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.
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Judge Calls Out Plaintiff For ‘Fraudulent Conduct’ in Granting Defendant’s MSJ
A District Court judge in Maryland has smacked down a plaintiff, falling short of accusing her of perjury, but questioning her attempts at “justify[ing] her fraudulent conduct,” in granting a defendant’s motion for summary judgment after it was sued for violating the Fair Debt Collection Practices Act and the Fair Credit Reporting Act in attempting to collect on a debt the plaintiff said was not hers, despite evidence to the contrary. More details here.
WHAT THIS MEANS, FROM BOYD GENTRY OF THE LAW OFFICE OF BOYD GENTRY: Things are not always as they First appear. The district Court seemed to relish the irony of a Plaintiff trying to profit from her own fraud. Plaintiff allowed her daughter to open the credit account in Plaintiff’s name, and then Plaintiff disputed the debt as fraudulent. That fake dispute was the genesis of a good deal of litigation. Plaintiff’s fraud upon the court might have continued had defense counsel settled early and not taken Plaintiff’s deposition. Moral of the story: test everything.
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Differing Amounts in Documents Leads Judge to Deny MTD in FDCPA Case
A District Court judge in Kentucky has dismissed claims that a collection law firm violated the Fair Debt Collection Practices Act when it sued to collect on an unpaid debt, but denied a motion to dismiss over claims that the defendant violated the FDCPA over discrepancies in the amount owed that were communicated to the plaintiff in the collection complaint, a verification letter, and in account statements from the original creditor. More details here.
WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: The complaint filed in the collection lawsuit requested $546.40, plus interest, costs, and other relief. The law firm later sent a verification letter reflecting a higher balance, which perhaps included the additional amounts that were requested, but not detailed, in the collection complaint. Because this is a compliance newsletter, I will restrain myself and not comment on the propriety of applying the FDCPA in this manner to lawyers litigating cases in accordance with their state’s laws, procedures, and rules of professional conduct. One goal of compliance is to avoid lawsuits, and perhaps the firm could have avoided this one by giving more detail in the collection complaint or in the subsequent verification letter. If permitted by court rules, a creditor’s lawyer could plead the exact amount of interest and costs incurred to date and then assert a claim for additional interest and costs as authorized by the agreement or by law. Although it was developed for letters and not collection complaints, guidance might be found in the safe-harbor language provided by the Seventh Circuit in Miller and adopted by the Second Circuit in Avila. However, the § 1692e(2) and (10) claims merely survived a motion to dismiss; and the court dismissed claims asserted under § 1692d, § 1692e(8), and § 1692f, as well as the plaintiff’s state-law claims. It will be interesting to see how the court addresses the surviving claims on summary judgment.
CFPB Shortchanging Scammed Consumers, Senate Democrat Alleges
The ranking member of the Senate Banking Committee is seeking information from the Consumer Financial Protection Bureau about why individuals who were victimized in a scam by a debt collector are not being afforded the opportunity to receive restitution for what they lost. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF BALLARD SPAHR: It is a bit surprising to see a letter like this come from the Republican- controlled Senate (as opposed to the Democrat-controlled House). It is also true that some post-Cordray consent orders seem to impose lower restitution and civil penalties when compared, at least on their face, to consent orders involving similar allegations rendered during Director Cordray’s tenure at the Bureau. However, it must be remembered that consent orders actually are negotiated settlements to avoid litigation. As with other negotiated settlements, we do not always get to know all of the underlying context and facts. For example, did the company already engage in voluntary remedial efforts? Is it possible that these companies may have already paid or otherwise remediated any alleged harm to the impacted consumers? Did the company self-report or otherwise obtain credit for cooperation? I have personal knowledge of issues being identified by the Bureau in investigations, which were then addressed by the company during the course of the investigation, and ultimately, neither the identified issues nor related remediation (including consumer restitution) ended up in the final consent order. I also see the Bureau continuing to aggressively examine entities subject to its jurisdiction, just as it did under Director Cordray’s leadership. The letter seems more like political posturing (perhaps as part of any effort by Democrats to flip the Senate, White House, or both coming into what will surely be an active election year), as opposed to expressing any shared concern that the Bureau is not properly exercising its statutory authority.
EDCA Judge Awards $300k in TCPA Damages To Plaintiff Contacted By Collector
A District Court judge in California has granted summary judgment in favor of a plaintiff who sued a collection agency for allegedly violating the Telephone Consumer Protection Act by calling her cell phone 199 times without first obtaining her consent to do so, awarding the plaintiff $300,000 in damages in determining that the violations were willful. More details here.
