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 Grants Class Certification in FDCPA Case
A District Court judge in Oklahoma has certified a class action against a defendant accused of violating the Fair Debt Collection Practices Act by sending a collection letter that failed to identify the name of the original creditor and that a dispute needed to be filed in writing in order to be considered valid. More details here.
WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: What can go wrong, goes wrong, at least according to one Court. The Court here allowed a class to be certified when an agency listed the creditor as “original creditor” — which plaintiff contended meant the debt had been sold or assigned to a subsequent [unidentified] current creditor. Other issues (e.g., “in writing”) further muddied the waters. But what this case really stands for is that the Court was willing to brush aside the fact that the “class” in this case would only receive 24 cents per person (based on the number of individuals in the class and the 1% new worth figure).
In other words, even though this would represent a de minimis recovery, the court nonetheless concluded that because class members could “opt out” and pursue “full” statutory damages on their own, certifying a class was a “superior” method to resolve the dispute under Rule 23 of the Federal Rules of Civil Procedure. Lessons? Just use “creditor” and avoid using “original creditor” unless you also list “current creditor” as well. Make sure you get the “in writing” phrase in the validation notice inserted in the right places. And do note that even a low net worth won’t always protect your agency from having a class certified, at least in some courts around the country.
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CFPB Announces Task Force to ‘Modernize’ Consumer Protection Laws
The Consumer Financial Protection Bureau announced on Friday the creation of a task force aimed at harmonizing and modernizing federal consumer laws. More details here.
WHAT THIS MEANS, FROM RICK PERR OF FINEMAN KREKSTEIN & HARRIS: A very interesting development from the CFPB – a task force to modernize consumer protection laws. It’s interesting because the CFPB in and of itself cannot make law. Only Congress can make laws (or modernize existing law). It is no secret that most consumer protection statutes are written for a bygone era. The speculation here is that by convening a panel of experts, the CFPB intends to create a blueprint for Congress to act. It is a bold initiative given the partisan nature of politics today; but, if done right, could provide some of the relief sought by both consumers and the ARM Industry.
Bill Introduced to Keep CFPB From Including ‘Unlimited’ Texts and Emails in Proposed Rule
I’ll admit that I didn’t even realize it when I listed a package of bills that were on the agenda to be discussed at last month’s House Financial Services Committee hearing on debt collection — largely because it had not been introduced yet, I’ll tell myself to try and make me feel better — but it does appear that Rep. Ayanna Pressley [D-Mass.] is moving forward with proposed legislation that would, among other things, prohibit the Consumer Financial Protection Bureau from issuing any rule that allows an “unlimited” number of text messages and emails to be sent to individuals by collectors. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF BALLARD SPAHR: Even if this bill ultimately is passed in the House, it has no chance of passing in the Senate and is likely a non-event. Nor is it surprising that something like this surfaced from the House coming into a contentious election year and in the midst of the CFPB’s collection rulemaking. Of course, depending on what happens in the 2020 election, this bill (and the concerns expressed by the House in the related letter to the CFPB) may serve as harbingers of things to come, including outlining the basis for a potential CRA challenge to any final rule once published by the CFPB, which is expected to happen sometime in Q2 2020. Further, the bill’s suggestion that the rule currently proposed by the CFPB permits “unlimited” emails and texts is simply incorrect. As it currently stands, the FDCPA contains an overarching prohibition against engaging in harassing communications with consumers, which includes the frequency of any communications. While there may not be a specific “numeric” limit on how many emails and texts can be sent in any given period, this bill ignores the plain text of the FDCPA.
NDOH Judge Denies MTD in FDCPA ‘Current Balance’ Case
A District Court judge in Ohio has largely denied a defendant’s motion to dismiss after it was sued for violating the Fair Debt Collection Practices Act by referencing the “current balance” owed by an individual in a collection letter. More details here.
