Compliance Digest – January 20

I’m thrilled to announce that Bedard Law Group is the new sponsor for the Compliance Digest. Bedard Law Group, P.C. – Compliance Support – Defense Litigation – Nationwide Complaint Management – Turnkey Speech Analytics.  And Our New BLG360 Program – Your Low Monthly Retainer Compliance Solution. Visit, email John H. Bedard, Jr., or call (678) 253-1871.

Every week, 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.


Appeals Court Overturns Certification in FDCPA Case Over False Threat in Letter

The Court of Appeals for the Fifth Circuit has reversed a lower court’s certification of a class action and questioned whether the class even has standing to sue in the first place in a Fair Debt Collection Practices Act case over whether a collection letter contained a false threat to sue for an unpaid debt. More details here.

WHAT THIS MEANS, FROM ETHAN OSTROFF OF TROUTMAN SANDERS: This Fifth Circuit opinion decertifying an FDCPA letter case contains some interesting analysis of Spokeo’s requirements for establishing Article III standing. While the court did not dismiss the claims for lack of standing (because it had already decertified the class on other grounds), it strongly indicated that letters that were received but ignored are not sufficient to prove an Article III injury for putative class members. The panel also rejected an argument that decertification would lead claims being unheard since it would be uneconomical for class members to pursue claims individually.

Recognizing the Fifth Circuit has not yet decided whether standing must be proven for unnamed class members, in addition to the named class representative, the panel acknowledged some circuits have held that “no class may be certified that contains members lacking Article III standing.” The court believed this to be “significant, because there are undoubtedly many unnamed class members here who lack the requisite injury to establish Article III standing” since “the putative class sweeps in ‘all persons in Texas . . . who received a form collection letter’ from” the debt collector. The court therefore concluded that, “[a]s a result, the putative class inevitably includes people who received the letter, but ignored it as junk mail or otherwise gave it no meaningful attention—and therefore lack a cognizable injury under Article III.”

After acknowledging that reversal of the class certification order here could mean that legitimate claims will go unheard, making this a “negative value suit” where class members’ claims would be uneconomical to litigate individually,” the Court relied on a 2013 Supreme Court decision that “made clear that fear of underenforcement is no justification for class certification.

California to Create Own CFPB; Reports Specifically Mention Debt Collection Oversight

Gavin Newsom, the governor of California, is expected to announce a proposal today that would create a state-version of the Consumer Financial Protection Bureau in The Golden State, joining a growing number of other states that are ramping up their efforts to regulate the financial services industry in the wake of a perceived pullback from the CFPB itself. More details here.

WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: Like Gov. Cuomo’s announcement outlining a set of financial services policy priorities that will bolster the state’s consumer protection capabilities, Gov. Newsom’s proposals seem to be taken from the same playbook. You will recall in May 2019, former CFPB enforcement attorney, Manny Alverez, was appointed as the new head of the California Department Business Oversight (DBO). Attending Mr. Alverez’s press conference was none other than Richard Cordray. It was clear then, as it is now, that California as well as New York, are making good on their promises, as well as those of their supporters and advocates, that the states will pick up where the CFPB left off.

Significant to the proposals put forth, Governor Newsom outlined the following:

  • The addition of 90 positions to the department by 2023 in order to administer the new program, with 16 dedicated to enforcement;
  • Funding will come from enforcement settlements, raising fees on business licensees, and establishing new fees for certain businesses which includes debt collection, who are not currently licensed in the state; and
  • The state will look to enforce “unfair, deceptive, and abusive practices” which will include enhancing the rules applying to regulated practices, and introducing new frameworks for currently unregulated industries, including debt collections.

DBO will change its name to the Department of Financial Protection and Innovation (DFPI) and there will be four positions dedicated to the identification and development of new consumer financial products. The DFPI plans to accomplish this by extensive data collection from consumer finance industries, and by rolling back some state chartered banking rules. In addition to self-reporting, the DFPI could create a state-wide consumer database in order to collect, analyze, and investigate consumer complaints.

Déjà vu all over again. While many in the ARM industry have spent the last decade developing extensive and robust policies and procedures in order to comply with federal and even state laws, there may be new regulatory regimes that will need to be addressed. Remember that state laws can be broader and more stricter than federal law. California, like many other states, have FDCPA-type statues that expands their reach to first parties. It appears that new state priorities are looking into all debt collection activity and not just the activity of federally defined debt collectors.

Supreme Court Agrees to Hear Arguments on TCPA Collection Case

The Supreme Court on Friday announced it had granted a petition from the U.S. government to hear arguments in a Telephone Consumer Protection Act case regarding an exemption that allows companies collecting debts on behalf of the federal government to contact individuals on their cell phones using an automated telephone dialing system without needing to obtain prior consent to do so. More details here.

