Compliance Digest – August 3

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.

Number of FDCPA Complaints Filed in June Spike: WebRecon

This month’s stats from WebRecon were looking at each other in the mirror, it appears. While the number of Fair Debt Collection Practices Act suits were up significantly for the month of June compared with the same month last year, but still down significantly through the first half of the year, the number of Fair Credit Reporting Act and Telephone Consumer Protection Act suits were down for June, but up for the first half of the year. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: Every month, WebRecon publishes data relating to the number of filings for specific types of cases – namely, FDCPA, FCRA, and TCPA. Many expected with some positive results out of the Courts for the TCPA, that filings would be down. But it’s been the opposite. Filings have been up for TCPA and for the FCRA, although in June, we are starting to see a shift downwards. Interestingly, FDCPA suit filings have gone up in June. We expect to see TCPA numbers up with Duguid putting everything in a tailspin, but one thing we know for sure, alphabet soup cases are always on Plaintiff’s lawyers minds and will always be a heavy presence in consumer finance litigation.


Appeals Court Affirms Ruling for Defendant in FDCPA Case Over Time-Barred Claim During BK

The Court of Appeals for the Eleventh Circuit has upheld a lower court’s decision in a Fair Debt Collection Practices Act case after filing proof-of-claim notices on time-barred debts during bankruptcy proceedings. More details here.

WHAT THIS MEANS, FROM MIKE FROST OF MALONE FROST MARTIN: This case involves an allegation by Plaintiff the during a Chapter 13 bankruptcy proceeding, a creditor filed proofs of claim alleging that Plaintiff owed unsecured credit card debts which were beyond the statute of limitations. Amongst other allegations, Plaintiff alleged that the defendants violated the Fair Debt Collection Practices Act (FDCPA) in an adversary proceeding in the bankruptcy court.

The bankruptcy court concluded that Plaintiff’s claim lacked merit and dismissed the adversary proceeding holding that the right to payment under [Florida] state law continues even if the statute of limitations extinguishes the remedy, under Midland Funding, LLC v. Johnson, 137 S. Ct. 1407 (2017).

Plaintiff then appeals the bankruptcy courts ruling as it relates only to the FDCPA to the 11th Circuit Court of Appeals. Like the lower court, the appellate court affirm the dismissal of the FDCPA claim based on Midland Funding. In Midland Funding, the Supreme Court held that a debt collector’s filing of a proof of claim that clearly indicated that the statute of limitations period had run “was not false, deceptive, misleading, unfair, or unconscionable” within the meaning of the FDCPA. 137 S. Ct. at 1415-16.  Where there is a “claim” as a “right to payment,” event if the claim is barred by the statute of limitations, a debt collector has a “claim” if it continues to have the right to payment under state law after the statute of limitations has run. Id.

Debt collectors should look to state law prior to making proofs of claim in bankruptcy to ensure the state law coincides with this decisions and provides a continued right to payment and should also ensure to properly disclose that the claims are stale or beyond the applicable statute of limitations.

Judge Grants MSJ For Defense in FDCPA Case Over ‘Fees,’ ‘Interest’ in Letter

A District Court judge in Pennsylvania has granted a defendant’s motion for summary judgment after it was sued for violating the Fair Debt Collection Practices Act because it included line items for interest and fees which the plaintiff took as a threat that they could be added to the unpaid balance in the future. More details here.

WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: Common Sense still exits, at least in this court. A collection agency had the audacity to send a letter with the following in it regarding the balance owed and the breakdown:

“Principal Balance: $894.04 Interest: $0.00 Fees: $0.00 Balance Due: $894.04

As has become common, a consumer attorney claimed the listing of zeros for interest and fees actually constituted a threat that interest and fees could/would accrue in the future. 

The Court was having none of it. The court first concluded that the amount due was disclosed. The court then went onto reason “[m]ore importantly, an unsophisticated consumer would not interpret line itemizations of “Interest: $0.00” and “Fees: $0.00,” without more, as a threat or implication that it could or would charge them in the future. The line items were part of a simple breakdown of Reyes’s balance. Nothing else in the letter referred to interest or fees, and nothing in the letter implied that such charges would ever begin to accrue Even the least sophisticated consumer would not interpret the itemizations as a threat to charge interest and fees.”

