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Eleventh Circuit Rules that Express Threat of Litigation Not Required to Implicate FDCPA

On April 5, 2019, in Holzman v. Malcom S. Gerald & Assocs., Inc., 2019 WL 1495642, the Eleventh Circuit held that an express threat of litigation is not required to state a claim under the Fair Debt Collection Practices Act so long as an implicit threat can be reasonably inferred from the communication. The plaintiff claimed that a debt buyer and a debt collection law firm violated the FDCPA by (1) sending a collection letter that did not disclose that the debt was barred by the statute of limitations in violation of § 1692e prohibition of misleading or deceptive communications, and by (2) attempting to collect a debt on which the statute of limitations had run in violation of § 1692f prohibition of unfair or unconscionable conduct. The district court dismissed both claims for failure to state a claim, and the plaintiff appealed. The Eleventh Circuit reversed the district court as to the first claim but affirmed it as to the second claim.

Although it comes at the end of the opinion, it’s important to note that the Eleventh Circuit did not accept the plaintiff’s invitation to hold that seeking to collect a time-barred debt is per se unfair under the FDCPA.  The Court noted that Seventh Circuit suggested as much in Pantoja, but disagreed and affirmed dismissal of plaintiff’s claim under § 1692f.

On the other hand, the Court reversed as to the claim for violation of § 1692e. The letter at issue invited the plaintiff to “resolve your delinquent account with” the debt buyer and offered a reduction in the balance. The letter also encouraged him to “take advantage of this offer” and set an expiration date for it. Evaluating this language under the “least sophisticated consumer standard,” the Eleventh Circuit held that the letter’s offer to resolve a time-barred debt, combined with a deadline to accept the reduced-payment offer and a warning that the offer might not be renewed if payment is not timely made, could plausibly deceive or mislead an unsophisticated consumer as to the legal status of the debt, even in the absence of an express threat of litigation. The Court cited decisions from the Fifth, Sixth, and Seventh Circuits in support of its conclusion that an implied threat of litigation could violate the FDCPA. Those Circuits had held that a collection letter that offered to “settle” a time-barred debt could be construed to contain an implied threat of litigation in violation of the FDCPA. The Eleventh Circuit held that the use of the word “resolve” was only a slight semantic difference from “settle,” which did not change the applicability of those decisions. The Court declined to follow the Eighth Circuit’s decision in Freyermuth, which held an express threat of litigation was required and noted that, although a Third Circuit case had previously aligned with the Eight Circuit, a more recent decision implicitly disavowed that holding and adopted the rationale of the Fifth, Sixth, and Seventh Circuits.

While the Eleventh Circuit concluded that some type of disclosure should have been given regarding the statute of limitations, it was not required to address what language would be sufficient. But, in rejecting the debt collector’s argument that a statute of limitations disclosure would require it to give legal advice, the Court followed Buchanan’s suggestion that “it would be easy to include general language about that possibility,” and specifically noting that the debt collector had subsequently adopted the most common disclosure language: “The law limits how long you can be sued on a debt.  Because of the age of your debt, LVNV Funding LLC will not sure you for it . . . .”  Other cases will require the Eleventh Circuit to directly address the sufficiency of this disclosure.