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Financial Services Law Insights and Observations

6th Circuit: Each alleged FDCPA violation carries its own statute of limitations

Courts Appellate Sixth Circuit FDCPA Debt Collection State Issues Consumer Finance

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On March 1, the U.S. Court of Appeals for the Sixth Circuit reversed the dismissal of a debt collection action, holding that every alleged violation of the FDCPA has its own statute of limitations. According to the opinion, the plaintiff financed a furniture purchase through a retail installment contract. While making payments on the contract, the company purportedly sold the debt to a third party. After the plaintiff defaulted on the debt, the third party—through the defendant attorney—sued the plaintiff in state court to recover the unpaid debt and attorney’s fees. After the third party eventually voluntarily dismissed the suit due to questions of whether the debt transfer was valid, the plaintiff sued the attorney for violating the FDCPA, alleging the defendant doctored the retail installment contract (RIC) to make it appear as if the debt assignment was legal. The defendant moved to dismiss the complaint as time-barred by the FDCPA’s one-year statute of limitations. The district court dismissed the case citing the complaint was filed more than a year after the third party filed the state court complaint and later denied both the plaintiff’s motion for reconsideration and the defendant’s motion for attorney’s fees. Both parties appealed.

On appeal, the 6th Circuit agreed that the plaintiff made a timely claim. Plaintiff argued that at least one of her claims fell within the one-year statute of limitations—the attorney’s filing of the updated RIC that allegedly showed the “contrived transfer” of debt—and maintained that she filed within one year of that alleged violation. The defendant countered, among other things, that the plaintiff’s claim was time-barred because it was a continuing effect of the third party’s initial filing of the state court complaint. The 6th Circuit reviewed caselaw on the “continuing-violation doctrine” and determined that the doctrine was not relevant to the case, stating that the plaintiff never invoked it because she was not “trying to sweep in acts that would otherwise be outside of the filing period,” but rather sought “redress for a single claim that is not time-barred.” The 6th Circuit emphasized that the plaintiff’s “single claim is independent of [the third party’s] initial filing of the lawsuit—not a continuing effect of it—because it is a standalone FDCPA violation.” The opinion further stated that the only date considered for the statute of limitations is the date a lawsuit is filed when subsequent FDCPA violations within that lawsuit occurred, and wrote that “[i]f we were to only consider the date [the third party] filed suit . . . we would create a rule that disregards the fact that §1629k(d) creates an independent statute of limitations for each violation of the FDCPA . . . . And if we adopted [the defendant’s] approach, we’d be saying that ‘so long as a debtor does not initiate suit within one year of the first violation, a debt collector [is] permitted to violate the FDCPA with regard to that debt indefinitely and with impunity.’”

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