Compliance Digest – October 26

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.

Judge Approves $6M Settlement in TCPA Case Against Collector

A District Court judge in California has granted final approval of a $6 million settlement in a Telephone Consumer Protection Act case that alleged a debt collector placed calls to individuals’ cell phones using an automated telephone dialing system without first obtaining their consent. The defendant has also agreed to create an $18 million debt relief fund that will waive up to $599 in debt owed to the defendant for each member of the class with an open account. More details here.

WHAT THIS MEANS, FROM NICOLE STRICKLER OF MESSER STRICKLER: A well-known debt servicer entered into a high dollar class settlement this past week, showing that despite the more recent positive developments in case law, the TCPA still poses significant risks for collectors. Without admitting liability, the collector agreed to set up a $6 million settlement fund to resolve claims that class members were called without their consent utilizing an ATDS. Notably, the claim is based in the S.D. of California, an unfriendly venue for TCPA defendants in light of the 9th Circuit’s opinion in Marks v. Crunch San Diego. In contrast to other circuits (think, the 7th or 11th), Marks adopted an expansive definition of an ATDS, which broadened the TCPA’s applicability to many dialing systems. One wonders if the same settlement would have been entered into if the case had been venued in friendly circuit.


Judge Denies MTD in FDCPA Case Over Garnishment SOL

A District Court judge in Texas has denied a defendant’s motion to dismiss after it was sued for violating the Fair Debt Collection Practices Act, ruling that a garnishment action taken eight years after a default judgment was awarded is not subject to the law’s one year statute of limitations when the underlying default judgment was obtained after filing a collection suit in the wrong venue. More details here.

WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: In this case, a predecessor of one of the defendants filed suit against the plaintiff in Denton County, Texas, to recover a debt. On Feb. 25, 2011, the court granted a default judgment against the plaintiff for failing to appear. Eight years later, on Feb. 14, 2019, the defendants filed a garnishment action in Denton County, Texas, to collect on the default judgment. After the defendants successfully garnished one of the plaintiff’s bank accounts, the plaintiff filed an FDCPA suit against the defendants to oppose the garnishment suit. Specifically, the plaintiff argued that the defendants violated section 1692i of the FDCPA for failing to bring the legal action in the proper judicial district. The plaintiff contended that he was a resident of Collin County, Texas, during that time.

The defendants filed a motion to dismiss and argued that the one-year statute of limitations for filing suit in Denton County expired more than eight years ago. The court denied the defendants’ motion to dismiss, relying on a Fifth Circuit decision which weighed in on the date of accrual of a statute of limitations for a violation of section 1692i. In that decision, the Fifth Circuit determined that a violation does not arise under section 1692i(a)(2) until the alleged debtor receives notice of the lawsuit. The Fifth Circuit also considered the history of the adoption of section 1692i.

In this case, the court recognized that the record did not identify when the plaintiff received notice of the credit card suit and therefore, it was unclear whether the one-year statute of limitations was ever triggered. The outcome of this case is not surprising given that the legislative intent in enacting section 1692i was to eliminate actions in distant counties to prevent a party from gaining an unfair advantage.

Judge Denies MTD in FDCPA Case Over Intangible Injuries

A District Court judge in Florida has denied a defendant’s motion to dismiss a complaint for lack of subject matter jurisdiction after the judge had already granted summary judgment in favor of the plaintiff, choosing to take a second look following a ruling in an Appeals Court case. More details here.

WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: Even though the Court explained its reasoning in a footnote, I’m surprised the court entertained the motion since a judgment had already been rendered.  The issue of standing will continue to be litigated as courts grapple with its amorphous meaning following Spokeo. Courts do appear to be narrowing the standing definition though as can be seen from both the Trichell decision out of the Eleventh Circuit and Frank v. Autovest out of the D.C. Circuit. While many motions to dismiss are filed based on standing, the issue may also be ripe at the summary judgment phase which is something to consider in such litigation.

Judge Grants Motion For Defense in FDCPA Case Over Creditor Identification in Letter

Robbie Malone and the team at Malone Frost Martin shared the details of a victory in a case in which a District Court judge in New York granted a defendant’s motion for judgment on the pleadings after it was accused of violating the Fair Debt Collection Practices Act by not properly identifying the creditor to whom a debt was owed in a collection letter. More details here.

