Compliance Digest – February 1

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.

CFPB Releases Small Entity Compliance Guide For Debt Collection Rule

The Consumer Financial Protection Bureau on Friday released a new resource related to its debt collection rule, this one aimed at helping smaller collection agencies comply with the rule once it goes into effect this November. More details here.

WHAT THIS MEANS, FROM CHANTEL WONDER OF GORDON & REES: The CFPB is making every effort to assist our industry in implementing its new Final Rule into practice by providing additional clarification on its provisions. Last week, the agency released The Small Entity Compliance Guide to help smaller collection entities comply with the new rule. The guide summarizes the nearly 700 page October Rule into 87 pages. Its succinct review of the Final Rule will be a good reference for any business, not just small collection agencies. The Guide mainly focuses on the October 2020 Final Rule for now, but will be updated to include additional guidance regarding the December 2020 Final Rule.

Many of the provisions in the new Final Rule will be familiar to collection agencies, but it includes further interpretation and clarification on how the provisions apply in practice. Importantly, the Rule provides guidance on how the FDCPA applies to new technology that has arisen since it was originally drafted, such as voicemails, emails and text messages.

Industry members have until Nov. 30, 2021 to comply with the new regulations. The Small Entity Compliance Guide makes it clear that you may implement new procedures to comply with the Final Rule in advance, but “to the extent the Rule establishes a bona fide error defense, safe harbor, or a presumption that certain conduct complies with or violates the Rule, those defenses, safe harbors, and presumptions are not effective” until the Final Rule is in effect. However, early compliance with new regulations and rules is always prudent and I foresee the courts applying the safe harbor provisions of the rule as persuasive guidance until the rule is in effect.


Consumer Attorney Agrees to Disbarment For Not Communicating Settlement Offer to Client

A consumer attorney who failed to communicate settlement offers in a Fair Debt Collection Practices Act case has agreed to have his license to practice law revoked. More details here.

WHAT THIS MEANS, FROM MANNY NEWBURGER OF BARRON & NEWBURGER: The sanctions award that led to the Bar proceedings came about as a result of the lawyer’s failure to convey two separate offers and his running of the case without communications with, and involvement of the plaintiff. It seems likely that the unending lack of civility that was the subject of more than one admonition from the bench also affected the court’s decision-making in awarding sanctions. The lawyer’s unrepentant argument that he could not be sanctioned for the unethical failure to convey offers was almost certainly a factor all of the tribunals.

The case demonstrates the value of recordings in getting plaintiffs to testify about how well they were treated. It reflects the importance of asking plaintiffs if offers have been conveyed, and it is certainly an example of why the refusal to be drawn into mutual combat in the face of incivility can let a judge see clearly what is really happening in a case. In 37 years of practice, it is the only case in which I have seen a plaintiff fire his lawyer on the record, during a deposition.

Judge Grants MTD in FCRA Case Over Ownership of Debt

A District Court judge in Illinois has granted a defendant’s motion to dismiss after it was sued for violating the Fair Credit Reporting Act because it allegedly did not conduct a reasonable investigation into a dispute, among other claims. More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: Consumer reporting agencies (CRAs) have a greater obligation under the Fair Credit Reporting Act than do data furnishers. Nowhere is this seen more than in the plethora of litigation alleging that CRAs fail to accurately report tradelines. Data furnishers do not have a similarly enforceable obligation through private litigation. Here, the United States District Court for the Northern District of Illinois narrowed the scope under which a consumer can attack the accuracy of the tradeline as published by a CRA. The Court reiterated that legal attacks on accuracy are not subject to re-investigation by a CRA. The validity of a debt (in this case who owned the debt) is a legal question, not a factual one. 

Judge Denies MTD in Case Over Healthcare Provider’s Billing Practices

A healthcare provider in Ohio has had its motion to dismiss a class-action suit alleging its billing practices violated state law denied, after arguing that the law exempts transactions between physicians and their patients. More details here.

WHAT THIS MEANS, FROM CARLOS ORTIZ OF HINSHAW CULBERTSON: In Van Brakle, an Ohio state court denied a motion to dismiss an amended complaint that included a putative class claim. The case arose out of the plaintiff’s visit to one of defendant’s facilities for radiology testing. According to the plaintiff, she paid $25 towards the cost of the testing, but was not provided a receipt. Plaintiff also alleged that the defendant did not provide her with an estimate for the cost of the testing. In addition, Plaintiff complained that additional payments she made to defendant were not applied towards the balance for the testing, but instead were allocated towards other balances Plaintiff had with the defendant. The plaintiff claimed that no physician was involved in administering the radiology testing. Plaintiff sued the defendant alleging violations of the Ohio Consumer Sales Practices Act.

