FDCPA Claims Might Not Be Barred By Statute of Limitations

Here is a powerful argument that SCOTUS acknowledged: nobody should benefit from their own fraudulent conduct. The FDCPA has a one year statute of limitations. And people have tried to litigate on the premise that the one year should run from the date of discovery not when the violation occurred. The courts have disagreed saying that if Congress wanted it to be the date of discovery it would have said so.

But if the date of discovery was delayed because of additional fraudulent conduct by the defendant then the courts, although always leaning heavily toward the banks, are left in a quandary. And SCOTUS acknowledged that issue and refused to rule directly on it because the consumer failed to preserve the issue on appeal — another example of how rules can lead to failure of you don’t follow them.

The wording of the opinion  and the opinion of analysts strongly suggests that if you plead, with specificity, fraudulent representations and conduct that caused the delay your claim is not barred until one year after the discovery of the violation.

Note that his will not help people who discovered or “should have discovered” the violation more than one year before filing suit.

Note also that it is one thing to plead and another to prove. Fraud requires specific pleading and proof regarding detrimental reliance on the fraud and causation of damages. The damage under this part of  the case would be that the consumer was unable to ascertain the violation and thus seek a remedy. Just using the word “fraud” is the surest ticket to failure.

see Fossano Article on Mondaq

See Rotkiske v. Klemm Rotkiske v. Klemm, No. 18-328 (U.S. Dec. 10, 2019)

Rotkiske v. Klemm, — S. Ct. — (2019) left open the question of whether a plaintiff can avoid the one-year statute of limitations by establishing that the delay in bringing the claim was the caused by the defendant’s fraudulent conduct. The answer to that question will have to await a case where the plaintiff properly preserves the argument on appeal. On a related note, the case reminds attorneys to ensure that they preserve all of their clients’ arguments at all stages of a case.

FDCPA violations could expose debt collectors to considerable damages and penalties, as well as legal costs and fees.

From the case:

Rotkiske argued for the application of a “discovery rule” to delay the beginning of the limitations period until the date that he knew or should have known of the alleged FDCPA violation. Relying on the statute’s plain language, the District Court rejected Rotkiske’s approach and dismissed the action. The Third Circuit affirmed. Held: Absent the application of an equitable doctrine, §1692k(d)’s statute of limitations begins to run when the alleged FDCPA violation occurs, not when the violation is discovered. Pp. 4-7.

Rotkiske v. Klemm, No. 18-328, at *1 (U.S. Dec. 10, 2019)

The Fair Debt Collection Practices Act (FDCPA) authorizes private civil actions against debt collectors who engage in certain prohibited practices. 91 Stat. 881, 15 U. S. C. §1692k(a). An action under the FDCPA may be brought “within one year from the date on which the violation occurs.” §1692k(d). This case requires us to determine when the FDCPA’s limitations period begins to run. We hold that, absent the application of an equitable doctrine, the statute of limitations in §1692k(d) begins to run on the date on which the alleged FDCPA violation occurs, not the date on which the violation is discovered.

Rotkiske v. Klemm, No. 18-328, at *3 (U.S. Dec. 10, 2019)

“Rotkiske’s amended complaint alleged that equitable tolling excused his otherwise untimely filing because Klemm purposely served process in a manner that ensured he would not receive service.” Rotkiske v. Klemm, No. 18-328, at *5 (U.S. Dec. 10, 2019)

This Court has noted the existence of decisions applying a discovery rule in “fraud cases” that is distinct from the traditional equitable tolling doctrine. Merck & Co. v. Reynolds559 U. S. 633, 644 (2010); Gabelli v. SEC568 U. S. 442, 450 (2013) (referring to the “fraud discovery rule”). And it has repeatedly characterized these decisions as applying an equity-based doctrineCalifornia Public Employees’ Retirement System v. ANZ SecuritiesInc., 582 U. S. ___, ___-___ (2017) (slip op., at 10-11); Lozano v. Montoya Alvarez572 U. S. 1, 10-11 (2014); Credit Suisse Securities (USA) LLC v. Simmonds566 U. S. 221, 226-227 (2012); Young v. United States535 U. S. 43, 49-50 (2002). Rotkiske failed to preserve this issue before the Third Circuit, 890 F. 3d, at 428, and failed to raise this issue in his petition for certiorari. Accordingly, Rotkiske cannot rely on this doctrine to excuse his otherwise untimely filing. (e.s.)

* * *

Rotkiske v. Klemm, No. 18-328, at *9 (U.S. Dec. 10, 2019)

Practice Note: I would suggest that practitioners take a close look at modifications as falling within two different doctrines and maybe more. 

First, modification offer from one who is not authorized to make the offer is a violation of the FDCPA. The acceptance and enforcement of payments under a modification agreement might also be a violation of the FDCPA. It is procured under duress.  It is a fraudulent misrepresentation designed to induce the borrower to waive defenses, change lenders (without realizing it) and essentially create an entirely new contract that may or may not incorporate the original note or mortgage. 

Second, the modification has many earmarks of a new financing subject to disclosures required for the origination of any loan. It makes the “new” claimed servicer the lender or the agent of a lender who is not disclosed and who probably has no claim within the chain of title relied upon by the servicer when it made the offer to modify. AND it might well be that it reflects an actual payment in the case where the loan was securitized after a bona fide loan. AND it has entirely new terms with new principal, new interests and frequently a new term.

