- More FDCPA Concerns for Debt Buyers
- April 17, 2017 | Authors: Lawrence D. Coppel; Christopher R. Rahl
- Law Firm: Gordon Feinblatt LLC - Baltimore Office
We reported in our March 2015 Maryland Legal Alert about "out of stat" debts (debts for which the appropriate state statute of limitations period has expired) and related challenges faced by debt buyers under the Fair Debt Collection Practices Act (FDCPA). The FDCPA, among other things, bans all false, deceptive, misleading, and unconscionable debt collection practices, including any false representations concerning the "character, amount, or legal status" of a debt. A common practice of debt buyers is to contact debtors with proposed settlement terms, sometimes involving "out of stat" debts. Cases out of both the 6th and 7th Circuit Courts of Appeals have found violations of the FDCPA where collection letters from debt buyers communicated a settlement offer for an "out of stat" debt. A 2016 decision from the 5th Circuit Court of Appeals reached the same conclusion. The Court held that an unsophisticated debtor might hastily accept a settlement offer for an "out of stat" debt not realizing that the debt is judicially unenforceable and that partial payment could restart the applicable statute of limitations. This case serves as a reminder that debt buyers should take steps to identify "out of stat" debts in their portfolios and document those identification efforts. For those debts identified as "out of stat," debt buyers should consider including disclosures in any communications concerning such debts that include notice that: (i) the debt buyer is not going to file suit to recover on the debt; and (ii) a debtor's partial payment will revive the debt buyer's ability to sue in connection with the total debt (note that some states require additional disclosures).