Compliance Digest – January 4

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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.

TCPA Class Action Filed Against Collector in Florida

A class-action lawsuit has been filed against a debt collector in Florida alleging it violated the Telephone Consumer Protection Act and the Fair Debt Collection Practices Act by calling the plaintiff more than 40 times after he allegedly revoked consent to be contacted and for mis-stating the amount that was owed during calls before consent was revoked. More details here.

WHAT THIS MEANS, FROM JUNE COLEMAN OF MESSER STRICKLER: Jacob Nieves filed a lawsuit against Nationwide Recovery Systems, Ltd. on December 21, 2020, alleging that NRS called Mr. Nieves to collect a medical debt at least 40 times after Mr. Nieves orally requested that the phone calls stopped, in violation of the Telephone Consumer Protection Act (TCPA).  Mr. Nieves also alleges that NRS violated the Fair Debt Collection practices Act, section 1692c(a)(1) by continuing to call Mr. Nieves on his cell phone after the oral request to stop because such calls were made at an “unusual time or place.” And therefore, NRS’s calls were also harassing, in violation of section 1692d(5) of the FDCPA because the calls after the oral request were repeatedly or continuously made with intent to annoy, abuse or harass Mr. Nieves. Finally, Mr. Nieves claimed that the amount of the debt changed with each phone call, and thus, there must be a misrepresentation, in violation of section 1692e(2) of the FDCPA. There was also a claim that all of this conduct violated Florida’s Consumer Collection practices Act.

It is difficult to discuss the merits of this case without some factual background, which you simply cannot discern from a complaint. And it appears that the answer (or a motion to dismiss) which might shed some light on the Complaint’s factual underpinnings will not be filed for several weeks. Were the calls  autodialer calls – or click to dial calls with human intervention?  Is this a jurisdiction that believes that predictive dialers do not fall within the reach of the TCPA and its definition of autodialer? Were calls placed to a cell phone or were the calls forwarded to a cell phone? (It appears that these are not messages dropped into the consumer’s messages without ringing the phone.) 

And perhaps one of the most crucial issues is whether there a revocation during a phone call?  Recordings will be helpful with that issue. But there have been other cases in which a consumer requests no phone calls and a collector reminds the consumer that any such request must be made in writing pursuant to the FDCPA – which is true under the FDCPA. The fact that the consumer failed to reference a cell phone might cause the collector to overlook that an oral revocation of consent to call a cell phone may be effective. And this might be the biggest issue that this case highlights – the possibility that the collector did not tie the oral request to cease calls to the TCPA requirement to cease calls to cell phones using an autodialer if consent is revoked, even orally. 

Of course, whether consent can be revoked and how it can be revoked is uncertain, depending on the jurisdiction, and may depend on what the original creditor’s contract says or anything else the consumer received regarding this issue. However, the Eleventh Circuit, which is where this Middle District of Florida case is venued, addressed this issue this year, and even recently refused to rehear the case on Sept. 1, 2020. In Medley v. Dish Network, LLC, 958 F.3d 1063 (11th Cir. May 1, 2020), the Eleventh Circuit followed the Second Circuit in in Reyes v. Lincoln Auto. Fin. Servs., 861 F.3d 51, 56 (2nd Cir. 2017), holding that if the original contract between the consumer and the creditor set forth consent to autodialed calls, the consumer cannot after the fact change the terms of the bargained for agreement. (Medley, supra, 958 F.3d at 1069-70.) So if the original contract contained such consent, it would appear that NRS may have an excellent defense to this claim.

And except for the other claim about the amount, the remaining claims appear to be dependent on Plaintiff’s revocation theory. Can a consumer’s oral request for no calls provide a basis for liability under section 1692d(5) for knowingly annoying and repetitive calls section 1692c for calls to a known inconvenient time or place even though section 1692b requires such requests in writing?

