In the recent decision of Simon v. FIA Card Services, N.A.
(“Simon”), the Third Circuit tackled the much debated issue of
communication with a debtor during bankruptcy proceedings is
considered a violation of the Fair Debt Collection Practices Act
(“FDCPA”). In its opinion, the Third Circuit held that
consumers are not barred from pursing claims against a collector
for communication during this sensitive time period that violate
In Simon, Stacey and Robert Simon (“Simons”) filed for
bankruptcy under Chapter
7. During the proceedings, the Simons submitted a
scheduled including an unsecured, non-priority claim credit card
debt owed to Bank of America, now FIA Card Services
(“FIA”). FIA retained the assistance of a law firm to
represent its interests in the Simons’ bankruptcy proceeding.
In an effort to be included in the proceedings the firm sent both
the Simons and their attorney a letter stating FIA was planning to
challenge the fact that the debt was dischargeable or alternatively
offered to forego the challenge if the Simons agreed to pay off the
debt for an agreed upon amount.
In response to the letter, the Simons filed suit, alleging FIA
violated their rights under the FDCPA by pursing a debt during
bankruptcy. The district court dismissed their claims stating
they were barred by the Bankruptcy Code
and furthermore, that their allegations were insufficient to state
a claim under the FDCPA. Dissatisfied with the outcome, the
Simons appealed to the Third Circuit, who disagreed with the
decision of the lower court.
In its opinion, the Third Circuit rejected the law firm’s
argument that the FDCPA was inapplicable because its communication
with the Simons should not be viewed as a demand for payment or an
attempt to collect a debt. The Court held that the FDCPA
applies to any type of communication where the end result is to
collect payment. The firm’s letter was in fact an attempt to
settle the debt and receive payment in lieu of the firm filing a
separate suit to re-characterize the type of debt so that it could
be included in the bankruptcy.
Second, the Court held that the allegations did in fact state a
viable claim under the FDCPA. The FDCPA specifically
prohibits collectors from ” threatening to take any action that
cannot legally be taken or that is not intended to be taken” and
“falsely representing or implying that documents are legal process”
under1692e. The Simons sufficiently showed the existence of
this conduct on behalf of FIA, by threatening to file suit if
payment was not agreed upon.
The moral of the story is crystal clear, when communicating with
debtor in a bankruptcy proceeding collectors must comply with
the FDCPA as they would when communicating with a non-bankrupt
debtor or be subject to the consequences.
If you feel your rights have been violated under the FDCPA and
you wish to speak with an attorney, contact
SmithMarco P.C. for a free case review.