Compliance Digest – May 26

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.

Advocacy Group Analyzes Consumer Complaints Filed With CFPB During COVID-19

A consumer advocacy has published an analysis of the complaints filed by consumers with the Consumer Financial Protection Bureau during the coronavirus pandemic and there are some interesting data points related to the accounts receivable management industry. More details here.

WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: The U.S. Public Interest Research Group’s (U.S. PIRG) analysis of CFPB’s complaint database during the coronavirus pandemic needs to be carefully scrutinized.

First let’s take a look at the data in come context. In the month of March of this year there were 29,499 complaints filed. 13,689 were filed in the first half of the month (pre-COVID) and 15,810 filed the remainder of the month when the majority of the country was under a shelter in place. For the month of April there were 35,085 complaints filed. In 2019, the month of March saw 23,056 complaints filed and 22,915 for the month of April. That is an increase from last year by over 25%.

U.S. PIRG is correct in its conclusion that the totals for March and April 2020 were the highest on record for CFPB complaints filed. However what consumers are complaining about has changed and certainly does not align with the over-reactionary response to suggest a ban on debt collection activity.

For years the industry has been told that the CFPB receives more complaints about debt collection than any other financial product or service. Not so. Of the 29,499 complaints received in March 2020 only 4,205 of those complaints involved debt collection. 17,225 involved credit reporting, credit repair or other personal consumer reports. For the month of April 2020, 4,514  of the 35,085 complaints were about debt collection. The numbers of complaints for debt collection are consistent for the same months in 2019. 2014 was the first full year that CFPB started collecting debt collection  complaints and since that time those complaints average about 44,000 per month with its highest one year total in 2018 at 51,185 and its lowest in 2014 at 39,139.  Since 2014, debt collection complaints were always behind mortgage complaints and credit reporting by wide margins. At an average of 44,000 debt collection complaints per year, that translates into an average of 3600 complaints per month spread over an entire country, that is 73 complaints per state/month.   

This data does not support the moratorium upswell especially when many states moratoriums specifically exclude the collection of mortgage debt. Nor quite sure why debt collection has become the villain in this coronavirus pandemic, but U.S. PIRG’s own data suggest that debt collection is not the sources of consumers’ concerns.  


CFPB Reaches Settlement With Debt Relief Companies, Will Pay $450k of $18M Fine

The Consumer Financial Protection Bureau yesterday announced an $18 million settlement and stipulated final judgment — most which has been suspended — with a number of individuals and companies who were accused of violating the Fair Credit Reporting Act by allegedly obtaining individuals’ credit reports illegally and allegedly charging unlawful advance fees for debt relief services. More details here.

WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: You gotta love it – our government hard at work. The headline reads the CFPB entered into a settlement with the bad guys, Chou Team Realty, LLC (owned by Thomas Chou) aka Monster Loans and several other individuals and related companies to the tune of $18 million. Wow! Except they really didn’t. 

In sum, the allegations were that “between 2015 and 2017, Monster Loans violated the Fair Credit Reporting Act (FCRA) by obtaining consumer-report information for over 7 million consumers with student loan debt from a major credit bureau based on the false representation that the company would use the information to offer mortgage loans to consumers. Monster Loans allegedly provided the reports to several associated student loan debt-relief companies to use in marketing their services,” according to the CFPB. The student loan debt-relief companies did what all too many debt relief companies did which was over-sell and under-deliver. According to the complaint filed on January 2 in the Central District of California, several of the entities “collected more than $15 million in illegal advance fees from thousands of consumers nationwide between 2015 and at least 2017.”

So you’d assume that the $18 million would cover that. Well actually, while per the terms of the settlement, a judgment for $18 million will be entered against Monster Loans and its principal Thomas Chou and several other related companies and individuals, that judgment will be suspended as long as Chou and related enterprise TDK Enterprises pays $403,750 broken into three payments, and Peter Cowell the other individual defendant and his company Cre8labs, Inc., agrees to pay $406,150, but that is suspended due to limited finances. Additionally, Chou Team Realty, LLC must make payments over a several month period in the amount of $200,000. So in actuality the CFPB collects only $603,750. And what does Monster Loans pay you ask – $1 (not a typo) based on its “limited ability to pay as attested to in its financial statements,” according to the terms of the settlement.

