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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.
Collection Calls Subject of TCPA Complaint
An individual in Florida has filed a lawsuit accusing a company of violating the Telephone Consumer Protection Act by making debt collection calls to the plaintiff’s cell phone after he had revoked consent to be contacted and told the defendant he intended to file for bankruptcy protection and asked the defendant to contact his attorney instead. More details here.
WHAT THIS MEANS, FROM NICOLE STRICKLER OF MESSER STRICKLER: On October 30, Capital One Financial Corp. (“Capital One”) was named in a lawsuit alleging willful violations of the Telephone Consumer Protection Act (“TCPA”). The action, filed in the U.S. District Court for the Middle District of Florida, alleges that Capital One placed at least 35 collections calls to Plaintiff’s cellular phone utilizing a pre-recorded message after being directed to stop. This case provides two important lessons. First, this type of “revocation of consent” claim is one commonly made by this particular consumer law firm, Sulaiman Law Group. Oftentimes, in these claims the plaintiff does not contest originally providing consent to be contacted but alleges that that consent was subsequently revoked orally. Any call recordings will be integral to a proper defense. Second, this case serves as a reminder that pre-recorded messages can be even more dangerous than those placed via ATDS. With pre-recorded messages, a Court need not delve into specifics of the system utilized to place the call. The pre-recorded nature of the communication alone places it within the purview of the TCPA.
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Appeals Court Overturns Dismissal of FDCPA Overshadowing Case
The Second Circuit Court of Appeals has overturned a lower court’s dismissal of a Fair Debt Collection Practices Act case in which a defendant was accused of overshadowing the validation notice in a collection letter by telling the letter’s recipient that a lawsuit may be filed against him without any further warning. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: This case is unremarkable except for the fact it falls into my “what were they thinking” pile, both as to the author of the letter and the district court that saw no problem and dismissed the case. I recently commented on a Plaintiff’s firm that seemed to take the position that unless the “Validation Notice” was printed in double sized day-glo colored letters it was overshadowed by the remainder of the letter, notwithstanding that the Notice usually followed the initial salutation paragraph in a separate paragraph using the the same size type.
Here the Defendant law firm did just the opposite instead of highlighting the Notice they put in capital letters: “THERE MAY BE NO FURTHER NOTICE OR DEMAND IN WRITING FROM PRIOR TO THE FILING OF SUIT” They added the warning that in the event of a lawsuit the debtor “may also be responsible for paying the attorneys’ fees incurred in prosecuting the lawsuit”; and that he could avoid these consequences by “paying … now or making a suitable payment arrangement.” What were they thinking?
The warning and the way it was presented couldn’t help but create the impression that only immediate payment could avoid a lawsuit. Had the all-caps warning been included in a second letter, 35 days after the initial notice had been sent, I don’t think there would have been a problem (assuming that the law firm normally did file suits after the validation period had passed). To make matters worse the 2nd Circuit pointed out that the uncertainty created by the letter’s payment demand is unmitigated by any “transitional language” “explaining that [the letter’s] demand d[oes] not override the consumer’s rights under Section [1692g] to seek validation of the debt.” Not sure that would have saved them but at least it would have provided an argument.
While clearly not the main issue, the 2nd Circuit also took issue with the lower Court for considering the attorney fee comment writing “the district court should not have considered the unsigned contract, which was not attached to, incorporated by, or integral to the complaint.” What was the law firm thinking?
A humble suggestion to prevent this type of situation
- Review your letters with a compliance professional
- Review your letters with some one unconnected with finance/debt collection, etc., and ask them what they understand the letter means. In other words, find out what the LSC is thinking.
Appeals Court Grants Request for Publication in FDCPA BFE Case
The Ninth Circuit Court of Appeals has granted a request for publication and replaced a memorandum of disposition with an opinion, updating the reversal of a lower court’s summary judgment ruling in favor of a defendant that was sued for violating the Fair Debt Collection Practices Act by relying on information it was provided by the original creditor, saying the defendant was not entitled to the FDCPA’s bona fide error defense. More details here.
WHAT THIS MEANS, FROM SARAH DEMOSS OF PREMIERE CREDIT OF NORTH AMERICA: There is a lot to unpack from the Urbina matter. First, let’s take a look at the bona fide error defense in general. As a simplistic summary, the bona fide error defense requires solid procedures and practices that normally would prevent the error (that you have to admit occurred) from happening. This often requires extensive discovery, depositions, and high outside counsel fees for an agency. Successful rulings help others in the industry strengthen their processes, and I’m glad people fight these cases instead of settling. However, when unsuccessful, they leave agencies scrambling to try and figure out what is a true best practice and how to protect ourselves. The Urbina matter is a good example of the latter. What is an agency’s obligation when a debt, that the agency doesn’t own, is disputed? If we aren’t the system of record, how will we ever know if the balance is 100% accurate? To some extent, we have to rely on what our clients tell us, or third party collections agencies wouldn’t be able to operate. Urbina seems to indicate at the end of the opinion that the timing is important, but fails to give us an actual roadmap or put us on notice of our obligations. Hopefully, other case law will provide better answers, but we need agencies to take on the cost of getting that far in court first.