WHAT THIS MEANS, FROM LAURIE NELSON OF PAYMENTVISION: A commentary to this case is quite simple; if you are a creditor listing zero balances as part of an itemized statement, you should review this process. Prior to listing any fee, even at a zero balance, you must confirm you have the legal right to collect an accrued amount of the fee listed. If you, the creditor, do not have the right to accrue and collect this type of fee, do not list! Assumptions could be made that under the FDCPA are misleading regardless if the creditor had the intent to do so. The intent of the Creditor is not needed to have a claim under the FDCPA. The balance owed should be stated as a simple way to ensure the clearest understanding possible.
If you are like most, you are likely asking, how will it ever be possible to avoid such an assumption? The good news is that there are courts that have granted motions to dismiss in favor of creditors in similar cases. For instance, as recent as September of this year, the Seventh Circuit, in Koehn v. Delta Outsource Group found that using the term “current balance” in a collection letter to reference a static amount of debt was not misleading and did not violate the Fair Debt Collection Practices Act (FDCPA). The letter did not “contain[ed] no directive to call for ‘a current balance,’ nor does it include any language implying that ‘current balance’ means anything other than the balanced owed.” Although the Seventh Circuit observed the same precedence used by the Sixth court in our subject case of Virden v. Client Services, that the question of if a collection notice will mislead or confuse is often a question of fact that cannot be resolved on a motion to dismiss, the Seventh Circuity Court relied on the opinion found in the 2012 case of Zemeckis v. Global Credit & Collection Corp. that stated, “(i)f it is apparent that ‘not even a significant fraction of the population would be misled by a collection letter, then the complaint can and should be dismissed.’”
To avoid the costs of these types of actions, creditors need to have in place ongoing review procedures to ensure that any notice that lists a balance owed now and in the future is understood without confusion, not only to the creditor, but to all groups of the populations. Notices need to be crystal clear if it is or is not the creditor’s intention to accrue or add fees to any balance. If there is no intention to do so, step one will be to ensure that such fees are not listed even if such are listed with zero balance lines.
Judge Partially Grants Motion for Judgment on Pleadings in FDCPA Case Involving Hired Attorney
A District Court judge in Illinois has granted a defendant’s motion for judgment on the pleadings related to one count that it violated the Fair Debt Collection Practices Act when it sent a collection letter to a plaintiff who had told a previous owner of the debt that she was represented by counsel, but denied the motion on a second alleged FDCPA violation. More details here.
WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: A consumer’s request to the creditor to cease contact is not binding on a subsequent collector. On the other hand, a notice of attorney representation provided to the creditor is binding on a subsequent collector, but only if the collector actually knows about the representation. In this case, the court granted the collector’s motion for judgment on the pleadings with respect to the cease-contact claim but denied that motion with respect to the attorney-representation claim, finding that the consumer is entitled to discovery to determine whether the information the collector received from the creditor included notice of the representation. Assuming the consumer is unable to obtain evidence that the collector actually knew she was represented by counsel, the collector should prevail on summary judgment. Of course, this will cost more money. The lesson is to make sure that accounts transferred to your company include information about attorney representation. If you are sued for contacting a consumer who is represented by an attorney you knew nothing about, your lack of knowledge is a defense. But it some cases it will be a fact-based defense that will require discovery before dismissal.
Calif. Gov. Signs Bill Limiting How Much Collectors Can Garnish From Bank Accounts
The governor of California has signed into law a bill that limits how much debt collectors can garnish from an individual’s bank account when seeking repayment on unpaid debts. More details here.
WHAT THIS MEANS, FROM ETHAN OSTROFF OF TROUTMAN SANDERS: On Oct. 7, Gov. Newsom of California signed into law SB 616, which creates a new exemption from levy through garnishment for money in an individual’s bank account. This law, effective Sept. 1, 2020, adds section 704.220 to California’s Code of Civil Procedure to exempt from garnishment funds in a deposit account in an amount equal to or less than the “minimum basic standard of adequate care for a family of four for Region 1” – this amount is established by the Welfare and Institutions Code and as annually adjusted by California’s Department of Social Services. This amount for 2019 is $1729 and will be updated each year, meaning the exempted amount may be higher by Sept. 1, 2020.
