Compliance Digest – July 19

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 Imposes Higher Standard on Defendant Using BFE Defense in FDCPA, FCRA Case

A District Court judge in Maryland has granted a plaintiff’s motion to strike four of the five affirmative defenses put forth by a defendant in a Fair Credit Reporting Act and Fair Debt Collection Practices Act case — including the use of the Bona Fide Error defense — ruling that the use of the BFE defense is subject to a heightened standard at the pleading stage of a case and that the defendant was required to identify specific policies to avoid such errors from occurring. More details here.

WHAT THIS MEANS, FROM MIKE FROST OF MALONE FROST MARTIN: This claim was initially filed by the Consumer Financial Protection Bureau (CFPB) against Fair Collections & Outsourcing, Inc. (FCO) on Sept. 25, 2019. The CFPB filed a seven-count complaint regarding various credit reporting issues.

CFPB filed a Motion to Strike Defendants Amended Affirmative Defenses –  Bona Fide Error Defense, Unclean Hands, and Constitutionality. The Court granted the CFPB’s Motion to Strike the Unclean Hands and Constitutionality Defenses. It also granted the Motion to Strike the Bona Fide Error Defense but granted FCO leave to amend by curing the defects in the pleading.

FCO has an opportunity to amend the pleading to meet the standards under Rule 9(b) as directed by the Court.


Judge Grants MSJ For Agency in FCRA, FDCPA Case Over Disputed Debt

A District Court judge in Pennsylvania has granted a defendant’s motion for summary judgment on all claims in a Fair Credit Reporting Act and Fair Debt Collection Practices Act case after it was accused by the plaintiff of not properly investigating a disputed debt because the plaintiff did not do his part in submitting documents to substantiate his claim that he was the victim of identity theft. More details here.

WHAT THIS MEANS, FROM LAUREN CAMPISI OF HINSHAW CULBERTSON: In Ingram v. Experian Information Solutions, Inc., et al., the Eastern District of Pennsylvania granted summary judgment in favor of the collection agency dismissing the plaintiff’s Fair Credit Reporting Act (FCRA) and Fair Debt Collection Practices Act (FDCPA) claims. The FCRA and FDCPA allegations stemmed from a letter sent to the creditor-furnisher generally disputing the accuracy of the information furnished to credit reporting agencies without specific information regarding the basis of the dispute other than to state that it was not the consumer’s account. The creditor-furnisher requested that the consumer provide an identity theft affidavit, police or incident report and additional information, to which the consumer did not respond. Subsequently the account was referred to a collection agency, which attempted to collect the amounts owed under the account.  The plaintiff also submitted indirect disputes through the credit reporting agencies. The plaintiff asserted FCRA and FDCPA claims against the collection agency. The court ultimately concluded the plaintiff failed to raise a bona fide dispute that would trigger an obligation to conduct a reasonable investigation or to report the account as disputed. The court also dismissed the FDCPA claims, finding no misrepresentation, false, misleading or deceptive means of collection activity when the plaintiff had no direction communication with the defendant. This case sheds light on the triggers of the obligations to report accounts as disputed and to conduct reasonable investigations and is helpful to collection agencies defending FCRA claims, particularly those based on generic dispute letters. That said, we recommend careful consideration of guidance and interpretation from the CFPB to mitigate potential risks of alleged noncompliance.

Appeals Court Reverses Dismissal of FDCPA Suit Over Use of Barcode on Envelope

The Court of Appeals for the Third Circuit has reversed the dismissal of a Fair Debt Collection Practices Act case, ruling that the disclosure of an individual’s Internal Reference Number — which included the first 10 characters of the individual’s street address — is sufficient for the individual to have suffered a concrete injury and have standing to sue in federal court. More details here.

WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER: As courts continue to fine-tune Spokeo’s central instruction that plaintiffs must have Article III standing to proceed in federal court, clear trends are emerging. Starting with Spokeo’s recognition that certain intangible harms can nonetheless be “concrete,” courts across the country are beginning to distinguish those types of intangible harms that do constitute concrete injury from those that do not. A month prior to the Third Circuit’s opinion in this case, the U.S. Supreme Court used “reputational harm, disclosure of private information, and intrusion upon seclusion” as archetypal examples of intangible but concrete harm sufficient to satisfy Article III’s requirements. Morales, like Hunstein before it, builds on that same concept. By embedding a consumer’s Internal Reference Number in a visible QR code, HRRG made consumers’ personal information publicly available, which in turn constitutes a concrete injury.

Taken together, these recent opinions illustrate courts’ heightened sensitivity to issues of consumer privacy. Industry members should likewise be mindful of this trend, both when interacting with consumers (and others) and when defending cases filed against them. But also keep in mind that standing is not a “one and done” analysis—courts must analyze standing at each stage of the case. A plaintiff who alleges sufficient material to defeat a Rule 12 motion may nonetheless be unable to actually show concrete harm during discovery. And as courts continue to sharpen their standing analyses, all parties should look to a deeper analysis of what types of information constitute “personal information” sufficient to yield the intangible but concrete injury found in Morales.

