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Every week, AccountsRecovery.net 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.
Judge Grants MTD in FCRA Case Over Dispute Investigation
A District Court judge in Illinois has granted a defendant’s motion to dismiss after it was sued for allegedly violating the Fair Credit Reporting Act by not investigating and removing inaccurate information from the plaintiff’s credit report. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: Soyinka v Equifax is one of numerous recent filings against the big three credit reporting agencies that address whether a dispute is “factual” and requires and investigation or if it is “legal” and thus is not something the bureaus reasonably can investigate. The trend in these cases is to reject the consumer’s claims that the bureaus violated the FCRA. Soyinka joins the trend in dismissing the claims.
Soyinka claimed that a debt buyer supposedly did not own her debt, which it had reported to the bureaus. This seems to be common claim in these recent cases. The debt remained on her report despite the dispute. She then sued, claiming Equifax undertook and unreasonable investigation into the tradeline in violation of §§ 1681e(b) and 1681i(a). Section 1681e(b) directs agencies to follow reasonable procedures to assure maximum possible accuracy in the reports. § 1681i(a) requires the agency to conduct a reasonable reinvestigation.
The judge in Soyinka stated that to avoid dismissal of such a claim, the consumer must identify a straightforward dispute that the reporting agency failed to resolve or investigate. In dismissing the case, the court relied on Court of Appeal precedents that hold the terms “accuracy” and “inaccurate” in those provisions refer only to factual errors, not to legal defenses to the debt. Plaintiff’s claim that the debt buyer did not own the debt asserted a legal defense to the debt and the bureaus could not be expected to conduct such an analysis.
Hopefully Soyinka will help put an end to this recent trend of FCRA cases.
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Plaintiff Files TCPA Suit, Alleges Receiving 130 Collection Calls After Revoking Consent
An individual has filed a Telephone Consumer Protection Act lawsuit, claiming she received more than 130 debt collection calls from a defendant allegedly using an automated telephone dialing system after revoking consent to be contacted. More details here.
WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: This new complaint is filed on behalf of plaintiff by the Price Law Group, well-known consumer attorneys. The complaint alleges revocation of consent as we see so often these days. So, the questions that will be at issue are as follows: Does defendant have a recording which will eviscerate the plaintiff’s facts claims? Will the Court stay the action until the Duguid v. Facebook ATDS case is heard by the Supreme Court? Was defendant using an autodialer (an ATDS) as currently defined by the TCPA? How will the court assess this case? Was a contract/agreement involved that gave rise to the debt in the first place? Does the law allow plaintiff to unilaterally “revoke” the terms of a bilateral contract?
From the above, one can see that there are many issues involved in a revocation of consent lawsuit under the TCPA. The above provides a roadmap to defendants on how to think about revocation cases and the strategies to consider when litigating such cases.
Semper Fidelis!!!
Judge Denies MTD in FDCPA Overshadowing Class Action
A District Court judge in New York has denied a defendant’s motion to dismiss a class-action lawsuit for allegedly violating the Fair Debt Collection Practices Act by allegedly overshadowing the validation notice when it made a reference to initiating “a review of the inquiry” in a collection letter. More details here.
WHAT THIS MEANS, FROM LORAINE LYONS OF MALONE FROST MARTIN: In a footnote in the Court’s opinion, we learn there is more to the story than what is presented in the complaint. The letter at issue appears to be a second letter Defendant mailed in response to Plaintiff’s dispute letter. Also, after sending the letter, Defendant mailed correspondence validating the Plaintiff’s debt. These facts were omitted from the complaint. The Court noted Defendant’s “assertions — if substantiated at later stages of the proceedings — may well fatally undermine Plaintiff’s argument.” However, at this stage, the Court cannot consider Defendant’s assertions as it does not look beyond the facts stated on the face of the complaint. Based only on the facts in the complaint, the Court found Plaintiff’s allegation of a FDCPA violation was plausible and denied Defendant’s Motion to Dismiss.
Judge Grants $175k Settlement in FDCPA Case
A District Court judge in California has granted final approval of a $175,000 settlement in a class-action Fair Debt Collection Practices Act case. More details here.
WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: How much exactly does an individual class member in an FDCPA class action lawsuit receive? Do you think it is $1,000 or more? How about roughly three dollars while the consumer attorneys receive more than $40,000 in fees and costs?! On September 10, a judge in the Southern District of California granted final approval to an FDCPA class action settlement. In this case, the plaintiff alleged that the defendant violated section 1692g of the FDCPA by sending a letter to the plaintiff demanding payment within twenty-four days of the date of the correspondence, overshadowing and contradicting the thirty-day dispute notice. Specifically, the plaintiff contended that the letter falsely and deceptively advised a consumer that “she must make the choice between taking advantage of the reduced ‘minimum amount’ due date to remove the account from collections” or exercise her right to seek validation of the debt.
