Consumer Finance Insights
November 10, 2014

Supreme Court Will Not Review Third Circuit FDCPA Decision

The U.S. Supreme Court recently declined to review a debt collector’s appeal of the Third Circuit’s decision this summer that debtors were not required to dispute their debt under the Fair Debt Collection Practices Act (FDCPA) before filing suit.  The Third Circuit decision reversed a district court’s dismissal of a class action brought against the debt collector because the plaintiff had not asked the debt collector to validate the debt before he filed suit.

According to the Third Circuit decison, plaintiff in the case, Timothy McLaughlin, obtained a mortgage with CitiMortgage Inc. in October 2005, and he claimed he fell behind on his mortgage payments because of an error on the lender’s part.  In 2010, the lender referred the debt to a collections law firm, and the firm sent plaintiff a letter detailing the amount of debt owed, along with charges for attorneys’ fees and other costs.

McLaughlin then filed a putative class action alleging that the collections firm violated the FDCPA by falsely representing that it had already performed legal services as of the date it sent plaintiff the original collections letter.  The district court dismissed the complaint (with leave to amend) after finding that McLaughlin could not file suit under the statute without first disputing the debt under the FDCPA’s debt validation procedure.  After the plaintiff amended the complaint, the district court dismissed the amended complaint as well – again finding that McLaughlin was required to follow the debt validation procedure under the FDCPA.

On appeal, the Third Circuit reversed the district court’s decision, ruling that it found no indication that Congress intended to require debtors to dispute their debts under Section 1692e of the FDCPA before filing suit under the same section of the law.  The Supreme Court, as is typical, did not explain its reasoning for declining the petition for review, but its decision leaves in place the Third Circuit’s opinion regarding borrowers’ requirement to validate debts before bringing suit.


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