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 www.bedardlawgroup.com, email John H. Bedard, Jr., or call (678) 253-1871.
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.
Plaintiff Files FDCPA Suit Over Receipt Emailed to Third Party
One of the downsides to sending emails has led to a collection agency being sued for allegedly violating the Fair Debt Collection Practices Act. More details here.
WHAT THIS MEANS, FROM LAUREN VALENZUELA OF PERFORMANT: The allegations in this complaint stem from a debt collector purportedly emailing a payment receipt to the wrong person (presumably this was a mistake). From the alleged facts, it seems the payment receipt may have contained enough information for it to be considered a “communication” under the Fair Debt Collection Practices Act (FDCPA). So, when the receipt was emailed to the wrong person, it amounted to an unauthorized third-party disclosure.
If the debt collector did accidentally send a payment receipt to the wrong person, one wonders what kind of process and controls the debt collector had in place for sending emails. Was it reasonably designed to prevent such an error so that the bona fide error defense may be asserted? Was there simply a typo in the email address, causing it to be sent to the wrong email address? So many questions I have! Nonetheless, looking at this complaint in the bigger picture created by the cross-section of the FDCPA and email, this complaint suggests a couple of things. Perhaps debt collectors are becoming more comfortable with emailing consumers, and perhaps consumers are okay with using email during the debt collection process (so long as it is sent to the right email address). Afterall, receiving a payment confirmation email is commonplace for anyone who conducts transactions over the internet or by phone. The main lessons to learn from this complaint is to ensure debt collectors have controls in place to mitigate the likelihood of sending communications to the wrong email address. What those controls look like will vary depending on the collector’s tools. For example, the controls used for a collector using a manual process to create and send an email will look different than the controls used for a collector sending emails though an email solution with a workflow.
In addition to FDCPA considerations, don’t forget the state laws which may apply to the unauthorized disclosure of a consumer’s personal information. For example, this plaintiff is in Colorado but if this plaintiff would have been in California, the California Consumer Protection Act (CCPA) provides a private right of action for unauthorized disclosures of a consumer’s nonencrypted and nonredacted personal information that are the result of a company’s failure to maintain “reasonable security procedures and practices.” Just another reason why thoughtful procedure development, documentation, execution, and monitoring is so important!
Defense Did Not Waive Arbitration Right By Answering FDCPA Suit, Judge Rules
A District Court judge in Illinois has ruled that a group of defendants did not waive their right to compel arbitration because they spent four months defending themselves against a lawsuit that alleged they violated the Fair Debt Collection Practices Act by trying to collect on a debt that had already been settled. More details here.
WHAT THIS MEANS, FROM JOHN BEDARD OF THE BEDARD LAW GROUP: The moral of this story is, “Don’t sit on arbitration rights you expect to exercise.” Although the court ultimately granted the defendants’ motion to compel arbitration, the court’s rational articulated some of the boundaries surrounding the waiver of arbitration rights. Wise defendants intending to exercise arbitration rights will (1) assert arbitration rights early, and (2) avoid taking any action inconsistent with their intensions to arbitrate. The court also gave special caution to defendants who remove cases to federal court from state court; do it at the risk of waving arbitration rights.
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FCC Consumer Advisory Committee Calls Special Meeting to Consider Call Blocking Recommendation
The Federal Communications Commission’s Consumer Advisory Committee has called a special meeting for Thursday, Feb. 13 where it will discuss a single item — robocalls and call blocking. More details here.
WHAT THIS MEANS, FROM ETHAN OSTROFF OF TROUTMAN SANDERS: Last June, the FCC issued a Declaratory Ruling and Third Further Notice of Proposed Rulemaking, in which it ruled that voice service providers could offer consumers call blocking “on an opt-out basis,” thus providing consumers “the benefit of call blocking without having to take action.” In December 2019, the FCC began the process of preparing the first of two reports on “the implementation and effectiveness of call blocking measures,” which is due by June 2020, when it asked for information regarding five categories, including what call-blocking tools are available to consumers and their effectiveness. Those comments were due by January 29, 2020 and replies are due by February 28, 2020.
Now, the FCC’s Consumer Advisory Committee is convening a special meeting on February 13 where the only agenda item is to consider a recommendation from its Robocall Report Working Group “on the gathering of data and/or sources relating to the availability and effectiveness of call blocking tools, ….” This discussion is another step in the FCC’s efforts to implement call blocking on an “opt-out” basis. At the meeting, there will be some time for public comments, which presents another chance for industry stakeholders to attempt to educate the FCC on the potential impacts of call-blocking tools, including the possibility of legitimate calls not being connected to consumers.
Briefs Filed in Defense of CFPB’s Leadership Structure
Those lining up to defend the current leadership structure of the Consumer Financial Protection Bureau, including the House of Representatives, 23 state attorneys general, and a large number of consumer advocacy groups all filed their amicus briefs with the Supreme Court earlier this week. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF BALLARD SPAHR: The states and House correctly recognize that there is absolutely no guarantee the Supreme Court will resolve any of the issues that could be created if the Court decides the CFPB’s structure in unconstitutional but does not mandate the related remedy. Indeed, a number of Justices (including Chief Justice Roberts and Justice Cavanaugh who I predict will be important votes on this issue) are on record stating that it is not appropriate the Court to legislate remedies as that power lies with Congress under the Constitution. The amici appear focused on doing their best to advocate to the Court the need to provide a decision with a remedy. Perhaps this position is borne by fear that the 2020 election may (or may not) lead significant changes in control in D.C. But regardless of whether everything (or nothing) changes, it bears noting that at least to the outside world, it often appears that both parties remained rather fractured internally on what their respective agendas should be, let alone how to best implement them. So no matter what, the prospect of a Congressional “quick fix” if the CFPB is deemed unconstitutional seems unlikely, and that could mean many things for many different interests across the collections industry.”