The maximum class recovery in FDCPA cases is capped at $500,000, or one percent of the defendant’s net worth, whichever is less. See 15 USC §1692k(a)(2)(B). However, in an individual case, a plaintiff may recover up to $1,000 in statutory damages, plus actual damages. Id. at (a)(2)(A). In this FDCPA class action lawsuit, the lead plaintiff will receive $750.00 and the individual class members are projected to receive approximately $3.00 each. In comparison, the plaintiff’s counsel will receive $40,658.50 in attorneys’ fees and costs. This case demonstrates why a plaintiff’s recovery may be greater without a class action lawsuit.
Referring Reader to Second Page of Letter Doesn’t Overshadow Validation Notice, Judge Rules
Similar to a case that AccountsRecovery.net wrote about last week, a District Court judge in New York has granted a defendant’s motion to dismiss on the grounds it did not overshadow the validation notice in a collection letter because it referred the plaintiff to the back of the letter for other important information. More details here.
WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: This case reminds me of a frequent saying uttered by my boss when I worked on a public works crew during my summers while in high school. Whenever we goofed something up royally, he’d say “We send you to school, we buy you books, and all you do is rip out the pages.” The moral – read the instructions completely and everything will be clear.
This case is akin to “ripping out the pages.” The consumer here (at, least the consumer’s attorney) seemed to think the consumer didn’t need to read the entire letter, including the both sides of the letter, even though it stated in bold/all capital letters typeface “NOTICE: SEE REVERSE SIDE OF THIS LETTER FOR IMPORTANT INFORMATION.”
The court easily and summarily tossed the case concluding – “Certainly, if the least sophisticated consumer can be expected to read the second page of a debt collection letter, he can reasonably be expected to read the first page. As the validation notice is on the front page of the Letter, and is not overshadowed or contradicted by the text on either side of the notice, it is legally sufficient.”
Judge Denies MTD in FDCPA Case While State Court Case is Ongoing
A District Court judge in Minnesota has denied a defendant’s motion to dismiss, and in the alternative, a motion to stay a lawsuit filed by a plaintiff alleging the defendant violated the Fair Debt Collection Practices Act during the course of filing its own lawsuit against the plaintiff in an attempt to collect on an unpaid debt. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: Becker v Portfolio Recovery Assoc. LLC serves as reminder that “the key to a [the] federal case is not only whether the debt was enforceable but also whether the [law firm’s] conduct when collecting that debt complied with the Fair Debt Collection Practices Act.” Acosta v. James A. Gustino, P.A., 478 F. App’x 620, 622 (11th Cir. 2012) and therefore in the event both a collection action and a FDCPA suit are pending at the same time, you need to get creative. Becker’s FDCPA suit contained multiple allegations, among them that PRA violated a prior CFPB Injunction Consent Order regarding what documents it had to have prior to filing a lawsuit and that it did not have a valid license to collect debts in Minnesota.
A review of the chronology points out that what started out as a simple collection action became a whole lot more.
PRA first filed its collection action on February 17, 2020. Two weeks later, on March 2nd, PRA moved for summary judgment. On March 24th, Becker filed her complaint in the federal district court alleging eight different violations of the FDCPA. [Becker filed an answer in the state court action that same day and responded to the SJ motion three days later, on the 27th.] PRA responded to the federal complaint by filing a 12(b)(6) motion to dismiss or in the alternative to stay the action, arguing that a favorable ruling in the state court, i.e that Becker owed the amount PRA claimed would be determinative of the federal action. On June 10th the state court heard oral argument and issued its Order on June 19th denying PRA’s request for summary judgment pointing out that there was a substantial issue of the basic fact – whether the amount sought was correct. Becker was on record vehemently denying several of the charges starting prior to the assignment of the debt to PRA and no evidence had been produced to meet her objections. That Order was subsequently filed in the federal action.
So, would it have made a difference if PRA was successful in the state court action? No. In denying PRA’s motion to dismiss or in the alternative to stay the federal action pending the conclusion of the collection case, the court held “the key to Becker’s FDCPA claims is not just whether the debt is enforceable, but whether PRA violated the FDCPA in its pursuit of that debt. Thus, there is not a substantial likelihood that the state court collection action will fully dispose of Becker’s FDCPA claims, and the Court cannot refuse to exercise its jurisdiction.”
Additionally, while the court noted that PRA’s motion was a 12(b)(1) standing/subject matter jurisdiction motion, it nonetheless was required the same standard of review favoring the non-moving party, that “the court must “accept as true all factual allegations in the complaint, giving no effect to conclusory allegations of law,” and determine whether the plaintiff’s alleged facts “affirmatively and plausibly suggest” that jurisdiction exists.” At *5. The key question that must be asked when a 12(b) motion is contemplated has to be whether the facts alleged in the complaint are disputed and therefore require evidence not made part of the complaint.
Both the state court collection case and the federal FDCPA suit continue so we will have to wait to see what pans out. As for creativity, I ask you out there to come up with alternative strategies that could have been tried. Start thinking as the issue of concurrent cases does occur now and again.