Judge Denies Certification in FDCPA Suit Over Credit Reporting Language in Letter

A District Court judge in New Jersey has denied a plaintiff’s motion to certify a class in a Fair Debt Collection Practices Act lawsuit, ruling that the different letter templates used by the defendant and the different language included in those templates requires individualized inquiries into whether the letters received by the members of the class were deceptive or not. More details here.

WHAT THIS MEANS, FROM PATRICK NEWMAN OF BASSFORD REMELE: Let’s start with the defense strategy our readers can take home from this case: “Every Snowflake is Unique.”

In class cases, beating class certification is the name of the game. If the defendant convinces the court that class treatment isn’t going to be the most efficient and effective way to handle it, the court denies certification and the case proceeds on an individual basis. This means the financial stakes are lower for the defendant because the potential exposure and settlement value of the case plummet in comparison to a certified class action. That’s a “win” in itself.

Among the several criteria for class certification under the Federal Rules are the requirements of “commonality,” “predominance,” and “typicality.” To avoid venturing too deep into the law nerd weeds on these “elements,” it’s simplest to boil them down into a couple of key concepts.

First, the plaintiff and the putative class members must share common questions of fact or law and those common questions must “predominate” over any individualized inquiries for the named plaintiff and/or the class members. Second, the named plaintiff must have a claim that is “typical” of the class members’ claim.

Essentially, the court needs to be able to make a determination on shared issues and facts that will adjudicate the claims of the named plaintiff and all the class members. Again, the courts consider these elements through the lens of efficiency.  Is there enough legal “glue” in the claims and facts such that the court can decide thousands of claims all in one fell swoop?

Here the district court said “no.” The defendants allegedly sent letters using numerous “templates” to communicate with the plaintiff and putative class members at various stages of the collection process. The court noted that, “[f]urther complicating any class-wide factual assessments, some of Defendants’ correspondence was mailed to putative class members before credit reporting began … [a]s a result, assessing class-wide liability requires considering the many types correspondence that were mailed at intervals based on Defendants’ complex mailing algorithm,” thus necessitating “individualized inquir[ies]” into whether the challenged letter language complied with the FDCPA. Because the defendants sent different letters at different stages of the collection process to different members of the putative class, the named plaintiff couldn’t satisfy the typicality requirement either.

In sum, there wasn’t enough “glue” to hold the claims together on a class basis because the fact situations and legal claims of the 11,000 or so putative plaintiffs were too individualized. And that brings us back to the take home message: when defending FDCPA class cases industry members should be working to frame the named plaintiff’s alleged legal claim, damages, and/or background facts as materially different from the putative class members’. Likewise, the defense should also focus on ways in which the putative class members’ alleged claims, damages, and/or facts differ from each other. Or, to keep it simple, you need to convince the court that the plaintiff and/or the putative class members are all unique snowflakes.

WDTN Judge Uses TransUnion Ruling to Grant MTD in FDCPA Case Over Debt Amount

A District Court judge in Tennessee is the latest to use the Supreme Court’s ruling in TransUnion v. Ramirez as grounds to determine that a plaintiff lacked standing to sue a collector for allegedly violating the Fair Debt Collection Practices Act because it indicated in a collection letter that additional fees could be added to the balance that was due. More details here.

WHAT THIS MEANS, FROM LAUREN VALENZUELA OF ACTUATE LAW: Things in the accounts receivable industry have been moving fast, and in case you missed it – in June of this year the Supreme Court issued a ruling of epic proportions for our industry and many others. In TransUnion v. Ramirez the Supreme Court clarified that even if a defendant violates a statute, the statutory violation by itself does not rise to the level of a “concrete injury” for purposes of Article III standing. In other words, for a plaintiff to have standing, they must have a real-world injury if they want to recover damages in a lawsuit.

In Kale v. PreCollect, we got to see TransUnion in action. To establish standing a plaintiff has the burden of establishing s/he “ ‘(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision’ ” (Kale citingSpokeo v. Robins, 136 S. Ct. 1540, 1547 (2016)). The court in Kale did not mince words when it stated: “this case boils down to whether the alleged procedural violations of the FDCPA, taken alone, are injuries in fact.”

For a plaintiff to establish an injury in fact, Supreme Court precedent has established that the injury “must be both ‘concrete’ and ‘particularized’” (id., citing Spokeo at 1548). The court in Kale explained how the plaintiff could have demonstrated injury in fact in one of two ways: (1) by showing that the defendant’s violation of the statute caused her concrete harm, or (2) by showing how the defendant’s violation “created a risk of harm that Congress intended to prevent” (Kale citing Buchholz v. Meyer, 946 F.3d 855, 863 (6th Cir. 2020)). Prior to TransUnion, the Sixth Circuit established the risk of harm inquiry was the only way a plaintiff could show a statutory violation by itself was a concrete injury (Kale citing Garland v. Orlans). The court acknowledged how the Supreme Court has since clarified, with its TransUnion ruling, that the risk of harm analysis only applies in lawsuits “seeking injunctive relief and cannot be used to establish standing in a suit for damages.” Here, the plaintiff was seeking damages (and no injunctive relief) and therefore could not use risk of harm analysis to establish the statutory violation alone caused an injury in fact. Hence, the plaintiff could not meet the first element required for standing and the case was dismissed.

