The Supreme Court issued an anticipated holding in Midland Funding, LLC, v. Johnson earlier this week. In a 5-3 decision authored by Justice Breyer, the Court held that a proof of claim filed on a time-barred debt does not violate the Fair Debt Collection Practices Act. Additionally, the Court discussed the concepts of "false," "deceptive," "unconscionable," or "unfair" conduct under the FDCPA and found that the interposition of the bankruptcy filing and involvement of the bankruptcy trustee mitigated the standard application of those terms.
The decision resolves a circuit split among the Third, Seventh and Eleventh and the Second and Ninth Circuit Courts of Appeal. Had the Court ruled differently, it would have placed attorneys representing creditors in the unenviable position of advancing legitimate client claims at the peril of potential FDCPA liability exposure for the attorney.
Justice Sotomayor, joined by Justices Ginsburg and Kagan, filed a scornful dissent implying that the decision was contrary to positions and investigations undertaken by the Federal Trade Commission and Consumer Financial Protection Bureau and subjected consumers to additional unfair practices.
A copy of the decision can be found here.