Plaintiff’s Attorney Ordered to Pay $27k After Judge Grants Sanctions Motion
A District Court judge in California has granted a defendant’s motion for sanctions under Rule 11 and ordered a plaintiff’s attorney to pay the defendant’s legal bills of more than $27,000 after it was sued for allegedly violating the Fair Debt Collection Practices Act for using a fake summons to try and collect on a debt. More details here.
WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER: Considering how steep the standard is for Rule 11 sanctions, this victory for the industry is particularly sweet. For those seeking to follow suit, keep three important things in mind: first, fundamentals matter. Anyone seeking Rule 11 sanctions needs to pay close attention to the notice and safe harbor requirements, or they’ll find their motion denied on purely procedural grounds. Second, timing is everything. Here, H&H knew from the get-go that the case against it was frivolous, but it waited until after the close of discovery to file its Rule 11 motion. While it’s tempting to respond to a patently frivolous complaint with a Rule 11 motion right out of the gate, H&H was right to wait until the end of the case — the court awarded sanctions not just based on Apps’ conduct in filing the complaint itself, but on his later failure to conduct any discovery or otherwise try to “discern the truth” about the claims he brought. Third, and finally, remember that H&H had to incur fees in order to recover them. Rule 11 practice is inherently an investment, and defendants should coordinate with their counsel to ensure they are making the wisest investment choices possible.
Consumer Groups Ask CFPB to Rescind FCRA Dispute Guidance
A group of 21 consumer advocacy groups yesterday sent a letter to Kathleen Kraninger, the director of the Consumer Financial Protection Bureau, asking the regulator to reconsider guidance it issued earlier in the coronavirus pandemic that said it would be flexible in giving furnishers more than the required 30 days to investigate disputes. More details here.
WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: Since the pandemic started, credit reporting has been a significant source of confusion and frustration for both consumers and industry. It began with the Section 4201 of the CARES Act which provided for a short term amendment to the Fair Credit Reporting Act (FCRA) with regard to the reporting of information during COVID. The amendment provides for the most part that if a furnisher makes an accommodation with respect to one or more payments on a credit obligation, the furnisher is to report the account as current unless the account was delinquent prior. The term accommodation is defined broadly in the Act. The Act said nothing about changing the statutory timeline for the FCRA dispute process. The Consumer Financial Protection Bureau’s (CFPB or Bureau) guidance issued April 1st appears to be an attempt to balance the needs of consumers and the operational disruption that occurred within the industry as the result of business shutdowns. The Bureau’s guidance extended the statutory dispute period from 30 days to 45.
Now advocates and attorneys general are seeking a rescission of that guidance. Their arguments for rescission are has hypocritical as the Senate’s position regarding the confirmation of a Supreme Court Justice in an election year. For example, the group states there is no need to relax statutory dispute deadlines due to business interruption because “Most states have partially or completely lifted shutdown orders that prevented employees from going to their offices”. Really? If you listened to the debate on Monday night, that logic seems to align with the gentlemen to the right, as opposed to the candidate I thought this group is supporting. The letter goes further to propose that the statutory dispute period be reduced to 15 days.
All signs point to the fact that data furnishing and credit reporting will be a target for the rest of the year and certainly in 2021. There is simply no room for error. The letter to the CFPB is the playbook for supervision and enforcement going forward. Take note and document.
Supreme Court Sets Date to Hear Arguments in TCPA ATDS Case
Mark your calendars, ladies and gentleman. December 8 is not just a day that is two days before my birthday anymore. That Tuesday will be the day that the Supreme Court will hear arguments in Facebook v. Duguid, a case that aims to settle — once and for all — how an automated telephone dialing system is defined under the Telephone Consumer Protection Act. More details here.
WHAT THIS MEANS, FROM NICOLE STRICKLER OF MESSER STRICKLER: A TCPA ruling out of the Court of Appeals for the Ninth Circuit is headed to the United States Supreme Court. In ruling on Duguid v. Facebook, the Ninth Circuit reversed the dismissal of the Plaintiff’s complaint, finding that the Plaintiff had plausibly alleged Facebook used an ATDS in sending unsolicited text messages to Plaintiff’s cellular phone. The holding contributes to the present circuit split regarding how ATDS technology is properly defined under the TCPA. In ruling for the Plaintiff, the court employed a definition that says the technology must simply have the “capacity…to store or produce telephone numbers to be called, using a random or sequential number generator.” Other circuits have ruled that the technology in question must itself have the capacity to “generate random or sequential numbers.” The SCOTUS will have the final say, determining: [w]hether the definition of ATDS in the TCPA encompasses any device that can “store” and “automatically dial” telephone numbers, even if the device does not “us[e] a random or sequential number generator.” Oral arguments are set for Dec. 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 www.bedardlawgroup.com, email John H. Bedard, Jr., or call (678) 253-1871.
