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Another Court of Appeals requires disclosure that debts are time-barred
In Daugherty v. Convergent Outsourcing, Inc., No. 15-20392, 2016 WL 4709712 (5th Cir. Sept. 8, 2016), the federal Fifth Circuit Court of Appeals (which covers Texas, Louisiana, and Mississippi) agreed with the Sixth and Seventh Circuits that the Fair Debt Collection Practices Act requires disclosure of the fact that a debt is beyond the statute of limitations when the debt collector is offering a settlement of the debt. The debt collector in Daugherty sent a letter to a consumer that offered to “settle” a $32,405.91 debt for a payment of $3,240.59. The consumer sued the debt collector, arguing that the collection letter was misleading and violated the FDCPA because it did not inform her that the debt was unenforceable “and that a partial payment would revive the entire debt.” After reviewing the varying approaches of its sister circuits, the Fifth Circuit agreed with the Seventh Circuit (covering Illinois, Wisconsin and Indiana) and the Sixth Circuit (covering Michigan, Ohio, Kentucky, and Tennessee) that “a collection letter seeking payment on a time-barred debt (without disclosing its unenforceability) but offering a ‘settlement’ and inviting partial payment (without disclosing the possible pitfalls) could constitute a violation of the FDCPA.” The Seventh and Sixth Circuit cases are Buchanan v. Northland Group, 776 F.3d 393 (6th Cir. 2015), and McMahon v. LVNV Funding, LLC, 744 F.3d 1010 (7th Cir. 2014).
Daniel A. Edelman argued the Seventh and Sixth Circuit cases and filed an amicus brief in support of the consumer in the Fifth Circuit case.