Alert October 02, 2012

Third Circuit Dismisses Suit Alleging FDCPA Violations in Foreclosure

The United States Court of Appeals for the Third Circuit has dismissed putative class action alleging violations of the Fair Debt Collection Practices Act, among other claims. Plaintiff, a mortgage borrower, alleged that a foreclosure law firm violated the FCDPA by failing to withdraw its foreclosure complaint after plaintiff had entered into a loan modification agreement. Affirming the District Court’s dismissal of the FDCPA claim on statute of limitations grounds, the Third Circuit strictly applied the FDCPA’s one year limitations period. Plaintiff had alleged that her FDCPA claim did not accrue until the defendant knew or reasonably should have known of its violation (i.e., after plaintiff had entered into a modification agreement). The Third Circuit rejected plaintiff’s formulation of the FDCPA, noting, with approval, prior rulings that the FDCPA is a strict liability statute that imposes liability “without proof of an intentional violation.” Holding that this language created a “straightforward, objective standard,” the Third Circuit affirmed the dismissal of plaintiff’s claim on grounds that applying a subjective standard for accrual of an FDPCA claim based on a defendant’s hypothetical knowledge of its violation was incompatible with the strict liability operation of the statute. Also of significance, the Third Circuit held that the limitations period on plaintiff’s claims was not tolled during the FDIC’s review of her claims against the lender, noting that plaintiff’s claims were not subject to tolling because they were not claims against the assets of the failed bank and because the lender’s receivership began after the case was removed to the District Court.