The statute of limitations on a consumer’s claim that debt collectors sued her in the wrong judicial district began to run when she learned of the suit, not when the suit was filed, the U.S. Court of Appeals for the Ninth Circuit has decided. In fact, the court went a step farther, deciding that the discovery rule applies to all suits under the Fair Debt Collection Practices Act (Lyons v. Michael & Associates).
The FDCPA says that unless an interest in real estate is at issue, a debt collector may file a collection suit only in the judicial district where the consumer lives or where the consumer signed the agreement being sued on (15 U.S.C. §1692i). The debt collector did not dispute that it had sued the consumer in the wrong county; however, it asserted that the consumer’s FDCPA suit came too late because it was filed more than one year after the collection suit was filed.
The consumer, however, asserted that the statute of limitations did not begin to run until she discovered the violation. Since she filed her FDCPA suit within one year of when she was served with the summons in the collection suit, she met the time limit, she claimed.
The federal district court judge rejected the discovery rule argument based on a 1997 Ninth Circuit decision. The appellate court, however, decided that the judge had relied on the wrong precedent and that the discovery rule does apply in FDCPA suits.
Discovery rule. The FDCPA says that a suit must be filed “within one year from the date on which the violation occurs” (15 U.S.C. §1692k(d)). While there was no question that the violation occurred when the collection suit was filed in the wrong county, the consumer claimed that the discovery rule delayed the start of the one-year limit until she discovered the violation.
The discovery rule generally applies to statutes of limitations under federal law, the court noted. There was no reason not to apply it to FDCPA suits.
Moreover, there was no reason to apply the discovery rule to some claimed FDCPA violations but not others, the court continued. Doing that would be inconsistent with the general applicability of the rule and with the consumer-protection goals of the act.
Wrong precedent. The 1997 opinion, Naas v. Stolman, 130 F.3d 892, was not relevant because it did not consider the discovery rule issue, the court then noted. Naas involved a consumer’s claim that the statute of limitations on an FDCPA suit began to run when a state appellate court affirmed a judgment in a collection suit. There was no consideration of when the asserted FDCPA violation was discovered.
Naas made clear that the filing of an improper collection suit was the injury that gave rise to the consumer’s claim. It had nothing to do with the discovery rule, the court said.
The correct Ninth Circuit precedent, on which the district court judge should have relied, was Mangum v. Action Collection Service, Inc., 575 F.3d 935 (2009), the appellate court added. That case, which involved a debt collector’s alleged improper disclosure of debt information to a third party, specifically considered the discovery rule and found it to be applicable.
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