Compare this result with fines levied against several large debt buyers and law firms we all know and love, that did not engage in criminal schemes but were charged with violations seemingly made up by the CFPB because they believed collecting debt is oppressive to consumers.  

By the way you know what’s best of all? Monster Loans, and Chou Team Realty, LLC are still doing business – according to their website they were open until 8:00pm on Memorial Day same as the rest of the week. And who says crime doesn’t pay? 

Texas Supreme Court Lifts Ban on Garnishment, Debt Collection Actions

The Texas Supreme Court yesterday issued updated emergency orders that lifts a temporary ban that had been in place barring evictions and debt collection lawsuits and garnishments. Proceedings for evictions and debt collection activity in the state can resume next week, according to the orders. More details here.

WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: The Texas Supreme Court on May, 14 entered an order that eases restrictions or garnishments that it put in place in April. These orders are part of the court’s response to the COVID-19 pandemic. A number of other states, including Illinois and Minnesota, similarly acted to limit collection litigation in various ways.

The April order allowed a writ of garnishment to be issued but it could not be served before May, 25. It also suspended default judgments until May 18, 2020. Under the new order, garnishments, turnover orders and collection actions can proceed. The order recognizes that stimulus money pursuant to the CARES Act shall be protected, and it allows for hearings on whether the funds are subject to the stimulus program. The judgment creditors, consequently, must provide notice to individuals that funds received under the federal CARES Act may be subject to a court stay that protects those funds from garnishment during the pandemic.

Despite the court returning some collection activity, there remain protections in place under other federal and city requirements. For instance, evictions may not proceed against tenants that have production under the federal Coronavirus Aid, Relief and Economic Security Act This includes renters in homes covered by federally backed mortgages. Likewise, Texas cities of Austin, Dallas and San Marcos have in place their own restrictions on certain collection activity.

This new order expires on August 12.

It is interesting how many different responses to the pandemic there have been by the courts, cities, states, and regulators. It is hard to keep track of them all. I know in my own cases I am constantly checking what different actions are in place and when we need to comply. It will be great to be back to normal.

Sketchy Collection Agency Part of FTC Enforcement Action

A debt collector is part of an enforcement action announced yesterday by the Federal Trade Commission, after it was accused of threatening organizations if they did not pay for merchandise they did not order. More details here.

WHAT THIS MEANS, FROM JUNE COLEMAN OF MESSER STRICKLER: On May 13, the FTC announced an enforcement action against International Credit Recovery and its client, American Future Systems, dba Progressive Business Publications and Center for Education and Employment Law.  Typically, when companies are abusing telemarketing to fraudulently sign up customers, which is alleged in the FTC complaint, there is an allegation that the client and the agency have common owners. And there is no such allegation in the FTC complaint. If the allegations against the telemarketer are true, this could be an instance where the commercial collection agency is in cahoots with its purported client. On the other hand, this may be a case where the collection agency brought on a client, and did not have a good understanding of how the client conducted his business. 

This case provides a cautionary tale of red flags that might indicate that the agency needs to dig deeper into its client. In this instance, the agency was the largest generator of complaints to the Better Business Bureau in its region, and most of the complaint claimed the debt was not owed to its client. You should always discuss Better Business Bureau complaints (and any complaint) claiming a debt is not owed with your client. This is especially true if your collection agency receives a lot of complaints revolving around one client. And many complaints may impact your FDCPA defense that allows you to reasonable rely upon the statements of your client. After all, it is not reasonable to rely on the representations of your client if you have many allegations that those statements are not true. Further discussions with your client might provide you with confidence that the client’s representations are correct – but they might also pinpoint that the debts are not real. 

While I do not know the agency and do not know whether the allegations are correct, this case provides a roadmap to issues that catch the eye of the FTC. In addition to the FTC’s  criticism of not discussing Better Business Bureau complaints (or any complaint) with their client, the FTC alleged violations because the agency made statements regarding the effect of nonpayment on a credit rating, characterizing these statements as false threats. The CFPB has already issued statements that agencies should not discuss the impact of a debt on a credit rating because there are many things that could affect a credit rating beyond the one debt you are attempting to collect. The agency is also alleged to have falsely threatened litigation and falsely threatened credit reporting when it never reported a debt and never filed a lawsuit. Thus, this FTC lawsuit highlights three things this agency did that caught the FTC’s enforcement department’s eye:  (1) not discussing complaints with clients; (2) referencing credit reporting or threatening litigation when you do not credit report or file lawsuits; and (3) referencing the impact the payment or non-payment of a debt has on a credit rating. Knowing what catches the eye of the FTC’s enforcement arm allows you to make sure you don’t catch the FTC looking your way.

