Eleventh Circuit Joins the Majority: Time-Barred Debt Collection + Implicit Threat of Litigation = Plausible FDCPA Claim
When it comes to collection of a time-barred debt, the Circuit Courts of Appeals are split as to whether an accompanying explicit threat of litigation is required for purposes of stating a plausible claim for violation of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692–1692p.
The minority holds that an explicit threat is necessary for a claim alleging “any false, deceptive or misleading representation” made in connection with collection of a time-barred debt. Freyermuth v. Credit Bureau Servs., Inc., 248 F.3d 767 (8th Cir. 2001). Whereas the majority holds that an express threat of litigation is not necessarily required to violate the FDCPA. Tatis v. Allied Interstate, LLC, 882 F.3d 422, 428-30 (3d Cir. 2018), adopting Daugherty v. Convergent Outsourcing, Inc., 836 F.3d 507 (5th Cir. 2016), Buchanan v. Northland Group, Inc., 776 F.3d 393 (6th Cir. 2015), and McMahon v. LVNV Funding, LLC, 744 F.3d 1010 (7th Cir. 2014).
The Eleventh Circuit had not taken a position. But that changed on April 5, 2019, when it joined the majority by holding that a time-barred collection letter without an express threat of litigation could still violate the FDCPA in Holzman v. Malcolm S. Gerald & Associates, Inc., 920 F.3d 1264 (11th Cir. 2019).
The facts: In 2005, Plaintiff incurred a $900 consumer credit card debt which was charged off by the original creditor in 2007. In 2015, Defendant LVNV Funding, LLC (“LVNV”), a debt collector, purchased the debt and retained a law firm, Defendant Malcolm S. Gerald & Associates, Inc. (“Malcolm”), to assist with collection. Malcolm sent Plaintiff a collection letter stating the amount of the debt, the charge-off date, and offering a 30% discount if paid by a certain date. The letter stated: “We are not obligated to renew this offer.” Id. at *4.
Plaintiff files suit in S.D. Fla.: Thereafter, Plaintiff filed a putative class action complaint in the Southern District of Florida alleging that Malcolm’s collection letter was: (1) “false, deceptive, or misleading” in violation of § 1692e of the FDCPA; (2) an “unfair or unconscionable” practice in violation of § 1692f of the FDCPA; and (3) a false assertion of a legal right that Defendant knew did not exist in violation of the Florida Consumer Collection Practices Act (FCCPA), Fla. Stat. §§ 559.55, et seq. See Complaint, Holzman v. Malcolm S. Gerald & Assocs., Inc., No. 9:16-cv-80643-RLR, Doc. No. 1 (S.D. Fla. Apr. 22, 2016). The district court dismissed Plaintiff’s FDCPA claims with prejudice pursuant to Federal Rule 12(b)(6), finding that the collection letter did not contain any language that could be interpreted as initiating or threatening legal action. The district court declined to exercise jurisdiction over Plaintiff’s FCCPA claim.
Appeal to the Eleventh Circuit: In Holzman, the Eleventh Circuit first upholds the district court’s dismissal under § 1692f, finding that a letter seeking collection of a time-barred debt is not a per se violation of the FDCPA. Next, the Court reverses the dismissal of Plaintiff’s § 1692e claim by holding that “with regard to a collection letter seeking payment on a time-barred debt, an express threat of litigation is not required to state a claim for relief under § 1692e so long as one can reasonably infer an implicit threat.” Holzman, 920 F.3d at 1271. In this particular case, the Eleventh Circuit found that “an offer to ‘resolve’ time-barred debt, combined with a deadline to accept . . . and a warning that the offer might not be renewed if payment is not timely made,” could plausibly deceive or mislead an unsophisticated consumer as to the legal enforceability of the debt. Id. at 1272 . Thus, in Holzman, the Eleventh Circuit—joining the majority—reversed and reinstated the Plaintiff’s § 1692e claim and his corollary FCCPA claim.