The Court of Appeals for the Ninth Circuit has partially affirmed the dismissal of a Fair Debt Collection Practices Act case — determining that an individual who has had loans discharged in bankruptcy cannot subsequently accuse a collector of violating the statute — but also reversed the dismissal of claims based on the FDCPA’s one-year statute of limitations, introducing a new test for determining which acts constitute independent violations of the law.
A copy of the ruling in the case of Brown v. Transworld Systems, Patenaude & Felix, et al. can be accessed by clicking here.
The plaintiff took out 10 student loans to attend college, each of which was purchased by one of the defendants, which assigned the accounts to Transworld Systems for collection. The plaintiff filed for Chapter 13 bankruptcy protection, and made payments to his creditors for 36 months, at which point the remaining funds were distributed to non-dischargeable student loan creditors, including the defendant. After the discharge, a collection law firm sent the plaintiff 10 letters to collect on the remaining balance for each of the loans. The law firm then filed 10 lawsuits against the plaintiff to collect on the debt, which were consolidated into one case. The creditor ultimately could not prove the debts had been properly assigned to them — one affidavit from an employee was deemed to be hearsay — and the suits were dismissed.
The plaintiff then filed an FDCPA class-action lawsuit against the defendants, saying the defendants violated the discharge order and by filing a meritless debt collection lawsuit. A District Court judge granted the defendants’ motion to dismiss, ruling the discharged debtors do not have a private right of action under the Bankruptcy Code and because the FDCPA’s one-year statute of limitations had expired.
The Appeals Court agreed with the District Court judge on the claim based on a violation of the bankruptcy discharge order, but disagreed on the statute of limitations.
The District Court judge ruled the plaintiff had one year from when the original collection lawsuits were filed to file his FDCPA suit, but the Appeals Court noted that the filing of the hearsay affidavit constituted a post-filing FDCPA violation. “By filing a new affidavit that attempted to show that the Trusts owned the debts, Defendants did more than ‘reaffirm’ the original complaint,” the Appeals Court wrote. “Rather, they presented a new basis — not contained in the complaint — to show that the Trusts owned the debts. When Defendants ceased to rely on the Audet Affidavit and moved forward with the Luke Affidavit, this discrete event created a ‘last opportunity to comply’ with the FDCPA.”
In making its determination, the Appeals Court defined the following test: “When the alleged FDCPA violation is the bringing of a debt collection lawsuit, we determine which actions constitute independent FDCPA violations by considering (1) the debt collector’s last opportunity to comply with the statute and (2) whether the date of the violation is easily ascertainable.”
