Compliance Digest – July 27

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.

Appeals Court Affirms MSJ in FDCPA Garnishment Case

The company that an individual is employed with matters a lot when seeking to apply a garnishment order after the individual moves to other states, the Ninth Circuit Court of Appeals has ruled in affirming a lower court’s summary judgment ruling in favor of a defendant that was sued for violating the Fair Debt Collection Practices Act because it applied a California garnishment order when the plaintiff moved to Indiana and Texas. More details here.

Dennis Barton

WHAT THIS MEANS, FROM DENNIS BARTON OF THE BARTON LAW GROUP: This case points out the important distinction between collection lawsuit and the garnishments used to enforce their judgments. With some exceptions, the FDCPA generally requires a lawsuit to be filed in the consumer’s county of residence. The same standard, however, is not applied to the filing of a post-judgment enforcement mechanism of a garnishment because a garnishment is an action against the employer rather than the judgment-debtor (and yes, I know “consumer” is the more palatable phrase, but “judgment-debtor” is the more accurate legal term).  

Generally (and this might vary depending upon state law), a writ of garnishment issued by a state court (as in this case) is to be filed in the county in which the employer is present. In Farrell v. Boeing Employees Credit Union, et al., addressed an issue of first impression when deciding whether a state court garnishment filed against the United States government must be served in the county (or at least state) in which the consumer resided. The court held that a garnishment issued by the State of California (where the underlying judgment was entered) against the federal government to garnish a federal government employee could be filed in any state and served upon the federal government in that state independent of whether the judgment-debtor lived in that state at the time the garnishment was filed, served, or executed.

While this is an interesting case, its holding is limited to service of state court garnishments when the judgment-debtor is employed by the federal government. It reminds us, though, that jurisdiction for purposes of state court wage garnishments (or bank seizures) is determined by the location of the garnishee rather than the judgment-debtor. My firm, for example, is licensed to file collection lawsuits in Missouri and Illinois. We sometimes obtain judgments against defendants who is reside in a neighboring state like Indiana where my firm is not licensed. Another firm can and would, however, file the garnishment in Indiana even if the defendant resided in Illinois at the time of garnishment.


Judge Awards $16k in Damages & Fees to Plaintiff in FDCPA Case With Fake Law Firm

I’ve been writing up summaries of cases where someone is accused of violating the Fair Debt Collection Practices Act for a while now and, for the first time, I’ve come across a case where one of the defendants is identified as “John Doe” and involves setting up a fake law firm website for the purposes of “intimidating consumers into making” payments for unpaid credit card debts over the phone. A District Court judge in Ohio has granted default judgment in favor of the plaintiff and awarded her more than $16,000 in damages and attorney’s fees. More details here.

WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: This case is a textbook example of the importance of the FDCPA, which is intended to eliminate abusive, deceptive, and unfair debt collection practices. The FDCPA prohibits debt collectors from using any false, deceptive, or misleading representation or means in connection with the collection of any debt.

In this case, the plaintiff alleged that the defendant violated the FDCPA by creating a fake law firm website to intimidate consumers into making credit card and debit card payments over the phone. The plaintiff asserted that in an attempt to collect a debt from her, the defendant falsely threatened legal action, verbally berated her, and impersonated an attorney planning to garnish her social security payments.

Granting the plaintiff $5,000 in actual damages, the court found that the defendant’s conduct was “inherently degrading” towards the plaintiff. More importantly, the court highlighted that “[t]hese are exactly the type of false and misleading statements that Congress has indicated is injurious to consumers.” In addition to actual damages, the court granted statutory damages, attorney fees and court costs, for a total amount of $16,470.16.

This case demonstrates the application of the FDCPA precisely as Congress intended.

CFPB Announces Action Against Participants in Debt Relief Scheme, Including Four Attorneys

The Consumer Financial Protection Bureau yesterday announced an enforcement action against several defendants, including two companies and their owners and four attorneys for engaging in a student loan debt relief operation that illegally charged individuals nearly $12 million in upfront fees. More details here.

