Thursday, December 19, 2019

Stimpson v. Midland Credit Management (9th Cir. - Dec. 18, 2019)

Maybe the debt collector's letter here was a little bit tricky.  But it wasn't illegally -- or even all that much -- tricky.

Defendant buys up stale debts (for an incredibly tiny fraction of their face value).  Since the debts are so old, it can't sue on 'em.  But it can send letters and make calls and try to persuade the debtor to pay.

So it sends the plaintiff here one of those letters.  Telling him that the benefits of paying are (1) Save $458.24 if you pay by 04-27-2017; (2) Put this debt behind you; (3) No more communication on this account; and (4) Peace of mind.

Now, since the defendant knows full well he can't sue, you might think that sending such a letter is at least a little bit deceptive.  But then there's this (extremely important) disclosure in the letter:

"The law limits how long you can be sued on a debt and how long a debt can appear on your credit report. Due to the age of this debt, we will not sue you for it or report payment or non-payment of it to a credit bureau."

That pretty much tells the debtor, in my view, most (if not all) that he needs to know.  He's not going to be sued or reported if he doesn't pay the debt.  So the only reason for him to pay is basically if he's had a serious religious conversion or the like and now feels like paying his time-barred debts.

But the plaintiff sues, claiming that by saying that the defendant "will not" sue, it's implicitly saying that the defendant could sue if it wanted.  But the Ninth Circuit rightly finds that argument too cute by half.  Even unsophisticated debtors can understand basic sentences.  The sentence at issue doesn't stand for the proposition that plaintiff claims.  It just says they won't sue, which is right.

(And the fact that states like California require precisely this type of statement on time-barred debts is only further evidence of this fact, in my view.  The case should come out the same way even without the existence of those statutes.  But they nonetheless help prove the point.)

Even though it's not deceptive, the letter is a little bit tricky.  First off, I suspect that the only people who pay in response to these letters are in fact people that (1) are confused by (or don't read) the "we won't sue or report you" disclosure, or (2) just want to stop the harassment (via letter or otherwise) of the debt collector, and don't realize that they're entitled to simply say "Stop talking to me" and have it end.  So it's tricky -- and effective -- in that way. 

And it's potentially tricky in another way.  Since although the debt is time-barred, defendant can't sue on it.  But in at least some states, if the letter effectively persuades the debtor make even a tiny little payment on the debt, the statute of limitations may restart, and allow 'em to sue on the whole thing.  Big money.

It's unclear if that's really what the defendant was trying to do here, or even if it'd work in practice (in this particular state for this particular debt).  But still.  If that's indeed the law, I'd bet good money that there are debt collectors out there adopting that strategy.  And there's little the law can do about that, because as the Ninth Circuit holds here (correctly, I think), that's not "deceptive" because defendant didn't actually say anything that was untrue or misleading.  They're just taking advantage of the law and the lack of knowledge by unsophisticated debtors.

And that, my friends, the law allows.