19 April 2023
/ Matthew W. Pomy
Collection Letters for Out-Of-Statute Debts: A Guide for Pennsylvania Creditors
As a general rule, debt collectors in Pennsylvania have been required to advise a consumer if their debt has passed the relevant statute of limitations and therefore cannot be successfully sued when attempting to collect on that debt. This all changed with the Superior Court’s ruling in Matteo v. EOS USA, Inc., which came in late March 2023.
This case involved a debt collector (EOS USA) attempting to collect a debt against Matteo from an alleged student loan. It is not disputed that the alleged obligations were passed the relevant statute of limitations. Despite this, EOS USA sent a collection letter seeking to make contact with the consumer. The letter, reproduced in its entirety in the ruling linked above, suggested Matteo contact EOS to discuss options and offered a willingness to work with Matteo to assist in seeking “financial freedom”. The letter did not advise Matteo that this debt had passed the statute of limitations and therefore could not be sued.
A complaint was then filed by Matteo alleging, among other things, EOS USA violated the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Extension Uniformity Act (FCEUA). EOS mounted a preliminary challenge to the complaint itself alleging that none of its actions constituted deceptive or misleading communications even to the least sophisticated debtor, which would be the standard. Even if the allegations were true, Matteo had not stated a claim for which relief could be granted. The lower court agreed and Matteo appealed. In its decision, the Superior Court agreed with the lower court found nothing in the letter could “deceive or mislead the least-sophisticated debtor into believing that she has a legal obligation to pay the time-barred debt.”
The Superior Court focused on the language contained in the letter. Importantly, EOS USA did not offer to negotiate the debt. It did not make an offer of settlement or request Matteo to enter into a payment plan. The letter simply offered “help” or “assistance.” EOS stated that if Matteo could not pay the balance claimed in the letter then EOS would be willing to discuss other options. The Superior Court held that these offers do not amount to an implicit threat of litigation and would therefore not be deceptive or misleading as to the current status of an obligation.
This ruling constitutes a significant shift in how courts in Pennsylvania have typically viewed settlement letters in connection with out-of-statute debts. While creditors had been forced to disclose the fact that a debt is out of statute when reaching out in an attempt to resolve the matter, it appears that courts are willing to apply a common sense approach to interpreting the actual language contained in a given letter. This suggests that similarly situated creditors may wish to reassess their approaches when it relates to out-of-statute accounts to more closely mirror the language employed by EOS in attempting to initiate conversations with consumers. In doing so, creditors may not only be successful in establishing agreeable payment plans on formerly stale accounts, but more effectively communicate with consumers without the need for cumbersome legal disclosures. These types of communications often stop conversations before they can begin.
Our team is constantly monitoring this topic. If you have any questions, feel free to connect with attorney Matt Pomy at any time.
This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.
This case involved a debt collector (EOS USA) attempting to collect a debt against Matteo from an alleged student loan. It is not disputed that the alleged obligations were passed the relevant statute of limitations. Despite this, EOS USA sent a collection letter seeking to make contact with the consumer. The letter, reproduced in its entirety in the ruling linked above, suggested Matteo contact EOS to discuss options and offered a willingness to work with Matteo to assist in seeking “financial freedom”. The letter did not advise Matteo that this debt had passed the statute of limitations and therefore could not be sued.
A complaint was then filed by Matteo alleging, among other things, EOS USA violated the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Extension Uniformity Act (FCEUA). EOS mounted a preliminary challenge to the complaint itself alleging that none of its actions constituted deceptive or misleading communications even to the least sophisticated debtor, which would be the standard. Even if the allegations were true, Matteo had not stated a claim for which relief could be granted. The lower court agreed and Matteo appealed. In its decision, the Superior Court agreed with the lower court found nothing in the letter could “deceive or mislead the least-sophisticated debtor into believing that she has a legal obligation to pay the time-barred debt.”
The Superior Court focused on the language contained in the letter. Importantly, EOS USA did not offer to negotiate the debt. It did not make an offer of settlement or request Matteo to enter into a payment plan. The letter simply offered “help” or “assistance.” EOS stated that if Matteo could not pay the balance claimed in the letter then EOS would be willing to discuss other options. The Superior Court held that these offers do not amount to an implicit threat of litigation and would therefore not be deceptive or misleading as to the current status of an obligation.
This ruling constitutes a significant shift in how courts in Pennsylvania have typically viewed settlement letters in connection with out-of-statute debts. While creditors had been forced to disclose the fact that a debt is out of statute when reaching out in an attempt to resolve the matter, it appears that courts are willing to apply a common sense approach to interpreting the actual language contained in a given letter. This suggests that similarly situated creditors may wish to reassess their approaches when it relates to out-of-statute accounts to more closely mirror the language employed by EOS in attempting to initiate conversations with consumers. In doing so, creditors may not only be successful in establishing agreeable payment plans on formerly stale accounts, but more effectively communicate with consumers without the need for cumbersome legal disclosures. These types of communications often stop conversations before they can begin.
Our team is constantly monitoring this topic. If you have any questions, feel free to connect with attorney Matt Pomy at any time.
This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.