WHAT THIS MEANS, FROM PORTER HEATH MORGAN OF MALONE FROST MARTIN: It is good to see the CFPB go after bad actors in the debt settlement space. Many in the industry have been frustrated with certain debt settlement companies that prey on consumers struggling with debt and that face collections. Enforcement actions like these continue to weed out bad actors in this space, and they should be supported by the collection industry in our role as advocates for consumers. 

N.D. AG Bans Unlicensed Collectors

A trio of debt collectors have been ordered to stop collecting debts by the Attorney General of North Dakota because they did not have the proper licenses and were harassing individuals when trying to collect. More details here.

WHAT THIS MEANS, FROM CARLOS ORTIZ OF HINSHAW CULBERTSON: A takeaway from this report is: Collecting consumer debts without a license is risky! Extreme monetary penalties, damaged professional reputation and the ability to keep the doors of the business open are just some of the risks. Yet, when businesses that engage in consumer debt collection grow and expand their reach into different states, an easily overlooked precaution is whether a license to collect consumer debt is required. Some states require a license to collect debt from their consumer irrespective of whether a business has a physical presence in that state or is licensed in its home state or elsewhere. Not only may attorneys general for states that require a license commence legal action against business engaged in unauthorized consumer debt collection, but private rights of actions that consumers initiate are also possible, which often turn into class actions. What is more, sometimes municipalities within a state may have their own licensing requirements that can be full of exemptions, but unclear on whether those apply to you. As a result, every business that collects consumer debts should confirm that they hold the proper licenses for each and every jurisdiction in which they collect. This will require not only confirming and maintaining the licenses it currently holds, but consistently keeping up with changes that may come in any jurisdiction where it pursues consumer debt.

Appeals Court Affirms Judgment in FCRA Suit

The Court of Appeals for the Ninth Circuit has affirmed a lower court’s decision in a Fair Credit Reporting Act case because the plaintiff chose to file suit instead of notifying the credit reporting agency and furnisher about the accuracy of the date in which a Chapter 13 bankruptcy filing was being reported. More details here.

WHAT THIS MEANS, FROM KATY SPICER OF SQUIRE PATTON BOGGS: An important reminder from the Ninth Circuit that consumers must provide CRAs adequate notice about what exactly is being disputed. Without adequate notice of the reporting error, how can CRAs fulfill their duties to perform a reasonable reinvestigation? Indeed, the FTC provides this exact guidance to consumers in its published instructions on how to properly dispute a credit report. Specifically, the FTC highlights that a consumer “letter should clearly identify each item in [consumer’s] report [consumer] dispute[s], state the facts and explain why [consumer’s] dispute the information, and request that it be removed or corrected.” If it is not clear what a consumer is disputing, a CRA can provide written notice back to the consumer to add more complete details about what is actually in dispute. In the absence of consumer clarification, the scope of a CRAs reinvestigation is likely limited to what facts a consumer provided adequate notice of in his or her letter to the CRA.

Judge Grants MTD in FDCPA Case Because Plaintiff Wasn’t Specific Enough About Injury

A District Court judge in Georgia has granted a defendant’s motion to dismiss and offered a great comparison a technical violation of the Fair Debt Collection Practices Act to pick-up basketball after a collection law firm was sued for allegedly violating the FDCPA by accidentally mailing documents in a separate collection suit 20 days later than it indicated. More details here.

WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: Every so often you come across a story or decision that just makes you feel good. Wendy Daniels v. Aldridge Pite Haan, LLP, 2020 U.S. Dist. LEXIS 119449 (M.D. Ga. July 8, 2020) is that kind of decision. The first sentence “No Harm, No foul” pretty much sums it up. 

The decision relies on Trichell v. Midland Credit Mgmt., Inc.,     F.3d    , 2020 U.S. App. LEXIS 20849, 2020 WL 3634917 (11th Cir. July 6, 2020) decided two days prior. In Trichell the 11th Circuit raised the issue of Article III standing after the appeal was filed, despite the fact that neither of the parties had raised it. Trichell was a letter case and the lower court dismissed it on the merits for failure to state a claim. 