State AGs Blast OCC’s Proposal to Fix Madden Interest Rate Issue
A bipartisan coalition of 22 state attorneys general have come out and are blasting a proposal from the Office of the Comptroller of the Currency that would clarify the “valid when made” doctrine to ensure the terms of loans would remain valid after they are sold or transferred and address the Appeals Court ruling in the case of Madden v. Midland Funding. More details here.
WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY AND SHUSTER: “Bipartisan” is not exactly an accurate term – the letter’s header is just the seals of New York, California and Illinois and they are the top anti-Trump AGs. In fact, the AG of South Dakota is the only Republican signatory. Nonetheless, the state AGs take a familiar states’ rights position that even Republican AGs concur – don’t mess with our authority, especially in the consumer protection realm. State AGs and the OCC have never had a particularly cozy relationship so it’s doubtful these comments will carry much weight with them.
Appeals Court Overturns Summary Judgment for Defendant in FDCPA Case over Creditor Name in Letter
The Court of Appeals for the Seventh Circuit has reversed a lower court’s summary judgment award in favor of a defendant and instead remanded the case back for summary judgment in favor of a plaintiff who sued a collection agency for allegedly violating the Fair Debt Collection Practices Act by not correctly identifying the current creditor to whom the debt was owed in a collection letter. More details here.
WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH VOLUCK: The “proper” identity of the “current” creditor cases vary from district to district and from circuit to circuit, and they tend to be very fact specific. Plaintiffs argue that any deviation from identifying the current creditor in an initial notice under 1692g as the “Current Creditor” is a violation of the FDCPA. The Act has no such specific obligation. The agency merely needs to identify the creditor to whom the amount is owed. Most courts agree that there is no magic language.
The difficulty arises in how this information is presented. For example, identifying original creditors and current creditors without being clear as to which is which can lead to liability. Failing to use a label at all possibly is a violation. Using multiple parties, even properly labeled, has been found to be confusing to the least sophisticated consumer.
Finally, in the case at issue, identifying the one and only creditor as follows: “Re: John Doe Hospital” was found to be a violation because it was unclear to the unsophisticated consumer what “Re:” referred to. On a side note, the author obtained summary judgment on a similar identification by a client in New York in the same week that the Seventh Circuit opinion was issued.
Agencies should be very cautious and use plain language when identifying the current creditor. Say “Current Creditor”, not just “Creditor” and not “Client.” And above all, don’t just use “Re:” and place the name of the creditor after without more identifying information. Better to be safe than sorry (to have spent all of the money on lawyers defending a word choice that could have been easily avoided).
CFPB Fine Cap Has Smallest Annual Jump in Three Years
Individuals and companies fined by the Consumer Financial Protection Bureau can expect to pay a little bit more starting last week, after the annual inflationary increase for civil money penalties went into effect. More details here.
WHAT THIS MEANS, FROM LAURIE NELSON OF PAYMENTVISION: This inflation is provided under §1083 (12 CFR 1083.1.) and follows the previous increases that occurred in 2017, 2018, and 2019 (82 FR 3601 (Jan. 12, 2017); 83 FR 1525 (Jan. 12, 2018); 84 FR 517 (Jan. 31, 2019)). “The adjustments are designed to keep pace with inflation so that civil penalties retain their deterrent effect and promote compliance with the law.” (https://www.federalregister.gov/d/2020-00364/p-17 (Jan 14, 2020) (See Inflation Adjustment Act section 2, codified at 28 U.S.C. 2461 note))
The fact that inflation is lower than the previous year’s results in a lower increase should not be used as an indicator that the CFPB is reducing efforts to fine companies deemed not to comply. Rather than focusing on the lower increase in the penalty amounts, companies should monitor the ongoing activity that continues within the bureau such as the creation of the Taskforce on Federal Consumer Financial Law (https://www.consumerfinance.gov/about-us/newsroom/cfpb-announces-membership-taskforce-federal-consumer-financial-law/ (Jan 9, 2020)) and the most recent statement made to provide more standards as to what practices will be deemed abusive (https://www.consumerfinance.gov/about-us/newsroom/cfpb-announces-policy-regarding-prohibition-abusive-acts-practices/ (Jan 24, 2020)). Both, while some may contend, may be a sign that these efforts may result in fewer actions by the CFPB are in this writer’s opinion, incorrect.
I believe these steps are being taken to allow just the opposite. By creating the task force and providing clear guidance, the CFPB is providing a definition where it once lacked. The definition is a good thing for those that are making efforts to comply, but not for those that are not. More established guidance and specific elements outlined for compliance will allow an easier path for enforcement. A prima facie case can be made by establishing a lack of compliance to the guidance and eliminate the costly litigation that can occur when defendants point to a lack of guidance, understanding and vagueness.
So, to end, while yes, we can report that this year’s increase is lower than years past, this does not imply that it will result in less of an increase in the amounts of fines sought out by the CFPB.
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 www.bedardlawgroup.com, email John H. Bedard, Jr., or call (678) 253-1871.
