Midland Funding, LLC v. Johnson, St. Ct., No. 16-348
In Midland Funding, LLC v. Johnson, St. Ct., No. 16-348, appeal docketed Sept. 16, 2016: US Supreme Court in 2017 will hear and decide a bankruptcy case involving a debt collection agency and a consumer bankruptcy debtor.
Issue is whether the Consumer Financial Protection Act prohibits a debt collection agency/creditor from filing a proof of claim, in a bankruptcy case, that is barred by the statute of limitations. More than two years into a litigation effort challenging the credit and collection industry’s practice of filing time-barred proofs of claim in consumer bankruptcy cases, all eyes are on the U.S. Supreme Court, which recently received a flood of “friend of the court” briefs arguing both sides of the debate – including amicus briefs from ACA International and the Consumer Financial Protection Bureau. In Midland Funding, LLC v. Johnson, St. Ct., No. 16-348, appeal docketed Sept. 16, 2016, a consumer is accusing a debt collector of engaging in deceptive, misleading, unfair, or unconscionable conduct in violation of the Fair Debt Collection Practices Act by knowingly filing an accurate bankruptcy proof of claim on a debt that is barred by the applicable statute of limitations. The district court judge in the Southern District of Alabama who considered the issue in Johnson granted the debt collector’s motion to dismiss, finding the FDCPA and the Bankruptcy Code in “irreconcilable conflict” because the Code allows all creditors to file a proof of claim on any debt, even if that debt is barred by the statute of limitations, whereas the FDCPA prohibits a “debt collector” from “us[ing] any false, deceptive, or misleading representation or means in connection with the collection of any debt,” including attempting to collect a debt that is not “expressly authorized by the agreement creating the debt or permitted by law” (i.e., a debt barred by the statute of limitations.) The district court found that the later-enacted Bankruptcy Code effectively repealed the conflicting provision under the FDCPA and precluded consumers from challenging the practice of filing time-barred proofs of claim as a violation of the FDCPA in a bankruptcy proceeding. [reported in 010517 Credit & Collection e-newsletter].