• Debt Buyers Win In Supreme Court FDCPA “Proof Of Claim” Case
  • August 10, 2017 | Authors: Robert A. Gaumont; Lawrence D. Coppel; Marjorie A. Corwin; Christopher R. Rahl
  • Law Firm: Gordon Feinblatt LLC - Baltimore Office
  • The United States Supreme Court recently issued a decision holding that debt buyers/creditors do not violate the Fair Debt Collection Practices Act (FDCPA) by filing a proof of claim in a bankruptcy proceeding where the underlying statute of limitations has expired on collecting the debt. Until now, lower courts have split concerning the issue, with many Circuits holding in favor of debt buyers/creditors (see our Legal Alerts in March 2015, April 2015, June 2015, and September 2016). The Eleventh Circuit consistently has held against debt buyers/creditors and the Supreme Court’s recent decision overturns an Eleventh Circuit decision from May 2016 in which that appeals court held that: (1) filing a proof of claim related to a time-barred debt is an attempt to collect a debt that misrepresents the "legal status" of the debt in violation of the FDCPA; and (2) the Bankruptcy Code does not preempt the FDCPA. The Supreme Court reversed the Eleventh Circuit, and held that filing a proof of claim on a time-barred debt is not unfair or unconscionable. The Supreme Court noted that untimeliness is an affirmative defense that a debtor may raise to avoid payment of a claim and the protections afforded a debtor within the bankruptcy process significantly diminish any concerns that a consumer will unwittingly pay a time-barred claim. The Supreme Court’s decision resolves the previous split among Circuits in favor of debt buyers/creditors. Please contact Christopher Rahl with questions concerning this topic.