- Third Circuit Holds That Attempt to Collect Time-Barred Debt Not a Violation of FDCPA or FCRA
- May 17, 2011 | Author: Nicholas D. O'Conner
- Law Firm: Hinshaw & Culbertson LLP - Chicago Office
In Huertas v. Galaxy Asset Management, 2011 WL 1361568 (3rd Cir. April 11, 2011), the U.S. Court of Appeals for the Third Circuit held that a debt collector’s letter attempting to collect a time-barred debt did not violate the Fair Debt Collection Practices Act (FDCPA). Furthermore, the Court found that the debt obligation was not extinguished by the statute of limitations and that the debt collector did not violate the Fair Credit Reporting Act (FCRA) when it pulled the consumer’s credit report in connection with the debt.
The case arose out of a debt that plaintiff debtor had incurred with defendant creditor that was subsequently transferred to defendant successor creditor. A debt collector attempted to collect the debt even though the six-year statute of limitations period had elapsed. The debtor sued, alleging, among other things, violations of the FDCPA and FCRA. The creditor and debt collector moved for summary judgment. The District Court held that the running of the statute of limitations made the debt unenforceable, but did not extinguish it.
On appeal, the debtor argued that the District Court erred in its finding that the running of the limitations period did not extinguish plaintiff’s debt. The Third Circuit found that, “[the debtor’s] debt obligation is not extinguished by the expiration of the statute of limitations, even though the debt is ultimately unenforceable in a court of law.” Furthermore, the Court held that the FDCPA permits a debt collector to “seek voluntary repayment of the time-barred debt so long as the debt collector does not initiate or threaten legal action in connection with its debt collections efforts.” The debt collector’s attempts to collect the debt here did not threaten legal action and, therefore, did not violate the FDCPA. Additionally, the Court held that the debt collector had not violated the FCRA because it sought the debtor’s credit report in connection with a credit account that the debtor had opened. For these reasons, the Third Circuit affirmed the lower court’s rulings dismissing the debtor’s claims.