Judge Awards $22k in Plaintiff’s Attorney Fees, Chastises Defense For ‘Aggressive Litigation Tactics’
A District Court judge in Wisconsin has granted a motion for attorney’s fees from the lawyers representing a plaintiff in a Fair Debt Collection Practices Act suit after the plaintiff accepted an offer of judgment, awarding $22,333.25. The defendant had made three recommendations ranging from denying the request to awarding $2,595, but the defendant’s own “aggressive litigation tactics” rendered the plaintiff’s attorney’s request “reasonable,” ruled Judge James Peterson of the District Court for the Western District of Wisconsin. More details here.
WHAT IT MEANS, FROM HILARY KORMAN OF BLANK ROME: This is a unique case where the judge granted the consumer attorney’s fee application, following an accepted Rule 68 offer of judgment, without any fee reduction (for $18,058.25). The judge was seemingly put off by the defendants’ “overly aggressive” posture in the litigation and in opposition to the fee application (defendants were self-represented), where they argued, among other things, that no fees should be awarded because there was no proof that plaintiff’s counsel was authorized to represent plaintiff (which was dispelled of through an affidavit attached to the reply), and where they protested time spent on “.1“ or “.2” hours. The judge also noted that the defendant declined Plaintiff’s previous offer to settle for $4,000, inclusive of fees and costs, and that they could have avoided making a Rule 68 offer altogether. If nothing else, the case is a reminder of the importance of optics and picking your battles.
Judge Grants MTD in FDCPA Case Over Colloquial Reference to Creditor in Letter
A District Court judge in Connecticut has granted a defendant’s motion to dismiss after it was sued for allegedly violating the Fair Debt Collection Practices Act by referring to the current creditor as “our client” in a collection letter. More details here.
WHAT IT MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: Common sense is taking root in the collection industry. There was no dispute that the challenged collection letter stated the entity to which the consumer owed the debt. But this lawsuit nonetheless claimed the agency was liable (under the FDCPA) because it failed to use the supposed magic word “creditor” just before it listed “Bridgeport Hospital.” Instead the agency had the audacity to use the term “our client” when listing the creditor. The Court dismissed. The labeling was not material. Common sense prevailed. Takeaway – best to use “creditor,” but if you use another moniker to label the creditor, this case will help serve to defend your agency.
CFPB Announces Symposia Series, First Event To Discuss ‘Abusive’ Definition Under UDAAP
Perhaps getting lost in Wednesday’s speech that outlined her view of the Consumer Financial Protection Bureau’s mission and an overview of what is likely to be included in the forthcoming proposed debt collection rule, agency Director Kathy Kraninger announced that the CFPB would be holding a series of events “exploring consumer protections in today’s dynamic financial services marketplace.” More details here.
WHAT IT MEANS, FROM CHRIS WILLIS OF BALLARD SPAHR: I believe that a symposium on the “abusive” standard is not likely to be a worthwhile exercise. The CFPB has used the “abusive” prong of its jurisdiction only sporadically, and usually in instances where the agency could have also used “deceptive” or “unfair.” So, I don’t see the “abusive” part of the statute as having had a significant impact on the industry, so consequently, clarifying it is unlikely to be helpful. Moreover, I think it is unlikely that “abusive” will ever be defined in a narrow enough way to really limit the application of the theory in practice. For all of those reasons, I am looking forward to the other symposia that the Bureau is planning.
Judge Grants MSJ For Defense in FDCPA Suit Over Common Creditor Name in Letter
Another plaintiff tried to allege a collection agency violated the Fair Debt Collection Practices Act because it only referenced “Verizon” in a collection letter and there are too many different entities that have the name Verizon in them to know to which one the debt was owed, but a District Court judge granted summary judgment in favor of the defendant. More details here.
WHAT IT MEANS, FROM MITCH WILLIAMSON OF BARRON NEWBURGER: Eger v. Sw. Credit Sys., L.P., No. 17 CV 819, (SJF)(AYS), 2019 U.S. Dist. LEXIS 62657 (E.D.N.Y. Apr. 11, 2019) is one of three recently decided cases, all brought by the same attorneys regarding the “name claim”, i.e. the identity of the current creditor. (the other two are Alwood v. Enhanced Recovery Co., No. 18 CV 4790 (AMD)(RML), 2019 U.S. Dist. LEXIS 67263 (E.D.N.Y. Apr. 11, 2019) and Williams v. Waypoint Res. Grp., LLC, No. 18 CV 4921 (ARR) (RML), 2019 U.S. Dist. LEXIS 50499, (E.D.N.Y. Mar. 26, 2019).
