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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.
Massachusetts Issues FAQ to Help With Emergency Collection Regulations
The Office of the Attorney General for the Commonwealth of Massachusetts has issued additional guidance and answers to some Frequently Asked Questions following the enactment of a series of emergency regulations related to debt collection that were put into place because of the coronavirus pandemic. More details here.
WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY & SHUSTER: Guidance is not law. Obviously, it’s important but if there’s an aspect of the guidance that is particularly harmful to your business, you should reach out to the Office of the Attorney General to raise the issue. That can be particularly important when there’s another way to protect the debtor that wouldn’t unduly burden your company. You can also raise the issue if you think the debtor may actually be harmed by the guidance or regulation. Quickly drafted regulations frequently have unintended consequences and you or your industry association should create a dialogue to bring harmful provisions to the AG’s attention.
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Supreme Court Postpones April Hearings, Including Key TCPA Case
The Supreme Court on Friday announced that it was postponing hearing arguments for the month of April as a result of the coronavirus pandemic, a decision which delays the outcome in a closely watched Telephone Consumer Protection Act lawsuit. More details here.
WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON MESSER: It is not surprising that the Supreme Court seeks to continue hearings on various cases that have not yet had oral argument, in light of the current pandemic. Every court throughout the country is having to delay hearings, trials, oral arguments, on countless cases. In light of the importance of the cases pending before the Supreme Court, it is not surprising that justice may have to be delayed because of the critical nature of oral argument. Even though countless industries have been clamoring for the hearing in Barr v. American Assoc. of Political Consultants so that it can be determined once and for all if the TCPA will stand, will fall, or may be substantially eroded, the result may have to wait until the next Supreme Court term. The Justices certainly recognize the importance of this case, and may not want to rush to judgment during this term, which ends June 2020. There are approximately 27-28 cases this term that have not yet been set for hearing, including Barr.
The good news is that oral argument in the Seila Law case proceeded as scheduled on March 3, 2020, just before the US shutdown occurred. According to the Supreme Court, “The Court will continue to proceed with the resolution of all cases argued this Term”. That means there will be a decision this term (by June 2020) on the constitutionality of the CFPB structure and whether the CFPB remains intact.
Whether Barr v. AAPC will be heard this term is still a wait and see proposition, as the Supreme Court noted it is considering “a range of scheduling options and other alternatives if arguments cannot be held in the Courtroom before the end of the Term.” Stay closely tuned, as there will be more to follow on this topic in the coming weeks.
Best to all and stay safe and well.
Appeals Court Overturns FDCPA Case Over Creditor Name in Letter
The Court of Appeals for the Second Circuit has overturned a lower court’s ruling in favor of a defendant that was sued for violating the Fair Debt Collection Practices Act because a letter that was sent to the plaintiff did not properly identify the creditor to whom the debt is owed. More details here.
WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH VOLUCK: In an effort to communicate with a consumer while collecting a branded account, the agency incorrectly identified the current creditor As the entity that originated the obligation and not the name of the current creditor. The District Court had concluded that the identity of the current was not significant as the consumer understood the obligation as arising from the brand, Kohl’s, and not the bank underwriting the credit card. The Court of Appeals overturned the District Court opinion, holding that using the wrong name for the current creditor constituted a violation of the FDCPA.
It is critical in identifying current and original creditors that agencies use the appropriate names. The fact the consumer would not recognize the creditor’s name, especially when a credit card is branded, is not relevant. These mistakes are easily avoided and due care must be used.
Appeals Court Overturns FDCPA Suit Based on SOL Calculation
It might have to do with a mortgage, which is something we do not normally address when it comes to the Fair Debt Collection Practices Act, but a ruling from the Eleventh Circuit Court of Appeals seemed interesting because it dealt with assumptions for how long it took a communication from a debt collector to reach the recipient, and because the Appeals Court overturned a lower court’s dismissal of the suit. More details here.
WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN SANDERS: The Eleventh Circuit Court of Appeals recently held that a district court erred in dismissing a plaintiff’s FDCPA claims as untimely when her complaint did not allege a date of mailing of the February mortgage statement, and it was not apparent from the face of her complaint whether her claim was time-barred. In Owens-Benniefield v. BSI Financial Services, the plaintiff alleged violations of a number of statutes, including the FDCPA, the Florida Consumer Collection Practices Act, and the Florida Deceptive and Unfair Trade Practices Act, and appealed after a district court judge granted a motion to dismiss. In ruling the district court had made in error in determining the claim was time-barred, the Appeals Court considered how long it took the collection notice to reach the defendant. The court pointed out that it had “never held that, when the date of mailing is in dispute and a plaintiff alleges receipt of a letter on a certain date, a court could presume a mailing date based on the date of receipt and the parties’ addresses.” Accordingly, the Appeals Court overturned dismissal of the suit.
Timeliness surrounding statutory deadlines and requirements under the FDCPA continue to be a thorn in the side of companies who follow their own procedures but remain trapped in litigation when a plaintiff alleges a fact issue in dispute. From a compliance perspective, the best advice is always – document, document, document. Continue to train your employees to document when mailings are sent, when letters are received, the noted date of the letter but also the noted date when the postal service sent it out. While time consuming, business records are a great asset.
Judge Grants MTD in FDCPA Case Over Summons Sent to Individual Instead of Attorney
A District Court judge has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act case after it was sued for mailing a summons to the home address of the plaintiff, even though she was represented by an attorney. More details here.
WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: It’s always nice when a judge issues a reasonable decision! The language in 15 U.S.C. § 1692c is clear that a debt collector can communicate with a consumer with the “express permission of a court of competent jurisdiction” and it was refreshing to know, at least according to this judge, relying on the rules of civil procedure equates to such permission. That being said, I think the case could have been avoided if the consumer’s attorney was asked whether they would accept service on behalf of their client. At the very least, if the consumer’s attorney had said no the FDCPA would appear disingenuous.
Third Circuit Overturns Graziano, Rules No Written Requirement to Dispute Under 1692g(a)(3)
Undoing a big split among the Circuit Courts of Appeals, the Third Circuit Court of Appeals yesterday overturned a well-known precedent and ruled that there is no written dispute requirement under Section 1692g(a)(3) of the Fair Debt Collection Practices Act. More details here.
WHAT THIS MEANS, FROM KELLY KNEPPER-STEPHENS OF TRUEACCORD: The Third Circuit fixed the problem in their jurisdiction that resulted in twenty years of unfair extra steps for consumers who wanted to dispute and thousands of lawsuits for collectors who simply added their phone number to the validation notice. The result is most positive for consumers and collection agencies alike! Consumers living in the Third Circuit (N.J., Penn., Del.) do not have to write out a dispute, they can communicate their dispute and once they do the agency cannot presume the account is valid per 1692g(a)(3). Collection agencies will get dismissals in cases alleging it is not an effective explanation of the validation rights to copy the validation notice from the FDCPA or when adding a phone number to an initial communication. Now, feel free to put your phone number on that initial communication in the Third Circuit!
This problem came from a decision by the Third Circuit 20 years ago. The Third Circuit held in Graziano that a collection letter requiring a consumer to dispute in writing did not violate the FDCPA. The thing is that Congress did not include a writing requirement for all parts of the validation notice. Yes, the word writing appears in two parts of the validation notice (sections 1692g(a)(4) and (5)) requiring a consumer to dispute in writing in order to obtain validation documents and dispute in writing in order to obtain the name of the name and address of the original creditor (if different from the current creditor). But, the word writing does not appear in 1692(g)(a)(3) which says that a debt collector can assume the debt is valid unless a consumer disputes within 30 days of the validation notice (see no writing requirement). So, under the plain words of the FDCPA if a consumer disputed over the phone the collector under (g)(3) could not presume the debt to be valid. Well, unfortunately, the Third Circuit in that Graziano opinion read into the FDCPA the word writing for 1692(g)(a)(3), explaining that even though the word writing is not in 1692g(a)(3) Congress probably just forgot it. Normally, when a court interprets a statute they cannot add words. Nevertheless, the result of this old decision effectively required written disputes from consumers who lived in the Third Circuit (although most collectors would accept a dispute over the phone anyway) and caused thousands of cases alleging having a telephone number or the words “call with questions” on the validation notice would confuse the consumer about the requirement to dispute in writing or simply overshadow the notice. Then about two years ago the Cadillo case exasperated the problem. It involved the typical Third Circuit allegation that having a phone number on the validation communication made it seem like the consumer could dispute over the phone, when in Third Circuit the consumer must actually put pen to paper to dispute. The District Court, on its own — not because a plaintiff made the claim — went beyond the allegations and found the language of the validation notice to be confusing (the ones Congress wrote). This resulted in even more cases in the Third Circuit against any agency who had literally copied the text of the FDCPA in an effort to effectively provide the validation notice. REALLY GOOD NEWS: These cases are over. The Third Circuit reconsidered and fixed the problems that Graziano created. Yippee!
