Compliance Digest – May 17

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 Credit Reporting Statement in Letter

Notifying an individual in a collection letter than not paying a debt may have a negative effect on that person’s credit score does not rise to the level of violating the Fair Debt Collection Practices Act, according to a District Court judge in Michigan, especially when the individual’s alleged emotional injury is self-inflicted because she failed to pay the underlying debt in the first place. More details here.

WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: The recent opinion in Randolph v. Congress Collections, No. 20-cv-12146, 2021 WL 1738874 (E.D. Mich. May 3, 2021) is another FDCPA standing win for the industry. The Honorable Mark A. Goldsmith dismissed the plaintiff’s complaint for lack of standing a second time, after having provided the plaintiff a chance to amend the first deficient pleading.

The plaintiff claimed the following language in a collection letter was threatening and deceptive in violation of 15 U.S.C. §§ 1692e and f:

“Your delay to pay this balance may result in negative effect on your credit score, causing you to pay higher interest rates on loans and auto insurance rates in the future.”

The court did not focus on the likelihood of this language being misleading, but ruled that, “[e]ven assuming that this is a misrepresentation, it is light years away from the types of misrepresentations that are sufficient in and of themselves to create an injury in fact.” In the Sixth Circuit, a consumer does not necessarily “suffer[] a concrete injury any time that she receives a communication containing a misrepresentation, no matter how trivial.” Only certain types of misrepresentations are considered inherently harmful: those “that Congress intended to prevent when it enacted the FDCPA,” such as “whether the plaintiff owed the debt,” “misstatements regarding the identity of the debtor, the amount of debt owed, or the validity of the debt[,]”  misrepresentations “that could cause the plaintiff to waive his procedural rights under the FDCPA” or “threats of arrest or criminal prosecution.”

As Randolph alleged no inherently harmful type of misrepresentation, she was required to allege some other cognizable injury traceable to the challenged language used by the collector. In this case, the Court found that no injury in fact was pled, as Randolph’s alleged anxiety was “about a possible future harm that is not certainly impending.” Moreover, the purported injury was not traceable to the collector’s conduct, because any emotional anguish and anxiety “is arguably self-inflicted,” arising from the plaintiff’s “own failure to pay her debts and the potential consequences of her delinquency.” Thus, the Court had no need to address whether the language may actually mislead a consumer, as this plaintiff could not pass the threshold hurdle of standing to properly place that question in front of the Court. 

Parts of the opinion may sound harsh, but opinions of the past that have dissected letters to look any for potentially misleading language, even if the consumer was not actually misled and suffered no resulting harm, also were harsh. It sounds like this Judge may have grown weary of a docket that likely is clogged with technical FDCPA claims that were not filed to address any real harm.      


Appeals Court Dismisses Request Seeking Additional Damages in TCPA Suit

The Eleventh Circuit Court of Appeals has dismissed an appeal filed by a plaintiff seeking to recover additional recoveries after being awarded $14,000 in a Telephone Consumer Protection Act case against a collector. More details here.

WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: This good decision from the 11th Circuit is all about the ridiculous nature of plaintiff’s untimely appeal.    

The plaintiff in Floyd v. Navient Solutions alleged that he received more than 100 calls in violation of the TCPA. In 2018, he obtained a summary judgment ruling from the Court which entitled him to damages for only 28 calls at $500 per call. The 2018 ruling did not include a specific computation that plaintiff’s damages amounted to $14,000, but the order did state that plaintiff was entitled to 28 calls at $500 per call. However, plaintiff claimed there were actually 100 calls. Plaintiff did not timely appeal the 2018 ruling within 30 days.

In 2020, the Federal District Court issued a final judgment which specifically stated that the plaintiff was entitled to $14,000 for the 28 calls. The plaintiff filed an appeal within 30 days of the 2020 judgment, and attempted to argue that he was entitled to a much higher award as he had allegedly been called more than 100 times.

The 11th Circuit Court of Appeals used excellent common sense here. The Eleventh Circuit held that the plaintiff’s appeal was untimely as he should have filed it back in 2018 when the original ruling was made. In other words, plaintiff was provided with ample notice back in 2018 regarding the amount of the award ordered by the District Court. The fact that the very simple calculation of the numeric amount of “$14,000” was not included in the 2018 order, but the Court’s order stated that Plaintiff’s damages were 28 calls x $500 per call, was held to be more than sufficient notice. Consequently, the Eleventh Circuit wisely dismissed the appeal. 

