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Sixth Circuit Rules Against Collection Agency in FDCPA Out-Of-Statute Debt Collection Case

Court Reverses District Court Decision in Buchanan Holding That an Offer to Settle a Stale Debt May Misleadingly Imply a Threat of Litigation in Violation of the FDCPA

The Sixth Circuit Court of Appeals issued a 2-1 ruling in Buchanan v. Northland Group, Inc., No. 13-2523 (6th Cir., Jan. 13, 2015), on Jan. 13, 2015. The ruling reversed the trial court’s dismissal of a Fair Debt Collection Practices Act (FDCPA) action that challenged a dunning (collection) letter offering to settle a debt subject to the statute of limitations.

At issue in the Buchanan appeal was the district court’s decision that a debt collector does not mislead a consumer and therefore does not violate the FDCPA by making a settlement offer to collect a debt without disclosing that the statute of limitations for filing a collection lawsuit has expired.

Contrary to the district court’s decision, the Sixth Circuit ruled that a settlement offer to resolve an unpaid debt at a discount without disclosing that the statute of limitations had run on the debt could possibly mislead a “reasonable unsophisticated consumer” into thinking her debt is enforceable in court.

In so ruling, the court remarked that “when a dunning letter creates confusion about a creditor’s right to sue, that is illegal,” under the FDCPA. The court also noted that “[a] misrepresentation about the limitations period amounts to a ’straightforward’ violation of [the FDCPA],” citing the Seventh Circuit Court of Appeals decision in McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 1020 (7thCir.2014).

Since the Sixth Circuit found that the question of whether a letter is deceptive and misleading is a question of fact that should be determined by a jury, the court remanded the Buchanan case back to the trial court for further proceedings to allow the consumer to present evidence that she was misled, confused and deceived by the collection agency’s letter.

Daniel A. Edelman argued the case for the consumer.