Consumer Finance Litigation

In a consolidated appeal of two cases from the United States Bankruptcy Court for the Middle District of Alabama, the United States District Court for the Middle District of Alabama held last week that the filing of a proof of claim in a debtor's bankruptcy case does not amount to an FDCPA violation. See Crawford v. LVNV Funding, LLC, Case No. 2:12-cv-701-WKW, Doc. 18 (M.D. Ala. May 9, 2013). The plaintiff-debtors had appealed the dismissal of their adversary complaints which asserted FDCPA claims against creditors who allegedly filed proofs of claim on time-barred debts in their bankruptcy cases. The district court affirmed the bankruptcy court's dismissal of the adversary complaint, finding that "the elephantine body of persuasive authority weighs against" finding that filing proofs of claim on time-barred debts violates the FDCPA. The court first found that "the FDCPA does not apply to the bankruptcy claims process because creditors who file proofs of claim are not engaging in the sort of debt-collection activity that the FDCPA regulates." The court then held that, even if the bankruptcy creditors were trying to collect a debt when they filed proofs of claim, the debtors' FDCPA claims still fail because the creditors "did not engage in any behavior that would violate the FDCPA." The court noted that the FDCPA only prohibits debt collection practices that are abusive, deceptive, and unfair, and that filing a proof of claim is not such a practice. Moreover, the court emphasized that "in the structured environment of the bankruptcy court, even the least sophisticated among us are protected from abusive practices." In a footnote, the court noted that it did not need to address the question of whether the FDCPA is preempted by the Bankruptcy Code because its holding was based on a finding that appellants "never alleged any conduct that was violative of the FDCPA in the first place." For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.