Compliance Digest – March 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.

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 Over Time-Barred Disclosure, Use of ‘We’ in Collection Letter

A District Court judge in Texas has granted a defendant’s motion to dismiss after it was sued for allegedly violating the Fair Debt Collection Practices Act because it failed to mention that a partial payment may revive the statute of limitations on a time-barred debt because state law in Texas requires written acknowledgement in order for the statute to be revived, and that using the word “we” in a collection letter does not misrepresent authority to file a lawsuit over an unpaid debt. More details here.

WHAT THIS MEANS, FROM SARAH DEMOSS OF PREMIERE CREDIT: The Christie decision fits in a recent line of cases where judges appear to be fed up with consumer attorneys creating torturous interpretations of letter language. The least sophisticated consumer standard means exactly what it sounds like; unsophisticated. It does not mean incapable of reading plain language. The FDCPA was written to protect consumers from bad actors, and its importance is often undermined by frivolous lawsuits. Unfortunately, letter language case law is still highly conflicting, so the agencies who are trying to do the right thing are unsure of what that looks like in terms of their correspondence. The CFPB attempted to address this issue through their model validation notice, and I’m hopeful the use of the notice alleviates some of the uncertainty.  We also need to keep going back to the reasoning behind Spokeo. In addition to the correct use of the least sophisticated consumer standard, we also need to make sure there is a common sense approach to who is being harmed and who is gaining when we discuss litigation in this arena.

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Judge Denies Plaintiff’s Attorney’s Request to Withdraw in FDCPA, FCRA Case

A District Court judge in Pennsylvania has denied a plaintiff’s attorney’s renewed motion to withdraw from a case against a student loan servicer for allegedly violating the Fair Debt Collection Practices Act and the Fair Credit Reporting Act, saying her “ill-conceived notion” that her client would be engaging in unlawful or improper behavior by not using the funds from a proposed settlement to pay off the student loan in question, for which the plaintiff is questioning its validity — after she represented him for 18 months after being made aware of the debt — is not grounds for stepping away from the case. More details here.

WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER: The obvious take-away message from this opinion is to know whereof you speak, particularly when you’re asking the court to allow you to take the extraordinary step of withdrawing your representation against your client’s wishes. It isn’t enough to simply claim “I have a conflict” and step aside — attorneys claiming that a conflict bars them from proceeding as counsel for their client must be prepared to navigate the tricky waters of maintaining their existing ethical obligations to the client while justifying their request to be excused. But the good news, attorneys, is that you’re not alone! Most state bars have ethics hotlines staffed by attorneys with solid knowledge of all things ethical, including conflicts of interest, and attorneys can ask questions anonymously. When in doubt, reach out!

Judge Grants Stay in TCPA Case Against Collector

A District Court judge in Washington, D.C., has granted a collection agency’s request for a stay in a Telephone Consumer Protection Act case pending the outcome of a Supreme Court case that will seek to define how an Automated Telephone Dialing System is defined under the statute. More details here.

WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: In Johnson v. Harris & Harris, the plaintiff alleges, in part, that the TCPA was violated due to the defendant’s use of an ATDS (automatic telephone dialing system). Based on these allegations, the Federal District Court, for the District of Columbia (Washington, D.C.) stayed the case pending the outcome of Facebook v. Duguid, in which the Supreme Court will analyze the TCPA’s ATDS  (autodialer) definition. 

The interesting aspect about the Johnson decision is that District Court Judge Dabney L. Friedrich (2017 Trump appointee) granted a stay notwithstanding the fact that the majority of the plaintiff’s claims and allegations are not focused on the TCPA’s ATDS definition. In this regard, the Johnson plaintiff also alleges a separate TCPA claim premised on calls made using an artificial or prerecorded voice, claims made under the FDCPA, and for violations of District of Columbia Debt Collection Law violations. Despite these other claims, Judge Friedrich noted that although the Supreme Court’s Duguid decision will not affect the outcome of calls made using an artificial or prerecorded voice, and “may not settle every question of fact and law” in this action, it will “settle some outstanding issues and simplify others”. 

This decision is a very conservative take on the scope of stay motions based on the pending Duguid case and one that is somewhat unusual in the context of numerous stay motions that have been granted throughout the US based on the Duguid. Generally, when a case contains TCPA allegations involving calls made using an artificial or prerecorded voice, even where ATDS claims are present, judges have opted not to grant such stay motions. 

Numerous District Courts have analyzed similar stay issues ever since the Supreme Court granted review in Duguid, some with opposite results as we have here. For example, in Lacy v. Comcast, 2020 WL 4698646 (W.D. Wash. Aug. 13, 2020) (a decision which was previously featured in this newsletter), the plaintiff was able to prevent a Federal Judge from granting a stay based on Duguid by alleging that the defendant made prerecorded or artificial voice calls in addition to using an ATDS. While other factors contributed somewhat, the outcome of Lacy was essentially the exact opposite of the outcome in Johnson. As such, the Johnson decision illustrates the breadth of a Federal District Court’s discretionary power in deciding whether to stay cases.

