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Friday, March 28, 2014

Ind. Courts - 7th Circuit recently held that "time-barred debt can violate Fair Debt Collection Practices Act"

A new article at The National Law Review reports:

The United States Court of Appeals for the Seventh Circuit (Wisconsin, Illinois, Indiana) has recently ruled that collection or "dunning" letters sent after the expiration of the applicable statute of limitations violate the Fair Debt Collection Practices Act ("FDCPA") unless they also disclose that the debt may be time-barred. * * *

The dunning letters at issue in the consolidated appeals McMahon v. LVNV Funding, LLC and Delgado v. Capital Management Services were sent many years after the applicable statutes of limitations for the debts had expired, meaning that the recipients had an "ironclad" defense to collection. Neither letter disclosed this fact. Both letters contained offers to settle the debt at less than the full amount owed. * * *

The Third Circuit (Delaware, New Jersey, Pennsylvania, Virgin Islands) and Eighth Circuit (Missouri, Arkansas, Iowa, Minnesota, North Dakota, South Dakota, Nebraska) Courts of Appeal have both held that sending dunning letters for time-barred debts does not violate the FDCPA unless the letter includes a threat of litigation. Conversely, government agencies including the Federal Trade Commission ("FTC") assert that sending dunning letters for time-barred debt could deceive a consumer because a) most consumers do not understand that their rights or the defense to a lawsuit that is available to them if the debt is time-barred, and b) partial payment on a time-barred debt may actually revive the entire debt in some states.

ILB: I believe this is referred to as "zombie debt." Here is the opinion, from March 11, 2014.

Posted by Marcia Oddi on March 28, 2014 01:12 PM
Posted to Ind. (7th Cir.) Decisions