Justices Rule Against Consumer in Debt-Collection Case

(CN) — A divided Supreme Court ruled Monday that debt collectors can’t be sued for trying to recover years-old credit card debt from people who seek bankruptcy protection.

In the 5-3 ruling, a majority of justices sided with Midland Funding, which was trying to collect $1,879 in debt an Alabama woman had incurred more than 10 years earlier.

Midland Funding brought the case to Washington after the 11th Circuit agreed with challenger Aleida Johnson that its collection efforts violated the Fair Debt Collection Practices Act.

It was shortly after Johnson declared bankruptcy in 2014 that Midland Funding acquired her defaulted credit card account and attempted to collect a $1,879 debt she had incurred more than a decade earlier.

Under Alabama law, there is a six-year statute of limitations for a creditor to collect overdue payments.

Midland’s claim against Johnson originated with Fingerhut Credit Advantage, and the date of the last transaction on her account was listed as May 2003.

Johnson objected to Midland’s attempts to collect the debt and its filing of a “proof of claim,” and the bankruptcy court disallowed it.

Johnson then sued Midland, alleging the filing of a proof of claim — basically, a record of the debt and associated information — on a time-barred debt violated the Fair Debt Collection Practices Act.

Though a federal judge granted Midland’s motion to dismiss, the 11th Circuit reversed in 2016, finding no irreconcilable conflict between the FDCPA and the later-enacted Bankruptcy Code.


Midland Funding complained in its petition for certiorari that the 11th Circuit ruling conflicted with decisions of the Fourth, Seventh, Eighth and Ninth Circuits. The first three courts found that the filing of a proof of claim for a time-barred debt in a bankruptcy does not violate the FDCPA, and the Ninth Circuit held that the Bankruptcy Code broadly precludes the application of the FDCPA.

Writing for the majority Monday, Justice Stephen Breyer said efforts to recoup old debt during the bankruptcy process do not violate the law. He said it wasn’t false or misleading because bankruptcy law technically allows such claims.

Breyer went on to say it wasn’t unfair or unconscionable since a bankruptcy trustee can object to any claims that are so old they don’t have to be repaid. This is what happened in Johnson’s case.

Breyer said that protection reduces any concern that consumers might unwittingly pay a debt that is too old.

Breyer’s opinion was joined by Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas and Samuel Alito.

Justice Sonia Sotomayor wrote the dissent, calling the debt-collection efforts supported by the majority “both unfair and unconscionable.”

“Professional debt collectors have built a business out of buying stale debt, filing claims in bankruptcy proceedings to collect it, and hoping that no one notices that the debt is too old to be enforced by the courts,” Sotomayor said.

Justices Ruth Bader Ginsburg and Elena Kagan joined the dissent.

Justice Neil Gorsuch did not participate in the case.

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