Opinion ID: 8414584
Heading Depth: 2
Heading Rank: 1

Heading: The Danger of Resetting the Statute of Limitations

Text: We begin with the danger that a debtor who accepts the offered terms of settlement will, by doing so, waive his otherwise absolute defense under the statute of limitations. Only the rarest consumer-debtor will recognize this danger. See, e.g., Buchanan, 776 F.3d at 399; McMahon, 744 F.3d at 1021; Pantoja, 78 F.Supp.3d at 746; Debt Collection, 78 Fed. Reg. 67,848, 67,876 (Nov. 12, 2013) (advance notice of proposed rulemaking by Consumer Financial Protection Bureau). This danger is present under Illinois law, which governs the underlying debt here. The statute of limitations for written contracts and debts is ten years. The statute provides further: “if any payment or new promise to pay has been made, in writing ... within or after the period of 10 years, then an action may be commenced thereon at any time within 10 years after the time of such payment or promise to pay.” 735 ILCS 5/13-206. That is, a new payment or written promise to pay starts a new ten-year clock. The applicable statute of limitations could also be the five-year limit of 735 ILCS 5/13-205, which seems to apply if the plaintiff-debt collector does not have written proof of the debt. See Herkert v. MRC Receivables Corp., 655 F.Supp.2d 870, 878 (N.D. Ill. 2009), citing Parkis, 2008 WL 94798, at ; Ramirez v. Palisades Collec tion, LLC, 2008 WL 2512679, at - (N.D. Ill. 2008). 2 Illinois courts hold that a new promise to pay will also start a new five-year clock under this statute. See, e.g., Abdill v. Abdill, 292 Ill. 231, 126 N.E. 543, 544 (1920); Schmidt v. Desser, 81 Ill.App.3d 940, 37 Ill.Dec. 206, 401 N.E.2d 1299 (1980) (requiring unambiguous written promise to restart clock); Ross v. St. Clair Foundry Corp. 271 Ill.App. 271, 273 (1933). On this point, case law allows some room for disagreement about the precise scope of Illinois law, such as which statute applies, whether the new promise to pay must be explicit or may be implied, and whether the new promise to pay must be in writing. Portfolio Recovery also points out that the most relevant precedents are relatively old. None of those points save this letter from being deceptive. Whatever the precise scope of the Illinois law on restarting the statute of limitations clock with a partial payment or new promise to pay, either step would have put Pantoja in a much worse legal position than he would have been in before taking the step. Before he received defendant’s letter, he had an absolute defense to any possible collection suit, which would have been illegal to file. If he had made or promised to make a partial payment, he could have been sued, likely as a pro se defendant, in a new suit. In such a suit, at best, he would have had to challenge the collector’s reliance on these Illinois statutes and case law that would have given the collector substantial support. Silence about that significant risk of losing the protection of the statute of limitations renders Portfolio Recovery’s dunning letter misleading and deceptive as a matter of law. To avoid this result, Portfolio Recovery points to the opening language in its letter: “We are offering to settle .this account FOR GOOD!”, and the language close to the settlement offers: “Once the full settlement payment is received your account will be considered settled in full.” Portfolio Recovery argues that these assurances show there was no danger of deception here because an unsophisticated consumer would have understood that his debt would have been extinguished if he had accepted its offer. That argument misses the point. We assume that if the debtor actually accepted the offer and made all payments required for the settlement, without missing one or being late once, the defendant could not have tried to revive the underlying debt for the full amount. But that’s not the relevant danger. The point is that an unsophisticated consumer debtor who makes the first payment or who promises to make a partial payment is much worse off than he would have been without taking either step. If he then fails or refuses to pay further, he will face a potential lawsuit. For purposes of this appeal, it does not matter whether a failure to make further payments would revive the original amount of the debt or just the smaller amount of the settlement offer. Either way, the debt- or will be much worse off. We assume that a few consumer debtors, even if they know the debt can never be collected in a lawsuit, might choose to pay an asserted debt based on a sense of moral obligation. But we believe the FDCPA prohibits a debt collector from luring debtors away from the shelter of the statute of limitations without providing an unambiguous warning that an unsophisticated consumer would understand. We will not attempt to prescribe exact language for debt collectors to use when writing such letters, but the language would need to be clear, accessible, and unambiguous to the unsophisticated consumer. Summary judgment for plaintiff was appropriate here because this letter provided no indication of the relevant danger.