Compliance Digest – September 8

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.

Pa. Judge Denies MTD in FDCPA Meaningful Involvement Case

Is the letterhead of a collection law firm at the top of a letter and a signature at the bottom of it enough to convey that an attorney is meaningfully involved in reviewing the details of an account? A District Court judge in Pennsylvania has said yes, denying a defendant’s motion to dismiss after it was sued for violating the Fair Debt Collection Practices Act by allegedly misleading the plaintiff. More details here.

WHAT THIS MEANS, FROM PATRICK NEWMAN OF BASSFORD REMELE: Two steps forward — one step back — in the realm of Article III standing in attorney “meaningful involvement” claims.

So far in 2020, the Sixth Circuit Court of Appeals and two Wisconsin district courts have concluded that consumers lack standing to prosecute “meaningful involvement” claims against law firms. We take heart from these decisions, which perhaps signal that the tide is turning and courts are beginning to warm up to the reality that no consumer — unsophisticated or otherwise — is “deceived,” “misled,” or “duped” regarding the level of an attorney’s involvement with a collection file based on the content of a letter or legal pleading.

But as with seemingly all things in 2020, anything good must also be counteracted by something bad. Enter Gibbons v. Weltman. Having already certified a class and determined that the level of the firm’s involvement with the consumer’s file was a question of fact for the jury — despite Weltman being vindicated on these exact claims and procedures in a case with the CFPB just two years ago — the Gibbons court ruled that the consumer did have Article III standing to prosecute her “meaningful involvement” claim. Very frustrating, on two levels.

First, in any other industry Weltman would be lauded for its innovation, efficiency, and compliance protocols. But in the Twilight Zone imposed on consumer collections, the firm instead has been forced to re-live Groundhog Day with a (second) opportunity to vindicate its policies and procedures before a jury in federal district court. Lucky them.

Second, the most recent Gibbons decision effectively says that where a consumer simply parrots the line that they “believ[ed] that an attorney was involved with the details of her account,” standing automatically arises, resulting in a potential fact question for trial as to whether the firm’s individual attorneys “conduct account-level reviews” — despite the court’s finding that the firm maintains robust policies and procedures for its collection processes and involves its attorneys in all aspects of initial review, client engagement, and file intake.

So here’s where we stand: battles have been won and battles have been lost, but the war continues. Keep those policies and procedures tight and continue to push the standing issue early and often.  


Judge Grants MTD in FDCPA Case Over ‘Nitpicks’ in Collection Letter

A District Court judge in New York has granted a defendant’s motion to dismiss after it was sued for violating the Fair Debt Collection Practices Act when it sent a collection letter to the plaintiff that allegedly included a number of misrepresentations, including multiple addresses that confused the plaintiff about how to dispute the debt, a deadline to accept a payment plan offer, whether the offer could be renewed, and including the dispute notice on the back page of the letter. More details here.

WHAT THIS MEANS, FROM NICOLE STRICKLER OF MESSER STRICKLER: In August, a New York federal judge granted a defendant debt collector’s motion to dismiss after it was sued for alleged violations of the Fair Debt Collection Practices Act. The plaintiff’s complaint, filed in the Eastern District of New York, alleged multiple FDCPA violations. The district court dismissed the Plaintiff’s suit in its entirety, holding that Plaintiff’s allegations amounted to “cherry-picking various portions out of [Defendant’s] letter, presenting them in a complaint deprived of context, and hoping something [would] stick.” The defendant prevailed largely due to its well-drafted collection letter that closely mirrored the plan language of the § 1692g validation section. This case further illustrates that the Eastern District of New York is growing tired of “straw-grasping” Plaintiffs’ suits that employ the kinds of “nitpick” legal theories advanced in this case. The ruling is a win for debt collectors with well-crafted collection letters, and will provide good defense against the ever-present threat of the “enterprising Plaintiff’s attorney.”

Judge Grants MSJ for Defense in Overshadowing Case Over Insurance Release in Letter

A District Court judge in New York has granted a defendant’s motion for summary judgment after it was sued for violating the Fair Debt Collection Practices Act because it allegedly overshadowed the validation notice in a collection letter by including a release that offered to check whether any of the unpaid debt might be covered by the plaintiff’s health insurance. More details here.

WHAT THIS MEANS, FROM MIKE FROST OF MALONE FROST MARTIN: It is not uncommon to see new theoretical cases filed in New York making allegations that the “least sophisticated consumer” (whatever that really is) was somehow confused by a statement in the initial collection notice and now has a compensatory damage. It is also not uncommon to see these types of allegations when the language in the letter is kind or helpful to the “least sophisticated consumer.” More and more in our industry we are seeing additional federal, state or local laws, like 501r, the NYCDCA preferred language rules (the list goes on and on) which require debt collectors to provide additional disclosures or to modify current disclosure requirements. This looks to be yet another one of those types cases. Thankfully, the Court rejected this non-sense and ruled that the debt collectors offer to work with the consumer to ensure that the consumer’s debt is not be covered by insurance before they paid, was not confusing to the consumer, regardless of level of sophistication.  

