District Court Opinion Shows Collateral Impact of Crawford Decision

A recent decision out of the Southern District of Georgia shows the collateral impact of the Crawford v. LVNV Funding proof of claim decision issued by the Eleventh Circuit. In Crawford, the Eleventh Circuit ruled that the filing of a proof of claim was an attempt to collect a debt and that the filing of a proof of claim on time barred debt violated the FDCPA.   Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11^th Cir. 2014).  Since Crawford, the debate has raged on with several courts weighing in on the subject.  Under one rationale or another, the majority have held that the filing of a proof of claim on a time barred debt does not give rise to a claim under the FDCPA. The Eleventh Circuit, however, is sticking to its guns and a recent decision by the Southern District of Georgia reflects to the collateral impact of the Crawford decision.

In McNorrill v. Asset Acceptance, LLC, the court was confronted with the issue of whether the collection of money as a result of the filing of a time barred proof of claim is in and of itself a violation of the FDCPA.  McNorrill v. Asset Acceptance, LLC, C.A. No. 1:14-cv-210, 2016 U.S. Dist. LEXIS 95216 (S.D. Ga. Jul. 21, 2016).  In McNorrill, the plaintiff, a Chapter 13 debtor, contended that the defendant filed a proof of claim on time barred debt.  During the bankruptcy, neither the debtor nor the trustee objected to the proof of claim.  As a result, the defendant received payments under the debtor’s Chapter 13 plan.  The plaintiff contended that the debt buyer not only violated the FDCPA by filing the proof of claim, but also alleged that “Defendant’s collection [of] money as a result of filing of time-barred proofs of claim…is a false, deceptive, or misleading representation or an unfair means of collection of a debt.”  Id. at *4.

The debt buyer filed a motion to dismiss claiming that plaintiff’s claims were time barred.  The court agreed as to the consumer’s claim as to the filing of the proof of claim. The court, however, disagreed as to the remaining claim concluding that the claim as to the debt buyer’s acceptance of payments was an independent violation and because payments were received by the debt buyer within the one year of the filing of the action, the consumer’s claim was not time barred.

Turning to the merits of the claim, the court concluded that the debt buyer’s acceptance of Chapter 13 payments was independent of the filing of the proof of claim itself and stated a plausible claim for relief.  In making its determination, the court was persuaded by the same concerns noted by the Eleventh Circuit in Crawford – specifically, that payment of a time barred claim “necessarily reduces the payments to other legitimate creditors with enforceable claims.” Id. at *13.   Moreover, the court concluded that “whether the FDCPA prohibits Defendant’s acceptance of payments is a matter of the FDCPA and not Bankruptcy or state law, and the “permitted by law” language found in §1692f(1) is not relevant.”  Id. at *16. 

The decision makes clear the lasting impact of the Crawford decision, at least in the Eleventh Circuit with respect to continuing chapter 13 payments.  What is not clear is whether a bona fide error defense would be effective under these circumstances – particularly where the debt buyer has relied upon the prior overwhelming authority holding that the filing of a proof of claim is not subject to the FDCPA.