Compliance Digest – June 22

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.

NYC Enacts Rule Regarding Language Access

A new rule is set to go into effect in New York City later this month that will require debt collectors to notify individuals who do not speak or read English well about other options that may be available to help those people understand their rights and communicate with collection agencies. More details here.

WHAT THIS MEANS, FROM KATY SPICER OF SQUIRE PATTON BOGGS: Why did New York pass a Language Access rule? First, New York is filling a gap left by federal law. Currently, the federal law does not have a mandatory language access rule governing debt collection practices.  Second, New York, as this New York Department of Consumer Affairs 2019 Report details, has vulnerable Limited English Proficiency (“LEP”) consumers that are “likely to face great challenges navigating the debt collection system” because of language barriers and that, “when left to their own devices, debt collectors are not taking adequate measures to enable LEP consumers to understand and resolve their debt collection issues.” Most importantly, a language barrier likely prevents LEP consumers from understanding their rights much less exercising their rights. This makes for a dangerous unfair playing field that is not going to end well for either the consumer or the debt collector. Indeed, the New York Department of Consumer Affairs (DCA) investigated 32 debt collection agencies that had been the subject of consumer complaints and found that:

  1. Although debt collectors claimed to offer language access, a careful review of the services were underwhelming and still left LEP consumers confused;
  2. Although debt collectors claimed to offer Spanish-language services, consumers were unable to access the services;
  3. Debt collectors were not properly identifying in consumer accounts requests for language access, which kept the confusion cycle alive with each follow on contact with a LEP consumer; and
  4. 10 of 32 debt collectors did not have written policies addressing LEP consumers.

As a result, it is no surprise that the language access rule now includes such things as informing consumers of language access availability, a mandatory retention process of consumer language preference(s), and internal reports identifying by language the number of non-English consumer accounts a debt collector employee attempted to collect. While the rule goes into effect June 27, the DCA may announce a 60-day delay before initiating enforcement actions to give debt collectors time to become compliant.   


Judge Certifies Class in FDCPA Case Over Voicemail Without Required Disclosure

A District Court judge in Nevada has certified a Fair Debt Collection Practices Act class action against a defendant that was accused of leaving a voicemail message as an initial communication that did not include the required disclosures, but instead relied on a letter that was usually sent the next day to do so. More details here.

WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: In the initial communication with a consumer, whether that communication is written or oral, collectors are required to disclose that “the debt collector is attempting to collect a debt and any information will be used for that purpose.” 15 U.S.C. § 1692e(11). In subsequent communications, the collector need only disclose that the communication is from a debt collector. In this case, the consumer alleges that the collector had a practice of issuing letters containing the full disclosure on the same day that it left voicemail messages that did not contain the full disclosure. However, those letters were not mailed by the collector’s letter vendor until the following day. Therefore, the initial communication was the voicemail message, which did not include the full disclosure required by § 1692e(11), and not the letter. This case provides another reason to test your entire letter process and not simply review the letters themselves. If you are using a letter vendor, then it important to understand how that will affect the timing of your letters so that you can make any necessary adjustments. 

Judge Denies Class Certification, Grants MSJ in FDCPA Case Over Rounding Issue

A District Court judge in New Mexico has granted a defendant’s motion for summary judgment and denied a plaintiff’s motion to certify a class in a Fair Debt Collection Practices Act case because a number of payment options were rounded to the nearest dollar and were different than the total amount owed. More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF PAYMENTVISION: This case is a fascinating one to review not just as a verdict that relieved a Defendant of a potential class-action suit but for the method in which the Court reviewed the case. First, it includes a review of a collection agency’s use of emails that include links to outside sites, and secondly, the Court’s review of the Defendant’s computer programing design as a means to find a bona fide error defense for the Defendant.  

