Debt collectors threatening to sue over time barred debit is a FDCPA violation

Have you received a lawsuit or a threat to sue over a very old debt? So did Michael Kaiser. He purchased a car with the usual monthly payments but eventually could not keep up with the payments. The car was repo'ed and sold but he was upside down so the sale didn't cover the loan and Mr. Kaiser didn't cover the remaining balance either.

Years later, the creditor and defendant in the above lawsuit, Cascade Capital, LLC, sought to collect that deficiency balance. It hired a law firm, Defendant Gordon, Aylworth & Tami, P.C. ("GAT"), to send Kaiser a letter that stated the firm had been retained with the authority to file a lawsuit against Kaiser and demanded payment of the outstanding debt. Kaiser failed to pay, and the defendants sued him in Oregon state court.

"The collection attempts—both the letter and the lawsuit—occurred between four and six years after Kaiser's default. Kaiser responded to Cascade's state court lawsuit by arguing that the debt was time barred under Oregon's four-year statute of limitations for sale-of-goods contract claims, Or. Rev. Stat. § 72.7250. Cascade countered that Oregon's six-year statute of limitations for other contract claims, Or. Rev. Stat. § 12.080, applied instead. The state court ruled for Kaiser"

Kaiser then sued the defendants in a Federal lawsuit, which the district court dismissed, reasoning in part that the defendants did not violate the FDCPA because the state statute of limitations had been unclear when they tries to collect the debt. Kaiser appealed and this is the opinion of the appeals court:

Kaiser v. Cascade Capital, LLC, 989 F.3d 1127, 1131 (9th Cir. 2021)

The 9th circuit didn't sugarcoat it

"We join our sister circuits in holding that attempts to collect on time-barred debt through a lawsuit or threat of suit violate the FDCPA. Whether Cascade may have been unsure of the legal status of the debt under Oregon state law does not affect this conclusion—though, as we explain, it affects Cascade's ability to assert a bona fide error defense to liability . . . We hold that lawsuits to collect time-barred debts are both unfair and misleading, violating § 1692f and § 1692e respectively, and threats to sue on time-barred debts are at least misleading, violating § 1692e."

The opinion is a must read for anyone defending against a time barred debt or going after debt collectors threatening to sue over time barred debt. It is a FDCPA for a debt collector to do so in the ninth circuit.

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The thoughts, opinions and musings of this blog are those of Peter Schneider, a consumer advocate and Washington State plaintiff's TCPA attorney at Northwest Debt Resolution, LLC. They are just that, his thoughts, opinions and musings and should be treated as such. They are not legal advice. If you are looking to file a lawsuit for TCPA violations and unwanted calls please contact me for a consultation.