Lesson learned for the plaintiff: Don’t file frivolous appeals. 

ACA Questions CFPB’s Motives in Seeking Delay of Debt Collection Rule

ACA International has submitted its comment to a proposal from the Consumer Financial Protection Bureau to delay the enactment of Regulation F, its debt collection rule, arguing that postponing the effective date of the rule for 60 days — to January 29, 2022 — would not likely “have a meaningful impact” on the readiness of collectors to comply with the regulation’s provisions. Rather than delay the effective date, ACA International suggested that the CFPB would be better off delaying the enforcement of the rule’s provisions for between six months and a year after the effective date, which is currently set for November 30. The association also questioned the motivations behind the proposed delay, saying that nobody in the industry has asked for more time to comply. More details here.

WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY & SHUSTER: Surely it is no coincidence that the CFPB delays this long-anticipated rule just as a new Biden-appointed director gets ready to take charge. Likely, the Bureau is cooling its heels until it completes its leadership team. The CFPB is hardly in the business of making debt collector’s lives easier especially without being asked.

Senate Bill Aims to Prohibit ‘Predatory’ Collectors From Accessing PPP Loans

A month after a similar bill was introduced in the House of Representatives, a bill has been introduced in the Senate that seeks to choke off access to the Paycheck Protection Program for any debt collector that has committed any violation of the Fair Debt Collection Practices Act. More details here.

WHAT THIS MEANS, FROM STEFANIE JACKMAN OF BALLARD SPAHR: It is unfortunate that members of the Senate are now joining certain members of the House in branding companies fulfilling an essential role within our financial system – and their employees – as somehow “less deserving” of receiving monetary relief aimed at keeping those employees employed. As I commented last month when the House version of this was proposed, there often can be significant disagreement between advocates, industry members, regulators, and courts (e.g., Hunstein, Acosta) on how to interpret and apply various provisions of the FDCPA. The receivables industry is a constituency comprised of an overwhelming number of highly responsible companies that provide meaningful employment opportunities for thousands upon thousands of Americans. While directing PPP funds to responsible industry members and away from irresponsible one may be an appropriate goal for Congress, the delineation between “responsible” and “irresponsible” must be drawn in a way that is appropriate. Members of the receivables industry members are entitled to defend themselves in the face of disagreement on what the rules require or say. Drawing the line at an entity being “irresponsible” based on a single adverse decision targets the entire receivables industry in a uniquely imbalanced way. I can’t help but wonder if these bills would survive a constitutional challenge if enacted as currently proposed.

Judge Grants MSJ for Defendant in FDCPA, FCRA Case Over Alleged ID Theft

What determines whether an investigation into a disputed debt is reasonable or not? A District Court judge in Indiana has granted a defendant’s motion for summary judgment in a Fair Credit Reporting Act and Fair Debt Collection Practices Act case, saying that its policies and procedures were “beyond question” in making sure a debt was valid when it reported it to a credit bureau. More details here.

WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER: Since FCRA claims are becoming more and more popular, it’s important to point out the two important FCRA take-aways from this opinion. First, passive debt owners should be pleased with the Court’s entry of judgment in LVNV’s favor on Plaintiff’s FCRA claims. This opinion emphasizes that FCRA liability flows from actually providing credit information to a CRA, and that absent evidence that LVNV itself had done so, LVNV was entitled to judgment as a matter of law. This is an important holding because too often, consumers opt to only file suit against the passive debt owner, not the entity who actually furnished the credit information. This opinion gives such defendants good ammunition to push back against FCRA liability in similar circumstances.

