Compliance Digest – March 29

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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.

Appeals Court Upholds Dismissal of FDCPA Case After Hospital Sought to Collect From Wife of Deceased Husband

The Third Circuit Court of Appeals has affirmed the dismissal of a Fair Debt Collection Practices Act case in which the wife of a deceased individual sued after she was sent collection letters by a law firm seeking to collect on an unpaid medical debt incurred by her deceased husband. More details here.

WHAT THIS MEANS, FROM CHANTEL WONDER OF GORDON & REES: In this favorable decision from the Third Circuit, the court found that Plaintiff’s three separate arguments in support of her FDCPA claim failed. The Third Circuit decision includes the specific conflict analysis for Plaintiff’s preemption argument, as well as discussion on the general objectives of the federal statute, finding that the ECOA did not apply to the medical debt at issue because it falls under the “incidental credit” exemption in the statute. Since the ECOA does not apply to the subject debt, it could not conflict with (or preempt) the state law in this case. Importantly, the court gave an indication that similar arguments may be struck down because the ECOA spousal signature prohibition was enacted to ensure the availability of credit rather than the allocation of liability between spouses.

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Appeals Court Affirms MSJ For Defendant in FDCPA Case Over Invitation to Call Made in Letter

The Third Circuit Court of Appeals has affirmed a summary judgment ruling in favor of a defendant that was sued for allegedly violating the Fair Debt Collection Practices Act because it invited the recipient of a collection letter to “eliminate further collection action” by calling the collector, which the plaintiff claimed deceived consumers into thinking that a phone call was a “legally effective” means of ceasing collection activity and raising uncertainty about how to dispute a debt. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: Earlier this month, in Moyer v. Patenaude & Felix, A.P.C., the Third Circuit Court of Appeals held that a debt collector’s letter—inviting the recipient to “eliminate further collection action” by calling the collector — did not mislead the debtor about the method for disputing a debt or imply that a debt collector was legally required to do anything in response to a call, and therefore did not run afoul of the Fair Debt Collection Practices Act. The Court thus affirmed the district court’s summary judgment ruling for the collector.

First, the Court concluded that the invitation to call to “eliminate” further collection activity did not constitute an assertion “explicitly or implicitly, that the phone call would, by law, force [the collector] to cease its collection efforts” (emphasis added), distinguishing this case from those where the letter stated that the law required the debt collector to suspend its collection efforts if the debtor called. Second, it ruled that placing the invitation to call directly before the validation notice requiring disputes to be in writing created no confusion, just as demanding payment for a debt prior to providing the validation notice does not mislead the debtor as to what he needed to do to suspend collection efforts.

This ruling confirms that even under the “least sophisticated debtor” standard, courts are willing to give debt collectors some leeway in their collection notices. So long as they instruct a debtor that a written dispute is necessary to stop collection activity, and do not state or imply legal consequences or obligations where none exist, debt collectors are free to encourage debtors to call to discuss debt collection efforts.

Judge Grants MTD on Claim Collector Name Viewable Through Envelope Window Violates FDCPA

A District Court judge in New Jersey has granted a defendant’s motion to dismiss a claim in a class-action suit that it violated the Fair Debt Collection Practices Act by allowing its name — Unifund CCR — to be viewed through a glassine window on an envelope containing a collection letter, rejecting the plaintiff’s argument that anyone could learn that the company was a debt collector by looking up the company name online. The judge denied the defendant’s motion to dismiss a claim that the creditor to whom the debt was owed violated the FDCPA because it was not licensed under state law in New Jersey. More details here.

WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: The recent opinion in Valentine v. Unifund CCR, Inc., No. 20-cv-5024, 2021 WL 912854 (D.N.J. Mar. 10, 2021) addresses a long-popular subject in the world of FDCPA claims: envelope text, or letter text that shows through an envelope’s glassine window. 

Any extraneous text or symbol showing on an envelope, other than the debt collector’s address and name (as long as the name does not indicate the debt collection business), is a risk. 15 U.S.C. § 1692f(8). In some jurisdictions, extra text may be a violation even if it is benign and in no manner indicates a debt collection communication. See, e.g., Preston v. Midland Credit Mgmt, Inc., 948 F.3d 772 (7th Cir. 2020) (no benign language exception applied to “Time Sensitive Document” text on envelope). But, if the plaintiff’s law firm in the Valentine case had its way, no debt collection agency would ever be able to visibly include its name as part of an envelope’s return address, no matter how generic the company’s name. Valentine contended that the name “Unifund” indicates the debt collection business because a consumer could search the internet and learn Unifund is a debt collector. Of course, the same argument could apply to any debt collector’s name. Thankfully, Judge Vazquez shut this theory down, logically concluding that such a reading would “eviscerate the statutory exception that permits debt collectors to include their name on the envelope.”

“Communicating with a consumer by use of the mails,” see 15 U.S.C. § 1692f(8), after all, is an important part of a debt collector’s business. Including a return business name along with the address is likely to increase the chance the addressee will recognize and open the letter, and may facilitate the return of undeliverable mail. Under the new debt collection rules effective this November, it will become even more important that debt collectors are able to timely receive back undeliverable letters. See, e.g., 12 CFR § 1006.30(a)(ii) (requiring debt collector to communicate with consumer prior to credit reporting and to monitor for undeliverable mail if that communication is by letter); 12 CFR 1006.42(a)(1) and Cmt 42(a)(1)1.ii (requiring a reasonable expectation that a mailed mandatory disclosure provides actual notice, and including the monitoring of undeliverable mail as a compliance factor).  

