Compliance Digest – May 3

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.

Judge Grants MTD in FDCPA Case Over Dispute Notification in Letter

A District Court judge in Pennsylvania has granted a defendant’s motion to dismiss after it was sued for allegedly violating the Fair Debt Collection Practices Act by not specifically mentioning in the validation notice that a dispute had to be filed in writing, because the plaintiff lacked standing to sue and failed to state a claim upon which relief could be granted. More details here.

WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: While this case was a loser from the outset due to a lack of standing, it was also a loser on the merits. As to the merits — or lack thereof — it was refreshing to hear from a Judge who willing to cut to the chase boldly and succinctly. 

The Court aptly tossed this case in part concluding Plaintiff’s “picayune dissection of the letter’s wording and structure is meritless.” Merriam-Webster’s dictionary defines picayune as “petty/small-minded.” Put another way, and taking a line from My Cousin Vinny, “Yeah, everything that guy just said is bovine excrement.” (This is a cleaned up version from the actual and immortal line from what might be the best “lawyer movie” ever made. I know Mike Gibb likes to keep these summaries PG-rated.) In short, dissecting a letter to gin up a claim should be attacked whenever possible. Reasonable judges will see through such attempts.

As to the standing aspect of this case, the Court easily tossed it for this reason as well reasoning “Absent an allegation [Plaintiff] sought to exercise his FDCPA dispute rights, any “incorrect” or “erroneous” statement is not enough to confer standing.” In other words, even with the tortured “reading” of the challenged letter as alleged in the Complaint, the Plaintiff never did anything after receiving it. Nothing. Nada. That alone doomed his case. In other words, in a typical case a Plaintiff must alleged he “did something” lest his case be dismissed like the tree falling in the woods with no one around to hear whether it made a sound.


Washington Legislature Increases Fines For Consumer Protection Act Violations

The Washington state legislature has passed a bill at the request of the state Attorney General that increases the penalty for violation of the state’s Consumer Protection Act nearly fourfold, to $7,500 — the first time the penalty has been increased since the law was adopted more than five decades ago. More details here.

WHAT THIS MEANS, FROM ROBERT SABIDO OF COSGRAVE VERGEER KESTER: Senate Bill 5025 increases the civil penalties that may be imposed under the Washington Consumer Protection Act (CPA) for engaging in unfair methods of competition or deceptive acts or practices, which includes violating the Washington Collection Agency Act (CAA). It is important to note, however, that these are civil penalties sought by the Washington Attorney General. They are not damages sought by  a private litigant for violations of the CPA/CAA. Those damages remain unchanged under Revised Code of Washington (RCW) 19.86.090. Significantly, unlike the FDCPA, RCW 19.86.090 does not provide for the recovery of statutory damages. Additionally, RCW 19.86.090 provides for the recovery of actual damages only if a “person … is injured in his or her business or property.”

Judge Grants MTD Over Lack of Standing on QR Code Case

A District Court judge in Pennsylvania has granted a defendant’s motion to dismiss a class-action lawsuit, ruling a plaintiff lacked standing to sue after claiming that a collector violated the Fair Debt Collection Practices Act by including “Personal & Confidential” on the outside of an envelope containing a collection letter and because “data symbols similar to a QR code” were visible through the envelope’s glassine window. More details here.

WHAT THIS MEANS, FROM CAREN ENLOE OF SMITH DEBNAM: At first blush, I got excited about this case thinking “finally, the Third Circuit is reconsidering its position on envelope cases.” A further read, however, tempered my enthusiasm. Did the Court dismiss this case for lack of standing? Yes! Is that a good thing? Yes! But a closer read indicates that it is simply case of the plaintiff’s counsel missing the magic words because plaintiff “says nothing about what, if any, information the data symbols reveal or what injury that revelation caused.” So what are the takeaways here? A court in the Third Circuit has issued a favorable standing decision and appears to be pushing back to the extent that precedent allows on the envelope cases. The Court really holds the plaintiff’s feet to the fire on the standing issue pointing out that the bar isn’t high on what needs to be alleged to assert a violation under Section 1692f(8) – just what information the envelope disclosed – and concluding the consumer did not meet that bar. The case should encourage members of the defense bar to continue to hold consumers’ feet to the fire as to their basic pleading requirements.

Judge Grants Plaintiff’s Reconsideration Motion in TCPA Case Over Gov’t Debt Exception

A District Court judge in Delaware has granted a plaintiff’s motion for reconsideration in a Telephone Consumer Protection Act case, ruling that the Supreme Court’s decision to invalidate the exception for using an automated telephone dialing system to collect on debts owed to the federal government means that companies that used that exception should be liable for the calls that were made while the exception was in place. More details here.

WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: A court finds that the TCPA applies to calls that were expressly exempt when they were made, yet that might not be the most interesting part of this decision. The court goes on to explain that the TCPA’s statutory damages are, in essence, punitive damages and it is unconstitutional to apply punitive damages without fair warning. No matter what happens from this point forward, it appears this plaintiff will not be cashing in to the tune of $500 per call, and treble damages are certainly out of the question. Instead, the plaintiff could be limited to whatever actual damages he can prove. Also, the court has not yet applied the Supreme Court’s most recent TCPA decision (Facebook v. Duguid) to the plaintiff’s ATDS allegations. 

First Class-Action Suit, post-Hunstein, Filed in N.Y. Federal Court

Well that didn’t take long. Less than a day after the Eleventh Circuit Court of Appeals issued its ruling in Hunstein v. Preferred Collection and Management Services, a class-action lawsuit has been filed in New York federal court accusing a debt collector of violating Section 1692c(b) and 1692f of the Fair Debt Collection Practices Act by communicating with a third party — a letter vendor — about the existence of a debt when it sent the plaintiff’s personal information to the vendor to be included in and mailed out as a collection letter. More details here.

WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: Blow the life rafts up, grab the vests and batten down the hatches – Hunstein is upon us. Get ready for a tsunami of litigation the likes of which have not been seen in some time. Least you think I exaggerate, only last week on, Mike G. commented that that a new case was filed in the EDNY based on the Hunstein decision, just a day after the decision was issued by the 11th Circuit. Actually, it was filed on the same day and it was two cases. For the uninitiated, Hunstein held that the Defendant’s use of a letter vendor constituted a violative third-party disclosure. 

The new filings were simply the first droplets. In the past seven days, I have seen at least 10 more cases filed in both New York and New Jersey, all by different attorneys citing Hunstein in support. And I wasn’t really looking. It will be fair by this time next month, if you’re a defense attorney and you haven’t gotten at least one call from a client advising they were served or threatened with a Hunstein based complaint then either you’re mail/phone service is down or those are now former clients. 

Pardon, but this is going to the second fastest virus after you know what. The number of suits we see on a nationwide basis with single allegation will dwarf any of the other previous flavor of the month claims we’ve seen in recent years. Evidence of that is the several webinars address the claim given with the last week with plenty more on the way. 

Ok, so what do we do? This is not a claim where we can simply make some minor operational changes and pay off a few claims waiting for the statute to run. The first thing, take a deep breath and start thinking about short and long term strategies, both legally and operationally. The Defendant in Hunstein is going to be requesting that the 11th Circuit review the decision en banc hoping for a reversal. All of the major organizations on the creditor’s rights side are gearing up to file amicus briefs in favor of an en banc hearing, and no doubt the consumer advocates will be doing the same opposing a rehearing. The process will take some time. And, its likely that what ever happens will not be the end of the story. Either way, the 11th Circuit is only one of 11 Circuits, covering Florida, Georgia and Alabama. None of the other 86 District Courts in the other 10 Circuits are bound by the 11th Circuit, so there are plenty of options to get more opinions either way. Eventually, (a few years from now) we could have a circuit split and SCOTUS here we come. 

So what do we do in the mean time? Attorneys defending these cases and advising clients need to talk to each other and think about global strategies. Example: there are one or two plaintiff’s attorneys filing most of the claims in your state or circuit, maybe you come up with a joint plan for dealing with those attorneys that force them into realizing it won’t be as easy as they thought or as lucrative. Organizations and companies should do the same, see what short term avenues might be available to deal with the issue. From a practical perspective, for the majority out there it will be very difficult, if not impossible, to make immediate operational changes so a litigation strategy will be important to navigate the expected onslaught as you work to come up with an operational game plan. 

I’d be remiss if I did not wonder out loud – where’s the CFPB on this? It will be interesting to see if they file an amicus brief, and if they do, on which side. Thanks and good luck.

Judge Grants MSJ for Defendant in FDCPA Case Over Allegedly Fraudulent Loan

Claiming you have been the victim of identity theft is not enough to get a collection item removed from your credit report, a District Court judge in California has ruled, granting a defendant’s motion for summary judgment after the plaintiff claimed it violated the Fair Debt Collection Practices Act by continuing to report the debt to a credit reporting agency after being notified of the alleged fraud. More details here.

