Compliance Digest – August 30

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.

Appeals Court Affirms Ruling for Plaintiff in FDCPA Case Over Call Placed 1 Day After C&D

Invoking the bona fide error defense is not a get-out-of-jail-free card for a debt collector. The defense only works if the policies and procedures it is meant to protect are reasonable. The Tenth Circuit Court of Appeals has affirmed a lower court’s ruling in favor of a plaintiff who accused a collector of violating the Fair Debt Collection Practices Act by making a collection calling the day after it received a cease-and-desist letter, ruling that the three-day window the collector gave itself to process such requests to be unreasonable. More details here.

WHAT THIS MEANS, FROM HEATH MORGAN OF MALONE FROST MARTIN: This ruling is instructive for other agencies in how to argue and use the Bona Fide Error Defense but also in how to shape your policies and procedures, especially in light of changes that need to be made to comply with Regulation F and the Model Validation Notice.

First agencies should know how strong their policies and procedures are before asserting the Bona Fide Error Defense. As of now the 10th Circuit certainly requires more depth than what was offered by the Agency. To be fair, the agency attempted to rely on the fact that they did not provide all of their policies and procedures surrounding their defense because they claimed the initial burden and proof was not met by the Plaintiff. The Court rejected that assertion, and it should be a good lesson moving forward that when attempting to assert the Bona Fide Defense, agencies should be prepared to offer whatever specific policies and procedures they had in place to prevent an error from the outset. Producing strong policies and procedures early on can also sometimes convince a plaintiff’s attorney they have a low likelihood of prevailing in pursuing a case, and can help in settlement discussions.

However there is another important lesson that agencies can take as we look ahead towards Regulation F. Agencies should review their cease and desist policies and make sure they are strong enough to prevail on a Bona Fide Error Defense, and this is especially true when making calls within the initial 30 day validation period. 

Few FDCPA violations annoy consumers more than contacting them after a cease and desist request. Agencies should understand that and take extra precautions around that in their review of their policies and procedures. And there are ways to implement processes to ensure that you don’t fall into the common trap of contacting a consumer the day after processing and receiving a cease and desist request that agencies should look to implement. 

Lastly, agencies should look at how they handle both cease and desist requests, and their call volumes during the initial validation period where extra protections are provided to consumers. In this case, the two arguments made by plaintiff for the FDCPA violation after a cease and desist Request were a cease after a dispute under 15 U.S.C. 1692(g), and a written cease and desist request under 1692c(c). This is important to point out because a cease and desist request under 1692(g) provides a debt collector the ability to make one more additional attempt under certain circumstances such as to notify them of next steps. In this case, if this violation or “error” occurred after the initial validation period, the agency could have argued that it was permitted to have one more contact attempt and might have prevailed under 1692(g). But because this cease and desist request also occurred during the initial validation period, it was unable to make that argument. 

With Regulation F looming, the way the CFPB and our industry looks at the Model Validation Notice and initial dispute period is going to change. The initial notice and period is no longer a time to make demand for payment, but a time to provide notice to consumers about their account. In fact, the Model Validation Notice provides consumers with a specific date by which consumers have to dispute the debt, and spells out the rights consumers have right on the letter – the ones that the plaintiff asserted in this case. With that in mind, agencies should review and updated their policies, procedures, and scripting of how they make phone calls during this initial dispute period to avoid more frequent lawsuits on this issue. 


Error Leads Judge to Overturn Verdict in Favor of Defendant in FDCPA Class Action

A District Court judge in Nebraska has admitted he made a mistake and thrown out a jury verdict in favor of a defendant, determining that the plaintiffs in a Fair Debt Collection Practices Act class action should be the prevailing parties, and awarding $39,000 in damages and attorney fees. More details here.

WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: Defeat snatched from the jaws of victory. The defendant collection agency won a jury trial. The trial judge then ruminated on the verdict and decided the jury got it wrong; at least in part. The trial judge concluded that he had incorrectly instructed the jury on an issue in the case. The issue in dispute concerned the adding of interest to debts in Nebraska prior to a judgment on the debt. 

