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.
Judge Grants MTD in FDCPA Case Over Credit Offer in Collection Letter
A collection agency has been granted a motion to dismiss by a District Court judge in Illinois after it was sued for allegedly violating the Fair Debt Collection Practices Act by including language in a collection letter that was provided by the creditor. More details here.
WHAT THIS MEANS, FROM BOYD GENTRY OF THE LAW OFFICE OF BOYD GENTRY: “Drive the new Cadillac for only $299 per month, with no money down. See dealer for details.”
How many of us see offers of credit like this in the mail or in advertisements? Don’t they always include some proviso like “subject to approval” and “for well-qualified buyers”?
While that may be common commercial speech, debt collectors should be careful when forwarding any offer of credit to a consumer. The key to this dismissal was the consumer’s failure to allege that the offer of credit was a complete sham. The consumer did not allege that Nationwide’s offer was “insincere or a sham—that is, in the sense that American Express had no intention of granting applications for an Optima Card and made the offers simply as a ruse to get Walston and other American Express debtors to pay their debts.” If the court had found that the text of the letter included an illusory offer, the debt collector could have faced a messy class certification battle. However, the fact that American Express retained the discretion to decide whether any particular debtor had the financial capacity to make minimum payments on the new credit did not make it an illusory offer. Debt collectors making these kinds of statements should brush up on contract and credit law, as they will be the first ones sued.
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New California ‘Gig’ Law Could Have Impact on Collection Agencies
A new law generating consternation in California that has the potential to spread to other states across the country could impact the credit and collection industry as well as the call center industry, depending on how individuals are classified by the companies for which they work. More details here.
WHAT THIS MEANS, FROM LAUREN VALENZUELA OF PERFORMANT: For every action, there is a positive and negative reaction. This rings true with California’s Assembly Bill (AB) 5. On one hand, this will allow many people who are currently classified as independent contractors to fall into an “employee” category, thereby unlocking all the rights and benefits that come with that. On the other hand, this will likely drive up the costs for services, such as Uber and Lyft rides, since new labor costs will need to be offset somehow; and the freedom and flexibility that people currently enjoy as an independent contractor will be replaced with things such as set-schedules, conforming to typical expectations companies have for employees, and perhaps being prohibited by company policy from working for a competitor. There are dozens of professions who are exempt from AB 5, which to me suggests that perhaps it is time for the law to contemplate a new category of workers to better accommodate modern realities. California is not afraid to pioneer new laws, and you can bet that legislators in other states and politicians across the country are eyeing this issue themselves. Changes in how independent contractors are defined will surely impact any company who has one and any person who is currently categorized as one. Therefore, I encourage the credit and collections industries to keep an eye on this issue (even if you’re not in California) if you want to stay ahead of the curve.
Judge Certifies Class in FDCPA Suit Over Use of Depositions in Post-Judgment Collection
A District Court judge in Pennsylvania has denied a defendant’s motion to dismiss and granted a motion to certify a class in a case in which the defendant is accused of violating the Fair Debt Collection Practices Act by sending deposition notices to individuals with default judgments entered against them as a means of getting individuals into a room with the defendant to discuss a settlement of the unpaid debt. More details here.
WHAT THIS MEANS, FROM RICK PERR OF FINEMAN KREKSTEIN & HARRIS: Sometimes, the FDCPA is simple – do what you say you are doing. Here, the agency served judgment-debtors with post-judgment discovery. On its face, very lawful. However, when serving deposition notices (again, lawful), defendant never arranged for a court reporter and allegedly never intended to take a deposition. Instead, the agency only sought to use the date to negotiate the judgment with the consumer face-to-face. Not surprisingly, the court certified a class of those people who appeared and no deposition took place. Everything the agency did would have been lawful had it done what it said it was doing – taking a deposition.
Jury Finds Collection Agency’s Letter Advising That Consumer Would Next Hear From An Attorney Did Not Falsely Threaten Suit In Violation Of The FDCPA
Stephanie Adams of Windsor, Virginia, who operates a credit repair business out of her home, was subject of collection action by Applied Business Services of Edenton, North Carolina for an unpaid medical bill. Applied sent Ms. Adams three letters and made two calls to her over a period of two and half months. After Ms. Adams failed to respond to Applied’s collection efforts, Applied sent her a follow-up letter telling her that the next letter she would receive would be from an attorney. However, before Applied referred the account to an attorney Applied, pursuant to its client’s instructions, reported the item as a bad debt on Ms. Adams’ credit report and sent Ms. Adams a letter notifying her of the credit reporting. More details here.
WHAT THIS MEANS, FROM RON CANTER, FROM THE LAW OFFICES OF RONALD CANTER: The defendant jury verdict in Adams v. Applied Business Services determining that a collector’s letter stating the next communication would be from an attorney was not a false threat of suit may best be explained by the fact that the consumer claimed no harm and only asked for statutory damages in this one-day trial. Ms. Adams explained during her testimony that $1000.00 was a fair amount for having to be in court for one day. The jury thought otherwise.
