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From Banking and Finance Law Daily, February 25, 2019

Supreme Court accepts FDCPA time limit appeal, rejects dispute-related petition

By Richard A. Roth, J.D.

The Supreme Court has agreed to consider an appeal that questions whether the Fair Debt Collection Practices Act statute of limitations includes a discovery rule; however, it rejected a different petition asking it to decide issues related to consumer debt disputes.

The Supreme Court has granted a consumer’s petition asking that it review whether the one-year Fair Debt Collection Practices Act statute of limitations began to run before he knew or should have known of his injury—in other words, whether the time limit is subject to a discovery rule. However, the Court acted unusually quickly in rejecting another consumer’s FDCPA appeal, deciding not to address questions about how consumer debt disputes must be handled less than three months after the petition was filed and before the debt collector was required to file a reply brief.

FDCPA time limits. In Rotkiske v. Klemm, the U.S. Court of Appeals for the Third Circuit rejected the consumer’s assertion that the FDCPA time limit included a discovery rule (see Banking and Finance Law Daily, May 16, 2018). According to the Third Circuit’s en banc decision, "In our view, the Act says what it means and means what it says: the statute of limitations runs from ‘the date on which the violation occurs.’" As a result, the time limit on the consumer’s suit expired four years before he knew the FDCPA might have been violated.

According to the opinion, a debt collecting attorney secured a default judgment against the consumer in 2009, allegedly based on deficient service of the summons and complaint. The consumer did not learn of the judgment until he applied for a mortgage in 2014. The consumer’s FDCPA suit was filed less than one year after he learned of the default judgment but nearly six years after it was entered.

The opinion was careful not to extend its ruling to claims of fraud or concealment. Equitable tolling might allow a late suit in such a case, the court conceded, but the consumer had not raised an equitable concealment claim.

The petition is No. 18-328.

Treatment of consumer disputes under FDCPA. The Court has rejected a consumer’s request that it settle several questions on how debt collectors are required to respond to a consumer’s debt dispute. The petition in Huebner v. Midland Credit Management (No. 18-991) posed three questions:

  1. Does the FDCPA require a debt collector to treat a consumer’s oral dispute the same as a written dispute?
  2. Does the FDCPA allow a debt collector to require the consumer to state a reason for disputing a debt?
  3. Is the "unsophisticated consumer" determination a question of law or of fact?

According to the U.S. Court of Appeals for the Second Circuit, the consumer, who is an attorney with FDCPA litigation experience, contacted Midland Credit Management to dispute a debt the company was attempting to collect from him. He recorded the telephone call that he made, during which he refused to answer any of the questions posed by the debt collector’s representative. The consumer did, eventually, say simply that the debt was "nonexistent." The court characterized the questions as the representative’s effort to gather information that could be used to resolve the dispute.

The appellate court affirmed a grant of summary judgment in favor of Midland and also affirmed sanctions orders against both the consumer and his attorney (Huebner v. Midland Credit Management, Inc.Banking and Finance Law Daily, July 20, 2018).

The petition is No. 18-991.

Other pending appeals. Currently, there are six significant banking and finance law-related cases awaiting Supreme Court review or decision. The Court has granted certiorari in Obduskey v. McCarthy & Holthus LLP (No. 17-1307), and it heard oral arguments in that case on Jan. 7, 2019. Obduskey is one of four pending appeals that raise issues under the FDCPA. Obduskey, Greer v. Green Tree Servicing LLC (No. 17-1351), and Maxwell & Morgan, P.C. v. McNair (No. 18-729) all ask whether mortgage foreclosures constitute debt collection activity that is subject to the FDCPA’s requirements. The grant of certiorari in Obduskey means the Court is likely to decide the issue, at least for non-judicial foreclosures, and that decision probably will affect the other two appeals as well.

As noted above, Rotkiske raises an FDCPA statute of limitations issue.

Of the other two petitions, one asks the Court to consider the breadth of the ban on foreclosing property interests held by Fannie Mae and Freddie Mac (SFR Investments Pool 1, LLC, v. Federal Home Loan Mortgage Corporation, No. 18-670). Lafferty v. Wells Fargo Bank, N.A. (No. 18-1012) presents questions about the Federal Trade Commission’s "Holder Rule"—does the rule create a private cause of action and does it preempt California’s Consumers Legal Remedies Act provisions on attorney fees?

Supreme Court docket. For details about this and other petitions and cases pending before the Supreme Court, please consult this list of selected banking and finance law cases awaiting action in the 2018 term. Issued opinions, granted petitions, pending petitions, and denied petitions are listed separately, along with a summary of the questions presented and the current status of each case.

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