CFPB Files Suit Against Credit Repair Partner To Compel Subpoena Compliance

The Consumer Financial Protection Bureau has filed a lawsuit against a partner of credit repaid company Progrexion Marketing, Inc., accusing the partner of refusing to comply with subpoena and provide documents requested by the agency. More details here.

WHAT THIS MEANS, FROM STEFANIE JACKMAN OF BALLARD SPAHR: It appears that the CFPB and have gotten into a good, old fashioned discovery dispute. But reading the motion and related correspondence including as exhibits stokes a feeling that perhaps the CFPB might have fared better using an investigatory CID, as opposed to a Rule 45 subpoena.  The requests are very broad and look almost identical to the types of requests that we see in CIDs as part of the CFPB’s initial investigation of alleged legal violations. But for CIDs (in contrast to Rule 45 subpoenas), the CFPB essentially functions as the sole arbiter of the appropriateness of such requests with regard to their scope and breadth. Of course, entities that are subject to a CID remain free to challenge it in court but doing so results in a public disclosure of the CFPB’s investigation, which is something that at least to date, most companies have not been overly eager to have happen.  In contrast, in civil litigation, courts have a much longer track record of striking a balance with respect to discovery disputes and I imagine the CFPB will not get everything it seeks. Perhaps there is another strategy afoot where the CFPB thought this would be a faster way to avoid some of the hurdles that appeared to have arisen in the primary litigation, as detailed in the emails attached to the motion. Either way, it certainly is worth watching where this one goes with the court.

FTC Files Suits Against Alleged Collection Scammers

A District Court judge in South Carolina has lifted the seal on two complaints filed by the Federal Trade Commission against debt collection operations that are accused of violating the Fair Debt Collection Practices Act by allegedly convincing unsuspecting individuals that lawsuits have been, or will soon be, filed against them if they do not make payments on the debts, which the individuals actually do not owe. More details here.

WHAT THIS MEANS, FROM ETHAN OSTROFF OF TROUTMAN PEPPER: The recent unsealing of two FTC complaints against several debt collection operations accused of violating the Fair Debt Collection Practices Act (“FDCPA”) involve scammers who collected more than $5.2 million by combining robocalling with allegedly convincing innocent people to pay fake debts, lying about filing lawsuits, threatening to file lawsuits and threatening to have individuals arrested. The seal was put in place, until all defendants were served, to minimize the danger that their advanced knowledge could pose to the court’s ability to ensure effective final relief. The Defendants allegedly collected more than $5.2 million through the scheme.

These cases show the FTC’s continued interest in cracking down on efforts to collect fake debts from consumers. Prior to FTC filing the these cases, it also filed suit against debt collectors in May of 2020, and on at least four occasions in 2019. The focus of those lawsuits, like the present ones, was fraudulent schemes to collect fake debts from consumers. The FTC’s continued interest in preventing illegal debt collection activity is an example of continued regulatory scrutiny on an already heavily-regulated industry. A few months prior to this lawsuit being filed, a letter signed by every state attorney general and the attorneys general of American Samoa and Puerto Rico was sent to USTelecom outlining initiatives to identify the sources of illegal robocalls. When you combine robocalling with clearly unlawful acts as part of a strategy to collect fake debts, it is not surprising that these Defendants got caught in the cross-hairs of the FTC.

Branch Manager Fined, Barred From Renewing License as Part of Kickback Scheme

The Minnesota Department of Commerce has banned a collection agency branch manager from obtaining a license for five years and fined him $2,500 for orchestrating a kickback scheme in which he inflated the commissions of a collector in order to share in the windfall. The collector was previously fined $15,000, $10,000 of which was suspended. More details here.

WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: This action relates to a kickback scheme that began in August 2014, when a branch manager at a collection agency manipulated the agency’s payroll system by altering the commissions that the agency paid the debt collectors that reported to him. The branch manager developed the scheme and then approached a debt collector about participating; offering to pay him up to $3,500 in commissions each month, in exchange for a $500 monthly kickback. The scheme lasted for approximately ten months and the branch manager was overpaid at least $8,000 in commissions. Additionally, the branch manager diverted in excess of $18,000 in unearned commissions to other participants and the debt collector. The debt collector received an average of $1,688 more than he was entitled to each month in his role as a collector, and a total amount of $18,563 as part of the scheme.