Practice Guidance – Companies and their counsel should consider filing motions for a stay in TCPA cases, even where the complaint may have mixed allegations of ATDS calls and calls made using an artificial or prerecorded voice. Of course, evaluation of your Court, your Judge, and the given circumstances and facts in your case is a significant part of the analysis in making the decision whether a stay motion should be filed. 

Update on Duguid v. Facebook –  the Supreme Court has not yet issued a decision, but we note that a decision in the Duguid case may be issued at any time from now through June 2021. Stay Tuned!!

Defendants Ask Judge to Reconsider Denying MTD Claim in FDCPA Suit

The defendants in a class-action Fair Debt Collection Practices Act overshadowing case have asked a District Court judge to reconsider her partial denial of a motion to dismiss, after the judge granted the motion on two of the three counts last month. More details here.

WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: Transitional language – language explaining that a request for payment, or settlement offer that expires, within the initial 30-day dispute period does not impact a consumer’s ability to exercise 1692g rights – can be tricky. The Honorable Judge Elizabeth K. Dillon (W.D. Va.) recently rejected an overshadowing claim, but declined to dismiss a misleading statement claim, based on the same settlement offer and transitional language. See Anderson v. Capio Partners, LLC, No. 7:20-cv-00298, 2021 WL 279612 (W.D. Va. Jan. 26, 2021). This is unsettling because the letter uses the identical transitional disclosure (used by this same collection agency) that was blessed by district courts in New York and Colorado where used in conjunction with similar settlement offers. See Santora v. Capio Partners, LLC, 409 F. Supp. 3d 106, 109 (E.D. N.Y. 2017); Hamilton v. Capio Partners, LLC, 237 F. Supp. 3d 1109, 1115 (D. Colo. 2017). Unless the collection agency’s motion for reconsideration is granted, it must now proceed to litigate a putative class action lawsuit based on the same language it has successfully relied on to defeat FDCPA claims at least twice.

While the safest path is to avoid settlement offers that expires within the 30-day dispute period, those offers arguably add value. They allow consumers an option to immediately extinguish a debt for less than the amount owed. But, unless language has been approved by every Circuit Court jurisdiction in which the letters are sent, there is always a risk that different district courts (and even different judges within a district) will view the same language differently. The Plaintiff’s bar will never stop betting on that possibility. The good(ish) news? Effective November 30, there is a model validation notice letter. Love it or hate it, there will finally be at least one universally-approved letter, with respect to both content and format. Attempting to comply with that model, however, is a topic for another day.       

CFPB Announces First Enforcement Action Under New Leadership

The post-Kraninger Consumer Financial Protection Bureau announced its first enforcement action yesterday, and while it might not directly relate to the accounts receivable management industry, there are a number of insights that the industry can and should glean from the news. More details here.

WHAT THIS MEANS, FROM VAISHALI RAO OF HINSHAW CULBERTSON: The enforcement action is foreshadowing for additional cases to come that will peel back the layers on possible ways people of color may be paying higher costs than others. In addition, it is a signal of renewed cooperation between the states and Bureau. Companies should expect that the Bureau and state attorneys general communicate regularly about potential cases and find ways to bring enforcement actions together, or in conjunction with one another.

Bill Introduced in Senate to Ban ‘Extraordinary’ Collection Actions Of Medical Debt

A bill has been reintroduced in the Senate that would prohibit healthcare providers and their agents from engaging in “extraordinary collection actions” until the COVID-19 pandemic is over or 18 months after the law is enacted. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: On February 22, Sen. Chris Van Hollen [D-Mary.] introduced Senate Bill S. 355, which is intended to prevent health care providers and their agents from taking “extraordinary collection actions” relating to the collection of debts incurred from the “receipt of medical services, products, or devices.”

If passed, the COVID-19 Medical Debt Collection Relief Act of 2021 would restrict certain debt collection practices until either: (a) the COVID-19 pandemic is over; or (b) 18 months after the date on which the law is enacted. The specific practices that would be prohibited in connection with medical debts are defined in 26 CFR 1.501(r)-6 and include the following:

  • Selling an individual’s debt to another party;
  • Reporting adverse information about the individual to consumer credit reporting agencies or credit bureaus;
  • Deferring or denying, or requiring a payment before providing, medically necessary care because of an individual’s previous nonpayment; or
  • Taking actions that require a legal or judicial process, including: (a) placing a lien on an individual’s property; (b) foreclosing on an individual’s real property; (c) attaching or seizing an individual’s bank account or any other personal property; (d) commencing a civil action against an individual; or (e) garnishing an individual’s wages.

