Recent Eleventh Circuit Decision Subjects Debt Collectors to FDCPA Liability for Filing Proofs of Claim as to Time-Barred Debts

Debt collectors filing bankruptcy proofs of claims in the Eleventh Circuit should take caution, as they will now be subject to the Fair Debt Collection Practice Act, 15 U.S.C. §§ 1692-1692p (FDCPA). In Crawford v. LVNV Funding, LLC, et al. (In re Crawford), 758 F.3d 1254 (11th Cir. July 10, 2014), the Eleventh Circuit ruled that by filing a proof of claim in a Chapter 13 bankruptcy case as to a time-barred debt, a debt collector violated the FDCPA by using false, deceptive and misleading means in connection with the collection of a debt.

In Crawford, a consumer owed approximately $2,000 to a furniture company. A debt collector purchased the debt from the furniture company in September 2001, and the last transaction on the consumer’s account occurred about one month later in October 2001. Alabama’s three-year statute of limitations expired on the enforcement of the debt in October 2004. In 2008, the consumer filed a Chapter 13 bankruptcy petition. During the bankruptcy proceeding, the debt collector filed a proof of claim in an effort to collect on the time-barred debt. In response, the consumer filed an adversary proceeding against the debt collector, alleging that the debt collector had violated the FDCPA by attempting to enforce a debt that was barred by the applicable statute of limitations.

The U.S. Bankruptcy Court for the Middle District of Alabama granted the debt collector’s motion to dismiss the FDCPA claim, and the U.S. District Court affirmed. The consumer appealed to the Eleventh Circuit Court of Appeals, which reversed in the consumer’s favor. The Eleventh Circuit held that the filing of a proof of claim is an attempt to collect a debt, and therefore, subject to the FDCPA. It reasoned that “a debt collector’s filing of a time-barred proof of claim creates the misleading impression to the debtor that the debt collector can legally enforce the debt.” The Eleventh Circuit noted that it need not address whether the Bankruptcy Code preempts the FDCPA, since the debt collector failed to raise the preemption issue in its briefs. The debt collector filed a petition for writ of certiorari, which the Supreme Court denied on April 20, 2015.

Notably, the Eleventh Circuit’s ruling runs contrary to several federal circuit courts—namely, the Second, Third, Seventh and Ninth Circuits—which either directly hold or otherwise suggest that the Bankruptcy Code preempts FDCPA in the context of a proof of claim. There is now an apparent circuit split regarding whether a violation of the FDCPA can be premised on the filing of a proof of claim as to a time-barred debt. As a result of Crawford, debt collectors in the Eleventh Circuit face increased liability under the FDCPA, and potentially under Florida’s counterpart, the Florida Consumer Collection Practices Act, for filing bankruptcy proofs of claims, at least until the Eleventh Circuit addresses the preemption issue.