In Simon v. FIA Card Services, N.A.,1 the U.S. Court of Appeals for the Third Circuit recently ruled that a debtor in a bankruptcy proceeding is not unconditionally precluded from bringing claims under the Fair Debt Collection Practices Act (the "FDCPA"). The FDCPA, enacted to eliminate abusive debt collection practices by debt collectors, establishes guidelines for debt collecting, clarifies creditor rights when dealing with debt collectors, and establishes penalties for debt collectors that fail to comply with the provisions of the FDCPA. When claims under the FDCPA are asserted by a debtor in a bankruptcy proceeding, they are often challenged by the debt collector on the basis that the Bankruptcy Code governs such matters and precludes application of the FDCPA. Although some courts have accepted this argument,2 the Third Circuit in Simon sided with courts that have found otherwise. In particular, the Third Circuit adopted the Seventh Circuit standard, which provides that courts should examine whether the FDCPA claim raises a direct conflict with the Bankruptcy Code, or whether it is possible to enforce both the Bankruptcy Code and the FDCPA at the same time. Applying this standard, the Third Circuit found that one of the debtors' FDCPA claims gave rise to a direct conflict, while another did not.
Factual Background
On December 30, 2010, Robert and Stacey Simon filed a voluntary petition under chapter 7 of the Bankruptcy Code.3 Shortly thereafter, on January 28, 2011, a law firm representing FIA Card Services sent a letter to the Simons' bankruptcy attorneys, stating that FIA was considering filing an adversary proceeding to challenge the Simons' proposed discharge of credit card debt owed to FIA.4 The letter also stated that FIA would forgo the...
