Pantoja v. Portfolio Recovery Assocs., LLC

• Decision Date: 29 March 2017
• Docket Number: No. 15-1567,15-1567
• Citation: 852 F.3d 679
• Parties: Manuel PANTOJA, Plaintiff-Appellee, v. PORTFOLIO RECOVERY ASSOCIATES, LLC, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

852 F.3d 679

Manuel PANTOJA, Plaintiff-Appellee,

v.PORTFOLIO RECOVERY ASSOCIATES, LLC, Defendant-Appellant.

No. 15-1567

United States Court of Appeals, Seventh Circuit.

Argued December 11, 2015

Decided March 29, 2017

Rehearing and Rehearing En Banc Denied May 15, 2017

Matthew Henry Hector, Attorney, Sulaiman Law Group, Ltd., Oak Brook, IL, Plaintiff–Appellee.

Joel D. Bertocchi, Attorney, Hinshaw & Culbertson LLP, Chicago, IL, for Defendant-Appellant.

Before Kanne, Rovner, and Hamilton, Circuit Judges.

Hamilton, Circuit Judge.

Back in 1993, according to defendant Portfolio Recovery Associates, plaintiff Manuel Pantoja incurred a debt for a Capital One credit card that he applied for but never actually used. Twenty years later, long after the statute of limitations had run, Portfolio Recovery had bought Capital One's rights to this old debt and sent Pantoja a dunning letter trying to collect. The federal Fair Debt Collection Practices Act ("FDCPA") prohibits collectors of consumer debts from, among other things, using "any false, deceptive, or misleading representation or means in connection with the collection of any debt." 15 U.S.C. § 1692e. This appeal concerns the practice of attempting to collect an old consumer debt that is clearly unenforceable under the applicable statute of limitations.

The district court granted summary judgment in favor of plaintiff Pantoja on his claim under § 1692e. The court found the dunning letter was deceptive or misleading because (a) it did not tell the consumer that the defendant could not sue on this time-barred debt and (b) it did not tell the consumer that if he made, or even just agreed to make, a partial payment on the debt, he could restart the clock on the long-expired statute of limitations, in effect bringing a long-dead debt back to life. Pantoja v. Portfolio Recovery Assocs., LLC , 78 F.Supp.3d 743 (N.D. Ill. 2015). We affirm, essentially for the reasons explained concisely by Judge Gettleman.

I. Factual and Procedural Background

We review de novo a grant of summary judgment, considering facts that are not disputed and giving the non-moving party the benefit of conflicts in the evidence and reasonable inferences that might be drawn from the evidence. Ruth v. Triumph P'ships , 577 F.3d 790, 794 (7th Cir. 2009), quoting Belcher v. Norton , 497 F.3d 742, 747 (7th Cir. 2007). In 1993, plaintiff Manuel Pantoja applied for a credit card from Capital One Bank. He was approved for the credit card, but he never activated the account or used the card for any purpose. Nevertheless, Capital One assessed annual fees, late fees, and activation fees against Pantoja's account. Not surprisingly, he never made any payment on the account. Defendant Portfolio Recovery Associates purchased a portfolio of consumer debts including the debt allegedly owed by Pantoja. In 1998, Portfolio Recovery attempted to collect the alleged debt by telephone calls but apparently stopped in fairly short order without success. Nothing more happened with the account until April 2013, when Portfolio Recovery sent a dunning letter to Pantoja claiming he owed $1,903.15. The letter said:

We are offering to settle this account FOR GOOD! Life happens and at times you may fall behind on your commitments. We understand and are offering you the opportunity to lock in this settlement offer with a low down payment of $60.00. If settling this account with the options that we are offering is difficult for you, give us a call.

Other payment options may be available so please call 1-800-772-1413 for more information.

Please understand, we can't help you resolve this debt if you don't call, our friendly representatives are waiting. Because of the age of your debt, we will not sue you for it and we will not report it to any credit reporting agency.

The letter also proposed three "settlement offers" to choose among. The first called for a "down payment" of $60.00 and payment of an additional $511.00 within a month, with the claim that this would "save" Pantoja $1,332.15. The second option called for a down payment of $45.00 and six monthly payments of $104.00 each, to "save" Pantoja $1,234.15. The third option called for a down payment of $40.00 and twelve monthly payments of $60.00, to "save" Pantoja $1,143.15. The offers added: "Once the full settlement payment is received your account will be considered settled in full." The second page of the letter cautioned: "We are not obligated to renew this offer." See Evory v. RJM Acquisitions Funding L.L.C ., 505 F.3d 769, 776 (7th Cir. 2007) (stating that this sentence, word-for-word, would protect consumers from false impressions concerning collectors' supposedly "one-time" settlement offers).