Links in emails and text messages have been a hot topic ever since the Consumer Financial Protection Bureau (CFPB) issued its proposed debt collection rules, which at this time are still pending. This Court took the approach that the links included in the email became part of the whole communication. The linked pages provided the specifics to each payment plan, which then required further steps the Plaintiff would need to take to eliminate confusion, that the information contained in the email by itself could have resulted in without. The Court stated that the least sophisticated consumer “is bound to read collection notices in their entirety” and, therefore, would click on the “Choose Option” hyperlinks to review the information of each payment plan option.

Secondly and very interesting is how the Court’s concluded its findings that the Defendant’s actions did not violate FDCPA under the bona fide error test by considering the computer programming in place. As stated above, the programming required all debtors to be presented information through the links included in the email that outlined the terms of each payment plan terms, before any plan could be selected. In addition, the programming also included measures in place to ensure that no payment plan option would result in a total payment that exceeded the amount owed by the Plaintiff. The programming showed the good intent of the agency to remain in compliance. This decision is a massive win for those collectors that use online tools that allow for such programming.

Judge Certifies Class in FDCPA Suit Over Tax Disclosure

A District Court judge in New Jersey has certified a class against a company accused of violating the Fair Debt Collection Practices Act by sending collection letters which included a disclosure regarding the possible need to report the forgiveness of a debt to the Internal Revenue Service. More details here.

WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: This case presents a useful discussion regarding the changing of the class definition late in the case. In Schultz v. Midland Credit Mgmt., Inc, 2020 U.S. Dist. LEXIS 98824 (“Schultz II”) the Court acknowledged that “[a] Plaintiff may amend the proposed class definition at the class certification stage.” The Court’s discussion leading to that point however offers arguments to oppose a change on those occasions when it is simply an issue of numbers.

The typical scenario: Plaintiff’s counsel is advised that the defendant company has a low net worth and the letter class as defined due to its size makes a class resolution economically impractical. When you point that out, the standard response is a threat to narrow the class to lower the number of potential class members to avoid that argument. The putative class counsel wants to change the geographical boundaries, going from the entire state to several or even a single county. Or to limit the class to those with those accounts deriving from the same original creditor. As a defendant, if you are going to settle as a class, you normally wanted the broadest class possible. The alternative is that by narrowing the class in this fashion, there is a real likelihood of additional lawsuits with the same claim for parties living in the remaining counties or that got the same letter but the original creditor was different. The rationale behind Schultz suggests the need for a better reason than sheer numbers.

The following facts are taken from the Schultz decision. “Defendant mailed collection letters to Schultz to collect on three different debts, the original creditors of which were Synchrony Bank, Citibank, and Capital One, respectively. All three debts were under $600. The letters contained the following language: We are not obligated to renew this offer. We will report forgiveness of debt as required by IRS regulations. Reporting is not required every time a debt is canceled or settled, and might not be required in your case.” Under the Department of Treasury and Internal Revenue Service (“IRS”) regulations, only discharges of indebtedness greater than $600 are subject to reporting, with certain exceptions. The class was defined as: 

All natural persons with addresses within the State of New Jersey, to whom, beginning July 20, 2015 through and including the final resolution of this case, Midland Credit Management, Inc., sent one or more letter(s) in attempts to collect a consumer debt, which contained the statement: “We will report forgiveness of debt as required by IRS regulations. Schultz II at *9.

After the District Court dismissed the Amended Complaint on the merits the 3rd Circuit reversed reasoning “there was no possibility of IRS reporting in light of the fact that the debt was less than $600, but the use of the conditional ‘might’ . . . suggested that reporting was a possibility.” Schultz v. Midland Credit Mgmt., Inc., 905 F.3d 159, 163 (3d Cir. 2018). On remand Midland filed a motion to compel arbitration as to the Synchrony Bank account. Midland also claimed that the letters on the other two accounts should be barred by the statute of limitations (“SOL”). The court denied the motion as to the SOL finding that the two added letters related back to the date of the original complaint and denied without prejudice, subject to further discovery, the motion to compel arbitration. Following limited class discovery Schultz moved to certify a class. However, in his motion the class definition was re-defined to create a much narrower class in three ways:

  1. The time period has been reduced from July 20, 2015 through and including April 25, 2016;
  2. The prospective class member’s original creditor must be Capital One; and
  3. The prospective class member’s current balance owed on the account must have been less than $600 at the time Defendant sent the collection letter. Schultz II at *9.