Second, consumers bringing FCRA claims frequently argue that had the furnisher done more—such as reaching out to police departments, family members or other third parties—the outcome of the furnisher’s investigation would have been different. Indeed, in this case, the plaintiff pointed out that Resurgent never contacted American Airlines, the Tipton County Police Department, the credit bureaus, or Plaintiff himself, nor did they investigate the origins of the debt or the purpose for which it was incurred. The question of where the line between “reasonable” and “unreasonable” lies is part of what makes summary judgment so hard to attain in the context of FCRA claims. But here, the court painstakingly itemized the extent of Resurgent’s investigation, juxtaposing it with the limited (and often unhelpful) information the plaintiff provided to Resurgent during the course of his disputes, and rejected the concept that a furnisher must automatically contact every consumer who disputes a debt. The court recognized the plaintiff’s failure to do more than suggest that a different investigation would have yielded a different outcome, emphasizing the need for actual evidence to bolster such speculation. Furnishers facing FCRA claims should keep this in mind as they defend similar claims, as this opinion provides a roadmap for how to establish the reasonableness of your investigation while reducing the consumer’s claim to nothing more than conjecture.

Judge Denies MTD in FDCPA Suit Over Fraudulent Debt

A District Court judge in Washington has denied a defendant’s motion to dismiss claims it violated the Fair Debt Collection Practices Act after it was accused of continuing to demand payment and moving forward with a collection lawsuit even though it had been notified by the plaintiff’s attorney that the underlying debt in question was written using a dishonored check on an account that had been closed because of fraudulent activity. More details here.

WHAT THIS MEANS, FROM PATRICK NEWMAN OF BASSFORD REMELE: As the defendant argued in this case, the United States Supreme Court has noted that the mere filing of a collection lawsuit that turns out not to be successful does not necessarily support a FDCPA claim. Some courts have embraced this concept more than others. Unfortunately, this particular court did not find it an avenue upon which to bounce the claim, instead effectively ruling that the question of whether filing suit on a debt the consumer claims not to owe violates the FDCPA is a bona fide error issue that cannot be resolved on a motion to dismiss.

This ruling is frustrating because in typical litigation this consumer’s claim would be an issue to be litigated during the lawsuit, not a basis upon which to sue a party involved in the lawsuit. But for entities and individuals covered by the FDCPA, that evidently is not the case. Again, frustrating, but the key take-away from this court’s order is perhaps best gleaned from the facts alleged in the complaint: plaintiff’s lawyer provided the defendant with evidence that she did not incur the debt. Maybe true, maybe not. In either event, and in a situation like this, the best practice is to determine whether the consumer’s defense can be overcome. If the answer is “no,” serious consideration should be given to whether proceeding with the lawsuit makes sense—either from a revenue generating perspective or a risk management perspective.

Calif. DA Reaches $30k Settlement With Debt Buyer, Collection Law Firm

A debt buyer and collection law firm in California have reached a settlement with a local District Attorney after being accused of suing an individual in an attempt to collect a debt that the individual did not owe, according to a published report. The settlement includes a civil penalty, a fine to reimburse the county for the costs of the investigation, and a prohibition for both the debt buyer and the law firm against using what are referred to as “gag clauses” that prevents individuals from reporting incidents to authorities. More details here.

WHAT THIS MEANS, FROM JONATHAN ROBBIN OF J. ROBBIN LAW FIRM: The District Attorney’s Office for Kern County, California (“DA’s Office”) reached a settlement with Winn Law Group, A.P.C. (“Winn”) and Cavalry Portfolio Services, LLC (“Cavalry”) regarding claims that the entities entered into settlement agreements that included a “gag order”.  Specifically, the consumer had previously sued Cavalry and Winn based on allegations that they were targeting the wrong person for debt collection, as the consumer never owed the debt. Despite the allegations, Cavalry and Winn persisted in their suit to collect debt never owed by the consumer. Ultimately, both Winn and Cavalry agreed to dismiss the lawsuit, but only on the agreement that the consumer release all claims he had against Winn and Cavalry and that he agree not to report Winn and Cavalry to the authorities. The DA’s Office took action against Winn and Cavalry for imposing this type of speech restriction and ultimately agreed to financial penalties of $25,000 in civil penalties and $5,000 to reimburse the cost of the investigation. More onerous though, the DA also barred the parties from imposing any gag order and gave the DA’s Office oversight over the terms of any settlement agreements entered between Cavalry and Winn with Kent County residents for a period of one year to ensure that the agreements to not include language that prohibit the consumers from contacting authorities. The DA’s office obviously came down harder on Winn and Cavalry as it was perceived that they were preventing the consumers of the assistance that government agencies can provide and depriving them of their rights. Thus, any settlement must be drafted to carefully protect against the appearance of gag orders.

