U.S. Supreme Court Declines to Hear Case Challenging the Seventh Circuit’s Treatment of Letters Seeking Collection of Out-of-Statute Debt

1/23/2018 11:51:00 PM

The Supreme Court of the United States denied a request to review a Seventh Circuit decision that a debt collector’s disclosure of its intent not to sue in a letter collecting time-barred debt violates the FDCPA if a consumer is not also advised of the consequences of payment or that a collection lawsuit is prohibited by law.

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Last week, the United States Supreme Court denied without comment a petition for writ of certiorari in Portfolio Recovery Associates, LLC v. Pantoja, No. 17-255, 2018 WL 410911, ___S.Ct.___ (U.S. Jan. 16, 2018). The issue in the Pantoja case was whether a letter seeking to collect time-barred debt that does not threaten litigation and, in fact, affirmatively disclaims it, is misleading or deceptive in violation of § 1692e of the Fair Debt Collection Practices Act. 

As ACA previously reported, the Seventh Circuit determined in Pantoja that the challenged language was deceptive to an unsophisticated consumer. The collection letter the agency sent to the consumer, which offered to settle a time-barred debt under various discount payment plans, stated:  “Because of the age of your debt, we [the collection agency] will not sue you for it and we will not report it to any credit reporting agency.” 

The appellate court found that such sentence was misleading because it gave the impression that the collection agency merely had “chosen not to sue,” as opposed to being prohibited by law from doing so.  Explaining that few consumers know about statute of limitations or that in many states making a partial payment on a debt or a promise to do so could result in waiver of the defenses, the Seventh Circuit held that without a clear warning about said defenses, some consumers will choose to pay their stales debts not out of a moral obligation, but because “they fear the consequences of not doing so.” 

On November 10, 2017, ACA International filed an amicus curiae (“friend of the court”) brief with the U.S. Supreme Court, urging it to consider the Pantoja case and ultimately reverse the Seventh Circuit’s decision because the lower appellate court’s “approach will chill legitimate debt resolution efforts, and may result in unsophisticated [consumers] being misled.”

ACA International’s Corporate Counsel Karen Scheibe Eliason told Law360 last week that “the appeals court ruling is far from clear on what collectors need to include in their letters to avoid a potential lawsuit.  Even collection letters that include the entire statute of limitations disclaimer condoned by the FTC and the Consumer Financial Protection Bureau are being attacked in lawsuits filed nationwide  . . .” and “that the current legal landscape ‘has made it difficult, if not impossible, for debt collectors to fashion letter language addressing the statute of limitations that will escape attack.’” 

Although the Supreme Court denied the writ of certiorari in Pantoja, such does not mean that the Supreme Court agrees with the Seventh Circuit’s decision in Pantoja.  Rather, the denial only means that the justices determined that the circumstances described in the Pantoja petition were not sufficient to warrant review.  Therefore, the Pantoja decision is now binding precedential, authoritative law only in the Seventh Circuit upon which lower courts subject to the Seventh Circuit’s jurisdiction (Illinois, Indiana and Wisconsin) must follow.

ACA’s efforts to proactively support the credit and collection industry are part of the association’s Industry Advancement Program, 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 Program supported cases, like the Pantoja case, you can always see the archived articles on the Industry Advancement Program website. Watch for updates when decisions are issued in these cases and learn more about new cases supported by the Industry Advancement Program in the future by reading ACA Daily and logging onto the Industry Advancement Program website throughout the year. 

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