WHAT THIS MEANS, FROM JOHN BEDARD OF THE BEDARD LAW GROUP: Unconstitutional government behavior must be thwarted. Nobody, including the collection industry, benefits when Congress violates the Constitution. Here, Congress overstepped its boundaries and amended the TCPA to allow government preference and “legal self-dealing” at the expense of the People’s free speech rights guaranteed by the First Amendment. The Supreme Court will now decide whether the 4th Circuit Court of Appeals correctly found that Congress’s exemption for government debt contained its 2015 TCPA amendment is unconstitutional. You heard it here first – the 2015 TCPA Amendment is unconstitutional and the Supreme Court will affirm the 4th Circuit’s decision and sever the offending exemption from the TCPA. Stay tuned!


Judge Certifies Class in FDCPA Case, But Limits Participation To One Creditor Only

A District Court judge in Massachusetts has granted certification to a class of plaintiffs alleging a collection letter sent by a defendant violated the Fair Debt Collection Practices Act, but restricted the number of participants to those plaintiffs who had the same original creditor. More details here.

WHAT THIS MEANS, FROM BOYD GENTRY OF THE LAW OFFICE OF BOYD GENTRY: It is not easy to defeat class certification in a letter case. As soon as the defendant points to a fatal flaw in the class definition, the consumer changes the definition. That is what happened here. The plaintiff sought a class of all persons who received a particular dunning letter. The defendants pointed out that many of the classmembers agreed to arbitration clauses in their underlying contracts. Undeterred, the plaintiff offered to exclude from the definition any class member who had agreed to an arbitration clause. The easiest path to this workaround was to identify the creditors which had known arbitration clauses in their contracts. Here, only one creditor had no arbitration clause (at least in the record of this case): Comenity Bank. Apparently, there was no evidence in the record that Comenity Bank customers had arbitration clauses in their contracts with the bank. Like so many before, this court recognized the fluidity of class certification and certified the class to include only Comenity Bank customers. This “limited” class does not affect the recovery of the plaintiff/class-representative. Similarly, it will have little impact on the attorney fees for class counsel, since any settlement or judgment is likely to involve a “lodestar” calculation under 15 U.S.C. 1692k (as opposed to a contingency fee from a common fund). 

The real savings will be realized when the plaintiff (or defendant) sends notice to the class. The general rule is that the plaintiff (or her class counsel) will fund the class notice. Limiting the class in this case probably saved tens of thousands of dollars in notice and class administration expenses – money that the plaintiff will seek from the defendant in the end.

One lesson to be learned is that class certification is fluid – the class definition can be changed at any time, and many judges favor the “economic benefits” of class certification. Those on the receiving end of a class complaint would do well to anticipate these issues and seek to maintain control of the class through negotiation with class counsel and not forced certification.

Fla. Judge Grants Stay in TCPA Case To See How FCC Defines ATDS

A District Court judge in Florida has granted a stay in a Telephone Consumer Protection Act case to see how the Federal Communications Commission moves forward with its definition of an automated telephone dialing system. More details here.

WHAT THIS MEANS, FROM STEFANIE JACKMAN OF BALLARD SPAHR: As a TCPA defense lawyer, it is always encouraging to see courts recognize the need to stay cases where the ATDS element of the TCPA is in dispute and wait for the further regulatory guidance the D.C. Circuit Court instructed the FCC to provide in the ACA International decision. But while the FCC continues to grapple with providing that clarity, I can’t help but wonder – might we know something soon and might it come from somewhere else?  Here’s why. 

Recently (as in January 2020), the Supreme Court granted a petition for certiorari in a case called Barr v. American Association of Political Consultants case out of the Fourth Circuit. In that case, SCOTUS is being asked to review the Fourth Circuit’s holding that Congress’s 2015 amendment to the TCPA exempting collection communications relating to government debts from the statute was an unconstitutional restriction on free speech. Specifically, the Fourth Circuit determined that because the 2015 amendment imposed a content-based exemption, strict scrutiny should be applied. As a result, in doing, the Fourth Circuit determining the amendment did not pass constitutional muster. Curiously, when the Supreme Court granted the Barr certiorari petition, just as it did in Seila Law, the Court requested related briefing on whether any statutory provisions that are determined to be unconstitutional can be severed from the statute. To me, this only further suggests what many of us wondered after that happened in Seila – might the Court  be focused not only on the issues in these cases but also clarifying/otherwise refocusing the development of the doctrine of severability? That doctrine has evolved much over the last 50-60 years and while I am certainly not a scholar of the history of the doctrine, my understanding is that the case law may benefit from such an effort by the Court. So that bring me to my initial query – if the Court determines the 2015 amendment to the TCPA is both unconstitutional and not severable (and the same question exists in Seila with regard to the CFPB’s structure and Dodd-Frank), what even further reaching impacts might there be on the TCPA, ATDS definition, and beyond…? What I do know is that that Court plans to hear and determine both cases in its current term, which ends in June. So, chin up to those of us who have been pessimistic that any clarity on the ATDS issue is coming anytime soon (of which I am one) because who knows, we might have a very clear answer very soon!