Judge Grants Preliminary Approval of Settlement in FDCPA Class Action
A District Court judge in Texas has granted preliminary approval of a settlement in a Fair Debt Collection Practices Act class-action lawsuit after a collection agency was accused of sending letters that offered individuals a limited time settlement offer on an unpaid medical debt without disclosing that the statutes of limitation had expired and were no longer legally enforceable. More details here.
WHAT THIS MEANS, FROM XERXES MARTIN OF MALONE FROST MARTIN: Time-barred debt collection can be a bit of a minefield as consumer attorneys continue to think of more alleged violations, or when state legislatures look to the subject and start writing regulations. On top of that, class-action letter cases can be expensive, win or lose. It stresses the importance of an annual letter review and monitoring new case law. I think an agreed class settlement in this case was the best strategy, as chosen here by the collection agency and debt buyer defendants. You have to pick and choose your battles appropriately and if you choose a wrong one to fight, it can be very costly. The early class settlement here does the best job at keeping both defense costs and liability expense, including Plaintiff’s attorneys’ fees, as low as possible.
Judge Partially Grants MSJ For Plaintiff in FDCPA Case
In a case that was spotlighted by Barron & Newburger, a Magistrate Judge in Ohio has granted partial summary judgment in favor of a plaintiff who sued a debt collector for allegedly violating the Fair Debt Collection Practices Act because it did not identify itself as a collector when leaving voicemail messages. More details here.
WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: Some things just aren’t defensible. Here, the factual recitation in the case describes an agency that come across as a “dabbler” when it comes to collecting consumer debts. Debt collection, of course, is not something one dabbles in. Instead, it requires strict adherence to FDCPA mandates. For example, this case confirms that if you don’t provide the FDCPA mini-miranda when leaving a voicemail message, don’t be surprised when a Judge finds in favor of the consumer.
This said, judges get it wrong too. The Judge here also found liability when the collector stated that the agency would credit report the debt – even though it knew the consumer disputed the debt. The FDCPA, however, does allow reporting of disputed debts so long as the debt is reported as disputed when it’s reported. (Just be careful here as to timing. If the dispute came in during the 30-day validation period, verification needs to be sent before any further collection activity can ensue, including credit reporting). The lesson? Ducks are born to dabble, debt collectors aren’t.
Judge Grants MSJ For Defense in FDCPA Dispute Case
A District Court judge in Illinois has granted a defendant’s motion for summary judgment after it was sued for allegedly violating the Fair Debt Collection Practices Act because the plaintiff claimed that the defendant would not allow him to dispute a debt, despite call recordings that illustrate the opposite is what he was told. More details here.
WHAT THIS MEANS, FROM SHANNON MILLER OF MAURICE WUTSCHER: In Dennin v. Waypoint Resources Group, LLC, a District Court Judge in the Central District of Illinois granted the defendant’s, Waypoint Resources Group, LLC (“Waypoint”), motion for summary judgment, where the issue before the Court was whether communications made regarding the dispute process were false and misleading and whether the validation notice was properly conveyed.
The plaintiff had sued Waypoint for violations of the FDCPA because of alleged misleading statements made pursuant to § 1692e(10) regarding his option to dispute the debt as well as for allegedly failing to provide the validation notice as required by § 1692g(a). Specifically, the plaintiff had alleged that during a telephone call with Waypoint he had been told that he could not dispute the debt and also that Waypoint had mailed the validation notice to his old address resulting in him never receiving it and thus being advised of his rights as required by § 1692g.
Considering the record before it, the Court quickly dispatched of the plaintiff’s claim that he was told he could not dispute the debt in issue as Waypoint had put into the record two call recordings which did not reflect Waypoint advising plaintiff that he could not dispute the debt but actually reflected that the plaintiff did dispute the debt to Waypoint, who updated its credit reporting of the debt to reflect that it was disputed. Further, while noting that the plaintiff had not alleged this argument in the complaint, the Court also dispatched of plaintiff’s claim, raised for the first time in his opposition to Waypoint’s motion, that instead Waypoint had told plaintiff that he could either pay the debt or dispute it; not both. While the Court did acknowledge that the record did reflect this statement had been made to the plaintiff, it also acknowledged that according to Waypoint it did not have a process for handling a dispute made upon a debt which had been paid because upon payment the debt would have been returned to the creditor. The Court found that although Waypoint had in fact stated that the plaintiff could only pay or dispute the debt its statement was not false or misleading because those were the only options for the plaintiff with Waypoint, not under the FDCPA generally, therefore making the statement true, and that the plaintiff could have paid the debt and then done any number of things to dispute the debt, including to the creditor and to the credit reporting bureaus, but nothing in the FDCPA required Waypoint to advise the plaintiff of such. Finally, the Court found that although Waypoint did mail the validation notice to the wrong address for plaintiff, because the plaintiff had been able to lodge a dispute with Waypoint he lacked any concrete injury as required for standing under Article III.
