Compliance Digest – August 23

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.

Mich. Judge Grants MTD in FDCPA Case Over Credit Reporting Statement in Letter

A District Court judge in Michigan has granted a defendant’s motion to dismiss after it was sued for allegedly violating the Fair Debt Collection Practices Act, ruling that informing the recipient of a collection letter that the unpaid debt may be reported to a credit reporting agency which would negatively impact the recipient’s credit score if the account was left unresolved does not overshadow the validation notice. More details here.

WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: The Midwest seems to be leading the charge in dismissing FDCPA cases for lack of Article III standing. This time a Michigan district court judge held that language about credit reporting consequences in an initial letter did not present a sufficient injury in fact. 

The plaintiff in Echols v Congress Collection, LLC, alleged an overshadowing claim. In response to the defendant’s Rule 12(b)(1) motion, plaintiff claimed there was standing because: (1) the letter violated a provision of the FDCPA, and (2) the “deception” put plaintiff at a materially greater risk of causing her to overlook her important validation rights. The court disagreed and relied on a growing body of cases. 

Plaintiffs without Article III standing cannot pursue claims in federal court. They may be able to turn to state courts, though, and we are starting to see that minor trend. The law on standing in state courts varies from state to state.


Calif. DFPI Assesses $1.4M in Fines and Refunds to Student Loan Debt Relief Provider

The California Department of Financial Protection and Innovation yesterday announced it had assessed $1.4 million in fines and penalties against a student loan debt relief company that was accused of collecting illegal advance fees that are prohibited under federal law. More details here.

WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: Consistent with a broader enforcement agenda designed to protect California student loan borrowers, the California DFPI assessed a significant penalty against Amerifed for alleged violations of the federal Telemarketing Sales Rule. The Rule clearly states that a telephone seller of debt relief services – which appears to have been Amerifed’s business model – cannot collect a fee for that service in advance of providing services. The DFPI enforced the federal regulation through its CFPB-like UDAAP authority under California law. Because the DFPI is a state regulator, it is curious that there were no other California state law claims referenced in the Order.

Ariz. Judge Grants MTD in FDCPA Class Action Over Credit Reporting Language in Letter

A District Court judge in Arizona has granted a defendant’s motion to dismiss a class action complaint after it was sued for allegedly violating the Fair Debt Collection Practices Act for using language in a collection letter that made it seem as though both the defendant and the original creditor were going to report the unpaid debt to credit reporting agencies. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: The United States District Court for the District of Arizona recently applied a common-sense approach to interpreting a letter sent by a collection agency to a debtor and granted the collection agency’s motion to dismiss. In Carter v. IC Systems, No. CV-20-00930-PHX-JJT, the plaintiff argued that the letter, which named the creditor and then stated that “[t]he account information is scheduled to be reported to the national credit reporting agencies in your creditor’s name,” meant that the debt would be reported by both the creditor and the collection agency in violation of the Fair Debt Collection Practices Act. In a roughly three-page decision on the papers, the court held that an act done “in [the] creditor’s name” “is implicitly done by another party,” and therefore the letter did not support an implication that the debt would be doubly-reported and was not “false, deceptive, or misleading as a matter of law.” The decision is good news for debt collectors, suggesting that while the FDCPA is a consumer protection statute, courts will not defer to “convoluted stretch[es] of the language … beyond what the least sophisticated consumer could reasonably be expected to understand from the letter,” and will dismiss complaints based on facially unreasonable interpretations of collection communications.

Utah Judge Grants MTD in FDCPA Case Over Lack of License

A District Court judge in Utah has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act class action case, ruling that it did not need a license to collect in that state in order to file collection lawsuits against the two named plaintiffs. The judge ruled that the Petition Clause of the First Amendment, which affords individuals the right to petition the government for redress of grievances, preempted the defendant’s need for a license to collect in the state. More details here.

WHAT THIS MEANS, FROM CHRIS MORRIS OF BASSFORD REMELE: While federal courts have at times dismissed “lack of state license” claims on the ground that violation of state law does not necessarily give rise to an FDCPA claim, here the court based dismissal on unique Constitutional grounds. In response to Defendant’s motion to dismiss, the court ordered the parties to address whether filing the underlying collection suit was protected under the Petition Clause of the First Amendment. That Constitutional defense is often raised in other contexts, such as antitrust claims, where the Noerr Pennington doctrine permits joint efforts to influence public officials even if intended to eliminate competition. The First Amendment has not been used with great success in defending FDPCA cases. But the court reasoned that application of the Petition Clause is not foreclosed by either Heintz v. Jenkins (rejecting the proposition that the FDCPA never applies to lawyers in litigation) or Jerman v. Carlisle, McNellie et al. (holding that bona fide error does not apply to legal errors). Citing Tenth Circuit precedent, the court held that notwithstanding those Supreme Court decisions, a collector is not liable for seeking to recover debts in state court unless the underlying collection lawsuit constitutes a “sham petition.” Given the frequency with which FDPCA claims arise from pleadings filed in underlying collection suits, perhaps the First Amendment defense will catch on among federal courts, in the way that lack of Constitutional standing has taken off in recent months – especially where the collector prevailed in the underlying lawsuit, or can show that it had a reasonable basis to conclude that its underlying suit had merit.

