Compliance Digest – February 24

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.

California AG Proposes More Regs to Comply With CCPA

The Attorney General of California has issued revised proposed regulations to implement the California Consumer Privacy Act twice in the past seven days, which are open for comment until the end of the month. More details here.

WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: The CCPA is mired in confusion. No one knows exactly how to interpret the statutory provisions and how detailed privacy notices have to be. The California law itself was drafted hastily, with significant gaps between its text and what businesses could reasonably operationalize from a compliance standpoint. However, it was important that the Attorney General (AG) seek to resolve the discrepancies and lack of clarification in the law.  But, the attempt by the AG to clarify some of the provisions raises some additional confusion as to compliance. The proposed modifications don’t really resolve the confusion, if the goal is to make compliance with CCPA requirements easier — or at least more understandable — for businesses subject to the law. 

One proposed change is a requirement that online notices to consumers should be “reasonably accessible” to those with disabilities and should comply with the World Wide Consortium’s Web Content Accessibility Guidelines (WCAG) Version 2.1, as an example of a generally recognized industry standard in this area. This is in line with the 9th Circuit Court of Appeal’s decision last year in Robles v. Domino’s Pizza, LLC, 913 F.3d 898 (9th Cir. 2019) where the 9th circuit held that websites must comply with the Title III of the ADA, as they are places of public accommodation. 

The proposed changes by the AG could become adopted and could roll out by the July 2020 deadline. However, businesses require further clarification and there are still pushes for additional amendments and a new ballot initiative that would provide additional privacy protections and consumer rights. This rollercoaster ride is not over yet. Continue to fasten your seatbelts!!! 


New App Allows Users to Automatically Generate TCPA Suits

A new app called Robo Revenge goes as far as to give individuals “burner” credit cards that are being used to gather information in order to automatically file Telephone Consumer Protection Act lawsuits against companies calling individuals’ cell phones without their consent. More details here.

WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: A net cast too broadly. Sure there are troublesome “robo calls” for telemarketing purposes and then there are calls made to secure payment from individuals for their past purchases. 

Collection agencies of course fall squarely into the latter category. Bills incurred need to be paid. Calls to consumers are part and parcel of all collection efforts. Collection calls are not telemarketing calls. 

So a new app called Robo Revenge represents a “solution” that could negatively impact legitimate collection calls. This program is an automated app that is designed to collect information that then self-populates a demand letter and legal forms to generate TCPA suits. The program smells like an improper practice of law. Perhaps some ethics complaints need to be lodged. We will need to keep an eye on this to see if claims begin to be lodged against agencies. If they do come down the pike, they need to be fought. 

Judge Dismisses Whistleblower Suit Against Collectors Over Student Loan Contract

A District Court judge in the District of Columbia has granted motions to dismiss filed by the remaining defendants in a whistleblower’s False Claims Act lawsuit that alleges the a number of debt collectors defrauded the federal government of more than $100 million in relation to a contract to service student loans with the Department of Education. More details here.

WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: In all honesty I wasn’t sure at first why this case might have relevance to’s readership, other than the fact that the defendants are debt collection agencies. However, as I read the case I began to see why Mike thought it worthy of note. But there need be some introductory explanation first.

PCA Integrity Assocs., LLP (a/k/a “Relator”) brought this action pursuant to 31 U.S.C. § 3730 Civil Actions for False Claims pursuant to 3730(c) (“FCA”) as a qui tam action. A qui tam action allows a party with knowledge of violations to the statute, which prohibits providing false information to the government in concert with making claims for payment, to bring an action in lieu of the Attorney General. While the FDCPA claims that individuals act like “private attorney generals”  prosecuting FDCPA actions, FCA claims do not consist of an aggrieved party prosecuting for wrongs it allegedly suffered. In FCA claims the aggrieved party is the United States and for whatever reason, perhaps a manpower issue, the government declines to prosecute and in a sense hires the work out. But there are requirements that have to be met. 

