New York City Debt Collection Defense Attorney

NY Consumer Permitted to sue LR Credit 22 after Settling Case

Consumers often settle debt-buyer lawsuits without a full understanding of their rights. Often, the settlement agreement contains overbroad release language promising not to sue the debt buyer or its lawyers for any conduct conceivably related to the case.

But a New York court allowed FDCPA claims to proceed against LR Credit 22 and Mel S. Harris and Associates for related conduct that preceded the settlement: filing the case that was too old to begin with, also known as a "time-barred" claim.

Many Settlement Agreements Are Not Consumer Friendly

That's what Paulette Cameron found out too late. She owed a debt to Chase Bank who later sold it to LR Credit 22, LLC (LR) – a third-party debt collection agency. After Cameron and LR settled the debt, she discovered that the statute of limitations had already run.

Cameron then sued in a separate, federal action claiming that filing a time-barred lawsuit violated the FDCPA. The defendants pointed to the following release in their defense:

Any counterclaim set forth by or for [Cameron] is discontinued with prejudice. Further, any and all potential defenses [Cameron] may have regarding this matter and any other claims [Cameron] may have to date against [LR] or its counsel related to this matter are hereby waived.

If you think that sounds overbroad, you're right. Under New York law, releases must contain an "explicit, unequivocal statement of a present promise to release [a party] from liability" in order to be valid. And if the release seeks to excuse a party from responsibility for misconduct, the court uses the "closest of judicial scrutiny."

The court agreed with Cameron that this release did not meet the legal standard. In fact, it ruled that the release was not specific enough to waive her claims for deceptive debt collection practices. In the end, Cameron convinced the court that she was entitled to bring her case, and that LR Credit sued her for what was time-barred under Delaware's (the location of Chase's headquarters) three-year statute of limitations.

Contact us right away if you've received any communication from Mel S. Harris and Associates or LR Credit.

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