Our principal focus is on the following language in the dunning letter: "Because of the age of your debt, we will not sue you for it and we will not report it to any credit reporting agency." The parties filed cross-motions for summary judgment. Portfolio Recovery pointed out that the dunning letter said the debt was so old that it would not sue the debtor, and it argued that the letter was at worst ambiguous as to whether it could have sued to collect the debt.

As noted, the district court granted summary judgment for Pantoja on his claim under the FDCPA. The court offered two independent reasons, and we agree with both. The first is that the dunning letter failed to warn Pantoja that if he accepted any of the settlement offers, whether by making a partial payment or even by just agreeing to make a payment, he would lose the protection of the statute of limitations. The second is that the letter deceptively said that Portfolio Recovery had chosen not to sue Pantoja, rather than saying that the debt was so old that Portfolio Recovery could not sue him for the alleged debt. The court entered a final judgment in favor of Pantoja for statutory damages of $1,000 but deferred until after this appeal any action on Pantoja's claim for attorney fees under 15 U.S.C. § 1692k(a)(3).¹

II. Analysis

The purposes of the FDCPA are "to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses." 15 U.S.C. § 1692(e). To accomplish those purposes, the Act provides in sweeping terms: "A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt." 15 U.S.C. § 1692e. The question is how that language applies to the dunning letter here, which attempted to collect a debt barred by the applicable statute of limitations.

We start with law that we believe is settled. First, a debt collector violates the Act by suing to collect a consumer debt after the statute of limitations has run and bars the suit. Phillips v. Asset Acceptance, LLC , 736 F.3d 1076, 1079 (7th Cir. 2013), collecting cases, including Kimber v. Federal Financial Corp ., 668 F.Supp. 1480, 1488 (M.D. Ala. 1987) ; Huertas v. Galaxy Asset Mgmt ., 641 F.3d 28, 32–33 (3d Cir. 2011) ; Harvey v. Great Seneca Fin. Corp ., 453 F.3d 324, 332–33 (6th Cir. 2006).

Second, a debt collector also violates the Act by threatening to sue to collect such a debt. See 15 U.S.C. § 1692e(5) (outlawing a "threat to take any action that cannot legally be taken or that is not intended to be taken"); McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 1021 (7th Cir. 2014) ("The plain language of the FDCPA prohibits ... threatening to take actions that the collector cannot take."); Huertas , 641 F.3d at 33 (plaintiff's FDCPA claim regarding attempt to collect a time-barred debt "hinges on whether [the dunning] letter threatened litigation"); Freyermuth v. Credit Bureau Services, Inc ., 248 F.3d 767, 771 (8th Cir. 2001) ("[I]n the absence of a threat of litigation or actual litigation, no violation of the FDCPA has occurred when a debt collector attempts to collect on a potentially time-barred debt that is otherwise valid."); Parkis v. Arrow Financial , 2008 WL 94798, at *7 (N.D. Ill. Jan. 8, 2008) ; Walker v. Cash Flow Consultants, Inc ., 200 F.R.D. 613, 616 (N.D. Ill. 2001) ; Beattie v. D.M. Collections, Inc. , 754 F.Supp. 383, 393 (D. Del. 1991).

The point of controversy here concerns efforts to collect consumer debts on which the statute of limitations has expired when the effort does not involve filing or threatening a lawsuit. Compare McMahon , 744 F.3d at 1020 (dunning letters offering to "settle" time-barred debts could violate Act by leading debtors to believe the debts were legally enforceable); Daugherty v. Convergent Outsourcing, Inc ., 836 F.3d 507, 509 (5th Cir. 2016) (effort to collect is not automatically unlawful, but letter violates FDCPA if it could lead unsophisticated consumer to believe her time-barred debt is legally enforceable); and Buchanan v. Northland Group, Inc ., 776 F.3d 393, 397 (6th Cir. 2015) (reversing dismissal on pleadings; offer to settle time-barred debt could violate Act by failing to disclose that suit would be time-barred or that partial payment would remove statute of limitations bar), with Huertas , 641 F.3d at 33 (holding that attempt to collect a time-barred debt was permissible if litigation not threatened), and Freyermuth , 248 F.3d at 771 (same).

Even without an express threat of litigation, such collection efforts offer opportunities for mischief and deception, as we explain below. We recognize that most states (though not Wisconsin, in this circuit) treat a debt as a debt even after the statute of limitations has run so that it cannot be legally enforced, at least if the defendant appears and asserts the affirmative defense. See, e.g., Buchanan , 776 F.3d at 396–97 (recognizing general rule); cf. Wis. Stat. § 893.05 (when statute of limitations expires, "the right is extinguished as well as the remedy"). The creditor retains the legal right to appeal to...