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.

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.
Bill Introduced to Modernize E-SIGN Act
A trio of Senate Republicans have introduced a bill aimed at making it easier for individuals to consent to receiving certain electronic documents, like account information and contracts, overhauling the Electronic Signatures in Global and National Commerce (E-SIGN) Act. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: On July 2, three Senators – John Thune [R-S.D.], Jerry Moran [R-Kan.], and Todd Young [R-Ind.] – introduced a bill to update the law regarding the use of electronic documents in commerce.
The Electronic Signatures in Global and National Commerce Act, 15 USCS § 7001 et seq., was originally enacted in 2000 to facilitate the use of electronic records and electronic signatures in interstate and foreign commerce. Under the E-Sign Act, “a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form.” § 7001(a). But the current form of the law requires consumers to reasonably demonstrate that they can access documents electronically before they can receive an electronic version.
The proposed amendment, the E-SIGN Modernization Act, Senate Bill 4159, is intended to streamline how consumers consent to receiving electronic documents such as bank statements, account information, and contracts. In a press release, Sen. Thune explained the purpose of the proposed legislation as follows:
As technology continues to advance and transform, so too should the laws that govern it, computers, smart phones, and other devices are more reliable and accessible than ever before. This legislation makes necessary updates to E-SIGN to reflect these advancements in technology and make it easier for consumers to receive documents electronically.”
The amendment is in its infancy, but we are hopeful that this amendment could be beneficial for companies that issues with communication – whether via the FDCPA or the TCPA.
THE COMPLIANCE DIGEST IS SPONSORED BY:

CFPB to Take ‘Final Action’ on Proposed Debt Collection Rule in October
It is shaping up to be a very interesting Fall for the credit and collection industry, one that could re-shape the industry for a generation to come. The Consumer Financial Protection Bureau this week published its Spring rulemaking agenda and indicated that it is planning to release its final debt collection rule in October, days before the presidential election. There will be a 12-month period before the rule actually goes into effect, giving companies plenty of time to prepare and make the necessary changes. More details here.

WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: The publication of an agency’s rulemaking agenda is nothing new. The debt collections industry has been closely following these publications since the ANPR was published back in 2013. It certainly appears that the debt collection rule maybe getting close to the finish line. However, given the recent Seila decision and the upcoming election, the future of the debt collection rule has a challenging future.
The first obstacle is the issue of ratification. Although the Supreme Court stopped short of articulating a specific remedy for actions taken by the current Director as well as her predecessors, the Bureau is moving ahead and has ratified all prior actions taken in most enforcement matters and all pending rulemakings. Parties who are subject to pending enforcement actions have started the process of challenging those ratifications in the lower courts. However, the consumer advocates will be watching. Those same arguments will be used to challenge the Director’s authority to proceed and authorize actions taken in pending rulemakings including the debt collection rule, as well as payday rule which was finalized on Wednesday, July 8th.
The second obstacle is the election. Since the CFPB Director now serves at the pleasure of the President, a change in administration may result in a new CFPB Director. That new Director may take a page out of Kraninger’s playbook. During the payday rule implementation period, the CFPB proposed rules to rescind the mandatory underwriting provisions of the 2017 final payday rule and to delay the August 19, 2019 compliance date for those provisions to November 19, 2020. Last Wednesday, the Bureau issued a final rule which formally rescinded the ability to repay provision. This could be the fate of some portions of the debt collection rule as well, even if the final rule is issued in October. The new Director can certainly have the CFPB revisit all or portions of the final rule during the implementation period or even delay the implementation period.
Bottom line, the issuance of a final debt collection rule is not the end of the story but the beginning of yet another chapter in the sage of an industry who has been looking for clarity under the FDCPA for 40 years.
Judge Grants MSJ in FDCPA Suit Over Payment Options ‘May’ Not Be Available
A District Court judge in Illinois has granted a defendant’s motion for summary judgment after it was sued for violating the Fair Debt Collection Practices Act by saying in a collection letter that payment options “may” not be available if the recipient of the letter did not contact the collection agency. More details here.

