Statutes of Limitations Apply to Debts
The Take-Away:
A debt collector who takes or threatens legal action on a consumer debt after the statute of limitations has expired violates the FDCPA.
Facts:
Mr. Huertas had a credit card debt with Applied Card Bank f/k/a Cross Country Bank (“ACB”) which he failed to repay. The account was sold to Galaxy Asset Management f/k/a Galaxy Asset Purchasing (“Galaxy”) who in turn hired Asset Management Professionals (“AMP”) to collect the debt. AMP mailed a collection letter to Mr. Huertas. The letter was sent after the expiration of New Jersey’s 6-year statute of limitations but did not threaten either directly or implicitly that legal action would be sought to collect the debt.
Upon receipt of the letter, Mr. Huertas sued ACB, Galaxy, AMP, and others. The suit alleged, among other things, that the sending of the collection letter after the expiration of the statute of limitations was a violation of the FDCPA. AMP and ACB moved to dismiss the case. The District Court granted the motion and Mr. Huertas appealed to the United States Court of Appeals for the Third Circuit.
In its April 11, 2011 opinion, the Court of the Appeals for the Third Circuit agreed with various other courts and held that it is illegal to take or threaten to take legal action on a consumer debt when the applicable statute of limitations has expired. The Court, however, affirmed the opinion of the District Court because it found that the letter in question did not directly or indirectly threaten legal action.
The Ruling:
A debt collector who attempts to collect a debt with an expired statute of limitations is in violation of the FDCPA when it takes or threatens to take legal action.
The Cite:
Huertas v. Galaxy Asset Management, et al., 641 F.3d 28 (3d Cir. 2011).