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Supreme Court Takes FDCPA "Proof of Claim" Case

The United States Supreme Court recently granted review of a case from the 11th Circuit to determine if a debt buyer violates the Fair Debt Collection Practices Act (FDCPA) by filing a proof of claim in a bankruptcy proceeding concerning a debt where the underlying statute of limitations has expired.  Courts have split concerning the issue, with many Circuits holding in favor of debt buyers (see our Legal Alerts in March 2015, April 2015, June 2015, and September 2016).  The 11th Circuit has consistently held against debt buyers, starting with its 2014 decision in Crawford v. LVNV Funding, LLC.  The 11th Circuit's most recent decision supporting and expanding its Crawford holding was issued in May of this year.  The 11th Circuit held that: (1) filing a proof of claim related to a time-barred debt is an attempt to collect a debt that misrepresents the "legal status" of the debt in violation of the FDCPA; and (2) the Bankruptcy Code does not preempt the FDCPA (while the Bankruptcy Code may allow creditors to file proofs of claim even where the applicable statute of limitations has expired, creditors are "not free from all consequences of filling these claims" and are still subject to penalties under the FDCPA).  The 3rd, 4th, and 7th Circuits have all reached contrary results and parties to a recent case from the 7th Circuit (holding in favor of debt buyers) also sought the Supreme Court's review, but the Supreme Court did not grant certiorari for the 7th Circuit decision.  The Supreme Court's decision to review only the 11th Circuit's decision concerning this issue, coupled with the decisions in favor of debt buyers in most other Circuits, may signal that the Supreme Court will come down on the side of debt buyers.  Please contact Christopher Rahl with questions concerning this topic.

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Date

11.15.16

Type

Publications

Authors

Rahl, Christopher R.

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