Judge Denies Certification in FDCPA Suit
A District Court judge in Ohio has denied a motion to certify a class in a Fair Debt Collection Practices Act case because the plaintiff’s father is a partner at the firm representing the class and because “extremely extensive individualized fact-finding” would be required to adequately identify the members of the class. More details here.
WHAT THIS MEANS, FROM ANDREW HALL OF ESTATE MANAGEMENT SERVICES: I have not reviewed any stats on the subject, but it does appear that judges are more closely evaluating motions for class certification in FDCPA cases. From our standpoint, this is a good thing. The vast majority of FDCPA violations are technical violations only, and not the result of major compliance issues or bad acts/intentions by the defendant. Also, it is no secret that judges want to lighten their dockets and make them less complex. Obviously, class action suits add a tremendous amount of complexity, time, and expense to a case that may very well have only a minor underlying FDCPA violation. Only the most serious and egregious cases should be reserved for class action status, in my opinion. An in-depth review would be required to determine whether an actual trend exists here.
Could Calls to Freeze Regulatory Agenda Put CFPB’s Debt Collection Rule in Jeopardy?
The scenario where the Consumer Financial Protection Bureau’s release of the final debt collection rule is postponed until after the presidential election in November is becoming more possible by the day, which could threaten the release of the rule altogether, if the Democrats win the White House. A growing number of attorneys general and trade associations are asking the federal government to delay all non-coronavirus rulemakings for up to six months, which, if put into place today, would be 31 days before the presidential election on Nov. 3. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: The CFPB issued last May its Notice of Proposed Regulations on Debt Collection Practices and the comment period to them ended in September. It has said that the regulations will be finalized in 2020. Earlier this year it issued a Supplemental Notice of Proposed Rulemaking that addresses collection of debts for which the statute of limitation to sue had expired. The public comment period for them was set to expire on May 5, 2020. The CFPB recently extended the comment period to June 5, 2020 due to the COVID-19 national impact.
There is no set timeframe to issue the rules. However, COVID-19 may have a bigger impact than just a 30 day delay on public comment. In the past week the Independent Community Bankers of America (“ICBA”) and a group of 18 Democratic State Attorney Generals wrote separately to numerous federal authorities, asking that the federal government suspend issuing any rules that are not related to COVID-19. They state that issuing new rules will be too burdensome with all else that is going on with COVID-19. ICBA asked for 180 day suspension and the State AGs were not specific on a timeframe. If new rules are suspended, it could push out the timeframe to shortly before, or even after, the national elections. During this time the Supreme Court also should issue a decision on the case challenging the constitutionality to the CFPB’s structure (Seila v CFPB). There is speculation that any such delay could impact whether the rules are even issued, but after all this time and all the work the CFPB has done it seems more likely that it will issue the rules.
CFPB Issues Credit Reporting Guidance During COVID-19
The Consumer Financial Protection Bureau yesterday issued guidance reminding furnishers that they should be accurately reporting any changes to payment plans or loan terms that are being made in response to the coronavirus pandemic. More details here.
WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: It is encouraging to see the Bureau acknowledge the operational disruptions faced by CRAs and furnishers during the COVID-19 pandemic. The Bureau intends to show some leniency to furnishers who extend hardship accommodations to distressed borrowers and accurately reflect those accommodations in their credit reporting. The Bureau also intends to take a flexible approach to investigation timeframes, so long as there is a good faith effort to investigate as quickly as possible. Similarly, the Bureau intends to be flexible when evaluating whether a furnisher or CRA properly determined that a dispute was frivolous or irrelevant and thus did not trigger a duty to investigate. Unfortunately, consumer plaintiffs are unlikely to be so forgiving.