WHAT THIS MEANS, FROM SHANNON MILLER OF MAURICE WUTSCHER: In Ramirez, et al. v. Midland Funding, LLC, et al., a recent opinion out of the Northern District of Illinois, the Court granted summary judgment for the defendants after it considered multiple plaintiffs’ challenges to identical collection letters received from one of the defendants, Midland Credit Management, Inc.), which the plaintiffs had alleged was false and misleading under the FDCPA for suggesting that once the debtors’ accounts were forwarded to an attorney, certain repayment options may not be available to the consumer anymore.
The letters in issue informed the consumer that his/her account was in “pre-legal review” and further stated
LET US HELP YOU! If the Account goes to an attorney, our flexible options may no longer be available to you. There is still an opportunity to make arrangements with us. We encourage you to call us at: (800) 939-2353.
Plaintiffs’ specific challenge was that the letter threatened action which defendants did not intend to take, in violation of 1692e(5), by suggesting that flexible options for repayment may not be available after placement with an attorney because, once placed with an attorney, such attorneys were permitted to accept repayment options for less than the full balance.
The Court, in granting the defendants’ motion for summary judgment, rejected plaintiffs’ argument, instead finding that the challenged language was not misleading in part because, while collection attorneys hired to collect the debts could, in some circumstances, accept settlements for less than the full value of the debt, the “goal” of placing the account with such attorneys was to collect the entire balance owed. However, the Court’s primary consideration was the challenged language’s use of the phrase “may” as opposed to “will”, stating that “[m]ost importantly, plaintiffs’ argument ignores the presence of the word ‘may’ in the letter”, articulating that the letter merely advised that certain “flexible options” “may” not be available to the consumer after placement with an attorney. The Court held that was consistent with what could factually happen; a consumer may still be able to negotiate a reduced balance settlement but they also may not. Had the letters used “will” instead, the Court opined, they would have been false on their face. As such, the language was not false and misleading.
The take away for the industry is certainly that speaking in absolutes is almost always a recipe for a violation under the FDPCA, given its strict liability. Unless the action that “will” or “will not” be taken is an absolute certainty, industry members are far better off using “may”, as in this case. While “will” reflects a certainty, “may” reflects an event or occurrence that could happen, but also could not; here that is what saved the letter in issue from constituting a violation. Additionally, it is important to note that use of flexible language such as “may” will only insulate your communication from becoming false and misleading if the act or occurrence actually has a chance to happen or not happen. Here, if the defendants’ placement of accounts with attorneys were to have no difference regarding the availability of “flexible options” to the consumer then the letter may very well have run afoul of the FDCPA after all.
Foreclosure Alone Not Debt Collection Under FDCPA, Appeals Court Rules
When foreclosing on a house, whether a lender attempts to recover the unpaid balance on a mortgage or just recover the property determines whether the Fair Debt Collection Practices Act applies, according to a ruling issued yesterday by the Ninth Circuit Court of Appeals. As long as the lender is only recovering the property, the FDCPA can not be applied, the court ruled in affirming a lower court’s dismissal of the suit. More details here.

WHAT THIS MEANS, FROM CARLOS ORTIZ OF HINSHAW CULBERTSON: In Barnes, the U.S. Court of Appeals for the Ninth Circuit held that a judicial foreclosure proceeding is not subject to the FDCPA when the proceeding does not include a request for a deficiency judgment or some other effort to recover the balance owed on the loan. In arriving at this holding, the Ninth Circuit focused on the text of the FDCPA, and specifically the definition under section 1692(a)(5) regarding a “debt.” In regards to a FDCPA debt, the court reasoned that a “debt” exists when there is an attempt to get a consumer to “pay money.” Because the defense was not seeking to collect the money owed on the mortgage, there was no FDCPA debt. This case was a friendly reminder to me of a lesson learned during my first semester of law school, which was to always go back to the language of the subject statute. Although there have been some tough cases that have expanded the applicability and reach of the FDCPA (thereby making our job in representing the consumer finance industry more challenging), this one represents one of a few that have gone the other way in attempting to get back to what the FDCPA was actually intended to regulate. By focusing on plain language of the FDCPA and how it defines a “debt,” the Ninth Circuit got this one right.
Appeals Court Overturns Dismissal of FDCPA Suit On Grounds it was Time-Barred
Every time the Fair Debt Collection Practices Act is violated a separate statute of limitations clock starts running, the Fourth Circuit Court of Appeals ruled yesterday, overturning a lower court’s dismissal of a suit for ruling that subsequent violations of the FDCPA were of the “same type” as the original which occurred outside of the one-year statute of limitations. More details here.

WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: Recently the 4th Circuit joined several other Circuits (the 6th, 8th and 10th) ruling that each individual violation of the FDCPA re-starts the SOL one year clock. In Bender v Elmore & Throop, P.C. it was a continuing series of communications to collect an alleged HOA [home owners association] debt. There’s a logic to this as the Court pointed out:
This interpretation avoids creating a safe harbor for unlawful debt collection activity. Under the district court’s approach, so long as a debtor does not initiate suit within one year of the first violation, a debt collector would be permitted to violate the FDCPA with regard to that debt indefinitely and with impunity. No matter how frequent or abusive such collection efforts might become, the debtor would be left entirely without a remedy simply because the debtor did not timely pursue the first violation. As the statutory text makes clear, Congress did not intend such a result.
The Court also relied on the recent Supreme Court decision in Rotkiske v. Klemm, 140 S. Ct. 355, 360 (2019) where the issue was the start date of a violation, whether it was when it occurred or was discovered. SCOTUS relied on the text of the FDCPA which states claims must be brought “within one year from the date on which the violation occurs.” 15 U.S.C. § 1692k(d). (emphasis added).
I don’t see any easy way around this ruling and would expect it to be adopted in those Circuits which have yet to address the specific question when it’s raised.
Judge Grants MTD Over Including of Tax Disclosure in Letter Where Forgiven Amount Was Only $40
A District Court judge in New Jersey has granted a defendant’s motion to dismiss after it was sued in a Fair Debt Collection Practices Act class action for including a disclosure about the possible tax consequences of a debt forgiveness offer, even though the amount being forgiven was $40 and for allegedly not identifying the current creditor to whom the debt was owed. More details here.

WHAT THIS MEANS, FROM PORTER HEATH MORGAN OF MALONE FROST MARTIN: This is a good, common sense decision out of New Jersey. It’s good to see that courts are finally beginning to take a stand against these frivolous cases. The main take away is the good language this opinion provides supporting use of the word “may” in collection letters. It follows the common sense meaning that gives collectors some discretion in its use on their letters.
House Passes Credit Reporting Reform Bill
The House of Representatives yesterday passed H.R. 5332, the Protecting Your Credit Score Act of 2019, which would create a central portal for individuals to view their credit scores and allow them to more easily file disputes and give the Consumer Financial Protection Bureau more oversight of credit reporting agencies. More details here.

WHAT THIS MEANS, FROM KIM PHAN OF BALLARD SPAHR: On June 29, the U.S. House of Representatives passed H.R. 5332, the Protecting Your Credit Score Act. The bill would require the three nationwide consumer reporting agencies (Equifax, Experian, and TransUnion) to create an online portal that consolidates consumer rights to request consumer reports, dispute consumer report information, request and remove security freezes, and access inquiry and permissible purpose information under the Fair Credit Reporting Act.
While the bill has been praised by consumer advocacy groups for protecting consumers, the bill has also been criticized by industry groups for being unduly burdensome. The White House has also issued a statement of administrative policy in opposition to the bill, which is not expected to see any movement in the U.S. Senate.
Judge Grants Motion for Defendant Accused of Threatening to Sue
A District Court judge in Illinois has granted a defendant’s motion for judgment on the pleadings in a Fair Debt Collection Practices Act case in which a collection agency was accused of threatening legal action which it did not plan to take. More details here.

