Cases from Different Circuits Conflict
Cases from different Circuits conflict, as to whether or not a creditor violates the federal Fair Debt Collection Practices Act (“FDCPA”), by filing a Proof of Claim, in a debtor’s bankruptcy case, that the creditor knows is “time barred” (past the statute of limitations for time period in which creditor must sue, if creditor wants to seek to collect the debt from the debtor who owes the debt. The US Supreme Court will likely eventually rule on this issue:
Here are some of the cases in conflict:
The Eighth Circuit Court of Appeals held that a debt collector’s filing an “accurate and complete” proof of claim for a time-barred debt does not constitute a practice forbidden under the Fair Debt Collection Practices Act.
See Nelson v. Midland Credit Management, Inc., — F.3d —-, 2015 WL
5093437 (8th Cir., July 11, 2016) (text of opinion). The court concluded that such a proof of claim “is not false, deceptive, misleading, unfair, or unconscionable under the FDCPA.”
To date only the Eleventh Circuit Court of Appeals has allowed a claim under the FDCPA for a debt collector’s filing a proof of claim for a time-barred debt. See Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir. 2014) (by filing a proof of claim for a time-barred debt, the debt collector engaged in conduct that was “deceptive,” “misleading,” “unconscionable,” or “unfair” under the FDCPA) (text of opinion) and Johnson v. Midland Funding, LLC, — F.3d —-, 2016 WL 2996372 (11th Cir., May 24, 2016) (the Bankruptcy Code does not preempt the FDCPA in the context of a Chapter 13 bankruptcy case in which a debt collector files a proof of claim for a debt the collector knows to be time-barred).
Conversely, decisions in two other circuits disallow such a claim under the FDCPA. In Simmons v. Roundup Funding, LLC, 622 F.3d 93 (2nd Cir., Oct. 5, 2010) (text of opinion), which involved a debt collector’s filing an allegedly inflated proof of claim, the Second Circuit Court of Appeals held that a creditor’s filing an invalid proof of claim in a bankruptcy case does not constitute the sort of abusive debt collection practice proscribed by the Fair Debt Collection Practices Act.
Previously, in Walls v. Wells Fargo Bank, N.A., 276 F.3d 502 (9th Cir.
2002), which involved a claim under the FDCPA for a debt collector’s attempting to collect a debt previously discharged in bankruptcy, the Ninth Circuit Court of Appeals held that a debtor’s sole remedy is under the Bankruptcy Code for creditor misconduct for which the Code provides a remedy; this decision has been interpreted as generally disallowing a claim under the FDCPA for creditor conduct during or related to a bankruptcy case.
See also Rhodes v. Diamond, 433 Fed. Appx. 78 (3rd Cir., April 28, 2011) (text of opinion), an unreported case that is similar to Simmons, above.
This issue is currently before five Courts of Appeals. See Martel v. LVNV Funding, LLC, Case No. 16-1653 (1st Cir., filed May 25, 2016); Torres v. Cavalry SPV I, Case No. 15-2132 (3rd Cir., filed May 13, 2015); Dubois v. Atlas Acquisitions LLC, Case No. 15-1945 (4th Cir., filed August 21, 2015); In re Broadrick, Case No. 16-5042 (6th Cir., filed Jan. 14, 2016); and Owens v. LVNV Funding, LLC, Case No. 15-2044 (7th Cir., filed May 13, 2015). Oral argument has been held in the Dubois (4th Circuit) and Owens (7th Circuit) cases (on May 10 and June 1, respectively); briefing is ongoing in the others.