A “time barred debt” is a debt that was not paid which a creditor can no longer pursue in court because a certain number of years has passed. The number of years that must pass before a debt becomes time barred depends on the applicable statute of limitations. A debt collector is still generally permitted to request that a time barred debt be voluntarily paid without violating the Fair Debt Collection Practices Act (“FDCPA”). However, the debt collector is not permitted to create the appearance that a time barred debt is still legally enforceable against the debtor. Doing so would result in a violation of the FDCPA. This is the situation that occurred in Holzman v. Malcolm S. Gerald & Assocs., Inc., 920 F.3d 1264 (11th Cir. 2019).
In Holzman, defendant LVNV (a debt collector) purchased a time barred debt that plaintiff had owed. LVNV enlisted co-defendant Malcolm Gerald & Associates (“Malcolm”) to engage in collection activities by sending collection letters to consumers (including plaintiff), which provided ‘offers’ to resolve outstanding time barred debts at reduced payment amounts in lieu of the full balance. These offers also required that payments be provided by certain dates before those reduced payment offers expired. The collection letters also failed to notify consumers that the debts which were being collected on were no longer legally enforceable against the consumer. Plaintiff filed a consumer class action complaint against the defendants for violating the FDCPA by issuing these collection letters as they were misleading, and the least sophisticated consumer could be misled as to their payment obligation (or lack thereof) to defendants based on the wording of the collection letters. The defendants filed motions to dismiss, which were granted by the district court.
The Eleventh Circuit (includes Alabama, Florida and Georgia) reversed the district court’s dismissal and held, among other things, that there was a viable FDCPA claim because “by urging the debtor to ‘take advantage’ of the offer, the letter might have caused an unsophisticated consumer to mistakenly believe that the debt was legally enforceable and that he had something to gain by accepting the offer, or to lose by declining it.” Holzman v. Malcolm S. Gerald & Assocs., Inc., 920 F.3d 1264, 1272 (11th Cir. 2019). This is yet another example where the consumer protection purposes of the FDCPA were recognized and upheld.
If you believe you have been subjected to any conduct by a debt collector that is intrusive, harassing or improper, it is important to seek the guidance of a skilled FDCPA and Consumer Protection Attorney as soon as possible. To schedule a consultation to discuss your situation with one of our attorneys, contact The Kim Law Firm, LLC today by calling 855-996-6342.
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Debt buyers and accounts past the limitations period
Portfolios of old, charged-off accounts trade cheaply precisely because many of them are past the point where a lawsuit could succeed. A buyer paying pennies on the dollar can still profit by collecting voluntarily, which is legal, and by suing on debts that are time-barred, which is not. The pressure point for consumers is that a partial payment or an acknowledgment can revive a limitations period in some states, so a debt that could not be enforced on Monday becomes enforceable after a good-faith payment on Tuesday.
- Midland Credit Management — services one of the country’s largest purchased portfolios.
- Portfolio Recovery Associates — acquires charged-off balances in bulk from major issuers.
- Cavalry Portfolio Services — collects on accounts held by an affiliated purchasing entity.
- Jefferson Capital Systems — both buys consumer accounts and pursues them directly.
- Resurgent Capital Services — the servicing name attached to several buying entities.
- Credit Control — works placed accounts on a contingency basis for owners.
Before responding to a demand on an old account, establish the date of first delinquency and check the limitations period in your state, since the two together determine whether a suit is even available to the collector. Do not make a payment or sign anything acknowledging the balance until that question is settled. If a lawsuit has already been filed on a time-barred account, appearing and raising the limitations defense is essential, because a default judgment converts an unenforceable debt into an enforceable one.
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