U.S. Court of Appeals Issues Important Ruling on Time Limits to Sue Under Fair Debt Collection Practices Act

On March 1, 2023, the U.S. Sixth Circuit Court of Appeals issued a decision with important implications for parties involved in debt collections regulated under the Fair Debt Collection Practices Act (FDCPA) The decision, in Bouye v. Bruce^[2], examined the FDCPA’s one-year statute of limitations for claims of improper debt collection practices, finding that the one-year period of limitations applied to each discrete violation of the FDCPA claimed by the plaintiff.

Background

Plaintiff Bouye signed a retail installment contract (RIC) with a furniture retailer, which sold the debt to Mariner Finance during Bouye’s payment period. When Bouye fell behind on payments, Mariner hired Bruce, an attorney, to file suit to collect the overdue balance on the RIC. The suit, filed in Kentucky state court on March 4, 2019, quickly focused on whether Mariner could establish that it actually was assigned the debt from the retailer, and as a result, Mariner submitted a second, updated RIC on July 2, 2019. A third RIC, stating that the retailer’s manager assigned the debt to Mariner, was filed on September 20, 2019. The Kentucky state court later issued summary judgment in favor of Mariner, but a Kentucky state appeals court reversed the order, finding that Mariner had not in fact established its ownership of the debt. Before the case could be heard again in the Kentucky lower court, Mariner voluntarily dismissed the state action.

On March 19, 2020, more than one year after the filing of the state court case, but less than a year after Mariner and Bruce filed the July 2 and September 20 supplemental RICs, Bouye filed this case against Bruce in federal district court, claiming that Bruce’s work on the supplemental RICs violated the FDCPA. Specifically, Bouye claimed that Bruce “doctored the RIC mid-litigation to make it look like the debt assignment”was proper. The district court later granted summary judgment for Bruce on the “doctoring” claim, ruling that because the events giving rise to Bouye’s claim were part of the state court case filed more than one year before the filing of the federal case, the claim should be dismissed for failure to meet the FDCPA’s one year statute of limitations.

Sixth Circuit Decision

After briefly addressing jurisdiction and standing issues raised by Bruce, the Sixth Circuit Court examined the statute of limitations for FDCPA claims. The Court noted that the FDCPA allows plaintiffs to file claims in “any appropriate U.S. district court without regard to the amount in controversy”, or in other courts with jurisdiction, “within one year from the date on which the violation occurs” Relying on its own unpublished prior rulings, and the clear wording of the statute, the Court concluded that “ ‘[T]he date on which the violation occurs’ determines when the one-year statute of limitations starts running’”and offered a simple summary: “Find the FDCPA violation in the complaint. Count out a year. That determines the statute of limitations.”

The Court next discussed Bouye’s specific claim that Bruce misrepresented the assignment date of the original debt when filing the July 2 and September 20, 2019 supplemental RICs in the state court case. It concluded that Bouye’s claim, based solely on Bruce’s alleged misrepresentations in the supplemental RICs, was: (i) independent of the original filing of the state lawsuit, (ii) alleged a standalone FDCPA violation, and (iii) was made in federal court within the one-year FDCPA limitations period. Thus, since Bouye’s FDCPA claim was timely filed, the Court reversed the order of summary judgment and ordered the case back to the district court for determination of its merits. It also ordered the district court to hear and decide jurisdictional issues first raised by Bruce on appeal, and to evaluate an earlier order denying attorney fees.

This case demonstrates that handling collection matters on behalf of a third party can be difficult.  A collection agent needs to move quickly but carefully when collecting consumer debts on behalf of a third party.

If you have any questions about this case, or about the FDCPA in general, please contact Firebaugh & Andrews 734-722-2999