Reversal of Dismissal of Fair Debt Collection Practices Act Cases Creates Circuit Split

On March 11, 2014,the Seventh Circuit Court of Appeals reversed two federal Fair Debt Collection Practices Act (“FDCPA”) claims attacking letters sent by collection agencies offering to “settle” debts that had surpassed their statute of limitations.

In its opinions rendered in the cases McMahon v. LVNV Funding, LLC, No. 12-3504 (7th Cir. Mar. 11, 2014) and Delgado v. Capital Mgmt. Servs., LP, No. 13-2030 (7th Cir. Mar. 11, 2014), the Seventh Circuit held that offers to “settle” a debt may falsely suggest that the debt is legally enforceable, and therefore, claims arising over such offers to settle may survive a motion to dismiss.  The Seventh Circuit’s opinions in McMahon and Delgado would seem to conflict with earlier opinions of the Third and Eighth Circuits that held that collection letters seeking to collect debts past their statute of limitations do not violate the FDCPA unless they threaten litigation.