Compliance Digest – February 17

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 Rules Student Loan Guarantor Not ‘Collector’ Under FDCPA, Even When Trying to Collect on Non-Existent Debts

The Eleventh Circuit Court of Appeals has affirmed a lower court’s decision that the Pennsylvania Higher Education Assistance Authority, a guarantor of student loans, does not meet the definition of debt collector under the Fair Debt Collection Practices Act after it was accused of collecting debts from the wrong individual. More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH VALUCK: All parties in this case agreed PHEAA was a guaranty agency for the Department of Education, which ordinarily would be exempt from the FDCPA under the fiduciary exception. However, since the loan in question was supposed to be in deferment at the time in question, not due to be paid and clearly not in default, collection efforts by PHEAA were not protected by the fiduciary exception. 

The text of the FDCPA covered debts owed or due or asserted to be owed or due another.  The unambiguous language covered even debts mistakenly attempted to be collected. As with recent U.S. Supreme Court cases and many TCPA cases, the Court of Appeals referred directly to the actual words used in the Act to reach the correct result.


Judge Tosses $2.5M Jury Verdict For Collection Agencies Against Lexington Law

A District Court judge in Texas has tossed a $2.5 million jury award in favor of two collection agencies that sued Lexington Law Group, saying that the evidence put forth was “legally insufficient” to support the jury determining that the defendants engaged in fraud by “preying on financially troubled consumers by drafting, signing, and mailing frivolous dispute correspondences.” More details here.

WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: This opinion was certainly a disappointment for anyone following this case.  CBE and RGS Financial both deserve credit for bringing the fight to Lexington Law and its affiliates as many in the industry continue to be plagued by their conduct. The size of the jury award that was set aside certainly justifies the cost of appealing to the Fifth Circuit which is something I (and I’m sure others) hope CBE and RGS undertake. Despite the disappointing opinion, I do think that industry members should be buoyed by the fact that a jury did rule in the industry’s favor and found that an alleged “consumer advocate” was actually committing fraud. Perhaps that will embolden other companies to take the fight to more of these companies who appear more interested in their own fees than truly advocating for consumers.

Judge Grants MTD in FDCPA Case Over SOL Disclosure

Keeping the language of a collection letter somewhat vague and stopping short of providing legal advice has allowed a defendant to be granted a motion to dismiss after it was sued for allegedly violating the Fair Debt Collection Practices Act because it did not specifically reference a state law on reviving the statute of limitations in a collection letter. More details here.

WHAT THIS MEANS, FROM AYLIX K. JENSEN OF MOSS & BARNETT: Florida is one of many jurisdictions that apparently requires a debt collector to provide a consumer disclosure when collecting on accounts past the statute of limitations. However, neither the Florida statute nor case law specify the exact wording of the disclosure to be given to the consumer in this situation. As a result, consumer attorneys are quick to challenge any out-of-statute disclosure provided in a debt collection communication to a Florida consumer. In Domke v. MRS BPO, LLC, the Court in the Middle District of Florida agreed with the debt collector’s common-sense arguments and held that there was nothing inaccurate or misleading about generally informing the consumer that certain circumstances could change the legal status of the debt. Despite this favorable decision, it is critical for debt collectors to carefully scrutinize the disclosures used when collecting on debts beyond the statute of limitations, especially in the numerous jurisdictions that require such a disclosure but do not specify the exact wording of the disclosure. 

ACA Part of 17 Groups That Ask FCC To Move Faster on New TCPA Rule

A group of 17 different trade associations, including ACA International, have asked the Federal Communications Commission to “expeditiously” clarify what constitutes an automated telephone dialing system under the Telephone Consumer Protection Act. More details here.

WHAT THIS MEANS, FROM STEFANIE JACKMAN OF BALLARD SPAHR: Although this filing is entirely understandable, given the almost two years that have now passed since the ACA decision, many remain pessimistic that we will receive any clarity anytime soon from the FCC. Since the ACA decision came down in 2018, the FCC has shown no outward movement or resolve towards addressing the matters referred back to it by the D.C. Circuit for further rulemaking. Instead, after completing its efforts with regard to net neutrality, the FCC has remained almost singularly focused on call blocking and related initiatives. The FCC surely knows about the ever-growing body of conflicting cases from circuit and district courts around the country reaching entirely inapposite holdings on the ATDS determination. Nevertheless, the FCC’s silence continues. One can’t help but wonder if the FCC might be angling for someone else, in some other context, to resolve the ATDS issue …and the Supreme Court’s recent grant of certiorari in the Barr v. American Association of Political Consultants appeal from the Fourth Circuit certainly could provide such an opportunity. Specifically, if the Court holds that the challenged 2015 amendment to the TCPA excluding the collection of government debts from the statute is both unconstitutional and not severable from the larger statute, almost overnight, we could find ourselves in a very different world where what constitutes an ATDS is largely moot. Personally, I am excited for the Court’s term to see how this will play out!

Judge Grants MTD in FDCPA Overshadowing Case

A District Court judge in California has granted a defendant’s motion to dismiss after it was sued for allegedly violating the Fair Debt Collection Practices Act because the content in a collection letter overshadowed the validation notice in the same letter. More details here.

