Compliance Digest – September 28

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.

NY DFS Announces First Case Under State’s Debt Collection Rule

The New York Department of Financial Services has announced its first-ever regulatory action taken in enforcing the state’s debt collection regulation, accusing a collection law firm of not substantiating “hundreds” of debts within the 60-day required timeframe. More details here.

WHAT THIS MEANS, FROM STEFANIE JACKMAN OF BALLARD SPAHR: Increased enforcement and regulation by states, not just New York, is likely to be the norm for the foreseeable future. Indeed, for the past several years, the industry has experienced a steady increase of state legislative and regulatory efforts across the nation to supplement what some state regulators believe are gaps in federal oversight. For example, at the outset of 2020, both New York and California announced legislation to enact licensing requirements for the collections industry. California’s Governor is expected to pass that legislation in the coming weeks and while New York tabled that proposal as a result of the pandemic, many expect that effort to be renewed in the upcoming 2021 legislative session. New York City also enacted a new series of LEP servicing requirements and a number of states enacted emergency regulations limiting or prohibiting collection activities relating to the pandemic. All signs point to state-level regulation and oversight remaining front and center, not just in New York but many others states, which will require continuing industry effort to ensure compliance with an ever-growing panoply of state collection rules and regulations.


One Missed, But Returned Phone Call Enough to Confer Standing in TCPA Case

In a case that was first reported by Eric Troutman at, a District Court judge in Texas has dismissed claims that a collector violated the Fair Debt Collection Practices Act by making one unanswered phone call to the plaintiff’s cell phone, but denied a motion to dismiss for lack of subject matter jurisdiction and failure to state a claim for alleged violations of the Telephone Consumer Protection Act because the plaintiff returned the call, not knowing who it was from. More details here.

WHAT THIS MEANS, FROM CARLOS ORTIZ OF HINSHAW CULBERTSON: In Cunningham, a federal judge from the Eastern District of Texas held that a single missed debt collection call made to the plaintiff’s cellular phone was sufficient to establish an injury-in-fact for purposes of  Article III standing under the TCPA. Although the defendant presented the court with authority from the Eleventh Circuit that held a single, unanswered text message was not sufficient to establish Article III standing under the TCPA, this court was not persuaded. The Cunningham court distinguished a text message in the other case from a cellular call in this litigation as follows:

At issue in this case is a missed call, not a single, unsolicited text message. It only takes one glance at a text message to recognize it is for an extended warranty for a car you have never owned or a cruise you have won from a raffle you never entered. A missed call with a familiar area code, on the other hand, is more difficult to immediately dismiss as an automated message.

While the Cunningham court had no Fifth Circuit precedent to guide it on how to define an injury-in-fact for a claim arising from the TCPA, the reasoning it applied was difficult to understand. That is, there are examples of decisions from other courts that have held that more alleged “harm” than what was at issue here was not enough to establish Article III standing under the TCPA. For example, in Perez v. Golden Tr. Ins., Inc., No. 19-24157-Civ, 2020 U.S. Dist. LEXIS 120819 (S.D. Fla. July 6, 2020), a district court held that two text messages received over the span of four days was not enough to establish Article III standing under the TCPA, even though the plaintiff alleged that “he was injured by wasting 60 seconds of his time reviewing the messages, causing aggravation and intrusion, wasting “7 minutes researching Defendant and the source of the messages on the internet,” and wasting “5 minutes locating and retaining counsel for this case in order to stop Defendant’s unwanted calls.”” Thus, the Cunningham court’s distinction on how an individual would react to a text message that he/she did not immediately recognize appears to be overly simplistic and inconsistent with everyday life.

Yet, the Cunningham court’s decision remains concerning. If a single unanswered call is enough to confer Article III standing under the TCPA, then it would appear that just about any alleged “harm” would be. Hopefully, there will be more decisions out of the Fifth Circuit and from other jurisdictions that will hold differently.  

Judge Dismisses Whistleblower Lawsuit Filed By Collection Agency Employees

A District Court judge in Illinois has dismissed a whistleblower lawsuit filed against a healthcare provider, medical debt collection agency, and a medical billing company, alleging they engaged in a “ghost payroll” scheme that resulted in a larger Medicare payment from the federal government than the provider was entitled to. More details here.

WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY & SHUSTER: Importantly, this decision doesn’t mean the matter is over. The Plaintiff chose a tough way to make her case and there are easier ways where she might get a different result. Plaintiff also appeared in a previous qui tam action where victorious parties can receive treble damages. Regulators may also be or get involved because consumers were likely harmed by alleged inaccurate reports of payment.

Site That Helps Consumers Respond to Collection Suits Launches Nationwide

A service that started in Utah to help individuals respond to debt collection lawsuits yesterday announced it would now be available nationwide as it seeks to win $50,000 in a technology competition. More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH VOLUCK: It should not be surprising that a group of students from Brigham Young University devised a company to assist defendants in legal proceedings. Companies have been around for decades offering “non-legal” advice to individuals. The collection industry is no stranger to correspondence from consumers that appears to be copied from dubious websites and sources claiming all sorts of reasons why collections should not be pursued. SoloSuit is simply marketed to a niche – consumers being sued for an outstanding debt. This development should only be a concern for agencies that file collection lawsuits believing the consumer will not respond and default. If that is your company’s business model, you may want to be prepared for an uptick in answers being filed defending the collection lawsuit.   

Judge Grants MTD in Student Loan Collection Case

A District Court judge in Connecticut has granted a motion to dismiss filed by a collection agency, a student loan servicer, and the plaintiff’s employer for allegedly violating the Fair Debt Collection Practices Act by attempting to garnish the plaintiff’s wages, because the statute of limitations on filing a claim had passed when the lawsuit was filed. More details here.

