Roxanne Daugherty v. Convergent Outsourcing, Inc.
2016 U.S. App. LEXIS 16531
| 5th Cir. | 2016Background
- Plaintiff Roxanne Daugherty defaulted on a credit-card balance that grew to $32,405.91; the statute of limitations to sue had expired.
- LVNV purchased the debt and retained Convergent Outsourcing to collect.
- Convergent sent a "Settlement Offer" letter proposing a 10% lump‑sum payment ($3,240.59) or other reduced-payment plans, without mentioning the debt was time‑barred or warning that partial payments could revive the claim.
- Daugherty sued under the FDCPA, alleging the letter was false, deceptive, or unfair (15 U.S.C. §§ 1692e, 1692f).
- The district court dismissed under Rule 12(b)(6), relying on Third- and Eighth‑Circuit precedent that attempts to collect time‑barred debt are lawful absent a threat to sue.
- The Fifth Circuit reversed and remanded, holding that such a settlement letter can violate the FDCPA if it could mislead an unsophisticated consumer into believing the debt is legally enforceable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a collection letter offering to "settle" a time‑barred debt without disclosing its unenforceability violates the FDCPA | Daugherty: The letter is misleading because it implies the debt is enforceable and omits that partial payment may revive the claim | Defendants: Collecting a time‑barred debt is permissible so long as no suit is threatened; silence about litigation is not deceptive | Held: A letter may violate the FDCPA if it could mislead an unsophisticated consumer into believing the debt is legally enforceable, even without threatening suit; dismissal reversed |
Key Cases Cited
- Huertas v. Galaxy Asset Mgmt., 641 F.3d 28 (3d Cir. 2011) (time‑barred debt collectors may request voluntary repayment absent threats to sue)
- Freyermuth v. Credit Bureau Servs., Inc., 248 F.3d 767 (8th Cir. 2001) (statute of limitations limits remedies but does not eliminate the debt; collection absent threat to sue not per se unlawful)
- McMahon v. LVNV Funding, LLC, 744 F.3d 1010 (7th Cir. 2014) (a settlement offer on time‑barred debt that omits unenforceability can mislead and violate § 1692e)
- Buchanan v. Northland Grp., Inc., 776 F.3d 393 (6th Cir. 2015) (nondisclosure of limitations expiry in settlement letters can misrepresent the legal status of the debt and violate the FDCPA)
- Castro v. Collecto, Inc., 634 F.3d 779 (5th Cir. 2011) (not dispositive here; noted that threatening to sue on time‑barred debt may violate the FDCPA)