Efficacy of Creditor Declarations Lead to Different Rulings in Appeals Court FDCPA Case

The Court of Appeals for the Eleventh Circuit has partially affirmed and partially overturned a case against a debt collector that was sued for violating the Fair Debt Collection Practices Act by allegedly filing lawsuits to collect on unpaid debts even though it knew the debts were “uncollectable.” The crux of the case has to do with whether the plaintiffs were properly provided a copy of a cardholder agreement by the original creditor which included a mandatory arbitration clause. The Appeals Court hinged its ruling on different declarations from representatives of the original creditors, with one being more complete and definitive than the other. More details here.

WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY AND SHUSTER: Evidence, evidence, evidence. Tricky little thing. The 11th Circuit issued a reminder of regardless of where parties contract, an enforcing party must have at least seen a copy of it! The emergence of online contracts and agreements creates issues for how parties maintain copies of the ones that pertain to each consumer. The 11th Circuit refused to allow a debt buyer access to arbitration because it failed to provide evidence that the creditor provided the consumer with an agreement with an arbitration clause. The online lead generation industry and buyers of these leads should also take heed – if you can’t provide the opt-in consent lead page AND the pages the consumer saw to get there, you may have your own evidence issues.

Sanders Bill Calls For Moratorium on Medical Debt Collection Until COVID-19 Vaccine is ‘Widely Available’

A group of Senate Democrats, led by Sen. Bernie Sanders [I-Vt.], introduced a bill on Friday that, among other provisions, would call for a moratorium on the collection of all medical debts nationwide until a vaccine for COVID-19 is “widely available to the public.” More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH VOLUCK: This is simply another headline-grabbing piece of legislation without any realistic chance at passage. Everything about the suggestion is flawed. It seeks to halt medical debt collection until a COVID vaccination is widely available. There is no guarantee that such a vaccine will ever be created, let alone “widely” available. It places the burden of the cost of medical services on providers, the very people who are on the front lines of the war against this virus. If patients don’t pay, doctors and nurses don’t get paid. Finally, it stands no chance of passage in the Republican-controlled Senate. The legislation evinces a complete lack of understanding of a credit-based economy and, if passed, would harm those most needing credit as providers would demand upfront payment before giving medical treatment. Even the government cannot force people to work for free. 

Oregon Issues Guidance for Collectors, Debt Buyers

Late last month, the Oregon Department of Financial Regulation issued guidance for all collection agencies and debt buyers regulated by the state, “encourag[ing]” them to take a more active role in helping individuals who have been impacted by the coronavirus pandemic. More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF PAYMENTVISION: The Oregon order does not require but instead encourages collectors to work with customers and take proactive measures to help customers make it through the current economic situation caused by COVID-19. This guidance is similar to the guidance issued in other states, such as in March by Illinois. While again, the recommendations are encouraged and not required, collectors should not disregard such haphazardly.   

The FDCPA provides that “(a) debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.” The possibility that the definition of an unfair or unconscionable action change is not one to be ignored; would it be ethical to take aggressive actions during this time? As actions taken during a Pandemic were arguably not considered when the FDCPA listed examples of what constituted unfair or unconscionable means, the answer is unknown. The possibility of such a change in interpretation is higher in states such as Oregon, where an order such as this one is in place.  

Judge Grants Second Motion to Compel Arbitration in FDCPA Case

A District Court judge in New Jersey has granted a defendant’s request to compel arbitration in a Fair Debt Collection Practices Act class-action case, more than a year after originally denying a request to do so. More details here.


Dennis Barton

For those of you with small kids, you may remember the inspirational line from “Toy Story of Terror!”: “Jessie never gives up; Jessie finds a way.” While movie quotations are not binding legal precedent, they make a lot more sense than some of the things I’ve read in judicial opinions. Jessie’s message is that you should not surrender (i.e., settle) because there are different ways to win.