The facts in Daniels are somewhat simple, subsequent to an answer being filed in a collection suit, the defendant law firm sent Ms. Daniels’ attorney a “Notice to Introduce Documentary Evidence” which said it included documents which the collection firm might later introduce as evidence. The transmittal also included a Certificate of Service stating that the documents were mailed on March 5, 2019. The documents were apparently inadvertently not included. As they say, he/she who has not committed this sin at least once now raise your hand. As those of us with our hands down know we usually discovery this error when our adversary points out somethings missing. In the normal course there’s an apology, the materials go out asap and life goes on. But in this case Ronald E Daniels, Esq. (*) took a different tack, “scoured the Notice and its accompanying certificate of service for possible FDCPA violations” and a year later, March 20, 2020, filed suit. [Is it just coincidence that the Plaintiff and her attorney share the same last name?]

The missing documents were sent on March 25, 20 days later and these were only courtesy copies, and per this decision the issue of this extraordinary delay was not raised or brought to the courts attention in the collection action.  So where was the alleged harm? 

Best of all, Daniels also alleged a lack of meaningful attorney involvement claiming “if there were meaningful attorney involvement in the case, this mistake/miscommunication would not have occurred.” The Court gave that allegation the attention it deserved. Speaking of “meaningful attorney involvement” one has to wonder why Mr. Daniels didn’t just do what any diligent attorney would do when faced with an empty envelope – call the sender! 

“So, the real question for the Court is whether Ms. Daniels has stated a particularized injury-in-fact sufficient to give her standing to complain or whether this is another FDCPA case of “no harm, no foul.” The Court easily concludes it is the latter.” Id. at *4 

For years, players in pickup basketball games all over playgrounds, church gyms, and driveway courts have followed this simple phrase. Although one team may have technically violated a rule, the other team wasn’t hurt or put at a disadvantage, so the refs (or more likely, the players themselves) just let it go as there was no need to slow down the game with silly, hypertechnical, ticky-tack fouls. In a way, courts have the same rule — if you aren’t really hurt, then you, quite literally, cannot make a federal case out of every technical violation of a statute. To get in the courthouse, you have to first show that you were specifically hurt in a tangible manner. If you can’t, then the “no harm, no foul” rule says you don’t have a suit at all. Id. at 2.

This is legal argument at it’s finest. If only more courts did have the same rule. The only real question I have is whether we can get the Honorable Tillman E. Self, U.S.D.J. to go on the road and impart that southern wisdom elsewhere. Read the decision if you haven’t already.

Judge Denies MTD in FDCPA Case After Defendant Moves Case to Federal Court

A defendant that was sued in state court for allegedly violating the Fair Debt Collection Practices Act and then moved to have the case tried in a federal court instead has had its motion to dismiss based on the plaintiff’s lack of standing denied and will also be on the hook for the plaintiff’s attorney’s fees relative to the defendant’s removal of the case, a District Court judge in Washington has ruled. More details here.

WHAT THIS MEANS, FROM JONATHAN ROBBIN OF J. ROBBIN LAW: This cases presents the interesting conundrum when a defendant would prefer to be in Federal Court but the Plaintiff lacks Article III standing. Here, once Defendant removed the case he should not have argued Plaintiff lacked Article III standing, as the case law appears to be clear, that one cannot remove and then seek to dismiss on the basis that Plaintiff would lack standing following that removal.  The Court was so clear on this, that not only did the it dismiss but it sanctioned the attorney for the frivolous removal. This is not to say that the case could not have been removed. Defendant could have removed it and then made the standard 12b6 arguments. To the extent Plaintiff argued he did not have standing and the case should have been remanded, Defendant could then argue that there was standing and even if unsuccessful would not have been sanctioned.

FCC Adopts Call Blocking Safe Harbors, Seeks Comment on Additional Protections

The Federal Communications Commission has adopted a pair of safe harbors aimed at complying with the TRACED Act and protecting telecom companies when blocking calls deemed to be illegal or unwanted robocalls. More details here.

