On May 15th, the Supreme Court of the United States handed down a split opinion on Midland Funding, LLC v. Johnson. Essentially, Midland Funding had asserted a claim during Johnson’s bankruptcy case that Johnson owed them ten year old credit card debt. In the state this was filed, the statute of limitations is only six years in this kind of case, and had obviously expired. Naturally Johnson objected to paying a debt that had gone “stale”, and then further went forward and claimed that “filing a proof of claim on an obviously time barred debt was ‘false’, deceptive,’ ‘misleading,’ unconscionable,’ and ‘unfair’…” under the guidelines of the Fair Debt Collection Practices Act. The issue that had to be decided by the court was whether filing these “stale” debt claims in bankruptcy cases falls under the guidelines of the FDCPA – if they did, they would be subject to the consequences for unfair debt collection practices.
The opinion handed down by the Justices, however, concluded that they don’t fall into that category, because this case has to do specifically with bankruptcy law. Declaring bankruptcy entails not only a set of regulations that govern that process, but when an individual does start that process a “knowledgeable trustee” is appointed to them who should, in theory know enough to catch these “stale” debts before the consumer begins to pay them.
Yet, as I said, this was not a unanimous opinion – Justices Sotomayor, Ginsburg, and Kagan dissented, with Sotomayor publishing her dissent. (You can find the dissent after the opinion in the hyperlink provided earlier). While her fellow justices had examined the context of bankruptcy in particular to determine the role of the FDCPA, Sotomayor looked at the debt buying industry as a whole, and the particular vulnerability of consumers who were in the position of needing to declare bankruptcy, writing that, “Professional debt collectors have built a business out of buying stale debt, filing claims in bankruptcy proceedings to collect it, and hoping that no one notices that the debt is too old to be enforced by the courts. This practice is both “unfair” and “unconscionable.” She later concludes that, “It does not take a sophisticated attorney to understand why the practice I have described in this opinion is unfair. It takes only the common sense to conclude that one should not be able to profit on the inadvertent inattention of others. It is said that the law should not be a trap for the unwary. Today’s decision sets just such a trap.”
The Perrin Law Firm has successfully represented many consumers against these debt buying companies, and the FDCPA has proven to be the greatest tool available in our legal system to protect consumers from unsavory tactics like those outlined above. Though the Justices carefully outlined that this opinion doesn’t indicate how they will respond in yet another case involving junk debt buying companies (which we have written on here), this ruling does not necessarily inspire confidence. What do you think this decision means in the future of the FDCPA?
-Written by Breana Smith
*All briefs cited were taken from SCOTUSblog.com