Second Circuit Holds That Debt Collector’s Post-Bankruptcy Actions May Give Rise to FDCPA Claims

The United States Court of Appeals for the Second Circuit recently reversed a District Court’s dismissal order and found that a debtor’s claims regarding a debt collector’s post-bankruptcy communications may be brought in the District Court under the Fair Debt Collection Practices Act (“FDCPA”), instead of as a contempt claim under the Bankruptcy Code.  See Garfield v. Ocwen Loan Servicing, LLC, 2016 WL 26631 (2d Cir. Jan. 4, 2016).  In the case, a loan servicer contacted a debtor regarding the debtor’s defaults on mortgage payments and, in doing so, claimed that the debtor owed about $22,000.  The debtor, however, only owed about $6,000, with the remainder having been discharged in the debtor’s bankruptcy action.  The debtor then filed a lawsuit with the United States District Court for the Western District of New York, alleging that the servicer had made false representations regarding the amount of the debt in violation of the FDCPA (15 USC 1692), among other alleged violations. The servicer filed a motion to dismiss, arguing that any allegations regarding the violation of a bankruptcy discharge injunction should be brought under the Bankruptcy Code, and the District Court agreed and dismissed the action.  The Second Circuit, however, reversed the decision and ordered that the complaint be reinstated.  In doing so, it held that the FDCPA violations alleged did not conflict with the Bankruptcy Code, and that “[t]here is no reason to assume that Congress did not expect these two statutory schemes to coexist in the post-discharge context.”  The Court further distinguished its previous decision, Simmons v. Roundup Funding, LLC, in which it had held that a party in an active bankruptcy action could not make FDCPA allegations against a debt collector because it was “already under the protection of the bankruptcy court.”  622 F.3d 93 (2d Cir. 2010).  It noted that the Simmons decision was limited to debtors in active bankruptcy actions, and not the post-discharge situation presented here. For a copy of the decision, please contact Michael O’Donnell at