Supreme Court holds FDCPA filing limit starts on date of violation

U.S. Supreme Court Courts FDCPA Discovery Consumer Finance

On December 10, the U.S. Supreme Court, in an eight-to-one decision, held that the one-year time limit for filing an FDCPA action starts on the date of the violation, and that no “discovery rule” applies. According to the opinion, the respondent law firm sued the petitioner seeking payment of credit card debt. The respondent attempted service on the petitioner at his old address, where the occupant accepted service. After the petitioner did not respond, a default judgment was entered against him in 2009. The petitioner claimed that he had no knowledge of the default judgement until 2014. He then sued the respondent in district court in 2015 alleging that the respondent “purposely served process in a manner that ensured he would not receive service,” and that the respondent violated the FDCPA by filing the debt collection suit against the petitioner “after the state-law limitations period expired,” and thus had no “lawful ability to collect.” The district court dismissed the action, rejecting the petitioner’s assertion of the U.S. Court of Appeals for the Ninth Circuit holding that a “discovery rule” exists, which delays the one-year limit to the date when the violation is discovered. The district court held that the FDCPA does not include a discovery rule, relying on the FDCPA’s “plain language.”

On appeal, the U.S. Court of Appeals for the Third Circuit affirmed the district court’s decision, holding that “there is no default presumption” of a discovery rule in the FDCPA.

Upon review by the Court, Justice Thomas, who penned the majority opinion, averred that the FDCPA explicitly provides a one-year limitation starting on “the date on which the violation occurs.” Moreover, the opinion points out that Congress would have added a provision to delay that limitation until after a violation was discovered if it meant for the FDCPA to have such a provision.

According to Justice Ginsberg’s dissenting opinion, though she agreed with the one-year limitation for filing suit under the FDCPA, she added that the discovery rule should be observed when fraud prevents the petitioner from filing within the one-year period, distinguishing the “fraud-based discovery rule” from general “equitable tolling” principles.