In all three cases the issue was whether the creditor, identified simply as either Verizon or Sprint, was identified sufficiently for the debtor to be able to recognize the account. The claim being that both Verizon and Sprint have multiple legal entities that begin either Verizon or Sprint and therefore the name alone would confuse the LSC. In Eger and Williams motions to dismiss were granted, in Alwood, the court denied the entry of a default judgment. In Eger the Court wrote: “Since letters must be read in their entirety, the use of a potentially misleading label may be cured by other language within the letter that alerts even the least sophisticated consumer to the identity of the creditor to whom the debt is owed,” and “even the least sophisticated consumer is assumedto know how to verify his or her account by cross-referencing it to the account number provided,” referring to the original creditor’s account number.
Communications can be tricky business – I know what I mean, but have I conveyed it clearly enough so you do too? That is the question. In the context of collection letters, it’s better to ascertain clarity and compliance in house rather than through a court review. Eger points out that identifying the client by name in the body of the letter “your account with XYZ Corp has been assigned to this office for collection” is also a good practice. Keep in mind, payment is more likely to be forthcoming if the debtor instantly recognizes the account in question.
Judge Grants MTD Over Current Creditor’s Name in Letter
A District Court judge in New York has granted a defendant’s motion to dismiss after it was sued for allegedly violating the Fair Debt Collection Practices Act because the plaintiff claimed she did not owe any money to the defendant named in a collection letter, even though the letter “clearly and unambiguously” identified the original creditor. More details here.
WHAT IT MEANS, FROM MARK ROONEY OF THE ROONEY FIRM PLLC: There are, in fact, limitations to the sort of tenuous (and perhaps feigned) consumer confusion sufficient to support an FDCPA claim for misidentification of a creditor under § 1692e—that’s the lesson of the Greifman decision. The collection letter, attached to and incorporated into the complaint, clearly identified both the original creditor (plaintiff’s credit card company) and the current creditor (a debt buyer). The plaintiff alleged that the letter was false and misleading because she never contracted with the debt buyer. But the court held that, even under the Second Circuit’s “least sophisticated consumer” test, the identification of the original creditor alongside the current creditor leaves no room for a plausible claim of confusion. The decision may serve as a valuable example in future cases that courts can, and should, outright dismiss such implausible claims at the pleading stage, saving litigants the cost and burden of discovery and additional briefing.
Judge Grants MSJ For Plaintiff in WVCCPA Bona Fide Error Case
A District Court judge in West Virginia has granted summary judgment in favor of a plaintiff who received a collection letter from a defendant that did not include updated language required under the West Virginia Consumer Credit and Protection Act related to the collection of time-barred debts. More details here.
WHAT IT MEANS, FROM DENNIS BARTON OF THE BARTON LAW GROUP: In Adkins & Short v. Midland Credit Management, Inc. (S.D. W. Va. April 9, 2019), the collector sent letters stating that it “will not” sue the consumer because of the debt’s age. A recently-passed state law, however, required that language to say, “[b]ecause of the age of your debt, [Midland] cannot not sue you for it.” Midland changed the language but there was a delay because the group responsible for making changes to letter templates missed an email from the legal/compliance team about the new statute. At the summary judgment stage of this class action case, Midland relied on a bona fide error defense claiming that it unintentionally mailed collection letters with the wrong language due to human error. The Court sided with the plaintiff finding that independent of the violation being unintentional (which the Court find to be an issue of fact given the circumstances), Midland failed to demonstrate it maintained procedures reasonably adapted to avoid the violation.