Judge Grants MSJ For Plaintiff Over Status of Debt Because Creditor Canceled Account

A District Court judge in New York has granted a plaintiff’s motion for summary judgment after it sued a debt collector for allegedly violating the Fair Debt Collection Practices Act by sending two collection letters to the plaintiff, determining that the plaintiff must have been correct when he claimed that he did not owe the debt because the collector was notified by the original creditor after sending the two letters to cancel the placement because the balance was being written off. More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF PAYMENTVISION: In this case, letters were sent to Plaintiff that incorrectly stated a debt owed. The Court rendered its opinion under the least sophisticated consumer standard, whereas the FDCPA is a strict liability statute; this Court, unlike others, has not adopted the idea that to find a claim under the FDCPA that Plaintiff has to show that the debtor knowingly misrepresented the incorrect information. 

While this writer believes that Defendant’s actions were, in fact, a mistake, as I believe the evidence proposed to the Court effectively illustrated that the information was miscommunicated to Defendant. Even if the Court reviewed the case under the well-known bona fide error defense, the idea that the result would be any different is not known.    

A bona fide error defense to the FDCPA can provide a safe harbor if the Defendant can show; first, it was unintentional.  Secondly, that the mistake caused the error. And lastly if the maintenance of procedures was in place to avoid such an error.  While the facts allude that the courts would find the first two elements, the last element is unknown. While this Defendant has been in business for over 20 years, there is no evidence that Defendant had procedures in place to avoid this type of issue. It is unknown what procedure would be reasonable, while such would not need to prevent conceivable error ever, but just what would be considered reasonable. If a court looked at this, it would evaluate written manuals, training, procedures required when disputes are received, manager review, etc.  

Every collection company should stand back and review its procedures today, to limit the risk if they would ever see themselves in the same position. Compliance procedures will first protect the company from mistakes occurring in the first place, then secondly, worse case, provide the means to a bona fide error defense. 

Judge Grants MSJ, MTD in FDCPA Cases Over Disputed Debts

A District Court judge in Mississippi has granted a defendant’s motion for summary judgment and a motion to dismiss two consolidated cases in which a debt collector was accused of violating the Fair Debt Collection Practices Act because it did not properly flag accounts as being disputed when furnishing information to credit reporting agencies. More details here.

WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: It will be interesting to see if this case gets appealed to the Fifth Circuit. While the district court did look at other cases where consumers who pled violations of § 1692e(8) were found to have standing, the court here found that plaintiffs (it was a consolidated case) lacks standing. While the issue of standing, especially in cases where only a procedural violation devoid of any actual harm, continues to be a lightning rod, it would be important to note that the standing argument in this case was brought at the summary judgment stage. The burden of proof on the plaintiff to show standing at this phase is higher than what they must plead to get through the courthouse’s doors. In essence, the court found that plaintiffs failed to provide the court with any evidence that they suffered any actual harm – even if they properly plead that they were harmed. 

Judge Grants MTD in FDCPA Case Over List of Complaints About Letter

A District Court judge in New York has granted a defendant’s motion to dismiss after it was sued in a class action for violating the Fair Debt Collection Practices Act in a number of ways relative to collection letters that were sent. Among the claims made by the plaintiffs were that informing the plaintiff that the defendant was not obligated to renew an offer made in the letter would confuse a least sophisticated consumer into thinking that it was not obligated to accept disputes, that the dispute notification in the letter was confusing because it contained two different addresses, that asking for a downpayment on a settlement offer and then saying the balance was due in 30 days was open to multiple interpretations of when the 30 days expires, and that the validation notice was “buried” because it was on the reverse side of the letter. More details here.

WHAT THIS MEANS, FROM JUDD PEAK OF CAPITAL ACCOUNTS: This is a refreshingly short, simple decision from the Southern District of New York. The brevity of analysis by the district judge (he gets right to the point in dismissing the claims) leads me to believe that courts are becoming tired of the re-hashed FDCPA letter claims that have been plaguing our industry for years. Is that being too hopeful? 

The specifics on the debt collector’s letter, language used and location of the mailing address are not terribly important, but I do think one thing is interesting. This court – as well as the court in Dillard v. FBCS reviewing identical claims – really holds the plaintiff’s claims to a legitimate “least sophisticated consumer” standard. Per the decision, the least sophisticated consumer does not imply no sophistication. There is some tangible threshold of expectation in a consumer, and claims under the FDCPA should meet that standard. I like and appreciate any trend toward giving teeth to the least sophisticated consumer standard, and this is a good example. 

NDOH Judge Grants MSJ for Defendant in FDCPA Case of Inclusion of ‘Interest’ in Letters

A District Court judge in Ohio has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case, ruling that the plaintiff lacked standing to claim an injury after receiving collection letters that listed itemized columns for interest and other charges that were not accruing, because he didn’t do anything to show that he was harmed by their inclusion. More details here.

WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER: As the body of case law on standing builds and more federal judges give FDCPA claims the boot for lack of concrete harm, we should all be prepared for the various ways consumers will pivot in response to these opinions — in fact, that pivot is already happening. Some consumers are making payments, then claiming their payments were due to something false, deceptive or misleading in the letter. Some consumers, convinced that defendants will settle FDCPA cases to avoid having them heard in state court, do not plead actual damages in their complaints, then seek a remand when their cases are removed to federal court. And in some states, consumers are making full use of state savings statutes, which allow them to simply re-file their claims in state court and deem those filings timely. When our opponents pivot, we need to respond in kind! All industry participants, and the lawyers who represent them, should strategize and develop a game plan for responding to these new efforts to side-step Article III standing.

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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