WASHINGTON—By a 5-3 vote, the Supreme Court has ruled that debt collection companies can’t be sued for trying to recover years-old credit card debt from people who seek bankruptcy protection.
The decision is considered a setback for consumer groups that have been complaining that debt collectors are unfairly misleading people into repaying old debts, even in instances where they are not required to under the law.
The ruling went in favor of Midland Funding, which was trying to collect $1,879 in debt Aleida Johnson of Alabama had incurred more than a decade earlier. Johnson argued that Midland had no right to go after the debt, because Alabama law has a six-year statute of limitations for a creditor to collect overdue payments.
Johnson ultimately avoided paying the debt, but a federal appeals court had ruled earlier that she could sue Midland for trying to collect it as a violation the Fair Debt Collection Practices Act, which bars collection companies from making a “false, deceptive, or misleading representation” or trying to recover debt through “unfair or unconscionable means.”
Writing for the majority, Justice Stephen Breyer said efforts to recoup old debt during the bankruptcy process do not violate the law. He said it wasn’t false or misleading, because bankruptcy law technically allows such claims. Breyer added it also wasn’t unfair or unconscionable since a bankruptcy trustee can object to any claims that are so old they don’t have to be repaid. That’s what happened in Johnson’s case, and Breyer wrote that reduces any concern that consumers might unwittingly pay a debt that is too old.
Breyer was joined by Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas and Samuel Alito.