Clock For FDCPA Claims Starts Running When The Bank Freezes Account

By: Robert J. Nahoum

A man in suit and tie with his arms crossed.

Federal debt collection laws known as the Fair Debt Collection Practices Act (FDCPA for short) regulates the collection of consumer debts by third party debt collectors.  The FDCPA precludes debt collectors from using false, misleading, deceptive and harassing debt collection tactics.

If a debt collector violates the FDCPA, it can be sued for statutory damages up to $1,000.00, actual damages (like pain and suffering) and the debt collection attorney may have to pay the consumer’s attorneys’ fees.

The FDCPA has a one year statute of limitations meaning that a claim against a debt collector that is brought beyond a year will be dismissed.  However, in order to determine if a claim is timely under the FDCPA, you must first know when that clock starts ticking.

It is generally understood that that one year FDCPA statute of limitations begins ticking at the time the violation occurs.  But what happens when the consumer was unaware of the debt collector’s unlawful conduct at the time it occurred?

The U.S. Court of Appeals for the Second Circuit was recently presented with this question and it’s answered clarified this timeline.

In this case the notorious junk debt buyer New Century Financial Services obtained a default judgment against Mr. Andrew Benzemann in 2003.  Five years later, in 2008, New Century’s attorneys, Houslanger & Associates, froze a bank account belonging to Alexander Benzemann who is unrelated to Andrew Benzemann.

The restraining notice Houslanger & Associates served to obtain the bank freeze identified “Andrew Benzemann†as the judgment debtor but listed the Social Security number and mailing address of “Alexander Benzemannâ€. Alexander Benzemann hired an attorney who convinced Houslanger to release the bank freeze and withdraw the restraining notice.  Three and a half years later, in 2011, Houslanger & Associates again froze Alexander Benzemann’s same bank account.

After the second improper bank freeze, Alexander Benzemann sued Houslanger & Associates for violating the FDCPA.  The suit alleges that Houslanger violated the FDCPA by using false or unfair means to collect a debt.

Mr. Benzemann’s complaint alleged that his bank account was frozen on December 14, 2011, but that the restraining notice was dated December 6, 2011. Mr. Benzemann filed his FDCPA complaint on December 14, 2012.

Houslanger & Associates moved to dismiss the FDCPA case on grounds that the one year FDCPA statute of limitations had run out.

The question before the court was whether the clock for claims under the FDCPA starts running when the bank freezes a debtor’s account or when the bank is served with the restraining notice?

The trial court agreed with Houslanger & Associates – United States District Court for the Southern District of New York Judge Naomi dismissed the FDCPA case.  Mr. Benzemann appealed the decision to the Second Circuit Court of Appeals who agreed with Mr. Benzemann.  The Second Circuit reversed the trial court’s decision and revived the case.

In coming to its decision, Justice Pooler wrote:

“Before Citibank froze Benzemann’s account, Benzemann had suffered no injury.  “Thus, as counsel for Houslanger conceded at oral argument, Benzemann could not have sued Houslanger before Citibank froze his account.”  […] “by the time Benzemann was able to file suit on December 14, 2011, the statute of limitations had been running for eight days.”

“We see no indication in the text of Section 1692k(d) that Congress intended for the FDCPA’s statute of limitations to begin to run before an FDCPA plaintiff could file suit,” […] “We find it implausible that the Congress that passed the FDCPA intended to create such an anomalous result.”

If you need help settling or defending a debt collection law suit, stopping harassing debt collectors or suing a debt collector, contact us today to see what we can do for you.  With office located in the Bronx, Brooklyn and Rockland County, the Law Offices of Robert J. Nahoum defends consumers in debt collection cases throughout the Tristate area including New Jersey.

The Law Offices of Robert J. Nahoum, P.C
(845) 232-0202

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