Judge Denies Credit Repair Org’s MTD in Suit Filed by CFPB

A District Court judge in Massachusetts has denied a credit repair organization’s motion to dismiss after it was sued by the Consumer Financial Protection Bureau and the state of Massachusetts for allegedly collecting upfront fees and misrepresenting its effectiveness at improving the credit scores for individuals who signed up for its services, ruling that the claims made by the plaintiffs are not unconstitutionally vague or discriminatory. More details here.

WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: We have seen a significant increase in enforcement actions from governmental agencies during the global pandemic, specifically relating to credit repair organizations (“CROs”). As the pandemic continues, CROs should expect continued aggressive regulatory enforcement. Debt collectors should continue to collaborate with consumers using CROs and be alert for any possible abuse to consumers by the CROs.

Fla. Judge Rules Calling Pattern Not Abusive in Dismissing FDCPA Claim

A District Court judge in Florida has granted a defendant’s motion to dismiss claims that it violated the Fair Debt Collection Practices Act when it made five calls during an eight-day span to an individual’s grandmother trying to get in touch with the individual to collect on an unpaid debt. The plaintiff did not claim that the calls violated the location information provisions of the FDCPA, only that they violated the provisions prohibiting harassing behavior. More details here.

WHAT THIS MEANS, FROM JOHN MAREES OF MESSER STRICKLER: This is an excellent opinion out of the Middle District of Florida. Here, at the motion to dismiss stage, the Court held a call frequency of no more than one call per day, only twice on consecutive days, without any other allegations of egregious conduct, did not constitute harassment under either the FDCPA or FCCPA. Because the question of harassment is generally fact specific, courts are reluctant to make these determinations at the motion to dismiss stage. The fact that Courts may now be willing to evaluate the sufficiency of call volume cases at the motion to dismiss stage is an encouraging sign for our industry.

All State AGs Ask FCC to Move Up Deadline for Small Telecoms to Comply with STIR/SHAKEN

If it’s one thing that all the Attorneys General across the country — regardless of whether they are Democrat or Republican — can agree on, it is their combined hatred of illegal robocalls. AGs from all 50 states and the District of Columbia yesterday filed a joint comment seeking to have the Federal Communications Commission move up the deadline for small telecom companies to implement STIR/SHAKEN technology to help identify legitimate callers. More details here.

WHAT THIS MEANS, FROM XERXES MARTIN OF MALONE FROST MARTIN: The Federal Communications Commission and the Attorney Generals have repeatedly made clear their objective to reduce and eliminate illegal call traffic. This coordinated effort to crackdown on spam calls simply reinforces to our clients the importance of complying with robocall regulations. STIR/SHAKEN technology being required in small telecom companies will reduce the effectiveness of robocalls and, ultimately, increase the effectiveness of FCC compliance.

Online Lender to Pay $1.6M Fine In Settlement With Mass. AG Over Alleged Collection Abuses

A company that services online loans made to consumers has agreed to pay $1.6 million in a settlement with the Attorney General of Massachusetts after it was accused of using abusive debt collections that violated state regulations. More details here.

WHAT THIS MEANS, FROM CARLOS ORTIZ OF POLSINELLI: In this instance, a state regulator in Massachusetts concluded that a loan servicer failed to comply with that state’s debt collection regulations when it exceeded the number of calls it was permitted to make to borrowers and by failing to notify them of their right to receive detailed documentation of their loans. The loan servicer ultimately paid a $1.6 million fine. This raises an obvious point that bears repeating: Know and comply with the laws of each state where you collect. While the FDCPA does not currently provide an exact number of debt collection calls that can be made during a specific time period, the state regulations in Massachusetts do, and there only two communications via phone during a seven-day period are permitted, pursuant to 940 C.M.R. 7.04(1)(f) (There, a communication may include reaching a borrower’s voicemail, but not leaving a message.) Many other states have laws that are unique to their jurisdiction. Some of those include:

  • Iowa – where a debt collector may communicate the fact of the debt not more than once in any three-month period, with the parents of a minor debtor, or with any trustee of any property of the debtor, conservator of the debtor or the debtor’s property, or guardian of the debtor. Iowa Code Ann. § 537.7103(3)(a)(7).
  • New York City: limits debt collection calls to two per a seven-day period. New York City, N.Y. Rules, tit. 6, § 5-77(b)(1)(iv).
  • West Virginia: limits debt collection calls to thirty times per week or ten telephone conversations per week. W. Va. Code Ann. § 46A-2-125.

Given the above, always know where you are collecting and what the laws are of that jurisdiction; otherwise, the consequence for not doing that can be very expensive.

TCPA Class-Action Filed Against Lender Accused of Making Collection Calls After Consent Had Been Revoked

A class-action lawsuit has been filed against Harley-Davidson Financial Services, accusing the lender of violating the Telephone Consumer Protection Act and the Illinois Consumer Fraud and Deceptive Business Practices Act because it allegedly contacted the plaintiff on her cell phone after she had revoked consent to be contacted. More details here.

WHAT THIS MEANS, FROM JASON TOMPKINS OF BALCH & BINGHAM: “You can check out any time you like, but you can never leave.” The Eagles’ words ring true in a few courts, which over the past couple of years have held that contractual consent cannot be unilaterally revoked (at least in the absence of a contractual provision providing a means of doing so). Presumably, in this case Johnson gave her consent to be called by signing a retail installment contract. So that issue may be front-and-center. The Seventh Circuit has not weighed in since the recent decisions from other circuits, and results have been mixed in the trial courts. This is a good case to watch to see if a consensus is forming, or if courts there will buck the trend.

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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