The Court of Appeals for the Ninth Circuit yesterday upheld a ruling in favor of collector that was sued for violating the Fair Debt Collection Practices Act because it allegedly failed to disclose that the statute of limitations had expired on a pair of debts when it sent collection letters to her. The defendant argued that a different statute of limitations applied, and if it did not, that it was entitled the FDCPA’s bona fide error defense.
A copy of the ruling in the case of Sprayberry v. Portfolio Recovery Associates can be accessed by clicking here.
The plaintiff defaulted on two credit cards — one that was opened at Target and the other that was opened at Walmart. While the nature of the relationship between the company issuing the credit card and the retailer was not the same, both debts were charged off and purchased by the defendant. For each debt, the defendant sent two letters to the plaintiff, offering to settle the balance for less than the full amount owed. None of the letters mentioned that the debts were time-barred, because the defendant’s research indicated that a six-year statute of limitations applied.
The plaintiff filed suit, alleging that the statute of limitations on the debts was four years, not six. The District Court judge ruled the defendant was entitled to the FDCPA’s bona fide error defense.
The plaintiff argued the alleged errors that were made by the defendant were intentional and that it failed to maintained procedures reasonably adapted to avoid a statute of limitations error. The defendant’s counsel reviewed and analyzed case law in Oregon to reach the conclusion that a six year statute of limitations applied and submitted his analysis to the compliance and general counsel departments for approval.
“PRA was under no obligation to show it had considered Sprayberry’s specific legal theory that store-branded credit card agreements are contracts for the sale of goods,” the Ninth Circuit wrore. “To qualify for the bona fide error defense under the FDCPA, the debt collector has an affirmative obligation to maintain procedures designed to avoid discoverable errors.”
Ultimately, the Appeals Court noted that the plaintiff could not show that the defendant erred in concluding that a six year statute of limitations applied.
