At issue in Perea v. Portfolio Recovery Assocs., LLC, No. 18-CV-06504 (N.D. Ill. Sept. 28, 2020) was whether a debt collector violated the FDCPA by attempting to collect time barred debt. Although the debt collector provided a disclaimer in the dunning letter that it would not restart the statute of limitations on the debt if the debtor made a payment, the district court found for the debtor that the communication was misleading on its face because it did not affirmatively state that a partial payment or a promise to pay would restart the statute of limitations under Illinois law.
The debt collector purchased credit card debt owed by the debtor who last made a payment on the account in 2011. The debt collector sent a dunning letter with multiple options to pay, including an option that discounted the outstanding balance. The letter contained the following disclaimer: “The law limits how long you can be sued on a debt and how long a debt can appear on your credit report. Due to the age of this debt, we will not sue you for it or report payment or non-payment of it to a credit bureau. In addition, we will not restart the statute of limitations on the debt if you make a payment.” At the time the dunning letter was sent, the statute of limitations on the debt had already expired.
The debtor sued contending the letter was false and misleading because it neglected to disclose (1) the effect of partial payment on the statute of limitations, (2) that the statute of limitations on the debt had run, and (3) that no information about the debt could be reported to credit bureaus. The district court agreed with the debtor finding that the case was governed by the Seventh Circuit’s decision in Pantoja v. Portfolio Recovery Associates, LLC, 852 F.3d 679 (7th Cir. 2017). Pantoja held that a disclaimer on an attempt to collect time-barred debt stating that “[b]ecause of the age of your debt, we will not sue you for it and we will not report it to any credit reporting agency”, was deceptive because 1) it neglected to warn the debtor that if he accepted a settlement it would restart the statute of limitations and 2) the disclaimer “said that [the debt collector] had chosen not to sue [debtor], rather than saying that the debt was so old that [the debt collector] could not sue him for the alleged debt.”
The district court in Perea found the instant disclaimer equally deceptive in that it failed to cure either of the deficiencies identified in Pantoja. The letter still fails to advise that partial payment or a promise to make a payment may eliminate an otherwise ironclad statute of limitations defense under Illinois law. The debt collector argued that unlike the language at issue in Pantoja, which included no language regarding revival of the statute of limitations, its letter explicitly informed the debtor it “will not restart the statute of limitations on the debt if you make a payment.” But the court fund this insufficient because a promise to not restart the statute of limitations is misleading if there is also not an affirmative statement that partial payment or a promise to pay will restart the statute of limitations. The letter misleadingly communicates that revival is a matter of the collector’s discretion rather than a matter of law, in order to induce the debtor to make partial payment. Doing so would forfeit the protection of the statute of limitations—the consumer’s vulnerability to suit is then at the sole discretion of the debt collector. This is not the sort of “clear, accessible, and unambiguous” language mandated by Pantoja.
The debt collector could not take refuge in the fact that its policy is not to restart the statute of limitations upon partial payment or a new promise to pay. Nor does it sell accounts, so the debtor suffers no adverse consequences by making partial payment. And the debt collector’s explicit promise that it will not sue even if the debtor makes a payment dispels any potential confusion. Not so, said the court, because the revival of the statute of limitations is not controlled by the debt collector’s policies but by operation of law. Also, the issue is whether the at-issue language would mislead or deceive an unsophisticated consumer. An unsophisticated consumer would not know about the dangers of revival and she would certainly not know about a debt collector’s internal policies.
Author
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Jim is a founding partner of Noonan & Lieberman. Jim has more than 25 years of experience in civil litigation on behalf of creditors, servicers, business and real estate owners.