In its motion to dismiss, the defendant made several unsuccessful arguments. First, the defendant argued that it was exempt from the Act because it is inapplicable to transactions involving physicians and patients. The court disagreed holding that the defendant did not meet the plain and ordinary definition of a physician. Second, the defendant argued that medical imaging services are not subject to the Act. In disagreeing with this argument, the court reviewed the Act and found that it expressly requires medical service providers to notify a patient of his/her right to request that the service provider offer a good-faith estimate of what it will charge the patient. Third, the defendant asserted that it was not possible to provide the plaintiff with a good-faith estimate because it was unclear what services would be provided to a patient over the course of treatment. The court refused to look at this as a course of treatment situation and reasoned that the plaintiff requested a routine radiology test, and the cost of that test was within the knowledge of the defendant. Next, the defendant attempted to attack the putative class claim arguing that it was without the requisite notice that failure to provide plaintiff with a receipt for the $25 payment she made equated to a deceptive act. The court, again, disagreed and held that the state attorney general had adopted a rule that prohibited what Plaintiff alleged the defendant had failed to do.

This case underscores the difficulty in prevailing on a motion to dismiss. It also highlights the dilemma that many defendants are faced with in litigation. Should they settle early into the case or invest in defending the case in order to provide the court with a record to support summary judgment? The former provides certainty and peace, but may come with some buyer’s remorse. The latter involves risk and uncertainty, but can come with much satisfaction if summary judgment is granted. This is always a very tough call.

Seventh Circuit Issues Another Ruling on Standing, Affirming Lower Court Dismissal

The Seventh Circuit Court of Appeals continued its assault on standing in Fair Debt Collection Practices Act cases yesterday, affirming a District Court ruling that a plaintiff lacked standing to sue a debt collector because she did not try to show an intent to dispute a debt while suing because she was confused about how to dispute it. More details here.

WHAT THIS MEANS, FROM CAREN ENLOE OF SMITH DEBNAM: The Seventh Circuit has now established a very industry positive line of cases which emphasize the importance of properly pleading injury in fact to create standing and the Court’s intolerance for technical violations absent such injury in fact. The minimum pleading requirements set forth in the Federal Rules as well as by the Supreme Court require that the plaintiff plead factual allegations which “raise a right to relief above the speculative level” and plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545-47 (2007); Ashcroft v. Iqbal, 556 U.S. 662 (2009). As the Court noted in Smith and previously in Casillas, that requirement is not relaxed in the face of a technical violation. Defense counsel should be scrutinizing every letter case’s complaint for factual allegations of injury in fact and not assume that a technical violation of §1692g is going to carry the day for the plaintiff.   

CFPB Issues Final Rule on Role of Supervisory Guidance

The Consumer Financial Protection Bureau yesterday released a final rule on the role of supervisory guidance, which clarifies the differences between regulations — which have the full force and effect of law — and guidance — which does not. More details here.

WHAT THIS MEANS, FROM STEFANIE JACKMAN OF BALLARD SPAHR: While the Bureau’s effort to clarify supervisory guidance as not having the force of law nor needing to be treated as such is appreciated, I am not sure that the new rule will do much to change compliance behavior in the current environment. Even in publishing the final rule, the Bureau expressly and unequivocally states that guidance demonstrates practices the Bureau views as compliant with existing law, highlights what the Bureau expects from its supervised entities, and reveals the Bureau’s compliance priorities when undertaking supervisory activities. That tells me that regardless of what the final rule says, companies who deviate from the “guidance” will need to be prepared to defend the alternative approach they adopted from a consumer protection perspective and be prepared to support that defend with data. Also, any supervisory guidance issued by the Bureau remains a “must read” for legal and compliance professionals to stay up-to-date with respect to the Bureau’s evolving expectations, risks, and regulatory priorities – particularly under its incoming leadership. While the rulemaking may have sought to position supervisory guidance as somehow “less than” formal regulations, given the amount of time, effort, and expense involved in promulgating regulations, I imagine the issuance of guidance will remain a common tactic used by the Bureau to shape compliance behavior. Just because non-compliance may not result in referrals to enforcement does not mean guidance will not still function as a “standard” for compliance behavior when undergoing an examination or other activity with the Bureau.

