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Compliance Digest – August 12

Every week, AccountsRecovery.net brings you the most important news in the industry. But, with compliance-related articles, context is king. That’s why the brightest and most knowledgable compliance experts are sought to offer their perspectives and insights into the most important news of the day. Read on to hear what the experts have to say this week.

I’m thrilled to announce that Applied Innovation has signed on to be the new sponsor of the ARM Compliance Digest. Utilizing over 50 years’ experience in the collections industry and over 75 in technology, Applied Innovation is helping to shape the future of accounts receivable management.

Illinois Gov. Signs Bill Lowering Post-Judgment Int Judge Denies Motion to Compel Arbitration in FDCPA Case Because Defendant Took Too Long

J.B. Pritzker, the governor of Illinois, yesterday signed a bill into law that will reduce the amount of time and the amount of interest that can be collected on judgments, in an attempt to “give real relief” to individuals trying to pay down their debts, the governor said. More details here.

WHAT THIS MEANS, FROM NICOLE STRICKLER OF MESSER STRICKLER: Illinois recently passed the Consumer Fairness Act touted as a means of giving relief to consumers seeking to pay their debts. The law lowers the post-judgment interest rate on unpaid debts in Illinois to 5%, from 9% currently. Judgment holders will now have 17 years to collect on a debt, instead of the 26 years they currently have. The Act applies to judgments of $25,000 or less and is limited to “consumer debts”, meaning those owing “by reason of a transaction in which property, services, or money is acquired by [a] natural person primarily for personal, family or household purposes.” Illinois is just one of many states to pass such consumer-friendly measures directed at judgments in the past year.

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Judge Grants MTD in FDCPA Case Over Language Used 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 by sending a letter that referenced a “current balance,” even though the balance could not increase. More details here.

WHAT THIS MEANS, FROM LAUREN VALENZUELA OF PERFORMANT: The court recognized that many FDCPA cases are “lawyer’s case[s]” and made no exception for this one! It was refreshing that the court put this case into perspective by reminding us why the FDCPA was created: “to protect consumers from abuse such as collectors using obscene or profane language, threats of violence, telephone calls at unreasonable hours, misrepresentation of a consumer’s legal rights, disclosing a consumer’s personal affairs to friends, neighbors, or an employer, obtaining information about a consumer through false pretense, impersonating public officials and attorneys, and simulating legal process,” and pointedly said “construing the FDCPA in light of its consumer protection purpose . . . I will not hold that defendant violated the FDCPA by disclosing even more accurate information than the Second Circuit [precedent] require[s].” Continuing with a no-nonsense tone, the court wrapped up the opinion by reminding everyone of the bigger picture. That bigger picture is the harmful consequences consumers pay as the result of “creative” arguments manufactured by consumer attorneys. The court explained “the cost of litigation in the collection industry logically must increase the cost of credit, especially to the least sophisticated consumer, as at least some of those costs will be passed on . . . by making [the consumer] pay higher interest rates, collection costs, or depriving her of access to credit at all, rather than helping her” (citations omitted). As New York continues to be a hotbed for litigation over collection letters and how balances, fees, costs, and the like are presented to consumers, the court’s analysis and approach in this case is encouraging.

Judge Grants MSJ For Defense in TCPA Case After Plaintiff Can’t Find Records That Calls Were Made

A District Court judge in Colorado has granted summary judgment in favor of a defendant that was accused of violating the Telephone Consumer Protection Act, even though the plaintiff’s call records did not show any calls from the defendant and the defendant did not even have the account when some of the calls were allegedly made. More details here.

WHAT THIS MEANS, FROM AMY JONKER OF JONKER LAW GROUP: A defendant won summary judgment on a TCPA claim where the plaintiff asserted it had made four phone calls to his cell phone. The plaintiff failed to provide evidence that he had received any calls from the defendant as his cell phone records did not show any phone numbers associated with defendant. Plaintiff argued that defendant used unlawful technologies to disguise the origins of the calls but he had no evidence to support that claim either. Defendant, on other hand, provided evidence that it did not receive plaintiff’s account until two months after the calls were made.

Senators Seek to Close Common Carrier Exemption to Help Stop Robocall Proliferation

A trio of Democratic Senators have introduced a bill in Congress that would remove an exemption for telephone carriers from having to comply with the Federal Trade Commission Act and open them up to investigation for helping facilitate illegal robocalls. More details here.

WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: Who doesn’t want the incessant calls about easy credit, extending your car’s warranty, getting solar panels on your roof or any of the other myriad deals/scams being offered to stop. Several senators want to put pressure on the carriers to take action to curb those calls and introduced the “Protection From Robocalling Act of 2019,” S.B. 2349.  It would allow the FTC to create rules and engage in enforcement actions against carriers who do not take adequate steps to block these unwanted calls.

The question however is what effects removal of the exemption may have on businesses, and in particular the debt collection industry, which rely on automated phone calls in various forms. Should the Act pass we may see litigation between collection entities and various carriers for overly enthusiastic implementation of blocking technology by those carriers who seek to avoid governmental scrutiny.

Data Breach Lawsuits Consolidated Into One MDL

The U.S. Judicial Panel on Multidistrict Litigation has ordered that all of the lawsuits that have been filed related to a data breach at American Medical Collection Agency be consolidated into one case that will be heard before Judge Madeline Cox Arleo of the District of New Jersey. More details here.

