement with Asset Acceptance, the district court wrote, “the FTC does not view the affirmative threat of litigation as a necessary element for a consumer to be deceived or misled by a dunning letter that seeks to collect on a stale debt. Rather, taking collection action on a time-barred debt may be considered deceptive, thus necessitating the need for…disclosures to consumers regarding the age of their debts and the consequences of making payments on them.”
The FTC and CFPB naturally agree with this position in their amicus brief. While conceding that “a debt collector may seek voluntary payment of a time-barred debt without violating the FDCPA, even if the communication is silent as to the statute of limitations,” the FTC has concluded that a debt collector’s solicitation of a settlement on a time barred debt can “create a misleading impression as to the consequences of making [a] payment.”
The amicus brief does mention in a footnote that the FTC and CFPB disagree with the plaintiff’s assertion that all debt collection activity on a time-barred account is deceptive.
Since the FDCPA does not require debt collectors to disclose if an account has passed its statute of limitations, the FTC-CFPB position appears to create a position that would require amending the law or writing a new rule.
The CFPB has written or signed on to a handful of amicus briefs in debt collection cases, most notably Marx v. General Revenue Corp. which was decided by the U.S. Supreme Court earlier this year.