Third Circuit Doubles Down on §1692f Violations

By Anna Claire Turpin and Caren Enloe

The Third Circuit recently doubled-down on its decision in Douglass v. Convergent Outsourcing, 765 F.3d 299 (3^rd Cir. 2014).  In Douglass, the Third Circuit held that displaying an internal collection agency reference number through a glassine envelope window violated §1692f(8). In DiNaples v. MRS BPO, LLC, 934 F.3d  275 (3d Cir. Aug. 12, 2019), the defendant debt collector sent a collection letter to the consumer in an envelope which, on its face, displayed a QR code. When scanned, the QR code revealed the debt collector’s internal account number. The consumer filed suit asserting the envelope violated 15 U.S.C. §1692f(8) which prohibits debt collectors from “using any language or symbol, other than the debt collector’s address, on any envelope when communicating with the consumer by use of the mails. . .”  The district court granted the plaintiff’s summary judgment motion on liability based on the reasoning in Douglass.

On appeal, the Third Circuit first addressed the issue of standing and determined the consumer had suffered a concrete injury and therefore had Article III standing to bring the FDCPA claim. In doing so, the Court held that the information in the QR Code was private information. Therefore, the disclosure of this information, which the Court determined was core information relating to a debt, was a concrete intangible injury susceptible to a privacy intrusion. 

The Court then addressed the merits of the FDCPA claim and the debt collector’s argument that the QR code was benign information that did not violate section 1692f(8). While the Court declined to decide whether a benign language exception exists for purposes of  section 1692f(8), the Court rejected the debt collector’s argument that a QR code is a “benign disclosure” because it requires someone to actually scan the code to retrieve the information. Instead, the court held that there is no material difference between displaying information on the face of an envelope as in Douglass and displaying the information in a QR Code. The court reasoned that both methods display the same information and were displayed to the public regardless of the steps needed to actually identify the information. Following its reasoning in Douglass, the court found that “the harm is the same, especially given the ubiquity of smartphones.” DiNaples, 934 F.3d at  282. 

Moreover, the Court having found a violation of the FDCPA, rejected defendant’s argument that the printing of the QR code on the envelopes was a bona fide error.  In asserting a bona fide error, the defendant argued that it "erred by using industry standards for processing return mail and appreciating that no person has ever used a QR Code to determine a letter concerned debt collection." DiNaples, 934 F.3d at 282-283.  The Court dismissed this argument, noting that the issue was a mistake of law and therefore defendant could not avail itself to the bona fide error exception.

Anna Claire Turpin is an attorney practicing in Smith Debnam’s Consumer Financial Services Litigation and Compliance Group.

SCOTUS Set to Decide whether FDCPA’s Statute of Limitations is Tolled by “Discovery Rule”

By: Zachary K. Dunn

The FDCPA requires that any lawsuit must be brought, if at all, “within one year from the date on which the violation” of the act occurs. 15 U.S.C. § 1692k(d). The US Supreme Court will hear argument this month in Rotkiske v. Klemm to decide whether this statute of limitations is paused until a plaintiff discovers the basis for his or her lawsuit.

The facts underlying the case are straightforward. Kevin Rotkiske accumulated credit card debt between 2003 and 2005, which was then referred to Klemm & Associates for collection. Klem sued Rotkiske in 2008 and attempted service at an address where Rotkiske no longer lived. The lawsuit was withdrawn, but Klemm tried again in 2009 and someone at the former residence accepted service on his behalf. Klemm obtained a default judgment for around $1,500.00.

Rotkiske did not discover the judgment until 2014 when he applied for a mortgage. In 2015, Rotkiske sued Klemm arguing that the collection efforts violated the FDCPA. Klemm moved to dismiss the suit, arguing that the suit was time-barred, as the alleged violations took place in 2008 and 2009. The district court agreed and dismissed the suit.  

In doing so, the district court rejected Rotkiske’s assertion that § 1692k(d) incorporates a discovery rule which “delays the beginning of a limitations period until the plaintiff knew of or should have known of his injury.” Rotkiske appealed the decision to the Third Circuit, which affirmed. Parsing the statutory text, the Third Circuit found that Congress did not include a discovery rule in the FDCPA, and that the remedial purposes underlying the act does not demand that courts interpret the FDCPA to include one. The court held that when drafting the FDCPA, Congress was most concerned about the “repetitive contacts” that debt collectors may make with debtors, not that debt collectors will conceal their actions to unscrupulously obtain judgments against unknowing consumers.

The Third Circuit’s en banc opinion created a split in the federal circuit courts of appeal, with the Third Circuit holding that § 1692k(d) does not contain a discovery rule, and the Fourth and Ninth Circuits holding that it does. Briefing is complete, and the case is set for oral argument at the court on October 16, 2019. Expect oral argument to encompass topics such as whether the FDCPA’s text clearly and unambiguously excludes a discovery rule, whether Congress presumed that a common law principle such as the discovery rule would be incorporated into the FDCPA, and whether an implied discovery rule fits with the act’s remedial purpose.

We will have a blog post after oral argument, and when an ultimate decision is made by the Court.  

Zachary Dunn is an attorney practicing in Smith Debnam’s Consumer Financial Services Litigation and Compliance Group