Third Circuit Holds “Settlement Language” in Collection Letter Can Be Misleading

Jonathan M. RobbinEdward W. Chang, and Scott E. Wortman

In a change of course from its prior holding in Huertas v. Galaxy Asset Mgmt., 641 F.3d 28 (3d Cir. 2011), the Third Circuit rules that the terms “settlement” and “settlement offer,” in connection with collecting of a time barred debt, may connote litigation and thus mislead a consumer. However, the Court continues to hold that settlement terms alone do not necessarily constitute deceptive or misleading practices under the FDCPA.

In a unanimous published decision in Tatis v. Allied Interstate LLC, No. 16-4022 (3d Cir.) the Third Circuit reversed the District of New Jersey’s granting of a motion to dismiss. The lower court had held that a debt collector’s attempt to collect the time-barred debt did not violate the Fair Debt Collection Practices Act (“FDCPA”) because the collection letter was not accompanied by a threat of legal action. In its order overruling the lower court, the Third Circuit deviated from its prior holding in Huertas v. Galaxy Asset Mgmt., 641 F.3d 28 (3d Cir. 2011) and instead looked to the more recent decisions from its sister circuits—the Fifth, Sixth, and Seventh—which all held that the term “settle” could mislead a consumer. Continue reading “Third Circuit Holds “Settlement Language” in Collection Letter Can Be Misleading”