WHAT THIS MEANS, FROM JONATHAN ROBBIN OF J. ROBBIN LAW FIRM: The Northern District of Illinois’s decision highlights two important issues. First, where a letter indicates that “future attorney involvement” is one option among others, there is no threat that imminent legal action is underway or contemplated. But where a letter indicates that an attorney is already involved, there is a threat. Second, even three months of inaction following such a threat to take legal action is still insufficient to demonstrate a lack of intent to take an action. The Court’s decision follows the line of cases holding that even where there is a threat of imminent litigation, that litigation does not need to be immediately commenced and a debt collector can attempt to resolve the outstanding balance without litigation.
FCC Tells Carriers When to Start Tracking Reassigned Numbers For Database
Voice service providers are going to start keeping track of the most recent date in which a phone number was permanently disconnected and must age phone numbers for 45 days before reassigning them by July 27, according to an announcement from the Federal Communications Commission’s Consumer and Governmental Affairs Bureau. More details here.

WHAT THIS MEANS, FROM KATHERINE BRAVO OF MANATT: This database would be helpful as it is difficult for companies to know whether a cell phone number has been recycled by the carrier. We saw this in the Nunes case in 2016 where the court denied Twitter’s cross-motion for summary judgement, thereby exposing companies to liability even when they are unaware that a phone number has been recycled. In that case, Twitter was inadvertently sending Tweets via text messages to the owners of recycled cell phone numbers that prior owners of the number signed up to receive.
CFPB Looks For More Info About Model Validation Notice
The Consumer Financial Protection Bureau, in a notice published in the Federal Register, is seeking to collect more information about collection validation notices, especially how individuals locate and use the information included in them. More details here.

WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER: Since validation notices generate such a significant volume of lawsuits — and lend themselves so nicely to class actions — some clarity from the CFPB would certainly be a welcome change for industry members. Assuming the Bureau continues to work off the proposed model first proposed in its 2019 NPRM, encouraging signs point to a notice that would address common causes of overshadowing claims, the use of electronic communication in debt collection, and the sufficiency of disclosures concerning debt balances. But it remains to be seen what, if any, revisions to the proposal would flow from these “cognitive interviews” and what the Bureau will consider to be acceptable “performance” of the model notice. Additionally, it remains to be seen whether this further testing will take into consideration the concerns previously voiced by industry members about the Bureau’s model notice.
Supreme Court Severs Gov’t Collection Exemption from TCPA; Leaves Rest of Statute Alone
The Supreme Court today ruled that the Telephone Consumer Protection Act does not need to be invalidated in order to correct a violation of the First Amendment in which it allowed collection calls to cell phones without prior consent when collecting debts that were owed to or guaranteed by the federal government. More details here.

WHAT THIS MEANS, FROM SCOTT GOLDSMITH OF DORSEY: The rumors of the end to the TCPA have been greatly exaggerated. Consistent with the comments during oral argument, the Supreme Court found the government backed debt exception violated the First Amendment, but was properly severed from the rest of the statue by the Fourth Circuit.
This case was never well positioned to deliver a knock out punch to the TCPA. The Fourth and Ninth Circuits agreed that severing the government backed debt exception was the proper remedy. The Justices were largely united on that result as well.
The result today should refocus attention on the Circuit split over the proper definition of an automatic telephone dialing system. After nearly thirty years of the TCPA, businesses still don’t know in some jurisdictions whether the equipment they’re using might expose them to ruinous damages in a TCPA class action. The same equipment may lead to TCPA liability in California when it is perfectly acceptable in Florida.
The Supreme Court will likely need to step up to decide, once and for all, the definition of an ATDS. The instant case does not offer many clues for how the Court would approach a future case on the ATDS definition. The majority opinion steered clear of evening using the legal term, instead opting to use the more nebulous “robocall” when referring to calls restricted by the ATDS.
In the short term, TCPA litigators will continue to litigate under disparate Circuit decisions. We will also look out for the long expected new TCPA omnibus from the FCC, which may offer some clarity and uniformity to the TCPA landscape.
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.
