Collector - April 2020 - 25

A

n out-of-statute debt is one that is older than the applicable
state statute of limitations. Debt collectors may collect these
debts through means other than lawsuits because a statute
of limitation only controls when a lawsuit can be filed rather than
the validity of the debt (except in a small number of states with laws
prohibiting the collection of a debt entirely after the expiration of the
statute of limitation).
In most states, when a consumer makes a partial payment on an out-ofstatute debt, this payment restarts the statute of limitations.
Section 1692e of the Fair Debt Collection Practices Act states: "A debt
collector may not use any false, deceptive, or misleading representation or
means in connection with the collection of any debt." It provides a nonexhaustive list of specifically prohibited conduct, including:
1.	Falsely representing "the character, amount, or legal status of
any debt;"
2.	Threatening "any action that cannot legally be taken or that is
not intended to be taken;" and
3.	"[T]he use of any false representation or deceptive means to
collect or attempt to collect any debt or to obtain information
concerning a consumer."
The Consumer Financial Protection Bureau identified this section of
the FDCPA as one "to prohibit debt collectors from suing or threatening
to sue consumers on debts they know or should know are time-barred
debts because such suits and threats of suit explicitly or implicitly
misrepresent, and may cause consumers to believe, that the debts are
legally enforceable."
Debt collectors face the dangerous issue of what constitutes a "threat" to
litigate and whether other disclosures are required. Consumer law firms
such as Consumer Law Group have recently filed cases, predominantly
in the Midwest (especially the Central District of Illinois), asking courts
to find violations of Section 1692e when the debt collector attempted to
collect an out-of-statute debt without disclosing the statute of limitations
had expired and the legal consequence of a consumer's payment.
Specifically, and the important fact pattern that separates these cases
from others before them, these consumers allege they reviewed their
credit reports, saw an out-of-statute debt, looked up their accounts on
the collection agencies' websites, and then filed suit based on the word
"settlement" appearing in the website or because the website did not
disclose the consumer's debt was out of statute and a partial payment
could restart the clock.
These cases primarily rely upon the holding of the 7th Circuit in
Pantoja v. Portfolio Recovery Associates, 852 F.3d 679 (7th Cir. 2017). In
Pantoja, the defendant sent a collection letter offering a settlement of
an out-of-statute debt. The court held that "[o]ffering to settle a legally
unenforceable debt violates the statute."
The letter also stated, "[b]ecause of the age of your debt we will not sue
you for it..."
The Pantoja court found that "[t]he letter is deceptive because it does
not tell the consumer that the debt is time-barred and defendant cannot
sue plaintiff to collect it, rather, it implies that defendant has chosen not
to sue." Unfortunately, and unnecessarily, the 7th Circuit goes on to say

COLLECTOR 04.20

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Collector - April 2020

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