In its recent session, the Supreme Court dealt a blow to consumers who filed claims against lenders under the Fair Debt Collection Act (FDCA) for acts that occurred more than one year prior to filing the claims. The FDCA was originally passed by Congress in 1977 for the purpose of eliminating abusive debt collection practices by debt collectors to protect consumers against debt collection abuses. 15 U.S.C. § 1692k (1977). Under the Act, private civil actions can be brought against debt collectors who engage in certain prohibited practices. § 1692k(a). The statute provides that “An action to enforce any liability created by this subchapter may be brought in any appropriate United States district court… within one year from the date on which the violation occurs.” §1692k(d). The question of the one-year time limit brought the issue before the Court.
The Court granted certiorari after the lower court ruled inconsistent with a prior ruling of the Ninth Circuit on the application of a “discovery rule" for causes of action filed under the FDCA. (see Mangum v. Action Collection Service, Inc., 575 F.3d 935 (2009)). The Supreme Court affirmed, barring a claim brought after the one-year statute of limitation ran.
In Rotkiske v. Klemm, No. 18-328 (2019), Justice Thomas, writing for the majority, stuck to the strict interpretation of the statute requiring claims for abuses under the Act be brought within a year of the date the alleged violation occurs and not on the date on which the violation is discovered.
Rotkiske, the debtor in the suit, argued for a discovery rule to toll the statute of limitations. Id. at 2. Klemm, the creditor, served notice of pending litigation for the outstanding debt obligation to Rotkiske at an old address and to a person who did not fit the description of Rotkiske. This notice was served in 2009. Id. When Rotkiske did not respond to the notice, as he was unaware of the debt, Klemm obtained a default judgment against him. Id. Rotkiske did not discover this judgment against him until 2014 when he was denied a mortgage due to the judgment. Rotkiske brought suit against Klemm under the FDCA claiming improper service. Id. The District Court dismissed the case; the Third Circuit affirmed the decision. Id.
Justice Thomas opined that reading a discovery rule into the strict interpretation of the statute is “particularly inappropriate when… Congress has shown that it knows how to adopt the omitted language or provision.” Thomas cited other statutes where Congress has expressly included language applying the discovery rule. Id. at 7.
This strict interpretation bars undiscovered claims from being heard after one year of the act.
If you are a lender facing a claim involving the Fair Debt Collection Act or want a law firm to handle your collections, contact Allen Stahl + Kilbourne to discuss your options.
By Jeff Stahl
Updated: December 11, 2019