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Financial Services Law Insights and Observations

1st Circuit: Statute of limitations starts on loan closing

Courts State Issues Appellate First Circuit FDCPA Debt Collection Mortgages


On January 17, the U.S. Court of Appeals for the First Circuit affirmed the dismissal of claims against a mortgage holder and a loan servicer (defendants), concluding the allegations were barred on statute-of-limitations grounds. In 2018, ten years after the borrower defaulted on her loan, she filed a suit against the defendants “alleging that the loan was predatory because at its inception the lender knew or should have known that she would not be able to repay it.” The borrower alleged first that the defendants violated the Massachusetts Consumer Protection Act (MCPA) by committing unfair and deceptive practices when trying to enforce a “predatory mortgage loan,” and second that the defendants violated the Massachusetts Fair Debt Collection Practices Act (MFDCPA) by collecting or attempting to collect on the loan in an unfair, deceptive, or unreasonable manner. The district court dismissed the first claim as time-barred, stating that the four-year statute of limitations period began when the borrower closed on the loan in 2005. The district court also ruled that Chapter 93, Section 49 of the MDFCPA does not provide a private right of action for the second claim.

The 1st Circuit affirmed on appeal, determining that, with respect to the borrower’s MCPA claim, the four-year limitations period “began to run on the signing date when interest began to accrue,” and that the borrower failed to show that any of the defendants’ later collection actions triggered a new limitations period. Concerning the borrower’s MFDCPA claim that the collection efforts were “unfair because they constituted enforcement of inherently unfair and deceptive loan terms,” the appellate court concluded it was unnecessary to decide the issue of whether the borrower held a private right of action under the MFDCPA because the borrower’s claim is time-barred.