In some cases it is a whistleblower and sometimes not. A whistleblower can sometimes get a reward for blowing the proverbial whistle. A qui tam plaintiff has to work for his/her money and can collect between 25% and 30% of the proceeds of the action plus reasonable expenses, reasonable attorneys’ fees and costs. § 3730(d)(2).

In this case brought by a qui tam plaintiff, the claims were against three groups of companies, each group having a Prime Contractor, Subcontractor and allegedly affiliated businesses. The basic claims were that the Prime Contractors bid and won contracts to do debt collection work for the government based on fraudulent information regarding the companies makeup and income contained within the bids. The government contracts had specific requirements for how the work was to be distributed. It required that the Prime Contractor would farm out work to Subcontractors who met certain criteria pursuant to the Small Business Act which aims to provide small companies with “‘the maximum practicable opportunity to participate in the performance’ of federal contracts.” Id. ¶ 63 (quoting 15 U.S.C. § 637(d)(1)). The allegations were thatthe information regarding the subcontractors and affiliated companies were not as portrayed, i.e. it was false. By way of example in one case, two companies which were held out as separate and distinct so they could qualify under the income guidelines but they were actually not separate and distinct. This was alleged based on their sharing office space, personal, management and money.     

A threshold issue unrelated to the merits of the claims is that it must be established that the party that wants to prosecute must have unique inside knowledge to get the right to prosecute or they can be defeated by what is called the Public Disclosure Bar. 

One final substantive issue remains: [*100]  whether Relator may pursue this qui tam action, or whether, as Defendants argue, the FCA’s public disclosure bar coupled with the inability to confirm Relator’s claimed “original source” status makes the action improper. 

The Court accepted the allegations of the complaint:

Relator is a limited liability partnership that consists of three unnamed partners with “personal knowledge of the false claims, statements, and concealments alleged,” Am. Compl. ¶ 7, ECF No. 54, based on participation in an unidentified private collection agency (“PCA”) “initiative working for certain PCAs” and Relator’s “independent investigation to uncover false claims,” id. ¶ 29

and declined to dismiss on pursuant to the Public Disclosure Bar which would have proved fatal. That’s not say that Plaintiff’s had to have direct insider knowledge and could not have obtained their knowledge through a third party. The Bar would be if the information was publicly available.

Discussions I found interesting were that there is a materiality standard applied to “FCA claims. And regarding parent-subsidiary issues which could easily apply to a number of the debt buyer entities and their corporate structures. Both discussions could easily be utilized regarding the same issues in some of the suits we all see.

Yes, the defendants won their motions to dismiss. But not as to the merits. 

(“[B]ecause the False Claims Act is self-evidently an anti-fraud statute, complaints brought under it must comply [*37with Rule 9(b).”). In such a suit, it is not enough to comply with Rule 12(b)(6); rather, FCA “plaintiffs must plead their claims with plausibility and particularity under Federal Rules of Civil Procedure 8 and 9(b) by, for instance, pleading facts to support allegations of materiality

The Court found, that Relator failed to meet the pleading standards of Rule 9(b). It granted the motions to dismiss without prejudice and further granted Relator leave to amend its complaint (for the second time.) Amending should not prove that difficult as the thirty-one page decision provides a roadmap of the open questions. While I’m not saying this is beach reading material, if you’re stuck in on a snow day it did prove educational.

Aren’t you glad you asked?

[*footnote]There is no mention of NCO Financial Systems, Inc. anywhere in the decision nor any explanation for its listing in the caption]. The decision under review was a 12b(6) motion to dismiss. 

State Banking Trade Group Calls for ‘Greater Effort’ in Regulating Collection Industry

An association representing state banking regulators is calling for a “greater effort” to develop “uniform and comprehensive standards for regulation” of the debt collection industry in a white paper that it published providing an overview of the industry and how it is regulated. More details here.

WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: The Conference of State Banking Supervisors (CSBS) has been around for over a century. Their mission is to support “state regulators in advancing the system of state financial supervision by ensuring safety, soundness and consumer protection; promoting economic growth; and fostering innovative, responsive supervision”. [1] As an organization their focus is primarily on the non-bank space which includes mortgage lending, consumer lending and debt collection. CSBS has also been very active in a series of initiatives, collectively known as CSBS Vision 2020, to bring a commonality among the states both in regulation, licensing and oversight. The disconnect between the various state licensing requirements which has directly impacted fintech companies is one such example.