WHAT THIS MEANS, FROM LAUREN VALENZUELA OF PERFORMANT: The takeaway here is that the broad definition of an ATDS from Marks v. Crunch is going strong in the Ninth Circuit, and that Marks continues to create a precarious environment to make calls in until the circuit split over the ATDS definition is resolved or until the FCC readdresses the issue. It is a good time for any company using any kind of automated telephone dialing equipment to reevaluate their calling strategy and their TCPA compliance procedures. As this case shows us, there is a relatively low bar for assessing treble damages. The defendant’s argument that its dialer was not an ATDS failed, so the court applied a very simple analysis thereafter to determine whether or not to assess treble damages: the defendant made calls to plaintiff, and defendant did not have the plaintiff’s prior express consent to make those calls. Done. The court reminded its audience that it was not necessary for the plaintiff to “show that defendant knew his conduct would violate the TCPA” for tremble damages to be awarded. It seems the Ninth Circuit will continue to attract TCPA litigation – brace for impact!
CFPB Sues Collector For FCRA, FDCPA Violations Related to Disputes
The Consumer Financial Protection Bureau has filed suit against a collection agency that specializes in collecting in debts on behalf of apartment complexes for violating the Fair Credit Reporting Act and the Fair Debt Collection Practices Act for collecting debts “without a reasonable basis to assert” the debts were valid. More details here.
WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: The CFPB has not gone away. Last week it filed an action against a collection agency the CFPB alleges failed to comply with the FCRA when investigating indirect E-OSCAR disputes.
While still just a complaint, what can be gleaned from it are the following: (1) the CFPB is monitoring how agencies respond to credit reporting disputes; (2) dispute concerning claims of ID-theft and agency policies and practices for investigating such claims are of paramount concern; (3) credit dispute investigation policies, procedures and training need to be updated regularly; the “pace of resolution” of disputes will be examined as a part of the CFPB examination of the robustness of the investigation process (i.e., how much time spent per dispute); and lastly, (5) consideration will be given to the rate of “cancellation without substantiating the debt” as compared to the volume of disputes received.
Credit disputes need to be taken seriously and the policies/procedures/training as well as the “paper trail” on each investigation should show a serious and robust process and actual investigation to pass muster when faced with a CFPB examination.
Appeals Court Upholds Dismissal of FDCPA Suit Referencing ‘Current Balance’ in Letter
The Seventh Circuit Court of Appeals has upheld a lower court’s dismissal of a suit against a collection agency that was accused of violating the Fair Debt Collection Practices Act by referencing a “current balance” in a letter even though the amount owed was static and not going to change. More details here.
WHAT THIS MEANS, FROM RICK PERR OF FINEMAN KREKSTEIN & HARRIS: The myriad of verbiage used by agencies to inform consumers about the “amount of the debt” (1692g(a)(1)) has provided the judiciary and plaintiffs’ attorneys with lots of fuel to issue opinions and bring lawsuits. Phrases such as “current balance” and “you owe xxx as of this date” are the source of much litigation and differing opinions. Plaintiffs argue that such wording confuses the least sophisticated consumer as the consumer does not know if the balance changes. Here, the United States Court of Appeals for the Seventh Circuit slapped back at a plaintiff’s attorney for the twisted interpretation. Using words such as current balance by itself does not convey the impression that the balance will change at a future date. While best practices for static debts would suggest simply identifying the amount of the debt as “Amount of the Debt” or “Amount Owed” or “Balance” without reference to a date or time, there is some solace in the fact that, if litigated, alternative language can be defended.
Republicans Ask OCC For Help Addressing Madden Fix
The Republican members of the House Financial Services Committee have written a letter to Joseph Otting, the Comptroller of the Currency, urging the regulator to use “administrative solutions to mitigate the consequences” of the Appeals Court ruling in Madden v. Midland Funding. More details here.
WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY & SHUSTER: The OCC seems to have tipped its hand that it may be willing to address the impact of Madden administratively. Congressional Republicans quickly seized the opportunity to push OCC to prioritize the issue in its rulemaking process. Many state laws also confuse other legal issues for debt buyers (interestingly called “fintech” in the letter) including determining which states’ statute of limitations apply. It would have seemed appropriate that the U.S. Supreme Court would have wanted to provide some guidance.