New California Regulator Launches Investigation Into Collection Industry; Subpoenas 12 Companies

The California Department of Financial Protection and Innovation (DFPI) came out swinging yesterday with its first major action, issuing subpoenas to a dozen companies in the accounts receivable management industry, investigating consumer complaints about alleged unlawful, unfair, deceptive, or abusive collection practices. More details here.

WHAT THIS MEANS, FROM JUNE COLEMAN OF MESSER STRICKLER: California Gov. Newsom announced in early 2020 a desire to create a mini-CFPB in California. In addition to the urgent issues that Governor Newsom addressed in 2020, legislation was passed to create the California Department of Financial Protection and Innovation (DFPI), which came into existence on January 1. And by January 19, California’s new mini-CFPB hit the ground running with subpoenas to some major players in the debt collection industry. Notably, the DFPI issued these subpoenas before it had any regulation in place.  

The DFPI needs regulations for several issue, especially since California also passed a law to require debt collectors to be licensed, by 2022. The DFPI will need to set up regulation about how to obtain a license, how much it will cost, etc. And the creation of a licensing program begins with the creation of a seven-member advisory committee, which will contain at least one consumer representative and other representatives from the ARM community – third party debt collection agencies, debt buyers, and collection law firms. Visit here for how to apply for appointment to the committee. Information must be submitted by February 19.

But what do the subpoenas predict about the DFPI? Since the DFPI is issuing subpoenas to the larger ARM players 19 days after its creation, we can predict that enforcement will be a priority for this new agency. Additionally, the DFPI stated that the subpoenaed companies were the subject of complaints from around the country. This should remind us that consumers are often advised to complaint to their state attorney general, as well as the state attorney general where the company is headquartered. Consumer complaints put pressure on governmental agencies to act – but so do calls from outer state AGs. And it is worth noting that the California law provides the DFPI with the authority to investigate and enforce existing laws, including the federal Consumer Financial Protection Act, subject to notice and possible intervention by the CFPB. And it should be noted that Mr. Alvarez is also on the Biden transition team reviewing operations at the CFPB. It would appear that the California DFPI and the CFPB might be in lock step with each other.

Looking at the leadership of the DFPI also lets us predict that enforcement will be a top priority for the DFPI. Manuel Alvarez has been appointed Commissioner of the DFPI. Mr. Alvarez was part of the “Founders Club” at the CFPB and worked for the California AG pursuing mortgage companies, but also served as General Counsel and Chief Compliance Officer to Affirm, Inc., a San Francisco-based technology start-up providing online point-of-sale consumer financing solutions. Mr. Alvarez supports innovation through technology, which might be encouraging. The DFPI is structured with various departments for the businesses that the DFPI regulates. Based on my review of the organizational structure, I would not be surprised if there is a new deputy commissioner heading up the debt collection program in the near future.

This is a time of uncertainty and change, which means it is the perfect time to get involved in advocacy to make sure the ARM industry voiced is heard.

Biden Names Temporary Picks to Lead CFPB, FCC, FTC

President Joe Biden named temporary heads to the three major government agencies regulating the accounts receivable management industry — the Consumer Financial Protection Bureau, the Federal Communications Commission, and the Federal Trade Commission. More details here.

WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: Elections have consequences and timing is equally as important. In less than a month, the three heads of the most important federal agencies, that have a direct impact on the ARM industry, are gone. Each, in the interim, have been replaced with acting leaders, all of whom have strong consumer protection priorities.

In terms of the CFPB, we already know that Biden has nominated Rohit Chopra to lead the Bureau. Dave Ueijo has been at the Bureau since 2012 where he has been in charge of among other things talent acquisition. He has also served as a strategy program manager, acting deputy chief of staff and acting chief of staff during his tenure.

Nominations for both FCC and FTC Chair has not been announced but their acting leaders. Jessica Rosenworcel and Rebecca Slaughter are formidable in their own right. Rosenworcel, a current commissioner at the FCC, has been a strong proponent of strengthening the TCPA and regulations regarding robocalls. Slaughter, a current commissioner at the FTC, has sided with Rohit Chopra on several recent dissenting opinions regarding data privacy and data collection, advocating for stronger state laws above and beyond any federal standard.

It is clear that the triumvirate of agencies that have a consumer protection focus are turning the corner into a new era. As for the FTC and the CFPB it is widely expected that enforcement and/or supervision will take an aggressive turn. Each of these acting picks are no doubt laying the groundwork for their permanent placements to come in and hit the ground running. The ARM industry will need to buckle up and be prepared for extensive scrutiny especially with regard to how consumers were treated during the pandemic.  

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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