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:
- Whether the filing of an accurate proof of claim
for an un-extinguished time-barred debt in a bankruptcy proceeding violates the
FDCPA. - 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.
