• Fifth Circuit Rules that FDCPA’s Limitations Period Begins When Debtor Suffered “Actual Injury” Through Notice of Underlying Collection Suit
  • October 14, 2013 | Authors: David N. Anthony; Scott Kelly; John C. Lynch; Alan D. Wingfield
  • Law Firms: Troutman Sanders LLP - Richmond Office ; Troutman Sanders LLP - Washington Office ; Troutman Sanders LLP - Richmond Office
  • A recent appellate decision represents a clear “win” for debtors in the ongoing wrong-venue litigation under the Fair Debt Collections Practices Act (FDCPA).

    On October 7, 2013, the Fifth Circuit Court of Appeals held that the statute of limitations period for the plaintiff’s filing of a wrong-venue action under the FDCPA did not begin until the plaintiff received notice of the underlying debt-collection suit.

    In Serna v. Law Office of Joseph Onwuteaka, the defendant filed the underlying debt-collection action in Harris County, Texas, in July 2010 regarding a $2,600 loan default by the plaintiff, a Bexar County, Texas resident. The debtor did not receive notice of the suit until August 13, 2010. He then proceeded to file his FDCPA action on August 12, 2011, which accused the defendant of violating the statute’s venue requirement since he did not reside in or secure the loan at issue in Harris County. The trial court dismissed the suit after finding that the one-year statute of limitations period had run on the plaintiff’s claim.

    The Fifth Circuit disagreed, ruling that the FDCPA statutory limitations period language - when the allegedly infringing parties “bring such action” - was ambiguous as to whether the period began on the date of filing or notice. Faced with that ambiguity, the court was guided by the FDCPA’s remedial nature in concluding that notice, not filing, begins the clock. The court explained: “Tying a violation to the mere filing of a complaint does not serve the statute’s remedial purpose. Upon receiving notice, however, the harm is realized because the debtor must then respond in a distant forum or risk default.”

    What does this mean?

    The Serna case sets the law for courts in the Fifth Circuit that a debtor’s notice of a collection suit starts the statutory clock for wrong-venue FDCPA claims. Behind the scenes, however, the case illustrates the fact that wrong-venue lawsuits are a particular hot-button issue in the FDCPA arena at the moment. Debt collectors should ensure their filing procedures are up to date given the litigation risk that can arise from this procedural miscue.