In a recent ruling, the United States Court of Appeals for the Second Circuit reversed a district court judge’s decision to bar debtor Alexander Benzermann from bringing an action under the Fair Debt Collection Practices Act. The FDCPA requires that actions be brought, “within one year from the date when the violation occurs.” This holding allows for the statute of limitations for claims brought under this act to start running when the bank freezes a debtor’s account, not when the notice of debt is served.
The purpose of the Fair Debt Collection Practices Act is to “eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.” The FDCPA creates a private right of action for debtors who have been harmed by abusive collection practices to accomplish such goals. However, if a plaintiff wishes to bring a private suit under the FDCPA, he must do so within the statute of limitations.
Benzemann v. Citibank began in the United States District Court for the Southern District of New York as a case of mistaken identity. On April 30, 2008, Citibank, through their attorneys, Houslanger & Associates froze the bank account of plaintiff and sent him a letter that referenced a judgment entered in the Civil Court of the City of New York from 2003. This judgement for $12,942 was actually entered against plaintiff’s brother, Andrew Benzemann, not plaintiff. Plaintiff also received a restraining notice from the judgment creditor, New Century Financial Services, a debt buyer. In this notice, Andrews Benzemann was identified as the judgment debtor, but the social security number and address were that of the plaintiff. Upon retaining counsel, the restraining notice was withdrawn by Citibank. However, approximately three-and-a-half years later Citibank again froze plaintiff’s account pursuant to a restraining notice based on the same judgment.
In the Court of Appeals case, the court concluded that the district court erred in finding the FDCPA violation occurred when the restraining order was sent. Instead the held that “where a debt collector send an allegedly unlawful restraining notice to a bank, the FDCPA violation does not occur for purposes of Section 1602k(d) until the bank freezes the debtor’s account.” They also held that in Benzemann’s case, the record was unclear as to when the freeze actually took place. Due to this uncertainty, the case was remanded to the district court for “whatever further proceedings are necessary to resolve this issue.”