Collection Agency Seeking Circuit Court Rehearing in Pivotal FDCPA Time-Barred Debt Settlement Case

A collection agency that saw a Sixth Circuit Court of Appeals decision go against it last month has filed a petition for rehearing and rehearing en banc with the Court. The case involved a settlement offer on a time-barred account. The collector initially won the case and the Sixth Circuit reversed that ruling in a split decision that carried a strong dissent.

The defendant in Buchanan v. Northland Group filed its petition on Tuesday with the Sixth Circuit. The petition seeks either a rehearing of the case or a rehearing en banc, which would occur before the entire Sixth Circuit rather than a three-judge panel.

Debt collection agency Northland Group, working on behalf of a debt buyer, sent a letter to Esther Buchanan offering to settle a nearly $4,800 debt for around $1,700. The letter even disclosed the debt had been purchased, specifically naming the buyer and seller, and that it had been assigned to Northland for collection.

Buchanan’s debt had already run her state’s six-year statute of limitations. Northland’s letter did not disclose this fact. So Buchanan filed a lawsuit that sought class action status claiming that the settlement offer was deceptive and illegal under the FDCPA.

A district court rejected Buchanan’s discovery request and granted Northland’s motion to dismiss, concluding that Northland’s letter was not misleading as a matter of law. Buchanan then appealed to the Sixth Circuit, which last month reversed the lower court decision and remanded the case for further proceedings.

The issue is whether a consumer could read the word “settle” and plausibly think that the collection agency was threatening to sue.

The case generated a lot of interest from government agencies and debt industry trade groups. The CFPB and FTC filed a joint amicus brief supporting the plaintiff and ACA International and the National Association of Retail Collection Attorneys (NARCA) sided with the defense in their briefs.

The Sixth Circuit opinion also furthered a rift in case law between circuits on the matter, with two now taking the position that settlement offers on time-barred debt can violate the FDCPA and two ruling the opposite.

The petition for rehearing notes that in this case, a district judge ruled the other way, and the dissent within the Sixth Circuit opinion itself make it ripe for rehearing. That two other Circuits have made different rulings also support its cause.

There was still much discussion of dictionary definitions in the petition. In the majority opinion from the Sixth, the two judges cited numerous examples where the word “settle” is defined as closing a legal argument. But in all of the examples cited, the financial definition of the word appears before the legal definition.

Northland noted that reliance on specific definitions of “settle” was “selective,” and listed examples of dictionaries defining the word in a legal context while ignoring preceding definitions which have a financial context, like “to pay, as a bill” and “to close (an account) by payment.”

ACA International said Wednesday that it has awarded Industry Advancement Funds to Northland to help finance the petition for rehearing.