In the case of Buchanan v. Northland Group, Inc., No. 13-2523 (6th Cir., Jan. 13, 2015) the Sixth Circuit Court of Appeals has reversed a lower court ruling that an offer to "settle" a debt outside the statute of limitations is not a threat to sue in violation of the FDCPA. The Sixth Circuit held that such language in the absence of informing the debtor that she can't be sued on the debt violated the statutory ban on threatening to take legal action that cannot be taken.
The Court also examined the failure to inform a debtor that making a single payment could restart the statute of limitations and actually place the debtor in a worse position than if she had made no payment at all. This practice coupled with the failure to inform the debtor that the debt could not be collected in court were potentially misleading in violation of the FDCPA.
There is a split among the circuits on this issue. The Third and Eighth Circuits have held that dunning letters like the one at issue in Buchanan do not violate the FDCPA. This issue may well make its way to the Supreme Court at some point, but for now, in the Sixth Circuit debt collectors that seek to settle time barred debt without informing the debtor that the debt cannot be collected in court because it is beyond the statute of limitations and that a partial payment may restart the statute of limitations violate the FDCPA.
The next question is whether the same logic applies to attempts to settle debts via telephone and the impact on the follow up validation letter if the initial attempt is via telephone. Stay tuned.
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