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Peterson v. Portfolio Recovery Associates, LLC

2011 WL 2181508 (U.S. Ct. App. 3d Cir. 2011) (Unpublished)

FDCPA; NOTICES — There can only be one “initial communication” between a debt collector and a debtor under the Fair Debt Collection Practices Act; therefore there is no so-called “continuing violations” rule that would reset the statute of limitations clock upon each subsequent communication.

A debt collection firm acquired a receivable from a bank. The firm sent a letter containing a validation notice. It also called the same individual with the same name as the debtor, and also called his parents, regarding the debt. However, the individual denied owing the debt. He claimed to have never lived at the address to which the firm sent the letter, and provided his current address. The firm sent a letter to the individual’s current address containing an offer to settle the debt at a discounted amount; the letter did not contain a validation notice. The firm’s dispute department then sent the individual a letter stating that it understood that the individual wished to dispute the debt because he had been a victim of identity theft or fraud and asked that he send an official identity theft report or written statement so that they could investigate the dispute. This letter also did not contain a validation notice.

Then, the individual emailed the firm to ask for additional information. His email explained again that he had been a victim of identity theft and provided details on how the identity theft had occurred. A firm representative responded by email approximately an hour later. The response contained more information about the debt and a request that the individual complete and return the previously sent identity theft packet. The individual then requested that another identity theft packet be mailed to him, as he did not have the one previously sent. The firm representative replied that the account would continue to be treated as disputed and another identity theft packet would be sent to him. A month or so after this exchange, the firm sent the individual a letter stating that it could not investigate the dispute because he had not returned the completed packet and that the account would no longer be treated as a disputed account, but instead would be returned to the collection floor.

The individual sued, alleging that the firm’s collection efforts violated the Fair Debt Collection Practices Act (FDCPA). On cross-motions for summary judgment, the lower court concluded that the validation notice included with the original letter did not comply with the FDCPA because that letter was not actually sent to the individual, but instead went to an address at which he had never resided. Accordingly, the lower court found that the firm was obligated to provide a new validation notice when it made its initial phone contact with the individual. According to the lower court, because it failed to do so, the collector violated the FDCPA. The lower court also held that the claim was not barred by the FDCPA’s one-year statute of limitations because, even though the individual filed his complaint more than a year after the phone calls, the firms had sent him later letters, each of which could serve as the basis for a non-time-barred action. It also awarded attorney fees to the individual, but decreased them, finding that the amount of time expended by the individual’s attorneys was unreasonable in light of the simplicity of the case, the fact that the individual’s attorneys specialized in FDCPA cases, and that the individual had been successful on only one of multiple claims.

The debt collector appealed, and the Appellate Division found that there could be only one “initial communication” between a debt collector and individual. Thus, it rejected the so-called “continuing violations” rule that would re-set the statute of limitations clock with each separate communication. For that reason, it reversed the lower court’s grant of summary judgment on this claim.

In the lower court, the individual chose not to pursue his other FDCPA claims because he had already received the statutory maximum award. The Court ruled that, on remand, the lower court should provide the individual with another opportunity to pursue his other claims. Consistent with the reversal, the Court also vacated the lower court’s award of attorney’s fees.

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