Collector - July 2017 - 42

IAP

U.S. Supreme Court Hands Collection
Industry a Win in ACA-Supported Case
The Supreme Court threw out the Eleventh Circuit decision in the
Johnson case, holding that filing an out-of-statute proof of claim in bankruptcy
does not violate the FDCPA.
By Karen Scheibe Eliason

R

eversing the Eleventh Circuit Court
of Appeals decision in Midland
Funding, LLC v. Johnson, No. 16348, in May the U.S. Supreme Court ruled
5-3 in favor of the credit and collection
industry.
The key issue in Midland was whether
a debt collector's filing of a proof of claim
that on its face indicates that the limitations
period has run falls within the scope of the
Fair Debt Collection Practices Act.
The high court concluded it does not,
holding that "the filing of a proof of
claim that is obviously time barred is not
a false, deceptive, misleading, unfair, or
unconscionable debt collection practice
within the meaning of the Fair Debt
Collection Practices Act."
On Nov. 21, 2016, ACA International
submitted an amicus brief to the Supreme
Court, urging it to reverse the Eleventh
Circuit's judgment. In its brief, ACA
convincingly argued that filing a bankruptcy
proof of claim on an out-of-statute debt does
not violate the FDCPA.

"If a debt collector
cannot work with the
debtor on resolving
debt that may be timebarred, then both the
creditor and the debtor
may end up worse off."
42

ACA's Chief Executive Officer Pat Morris
said, "This is an important issue for our
industry, and ACA International continues
to be involved in the courts to protect our
members' ability to recover rightfully-owed
obligations-including debts that remain
valid under the law even after the statute of
limitations has expired. The economic and
social benefit that the credit-and-collection
industry provides applies with no less force
to time-barred debt, or debt that may be
time-barred, than to any other debt. There
are often reasons why the debtor wants to
resolve an otherwise time-barred debt. If a
debt collector cannot work with the debtor
on resolving debt that may be time-barred,
then both the creditor and the debtor may
end up worse off. When it comes to old debt,
the U.S. Supreme Court today recognized
that the law should not force debt collectors
and debt buyers (and their attorneys) into
the Hobson's choice of either filing a proof of
claim and facing liability under the Fair Debt
Collection Practices Act, or being excluded
from the bankruptcy process in order to
avoid such liability."
Writing for the court's majority, Justice
Stephen Breyer explained that the "law has
long treated unenforceability of a claim (due
to the expiration of the limitations period) as
an affirmative defense."
Therefore, the court concluded that there
is "nothing misleading or deceptive in the
filing of a proof of claim" that follows the
structural features of the bankruptcy claims
resolution process, including the trustee's
objection for a claim's untimeliness as an
affirmative defense.
The court also reasoned that the practice
of filing a time-barred claim is not "unfair"

or "unconscionable" within the terms of the
FDCPA because the procedural mechanisms
and protections in a bankruptcy proceeding
along with the "simple affirmative defense
approach" "make it considerably more likely
that an effort to collect upon a stale claim
in bankruptcy will be met with resistance,
objection, and disallowance," which
"minimize[s] the risk to the debtor."
Notably, the court was not persuaded by
the Consumer Financial Protection Bureau's
argument in its competing amicus brief that
the Federal Rules of Bankruptcy Procedure
make the practice of filing time-barred
bankruptcy proofs of claim open to sanction,
and that sanctionable conduct is unfair
conduct.
Similarly, the court refuted the CFPB's
argument that the FDCPA seeks to help
consumers by closing "a loophole in the
Bankruptcy Code." Instead, the court said
that the FDCPA and the Bankruptcy Code
"have different purposes and structural
features," such that the FDCPA helps
consumers "by preventing consumer
bankruptcies in the first place."
As ACA reported previously, the district
court judge in the Southern District of
Alabama who considered the issue in the
Midland case granted the debt collector's
motion to dismiss, finding the FDCPA and
the Bankruptcy Code in "irreconcilable
conflict" because the code allows all creditors
to file a proof of claim on any debt, even
if that debt is barred by the statute of
limitations, whereas the FDCPA prohibits
a "debt collector" from "us[ing] any false,
deceptive, or misleading representation or
means in connection with the collection of
any debt," including attempting to collect a

ACAINTERNATIONAL.ORG


http://www.ACAINTERNATIONAL.ORG

Table of Contents for the Digital Edition of Collector - July 2017

Upfront
Industry News
Best Practices
FYI
Collection Tips
What’s in Your Policy?
State Licensing Laws: What’s New and Trending
The Question of Rule 68
Calendar
Honor Roll
Healthcare Data at Risk
ACA Members Meet in D.C. to Advocate on Behalf of Industry
Fixing What’s Broken
Credit Listening Considerations
U.S. Supreme Court Hands Collection Industry a Win in ACA-Supported Case
Compliance
ACA SearchPoint
Last Word
Collector - July 2017 - Cover1
Collector - July 2017 - Cover2
Collector - July 2017 - 1
Collector - July 2017 - 2
Collector - July 2017 - Upfront
Collector - July 2017 - Industry News
Collector - July 2017 - 5
Collector - July 2017 - 6
Collector - July 2017 - 7
Collector - July 2017 - Best Practices
Collector - July 2017 - 9
Collector - July 2017 - FYI
Collector - July 2017 - 11
Collector - July 2017 - Collection Tips
Collector - July 2017 - 13
Collector - July 2017 - What’s in Your Policy?
Collector - July 2017 - 15
Collector - July 2017 - 16
Collector - July 2017 - 17
Collector - July 2017 - 18
Collector - July 2017 - 19
Collector - July 2017 - State Licensing Laws: What’s New and Trending
Collector - July 2017 - 21
Collector - July 2017 - 22
Collector - July 2017 - 23
Collector - July 2017 - The Question of Rule 68
Collector - July 2017 - 25
Collector - July 2017 - 26
Collector - July 2017 - 27
Collector - July 2017 - Calendar
Collector - July 2017 - Honor Roll
Collector - July 2017 - Healthcare Data at Risk
Collector - July 2017 - 31
Collector - July 2017 - ACA Members Meet in D.C. to Advocate on Behalf of Industry
Collector - July 2017 - 33
Collector - July 2017 - 34
Collector - July 2017 - 35
Collector - July 2017 - Fixing What’s Broken
Collector - July 2017 - 37
Collector - July 2017 - 38
Collector - July 2017 - 39
Collector - July 2017 - Credit Listening Considerations
Collector - July 2017 - 41
Collector - July 2017 - U.S. Supreme Court Hands Collection Industry a Win in ACA-Supported Case
Collector - July 2017 - 43
Collector - July 2017 - Compliance
Collector - July 2017 - 45
Collector - July 2017 - ACA SearchPoint
Collector - July 2017 - 47
Collector - July 2017 - Last Word
Collector - July 2017 - Cover3
Collector - July 2017 - Cover4
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