WHAT THIS MEANS, FROM JOHN BEDARD OF THE BEDARD LAW GROUP: To the victor go the spoils! Mark another case in the win column for debt collectors after a consumer’s challenge to the language contained in a validation notice was found by the Eastern District of California to be free from any overshadowing defect. In Robertson, the Court repeated the familiar instruction to avoid demanding the consumer’s payment prior to the expiration of the validation period.  The Court also appreciated the collector’s effort to explain, with clear language, that the consumer should read the important disclosures contained in the letter and further that making payment on the account would not “eliminate or affect” any of the consumer’s important rights described in the letter. Denying the consumer a second bite at the apple, the court dismissed the complaint without leave to amend. A big shout-out goes to AllianceOne Receivables Management, Inc. for defending against these spurious claims.

TCPA Suit Filed Over Text Messages to Wrong Number

A plaintiff has filed a class-action lawsuit alleging a defendant violated the Telephone Consumer Protection Act because it did not stop sending text messages after the plaintiff wrote a text message back saying he had never ordered anything from the defendant, but it appears as though the text messages did stop after the plaintiff called to revoke consent to be contacted. More details here.

WHAT THIS MEANS, FROM JUNE COLEMAN OF MESSER STRICKLER: As the collection industry looks to communicating via text messaging, the industry is becoming more aware of text messaging issues that are being litigated. The Rease v. Charter Communications, Inc. case filed a couple of weeks ago, is one such case. In the Rease case, Charter Communications sent a text message to Rease confirming an order. Rease responded to the text message that Rease had not placed an order. Charter did not interpret Rease’s response as a revocation of consent or as information that Charter had the wrong phone number (and thus, no consent). Charter continued to send text messages providing updates on the status of the order. All of the text messages sent to Rease were automated, and in all likelihood sent by an automated telephone dialing system. Although many aspects of the Telephone Consumer Protection Act (“TCPA”) and liability under the TCPA are unsettled, the courts have uniformly held that the TCPA applies to text messages. In Rease, the issue looks like it will be whether there was a revocation of consent, and possibly whether there was any consent initially, and certainly, any consent after knowledge that Rease was not the purchaser. This case is a good reminder that statements of revocation can come in all shapes and sizes. Clearly, texting STOP as instructed in a text message works. But this may not be the only way to revoke consent, even if the text instructs to text STOP. Some other consumer responses are obvious, like a text that states:

  • “I would appreciate [it] if we discontinue any further texts;”
  • “Thank you but I would like the text messages to stop can we make this happen.”
  • “I’m simply asking for texts to stop. I would appreciate that. Thanks.”
  • “As I requested earlier I asked that the text would stop, I would greatly appreciate it. Thank you.”
  • “I’m simply asking for texts to stop. I would appreciate that. Thanks.”

(See, e.g., Epps v. Earth Fare, Inc., No. CV 16-08221 SJO (SSx), 2017 U.S. Dist. LEXIS 63439, at *13 (C.D. Cal. Feb. 27, 2017).)

And while courts appear to be split on whether one can reasonably limit revocation to a specific method, such as texting STOP, consumers have filed lawsuits, and defendants have had to defend those lawsuits, when consumers have made the following statements, that they contend revoke consent: 

  • “Take my contact info off please.”
  • “I want to confirm that I have been removed off your contacts”
  • “Again I want to stop this service thank you.”

(Rando v. Edible Arrangements Int’l, LLC, Civil Action No. 17-701(JBS/AMD), 2018 U.S. Dist. LEXIS 51201, at *2 (D.N.J. Mar. 28, 2018) (holding such responses did not revoke consent when instructed to text the word “STOP”).)

Other statements are less clearly revocations, although claimed to be so by consumers. For instance, cancelling a gym membership did not revoke consent to receive texts.  (Van Patten v. Vertical Fitness Grp., Ltd. Liab. Co., 847 F.3d 1037, 1048 (9th Cir. 2017).)  And perhaps a consumer revokes consent to receive texts when the consumer states: “I would also like to request in writing that no telephone contact be made by your office to my cell phone.” (Reyes v. Lincoln Auto. Fin. Servs., 861 F.3d 51, 54 (2d Cir. 2017).) And there are many cases where a consumer asks for no more calls orally, and collection professionals immediately respond regarding the federal Fair Debt Collection Practices Act’s written requirement for such requests, overlooking how such an oral request could be deemed a revocation of consent under the TCPA.

And, the collection industry will have to consider texts sent to the wrong party, and how courts have dealt with that situation when calls are placed to the wrong party.

Because the goal is typically to avoid litigation, not just prevail in litigation, these lawsuits are important to the industry because they provide real life examples of how consumers communicate revocation of consent. These real life examples are great training tools. And they are also good cautionary tales that when a consumer wants to cease communication, that intent should be interpreted broadly to include communications that fall under the TCPA, whether or not that consumer used special words or communicated in writing or orally.

Judge Denies MTD in FDCPA Case Over Total Amount Owed

A District Court judge in New York has denied a defendant’s motion to dismiss after it was sued for allegedly violating the Fair Debt Collection Practices Act because it included too many dollar amounts in a collection letter and confused the plaintiff, despite saying in the letter “you owe $7,590.41.” More details here.