The FDCPA’s strict liability framework has encouraged a lot of litigation over statutory violations, and consequently, it has also encouraged a lot of vexatious litigation. Perhaps Kale shows us that the TransUnion ruling will serve as a balancing pendulum to the FDCPA’s strict liability framework going forward. Or perhaps plaintiff’s will simply get better at articulating their injuries, so they pass “concrete” and “particularized” muster. Or perhaps we will see an increase in plaintiff’s leveraging state consumer protection laws and an increase in state court filings where there are more lenient standards for standing. Only time will tell. For now, I chose to see the TransUnion ruling as a small ray of hope for defendants encountering frivolous FDCPA litigation, and as a win for those consumers who are truly harmed by illegal debt collection acts and practices since court resources will not be as easily diverted as before.

State Regulators Ask Ed. Dept. To Rescind Guidance and Make it Easier to Investigate Student Loan Collectors

State regulators, including those that specifically regulate collection agencies, have asked the Department of Education to “cease obstructing or discouraging state regulation” by formally taking steps to prove it is serious about not blocking attempts from state regulators to access records needed to investigate student loan servicers and debt collectors. More details here.

WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY & SHUSTER: The most interesting thing about this letter is the cc to Richard Cordray, former Ohio Attorney General and Director of the CFPB. Cordray is now the COO of Federal Student Aid, U.S. Dept. of Education. In other words, these organizations are asking to hook them up with a pretty well known aggressive regulator. Obviously, enforcement actions in the student loan arena look to be ramping up soon!

Petition Filed With FCC to Clarify Whether Certain Ringless Voicemails Count as Calls Under TCPA

A petition has been filed with the Federal Communications Commission seeking to clarify whether a ringless voicemail constitutes a call under the Telephone Consumer Protection Act’s prohibitions against using an automated telephone dialing system to contact an individual on his or her cell phone without first having consent to do so. More details here.

WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: Are ringless voicemails “calls” within the meaning of the TCPA? This is the question the FCC has been asked to answer by the political campaign of former U.S. Senator David Perdue. Senator Purdue says the voicemails are not calls under the TCPA and should not be considered as such.

There are certainly legal arguments that can be made that a ringless voicemail is not a “call,” and therefore, the TCPA’s restrictions do not apply. For example, as the Perdue campaign argues, the recipient’s telephone does not ring; a wireless network is not used to transmit the voicemail; and there is no monetary charge to the recipient.

Another of the Purdue campaign’s main arguments is that a ringless voicemail is not as intrusive as a regular call or text message might be. They argue that the same privacy issues the TCPA was designed to address do not arise with respect to a ringless voicemail.

We agree with the arguments raised by Purdue in the FCC petition that ringless voice mail or message drop voice mails should not be considered prerecorded or artificial voice calls under the TCPA.

As the Supreme Court strongly stated in its recent Facebook v. Duguid ATDS  autodialer ruling, the TCPA is an antiquated statute that needs to be amended to reflect current technologies. We believe that the FCC should also consider the antiquated nature of the TCPA. The FCC should focus on modernizing the TCPA with an eye towards balanced business sensibilities to allow businesses to operate and communicate with consumers in the least intrusive manner possible. This would be a win-win for businesses and consumers.

It will be interesting to see how the FCC answers this question. It has been an issue pending before the FCC for years. We will closely watch the FCC’s position and update readers accordingly.

Judge Denies Defendant’s Stay Request in a Hunstein Case

A District Court judge in Florida has denied a defendant’s motion to stay a Hunstein case, ruling that the pending en banc petition in Hunstein before the Eleventh Circuit Court of Appeals “does not affect the precedential value” of the ruling, “which is the law of this circuit.” More details here.

WHAT THIS MEANS, FROM MEAGAN ANNE MIHALKO OF TROUTMAN PEPPER: A Southern District of Florida judge recently denied a request to stay based on the pending request for en banc hearing in Hunstein. Durling v Credit Corp Solutions, Case no. 21-61002-CIV-SMITH, Doc. no. 24 (S.D. Fl. Jul. 8, 2021). The Court quickly disposed of the stay request ruling that (1) “[u]nder the law of this circuit, published opinions are binding precedent. The issuance or non-issuance of the mandate does not affect the result . . . .” and (2) Credit Corp Solutions had not adequately shown it would face hardship or inequity if the case was not stayed.

The Court made clear that there is nothing “there” with respect to any argument regarding the lack of a mandate being issued. Hunstein is published and binding.

With respect to the substantive argument on the requested stay, the opinion focused on Credit Corp Solutions’ failure to show hardship or inequity if the case moved forward. The opinion suggests there may be room for a stay in cases where hardship or inequity would be shown if a stay is not granted. Companies that want to seek a stay based on Hunstein should pay particular attention to what facts and evidence they can present to meet this burden in order to avoid a similar ruling.

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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