CFPB Task Force Seeking Answers About Regulations
A task force created by the Consumer Financial Protection Bureau to examine consumer financial law has issued a Request for Information, seeking answers to two dozen questions about how well the financial markets are functioning for consumers. More details here.
WHAT THIS MEANS, FROM ROZANNE ANDERSEN OF ONTARIO SYSTEMS: One of the questions posed by the CFPB was: Uncertainty can increase compliance costs and litigation risk without benefitting consumers. Are there areas of significant ambiguity or inconsistency in the regulations? Where would regulations benefit significantly from increased clarity or harmonization—both with respect to the Bureau’s regulations and with respect to overlap, duplication, or inconsistency with regulations issued by other Federal agencies?
Answer: Two areas of ambiguity and concern pertain to digital communication disclosures as provided in Section 1006.42 of the proposed new rules for debt collection (Proposed Rules). First, the Proposed Rules dance around the need for security with regard to consumer communications. For example, the sum total of information presented in the proposed rules regarding security requirements associated with the use of a URL is as follows. “Use a secure link.” It would behoove the CFPB to detail the security requirements that apply to debt collection communications similar to the approach Health and Human Services has taken with the Health Insurance Portability and Accountability Act.
Second, in several provisions of the new rules for debt collection, the CFPB makes reference to a “prior debt collector.” It is not reasonable to expect downstream collection agencies to rely on the sufficiency of consent or any other information obtained by a prior debt collector in connection with the collection of a debt for purposes of meeting the E-Sign Consent requirements of 1006.42 (c) or any other compliance requirement under the Proposed Rules or the Fair Debt Collection Practices Act.
Illinois Issues Guidance To Licensed Agencies
The Illinois Department of Financial and Professional Regulation released guidance yesterday, advising collection agencies about what to do if they wish to have employees work from home, and encouraging collection agencies and debt buyers to suspend all collection activity for the next 60 days. More details here.
WHAT THIS MEANS, FROM NICOLE STRICKLER OF MESSER STRICKLER: Last week the state of Illinois Department of Financial and Professional Regulation (“IDFPR”) published guidance directed towards the broader collections industry and addressing a number of prevalent topics related to the COVID-19 pandemic. Among the issues addressed was collections employees’ transitioning to a work from home format that was otherwise unanticipated by state regulators.
The IDFPR guidance further addressed accommodations for debtors in light of the ongoing crisis, and encouraged collections agencies to suspend all collection activity for at least 60 days. Similarly, the IDFPR issued additional guidance for banks and credit unions encouraging these entities to work with consumers to come to reasonable agreements regarding payment deadlines and deferrals.
COVID-19 Leads N.Y. to Scrap Collector Licensing: Report
It appears as though a proposal in New York that would require debt collectors to be licensed will not be moving forward, likely due to the state’s efforts to combat the spread of the coronavirus. More details here.
N.Y. Legislator Says He Has Introduced Bill to Ban Collections in State
A member of the New York Assembly has come out and said he has introduced a bill that would ban collection agencies from contacting individuals for 90 days. More details here.
WHAT THIS MEANS, FROM PORTER HEATH MORGAN OF MORGAN FINANCIAL GROUP: The decision of New York to stop pursuing collector licensing at this time is a good one for the industry. There are plenty for collection agency owners to worry about without adding licensing to the mix. When New York decides to revisit this again in the future, the industry may look very different with a higher percentage of work from home agents, which could have an impact in the way licensing is looked at in the future.
Assemblyman Ortiz’s proposed bill (AB 10261) finally was published April 8 and looks to “suspend all student loan, mortgage, auto loan, credit card, and utility payments for 90 days in response to COVID-19”, but it is really not much more than a published for publicity. It is a short and poorly written bill that tries to apply to both original creditors and third parties. Because of the broad language of what is proposed, this bill will see a lot of push back from a wide range of industries, and it is hard to see how the NY Assembly would even have the authority to enforce what it proposes to regulate.
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.