WHAT THIS MEANS, FROM JONATHAN ROBBIN OF J. ROBBIN LAW: In Madroskaya, the E.D.N.Y. continues to convolute the issue of when a collection letter must disclose whether interest is accruing by finding the mere listing of a non-zero monetary amount of interest creates ambiguity. The Court held that despite Defendant’s evidence that interest was not accruing, the inclusion of the “Total Interest Accrued Since Charge Off: $346.02” implied that interest and fees may accrue in the future. As a result, the E.D.N.Y. held defendant had an affirmative duty to state whether interest was in fact accruing, or not.

Defendant attempted to rely on the Second Circuit’s precedent set by Taylor v. Fin Recovery Serv., 886 F.3 212 (2d Cir. 2018), which holds a collector has no duty to disclose that interest is not accruing. But the Eastern District held Taylor was inapplicable because in Taylor the Total Interest Accrued Since Charge Off line was zeroed out, whereas here, the letter included both a stated current balance and a non-zero ($346.02) amount of interest. As a result, the court made clear that even if interest is not accruing, where a collection letter indicates any interest or fees, regardless of whether those relate to charges incurred in the past, agencies cannot rely on Taylor, but must state that interest is not accruing.

Plaintiffs Accuse Hospital of Trying to Collect Discharged Debts

A trio of former patients are accusing a South Carolina hospital of violating federal law by attempting to collect on debts after individuals have filed for bankruptcy protection. More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF PAYMENTVISION: To discuss this case, Jones, Mayers and Williams v. Lexington Health Services District dba Lexington Medical Center (“LMC”), it is important to first look at the law at issue. When a creditor or debt buyer persistently tries to collect on a debt that was discharged in bankruptcy, that creditor is violating federal law (11 U.S.C. § 524 (a) (1)-(3)). While this is not a new law, many still debate what actions constitute an offense. 

A developed case law holding is well accepted that finds a sophisticated institutional creditor cannot avoid contempt by failing to implement effective procedures to track bankruptcy cases (See, e.g., In re Campion, 294 B.R. 313 (B.A.P. 9th Cir. 2003); In re Rijos, 263 B.R. 382 (B.A.P. 1st Cir. 2001). However, still, question application when one doesn’t fall under the sophisticated institutional creditor definition or if the failure wasn’t an issue of the failure to implement procedures. For resolution on this question, the U.S. Supreme Court agreed to hear a case that allowed the court to set an official standard for determining when to punish creditors that violate the discharge injunction (Taggart v. Lorenzen, 2019 WL 2331303 (June 3, 2019)). Eight months ago, the Supreme Court held that the proper standard to apply is an objective standard rather than a subjective one. In other words, civil contempt is appropriate based on a review solely on their conduct rather than individual beliefs and motivations.

This brings us to the facts presented in the case of LMC. The three named plaintiffs are bringing the claims as a class action all claim that “LMC” ignored 341 notices and continued collection efforts. The first and second named plaintiffs both claim that the actions taken after the notice was provided to LMC included LMC’s use of state of South Carolina’s Setoff Debt Collection Program, deducting the claimed amount from any tax refund due from the state. The first plaintiff only filed bankruptcy a month prior to LMC’s collection under the state program and the second was discharged from bankruptcy nearly five years prior to the collection. The third named plaintiff was discharged in 2017 but after continuing threats that occurred after such discharge, made three payments totaling $100 in 2018. In 2019 LMC threatened the third plaintiff that the remaining balance would be submitted to the same Setoff Debt Collection Program.

If LMC was successful in defending liability under the well-known standard for sophisticated creditors for failure to establish procedures to track bankruptcy case would then be looked at under the objective standard per the recent Supreme Court holding. While this standard is more rigorous than the standard of good faith, it is also less stringent than a standard of strict liability. The question being is there an objectively reasonable basis for concluding that the creditor’s conduct might be lawful. If the claims in the complaint are found to be true, it would be a hard defense under either standard.   

If this case proceeds, the amount awarded under this class action could be substantial. The complaint states that in 2017 alone LMC collected $19.2 million in payments under the South Carolina program; it will be interesting to see if more debt that was subject to discharge or an automatic stay are included in this total.

Bill Introduced in California to License Collectors, Debt Buyers

California state Senator Bob Wieckowski has introduced a bill that would require collection agencies in The Golden State to be licensed, adding another state to the list of those seeking to mandate such a measure. More details here.

WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY & SHUSTER: Many industry associations support the concept of licensing as a tool for consumers to know whether a company is complying with the most basic of regulations. In fact, the Receivables Management Association International has supported the concept of licensing debt buyers for years. Merely forcing a debt collector to recite the license number or list it with dozens of other states’ requirements, however, not only does nothing but distracts the consumer from the important information on the mailer. Requiring the debt collector to send the State sample correspondence is also problematic. If a debt collector provides this information, then doesn’t hear back about any concerns, it may assume the State has no concerns. Typically, these samples just go in a folder until other issues arise rendering the requirement worthless.

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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