WHAT THIS MEANS, FROM STEFANIE JACKMAN OF BALLARD SPAHR: Call blocking continues to present compliance and communication challenges to the telecommunication industry and, as a result, impacts to ARM industry participants attempting to collect valid debts in a responsible and compliant manner. Indeed, the TRACED Act and related requirements implemented over the past two years have not just impacted telephone calls but also text message communications. With publication of the CFPB’s final collections rule anticipated in October and which is expected to further limit how the ARM industry can contact consumers to attempt to resolve debts, ensuring that consumer receive valid and compliant collection calls and text messages becomes even more critical to the ARM industry and consumers alike. Hopefully, the new safe harbors for providers relating to call blocking efforts and further rulemaking on additional controls and whether to require disclosure of caller information to consumers will present opportunities to raise and address some of these ongoing collection challenges.

FCRA Class Action Filed Over Accidental BK Notification on Credit Report

A class-action lawsuit has been filed against one of the nation’s largest financial services companies, alleging it violated the Fair Credit Reporting Act by inaccurately listing individuals as having for filed for bankruptcy protection and then refusing to correct their credit reports. More details here.

WHAT THIS MEANS, FROM SHANNON MILLER OF MAURICE WUTSCHER: This month, a class action complaint was filed against Bank of America, NA (“BOA”) regarding its credit reporting practices associated with consumer bankruptcies. In Brooks, et al. v. Bank of America, NA, the Plaintiff, William Norman Brooks, III (“Plaintiff”), makes claims pursuant to the Fair Credit Reporting Act, 15 U.S.C. § 1682, et seq., (“FCRA”) and the California Consumer Credit Reporting Agencies Act, Cal. Civ. § 1785, et seq. (“CCRAA”) on behalf of a class of similarly situated individuals against BOA for “systematically failing to obtain and use adequate identifying information” resulting in it “inaccurately reporting the existence of a bankruptcy filing to consumer credit reporting agencies” (“CRAs”). 

The Plaintiff alleges that BOA routinely runs bankruptcy scrubs to identify if any of its account holders have filed for bankruptcy, as doing so affects an account holder’s ability to maintain an open credit account with BOA. The complaint alleges that when BOA receives information regarding an account holder’s bankruptcy in which the BOA account is included, it closes the particular account and also reports to the CRAs that the account has been included in a bankruptcy. However, the complaint alleges that in doing so, BOA “fails to obtain sufficient identifying information” to properly confirm that the bankruptcy they are attributing to a particular account holder should in fact be attributed to such account holder and that as a result, BOA “will falsely report to consumer credit reporting agencies [] that a credit account has been included in bankruptcy.”

Specific to the Plaintiff, the complaint alleges that he held a BOA account and that in January of 2020 received a letter from BOA advising that it had identified a bankruptcy filing in his name and was therefore closing his account. Plaintiff denied that he had filed for bankruptcy and subsequently learned that BOA had attributed a bankruptcy to him that had been filed by an individual named “William E. Brooks” who had a social security number with the same last four digits as Plaintiff’s. Plaintiff disputed that the bankruptcy was his to BOA who he alleges nevertheless reported the bankruptcy to the CRAs causing his credit score to drop substantially. Plaintiff alleges further that, pursuant to the FCRA and the CCRAA, he disputed that the bankruptcy was his to the CRAs who in turn relayed the dispute to BOA. However, the complaint alleges that BOA “failed to investigate Plaintiff’s disputes as required” and “failed to remove the bankruptcy” from his credit reports, causing him damages. As a result, the complaint seeks actual and statutory damages as well as injunctive relief on behalf of the class.

The take away for the industry is initially that credit reporting continues to be the new hot topic for consumer litigation. Additionally, the complaint highlights the inherent risks associated with credit reporting; there’s always the potential that the information you are reporting is inaccurate. Here, it will be interesting to see if the Plaintiff will actually be able to certify a class; the violation seems to be the result of an unlikely perfect storm where two consumers share the same first and last name as well as the same last four digits of their respective social security numbers. However, depending on how many data points BOA requires in order to attribute a bankruptcy to a particular consumer, the problem may very well be more widespread, for example if only a consumer’s name is being compared, regardless of differences in dates of birth, addresses, social security numbers, and other personal identifying information BOA may have available to it. Lesson to be learned is to consider your own credit reporting practices and if they are thorough enough to ensure that you are reporting accurately and processing disputes properly.

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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