The Supreme Court has agreed to hear a case involving a debt collector who violated the Fair Debt Collection Practices Act (FDCPA) by filing a claim on a time-barred debt. The case involves Aleida Johnson, a resident of Alabama, who entered into Chapter 13 bankruptcy in 2014. A large debt collection agency called Midland Funding filed a proof of claim on a debt of $1,879 that Ms. Johnson owed 10 years ago, despite the fact that Alabama’s statute of limitations on such debt collections is 6 years. As a result, Ms. Johnson is suing the collection agency, stating that filing a claim on a debt outside the statute of limitations is a violation of the FDCPA.
The Role of the FDCPA
The FDCPA is enforced by the Federal Trade Commission (FTC) as a way to keep debt collection agencies from using “abusive, unfair, or deceptive practices” against consumers when they are attempting to collect a debt. Some of the restrictions the act puts in place against debt collectors include:
- Debt collectors may only contact you between the hours of 8:00am and 9:00pm.
- Debt collectors must stop contacting you if you send a letter telling them to do so.
- Debt collectors may not call repeatedly within a short time frame (i.e., they cannot call you several times back-to-back) or use an auto dialer to continuously call you.
- Debt collectors cannot make threats, use profane language, or verbally abuse you.
In her lawsuit, Ms. Johnson claims that Midland Funding’s attempt to collect on a debt that has been extinguished because it is outside of the state’s statute of limitations is a violation of the FDCPA. Midland Funding is within its rights to file the proof of claim; the Bankruptcy Code states that creditors may file these claims, even on debt that has past the state statute of limitations. But the Code does not stop the FDCPA from penalizing debt collectors for filing claims on old debts if they consider the claims to be misleading or unfair. The Code does say that these claims are only valid if the debtor does not object, and Ms. Johnson did object to Midland’s claim.
Does the Bankruptcy Code Preempt the FDCPA?
One of the major questions the Supreme Court needs to consider is whether or not the Bankruptcy Code preempts the FDCPA. Midland claims it does, in fact, preempt the FDCPA, so the debt collector should not face any penalties. Ms. Johnson and her lawyers dissented, arguing that the Code exists alongside the FDCPA and that the violations Midland committed should have consequences.
The district court agreed that Midland’s claim was indeed a violation of the FDCPA; however, the court also found that the Bankruptcy Code preempts the FDCPA, so Midland was not penalized for their violation. The Court of Appeals affirmed the district court’s decision. Now it will be up to the Supreme Court to hear the case and decide if it, too, will side with the previous court decisions, or if it will find that the Bankruptcy Code and the FDCPA work together, thus resulting in penalties for Midland’s violation.
What the Supreme Court Decision Would Mean for Creditors
If the Supreme Court rules in favor of Ms. Johnson’s claim, the result could have some negative consequences for debt collectors. Midland’s attorneys said companies like Midland, which buy up old debt at major discounts and try to collect payment, often contact consumers regarding a debt that has exceeded the statute of limitations. However, if these collectors become targets for FDCPA penalties in bankruptcy cases, it will change the way they have been collecting debts, and possibly even stymie their attempts.
Contact a Cleveland Bankruptcy Lawyer
Regardless of how the Supreme Court rules in Midland v. Johnson, consumers need to remember that debt collectors are held to certain regulations, and any violation of the FDCPA can spell trouble for them. If you are receiving harassing phones calls from a debt collector, or you feel a creditor is using unethical means to collect from you, contact Ohio bankruptcy attorney Matthew Alden right away. You have rights, and a knowledgeable attorney will be able to explain how the FDCPA protects you from mistreatment by debt collectors. The attorneys at Luftman, Heck & Associates have fought against the unsavory practices of these big debt collecting companies for years; call us today at (216) 586-6600, or contact us online to see how we can help you, too.