The take-away for the industry is to make sure your call representative scripts are thorough and that your reps are not talking on points which they should not be speaking upon or have not been trained upon. Here, it seemed that perhaps the representative had “spoken out of turn” but Waypoint was able to clean up a potential violation through subsequent fact and evidence development as the case progressed. Although the Court found for Waypoint, this is really a close call that could have easily gone the other way.
HHS Fines City $202k For Allowing Ex-Employee to Download PHI
Forgetting to pull the plug on the access credentials of an employee who had been terminated is going to cost the city of New Haven, Conn., $202,400, after it was fined by the Department of Health & Human Services’ Office of Civil Rights for allowing a data breach that compromised the protected health information of 500 city residents. More details here.
WHAT THIS MEANS, FROM LESLIE BENDER OF CLARK HILL: The bedrock of HIPAA’s Security Rule is a matrix of administrative standards or safeguards to help companies, including healthcare providers and their business associates, assure that their conduct and that of their employees safeguards the integrity, confidentiality and availability of the non-public information entrusted to their care. An essential feature of this would be the program a company has in place known as “workforce clearance procedures.” At the outset these would be the policies and procedures an organization has to assure it is verifying the credentials and backgrounds of potential hires and as an employment arrangement evolves these would include assuring that any permissions employees have to access information systems and patient information remain current and aligned with an employee’s role. It is not uncommon for companies to offer internal promotion opportunities to members of their workforce – and this is permitted by HIPAA but if and only if the organization also assures that any access controls are adjusted to and changes in job descriptions to adapt to HIPAA’s “need to know” expectations and to terminate all access controls at the time specific employees are separated from employment. The recent HHS enforcement action confirms this compliance strategy. Inexplicably in the City of New Haven Health Department (NHHD) enforcement action an employee was separated from employment but her permissions and access privileges to key health information that was non-public were not terminated. Fact finding revealed outrageously that an employee separated during her probationary (introductory) period re-entered the NHHD facilities using a work key she still retained and locked herself and a representative of hers in her former office. While there the separated employee logged into her former NHHD computer and downloaded patient information from it onto a USB thumb drive. The former employee then collected her personal belongings and some paper records and she and her legal representative exited the NHHD premises taking sensitive medical information about 498 patients with her.
What does this mean? There are two important takeaways to consider. First, the NHHD facts are ideal for a “table top” exercise among a company’s senior leadership or compliance committee. Providing these facts to your senior leadership team or compliance team would be a great way to spark a conversation about what controls or safeguards should your company have in place to prevent these facts from occurring and what interdisciplinary considerations are there for preventing loss or damage in this way. Second, there is no time like the present to assure that your compliance team and human resources are aligned when employees are hired, transferred, or separated from employment. A great resource is a fact sheet HHS has available on these administrative controls that you will find right here.
State Court Affirms Denial of Arbitration Because Loan Sale Agreement Was Not Specific Enough
The North Carolina Court of Appeals has affirmed a pair of lower court decisions that denied a defendant’s motion to compel arbitration after it was sued for allegedly violating a state law during the process of suing individuals with unpaid debts. More details here.
WHAT THIS MEANS, FROM JONATHAN ROBBIN OF J. ROBBIN LAW FIRM: The use of arbitration agreements can be a powerful weapon in defending FDCPA and other litigation. But as is typically the case, the party seeking to enforce the agreement is not the original creditor. Thus, it is imperative that loan sale agreements be specific that the right to arbitrate was transferred along with all other rights and interest. In these North Carolina cases, the court held provisions of the arbitration agreement stating that the original creditor was assigning the “receivable” and assigning the “account” was insufficient to transfer the arbitration rights. The court went on to hold that there needed to be some additional showing of intent to transfer the arbitration rights. Neither provision stated “all rights title and interest in the receivable or account.” This simple distinction created sufficient ambiguity for the court to deny defendant’s motion to compel. Thus, it is imperative that “all rights, and title, and interests” be assigned and not simply the account or receivable.
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.