In George v. Rushmore Service Center, LLC, the consumer filed an FDCPA case relating to the collection of a credit card debt. Defendant Rushmore filed a motion to enforce the arbitration agreement. George opposed the motion arguing he never agreed to mandatory arbitration, and even if he did, arbitration did not apply to FDCPA claims. The court disagreed and granted Rushmore’s motion. In doing so, the court relied on testimony from the underlying credit card company. She testified that all customers, including George according to company records, are sent an agreement saying that they consent to mandatory arbitration by using the credit card. The District Court of New Jersey applied South Carolina law because the agreement contained a choice of law provision mandating the law of that state apply to any dispute relating to the credit card.  South Carolina law also says consumers consent to arbitration agreements mailed to them upon using the credit card. Lastly, the George court found the arbitration agreement applied to FDCPA cases against third-party collectors because collection attempts “relate” to the underlying transaction and use of the card.

The takeaway from this case is to always remember contracts between the creditor and consumer may contain language that helps collectors defend FDCPA cases. Arbitration agreements are a prime example. While cases are not dismissed when transferred to arbitration, most consumer attorneys voluntarily dismiss their claims once that happens. Choice of law provisions can also assist in defending FDCPA cases. The George case reminds us that arbitration agreements are one of the tools in our defense toolbox. Once served with a lawsuit, always obtain all of the documents relating to the underlying business transaction between the creditor and consumer. In addition to arbitration agreements, jury trial waivers and class action prohibitions (often also part of arbitration agreements but can be separate depending upon state law) also often exist to severely undermine consumer lawsuits.  In other words, never give up. You can find a way.

TCPA Class Action Filed Against Collection Law Firm for Allegedly Leaving Messages on Wrong Number

A class action lawsuit has been filed against a collection law firm for allegedly violating the Telephone Consumer Protection Act because it left two voicemail messages on the plaintiff’s phone, but the messages were an attempt to reach someone other than the plaintiff. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN SANDERS: A plaintiff in the District Court for the District of Arizona filed a class action lawsuit against a collection law firm for allegedly violating the Telephone Consumer Protection Act (“TCPA”) because it left two voicemail messages on the plaintiff’s phone. In Morgan v. Linebarger Goggan Blair & Sampson, LLP, the plaintiff received two calls on her VoIP phone. Notably, the calls were an attempt by the firm to reach someone else. The plaintiff stated in her complaint that she has no idea who the other individual is, and she has no business of any kind with the defendant. The plaintiff is seeking to include anyone who received a call on his or her cell phone which was intended for someone else – and placed from the defendant’s automated telephone dialing system (“ATDS”) – as a participant in the class.

What is interesting about the Complaint is that the VOIP phone appears to be connected to both a residential and a cellular telephone number – raising issues as to whether the defendant law firm was attempting to call a residential number and the number was “ported” or whether it was attempting to call a cell phone number for a reassigned number. What we know, however, is that this case is brought in Arizona, which is in the Ninth Circuit. While most Circuits have followed Glasser and Gadelhak and Dominguez, Marks still reigns supreme in the Ninth Circuit. Plaintiff’s lawyers are becoming more and more savvy with the types of fact patterns they are alleging and have become more aggressive at the outset (versus seeking early resolution).

Collectors Can Keep Working From Home in Minnesota

The Minnesota Department of Commerce on Friday issued new guidance to collection agencies that have collectors working from home, reminding the companies that, among other things, they are responsible for supervising employees working from home to ensure that consumer information and data are being protected. More details here.

WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: On May 15, the Minnesota Department of Commerce issued a second extension regarding its authorization for debt collectors to work from home without licensing for the home locations, provided certain criteria are met. Like the initial work-from-home guidance and first extension, the second extension clearly provides that while the Department is temporarily suspending the licensing requirements of Minn. Stat. § 332.33, subd. 3, all other requirements remain in effect.

Thus, as Minnesota debt collectors continue to work from home, it is critical for collection agencies to ensure that their employees remain compliant with federal and state laws. This includes abiding by sufficient policies and procedures regarding working remotely and confirming that employees are taking all necessary steps to protect consumer data in their remote environment.

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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