WHAT THIS MEANS, FROM PATRICK NEWMAN OF BASSFORD REMELE: Here is a case that confirms no purported “interpretation” of a letter’s language is too tortured for some lawyer, somewhere, to attempt to make it the centerpiece of a federal lawsuit (and sometimes win). In your humble author’s view, there is no reality in which a consumer (sophisticated, unsophisticated, or otherwise) reads “RE: [CREDITOR NAME]” to mean anything other than “this is the creditor we’re writing to you about and to which you owe this debt.” Anyone who has ever sent or received an email understands the conventional use of “Re:”.  

Yet, FDCPA litigation and reality often occupy different zip codes. (In fact, several courts have determined the use of “Re:” does not adequately identify the creditor.) So, here we are, defending a deluge of these claims.

Happily, the Kim court considered the complete context of the letter and was unwilling to take the “leap” consumer’s counsel advocated. This is a good win and a move in the right direction. But, as always, an ounce of prevention is worth a pound of cure. Vetting your letters to remove any notation or shorthand that could be flyspecked by a consumer lawyer for failure to strictly adhere to the FDCPA avoids the litigation battle in the first instance. Have your letters reviewed for the use of “Re:” or similar language.  

NMAC Pays $5M In CFPB Consent Order; Third-Party ‘Deprived’ Consumers of Lower Pay-by-Phone Options

The Consumer Financial Protection Bureau announced it had entered into a consent order with Nissan Motor Acceptance Corp., which will require the auto lender to repay consumers $1 million and pay a $4 million fine after it was accused of wrongfully repossessing vehicles and because its third-party payment processor did not inform consumers who were paying their bills via phone calls that there were other — less expensive — payment options available to them. More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF PAYMENT VISION: When the CFPB slowed down in actions these last two years, many started to believe that the number of CFPB actions could remain low. Still, as this Order against Nissan Motor Acceptance Corp. (NMAC) is added to the latest in a slew of enforcement actions from the CFPB, this idea seems very unlikely. In the third quarter of 2020 alone, the CFPB brought 19 public civil and administrative actions, a pace not seen since Richard Cordray helmed the CFPB. In addition, this order against NMAC is the largest since the CFPB’s consent order totaling nearly $12 million with Santander Consumer USA in November 2018.

It is important to note that the timeliness of actions could vary not due to more active initiatives, but due to the time needed to investigate, as investigations can take years in some cases. In this case, the order addresses NMAC’s repossession procedures, agreement terms, and the fee paid to complete the transaction (commonly known as a convenience fee), which occurred from 2013 until September of last year. It did not specify when the investigation started, but likely a year or more, as if an investigation was not underway, one would have been likely triggered when in 2019, the Department of Justice settled with NMAC for violations against the Servicemembers Civil Relief Act.

So, the takeaway for all, don’t rely on the idea that the CFPB is not enforcing as aggressively as in the past. Administrations will continue to change and modify but as long as the CFPB is an active regulatory body, be prepared to answer any questionable practices. Companies must ensure that all processes comply with the various regulations, especially when it applies to the topics that the CFPB has focused on. For example, in this case, NMAC should have taken steps to ensure the required compliance when charging convenience fees. This has been a hot topic for the CFPB for years and was explicitly addressed by the CFPB back in 2017. 

Judge Denies Renewed MSJ in FDCPA Case Over Status of Letter

A District Court judge in Florida has denied a defendant’s renewed motion for summary judgment after it was sued for allegedly violating the Fair Debt Collection Practices Act by not including some of the required disclosures in a letter sent to the plaintiff, which the defendant attempted to claim should not have been considered a communication in connection with the collection of a debt. More details here.

WHAT THIS MEANS, FROM SHANNON MILLER OF MAURICE WUTSCHER: In Valenzuela v. Axiom Acquisitions Ventures, LLC, a District Court Judge in the Middle District of Florida denied a renewed motion for summary judgment filed by the defendant, Axiom Acquisitions Ventures, LLC where the issue before the Court was whether a communication to a consumer was made “in connection with the collection of a debt.”

