The Fair Debt Collection Practices Act contains a one-year statute of limitations, which runs from “the date on which the violation occurs.” While straightforward as written, federal circuits have been split on whether the limitation period could be tolled by the discovery rule. The Sixth Circuit has repeatedly danced around the issue, without ruling one way or the other.
The Supreme Court put the issue to rest in Rotkiske v. Klemm. Calling an expansive approach to the discovery rule a “bad wine of a recent vintage,” the Court declined to apply the discovery rule to FDCPA actions. The Court effectively stated that the statute says what it means and means what it says. However, the Court punted on the issue of whether the limitation period could be equitably tolled in some circumstances, ruling that the issue hadn’t been preserved for appellate review.
Kevin Rotkiske (the debtor) accused Klemm & Associates (the debt collector) of “sewer service”—a colloquial phrase used to describe a practice in which the debt collector intentionally serves process in a manner designed to prevent the debtor from learning of the debt-collection action, which allows the debt collector to obtain a default judgment (and perhaps a subsequent remedy such as wage garnishment) without ever facing any real defense. Rotkiske alleged that Klemm knowingly served him at an address at which he no longer lived, and someone other than Rotkiske accepted service. Unaware of the debt-collection action, Rotkiske failed to respond and Klemm obtained a default judgment. Rotkiske first learned about the default judgment some five years later when he attempted, unsuccessfully, to obtain a mortgage. Justice Ginsburg noted that “sewer service” amounts to fraud. She, along with Justice Sotomayor, indicated that the outcome may have been different if Rotkiske hadn’t abandoned the equitable-tolling issue.
What this means for Michigan attorneys
The Supreme Court’s decision further protects debt collectors from an already-strict statute of limitations. But the decision also represents a cautionary tale for anyone who conducts “sewer service”—a practice that is unfortunately somewhat common in the debt-collection industry. The limitation period may be tolled if “sewer service” can be proven. But if service passes the smell test, so to speak, the one-year limitation period applies.