CSBS Vision 2020 actually started in early 2019 with the goal to develop an overarching white paper entitled Reengineering Nonbank Supervision to serve two primary purposes: “first, as a stakeholder awareness document covering state supervision of the nonbank marketplace, and second, as a change document or roadmap to assist state supervisors in identifying the current state of supervision and making informed changes to state supervisory processes.[2]  Since its first submission of Chapter 1 in June 2019, Introduction to the Nonbank Industry,  CSBS has added subsequent chapters covering topics like state nonbank supervision, nonbank mortgages and money services businesses. Chapter 5, issued last week is titled Overview of Debt Collection.

As its title suggests, the CSBS paper does a fairly accurate portrayal of the history of the third party debt collection industry and identifies its players (agencies, debt buyers and attorneys). The paper highlights the intersection of the Fair Debt Collection Practices Act (FDCPA) and the various state laws. A comprehensive overview of the different debt types like credit card debt, student loans and mortgages is also provided. Finally the papers points to the challenges in debt collection supervision both at the federal and state level, especially if an agency operates in several different states. It is important to note that the CSBS recognizes the important role of the debt collection industry and that when consumers fail to pay, creditors have little choice but to seek repayment. However, the paper notes that when federal and state consumer protection laws are violated they damage the marketplace and tarnish the industry. [3] 

CSBS concludes that “greater effort in developing uniform and comprehensive standards for regulation throughout the state system would result in better supervision of debt collection

practices”. [4]  This, in my opinion, is a positive sign for the industry and consistent with what state attorneys generals indicated to industry in a recent meeting at the CRC last fall. Ironically this contradicts the opinion of many national consumer advocates who have such a consistent and coordinated efforts. Regulators charged with the supervision of covered entities need consistency and direction to know what they are looking for and how to direct their examiners in order to make examinations more efficient and worthwhile. Debt collection begins at the state level but in an era of increased cross border transactions,  it has been virtually impossible to keep up with every state’s idiosyncratic requirement.  CSBS’ conclusion of uniformity should be welcomed by the industry. There has never been adversity to compliance, rather a desire to comply with what are known to be the explicit rules.   

[3] Id. at p.7.
[4] Id. at p.24

Judge Denies Class, Grants MSJ For Defendant in TCPA Case Over Texts Allegedly Sent Via ATDS

In another Telephone Consumer Protection Act case that further muddies up the compliance waters, a District Court judge in Missouri has denied a plaintiff’s motion to certify a class and granted a defendant’s motion for summary judgment after it was accused of violating the TCPA by sending text messages to individuals’ cell phones using an automated telephone dialing system. More details here.

WHAT THIS MEANS, FROM NICOLE STRICKLER OF MESSER STRICKLER: What exactly is an automatic telephone dialing system (“ATDS”)? That is the question facing federal courts in the wake of the D.C. Circuit’s opinion in ACA International. As the case law continues to develop, the Ninth Circuit’s broad definition has become the minority. In Marks v. Crunch San Diego, the Ninth held that an ATDS included devices with the capacity to dial stored numbers automatically notwithstanding their inability to call numbers using a random or sequential number generator. However, many federal courts have criticized Marks’ holding as contrary to the TCPA’s express statutory text. Beal is the newest of these courts. Beal found that for the system to meet the definition of an ATDS it must produce numbers to be called “using a random or sequential number generator.” Given how often TCPA cases are filed, it should come as no surprise that the Supreme Court is considering several TCPA cases this coming year. Any one of these could theoretically provide guidance on the proper definition of ATDS and establish a consistent approach within the federal circuits.  

Judge Grants MTD in Case Over Interest Disclosure in Letter

A District Court judge in Wisconsin has granted a defendant’s motion to dismiss after it was sued for allegedly violating the Fair Debt Collection Practices Act by not being clear enough about the purported interest that may have been accruing on an unpaid debt. More details here.