Judge Partially Grants MSJ for Defendant in FCRA, FDCPA Suit Over Disputed Rental Debt

A District Court judge in Alabama has denied a plaintiff’s motion for summary judgment and granted a defendant’s motion on most of the claims it violated the Fair Credit Reporting Act and the Fair Debt Collection Practices Act after it attempted to collect on an unpaid debt related to an apartment rental. More details here.

WHAT THIS MEANS, FROM SARAH DEMOSS OF PREMIERE CREDIT OF NORTH AMERICA: The decision in this case was made on a very specific fact pattern that may not be helpful in cases with different facts. However, the Court did a really good job of breaking down some of the differences between the FDCPA and the FCRA, and that analysis can be helpful to other fact patterns. Often times agencies will receive a lawsuit or a demand with allegations of violating both laws and settle without trying to knock out one of the statutes. However, if you dig into the nuances of each statute, and keep them separate in your analysis, you have a good chance of kicking one out and reducing your settlement amount.   

Hunstein-Related Class Actions Continue Piling Up

The number of 1692c(b) lawsuits alleging that a debt collector communicated information with a third party in violation of the Fair Debt Collection Practices Act continues to explode in the weeks following the Eleventh Circuit Court of Appeals’s ruling in Hunstein v. Preferred Collection and Management Services. There have been 42 cases filed across the country since the Hunstein ruling was announced on April 21, with 27 of them class-actions, according to data compiled by WebRecon. There was only one 1692c(b) class-action filed this year before the Hunstein ruling came out, according to WebRecon’s database. More details here.

Hunstein Update: Deadline to File Petition Extended, More Lawsuits Being Filed

The defendant in the Hunstein case before the Eleventh Circuit Court of Appeals yesterday asked for, and received, a two-week extension to file its petition for an en banc rehearing before the entire panel of Eleventh Circuit judges. More details here.

WHAT THIS MEANS, FROM COOPER WALKER OF MALONE FROST MARTIN: In just a few short weeks, Hunstein has proven to be everything we thought it would be — an absolute nightmare. The Plaintiffs’ Bar is lining up to see if they can turn this case into a get-rich-quick settlement scheme. While I’m hopeful this issue will be resolved in the industry’s favor, I’m less hopeful that it will happen quickly. This issue is here to stay. In the meantime, it would be wise to develop a game plan moving forward both operationally and when the inevitable lawsuit ends up on your desk. The answer could be different based on the size of your operation, how many third-party vendors you regularly deal with, and/or the plaintiff’s firm you are dealing with.

CFPB Sued Over FDCPA Eviction Rule

The Consumer Financial Protection Bureau is being sued over an interim final rule it issued saying that collectors may face prosecution under the Fair Debt Collection Practices Act for not providing written notices to individuals being evicted, with plaintiffs claiming their First Amendment rights under the Constitution are being violated because they are being required to lie. More details here.

Judge Strikes Down CDC’s Ban on Evictions; DOJ Plans to Appeal

The Centers for Disease Control & Prevention’s moratorium on evictions in the wake of the COVID-19 pandemic took another turn yesterday, with a District Court judge in the District of Columbia ruling that the agency overstepped its bounds by saying that individuals could not be evicted during the pandemic. The ruling occurred on the same day that a rule from the Consumer Financial Protection Bureau was published in the Federal Register that prohibits collectors from evicting individuals without first providing them with a “clear and conspicuous” written notice detailing the protections that those individuals have under the CDC’s moratorium. More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: It started with the Industry’s lawsuit against the Massachusetts Attorney General and now courts around the country are joining in the chorus of academics, lawyers and advocates who contend that even in the face of a pandemic, the government does not have the absolute right to suspend constitutional protections. Given the rapid pace at which barriers to activity are being torn down in the face of mass vaccinations of Americans, many of these restrictions will be short-lived. It will be interesting to see if legislators and regulators will have the stomach to continue to pursue similar items going forward.

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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