On Monday, the Second Circuit ruled that Andrew Benzemann should be allowed
to sue Citibank after his account was frozen while the bank tried to collect
another customer’s debt. This case stems from an April 2003 judgment
brought by, New Century Financial Services, a debt buyer against Benzemann.
Citibank used the Manhattan Supreme Court judgment a little more than
five years later to justify freezing the account of Mr. Benzemann. The
restraining notice used to freeze the account incorrectly listed Benzemann’s
first name but correctly listed his social security and address. Benzemann
was able to have the 2008 restraining notice withdrawn with the help of
an attorney. However, the same mistaken information was used by Citibank
to freeze his account in December 2011.
In 2012, Benzemann filed a federal complaint against the bank and its subsidiary
attorney, Todd Houslanger & Associates under the Fair Debt Collection
Practices Act. The complaint alleged that Houslanger violated 15 U.S.C
§1692e & f, which state “any false, deceptive, or misleading
representation or means in connection with the collection of any debt
or using unfair or unconscionable means to collect or attempt to collect
any debt.” The statute of limitations under the Fair Debt Collection
Practices Act requires that all complaints must be filed within one year
of the alleged violation. A federal judge dismissed Mr. Benzemann’s
case last year, determining that alleged violation occurred when Citibank’s
lawyer sent of the restraining notice in 2008.
The Second Circuit revived claims against Houslanger and his firm on Monday.
However, it dismissed the claim against Citigroup. Writing for the court,
Judge Rosemary Pooler stated, “Benzemann could not have known that
Houslanger sent the allegedly unlawful notice until, at the earliest,
his account was frozen.” The Second Circuit spoke to Congress’s
intent, holding that it saw “no indication in the text of §1692
that Congress intended for the FDCPA’s statute of limitations to
begin to run before an FDCPA plaintiff could file suit.”
The Second Circuit ultimately concluded that the district court erred in
finding that the FDCPA violation occurred when Houslanger sent the restraining
notice. The Court held instead that where a debt collector sends an allegedly
unlawful restraining notice to a bank, the FDCPA violation does not occur
until the bank freezes the debtor’s account. Furthermore, it held
that the record was unclear as to when the freeze actually took place
and therefore, because of the uncertainty surrounding the date of the
freeze, the Second Circuit remanded the case to the district court.