WHAT THIS MEANS, FROM XERXES MARTIN OF MALONE FROST MARTIN: FDCPA claims are rooted in statutory interpretation, and the door swings both ways in this regard. Judge Meyer’s recent decision in Hagwood-El v. Allied Interstate, Inc. is ironic because defense attorneys in our field often represent clients that are pinned for technical violations of the FDCPA such as is a certain term or identification may be ambiguous. Here, we see how the technicalities in the FDCPA can create equal problems for Plaintiffs. This particular Plaintiff failed to ensure that Defendants fit under the term “debt collector” under the statute and that his filing was within the statute of limitations. The case is a testament to the practice of going through a checklist for all potential defenses in every FDCPA case so you do miss the opportunity for early dismissal.

Judge Denies Motion to Compel Arbitration in FDCPA, TCPA Class Action

A District Court judge in Hawaii has denied a defendant’s motion to compel arbitration in a class-action suit accusing it of violating the Telephone Consumer Protection Act and Fair Debt Collection Practices Act because the defendant did not show that the plaintiff must rely on the terms of his customer agreement with the original creditor in asserting claims against the defendant. More details here.

WHAT THIS MEANS, FROM SHANNON MILLER OF MAURICE WUTSCHER: In Ioane, et al. v. MRS BPO, LLC a/k/a MRS Associates of New Jersey, the District of Hawaii recently denied a motion to compel arbitration filed by the defendant, seeking to compel plaintiff to arbitrate his claims on an individual basis as opposed to litigating them as a class action in the federal court. In Ioane, the plaintiff had brought a class action complaint against the defendant, MRS BPO, LLC a/k/a MRS Associates of New Jersey (“MRS”) pursuant to the TCPA and the FDCPA. Specifically, the plaintiff alleged that MRS was hired by Verizon Wireless (“Verizon”) to collect a past due wireless bill and as a result sent several text messages to plaintiff. The plaintiff had alleged that the text messages were sent using an automatic telephone dialing system (“ATDS”) without the plaintiff’s express consent in violation of the TCPA and that MRS also failed to provide plaintiff with a validation notice as required by § 1692g in violation of the FDCPA.

Citing the customer agreement entered into between plaintiff and Verizon which required arbitration to resolve any dispute, MRS moved to compel arbitration arguing that, although not a signatory to the agreement, it could enforce arbitration under Hawaii state law. Specifically, Hawaii law provides that a nonsignatory has standing to invoke an arbitration agreement “where a signatory to a  written agreement containing an arbitration clause must rely on the terms of the written agreement in asserting its claims against the nonsignatory.” MRS argued that the customer agreement provided Verizon and anyone collecting on its behalf with consent to contact plaintiff using an ATDS. As such, MRS argued, the plaintiff’s claims relied on the customer agreement because an essential element of her TCPA claim is lack of prior express consent.

The Court, while noting that MRS failed to address how the FDCPA claim similarly relied on the customer agreement, disagreed with MRS’ argument. Instead, the Court articulated that prior express consent is not an element of plaintiff’s TCPA claim but is instead an affirmative defense for which MRS bears the burden of proof. In this regard, while MRS’ potential defense to the TCPA claim relied upon the customer agreement, plaintiff’s claim did not. The Court held that the plaintiff’s allegations take issue with the receipt of unwanted text messages and do not reference any term of the customer agreement, allege any violation of it or seek to enforce or benefit from any of its terms. As such, MRS could not compel plaintiff to arbitrate his claims under state law.

The take-away for the industry is to remember that prior express consent is an affirmative defense to TCPA claims and not an element that a plaintiff needs to prove. All too often this is forgotten, and TCPA litigants attempt to shift the burden to the plaintiff to disprove that there was prior consent provided. This case is also a good reminder of the difference between a claim falling within the scope of an agreement to arbitrate, which likely the TCPA and FDCPA claims did, and a claim relying on the terms of an agreement for purposes of providing standing to enforce the agreement; the two are not the same.

Appeals Court Rules Incentive Awards in Class-Action Suits Are Forbidden

The Eleventh Circuit Court of Appeals ruled yesterday in a Telephone Consumer Protection Act case against a debt collector that incentive payments for the named plaintiff in a class-action lawsuit are illegal under Supreme Court precedent dating back more than 130 years. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: In Johnson v. NPAS Sols., LLC, No. 18-12344 (11th Cir. Sep. 17, 2020), the Eleventh Circuit reversed an order approving payment of an incentive award to the named plaintiff in connection with the settlement of a class action alleging violations of the Telephone Consumer Protection Act. Relying on a pair of Supreme Court cases from the 1880s – Trustees v. Greenough, 105 U.S. 527, 26 L. Ed. 1157 (1882), and Central Railroad & Banking Co. v. Pettus, 113 U.S. 116, 5 S. Ct. 387, 28 L. Ed. 915 (1885) – it held, “A plaintiff suing on behalf of a class can be reimbursed for attorneys’ fees and expenses incurred in carrying on the litigation, but he cannot be paid a salary or be reimbursed for his personal expenses.” Although it noted that incentive awards are commonplace in class actions, the Eleventh Circuit found them to be unlawful and reversed the district court’s approval of a $6,000 payment to the class representative.

To put it bluntly, the Eleventh Circuit does not like the TCPA. From Article III standing, to the definition of an ATDS, to settlements and incentive awards for class members, this Court is telling Plaintiff’s lawyers not to file TCPA class actions in this Circuit. And with a rapid uptick of Florida lawyers taking the California bar, I think people are getting it. 

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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