The Superior Court of Pennsylvania, an intermediate appellate court, recently affirmed a trial court's order sustaining preliminary objections to a complaint alleging violations of the Pennsylvania Fair Credit Extension Uniformity Act (PFCEUA), which incorporates by reference the federal Fair Debt Collection Practices (FDCPA).
In so ruling, the Superior Court held that the defendant collection agency was not obligated to advise the plaintiff consumer that her debt was time-barred in its dunning (collection) letter because the letter only sought the consumer's voluntary repayment and would not have deceived or misled the "least-sophisticated debtor."
A copy of the opinion is available at: Link to Opinion
The consumer received a dunning letter from the defendant collection agency, which indicated that the agency had a "willingness to work" with the consumer on her account and was there to "assist and help" and "discuss other options."
The consumer filed suit, alleging that the letter violated Pennsylvania's PFCEUA, which incorporates the federal FDCPA, because it purportedly attempted to collect on a debt that was beyond the statute of limitations and was false, deceptive, or misleading.
In response to the consumer's complaint, the defendant debt collector filed preliminary objections arguing that its sending of the dunning letter to the consumer on an allegedly time-barred debt without disclosing that the debt was time-barred did not violate the FCEUA or FDCPA. The trial court sustained the debt collector's preliminary objections, holding that the consumer failed to plead sufficient facts to support a claim for a violation of the FCEUA or FDCPA. The consumer timely appealed.
On appeal, the consumer argued that the dunning letter was false, deceptive, or misleading because it offered "financial freedom even though such freedom had already been obtained by virtue of the statute of limitations" and because it invited her to settle but failed to inform her "that the debt is time-barred and the ramifications thereof."
Pursuant to Pennsylvania's FCEUA, "[i]t shall constitute an unfair or deceptive debt collection act or practice under this act if a debt collector violates any of the provisions of the [FDCPA.]" 73 P.S. 2270.4(a). The FDCPA prohibits debt collectors from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt," including falsely representing "the character, amount, or legal status of any debt." 15 U.S.C. § 1692(e),(f).
Here, the Superior Court noted that the statute of limitations' expiration does not invalidate a debt, but just makes it legally unenforceable. Huertas v. Galaxy Asset Management, 641 F.3d 28, 32 (3d Cir. 2011). As long as the debt collector does not initiate or threaten legal action on a time-barred debt, it is permitted to seek voluntary repayment without advising that the statute of limitations has run. See id.
Because the debt collector did not threaten litigation on a time-barred, legally unenforceable debt but, instead, sought the consumer's voluntary repayment, the Superior Court concluded that the debt collector was not obligated to advise the consumer that the debt's statute of limitations had expired.
The consumer also urged the Superior Court to find that the dunning letter qualified as a settlement offer that suggested the resolution of litigation. However, the Court was not persuaded because the letter did not expressly use the term "settle" or, in the Court's view, carry the resulting inference of litigation. Additionally, the Court reasoned that even if the letter did expressly or implicitly contain an offer to settle, this, standing alone, would not render the letter false, deceptive or misleading because there is nothing improper about a settlement offer. See Tatis v. Allied Interstate, LLC, 882 F.3d 422, 430 (U.S. Court of Appeals 3rd Cir. 2018).
Instead, the Superior Court held that the proper question was whether, when read as a whole, the letter would "deceive or mislead the least-sophisticated debtor into believing that she has a legal obligation to pay the time-barred debt." Id. The Court could discern no such interpretation from the letter because it found that the phrases "willingness to work with you" and "discuss other options" could not reasonably be read to imply a threat of litigation.
Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: rwutscher@MauriceWutscher.com
Admitted to practice law in Illinois
Alabama | California | Florida | Illinois | Massachusetts | New Jersey | New York | Ohio | Pennsylvania | Tennessee | Texas | Washington, DC
NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.
Our updates and webinar presentations are available on the internet, in searchable format, at:
Financial Services Law Updates
and
The Consumer Financial Services Blog™
and