Midland objected. In rejecting Midland’s objection the Court pointed out that “the narrower Proposed Class is consistent with Plaintiffs’ legal theories and the defenses raised by Midland.” It went on to point out “Plaintiffs restricted the Proposed Class to cases where the original creditor was Capital One because Capital One is Plaintiffs’ only original creditor whose underlying credit agreement did not contain an arbitration clause” and Midland had contended from the very start that the dispute was subject to arbitration. Additionally, “[b]y nullifying that defense in defining the Proposed Class, Plaintiffs helped to ensure that common issues predominate over individual ones.” Id. at *10-11. (The other two creditor accounts were added when the complaint was amended.) The Court also found that limiting the class to those accounts with balances under $600 made sense because with those there is “no set of circumstances” where “reporting [to the IRS will] ever occur.” Id. at *10 (emphasis supplied).

Contrasting the analysis the Court went through in Schultz with a Plaintiff’s request to narrow the solely due to the lack of resources available for the class as defined may convince a Judge not to allow it. There are a number of cases that state a case can be certified even when a defendant’s net worth is zero. Food for thought. 

FTC Fines Retailer For Violating FCRA

A retailer has agreed to pay $220,000 to settle claims alleged by the Federal Trade Commission that it failed to provide the proper records to individuals who claimed to be the victims of identity theft. The suit marks the first time that the FTC has used its powers under a section of the Fair Credit Reporting Act to require companies to provide such information within 30 days of it being requested by an individual. More details here.

WHAT THIS MEANS, FROM MIKE FROST OF MALONE FROST MARTIN: The Department of Justice (DOJ) on behalf of the Federal Trade Commission (FTC) filed a complaint in US District Court Eastern District of Wisconsin Milwaukee Division, Civil Action No. 2:20-cv-859 against Kohl’s Department Stores alleging the company failed to provide complete records of transactions to consumers whose personal information was used in identity theft cases as required by the Fair Credit Reporting Act (FCRA). The FCRA, Section 609(e), provides rights for victims of identity theft, as well as, the responsibilities of businesses where identity theft victims request transaction records on the underlying identity theft business applications. 

The FTC provides a FAQ page that provides additional information and guidance for businesses that can be found here:

Kohl’s has agreed to pay a civil penalty of $220,000 to settle the FTC enforcement action and has agreed to coordinate with the FTC in revisions to its polices related to the appropriate response to document requests from a consumer that is the victims of identity theft.

Third party debt collectors often respond to consumer allegations of identity theft. Now is a good time for debt collectors to review their internal policies related to consumer inquiries related to identity theft situations to ensure proper compliance with the regulations whether that is directed back to the underlying creditor or through the third party debt collection agency. A review of the facts and allegations in this case as well as the recommendations from the FTC in the FAQ and the statements associated with the litigation would be a good starting point.

Judge Grants MTD After Plaintiff Files for BK Because of Collection Letter

An individual who filed bankruptcy because of what she read in a collection letter that was sent to her essentially overreacted, a District Court judge in Wisconsin ruled in granting a motion to dismiss filed by the defendant. More details here.

WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: In this case, the plaintiff claimed that certain language in a debt collection letter violated the FDCPA because it created such a sense of urgency that it forced her to file for bankruptcy. Granting the debt collector’s motion to dismiss, the court agreed with the debt collector that the plaintiff’s interpretation of its collection letter was “bizarre and idiosyncratic.” 

In determining the reasonableness of the plaintiff’s reaction, the court considered the amount of the debt at issue and concluded that “no reasonable trier of fact could find that a significant fraction of the population would arrive at plaintiff’s claimed interpretation of the statement over that sum of money, never mind claimed reaction.” Moreover, the court noted that the language at issue constituted “puffery” and was not facially misleading for purposes of the FDCPA. 

