This is a question that we get quite often – “What happens when I’m sued after the statute of limitations by a debt collector in Alabama?” We wrote an article on this on our website Alabama Consumer but we wanted to give more detail in this blog post. Two short answers:
1. You should win the collection lawsuit as you have a great defense – statute of limitations; and 2. You can often sue the debt collector for suing you after the statute of limitations has expired.
The first is based upon the general law of affirmative defenses under Alabama law. You must raise this defense when you answer the lawsuit. If you don’t, you will likely waive this defense which is not a good thing.
The second – being able to sue the debt collector – is based upon a federal case in Alabama called Kimber v. Federal Financial Corporation.
Because this is such an important issue we are quoting extensively from this critically important case which explains why the filing of a lawsuit after the statute of limitation violates the Fair Debt Collection Practices Act (FDCPA):
Kimber claims that FFC’s filing of the lawsuit against her violated § 1692f. That section states simply that, “A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.” Kimber argues that filing a lawsuit to collect on a debt that appears time-barred, without first determining after a reasonable inquiry that the limitations period is due to be tolled, constitutes an unfair and unconscionable practice offensive to § 1692f. The court agrees with Kimber.
“Statutes of limitations are not simply technicalities. On the contrary, they have been long respected as fundamental to a well-ordered judicial system.” Board of Regents v. Tomanio, 446 U.S. 478, 487, 100 S.Ct. 1790, 1796, 64 L.Ed.2d 440 (1980). They reflect a strong public policy, as determined by legislative bodies and courts, that “it is unjust to fail to put the adversary on notice to defend within a specified period of time and that `the right to be free of stale claims in time comes to prevail over the right to prosecute them.'” United States v. Kubrick, 444 U.S. 111, 117, 100 S.Ct. 352, 356-57, 62 L.Ed.2d 259 (1979) (emphasis added), quoting Railroad Telegraphers v. Railway Express Agency, 321 U.S. 342, 349, 64 S.Ct. 582, 586, 88 L.Ed. 788 (1944). These statutes therefore “afford plaintiffs what the legislature deems a reasonable time to present their claims,” while at the same time “protect[ing] defendants and the courts from having to deal with cases in which the search for truth may be seriously impaired by the loss of evidence, whether by death or disappearance of witnesses, fading memories, disappearance of documents, or otherwise.” Kubrick, 444 U.S. at 117, 100 S.Ct. at 357.
However, because these statutes are based on concepts of what is just and fair, “most courts and legislatures have recognized that there are factual circumstances which justify an exception to these strong policies of repose. For example, defendants may not, by tactics of evasion, prevent the plaintiff from litigating the merits of a claim, even though on its face the claim is time-barred.” Tomanio, 446 U.S. at 487-88, 100 S.Ct. at 1797. These exceptions to the statutes are generally referred to as “tolling.” Id.
The court agrees with Kimber that a debt collector’s filing of a lawsuit on a debt that appears to be time-barred, without the debt collector having first determined after a reasonable inquiry that that limitations period has been or should be tolled, is an unfair and unconscionable means of collecting the debt. As previously demonstrated, time-barred lawsuits are, absent tolling, unjust and unfair as a matter of public policy, and this is no less true in the consumer context. As with any defendant sued on a stale claim, the passage of time not only dulls the consumer’s memory of the circumstances and validity of the debt, but heightens the probability that she will no longer have personal records detailing the status of the debt. Indeed, the unfairness of such conduct is particularly clear in the consumer context where courts have imposed a heightened standard of care-that sufficient to protect the least sophisticated consumer. Because few unsophisticated consumers would be aware that a statute of limitations could be used to defend against lawsuits based on stale debts, such consumers would unwittingly acquiesce to such lawsuits. And, even if the consumer realizes that she can use time as a defense, she will more than likely still give in rather than fight the lawsuit because she must still expend energy and resources and subject herself to the embarrassment of going into court to present the defense; this is particularly true in light of the costs of attorneys today.
1488 FFC asserts, nevertheless, that because a statute of limitations is an affirmative defense which is waived if not raised, a plaintiff may not be penalized for knowingly filing a time-barred suit; indeed, according to FFC, its attorney was ethically authorized, if not bound, to pursue such a suit in light of the defensive posture of the limitations statute. Although the staleness issue has not been previously considered in relation to unfairness under the Fair Debt Collection Practices Act, the propriety of bringing a lawsuit to which there appears to exist a complete defense, without first making a reasonable inquiry as to whether the defense is in fact not complete, has been discredited elsewhere. Rule 11 of the Federal Rules of Civil Procedure demands that an attorney conduct a reasonable investigation into whether a claim is well grounded in law and fact, and not inspired by an improper purpose, before signing a pleading. Sanctions against attorney and client under the rule have been imposed where the attorney knew or should have known a claim was time-barred. Steinle v. Warren, 765 F.2d 95 (7th Cir.1985); Van Berkel v. Fox Farm and Road Machinery, 581 F.Supp. 1248 (D.Minn.1984). Further, the fact that a defense is affirmative has not relieved counsel of their Rule 11 responsibilities in other contexts. See, e.g., Southern Leasing Partners, Ltd. v. Bludworth, 109 F.R.D. 643 (S.D.Miss.1986) (suit barred by res judicata); Hasty v. Paccar, Inc., 583 F.Supp. 1577 (E.D.Mo.1984) (lack of personal jurisdiction.) In view of these holdings, FFC’s argument that its attorney was ethically authorized to pursue the collections in case the debtors failed to raise the statute of limitations defense lacks authority.
The court must therefore conclude that FFC violated § 1692f when it filed suit against Kimber. There is no question that the debt FFC sought from Kimber was barred as stale. Two limitations periods were applicable. Where a stated account or simple contract is at issue, the Alabama Code of 1975, § 6-2-34(5) and (9) provides for a six year period; on an open account, a three year period applies, pursuant to § 6-2-37(1). Regardless of which statute is applied to Kimber’s alleged debt, the limitations period has run, since her debt was assigned by W.T. Grant in 1976, or nine years before FFC sued her, and the debt was in default at the time of assignment. There is also no question that FFC’s attorney did not, prior to filing the lawsuit, make a determination after a reasonable inquiry that the limitations period was due to be tolled. Under these circumstances, FFC’s conduct was unjust and unfair, and in violation of public policy as well as the Fair Debt Collection Practices Act. Kimber is entitled to summary judgment on her claim that FFC violated § 1692f of the Act.
If you live in Alabama and are facing a debt collection lawsuit that may be outside the statute of limitation or if you are dealing with debt collectors in general, feel free to contact us or give us a call at 205-879-2447.
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