Plaintiff Files FDCPA Class Action Over Allegedly Conflicting Statements in Summons, Affidavit

A consumer is alleging the purchaser of a defaulted credit card account and the law firm it hired to file a lawsuit against the consumer to collect on the unpaid debt violated the Fair Debt Collection Practices Act by seeking to collect court costs from the consumer, even though it indicated in an affidavit that it was not seeking to collect more than what was owed. More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: In an ideal world, the two statements referenced by Plaintiff would be identical.  However, the fact that there is a difference does not necessarily amount to a violation of the FDCPA.  There is a very plausible argument that the addendum clause in the Complaint is a pro forma pleading seeking costs that can be awarded to a prevailing party by operation of the Rules of Court.  Similarly, the affidavit refers to amounts added to the obligation b the creditor or collection agency post-charge-off.  While there may not have been an amount added by the creditor or the collection agency since charge-off (and, thus, the accurate recitation on the affidavit), the consumer-plaintiff may still be subject to court costs if she loses the collection lawsuit.  Both statements can be correct and not contradictory.  However, given that court costs tend to be de minimus, the amount of money neded to defend this lawsuit probably outweighs the request for court costs and simply deciding not to seek costs would likely have avoided the current situation.

Virginia Issues Final Debt Buying Apportionment Guidance

The Virginia Department of Taxation has released its final guidelines related to debt buyer apportionment, which requires debt buyers, regardless of where they are based, to apportion their income from the collection of debt to Virginia based on a single sales factor. More details here.

WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY & SHUSTER: Virginia passed the Debt Buyer Apportionment Law in 2018. The Department of Taxation has now provided guidelines that become effective Feb. 6, 2020. The 11-page guidelines provide the Department’s interpretation of the 2018 law. The guidelines are not formal rulemaking or law so they may be challenged informally with the Department or in court. They provide multiple examples that may prove useful to effected debt buyers. There is certainly a concern that as other states address this year they may provide methods inconsistent with the Virginia system.

Judge Awards Plaintiff’s Attorneys Half of What Was Requested in FDCPA Case

A District Court judge in Missouri has determined the amount of attorney fees to be paid to the plaintiff’s lawyers following the settlement of a Fair Debt Collection Practices Act lawsuit to be 53% lower than what the plaintiff’s attorneys requested. More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF PAYMENTVISION: The FDCPA included a fee-shifting provision as part of Congress’ intent to enforce the FDCPA through private attorney firms (Graziano v. Harrison, 950 F.2d 107, 113 (3d Cir. 1991)). This case is an example of one of the risks that a fee-shifting provision can create, inflated billing. 

In this case, the plaintiff was awarded a judgment in the amount of $1,250. The case itself was straightforward; a complaint was filed; the defendant offered a judgment which was agreed to by the plaintiff and approved by the court. The plaintiff’s attorney followed by submitting an invoice in the amount of $11,295. The court reduced this by 53% by finding that the hours billed for drafting the complaint is double what should be considered reasonable; there were hours billed for extensive time reviewing short emails and one-page documents; hours were billed for clerical tasks, which are not compensable as attorney billed hours; and the billing included hours for multiple attorneys for the same work.  

This court is not the only court that has drawn into question plaintiff counsel fees submitted under FDCPA claims. An example of a case where fees were denied in whole can be found in the Fifth Circuit when in 2018 the Fifth Circuit upheld a magistrate judge’s ruling to deny a motion for attorney fees after the judgment of the plaintiff’s FDCPA action was found in the plaintiff’s favor and the plaintiff was awarded $1,000 (Davis v. Credit Bureau of the South, No. 17-41136 (Fifth Cir. Nov. 16, 2018)). The magistrate judge stated that in this case, the award of attorney’s fees was unjust and believed the claim (while valid) “was created by counsel for the purpose of generating, in counsel’s own words, an ‘incredibly high’ fee request.” The Fifth Circuit concurred with the magistrate judge’s findings and stated its disapproval of “utilizing technical violations of the FDCPA solely as a means for generating attorney’s fees” and concluded: “This simply cannot be tolerated. Bottom-line: the FDCPA does not support avaricious efforts of attorneys seeking a windfall.”  