WHAT THIS MEANS, FROM BOYD GENTRY OF THE LAW OFFICE OF BOYD GENTRY: 15 USC 1692g(a)(1) requires the disclosure of “the amount of the debt”.  Seems simple, but leave it to the lawyers to make it complicated.  

Here Americollect’s letter tried to go “above and beyond” giving not just “the amount of the debt”, but also disclosing that interest may accrue in the future. This complaint is proof that no good deed goes unpunished. Here is what the letter disclosed:

“The amount due stated below, is the amount due as of the date of this letter. Future interest of 5% per year may be added to the account if the amount due is not paid.”

The plaintiff argued that “the amount of the debt” should include an explanation of what would happen if she made a payment of less than the full balance. The trial court got it right concluding that nothing in 1692g  required such an explanation of future hypothetical situations.   

This collection letter is clearly not the type of “abusive” behavior Congress had in its crosshairs when it enacted the FDCPA. In fact, this is what is wrong with the FDCPA landscape: some debtors see these letters as a revenue stream. While many consumer advocates agree that more information is better (like this letter tried to do), the FDCPA remains a boondoggle for creative consumers. Keep up the good fight!

Judge Dismisses FDCPA, TCPA Case Over Improper Service

A collection agency that never responded to a lawsuit or appeared to defend itself against a default judgment nonetheless still won a dismissal because the plaintiff did not properly serve the defendant with the summons after alleging the agency violated the Fair Debt Collection Practices Act and the Telephone Consumer Protection Act. More details here.

WHAT THIS MEANS, FROM DENNIS BARTON OF THE BARTON LAW GROUP: Building a case is like building a house. There are many steps, and most of those steps have a specific order. When it comes to lawsuits, the plaintiff’s first step is to properly serve the defendant. Proper service is the foundation on which the rest of the case is laid. The lack of proper service dooms a case because the court lacks jurisdiction over the defendant to rule upon the merits and enter a judgment. 

The federal rules of civil procedure allow a person to be served either according to the federal rules regarding service, the state rules where the federal district court is located, or the state rules where the defendant resides. That means a plaintiff must abide by one of these three rules. While there is usually a lot of similarity, sometimes a state law offers more flexibility.

Instead of getting into the weeds regarding the specific service issue in this case, the larger takeaway is to always make sure service is proper. Do not assume. Force plaintiff’s counsel to get service correct unless you previously agreed to waive service (and my personal opinion is to not do that because it helps plaintiff’s attorney, and you usually do not see any discount).

Another important note is that most of the law on service says that a technical issue may not result in improper service. That is important because if you ignore the lawsuit because you believe a hyper-technical error occurred, that may not be a sufficient reason to set aside a default judgment if one was entered. In this case, defendant was fortunate that the court found service improper because many other courts would have ruled otherwise leaving defendant with a finding of default the court may not be willing to set aside. 

House Leaders Unveil New Surprise Medical Bill

Surprise medical bills — where a patient thinks he or she has medical coverage only to find out that a doctor was out of his or her healthcare network after the fact — has become a hot-button topic on the presidential campaign trail, in state governments across the country, and now on Capitol Hill, where the House Ways & Means Committee has released a new bill that is being labeled as “provider-friendly.” More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN SANDERS: In early February, the House Ways & Means Committee released text of the Consumer Protections Against Surprise Medical Bills Act of 2020, the Committee’s proposal to shield patients from surprise medical bills which may lead to bankruptcy. The bill aims to protect patients from balance billing and to enhance consumer protections, requiring greater transparency from providers, and providing patients with information about their health care costs. The bill also includes an independent mediated negotiation process to resolve billing disagreements, first offering providers or individuals a 30-day window to share information and try to reach a resolution on their own.

From the patient side, the passage of this bill would mean emergency services provided by out of network providers would be limited to in-network rates. Balance billing by out of network providers would be severely reduced in that regard. This also means that patients should have a clear understanding of what their costs could be, which would hopefully make any collections efforts smoother for all.

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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