Under this law, a debtor is not required to make a claim to obtain this exemption and is still entitled to all other exemptions provided for by state or federal law. However, this exemption does not apply to money garnished to satisfy certain obligations such as wages owed, child support, or spousal support. It also does not apply to the collection of a liability by the State, or any of its departments or agencies.
This exemption applies per judgment debtor, not per account. And if a debtor has more than one bank account at a single financial institution, then either the creditor or the debtor may file an ex part application for a hearing to establish how and to which account the section 704.220 exemption should be applied.
The Judicial Council will be amending or adopting the necessary forms to implement this, as the law requires a levy against a judgment debtor’s deposit account to include a description of the right to, and the limitations of, this new automatic exemption. It will be important to follow the development of these forms to ensure that the appropriate version is used as of the effective date in less than a year. In addition to decreasing the effectiveness in California of a garnishment to recover funds to collect on a judgment, this law may also lead to increased litigation costs because of more court appearances due to the interplay between this new exemption and already existing ones, as well as situations involving more than one account at a single bank.
House of Representatives Wants Chance to Defend CFPB’s Leadership Structure
The House of Representatives is seeking an opportunity to weigh in and convince the Supreme Court not to hear arguments in a case that would question the constitutionality of the leadership structure atop the Consumer Financial Protection Bureau. More details here.
WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY AND SHUSTER: At the request of the U.S. DOJ, the House of Representatives gladly agreed to defend the constitutionality of the CFPB as it is currently structured. This comes on the heels of Democratic members of Congress disbursing significant amounts of propaganda, eager to highlight the CFPB as a campaign issue. The House, however, offers no new arguments in its motion, rather is regurgitates favorable and expected 9th Circuit language upholding the Bureau structure.
Judge Grants MSJ in FDCPA Case Over Missed Dispute Notification
A District Court judge in Arizona has granted a defendant’s motion for summary judgment and agreed to entertain the defendant’s request for its attorney fees and costs to be covered by the plaintiff in a Fair Debt Collection Practices Act case in which the plaintiff was attempting to hold the defendant liable for the inaction of a credit bureau. More details here.
WHAT THIS MEANS, FROM KELLY KNEPPER-STEPHENS OF TRUEACCORD: The recent Navarro v. PRA decision demonstrates the value of the Bedardism “don’t tell me, show me.”** (Bedardism = a principle John Bedard uses when presenting on best practices.)
Plaintiff claimed Defendant did not report the dispute to the credit reporting agencies. Defendant (a debt collector and data furnisher) provided an affidavit from the VP of Disputes telling that the debt collector reported the dispute with an XB code (E-Oscar compliance code for disputed debt) and, after validating the debt, the collector reported the XC code (E-Oscar compliance code for investigate completed but consumer disagrees with the outcome of the investigation).
To support this affidavit, the collector provided documents to show that the information in the affidavit happened. The collector provided internal records showing the information provided to the credit reporting agencies did not include a compliance code prior to the receipt of the dispute, did include the compliance code XB for the report after receiving the dispute, did include the compliance code XB during the investigation of the dispute, and did include the compliance code XC for all the reports after the conclusion of the dispute investigation through the date of the lawsuit.
The Court in granting the Defendant’s motion to dismiss, noted that Plaintiff provided no evidence to the contrary. For example, Plaintiff provided no evidence that the credit reporting agency did not receive the compliance codes reporting the dispute (which would have countered the Defendant’s evidence). Therefore, the principle “document, document, document” wins the case for the Defendant collector.
Additionally, the Court agreed that Plaintiff may have to pay the Defendant’s costs and fees for having to defend this case and asked for Defendant to provide such a motion for the Court to consider (this motion is pending).
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