This decision highlights that while application of the “least sophisticated consumer” standard typically requires fact-intensive inquiries, that is negated when a plaintiff’s interpretation is unequivocally bizarre and idiosyncratic.

FCC Proposes Record Fine For Illegal Robocaller

The Federal Communications Commission has proposed a fine of $225 million which, if confirmed, would represent the largest fine it has ever assessed, after it accused a company of making more than 1 billion illegally spoofed robocalls. More details here.

WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY & SHUSTER: The DOJ rightly raises the issue of the collectability of this fine. Unfortunately, companies who flaunt the law to this degree rarely are upstanding entities with the means to pay these 9-figure penalties. The individuals who own and run these types of companies may be a better source of payment but they may keep funds hidden offshore if they realize the illegality of their actions. Regardless, the FCC’s action is a bold reminder to legitimate companies of the importance of rigorous compliance measures.

Judge Grants $65k in Fees For Defendants in FDCPA Case

A District Court judge in Oregon has awarded the defendants in a Fair Debt Collection Practices Act case more than $65,000 in fees and costs — about 40% of what was being sought — ruling that the plaintiff’s claims in her lawsuit were “clearly untenable” from the outset of the case. More details here.

WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER: While it is disappointing to see such a significant reduction of defense fees and costs in a case that went all the way to summary judgment, take heart! This opinion sheds some much-needed light on the fact that all too often, plaintiffs and their counsel file and pursue frivolous claims in the hopes that defendants will pay a few thousand dollars to resolve the case rather than spend thousands of dollars — or, in this case, more than $100,000 — to defend it. Although the defendant was only awarded about 40% of what it sought to recover, the decision to defend this case and seek fees will pay dividends in the future: plaintiffs and their lawyers will know, at the outset, that Suttell & Hammer is not only willing to defend itself vigorously, but that it won’t be satisfied with just winning the case. Using this strategy can have long-term benefit.

Judge Grants Motion for Defense in FDCPA Case Over Letter Sent to Grandma’s House

How can a plaintiff file a lawsuit against a debt collector claiming she never received the disclosures that are required in an initial communication even though she has to concede she received the initial communication because how else could she claim the letter did not include the required disclosures? Turns out that she can’t, which is why a District Court judge in New York has granted a defendant’s motion for judgment on the pleadings. More details here.

Dennis Barton

WHAT THIS MEANS, FROM DENNIS BARTON OF THE BARTON LAW GROUP: The applicable Latin term for litigation of this caliber is “goofball case.” As a collection attorney, I do not want to get sued, and I do not want my clients to get sued. If we are going to be sued, however, I want this to be the claim and these to be the facts. Plaintiff Saoulis sued Credit Control Services for sending a validation notice to an address to which she claimed CCS knew or should have known she did not live. Saoulis sabotaged her credibility by waving around the letter demonstrating she received it. In addition, even if she did not receive it within five days of it being sent, the letter itself was the initial communication. That means the clock on the validation period did not start until she received a letter. 

This claim reminds me of this:

One other thing to note in Saoulis is another case the court mentioned in its opinion. In that case,  the collector sent many letters to a consumer’s brother (where she did not live) without having any account that used the address of the consumer’s brother. The court in that case found plaintiff stated a claim for a violation of § 1692c(a)(1) for sending the letter to an “inconvenient” place. Those are pretty shaky facts as well because it is legitimate to skip trace for an address different from one in the creditor’s system. Although I do not know all the facts of the case, had it gone beyond the motion to dismiss stage, it likely would have been successfully defended.

The first takeaway from Saoulis is that no matter how compliant you are, you can still get sued. Not a shocker. The second takeaway is you may have some exposure arising from sending multiple letter to an address without documentation to support the consumer lives at that address. The final takeaway is a case like Saoulis must be defended. Any case this poor was only brought to extort a settlement. While I understand it is often cheaper to settle no matter your chance of successfully defending it, these bad-faith consumer attorneys will file more of these pitiful cases if the result is them receiving settlement money. And maybe next time take steps to seek sanctions. 

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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