That sounds like a refinancing to me. If I am right, then the modification is subject to rescission, to wit: (1) 3 day TILA rescission, (2) 3 year TILA rescission and (3) common law rescission. In addition there are claims under RESPA and FDCPA that would appear to arise anew. The specific disclosures required are contained in Federal lending law (TILA) and state deceptive lending laws. ALl such laws are incorporated into contracts for lending by operation of law. So it is not only fraud it is a violation of statute. 

The fraud in such situations is that an interloper falsely poses as a lender or agent of lender. The borrower is in financial emotional distress is induced to enter an agreement that the borrower reasonably believes is for (a) the benefit of the borrower and the (b) creditor who has paid for his debt and owns it — because that is the representation of the servicer who offered it. That is  false. The borrower is injured because while seeking settlement or at least communication with the actual party who has paid for and owns his debt he was prevented from doing so and the borrower had no way of knowing that the servicer’s representations were untrue.

As always discovery is key to proving these allegations and without follow up motions to compel and motions for sanctions discovery won’t do you any good. They won’t answer because they can’t answer. 

9 Responses

  1. Ha Ian — I broke a mirror too. And I am way past the 7 years of bad luck.

  2. ANON I am not an attorney either. Actually, I broke a mirror some time ago and thought I’d have 7 years of bad luck, but my attorney got it down to 5.

  3. And Java – what is sad is that most don’t have a clue. There are a few of us left posting here. Most have just given up. They are embarrassed. Embarrassed about life’s hardships – loss of job, illness, emotional distress, divorce, problems with children, inability to cope – missing a few payments. The cultural effect of the crisis, and fraud, permeates throughout our country, and no one but Neil, and the few that post here, even care. It is as if we don’t exist or matter. Our culture and society is deeply destructed, I appreciate Neil, and all who post here. Those who never give up for the truth to be told.

    As my father used to say – all goes in cycles. We have not hit the cycle yet. We will. The Great Depression, and as told by the story – The Great Gatsby, reminds of the “cycle.” A horrible and destructive war had to take us out of the Great Depression. Stock market continues to rise today for top 10%. Yet, cycles we will always have. Economics 101. Eventually, all will be brought to fruition. It may too late. Too late for our children, grandchildren, nieces, nephews, and young friends. Yet, all here are greatly appreciated. I have not given up, and I know you and others do not give up. .

    Always the best to you. .I urge Neil to use his excellent resources to stand up for all. Let truth be told as Neil states it, not just individually, but also in unity. Find a way to unite. It will work in unity. I am trying best I can. Although some at the top know exactly what happened, many below them do not – including our judges. We have to educate them.. From what I see – judges are – in a word – “wimps.”. They are influenced by the power of certain law firms, and peer decisions that control case law. This is by media bias and government lack of control. Judges are afraid to take a stand — we simply do not matter.

    In a word – Politics. Idiotic Politics.

    Thanks. .

  4. I understand Java. I try to stop myself from posting so much, but I can’t help it – I have seen too much for more years than I like to acknowledge. .

    Way to go to challenge and try to rescind loan modification. Nothing more than transfer of recycled unsecured debt.

    Good Luck!!! Go for it!!! Behind you 100%. Keep us posted!!!!!. You know what to do!!! This is all a travesty!!!

  5. PS.

    ANON. I meant silence from Neil. You and the others who still post here have always been very good with helpful information and posting replies. It’s appreciated.

  6. I’m tired of the Banksters and their Ponzi. So I’m going to rescind my modification (like I thought made sense to me 1.5 years ago) and let’s see how it goes. Will keep everyone updated.

  7. Java — I am not the blog, and I am not an attorney, but I having been warning about modifications for a long time. People just can pay anyone. They need clear title recorded in their county. They need to know where their money has gone and goes.

    Modifications do NOT give clear title. Most are not even recorded. This most alarmed me recently when I spoke to someone trying to renew a 5 year modification, and he had no clue who he is paying, or who is legal mortgage holder. And, he didn’t care. Expensive house in your neck of the woods.

    Whether these homes have clear and marketable title is a huge question. Modifications were presented to mask fraudulent title. For those who battle foreclosure, they have to show ability to pay – NOT standing and mortgage holder for clear title. When you sign that dotted line for modification, Neil is correct, it is, in effect, a refinance – unrecorded. Modifications are, in effect, protracted concealment, which have been pushed on those most vulnerable. This is something our legislators have to address, and they are in la-la land.

    As to rescission — I don’t know, not an attorney. However, if these loans were not an actual mortgage, by which the BORROWER paid off the prior loan (which I more than know they are), rescission should be on the plate.

    As to Neil and FDCPA — he is correct. SOL should be from discovery. Especially when information is contained in the hands of others and not available to the borrower (strong case law on this). .

    This was excellent from Neil. I hope people listen, and move forward accordingly. However, it will not happen just in individual cases. Modifications and legal holder should be challenged. NOW.

    I have also said for years – people have to unite. That does not mean give up individual case, and not seek help. To the contrary. However, without alerting those in authority, with the ability to make changes, cases will fall by the wayside.


  8. I’ve been asking this blog about rescission AND modifications for many years and never received a reply once, only heard silence !!!!!!!

  9. Excellent on all points Neil.

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