The Consumer Financial Protection Bureau has filed an amicus brief in the U.S. Supreme Court in support of the respondent/consumer in Midland Funding, LLC v. Aleida Johnson, a decision of the Eleventh Circuit
that held Midland’s filing of an accurate proof of claim in the
consumer’s bankruptcy case on a time-barred debt violated the FDCPA.
In its brief, the CFPB argues that the Supreme Court should reject
Midland’s arguments that the filing of a proof of claim that is accurate
(i.e. provides correct information about an unpaid debt) but is for a
debt that is time-barred does not violate the FDCPA, and even if the
filing does violate the FDCPA, the Bankruptcy Code (Code) would preclude
such application of the FDCPA. According to the CFPB, nothing in the
Code allows a creditor to legitimately file a proof of claim that it
knows is subject to disallowance under the Code because it is
time-barred. The CFPB also argues that because a debt collector
implicitly represents that it has a good faith basis to believe its
claim is enforceable in bankruptcy when it files a proof of claim, the
filing is misleading and unfair in violation of the FDCPA when the
collector knows the claim is time-barred and therefore unenforceable in
bankruptcy.
With respect to Midland’s preclusion argument, the CFPB argues that
Code does not preclude an FDCPA action based on the filing of a proof of
claim for a time-barred debt. According to the CFPB, treating
Midland’s alleged conduct as an FDCPA violation would not penalize
Midland for conduct the Code authorizes and would not otherwise create
any conflict between the FDCPA and the Code.
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