Lawsuit Totals Continue Decline, But Some ‘Terrifying’ Data Still Causing Problems For Collection Agencies
Collection agencies may not necessarily be noticing it, but there continues to be a precipitous drop in the number of lawsuits being filed alleging violations of the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and the Telephone Consumer Protection Act, according to data released yesterday by WebRecon. More details here.
WHAT THIS MEANS, FROM LAURIE NELSON OF PAYMENTVISION: The idea that the report that lawsuits are on a decline can be relied on for comfort would be naïve. Rather the term “terrifying” is correct. In August, it is reported that 39% of the plaintiffs have filed previously; prior, the number was only approximately 32%. The article refers to this class as “professional” plaintiffs as they have the experience to know the process and what proof will be is needed to establish the cause of action. A “professional” plaintiff will, in cases, actively seek and even set up a likely scenario to find causes of actions. A claim by a professional plaintiff will likely include more than the standard statutory damages and attorney fee claims; they have the experience and knowhow to build cases that include more damage claims, including lost wages, physical distress, and emotional distress.
Even more concerning and “terrifying” is the increase from 33% to 41% of TCPA actions that are filed as putative class actions. A TCPA class action is not as hard as many to come across as the mistake that resulted in one unauthorized phone call, text, or fax.; the most prominent cause of action that applies to debt collections is the prohibition on making nonconsensual auto-dialed calls to a cell phone. A successful claim under TCPA must demonstrate a call using an automatic dialing system or prerecorded voice to a cell phone without prior consent. A very recent example of the increased loss risk under a class action suit was ordered just last month; on Sept. 10, a $267 million judgment was ordered against a debt collection agency, Rash Curtis & Associates, for TCPA violations. A class action judgment can put an agency out of business and are a much higher loss risk than a single violation penalty of $500.
Judge Grants MTD in FDCPA Case Over Description of Legal Process in Collection Letter
Calling a plaintiff’s argument “bordering on absurdity,” a District Court judge in Illinois has granted a defendant’s motion to dismiss after it was sued for allegedly violating the Fair Debt Collection Practices Act by sending a collection letter that said an attorney had not yet reviewed the circumstances of the case in question, but could do so at a later point and decide to file a lawsuit against the plaintiff, at which point the lawyer would ask for the court to enter a judgment against the plaintiff for the full amount owed. More details here.
WHAT THIS MEANS, FROM MATT KIEFER OF THE PREFERRED GROUP OF TAMPA: In the case of Sholty v. Cavalry Portfolio Services, LLC and Cavalry SPV I, LLC, it is great to see a Judge simply call out a Plaintiff that filed a frivolous suit and got too creative in its allegations. In this case Plaintiff contended that the collection letter from CPS “contained threats of potential litigation against Plaintiff by warning him that his account purportedly met Defendants’ criteria to place it with a collection law firm.”
The Plaintiff stated in its complaint that CPS “violated § 1692e, and specifically § 1692e(10), when they misleadingly portrayed a potential collection lawsuit to be completely in favor of Defendants. Counsel for CPS filed a MTD arguing the letter was not confusing nor misleading as a matter of law and therefore failed to state a claim under either § 1692e or § 1692f.”
However, the letter clearly indicated that an attorney had not yet reviewed the account and that would be the first step IF the account were to be placed with a collection attorney.
The best part of the Judge’s Order is this:
While the confusing nature of a dunning letter is usually a question of fact, “a plaintiff fails to state a claim and dismissal is appropriate as a matter of law when it is ‘apparent from a reading of the letter that not even a significant fraction of the 1:19-cv-01170-JES-JEH # 13 Page 5 of 9 6 population would be misled by it.’ ” Zemeckis v. Glob. Credit & Collection Corp., 679 F.3d 632, 636 (7th Cir. 2012) (quoting Taylor v. Cavalry Investment, L.L.C., 365 F.3d 572, 574 (7th Cir. 2004)). In other words, if the plaintiff’s interpretation of the letter is a “fantastic conjecture,” the court “should reject it without requiring evidence beyond the letter itself.” Taylor, 365 F.3d at 574–75. Here, Plaintiff’s argument borders on absurdity. Of course Defendants would ask a court to enter judgment against Sholty if they sued him—in fact, at least under the Federal Rules of Civil Procedure, they would be required to do so. A civil action is commenced by filing a complaint with the court. Fed. R. Civ. P. 3. And a complaint must contain “a demand for the relief sought[.]” Fed. R. Civ. P. 8(a)(3). A complaint without a prayer for relief is nothing more than an essay.
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