Others have made these same arguments, and for the most part, a 1692d(5) repetitive and harassing phone call claim and a 1692c(a)(1) inconvenience phone call claim based on an oral request not to call or not to call on a cell phone will typically fail.  (See, e.g., Brown v. Credit Mgmt., LP, 131 F. Supp. 3d 1332, 1339 (N.D. Ga. 2015).)  Courts rely heavily on the fact that the FDCPA section 1692b requires a written request to cease and desist. Courts then look to see if the number or pattern or calls is excessive, as it would in any other claim not dependent on the revocation or consent, and whether there was any communication from the consumer that indicated calls were inconvenient – something other than a mere oral request not to call.  (See, e.g., Moltz v. Firstsource Advantage, LLC, 2011 U.S. Dist. LEXIS 85196, *8, 10 (N.Y.W.D. 2011) (oral request and then 25 calls made in six months insufficient to constitute 1692d(5) harassment by itself and no evidence that the oral request to cease calls referenced an inconvenient time in violation of 1692c(a)(1)); accord Starkey v. Firstsource Advantage, 2010 U.S. Dist. LEXIS 60955, *15 (N.Y.W.D. 2010) (same).) And when the number of calls or the pattern of calls may give rise to a claim, that is the basis for the claim – not the oral request to cease calls. (See Moore v. Firstsource Advantage, LLC, 2011 U.S. Dist. LEXIS 104517, *41-42 (insufficient evidence regarding number of calls and timing and pattern of calls to deny summary judgment based on calls after oral request to stop calling phone).)

It will be interesting to watch this case and see how NRS develops the facts to determine what really happened in this case. But it is clear that NRS may have some great facts to develop defenses. We need only wait and watch.


Seventh Circuit Reverses Ruling in Letter Case Over Lack of Standing

The Court of Appeals for the Seventh Circuit continued its attack on standing in Fair Debt Collection Practices Act cases yesterday, vacating the denial of a defendant’s motion to compel arbitration because the court lacked jurisdiction after it ruled that the plaintiff failed to allege she suffered an injury after receiving a collection letter from the defendant that sought to collect more than what was owed. More details here.

WHAT THIS MEANS, FROM CAREN ENLOE OF SMITH DEBNAM: Nettles continues a positive trend for the ARM industry as it relates to standing.  This is one of several cases in which the Seventh Circuit has recently reviewed Article III standing in the context of the FDCPA.  Importantly, the Court in Nettles has signaled its willingness to apply a Spokeo analysis of subject matter jurisdiction to substantive provisions of the FDCPA – this time examining standing in the context of §§1692e and f. 

Judge Grants MSJ for Plaintiff in TCPA ATDS Case, Awards $122k in Damages

In a case that was first spotlighted by Eric Troutman at, a District Court judge in Ohio has granted a plaintiff’s motion for summary judgment and awarded it $122,500 after he was contacted by a debt collector 245 times during a 4 1/2-month span, even though the creditor never communicated to the collector that the plaintiff had revoked consent to be contacted. More details here.

WHAT THIS MEANS, FROM JUDD PEAK OF CAPITAL ACCOUNTS: This decision is troubling, but highlights the principal that the Telephone Consumer Protection Act is a strict liability statute. A business can do everything right based on the information they have, and still be held liable in court. In Ramsey, the original creditor knew that the consumer had revoked consent to be called, but never communicated that revocation to its third-party collection agency. When the agency made calls under the assumption that prior express consent was present, it became a TCPA violation.  

So, what should an outside collection agency do to prevent this outcome? As a preliminary matter, TCPA liability for calls such as these only exists if the calls were made using an automatic telephone dialing system (ATDS).  So, don’t use an ATDS if you cannot conclusively establish the existence of prior express consent (and lack of revocation). Beyond that, an agency is best served by ensuring that there are representations and warranties in its client contracts, and even better, indemnification obligations if the client fails to notify the agency of a consent revocation. While the existence of contractual remedies are not a defense to liability in court, they can mitigate your overall risk associated with using an ATDS. 

Sixth Circuit Reverses Ruling in FDCPA Envelope Case

The Sixth Circuit Court of Appeals has reversed a lower court’s ruling in favor of a defendant that was sued for violating the Fair Debt Collection Practices Act, ruling that all the information that can be viewed through the glassine window portion of an envelope containing a collection letter matters under Section 1692f(8) of the statute. More details here.

WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: An observation: the “benign exception” exception is similar to pornography – it can’t exactly be defined, but a judge will knows it when he/she sees it. In Donovan v Firstcredit, Inc. the Court was faced with two issues. The threshold query is should § 1692f(8) should be read to include a benign exception. There is a split between the circuits as to that question and for those who do business within the Sixth Circuit (Kentucky, Michigan, Ohio and Tennessee) the answer is now clarified as NO. The second issue, while not determinative, was whether the exception could apply to FirstCredit’s letter.

§ 1692f(8) prohibits: Using any language or symbol, other than the debt collector’s address, on any envelope when communicating with a consumer by use of the mails or by telegram, except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business.

In this case, the complained of language, “an empty checkbox followed by the phrase “Payment in full is enclosed,” was not on the envelope but visible through a glassine window. There was also — depending on the folded letter’s placement in the envelope — a second empty checkbox followed by “I need to discuss this further. My phone number is  —–,” [is] visible directly below the first.” (In a footnote, the Court commented that while those phrases could also apply outside of debt collection, it did not eliminate the risk that it appeared to come from a debt collector thus pointing out the challenge regarding the application of the exception.)

The decision is extensive, and discusses issues of standing and statutory interpretation which might prove useful in other cases. There is a cautionary lesson here. 

Why was these phrases location on the letter susceptible to being viewed? Could they have been located elsewhere on the letter? Was any testing done of a sample letter put in a sample envelope to gauge potential movement and make adjustments to the layout and/or fold of the letter? Remember not too long ago there was a case where a court found that the letter was visible through a solid envelope (apparently the paper used was exceedingly thin). These are not esoteric questions.

The takeaway, this was a self-inflicted wound. It’s common to spend time reviewing the language in letters for compliance. This case points out that is only part of a necessary review. Even if you are in a venue that allows benign exceptions, do you really want to have to argue its application in defense of a lawsuit? Happy New Year. 

CFPB Fines Santander $4.75M for FCRA Violations

The Consumer Financial Protection Bureau yesterday announced it had issued a consent order against Santander Consumer USA, accusing it of violating the Fair Credit Reporting Act by furnishing accurate information to credit reporting agencies and fining the nonprime auto lender $4.75 million. More details here.

WHAT THIS MEANS, FROM HEATH MORGAN OF MALONE FROST MARTIN: The Kraninger CFPB gave the industry a “Christmas present” that is fitting for 2020. The CFPB’s consent decree against Santander continues to revive the once declared dead policy of “regulation by enforcement” in its allegations against Santander for FCRA violations. 

The most relevant issue that agencies should be aware of is the CFPB’s issue with reporting a date of first delinquency as the same date of account information. This is important for companies in the third party space as the industry has struggled to identify clear guidelines for reporting date of account and date of delinquency information. The CFPB’s focus on this area under the FCRA only increases the need for agencies to have clear, defined standards for reporting such information from their clients.

The CFPB further found and alleged that Santander failed to establish and implement reasonable policies that related to the accuracy and integrity of consumer information it was furnishing to CRAs in violation of Regulation V and 12 C.F.R. 1022.42(a). Similar to its allegations in the CFPB’s Complaint against FCO Holdings, the Order alleges that its policies and procedures were not sufficient given its nature, size, complexity, and scope of its activities. Finally it pointed to a Santander internal audit finding that stated that written procedures do not exist that would govern daily reporting activities within the Credit Bureau reporting department and found other gaps in the companies procedures to speak to its awareness and failure to correct those issues.

Another allegation that is worth noting for agencies concerns how they handled multiple error reports from CRAs. The order’s allegations state that Santander did not promptly update or correct the incomplete or inaccurate information which would be a violation of Section 623(a)(2) of the FCRA.

One final note is that while these allegations were brought under the FCRA which has by statute a two year statute of limitations, the CFPB Consent Decree cites allegations and evidence from January 2015, almost five years from the consent decree order.

Like the CFPB’s Complaint against FCO Holdings, this consent decree is must reading for all compliance officers of agencies who credit report.

