Compliance Digest – Sept. 14

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.

Groups Call on FCC to Require Notification of Blocked Calls

A number of financial services trade organizations, including ACA International, are calling on the Federal Communications Commission to require that telecom companies notify businesses when their calls are being blocked or labeled as spam. More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH VOLUCK: The proliferation of call-blocking and call-labeling technology implemented unilaterally by telephone carriers (as opposed to conscious decision making by the call recipient) has reached a crisis level. Carriers, based on flawed algorithms, are blocking telephone calls from reaching consumers. They are similarly labeling calls as “spam.” Ignoring the problem that this policy is being made without any true evaluation of the calls being blocked or labeled, most call makers are unaware their calls are being blocked or labeled. The initial legislation on these subjects along with implementing regulations do not currently require the carriers to notify call makers of this activity. 

A coalition of financial services trade groups are rightly petitioning the FCC to require carriers to notify call makers that their calls are being blocked or labeled, and requesting a reasonable procedure for appealing such a decision. This step is very much needed as some agencies are learning that over 75% of their calls are not going through. By restricting communication, again, unilaterally and without even the recipients’ knowledge, telephone carriers are harming consumers by preventing them from communicating with their creditors. This will lead to more debt being unresolved, less money returned to creditors, increases in the cost of goods and services to the general public and more litigation and credit reporting. 


MTD in Permissible Purpose FCRA Case Denied

A District Court judge in New Jersey has denied a defendant’s motion to dismiss after it was sued for violating the Fair Credit Reporting Act by obtaining the plaintiff’s credit report without a permissible purpose to do so. More details here.

WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER: Verizon used an interesting strategy in this case. Generally, on motions to dismiss, courts evaluate whether plaintiffs have pled plausible claims under Federal Rule of Civil Procedure 8(a)(2), which merely requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” But Rule 9, which governs pleading special matters, requires a plaintiff claiming fraud to “state with particularity the circumstances constituting fraud,” effectively raising the pleading requirement. Verizon argued that the plaintiff’s claims, though labeled as FCRA violations, truly sounded in fraud, and thus required the plaintiff to file a much more factually-intensive complaint. Unfortunately, the court rejected Verizon’s argument and evaluated the sufficiency of the complaint under Rule 8(a), resulting in a textbook example of the court sticking closely to the appropriate standard of review which, on motions to dismiss, overwhelmingly favors plaintiffs.

CFPB to Subject Research to Peer Review; Starts With Time-Barred Disclosures

Looking to hold itself accountable for the decisions that are made based on the research it conducts, the Consumer Financial Protection Bureau has announced it will have some of its research reviewed by the Bureau’s Academic Research Council, an external panel of researchers with experience in consumer finance. What is the first piece of research that is being subjected to this peer review process? A report on the results of a survey that the CFPB conducted testing different disclosure notices associated with collecting on time-barred debt. Interestingly enough, the ARC had a number of questions about the survey and its results. More details here.

WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: The CFPB’s proposal to subject some of its research to peer review is an important step to legitimize the policy initiatives of the agency. Many in the financial services industry recall the thin research put forth by the CFPB when it proposed the arbitration rule. Some of the research leading up to the NPR was equally concerning including the results from the debt collection survey. It is still unclear how much of the Bureau’s research will be subject to peer review and what the process will be to determine what evidence is reviewed. However, the Bureau’s own Academic Research Council (ARC), a panel of outside researchers with expertise in consumer finance, will be conducted the reviews.

It is interesting that the study reviewed was the Disclosure of Time-Barred Debt and Revival: Findings from the CFPB’s Quantitative Disclosure Testing.  The review was requested by the CFPB in April of 2020 and on June 30th the Peer Review Report was completed. It is unclear why it took the CFPB a month to publish the report let alone disclose they were proceeding with a peer review process. As it relates to the time-barred debt disclose testing the ARC was asked to consider, among  other things (1) whether the methodology and assumptions employed are reasonable, appropriate, and consistent with accepted social science theory and statistical practices; (2) whether the data used are reasonable and of sufficient quality for purposes of the analysis; and (3) whether the conclusions, if any, follow from the analysis. The ARC made clear in their report that the review focused onscientific merit and not whether the report should inform policy or rulemaking. The ARC pointed to several limitations of the report including that the results did not address the level of economic harm arising from current disclosures or the potential of a  reduction of harm by alternative disclosures and that the study is silent on what is a successful disclosure.  

