Eighth Circuit Rejects Crawford Decision on Stale Claims
Crawford, however, ignores the differences between a bankruptcy claim and actual or threatened litigation. In Freyermuth, this court held that a defendant’s FDCPA liability turns on “whether an unsophisticated consumer would be harassed, misled or deceived by” the debt collector’s acts. (citation omitted). The bankruptcy process protects against such harassment and deception. Unlike defendants facing a collection lawsuit, a bankruptcy debtor is aided by “trustees who owe fiduciary duties to all parties and have a statutory obligation to object to unenforceable claims.” (citation omitted).
Defending a lawsuit to recover a time-barred debt is more burdensome than objecting to a time-barred proof of claim. “[T]he Bankruptcy Code provides for a claims resolution process involving an objection and a hearing to assess the amount and validity of the claim . . . [that] is generally a more streamlined and less unnerving prospect for a debtor than facing a collection lawsuit.” (citation omitted). Because a proof of claim does not expand the pool of available funds in bankruptcy, debtors have less at stake than a collection defendant. Rather, an unsecured creditor likely shares only “pro rata in the distribution of the pool of available funds and see[s] the unpaid portion of its claim discharged.” (citation omitted).
These protections against harassment and deception satisfy the relevant concerns of the FDCPA. “There is no need to protect debtors who are already under the protection of the bankruptcy court, and there is no need to supplement the remedies afforded by bankruptcy itself.” (citation omitted).
This court rejects extending the FDCPA to time-barred proofs of claim. An accurate and complete proof of claim on a time-barred debt is not false, deceptive, misleading, unfair, or unconscionable under the FDCPA. The district court properly dismissed for failure to state a claim.
Note: Wanda Borges and I will be discussing Nelson v. Midland Credit Management and other noteworthy FDCPA decisions at the joint IACC/CLLA Meeting in Napa, CA on July 19, 2016.