Student Loan Servicer to Pay $35M in Fines and Redress for Violating Consent Order

The Consumer Financial Protection Bureau yesterday issued a consent order against a student loan servicing company for violating a prior consent order in which it was accused of mis-stating minimum amounts due on billing statements and engaging in illegal debt collection practices. In this newest consent order, Discover Bank, the Student Loan Corp., and Discover Products will have to repay $10 million to affected consumers and a civil money penalty of $25 million. More details here.

WHAT THIS MEANS, FROM CARLOS ORTIZ OF HINSHAW CULBERTSON: To the relief of many, 2020 is over, but many regulatory agencies finished the year with a bang. From the SEC filing suit against Ripple and announcing a settlement against Robinhood, to the FDIC publishing a final rule regarding industrial loan company charters, to the CFPB issuing two consent orders against Discover Bank, the Student Loan Corp., and Discover Products in one instance, and Santander Consumer USA Inc. in the other.  In the consent order involving Discover Bank and two of its subsidiaries, Discover will pay $35 million arising from the CFPB finding that Discover did not comply with an earlier consent order involving it. The CFPB’s concerns in this matter included allegedly withdrawing payments from more than 17,000 consumer accounts without proper validation, canceling payments for more than 14,000 consumers without notifying them, misrepresenting the minimum payments more than 100,000 consumers owed, as well as the amounts of interest more than 8,000 consumers paid. Discover explained that there had been issues with the migration of consumer data to a new student loan servicing platform, but stated that many of those issues had been fixed. The penalty is comprised of a $25 million fine and $10 million to be repaid to consumers. Many are predicting that with the incoming administration the CFPB will engage in more aggressive enforcement and seek higher penalties. Thus, investing in internal compliance will be of upmost importance for the financial services industry as we transition into 2021 and the years to come.

Class-Action Suit Filed Against Collection Agency

A class-action lawsuit has been filed against a debt collector, accusing it of making it look like the collector purchased debts from a healthcare provider when it had not done so and for violating a state collection law in Colorado. More details here.

WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: Colorado-based Credit Service Company, Inc. was recently sued in a putative class action lawsuit in Denver County District Court. The Plaintiffs’ interests are jointly represented by Vedra Law LLC, the National Consumer Law Center, and Towards Justice, a nonprofit law firm.  

The 196-paragraph Complaint is conclusory and confusing. Plaintiffs seem to allege as a primary theory that CSC is a debt buyer that failed to provide certain consumer disclosures required of debt buyers (Counts I, III, VII). Yet, many counts in the Complaint are based on the alternative and contrary position that CSC falsely represents itself as a debt buyer that owns medical debt when, in fact, it is merely a third-party collections agency (Counts II, IV, V, VI, VIII). According to Plaintiffs, bringing collections lawsuits in its own name somehow means that CSC is engaged in the unauthorized practice of law (Count VIII). 

Plaintiffs attempt to create a catch-22 for CSC, alleging that, whether creditor UCHealth is transferring actual ownership of the medical debt or merely assigning collection rights, CSC is violating the Colorado Fair Debt Collection Practices Act: “In short, CSC is illegally pursuing medical debts on behalf of UCHealth — either as a debt buyer avoiding the obligations of Colo. Rev. Stat. § 5-16-111 or a corporate third party deceivingly naming itself as a real party in interest in lawsuits and undertaking the unauthorized practice of law.” 

Even if these alternative theories each have independent legal merit, the Complaint leaves one to wonder what factual basis exists for Plaintiffs and their counsel to pursue both of these contradictory theories in good faith with respect to the assignment of the representative medical debt at issue.       

Advocates Share Feelings About Provisions of Part II of CFPB Debt Collection Rule

Now that Part II of the Consumer Financial Protection Bureau’s debt collection rule has been released, consumer advocates can finally get a fuller sense of what protections are being put in place for consumers, and they are having no problem sharing how they really feel about the provisions of the rule. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: Finally, we now have the complete final debt collection rule — Regulation F — from the CFPB. This part of the rule relates to validation notices, time-barred debt, and passive debt collection, three areas of law that those in the collection industry (and on the consumer advocacy side) have been particularly interested in.