So, put this case in your arsenal if you choose to send letters with zeros for interest and fees. Better yet, perhaps note “Not applicable” or “N/A” and if you use the abbreviation, perhaps explain that “N/A” means not applicable in the verbiage of the letter. Always try to stay a couple steps ahead of those trying to eat you alive.

CFPB Announces ANPR Coming on Consumer Access to Financial Data

The Consumer Financial Protection Bureau on Friday announced its intention to release an Advanced Notice of Proposed Rulemaking that seeks to provide individuals with more access to their financial records. More details here.

WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: The CFPB’s desire to get into the “data” game puts the agency in the middle of the on-going debate around a national strategy for data privacy and security. Industry is all too familiar with the challenges the California Consumer Protection Act (CCPA) will pose upon businesses and the likelihood that many states will follow with their own and unique set of standards for consumer data collection. The ARM industry will recall the ANPR for debt collection; a daunting document with over 400 questions. One can only imagine the vast inquiry an ANPR for data collection will look like.

The CFPB has clear authority to address the issue of consumer access to their financial data under Dodd-Frank and this ANPR is the next logical step for the CFPB following its symposium this past February. However, one must wonder how the Bureau’s efforts in this space will harmonize with the FTC’s long-standing work in this area, especially as it relates to Gramm Leach Bliley (GLB).  

In May 2003, the FTC implemented the Safeguards Rule pursuant to GLB. The Safeguards Rule requires a financial institution to “develop implement and maintain a comprehensive information security program” in order to access, collect and protect, among other things, consumer information. Financial institutions are charged with identifying reasonable and foreseeable internal and external risks that could compromise consumer information. In 2019, the FTC issued their own NPRM on Standards for Safeguarding Customer Information which proposed several modifications to the existing Safeguards Rule including expanding the definition of a financial institution.  The FTC has yet to issue a final rule.

Many in the ARM industry are already subject to GLB. Until the CFPB publishes their ANPR, it is unknown where either agency’s priorities will overlap. Even more concerning is whether the opportunity for pre-emption will exist.

Judge Grants MTD in TCPA Case Because Collectors Don’t Call Random Numbers

A District Court judge in Illinois has granted a collection agency’s motion to dismiss after it was sued for violating the Telephone Consumer Protection Act, ruling that there is “no plausible explanation” why a debt collector would use a random or sequential number generator to try and collect on a debt. More details here.

WHAT THIS MEANS, FROM NICOLE STRICKLER OF MESSER STRICKLER: On Monday, agency General Revenue Corporation (“GRC”) prevailed on its motion to dismiss a Telephone Consumer Protection Act (“TCPA”) claim filed in the Central District of Illinois. District Judge James Shadid dismissed the plaintiff’s TCPA claim alleging that GRC had contacted Plaintiff’s cellular phone multiple times using an automated or predictive dialing system. In dismissing Plaintiff’s claim, the court held that “Plaintiff offers no plausible explanation why a debt collection company would need or use a machine which had the capacity to dial or store randomly or sequentially generated numbers.” This is consistent with the Seventh Circuit’s interpretation of a dialer, as to exclude those systems without the capacity to randomly or sequentially generate numbers. The court found Plaintiff’s allegations failed to state a plausible claim for relief, as “companies engaged in debt collection call specific individuals, at specific numbers, about specific debts, not random individuals at random numbers.” While the Plaintiff had claimed GRC might have used a device capable of randomly or sequentially generating numbers, the court determined that “there still must be some basis in the pleading which raises the [TCPA] claim from speculative to plausible.” Unless the Supreme Court resolves the definition of autodialer (and it decided to- finally!) contrary to the Seventh’s definition, this decision will make it much more difficult for plaintiffs to state claims against debt collectors under the TCPA. 

Appeals Court Upholds Ruling in FCRA Dispute Case

The Court of Appeals for the Ninth Circuit has upheld a lower court’s ruling in favor of a credit reporting agency that was sued for violating the Fair Credit Reporting Act because it did not provide the plaintiffs with the results of a dispute investigation, agreeing with the lower court that the plaintiffs did not challenge that the disputed information was accurate. More details here.

WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: This was a simple case of the 9th Circuit following its own precedent. When a consumer disputes their credit report because of a perceived inaccuracy, even on reinvestigation by the credit reporting agency, it is not logical that the credit reporting agency would need to provide the results unless the disputed item was found to be inaccurate. While the consumer may want the credit reporting agency to “close the loop” so to speak, that does not mean the credit reporting agency has a legal obligation.

Judge Grants MSJ For Defendant in FDCPA Overshadowing Case

A District Court judge in New Jersey has granted a defendant’s motion for summary judgment after it was sued for a number of alleged violations of the Fair Debt Collection Practices Act, including duplicating part of the validation notice on both sides of a collection letter. More details here.

WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: In Espinal v. Enhanced Recovery Company, LLC, Judge John Michael Vazquez of the District Court for the District of New Jersey recently granted, in part, a defense summary judgment that shut down multiple claims that a collection letter was deceptive and misleading. While the claim-by-claim substantive rulings were mostly in favor of the collector, the Court rejected the overarching standing challenge to the lawsuit, a defense position that has recently gained traction in other jurisdictions. 

The key takeaways from the July 16th opinion are:

  • If Rule 1692g(a) disclosures are provided on the back of a letter, provide a notice on the front to see the reverse side; 
  • Repeating verbatim just one part of a 1692g(a) disclosure separate and apart from the full set of disclosures does not overshadow the full set, or mislead the least sophisticated debtor into the thinking the repeated disclosure is more important; 
  • Collectors using acronyms or trade names should do so consistently and register the alternate names; 
  • A statement that fees “may” be included in a disclosed balance and “may be credited” might be false or misleading; and
  • In courts requiring letters seeking leave to brief dispositive motions, carefully articulate and preserve your arguments, or they may be excluded from consideration. 

Finally, in a departure from a recent series of defense wins in the post-Spokeo FDCPA standing context, the court in Espinal rejected a standing challenge. The court held that “receipt of the allegedly misleading Debt Collection Letter alone is a sufficient harm” to confer Article III standing and a debtor need not “plead any additional injury” or claim to be “actually misled.” This ruling is in contrast to the July 6th decision in Trichell v. Midland Credit Management, Inc., where the Eleventh Circuit sua sponte raised the issue of standing and held that a debtor does not suffer the required injury in fact through the mere receipt of an allegedly misleading communication that did not actually mislead the debtor. The circuits remain split on this issue.  

Judge Denies MTD in FDCPA Case Over Implied Litigation Threat in Letter

At what point does language in a collection letter become a threat of litigation and possible violation of the Fair Debt Collection Practices Act. That is a moving target that is changing in courtrooms across the country. A District Court judge in Illinois has denied a defendant’s motion to dismiss after it was sued for violating the FDCPA by making a false threat of litigation in a collection letter even though the defendant argues that the letter essentially asks the individual to pay the outstanding balance, contact his or her attorney, or contact the collection agency. More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF PAYMENT VISION: Holdings on what is false and misleading under the FDCPA can change from one case to the next and from one district to the next. This case illustrates when even one or two words change a collection letter; a collection agency may be opening itself up for liability. 

When asking the Court to rule on its motion to dismiss, the Defendant referenced six cases with very similar wording, but as the Court pointed out, not exactly the same, and secondly, only two of which applied the Seventh Circuit standard, the district of this case. The Seventh Circuit treats the question if statements are false or misleading as an issue of fact. 

Regardless the Court points to one case out of those referenced by the Defendant, it felt like the most relevant case to apply to its review. While the Court agrees the wording is similar, it points to the distinguishing difference in the letter at issue vs. the letter in the referenced case, the mention of an offer and settlement. Finishing out, the Court went further to point out that the disclaimer many have come to rely on, that states that an attorney has not personally reviewed the account will not undermine a threat of litigation. 

The take away for all that fall under the FDCPA ensure that collection letters are clear, and all changes are closely scrutinized. Be extra cautious when a letter includes reference to an attorney, offer or settlement, and lastly, do not rely on standard disclaimers as a defense. 

