The U.S. Supreme Court has agreed to resolve a circuit court split over whether the one-year statute of limitations (SOL) in the Fair Debt Collection Practices Act (FDCPA) runs from the date of the alleged violation or starts upon a consumer's discovery of the violation.

The FDCPA provides that "[a]n action to enforce any liability created by this subchapter may be brought in any appropriate United States District Court…within one year from the date on which the violation occurs." In Rotkiske v. Klemm, the plaintiff alleged that the defendant violated the FDCPA by obtaining a default judgment against him based on service of a complaint at an address the defendant knew or should have known was incorrect.

An en banc U.S. Court of Appeals for the Third Circuit rejected the plaintiff's argument that the FDCPA's one-year SOL did not begin to run until he discovered the default judgment upon applying for a mortgage loan approximately five years after service of the complaint. Instead, based on the statutory text, the Third Circuit held that the SOL runs from the date of the violation. It appears the Supreme Court granted the petition for a writ of certiorari in Rotkiske to resolve the circuit split: unlike the Third Circuit, the Fourth and Ninth Circuits have held that the discovery rule does apply to the FDCPA's one-year SOL.

The Third Circuit's reading is the one most consistent with the statutory text. As the Third Circuit wrote, "the [FDCPA] says what it means and means what it says." A decision by the Supreme Court that adopts the Third Circuit's view would further constrict the time frame for plaintiffs' attorneys to bring claims, whereas a decision that adopts the view of the Fourth and Ninth Circuits could lead to more FDCPA litigation. In any event, a Supreme Court ruling will provide consistency, something that is sorely needed in FDCPA litigation.

Attorneys in Ballard Spahr's Consumer Financial Services Group regularly advise clients on compliance with the FDCPA and state debt collection laws and defend clients in FDCPA lawsuits and enforcement matters. The Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance.


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