Fourth Circuit Addresses FDCPA Limitations Period
The Fair Debt Collection Practices Act (FDCPA) provides that a claimant must bring an FDCPA claim “within one year from the date on which the [FDCPA] violation occurs.” A majority of federal courts, including the U.S. Court of Appeals for the Third and Eighth circuits, have held that each alleged FDCPA violation starts a separate limitations clock. However, some federal courts, including the U.S. District Court for the District of Maryland, have held that the statute of limitations for a series of repeated FDCPA violations of the same type run from the first violation of that type. The U.S. Court of Appeals for the Fourth Circuit appeared to have adopted this minority approach in two unpublished per curiam orders.
In a recent decision, the Fourth Circuit shifted away from the minority view, holding that each alleged FDCPA violation has its own limitations period. In this case, the borrowers alleged FDCPA violations against a debt collector in connection with the collector’s communications with the borrowers. The borrowers filed suit more than a year after the debt collector’s first alleged unlawful communication occurred but less than one year after the other allegedly unlawful communications occurred. The U.S. District Court for the District of Maryland granted the debt collector’s motion to dismiss, reasoning that the first of the series of allegedly unlawful communications occurred outside of the limitations period and therefore the borrowers’ entire claim was time-barred.
In overruling the trial court, the Fourth Circuit reasoned that the FDCPA did not have textual support to suggest that the one-year limitations period applied to a series of repeated violations instead of each individual violation. The court also emphasized that, practically speaking, if the court followed the minority approach, a debt collector could violate the FDCPA with impunity once the initial violation in a series of similar violations fell outside of the one-year limitations period. The court also noted that its prior per curiam orders that aligned with the minority approach were not binding. The Fourth Circuit overruled the trial court and held that the borrowers could maintain their suit with respect to the alleged violations that occurred less than one year before the borrowers filed suit.
Practice Point: The FDCPA’s limitations period has been a ripe area for litigation in recent months. Earlier this year, the U.S. Supreme Court ruled that a general “discovery rule” did not apply to the FDCPA’s statute of limitations. That ruling did not address whether a “fraud-based discovery rule” could extend the statute of limitations and at least some of the justices appear receptive to such an exception. The recent Fourth Circuit decision swings the pendulum back to the borrowers, as debt collectors in Maryland have now lost a compelling statute of limitations defense.
Please contact Bryan M. Mull with any questions concerning this topic.