Collection of Time-Barred Debts Held Not A Violation of Fair Debt Collection Practices Act
October 22, 2007
Larry Brewer sued Portfolio Recovery Associates in the matter of Brewer v. Portfolio Recovery Associates, 1:07CV-113-M (W.D.Ky. 2007), alleging claims under the Fair Debt Collection Practices Act. Brewer claimed that Portfolio violated the FDCPA by sending a letter requesting payment on a time-barred debt. The U.S. District Court for the Western District of Kentucky, however, thought otherwise and dismissed the case.
On May 8, 207 Portfolio sent Brewer a letter that said as follows:
Portfolio Recovery Associates purchased the account referenced above [Capital One Bank, balance $2,444.20] on 03/22/07. Interest continues to accrue on this account until the account is satisfied. The stated balance includes interest as of the date of this letter. All future payments and correspondence for this account, including credit counseling service payments, should be directed to us. This account may be collected by us or by our affiliate, Anchor Receivables Management.
Brewer maintained that enforcement of the alleged debt is barred by the statute of limitations and Defendant “in an unfair and deceptive trade practice and in violation of the FDCPA misrepresented the legal status of the debt and attempted to deceive Brewer in paying an alleged debt that is no longer a legally enforceable debt.”
The court, however, pointed out that the running of the statute of limitations did not extinguish the debt, but merely the ability to collect on it. It also pointed out that because the running of the statute of limitations does not extinguish a debt, courts have generally held that absent a threat of litigation or actual litigation, there is no FDCPA violation in attempting “to collect on a potentially time-barred debt that is otherwise valid.” Freyermuth v. Credit Bureau Services, Inc., 248 F.3d 767, 771 (8th Cir.2001); Johnson v. Capital One Bank, 2000 WL 1279661, *2 (W.D. Tex. May 19, 2000); Shorty v. Capital One Bank, 90 F. Supp. 2d 1330, 1332 (D. N.M. 2000); Beattie v. D.M. Collectors, Inc., 754 F.Supp. 383, 393 (D. Del. 1991). See also Harvey, 453 F.3d at 332 (recognizing this line of case law without expressing an opinion on this question). “However, where a debt collector threatens to sue on a debt it knew was time-barred by the statute of limitations, a violation of the FDCPA will lie.” Gervais v. Riddle & Associates, P.C., 479 F. Supp. 2d 270, 273 (D. Conn. 2007).
Therefore, the decision rests upon the fact that at no time in the letter did Portfolio threaten legal action; had it done so, Mr. Brewer’s rights would have been violated. The Court did not find a threat to sue when reading the letter from the standpoint of the the least sophisticated debtor perspective.
But isn’t that the entire point of a collection letter? Does it not say to the recipient, “Pay us or we’re going to do nasty stuff to you?” If not, then there is no purpose to such a dunning letter at all.
In sum, the court here got it wrong. Really, really wrong.
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