The collector’s counsel argued that the purported violation was neither frequent nor persistent and did not involve harassing phone calls, robocalls or disclosures to 3rd parties.
The collector did not serve an offer of judgment in this case that was filed as a class action because court rulings have permitted class actions to proceed even if an offer of judgment for full relief is made to the Plaintiff.
The plaintiff never moved for class certification. The parties could not settle because plaintiff’s counsel wanted $1000.00 for the client plus all attorney fees including work done on the never pursued class action.
So instead, the plaintiff and counsel got nothing because there was no damage, no harm and no injury. This result suggests that there are real risks for a consumer attorney to take a no damage case to a jury trial.
MSJ Denied in FDCPA Case Over False Name Exemption
A Magistrate judge in Florida has denied motions for summary judgment from both the plaintiff and the defendant in a case where the defendant — a hospital — is accused of violating the Fair Debt Collection Practices Act by using the name of its in-house collection operation when filing a lien against the plaintiff for an unpaid debt. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF BALLARD SPAHR: This decision presents a timely reminder of why the healthcare industry needs to pay attention to their collection strategies and whether they are compliant now because not doing so risk both direct and indirect consequences for both the industry and its members. Even if a provider does not believe it is subject to the FDCPA, there are a multitude of state collection laws that can apply directly to the healthcare provider’s collection efforts, not to mention other federal consumer protection statutes like the EFTA (for recurring ACH payments) and TILA (for pre-service payments plans). And, as this court noted, there are ways that one’s FDCPA-exempt status can be lost. In addition to continuing to invest in HIPAA, 501r, and Medicare/Medicaid compliance, providers also must make a serious investment in adding consumer compliance into their overall risk mitigation and avoidance plans.
Judge Denies MSJ in TCPA Case Over Pre-Recorded Message Asking Recipient To Wait For Representative
In an interesting twist on what defines an automated telephone dialing system, a District Court judge in Florida has denied a defendant’s motion for summary judgment, ruling that an automated message at the beginning of a call asking the recipient to wait for a representative falls under the scope of the Telephone Consumer Protection Act. More details here.
WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: Beware of AI? Or at least be forewarned. Understandably, any entity that needs to place calls to a large number of individuals will strive to use automated artificial intelligence. The days when every call was placed with a live person dialing a rotary phone, or punching in the numbers, are over. Commerce could not operate without automation. More importantly, consumer could not afford to buy anything if we didn’t use AI automation for routine repetitive tasks.
So what does this case tell us? Complying with the TCPA can be tricky when it comes to automated calling. This case involved the TCPA’s restrictions on using an artificial voice or pre-recorded message. Here, the involved consumers allege that when they answered their cell phones, they heard a pre-recorded message from their mortgage loan servicer essentially stating – “Please wait for next available representative.” The record in the case contained a declaration from the plaintiffs that they had revoked any TCPA consent before receiving these pre-recorded messages. And with that, the court denied the defendant’s motion for summary judgment regarding the pre-recorded “please wait” message.
The lesson perhaps? Use AI but also use your good old common horse sense. Slow down the automation. It’s always better to set the “speed dial” on automation such that an agent has just a bit of downtime to take a breath between calls, than have it set such that a consumer hears that dreaded “Please wait for the next available representative” – especially when the consumer actually answers a call you placed to them!
Idaho Plaintiff’s Attorney Gives Up Law License Following State Bar Investigation
An Idaho plaintiff’s attorney who specialized in filing suits against collection agencies has agreed to voluntarily give up his law license rather than face a disciplinary hearing before the state bar, admitting he took “shortcuts” when representing his clients, according to a published report. More details here.
WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY & SHUSTER: Targets of suits like debt collection and TCPA and their counsel shouldn’t forget that plaintiff’s attorneys have ethical obligations, too. As these attorneys get more aggressive recruiting clients, be sure and watch for unethical conduct. Wave your sword judiciously though, it cuts both ways.
Judge Signs Off on $267 Million Judgment Against Collector in TCPA Case
A final judgment of $267,349,000 has been entered against a collection agency that was found guilty of violating the Telephone Consumer Protection Act by making calls to individuals’ cell phones without their prior consent. More details here.
WHAT THIS MEANS, FROM NICOLE STRICKLER OF MESSER STRICKLER: The shockingly high award in this case is a prime example of a legislative approach gone awry. Here, despite no actual harm, a jury awards hundreds of millions of dollars in statutory damages. Notably, statutory damages were intended to help small litigants vindicate legal injuries that otherwise might go without redress, but now seem to have a life of their own. Class action growth and the expansion of technology has vastly expanded the potential liabilities of defendants. It will be interesting to see what will happen with an award of this size and specifically, whether a higher court will have an opportunity scrutinize the award.
Thanks again to Applied Innovation — the team behind ClientAccessWeb, Papyrus, PayStream, and GreenLight — for sponsoring the Compliance Digest.