The FDCPA was created to protect consumers, but defense counsel must protect its clients, and courts must ensure that even in cases where the plaintiff’s claims are found to be valid, the protections such as fee-shifting are not abused. It is always a risk when setting rules to protect one side that even the abiding parties on the other side are negatively affected. 

Report Accuses Medical Collectors of Suing When They Shouldn’t

A published report blasts the credit and collection industry, especially those collecting medical debts, for suing individuals with unpaid debts that should have been covered by workers’ compensation insurance and infers that those doing the suing are knowingly taking the risk, expecting that the individual is not going to do anything other than pay the debt. More details here.

WHAT THIS MEANS, FROM MATT KIEFER OF THE PREFERRED GROUP OF TAMPA: The article presumes debt collectors are collecting and suing patients for invalid debts like claims covered or that should be covered by Worker’s Compensation. It gives an example of a police detective injured on the job in 2016 and finding a ding on his credit report a day after Christmas in 2018. No mention of any dunning notices from the provider or collection letters or calls regarding the debt since 2016 which would have cleared the matter up beforehand. No mention of him being sued either. Of course, he fought the charge, lawyered up, and settled with the agency. 

The article states “there are hundreds of other cases like this according to many different South Florida consumer protection attorneys who frequently sue debt collectors.” Of course we know that is certainly true! The attorneys presume it keeps happening because the reward to the agency is worth more than the risk of penalty. One attorney commented that in recent years debt collectors have “grown more aggressive and the field is crawling with bad actors who ignore or defy the law to chase after the sick and injured for money that they do not even owe.” Really? Is South Florida just unique like that with so many bad actors or is this Fake News? Well, the article states that one attorney In Delray Beach sues medical debt collectors that are chasing workers’ compensation claimants so often that it has become his bread and butter. He has settled 100 cases in the last year and has 25 -30 more cases in litigation. Let’s see. Let’s say the average settlement was for $6K over a $350 debt…so $600,000 to settle a suit with a debt collector? Not a bad living and agencies that settle set a precedent even if they were erroneously passed the debt from their client. Let’s say it was an ER Physician group that struggled with the workers comp carrier to get it to pay the claim and the carrier didn’t pay so the physician group turned the account to self-pay and knowingly turned it over to the collections? Does it happen? Yes, it happens. The collector sent its first notice and started call campaigns but the patient never answered nor disputed the account. How is the collections agency supposed to know it was a workers comp case if it is never notified? 

This is an example why I don’t buy newspapers because this article is so one-sided and skewed against our industry.

I did find a piece of information that I didn’t know that is helpful and will be interesting to watch. According to the article: 

“a recent ruling by US District Judge, Rodolfo Ruiz, could weaken one of the most common defenses debt collectors use in federal court: that they were simply relying on the information a medical provider gave them and therefore aren’t responsible for sending an erroneous collection notice. The judge said the agency is not entitled to rely on that presumption that all debts sent to collections are valid debts. The decision is being appealed to the 11th U.S. Circuit Court of Appeals in Atlanta. … Under the court’s ruling, she said, the judge held the debt collector “accountable for its sloppy practices” and wouldn’t let the company “blame the healthcare provider for its own lack of a reasonable process to confirm that the debt was valid.’ ”

Not sure how an agency is going to manually check every single account placed to ensure no mistakes happened and it is a valid debt BEFORE they send the first notice. This means agencies need to pay attention to how this case plays out on appeal because you may need to beef up your contracts and use that indemnification clause if you have clients that routinely send accounts to collect on that they shouldn’t. Sounds like South Florida has medical providers that need to be put on notice, if this is so pervasive down there, and that they need to do a better job of scrubbing out invalid debts or knowingly turning accounts to self-pay that shouldn’t. With contingency rates declining and compliance costs soaring, you may NOT be able to NOT hold your client accountable if you keep getting sued because of them.

If you made it this far, and totally unrelated, please help us defeat the House Bill H.R. 5330, “The Consumer Protection for Medical Debt Collections Act” by clicking

I’m thrilled to announce that Bedard Law Group is the new sponsor for the Compliance Digest. Bedard Law Group, P.C. – Compliance Support – Defense Litigation – Nationwide Complaint Management – Turnkey Speech Analytics.  And Our New BLG360 Program – Your Low Monthly Retainer Compliance Solution. Visit, email John H. Bedard, Jr., or call (678) 253-1871.

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