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U.S. Supreme Court to Decide Whether Discovery Rule Applies to FDCPA Claims

The U.S. Supreme Court has agreed to resolve a circuit court split over whether the one-year statute of limitations (SOL) in the Fair Debt Collection Practices Act (FDCPA) runs from the date of the alleged violation or starts upon a consumer's discovery of the violation.

The FDCPA provides that "[a]n action to enforce any liability created by this subchapter may be brought in any appropriate United States District Court…within one year from the date on which the violation occurs." In Rotkiske v. Klemm, the plaintiff alleged that the defendant violated the FDCPA by obtaining a default judgment against him based on service of a complaint at an address the defendant knew or should have known was incorrect.

An en banc U.S. Court of Appeals for the Third Circuit rejected the plaintiff's argument that the FDCPA's one-year SOL did not begin to run until he discovered the default judgment upon applying for a mortgage loan approximately five years after service of the complaint. Instead, based on the statutory text, the Third Circuit held that the SOL runs from the date of the violation. It appears the Supreme Court granted the petition for a writ of certiorari in Rotkiske to resolve the circuit split: unlike the Third Circuit, the Fourth and Ninth Circuits have held that the discovery rule does apply to the FDCPA's one-year SOL.

The Third Circuit's reading is the one most consistent with the statutory text. As the Third Circuit wrote, "the [FDCPA] says what it means and means what it says." A decision by the Supreme Court that adopts the Third Circuit's view would further constrict the time frame for plaintiffs' attorneys to bring claims, whereas a decision that adopts the view of the Fourth and Ninth Circuits could lead to more FDCPA litigation. In any event, a Supreme Court ruling will provide consistency, something that is sorely needed in FDCPA litigation.

Copyright © by Ballard Spahr LLP

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Kaplinksy, partner, New York, finance
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Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

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Christoper Willis, Partner, Ballard Spahr law firm, Consumer Financial Services Litigation attorney
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Christopher J. Willis is Practice Leader of the firm's Consumer Financial Services Litigation Group. He devotes his practice to assisting financial services institutions facing government investigations and examinations, counseling them on fair lending risk and compliance assessments, and defending them in individual and class action lawsuits brought by consumers and enforcement actions brought by government agencies.

Mr. Willis also chairs the firm's Fair Lending Task Force. His clients span the financial services industry and include banks and non-banks, mortgage banking lenders and servicers, debt collectors and buyers, third-party service providers, student lenders and servicers, and auto finance companies.

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Culhane, Ballard, Partner
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John L. Culhane, Jr., is known for his work advising on interstate direct and indirect consumer and residential mortgage loan and leasing programs, through both traditional brick-and-mortar facilities and e-commerce. Before joining Ballard Spahr, Mr. Culhane was associate counsel with Mellon Bank, N.A.; associate counsel with Bank of America NT&SA; and senior attorney (section chief) with the National Credit Union Administration, the federal agency regulating federal credit unions.

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Stefanie Jackman, Ballard Spahr law firm, Partner, financial services institutions lawyer
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Stefanie H. Jackman devotes her practice to assisting financial services institutions facing government investigations and enforcement actions, as well as defending them in individual and class action lawsuits. Ms. Jackman regularly handles matters arising under an array of federal and state consumer financial laws, including UDAP/UDAAP statutes, FDCPA, FCRA, TCPA, EFTA, SCRA, and TILA. Ms. Jackman represents clients across the financial services industry, including banks and nonbanks, mortgage banking lenders and servicers, debt collectors and buyers, third-party...

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