OCC Issues Proposed Rule Aimed at Closing Gap in Debt Buying Process

The Office of the Comptroller of the Currency has issued a proposed rule that seeks to close a gap in the process of selling loans to third parties, which should further help the sale of portfolios in the debt buying market. More details here.

WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY AND SHUSTER: Let the battle begin! No sooner did the OCC propose another rule opposed by consumer advocates then three state Attorneys General sued the OCC for its last rule. At issue is preserving the validity of state’s rights to set its own interest rates. There is no issue that joins state AGs together, regardless of party, more than state preemption. Although yesterday’s suit is by three powerhouse D’s, Illinois, California and New York, we might see some Republican AGs dip their toes in this water.

Senate Passes Bill Preventing Collectors From Garnishing Stimulus Payments

It turns out there are some things that everyone in the Senate can agree on, and it actually pertains to the debt collection industry. More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH VOLUCK: It is tough to figure out where to begin with the latest piece of legislation passed in the Senate in response to the COVID-19 pandemic. It is a positive that the Senate passed legislation on a bi-partisan vote. It is a positive that the Senate affirmatively seeks to protect any stimulus checks issued under the legislation from garnishment; this is a position never opposed by the ARM industry. But, there was hardly a widespread flurry of stimulus checks being targeted by collection agencies. These checks were being seized by the creditors (i.e., banks) directly upon deposit. As most know, an active garnishment of a bank account by a third party doesn’t reveal the source of funds when the garnishment takes place. The burden is on the account holder to identify certain exemptions to the bank, which will preclude those funds from being taken. The Senate legislation (which needs companion legislation in the House and which is expected to appear in any version passed by the House) addresses that concern on the federal level. Debt collectors were never going around the country taking stimulus money. But in an election year we can count on politicians not to let the facts get in their way.

Healthcare Provider Fined $25k For Potential HIPAA Violations

The Department of Health and Human Services’s Office of Civil Rights (OCR) has levied a $25,000 fine against a healthcare provider to settle potential violations of the Health Insurance Portability and Accountability Act (HIPAA) for “widespread compliance issues” that were uncovered after a data breach occurred. More details here.

WHAT THIS MEANS, FROM LESLIE BENDER OF BCA FINANCIAL SERVICES: In an unusual HIPAA enforcement action, HHS revealed on July 23, that earlier this year it had reached a consent agreement with a small healthcare provider in North Carolina who offers services to rural and underserved populations. Apparently the healthcare provider, the Agape Health Services (a/k/a the Metropolitan Community Health Services, Inc. – and referred to as “Agape”) had reported a data security breach affecting roughly 1,200 patients in 2011. To be specific, the 2011 breach that led to this week’s HHS announcement had reported that an email containing the names of 1263 patients was sent to an unknown email address. The timing and nature of the breach are difficult to understand. 

First, why is HHS reporting an enforcement action in July, 2020 that was resolved in April – and second, why was HHS investigating a 2011 incident now in which some of the remediation may have begun in 2016? For reasons not included in the public documents, an investigation revealed that Agape had failed to comply with many HIPAA standards – including nearly the entirety of HIPAA’s Security Rule. The consent order specified that Agape must undertake a detailed data mapping inventory and risk assessments acceptable to HHS and must adopt at a minimum a dozen or so policies and procedures and then distribute them to each member of its workforce. The policy and procedure topics included some HIPAA Privacy and Security basics such as proper uses and disclosures of protected health information, correct application of HIPAA’s need to know rule – the minimum necessary standard, coordinating data flow with business associates, data breach handling and notification to affected patients, training, and all required administrative, physical and technical safeguards. This enforcement action required extensive corrective action, all subject to HHS approval and oversight of a community health services company serving many rural and underserved North Carolina counties. It is somewhat unique in providing direct primary and preventive medical, dental, pharmacy, and behavioral health services to the community on a sliding fee scale. Here are three takeaways:

  • It is not too late to spruce up your HIPAA security and breach notification policies and procedures and train them out to your workforce;
  • Even philanthropic small healthcare providers are expected to be HIPAA compliant (as are their vendors); and
  • Training and talent development to keep an awareness and practical eye toward privacy and data security will go a long way toward minimizing risks of HIPAA issues.

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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