ACA Industry Advancement Support Helps Secure Victory for Collection Industry in 8th Circuit FDCPA Case
7/12/2016 1:00 AM
Rejecting the Eleventh Circuit’s decision in Crawford, the Eighth Circuit ruled that filing a proof of claim in a bankruptcy proceeding based on an out-of-statute debt does not violate the FDCPA.
ACA International applauds the 3-0 decision the Eighth Circuit Court of Appeals entered Monday in the case of Nelson v. Midland Credit Management, Inc., No. 15-2984, 2016 WL ------- (8th Cir. July 11, 2016). The ruling affirmed the district court's decision to toss out the consumer's Fair Debt Collection Practices Act action that challenged the debt collector's filing of a proof of claim in the consumer's Chapter 13 bankruptcy case based on an out-of-statute debt as a false, deceptive or misleading debt collection practice. ACA assisted in successfully defeating the consumer's appeal by providing amicus brief support in the case, leading to a significant FDCPA ruling positively impacting ACA members.
In Nelson, the consumer filed for Chapter 13 bankruptcy relief. The debt collector then filed a proof of claim in the consumer's bankruptcy case for the amount of a debt upon which the consumer defaulted over eight years earlier. The consumer filed an objection to the debt collector's claim in the bankruptcy proceeding, arguing it was time-barred. The bankruptcy court sustained the consumer's objection, ordering the debt collector's claim disallowed in its entirety. The consumer subsequently sued the debt collector, alleging that the debt collector violated the FDCPA by filing the proof of claim on the time-barred debt. The district court granted the debt collector's motion to dismiss the FDCPA claim, ruling that the FDCPA is not implicated by a debt collector filing an accurate and complete claim on a time-barred debt. The consumer appealed.
On December 14, 2015, ACA submitted a “friend of the court” brief to the Eighth Circuit in Nelson to support the debt collector's position and to protect its members' ability to recovery rightfully owed obligations – including debts that remain valid under the law even after the statute of limitations has expired. In its amicus brief, ACA urged the Eighth Circuit to decide that filing a bankruptcy proof of claim on an out-of-statute debt does not violate the FDCPA.
In particular, ACA asked the Eighth Circuit to not follow the Eleventh Circuit's decision in Crawford, and to reject the consumer's argument that a proof of claim in bankruptcy should amount to a lawsuit for FDCPA purposes. ACA argued that “[c]alling a proof of claim a lawsuit does not turn it into a lawsuit. But the United States Court of Appeals for the Eleventh Circuit has tried to obliterate the distinction, with results that have confused the credit-and-collection industry, that have created unnecessary conflict between two federal statutes and among the circuit courts of appeals, that will frustrate the Bankruptcy Code's purpose of giving debtors a fresh start, and that will unfairly impose liability on debt collectors for following a longstanding and consistent rule that multiple federal appellate courts have articulated.” And ACA contended that “[t]he Bankruptcy Code itself contains adequate remedies against proofs of claim that are stale or otherwise invalid. . . . That protection against a stale claim is available within the bankruptcy case itself, and '[n]othing in either the Bankruptcy Code or the FDCPA suggests that a debtor should be permitted to bypass the procedural safeguards in the Code in favor of asserting potentially more lucrative claims under the FDCPA.'”
On appeal, the Eighth Circuit affirmed the district court's decision, rejecting an extension of the FDCPA to time-barred proofs of claim. The appellate court found that “an accurate and complete proof of claim on a time-barred debt is not false, deceptive, misleading, unfair, or unconscionable under the FDCPA.” In doing so, the Eighth Circuit adopted the arguments ACA advanced, ruling that “Crawford . . . ignores the differences between a bankruptcy claim and actual or threatened litigation.” The appellate court reasoned that “[u]nlike defendants facing a collection lawsuit, a bankruptcy debtor is aided by 'trustees who owe fiduciary duties to all parties and have a statutory obligation to object to unenforceable claims.'” As such, the appellate court concluded that these bankruptcy process “protections against harassment and deception satisfy the relevant concerns of the FDCPA” and, therefore, “'there is no need to supplement the remedies afforded by bankruptcy itself.'”
The Nelson decision is now precedential, authoritative law in the Eighth Circuit upon which lower courts subject to the Eighth Circuit's jurisdiction (Minnesota, Nebraska, Iowa, Missouri, Arkansas, North Dakota, and South Dakota) must follow. ACA is encouraged by this important decision and confident it will become positive persuasive authority in several other jurisdictions around the county where similar challenges related to filing stale proofs of claim in bankruptcy are pending. And ACA is delighted that the Nelson decision raises the industry-favorable decisions (wins) ACA has helped to achieve for its members through the Industry Advancement Fund to a total of 19 in a little less than three years.
ACA International's efforts to proactively support the credit and collection industry are part of the association's Industry Advancement Fund, and are made possible by funding through ACA's Industry Advancement Fund.
If you missed any of the articles previously published in ACA Daily that provided more detailed information about Industry Advancement Fund supported cases, like the Nelson case, you can always see the archived articles on the Industry Advancement Fund website. Watch for updates when decisions are issued in these cases and learn more about new cases supported by the Industry Advancement Fund in the future by reading ACA Daily and logging onto the Industry Advancement Fund website throughout the year.
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