Consumer Finance Insights
April 30, 2019

Eleventh Circuit Holds FDCPA “Plausibly” Violated Despite Lack of Express Threat of Litigation

On April 5, 2019, the Eleventh Circuit Court of Appeals issued a decision holding that a plaintiff asserted a plausible claim under a provision of the Fair Debt Collection Practices Act (FDCPA) that forbids debt collectors from using “false, deceptive, or misleading representation[s] or means in connection with the collection of any debt,” even though the debt collector did not expressly “threaten[] to sue on a time-barred debt.”  The court’s decision in Holzman v. Malcom S. Gerald & Associates, Inc., et al., No. 16-16511 (11th Cir. April 5, 2019), situates the Eleventh Circuit alongside the Fifth, Sixth, Seventh, and Third Circuits which have similarly concluded that violations of section 1692e of the FDCPA do not necessarily require express threats of litigation.

The decision arises from plaintiff Stephen Holzman’s putative class action lawsuit against defendants LVNV Funding, LLC (LVNV) and Malcolm Gerald & Associates, Inc. (Malcolm) for violations of the FDCPA and its Florida state analogue.  Defendants attempted to collect on Mr. Holzman’s time-barred debt stemming from a personal credit card that was “charged off” by the original creditor in 2007.  Despite the “charge off,” Malcolm, at the behest of LVNV, sent Holzman a collection letter offering him payment terms to “resolve” his “outstanding debts.”  Holzman filed putative class action claims, alleging that this letter amounted to a “false, deceptive, or misleading” attempt to collect a time-barred debt in violation of section 1692e of the FDCPA.

The district court dismissed Holzman’s FDCPA claims, reasoning that because the letter “did not contain any language that could be interpreted as initiating or threatening legal action,” Holzman’s complaint “did not assert a plausible violation of the FDCPA.”  In so concluding, the court relied upon cases from the Eighth and Third Circuits, as well as the Southern District of Florida, for the idea that the FDCPA does not forbid debt collectors from seeking the “voluntary repayment” of “time barred debt so long as the debt collector does not initiate or threaten legal action in connection with its debt collection efforts.”  The district court distinguished decisions from the Fifth, Sixth, and Seventh Circuits, all of which concluded that collection letters making offers to “settle” time-barred debt—but not overtly threatening litigation—can still violate the FDCPA.  Mr. Holzman appealed the dismissal of his FDCPA claims, arguing “that the collection letter he received from [d]efendants was ‘false, deceptive, or misleading’ . . . given that the debt referenced in the letter was legally unenforceable.”

The Eleventh Circuit reversed, reasoning that it was more persuaded by the Fifth, Sixth, and Seventh Circuit decisions that the district court attempted to distinguish.  The court thus held 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 [section] 1692e so long as one can reasonably infer an implicit threat.”  According to the court, such a reading is not only supported by the text of the statute, but by a “common-sense application of the least-sophisticated consumer standard,” which requires reviewing representations made in collection letters with an eye towards whether they “would be deceptive or misleading to the last-sophisticated consumer.”  Because the language of the statute forbids debt collectors from threatening actions “that cannot be legally taken” and from misrepresenting the “legal status” of a debt, and because the language of the letter Mr. Holzman received could plausibly “deceive or mislead an unsophisticated consumer as to the legal status of the debt,” the Eleventh Circuit revived plaintiff’s FDCPA claims.

The lasting impact of this decision remains to be seen, but the immediate impact of the case is to deepen the weight of authority holding that debt collectors can violate section 1692e of the FDCPA in attempting to collect time-barred debts, even where they do not overtly threaten litigation.  Although some courts continue to hold that debt collectors may seek “voluntary repayment” of time-barred debts, debt collectors would be wise to proceed with caution as this issue continues to work its way through the circuits.

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