Disclaimers as a defense to FDCPA Violations

In the lead-up to the Supreme Court case Midland Funding LLC v. Johnson, the 4th circuit recently ruled that a disclaimer was sufficient to protect creditors from violating the FDCPA when filing proofs of claim.

In a bankruptcy, creditors get paid through filing proofs of claim – however, the Midland case mentioned above may soon resolve whether or not filing a stale proof of claim (one that has passed the statute of limitations) violates the FDCPA.

The Fair Debt Collections Practices Act was passed to protect consumers from predatory debt collectors.  One of the protections offered was that communications be truthful, which would include whether or not a debt is owed.  By filing a proof of claim on a time barred debt, there is a colorable argument that the FDCPA is being violated.  However, debt collectors can still call debtors to request payment on time barred debt, they just cannot try to enforce it in court, or explicitly state that there is a legal obligation to pay.

In the present case (not the Supreme Court case which is pending) the 4th Circuit ruled that the boiler plate language found on most bankruptcy collection letters that “this is not an attempt to collect a debt” was sufficient to obviate the sanctions of the FDCPA.  In a sense, it is creating an avenue for creditors in the event of a pro-debtor decision being handed down by the Supreme Court.

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