There are important takeaways from this case. First, in states that require collectors to disclose they cannot sue for out-of-stat debt, “will not sue” is not an acceptable alternative. Consumers are finding success in a growing number on this issue. Second, Adkins highlights more than just the importance of having effective procedures to support a bona fide error defense. It emphasizes the importance of strong and consistent communication between operations and compliance. The Adkins court suggested “pre-scheduling meetings at the time of submission of a change request, requiring follow-up by the individual submitting a change request, or systems for Legal/Compliance to monitor for compliance prior to the effective dates of new legislation.” It is easy to sympathize with Midland and something as common as a missed emailed leading to this result. The real lesson is that we must rely upon more than just email to ensure important changes are made in a timely manner within our organizations. Emails can be easily and innocently overlooked. Multiple layers of interaction occurring in anticipation of regulatory change rather than after procedural modification should have already made reduce a company’s risk and strengthens its bona fide error defense when human error does occur.
Lawsuit Totals Flip-Flop As FDCPA, TCPA Suit Totals Increase and FCRA Suit Totals Drop: WebRecon
For the first time in more than a year, the number of lawsuits against companies in the credit and collection industry alleging violations of the Fair Debt Collection Practices Act and the Telephone Consumer Protection Act were up while the number of suits alleging violations of the Fair Credit Reporting Act were down on a month-over-month basis, according to data released earlier this week by WebRecon. More details here.
WHAT IT MEANS, FROM ETHAN OSTROFF OF TROUTMAN SANDERS: While definitely surprising, caution should be heeded before taking too much away from the statistics for consumer litigation filed in March 2019, in particular because the same thing happened in March 2018. Maybe the plaintiff’s bar likes to get complaints on file before heading out on Spring Break to some luxurious destination?
What’s perhaps more interesting are the 2019 year to date numbers compared to 2018, which show significant drops in three of the four main categories of complaints: CFPB complaints against debt collectors are down by 24.9%, FDCPA complaints are down by 14.2%, and TPCA complaints are down by 10.5%, while FCRA complaints are down a modest 1.5%. All four categories also show a decline in March 2019 when compared to March 2018: CFPB complaints against debt collectors are down 22.1%, FDCPA complaints are down 14.5%, TPCA complaints are down 16.3%, and FCRA complaints are down 5.9%.
Hopefully downward trend in consumer litigation will continue through the remaining three quarters of 2019. With the expected release of the CFPB’s debt collection rules any day now, big changes are in store requiring additional bandwidth from compliance and legal teams for the foreseeable future.
Collection Agencies Among Professions Covered Under New Arizona Out-of-State Licensing Recognition Law
The governor of Arizona has signed a bill into law that will recognize out-of-state licenses for a large number of professionals, including collection agencies, when seeking to obtain a license to work in The Grand Canyon State. More details here.
WHAT IT MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: The State of Arizona is once again leading the way with responsible, pro-business legislation. Like the recently enacted regulatory sandbox law that enables eligible applicants to obtain limited access to Arizona’s market to test innovative financial products or services, the new universal licensing law allows licensed entities, including collection agencies, to set up shop quickly and efficiently in the land of the sun. While the law targets professional licenses — like those of veterinarians, physicians, nurses and real estate agents — the law also targets collection agencies. The amendments to the existing law eliminates the reciprocity requirement for out-of-state collection agencies looking to do business in Arizona. Previously, an out-of-state licensed collection agency could only obtain a license in Arizona if their home state “extends reciprocity under similar circumstances to licensed collection agents of [Arizona].” If there was no reciprocity, then the agency would need to set up a whole new entity.
As anyone in the debt collections industry knows, obtaining a collection agency license in some states can not only be an onerous process, but can also require navigating a myriad of differing requirements. Numerous factors need to be considered when contemplating an expansion, especially if it means going into a new state. For example, Nevada requires someone from the agency to pass an examination in order to be a licensed manager. Many states require fingerprints as well as audited financials. In the state of Massachusetts, it can take upwards of 6 to 8 months just to obtain an agency license.
New agencies coming into Arizona will still need to obtain a license and pay the appropriate bonding and insurance fees. It is still uncertain what supporting documentation and information provided in support of the out-of-state license will be accepted under Arizona’s new law. Arizona’s Department of Financial Institutions will also need to weigh in on what documentation will be accepted. Nonetheless, Arizona’s approach to common sense legislation, striking the appropriate balance between necessary bureaucracy and economic growth should be applauded. There is no doubt that Arizona now moves to the top of the list when it comes to growth opportunities for the ARM industry.