## Facts

- Michelle Tatis incurred a $1,289.86 consumer debt to Bally Total Fitness more than six years before suit.
- Allied Interstate, LLC, a debt collector, sent Tatis a collection letter offering to accept $128.99 “in settlement” and inviting acceptance of the “settlement offer” within 40 days.
- At the time of the letter, the applicable New Jersey statute of limitations for a collection action had expired, making the debt judicially unenforceable.
- Tatis filed a putative class action under the Fair Debt Collection Practices Act (FDCPA), alleging the letter’s repeated use of “settlement” misleadingly suggested a legally enforceable obligation and implied potential legal consequences.
- The complaint asserted violations of 15 U.S.C. § 1692e, including § 1692e(2)(A), § 1692e(5), and § 1692e(10).
- The district court dismissed under Rule 12(b)(6), reasoning that attempting to collect a time-barred debt without threatening suit did not state an FDCPA claim.
- Tatis appealed.

## Issues

1. Whether a collection letter offering to “settle” a time-barred debt can plausibly violate FDCPA § 1692e as misleading, even if the letter does not expressly threaten litigation.
2. Whether, under the least-sophisticated-debtor standard, the letter’s “settlement” language could be understood to imply legal enforceability or litigation risk for a time-barred debt.

## Decision

- The Third Circuit reversed the Rule 12(b)(6) dismissal and remanded.
- The court held that a “settlement offer” on a time-barred debt could mislead the least-sophisticated debtor into believing the debt is legally enforceable or that litigation is a realistic possibility.
- The court rejected a requirement that a plaintiff plead an explicit threat of suit to state a claim under § 1692e in this context.
- At the pleading stage, Tatis plausibly alleged that the letter’s language was deceptive or misleading under § 1692e.

## Legal Principles

- FDCPA § 1692e prohibits “any false, deceptive, or misleading representation or means” used to collect a debt, and its reach is not limited to express threats or literal falsities.
- Under the least-sophisticated-debtor standard, a communication may violate § 1692e if it is reasonably susceptible to an inaccurate meaning, including where the words are technically true but misleading in context.
- Collecting on a time-barred debt is not per se unlawful, but a collector may not use language that suggests the debt is judicially enforceable or implies litigation consequences when the statute of limitations has run.
- Use of the term “settlement” in a collection letter about a time-barred debt can plausibly imply a legally enforceable claim and can therefore support a § 1692e claim without an explicit litigation threat.

## Conclusion

The Third Circuit reinstated the FDCPA claims, holding that a debt collector’s “settlement” language in a letter seeking payment on a time-barred debt can plausibly mislead the least-sophisticated debtor about legal enforceability, even absent an express threat to sue.


Tatis v. Allied Interstate, LLC, 882 F.3d 422 (3d Cir. 2018)