WHAT THIS MEANS, FROM ETHAN OSTROFF OF TROUTMAN SANDERS: The U.S. Judicial Panel on Multidistrict Litigation (MDL) decided to consolidate all lawsuits, including more than 40 class actions, brought over a data breach at American Medical Collection Agency Inc. (AMCA), into one proceeding, and transferred them all to the District of New Jersey before Judge Madeline Cox Arleo. Creditors and their vendors, in particular collection agencies, would be well served to monitor the organization and progress of these important cases that are likely to offer a window into the requirements and obligations required to implement adequate and reasonable cyber-security procedures and protocols necessary to protect patient personally identifiable information (PII).

The data breach reportedly compromised the PII, including financial data, Social Security numbers and medical information, of more than 25 million people, including 11.9 million patients at Quest Diagnostics Inc. and 7.7 million at Laboratory Corp. of America. The breach was apparently the result of malicious activity on the web payments page of AMCA, a third-party collection agency for the medical testing companies. Attorneys General in Connecticut and Illinois have opened investigations into the breach, which now involves more customers of several additional medical companies.

“All defendants and plaintiffs in over a dozen actions support this district, where four actions on the motion and seven potential tag-along actions are pending,” wrote the MDL panel. “Defendants Quest and Bio-Reference have their headquarters there, and AMCA is located nearby in Elmsford, New York. Thus, common documents and witnesses likely will be located in or near this district.” AMCA has not appeared before the MDL after filing for Chapter 11 bankruptcy in June.

In its order, the panel rejected an attempt from some plaintiffs attorneys to create multiple MDLs based on various laboratories. “In many situations,” according to the panel, “we are hesitant to bring together actions involving competing defendants, but when, as here, the actions stem from the same data breach, and there is significant overlap in the central factual issues, parties, proposed classes, and claims, we find that creation of a single MDL is warranted.”

Judge Grants MTD in Letter Case, Labeling Arguments as ‘Strained and Disingenuous’

A District Court judge has used a collection industry defendant’s favorite word in granting a motion to dismiss: frivolous, after the defendant was accused of violating the Fair Debt Collection Practices Act by misrepresenting the amount of attorney involvement in a collection letter. More details here.

WHAT THIS MEANS, FROM BOYD GENTRY OF THE LAW OFFICE OF BOYD GENTRY: There was a time when a letter from an attorney (or law firm) meant that “the price of poker has gone up.” The disclosures used in this case (“only acting as a debt collector” and “will not commence a suit,”) are once again enough to (1) remind the unsophisticated consumer to read the full text of a letter and (2) give it a natural reading. With these disclosures, the price of poker has NOT gone up. More and more judges grow weary of creative attorneys. 

Collection Scam Ringleader Sentenced to Four Years in Prison

The alleged ringleader of a debt collection scam has been sentenced to four years in prison after pleading guilty to charges he and his employees induced more than 200 victims to make payments on fictitious debts. More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: This case is yet another example of bad actors that work to give the collection business a bad name. This case is not a result of recent events that occurred this year but rather a conclusion of an investigation that started back in 2016. And while it is a case of not only bad collection practices but one where such practices were put into place to collect on fraudulent debt claims it should still remind collection companies of the importance of their own ongoing review process of their own employees and practices.

Today, companies should be taking the time needed to validate debts with clients; no more legal threats or strong-arm tactics should be used. If a client does not pay, and the debt is validated, an attorney should then look to legal actions; this should not be threatened by the call center employee. While the complaints found in the CFPB database are still to date not validated by a third party, any pattern in complaints that insinuate this behavior should be closely scrutinized.

That said, the result of this case which included 48 months in prison, an order to forfeit assets and three years of supervised release after completion of incarceration should be taken as a good sign to all. It is proof that these illegal practices are not being overlooked and action is being taken to eliminate the bad actors that work to take advantage of the public, and gives the collection industry a bad reputation.

 Judge Denies Motion to Compel Arbitration in FDCPA Case Because Defendant Took Too Long

If there are certain defenses, such as compelling mandatory arbitration, that are available to defendants, they would be wise not to wait to use them, according to a ruling from a judge the District of New Jersey, who denied a motion to compel arbitration from a defendant accused of violating the Fair Debt Collection Practices Act by mentioning the tax implications in a collection letter. More details here.

WHAT THIS MEANS, FROM RICK PERR OF FINEMAN KREKSTEIN & HARRIS: The ARM Industry has been very successful compelling plaintiffs in consumer litigation to arbitrate those claims pursuant to arbitration agreements contained in the original creditor’s credit/service agreement with the consumer. This has even extended to agreements not to bring class action claims. However, the decision to invoke use of arbitration is not without its limits. The District of New Jersey, like several other district courts, has found that a collection agency defendant cannot sleep on its right to compel arbitration. It must be sought at or near the beginning of the litigation. This imposes a duty on defense counsel to make sure it obtains the original creditor agreement very shortly after being retained to determine if the arbitration route is available. Many plaintiffs don’t wish to pursue arbitration; a motion to compel arbitration can sometimes act as a motion to dismiss. Don’t waste a golden opportunity by filing the motion too late.

Thanks again to Applied Innovation — the team behind ClientAccessWeb, Papyrus, PayStream, and GreenLight — for sponsoring the Compliance Digest. 

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