In the recent Third Circuit decision of Peterson v. Portfolio Recovery Associates, LLC, 10-2824, 2011 WL 2181508 (3d. Cir. June 6, 2011), the court reviewed the event that triggers the running of the one year statute of limitations for a violation of the FDCPA's validation notice requirement. In the Peterson case, Robert Peterson (“Peterson”) sued Portfolio Recovery Associates, LLC (“PRA”), in the District Court for the District of New Jersey, alleging violations of the federal Fair Debt Collection Practices Act (“FDCPA”). The defendant, PRA, is in the debt collections business.
In 2003, PRA sent a letter to Peterson seeking to recover a debt in the amount of $2,936.32 which PRA had acquired from Fleet Bank. Peterson later denied that he was the same Robert Peterson who lived at the address to which the 2003 letter was sent. The 2003 letter contained a “validation notice,” required pursuant to 15 U.S.C. § 1692g(a) FDCPA. Under that provision, “[w]ithin five days after the initial communication with a consumer in connection with the collection of any debt,” the debt collector must provide the consumer with written notice regarding a number of items including, among other things, the amount of the debt, the name of the creditor, and disclosures as to the consumer’s rights and the available procedure for disputing the debt.
In 2007, PRA called Peterson on several occasions attempting to collect the debt. During those conversations, Peterson denied owing the funds and also provided PRA with his then-current address. In 2008 and 2009, PRA sent Peterson further correspondence in an attempt to settle the outstanding debt and investigate Peterson’s identity theft claim. None of PRA’s communications in 2007-2009 were accompanied by the FDCPA validation notice.
In June 2009, Peterson filed suit against PRA in the Federal District of New Jersey alleging that PRA violated the validation notice requirement set forth in 15 U.S.C. § 1692g(a). The district court granted summary judgment in Peterson’s favor, holding that the validation notice in the 2003 letter was insufficient because it was not sent to his correct address. As such, the validation notice requirement was triggered when PRA contacted Peterson by phone in 2007. Finally, the court held that, although more than a year had elapsed since the 2007 phone calls, the action was not barred by the FDCPA’s one year statute of limitations (15 U.S.C. § 1692k(d)) because PRA’s 2008 and 2009 letters could serve as an adequate basis for a non-time barred action. Accordingly, the district court awarded Peterson maximum statutory damages of $1,000 as well as a reduced amount of his requested attorney’s fees (totaling $10,351). Both parties appealed on various grounds.
In a decision written by Judge Tashima of the Ninth Circuit, sitting by designation, the Third Circuit reversed summary judgment granted in Peterson’s favor finding that his claim was time barred. According to the Third Circuit, the FDCPA’s notice requirement applies exclusively to a debt collector’s “initial communication” with the consumer. Accordingly, the one year statute of limitations began to run when PRA failed to appropriately provide a validation notice after the 2007 phone conversations, which constituted PRA’s “initial communication” with Peterson.
In so holding, the Third Circuit also reversed the district court’s conclusion that the 2008 and 2009 letters could serve as the basis for a non-time-barred claim. Citing several district court decisions out of the Second Circuit, the court reasoned that “[f]aced with cases in which a validation notice did accompany an initial communication, but the plaintiff argued that the FDCPA was violated by subsequent communications lacking such a notice, courts have concluded that a debt collector has no obligation to send a validation notice with any communication other than the initial communication.”
As such, the Third Circuit declined to apply a “continuing violations” rule that would restart the statute of limitations for each subsequent communication sent without notice. This approach, the court recognized, is consistent with a number of sister circuits that have held that the FDCPA’s statute of limitations begins to run at “the debt collector’s last opportunity to comply with the Act.” Under the facts in Peterson, the last opportunity to comply with the Act would have been five days after the initial phone conversation in 2007, well outside of the statue of limitations.
The Peterson case demonstrates the Third Circuit’s strict application of the FDCPA’s statute of limitations provision and the court’s decision not to impose any tolling doctrines that could have permitted a less harsh result for the plaintiff. Although the court did not address it, the outcome may have been driven by the lack of any discernable actual damages caused by the lack of notice, the relatively low statutory damages amount of $1,000, and the disproportionately high attorney’s fee award. In short, neither the facts under review nor the provision at issue presented a compelling case for a less rigorous application of the statute of limitations.