Consumer Finance Litigation

In Nichols v. Niagara Credit Recovery, Inc., No. 5:12-cv-1068, 2013 WL 1899947 (N.D.N.Y. May 7, 2013), the Northern District of New York held that the plaintiffs' Fair Debt Collection Practices Act ("FDCPA") claims were barred by the FDCPA's one-year statute of limitations, where the plaintiffs attempted to raise an equitable tolling argument for the first time in their response to the defendants' motion to dismiss. The wife in Nichols had defaulted on a loan from the original creditor, who assigned the debt to a debt collection company for collection. The debt collector, in turn, retained the services of a debt servicing company and a law firm. In their complaint filed July 3, 2012, the plaintiffs alleged that the debt collector violated the FDCPA by assigning the debt to a third party after the law firm had already settled the debt with Mrs. Nichols on September 21 2010 on behalf of the debt collector. The plaintiffs also alleged various FDCPA violations on the part of the assignee based on collection efforts beginning in January 2012. The debt servicer and law firm moved to dismiss the claims against them as time-barred, given that the plaintiff had not alleged any conduct on the part of the debt servicer or law firm after September 2010. In response, the plaintiffs argued that equitable tolling should apply because they did not have reason to know of the assignment until January 24, 2012, when the assignee began collection efforts. Actions under the FDCPA must be filed within one year from the date on which the violation occurred. See 15 U.S.C. § 1692k(d). However, equitable tolling may apply to an FDCPA claim where a plaintiff shows that (1) the defendant concealed the existence of the plaintiff's cause of action, (2) the plaintiff remained ignorant of the cause of action until some point within the limitations period, and (3) the plaintiff's continuing ignorance was not due to a lack of diligence. Dismissing the plaintiffs' claims against the law firm and debt servicer, the court first noted the only alleged violations occurring within the one-year statute of limitations were those of the assignee. Therefore, the plaintiffs' claims against the debt servicer and law firm would be timely only if the assignee could be considered an agent of those defendants. Because the plaintiffs did not plead facts sufficient to allege such an agency relationship, the court held that the plaintiff's claims against the debt servicer and law firm were barred by the statute of limitations. The court also rejected the plaintiffs' equitable tolling theory, observing that they had not alleged any facts in their complaint to suggest fraud or concealment on the part of the law firm or the debt servicer. Therefore, the plaintiffs' equitable tolling argument was unsupported by the pleadings and due to be dismissed. 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.