WHAT THIS MEANS, FROM JUNE COLEMAN OF MESSER STRICKLER: In Blackmon v. Ad Astra Recovery Services, Inc., the Court ruled in favor of the collection agency for handling a consumer’s claim that the debt was fraudulent. This case provides an excellent roadmap for what is permissible when a consumer suddenly claims identity theft after years of collection efforts. During the 3 ½ years that Ad Astra Recovery Services was assigned the payday loan account, Ad Astra Recovery Services mailed letters to Ms. Blackmon and placed phone calls, but was unable to connect with Ms. Blackmon. Ms. Blackmon called Ad Astra Recovery Services more than 4 years after the payday loan was made, stating that she had viewed the debt on her credit report and believed it to be fraudulent. The collector told Ms. Blackmon that she needed to provide a police report or a completed, signed, and notarized fraud affidavit, along with a letter of dispute explaining why she believed the account to be fraudulent. After the call, the account was marked disputed.  Ms. Blackmon never provided any of the requested documentation. Apparently, Ms. Blackmon had reported another instance of identity theft, but never reported anything to the police about the payday loan account. Over 11 months later, Ms. Blackmon’s attorney called Ad Astra Recovery Services requesting documentation of the debt and that Ad Astra verify the debt. Ad Astra Recovery Services reviewed the account and responded to the attorney in writing that the facts regarding the account were consistent with the information that was supplied by the original creditor, including a copy of the loan agreement and the history of charges and payments. Ad Astra Recovery Services also explained how Ms. Blackmon could complete an identity theft affidavit. The Court found that none of the conduct was misleading in violation of section 1692e, nor was the conduct unfair in violation of section 1692f. The Court noted that the steps that Ad Astra Recovery Services did informing Ms. Blackmon of the need for a police report, an identity theft affidavit, and a statement was exactly what Ad Astra Recovery Services should have done. And the steps that Ad Astra Recovery Services took provides a roadmap to others who have to handle an identity theft allegation. The case also addresses California’s Identity Theft Act, which requires that the defendant have a current interest in the debt or a current interest in attempting to collect the debt on the date the California Identity Theft Act claim is filed in court. Because Ad Astra Recovery Services had closed the account prior to the filing of the lawsuit, Ms. Blackmon’s Identity Theft Act claim also failed. And Ms. Blackmon had alleged a California Consumer Credit Reporting Agency Act claim, based on alleged inaccurate credit reporting. While California’s statute is one of two that are expressly not preempted by the federal Fair Credit Reporting Act, California’s credit reporting statute provides for liability only if the furnisher of information knew or should have known about the inaccuracies. Because Ms. Blackmon never provides any other information, including a police report, the Court found that Ad Astra Recovery Services could not have known that the information reported was inaccurate. This case provides a great example of what should be done when a consumer claims identity theft, and how taking the right steps will result in a judgment in the debt collector’s favor.

House Passes FDCPA Amendment Bill to Protect Servicemembers

The House of Representatives has passed a bill aimed at amending the Fair Debt Collection Practices Act to provide additional protections to servicemembers. More details here.

WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: HR 1491 is one of several financial services bills that are making their way through the House that seek additional protections under the FDCPA. This bill and others have an uncertain if not unlikely future in the Senate.

Certainly no one can argue that servicemembers should not be harassed, threatened or otherwise targeted by unscrupulous debt collectors. True industry participants, especially those that subscribe to, already know better and do not engage in such conduct. The bill’s sponsors seek to amend §1692c & §1692d to address specific threatening conduct directed to servicemembers. Unfortunately for the bill’s sponsors, they have neither read the FDCPA nor sought industry input. The amendments proposed are not only redundant to existing sections of the statute, but candidly incompatible with  parts of the statute as well.

With respect to the amendments to §1692c, the bill proposes to prohibits debt collectors, among other things, from threatening servicemembers that the failure to pay the debt would result in a reduce in rank. §1692e(10) already accomplishes that by prohibiting “any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer”.  I am not aware of any debt collector who would have any authority to compromise a military member’s rank or status. The slightest inference of same would be cause for an FDCPA violation. Furthermore, the bill now looks to define servicemembers as covered persons, when they are already defined as consumer under  §1692a(3). Covered persons are not defined anywhere else in the act creating even more confusion or more importantly opportunities for exposure.

The bill also looks to define the conduct articulated in §1692c as an unfair practice as well. This further shows the sponsors’ lack of knowledge of not only the FDCPA but FDCPA case law. Many courts have refused to find multiple FDCPA violations on the same set of facts yet this is exactly what is being proposed here.

Industry has been committed to protecting our military and the people who serve on our behalf. Robust policies and procedures that specifically address servicemembers are a critical part of any compliance management system. As is always the case, bad actors drive the legislation but the good actors pay the price. Here’s hoping the Senate takes a more critical look.

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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