On a question where the circuits are split, the Eleventh Circuit sided with the majority and held that an attempt to collect a time-barred debt can state a plausible claim for violation of the federal Fair Debt Collection Practices Act, or FDCPA, 15 U.S.C. § 1692-1692p.

A consumer owed about $900 on a credit card that the lender had charged off in 2007. Years later, the lender sold the debt for pennies on the dollar to an outfit specializing in the collection of time-barred debts.

The purchaser engaged a law firm that wrote a letter to the consumer stating the amount of the debt and the date it was charged off. The letter went on to offer a 30% discount. If the consumer did not accept the offer by making the requested payment by the specified date, the letter said, “We are not obligated to renew this offer.”

On receipt of the letter, the consumer initiated a putative class action contending, among other things, that the letter violated Sections 1692e and 1692f of the FDCPA. The district court granted a motion to dismiss for failure to state a claim.

On appeal, Circuit Judge Julie Carnes wrote a 20-page opinion for the Eleventh Circuit on April 5 reinstating the claim under Section 1692e but upholding dismissal under Section 1692f.

The Statute

Section 1692e bars a debt collector from using “any false, deceptive or misleading representation or means in connection with the collection of any debts.” The section includes a nonexclusive list of prohibited conduct, including falsely representing the “legal status of any debts” and threatening “any action that cannot legally be taken or that is not intended to be taken.”

Section 1692f bars use of “unfair or unconscionable means to collect or attempt to collect any debt.”

Reinstatement of the Section 1692e Claim

The law firm and the purchaser of the debt were both admittedly debt collectors subject to the FDCPA. Judge Carnes framed the question on appeal as whether the complaint stated a plausible violation of Section 1692e when applying the “least-sophisticated consumer” standard.

Judge Carnes said that courts have “uniformly” held that suing or threatening to sue on a time-barred debt is a violation of Section 1692e.

When the collection letter does not include an explicit threat to sue, the circuits are split. Judge Carnes explained how the Eighth Circuit held that a threat of litigation is necessary for a claim alleging “any false, deceptive or misleading representation” made in connection with collection of a time-barred debt.

On the other hand, Judge Carnes said, the Third, Fifth, Sixth and Seventh Circuits have held that a collection letter can violate the FDCPA without “an express threat of litigation.” According to Judge Carnes, those circuits held that “an offer to ‘settle’ a time-barred debt, without an accompanying disclosure that the debt is judicially unenforceable, plausibly could mislead an unsophisticated consumer as to the legal enforceability of the debt.”

Nonetheless, Judge Carnes said that those courts “recognized that, as a general matter, a creditor can seek voluntary payment of a time-barred debt.” Still, she said, the “right to seek repayment does not confer a right to mislead.”

Not ruling that the collection letter was a per se violation of the FDCPA, Judge Carnes reinstated the claim under Section 1692e. She held that “an express threat of litigation is not required to state a claim for relief under Section 1692e so long as one can reasonably infer an implicit threat.”

Judge Carnes said that an offer to “resolve” the debt, combined with a deadline for acceptance, made it “plausible that a reasonable jury could find that this representation would so mislead an unsophisticated consumer.” [Emphasis in original.]

No Claim Under Section 1692f

Judge Carnes upheld dismissal of the claim that a collection letter on a time-barred debt was a per se violation of Section 1692f. Although the section bars “unfair or unconscionable means” to collect a debt, she said that “courts generally have recognized that the FDCPA does not impose a bright-line rule prohibiting debt collectors from attempting to collect on time-barred debt.”