Further, for individuals who have entered into payment plans for unpaid medical debts, the bill would allow the suspension of those payments and prevent interest from accruing the unpaid balance until after the expiration of the period covered by the law.

Additionally, in the event of noncompliance by a health care provider, the bill would permit individual patients to file suit seeking to recover actual damages, additional damages of up to $1,000 for each failure to comply, and reasonable attorneys’ fees.

Keep in mind, however, that normal communications regarding outstanding balances with consumers or patients who owe a debt is still permitted.

Ohio Passes Bill Shortening Statute of Limitations

The Ohio legislature has passed a bill that will reduce the statutes of limitations on filing lawsuits to collect on debts to four or six years, depending on whether a written contract exists. The bill will now proceed to Gov. Mike DeWine for his signature to become law, and he is expected to sign it, according to a report that was published by ACA International. More details here.

WHAT THIS MEANS, FROM BOYD GENTRY OF THE LAW OFFICE OF BOYD GENTRY: This bill was the product of a good deal of work by industry leaders. The obvious change in this bill is the shortening of the limitations period in Ohio. However, possibly the biggest change is the amendment to Ohio’s “borrowing statute” (2305.03). That statute is now amended to be clarify that it only applies to “tort” actions, not contract actions.  For those of us fighting abusive cases under the borrowing statute, this is a common sense solution that is long overdue. Ohio’s “Borrowing Statute” was originally intended to be part of tort reform, but because it was drafted overly broad, it had been used by Ohio courts to limit contractual actions in ways beyond what anyone expected. That gave rise to many class action filings against debt collectors. This amendment is a welcome clarification and a step in the right direction to make Ohio law predictable for debtors and creditors.

Judge Strikes Down CDC’s Ban on Evictions

A District Court judge in Texas has ruled that the Centers for Disease Control (CDC) overstepped its authority when it ordered that all evictions be stopped during the COVID-19 pandemic. More details here.

WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: The Court’s order can be boiled to one sentence from the opinion:  “[T]he eviction of one person from a dwelling does not along have a self-evidence substantial effect on interstate commerce, and the government has not pointed to any finding demonstrating such a substantial effect.” Landlord/tenant law is inherently a function of a states’ property law and the government clearly overstepped. The Court was concerned with the federal government’s reliance on statistics to enforce or propose a national policy in areas of tradition state control. Were there good public health reasons for wanting to halt evictions? Possibly. But the government’s reliance on the Commerce Clause was clearly not persuasive. 

Judge Denies MTD Over Reinvestigation of Dispute in FCRA Case

A District Court judge in Massachusetts has denied a defendant’s motion to dismiss a Fair Credit Reporting Act case after it was sued for not properly investigating a dispute arising from an individual claiming loans taken out in his name were the result of identity theft. More details here.

WHAT THIS MEANS, FROM XERXES MARTIN OF MALONE FROST MARTIN: While plaintiff was able to “survive” defendant’s motion to dismiss, there is a stronger opportunity with a motion for summary judgment. In denying defendant’s motion to dismiss, the District Court stressed that the defendant must do more than dispute plaintiff’s facts of the case; in fact, defendant could not present any facts supporting the reasonableness of the investigation its defense relies on. Moving forward in such a fact-intensive case, a persuasive motion for summary judgement would lay out the story behind the case, likely raise similar arguments as before, and reinforce those arguments using concrete evidence that the District Court was initially missing. While in certain cases, reasonableness is said to be a fact issue for a jury, but the Court can still make the determination at summary judgment. Last year the Eastern District of Texas ruled in our favor at summary judgment. on the reasonableness of our client’s investigation in Melinda Palmer v. Online Information Services, Inc., Case No. 6:19-cv-00352 (E.D. Tex. Nov. 9, 2020). We have seen an uptick in cases like this, so tighten up those investigation policies and procedures to present at summary judgment.

Appeals Court Affirms MSJ For Contact Center in ADA Case

The Court of Appeals for the Eleventh Circuit has affirmed a summary judgment ruling in favor of a contact center that was sued for violating the Americans with Disabilities Act because it allegedly fired the plaintiff for being anemic, even though she never mentioned having anemia until after she was fired. More details here.

WHAT THIS MEANS, FROM CHANTEL WONDER OF GORDON & REES: The court found that the Plaintiff’s claim failed in this case because she never informed her employer of her condition and never requested any accommodations from her employer. In addition, she failed to prove that her condition limited her activity. The fact that the Plaintiff only raised the issue once she was being fired seems to have undermined the legitimacy of her claim. This decision is a good reminder of the vast amount of compliance issues collectors face everyday. In addition to the alphabet soup of consumer statutes we must adhere to in this industry, there are many other regulations, such as the ADA and employment law issues raised in this case.

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.


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