Ninth Circuit Confirms Discrete Actions in Debt Collection Litigation can Trigger FDCPA One-Year Statute of Limitations

A panel of the U.S. Court of Appeals for the Ninth Circuit recently held that because of the timing of a filing in a collection action against a student loan borrower, his claim that debt collectors violated the Fair Debt Collection Practices Act (FDCPA) was not time-barred, reversing the lower court’s dismissal. 

In Brown v. Transworld Systems, Inc., the panel affirmed in part and reversed in part the lower court’s dismissal, for failure to state a claim, of a lawsuit in which  Brown, a student loan borrower who had received a bankruptcy discharge, alleged that the collectors’ attempts to collect discharged debts violated the FDCPA.  In pertinent part, the panel held that as long as the date of the action is easy to determine, the FDCPA one-year statute of limitations begins to run when a collection attorney takes the last action that could independently violate the statute.  The panel also held that the determination of whether a lawyer’s conduct or communications made during a collection lawsuit violates the FDCPA is a fact-intensive inquiry that requires a case-by-case examination.

From 2003 to 2007, Brown took out ten student loans.  The purchaser of the loans hired Transworld System, Inc. to collect on the defaulted loans and Transworld subsequently filed a series of collection lawsuits in state court on behalf of the purchaser.  In support of these collection efforts, the collector filed two separate affidavits purporting to establish the purchaser’s ownership of the debts, with the second affidavit intended to replace the first affidavit after it was questioned by Brown in his summary judgment motion. The state court ruled that the second affidavit declaring that the purchaser owned the underlying student loan debts was hearsay and excluded it.  Because the purchaser could not prove its ownership of the debt, the state court granted summary judgment in favor of Brown.