Validation Notices

The final rule on the validation notice is largely the same as the proposal. If a debt collector wants to take advantage of the safe harbor, the collection notice needs to mirror the model notice. If a state requires its disclosures to be on the front page of a collection letter, then that is allowed. Otherwise, state disclosures are allowed on the reverse side of the letter.

Many in the industry are disappointed, however, that the CFPB did not create a mandated, nationwide form to follow. As a result, this decision could render the “model form” subject to circuit-by-circuit, or even district-by-district, variation, as federal courts interpreting the FDCPA and the final rule require disclosures not covered by the model form itself. 

Time-Barred Debts

This section is where the CFPB made the most changes from the proposal. Specifically, the Bureau decided not to mandate a time-barred debt disclosure, which means that there are no changes for those in the collection industry here. The Rule does prohibit suing on a time-barred debt. What is unclear relates to a proposed disclosure, which the final rule does not include. From a compliance perspective, it would make sense to include some disclosure in order to avoid a costly class action here.

Passive Debt Collection/Delayed Credit Reporting

The final rule mandates that debt collectors send a communication about the debt to the consumer. If that communication is in writing, the debt collector must wait a reasonable time — to ensure there are no deliverability issues — before it is allowed to credit report the account. “Reasonable time” is defined as fourteen days for snail mail. Unfortunately, it seems that the CFPB also applied a 14-day “reasonable time” to electronic communications. It is unclear whether this was an attempt to maintain consistency across the board, but it makes little sense when electronic communications are send and delivered almost immediately. The CFPB did not, though, that there would be no violation of the rule, even if the debt collector received a notice of undeliverability after the expiration of the 14-day period.

The full final rule will have one effective date: Nov. 30, 2021.

Appeals Court Vacates Judgment for Plaintiff in FDCPA Case

The Court of Appeals for the Eighth Circuit has vacated a judgment in favor of a plaintiff who alleged a debt buyer violated the Fair Debt Collection Practices Act because the collection agency it used to collect on an unpaid debt contacted the plaintiff even though she was represented by an attorney — a fact that the defendant failed to share with the agency. While the defendant met the definition of a debt buyer under the FDCPA, the Appeals Court ruled the actions of the collection agency could not be imputed to the defendant. More details here.

WHAT THIS MEANS FROM PATRICK NEWMAN OF BASSFORD REMELE: File this one under “mixed bag, but still very positive.”

Make no mistake, the debt purchaser raised fine arguments regarding the (in)applicability of the “debt collector” definition under the circumstances. It simply ran into an appellate panel that took an expansive view of the definition of “debt collector” as well as the concept of a “passive” debt buyer.

As for the good news, the court’s holding on the issue of the debt purchaser’s liability for the actions of the collection agency is positive both from a substantive and an evidentiary perspective.

On the substance, the court upheld the well-established agency tenet that knowledge of the principal is not imputed to the agent. For example, if a creditor (or, in this case, a debt purchaser) receives notice or information from the consumer, that knowledge is not necessarily imputed to the collection agency simply because the creditor knew it. Although this is not a new revelation, this holding will be helpful to agencies defending actions involving claims that the agency continued to contact the consumer after the consumer provided notice of attorney representation or a cease to the creditor, or similar claims.

The evidentiary issue is perhaps even more positive. In reversing the district court’s grant of summary judgment to the consumer, the Sixth Circuit noted that the consumer’s “direct liability” claim against the debt purchaser (which also requires an agency relationship between the debt purchaser and the collection agency) could not succeed on the appellate record because the consumer failed to present any evidence in the district court on this issue. In other words, the consumer failed to prove this claim.

The FDCPA is often talked about in terms of strict liability and a great deal of this litigation is decided on motions to dismiss or on agreed facts at summary judgment. Nonetheless, this opinion underscores that you cannot lose sight of the fact that, when pressed, the consumer (or their counsel) oftentimes simply is not equipped to prove their claim on summary judgment or at trial. If the matter can’t be resolved reasonably, or if an institutional policy or practice needs to be tested, do not be afraid to put the plaintiff to their proof.

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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