As industry is aware, the Supplement Notice of Proposed Rulemaking (SNPR) for time barred debt disclosures was published in February. Due to COVID and the joint request from both industry and consumer advocates, the comment period was extended to beginning of August. It is unclear why stakeholders were not privy to the Peer Review Report prior to the end of the comment period. Certainly the findings of the ARC would have impacted how stakeholders framed their comments irrespective of whether comments supported or opposed the proposals set forth in the SNPR. The challenge to agency research is an integral part  of a challenge to any rule. However, be careful what you wish for. While a peer review may be critical of CFPB research it can also support research that industry may find otherwise unfavorable. Regardless, it appears that the CFPB is attempting to level the playing field maybe in an effort to reduce those challenges before they make their way to the courts.

Judge Grants MSJ For Defense in FDCPA Case Over Settlement Deadline, Using ‘Balance Due’

A District Court judge in Wisconsin has granted a defendant’s motion for summary judgment after it was sued for allegedly violating the Fair Debt Collection Practices Act by including a time limit on a settlement offer and by using the phrase “balance due” in a collection letter. More details here.

WHAT THIS MEANS, FROM DENNIS BARTON OF THE BARTON LAW GROUP: There are two takeaways from Nagan v. Optio Solutions, LLC: (1) “Balance Due” does not confuse an unsophisticated consumer as to whether interest may or may not be accruing; and (2) collectors must be very cautious when making settlement offers with expressed deadlines.

This court said settlement language in a letter may be misleading when there is a deadline (e.g., “this offer expires in 45 days”). It believes unsophisticated consumers may think if they do not pay by the deadline, they will have no further chance to settle their debt for less than the full amount. The court recognized, however, collectors would be unreasonably disadvantaged during settlement negotiations if they were required to disclose the consequences of consumers rejecting the initial offer.

In Evory v. RJM Acquisitions Funding L.L.C., 505 F.3d 769 (7th Cir. 2007), the Seventh Circuit previously addressed this exact issue creating safe harbor language when it comes to timelines for settlement offers: “We are not obligated to renew this offer.”  Collectors can say, “You have 45 days to respond to this settlement offer” if and only if they also include the language, “We are not obligated to renew this offer.”  As offended as I am when courts create requirements like this not otherwise found in any statute, my personal feels are irrelevant. If collectors do not add the safe harbor language about the possibility the offer may not being renewed, courts are likely to find their letters misleading and violative of the FDCPA. This also applies to a collector’s verbal statements during a consumer call and could lead to questions asked during a bait call (e.g., “what happens if I do not pay within 45 days?”). 

CFPB Warns 9th Circuit What Could Happen if Ratifications Are Set Aside

The Consumer Financial Protection Bureau wants the Ninth Circuit Court of Appeals to think about the ramifications of what will happen if the Court chooses to ignore a pair of ratifications from the former Acting Director and current Director of the Bureau and rule in favor of a law firm trying to fight being forced to respond to a Civil Investigative Demand letter. Those ramifications could “raise doubts about the validity of other actions the Bureau has taken over the past decade” and call into question any enforcement action that the CFPB has taken during its decade of existence. More details here.

WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: CFPB asks the 9th Circuit to proceed very carefully. Why? In the Seila Law case that went to the US Supreme Court (finding the structure of the CFPB unconstitutional insofar as it pertained to the Director essentially being accountable to no one), the 9th Circuit on remand must now decide whether to enforce the Civil Investigative Demand (CID) issued to Seila Law by the CFPB — when the statute was still unconstitutional. Kind of wonky actually. But the CFPB rightfully is concerned that if the 9th Circuit does decide the CID is unenforceable because it (originally) was issued by an “unconstitutional” Director, ALL CIDs and decrees issued in the past by the “unconstitutional” Director might be deemed likewise void. That’s a can of worms the CFPB would rather avoid. Stay tuned to see how this turns out.

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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