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An interesting read from the courts of Wisconsin....
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Posted by Jim
(68.113.224.117) on July 28, 2002 at 20:17:40:
IS THIS A PRECEDENT SETTING CASE FOR ALL JURISDICTIONS? In a recent decision in the United States District Court for the Western District of Wisconsin, unreported, in the matter of Kelly A. Clure, plaintiff v. Calvary Investments, LLC. case number 016-541-5 the following fact situation occurred. Prior to 1993, the debtor Clure, contracted with Elan Financial Services of Illinois for a consumer credit card. Her last payment on that credit card account was sometime in March 1993. Subsequently, Elan transferred this account, closed it, and sold it to Aman Collection Services Inc, which took no action on the account. Sometime in March of 1999, the statute of limitation in Wisconsin expired under Wisconsin Statutes Section 893.43. On or about June 23, 2000, Calvary Investments obtained and bought the account from Aman, which was part of a purchase of over 19,000 accounts. Subsequently, Calvary Investments, who is the defendant in this case, sent to the debtor, Clure, a collection letter dated February 13, 2001, which offered the debtor/plaintiff a chance to reduce her balance of $12,466.00 by half. Additionally, no further interest would be charged. The letter included an acknowledgment of the debt form, but included no language indicating that the debtor had 30 days to contest the amount or request proof of debt. The letter did not contain any language indicating that the purchaser of the account, defendant Calvary, planned to take any further action. The debtor subsequently contacted legal counsel. The claim by the debtor, Clure, was that Calvary attempted to collect the debt, which was first, in violation of the FDCPA, and further there was no verification. In addition thereto, the statute of limitations had tolled and therefore, this was a violation of Wisconsin Statute Section 893.43. The debtor's complaint alleges violations of Section 1692e(2)(A), (5), (10), and Section 1692(f), in addition to a claim under the Wisconsin Statutes Section 427.104(1)(j). The claim was that this was false and deceptive and misleading representations, and that further, since this claim was out of statute, and had expired, the entire demand was misleading. The debtor\plaintiff's claim centers around, whether Wisconsin statute of limitation acts to effectively extinguish and cancel the debt as opposed to merely eliminating the judicial remedy as is typical in most state's statutes of limitation. If the running of the statute of limitations in Wisconsin acts to extinguish the debt, as the debtor maintains, then the defendant, Calvary, has violated the FDCPA in so far as its dunning letter, misrepresents the legal status and the amount of the debt, which is legally nothing. Heretofore, most states have indicated that, although a statute of limitations has run, it is not inappropriate to make demand for the debt, and in some instances, suit can be commenced, even though the claim is out of statute causing the debtor to raise the affirmative defense of the claim being out of statute. In this particular case, the Wisconsin statute of limitations effectively extinguishes the debt and renders it nil. Section 893.05 of the Wisconsin Statutes provides, that when the period within which an action may be commenced on a Wisconsin cause of action has expired, the right is extinguished as well as the remedy. "It is a rule of law in the state of Wisconsin that the statute of limitations extinguishes the right and creates another right in the debtor of equal dignity and that the obligation is thereby extinguished as completely as if it had been paid or otherwise fully satisfied". See Banking Commissioner v. Buchanan, 279 N.W. 71, 1938, and First National Bank of Madison v. Kolbeck, 247 Wis. N.W2D908, 1945. The court held further that, defendant has violated section 1692e(2)(A) insofar as its letter has misrepresented the legal status of plaintiff's debt. The court further stated that the creditor defendant had attempted to collect a debt that it had no right too, and for this reason, this letter suggesting otherwise, misrepresented the legal status of the debt in violation of the FDCPA. The court further held that defendant's letter violates the FDCPA on its face. Defendant's letter does not indicate that the plaintiff has a right to contest the debt or obtain verification. Finally, Wisconsin Statutes Section 427.014(1)(j) provides that "in attempting to collect an alleged debt arising from a consumer credit transaction, or other consumer transaction, whether there is an agreement to defer payment, a debt collector shall not claim or attempt to enforce that right where there is knowledge, or reason to know that the right does not exist." The language of this statute is unequivocable and that defendant's attempt to collect plaintiff's time barred debt clearly constitutes an attempt to enforce a right that defendant should have known did not exist. What will be the impact of this unreported case in Wisconsin, predicated primarily on Wisconsin Statute, remains to be seen. There is no question that pursuing claims that are out of statute, not only by making demand by letter, but by further litigating them may no longer be appropriate if not under a state statute, but possibly under FDCPA. This case may have tremendous impact on those parties who buy bad debt, which may be out of statute. By: Attorney Robert W. Kohn, Partner
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