On May 6, 2020, the Minnesota Department of Commerce (“the Department”) entered into a Consent Order with the branch manager, which provided that he had engaged in multiple willful and fraudulent acts demonstrating that he was untrustworthy, financially irresponsible, or otherwise incompetent or unqualified to act under the license granted by the Commissioner, in violation of Minn. Stat. 45.027, subd. 7(a)(4). The Consent Order further provided that the branch manager may not renew his expired debt collector registration or apply for a new debt collector registration for at least five years. The branch manager was ordered to pay a $2,500 civil penalty to the State of Minnesota. In April 2019, the debt collector entered into a Consent Order with the Department and he was ordered to pay a civil penalty of $15,000, $10,000 of which was suspended.

While the majority of actions are settled without a hearing, a respondent has a right to request a hearing to contest a consent order within 30 days after receiving it. If the respondent requests a hearing to contest the order, the hearing will occur before an Administrative Law Judge. If the respondent does not request a hearing to contest the order within the 30-day period, the consent order becomes final by operation of law, and the Department may issue an order imposing the referenced sanctions against the respondent. In these matters, both the branch manager and debt collector waived their rights to a hearing and agreed to an informal disposition.

CFPB Denies Petition From Credit Repair Org. to Set Aside CID

The Director of the Consumer Financial Protection Bureau has denied a petition from a credit repair organization to set aside a civil investigative demand it received from the Bureau, disagreeing with the premise that the CFPB’s request is unlawful because it could not bring an enforcement action against the company. More details here.

WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: The CFPB’s investigative authority is extremely expansive, and we have observed that its enforcement ability is powerful. The CFPB investigative process often starts with a broad Civil Investigative Demand (“CID”). If the recipient objects to the CID, the objection is decided by the CFPB Director. Not surprisingly, the objections are often overruled. At that stage, the recipient either responds to the CID or seeks help in the federal courts.

Another example of this process is playing out with Daniel A. Rosen, Inc., d/b/a Credit Repair Cloud (“CRC”). The CFPB issued it a CID for information on whether CRC requested or received prohibited payments from consumers in violation of the Telemarketing Sales Rule (“TSR”), or provided substantial assistance in such violations that could violate the Consumer Financial Protection Act (“CFPA”).

CRC objected to the CID, arguing that the CFPB could not bring an enforcement action against it under either the TSR or the CFPA.Director Kraninger considered the objection. The Director stated that a challenge to the relevance of a CID raises two questions: (1) whether the Bureau has the authority to investigate the topics described in the CID’s Notification of Purpose, and (2) whether the CID requests information that is relevant to those topics. The objection focused on the first question, and it recently was denied.

In the Decision and Order, the Director pointed out that the CFPB’s investigation authority is broader than its enforcement authority. She also noted that the company made a number of fact-based claims, such as it “does not interact with consumers,” and “has no role in facilitating or assisting a credit repair company requesting or receiving any payment, ” but fact gathering is the purpose of the CID. Director Kraninger declined to resolve factual issues when it is in the process of gathering relevant information. We will now see if CRC responds to the CID of seeks court intervention. 

Garnishment Protection Bill Advances in Va. Legislature

Even as many states are moving to ease collection restrictions that were put into place at the start of the coronavirus pandemic, the Virginia legislature is moving forward with a bill that would protect the economic stimulus payments received by individuals from being garnished by debt collectors. More details here.

WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY & SHUSTER: Although late to the game, the Virginia legislature is lockstep with several other Democratic stronghold states. With multiple stories detailing consumers spending these checks on expensive toys, sporting goods and luxury items, it certainly seems unfair to debt collectors to not collect the available money. Nonetheless, this close to an election it’s always a win to push consumer friendly legislation in a Democratic state, especially in a presidential election year.

Lawsuit Activity Rebounds in July, But Still Well Below 2019 Levels: WebRecon

Only in 2020 would the number of lawsuits filed against collection agencies claiming violations of the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, and the Telephone Consumer Protection Act be both up and down, according to data published yesterday by WebRecon. More details here.

WHAT THIS MEANS, FROM SARAH DEMOSS OF PREMIERE CREDIT: It’s not a surprise that the current statistics are funky considering how the rest of the year has been going. Normally, I’d say the complaints will keep going up throughout the remainder of the year, because consumer attorneys will need to make up for some of the lull identified. However, I have been hit with more demands this year than in past years which isn’t accounted for in the stats. Unless my company is an anomaly, it appears consumer attorneys have been working on income through the informal demand route while the courts have been on hold or backlogged due to the pandemic. So, they haven’t truly raised less issues. They’ve just filed less. In addition to the number of suits, two other statistics stand out to me in this article. It says about 35% of all plaintiffs who filed suit last month had filed at least once before. This is a frustrating statistic for agencies to see when we are working so hard trying to do the right thing and put processes in place. I also find it interesting that 3% of responses to the CFPB were untimely. It makes me wonder if people have furloughed support personnel due to the pandemic.

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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