The plaintiff had sued Axiom for violations of the FDCPA in relation to receipt of a letter which the plaintiff alleged failed to provide a disclosure as required by § 1692g and was also false and misleading as well as unfair an unconscionable pursuant to §§ 1692e and f. Axiom had argued that the FDCPA was inapplicable because the letter in issue was sent merely to advise the plaintiff that his debt had been sold to another entity and as such was not a regulated “communication”. The Court, noting that it must “look to the language of the communication itself to ascertain whether it contains a demand for payment” as well as the Eleventh Circuit precedent that “a communication from a debt collector may have dual purposes, such as giving notice to a consumer of certain matters and demanding payment”, found that the letter was a communication subject to the FDCPA. While noting that it was a close call, the Court pointed out that the letter goes beyond merely informing the plaintiff that his debt had been sold because of “specific language urging Plaintiff to immediately remit future payments to” the new creditor. Noting that “[h]ad that part of the letter not been included, the outcome here may have been different”, the Court found the ‘“call of action’ for Plaintiff to remit payment” was enough to constitute a communication in connection with collection of a debt under the FDCPA.

The take-away for the industry is simply a reminder that you should not try to get too cute with your letters. Less is more, and here, literally, less would have kept Axiom from facing suit. Whether a letter is a communication in connection with collection of a debt is always a fine line upon which the Courts are, more likely than not, going to err on the side of caution. Good rule of thumb: always assume that your letters are subject to the FDCPA and draft them accordingly.

Judge Grants MTD on State Collection Law While Also Commenting on Consent Revocation

A District Court judge in Oregon has granted a defendant’s motion to dismiss a claim it violated a state collection law while also ruling that revocation of consent must be made to all parties instead of assuming that if consent is revoked to one party, then all other parties will be notified and also revoke consent. More details here.

WHAT THIS MEANS, FROM HEATH MORGAN OF MALONE FROST MARTIN: This is an encouraging case for the industry to be able to defeat the issue of revocation of consent at the Motion to Dismiss level. We’ve seen similar factual allegations survive a Motion to Dismiss and have to be defeated at the Summary Judgment level, costing an agency thousands of dollars. 

As plaintiffs and plaintiffs attorneys continue to evolve and look for ways to discretely revoke consent to entice and bait TCPA claims, this case provides good language for the industry to prevail.

Encore to Pay $15M to Settle CFPB Lawsuit

The Consumer Financial Protection Bureau announced it has settled a lawsuit it filed last month against Encore Capital Group and its subsidiaries, Midland Funding, Midland Credit Management, and Asset Acceptance Capital Corp. The companies will repay consumers nearly $80,000 and pay a civil fine of $15 million. More details here.

WHAT THIS MEANS, FROM JONATHAN ROBBIN OF J. ROBBIN LAW FIRM: The CFPB sought to make an example out of Encore/Midland by bringing the action against it based on outdated accusations that the companies violated the terms of a 2015 consent order by inter alia suing consumers without possessing required documentation, using law firms and an internal legal department to engage in collection efforts without providing required disclosures, and failing to provide consumers with required loan documentation after consumers requested it. According to Encore, entering into the settlement helps quickly resolve all outstanding issues it has with the CFPB, and has no operational impact. Finally, Encore and the rest of the collections industry await rulemaking from the CFPB, which will help provide further guidance on necessary disclosures and it appears that using the model language provided by the CFPB may provide a safe-harbor. Stay tuned.

CFPB Enforcement Actions Spike in 3Q

Maybe there is something to the theory that people are far more productive when working from home than they ever were sitting inside an office. That might be one explanation why, and I say this completely with my tongue in my cheek, the number of public enforcement actions taken during the third quarter of 2020 — when employees from the Consumer Financial Protection Bureau and the rest of the country were working from home — was five times higher than the number announced during the second quarter and more than double the amount announced during the third quarter of last year. More details here.

WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: Life, and apparently CFPB actions, are a roller coaster. This past quarter saw a significant spike in CFPB enforcement actions. It brought 19 matters, which is four times the number in the prior quarter and double the amount in the same quarter last year. The recent numbers have not been seen since Cordray was the director five years ago. However, this is probably less a sign of things to come and more the result of predictable events.  

First, and no particular order, the Supreme Court’s ruling in Seila Law provided some clarity on the constitutionality of the CFPB, which in turn likely freed it up to take the actions. Second, there was a pause in investigations under [former acting director Mick] Mulvaney but [Kathleen] Kraninger picked up the pace. Enforcement actions often are the result of years of work, so numerous of those investigations likely concluded around the same time. Third, government agencies often wrap up investigations at the end of the year so they can be included in their annual reports. Fourth, the CFPB maybe released these in case there is a change in the presidency, which will result in a change in the director’s position. There likely are a number of other explanations.

The recent CFPB enforcement numbers were eye opening, but they likely will not stay at those levels.

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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