In short, the trial judge concluded “Nebraska law does not entitle a party to charge interest under § 45-104 absent a judgment. Consequently, because CBS admits to charging interest pursuant to § 45-104 without pursuing or obtaining a judgment, CBS necessarily misstated the amount legally owed by the Bassetts. Since a false representation of the amount owed is a material violation of 15 U.S.C. §1692(e), this Court finds in favor of the plaintiffs.”

Likewise, the trial judge next concluded that the plaintiffs (class representatives) had also proved up a claim under the Nebraska Consumer Protection Act for the same reason. That particular state statute does not require actual damages (and none were claimed in the lawsuit) and instead provides for injunctive relief. The court therefore enjoined the agency from collecting interest in the future under § 45-104 without first obtaining a judgment.

To add insult, the court awarded the maximum statutory damages allowed to the named plaintiffs as well as to the class.  To top that off, the judge also ordered plaintiffs’ counsel to submit their fee/cost request with a fee/cost award to be decided thereafter. The lesson – be very careful when adding anything to the amount a creditor places for collection, especially if you are relying on ambiguous state statutory law.

DFPI Issues Proposed Rules Related to Consumer Complaints

The California Department of Financial Protection and Innovation is inviting comments on a proposed rule that will address how consumer complaints are handled in relation to the California Consumer Financial Protection Law (CCFPL). More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: The DFPI’s newest invitation for comments builds on responses to initial comments received last February, relating to certain subdivisions of section 90008 related to consumer complaint regulations. If your company will be impacted by the new consumer compliant regulations, this opportunity should not be overlooked, the impact of this section in the regulation could be substantial.

The section in question requires among other things, a requirement to create an accessible complaint form on a company’s webpage and at any physical location in addition to a toll-free number. To be an accessible webpage form, a company must ensure the page is ADA compliant. The regulation goes further to outline what makes an inquiry a compliant, what is required for an investigation, required tracking, required record keeping and the communication to the consumers themselves. Like a consumer’s right to request information to validate a debt, this regulation requires a written decision to be made to the consumer within 15 days of receipt which if a company does not comply with, proof of non-compliance is simple to document. And in addition to the regulations demand on the company’s internal processes, it also requires quarterly reports to be filed with the DFPI which describes the volume and type of complaints received.

It is not my place, nor do I have the information to speak to the need for such stringent regulations. But if a company will be met with a burden to implement the processes needed to comply, I highly suggest you take the time to comment. Industry comments are needed to inform the regulators of what the end effect of the regulation looks like in commerce. If no one comments, the DFPI could take silence to assume that the industry is comfortable with the regulation as is.

Appeals Court Upholds Win For Defendant in FDCPA Case

The Court of Appeals for the Sixth Circuit yesterday overturned a summary judgment ruling in favor of a collector in a Fair Debt Collection Practices Act case, but only to remand the case back to the District Court with instructions to dismiss it instead, because the plaintiff lacked standing to bring his suit in the first place. More details here.

WHAT THIS MEANS, FROM DAVID SHAVER OF SURDYK, DOWD & TURNER: In this Opinion, the Sixth Circuit has confirmed that a bare procedural violation of the FDCPA, without any other evidence of harm, is insufficient to confer standing to sue under the FDCPA. Additionally, the Sixth Circuit has confirmed again that confusion, by itself, does not constitute a concrete injury sufficient to confer standing to sue. Nor does incurring the expense of hiring counsel to sue constitute a concrete injury.

Here, the consumer argued that the agency’s alleged failure to meaningfully identify itself and use its full corporate name in voicemails that he received caused him to be confused, hire counsel, and send a cease-and-desist letter to the wrong, though similarly-named, entity. However, the Sixth Circuit determined that mere confusion about an agency’s identity does not closely resemble the historical harm of “invasion of privacy” such that a concrete injury – which a consumer must have in order to have standing to sue – could arise from that alleged procedural violation alone.

Notably, Judge Moore’s Dissent sets forth the reasons why she would have found that the consumer had standing. Judge Moore would have found standing because, in her view, receiving a single unwanted and allegedly harassing voicemail message after sending a cease-and-desist letter is similar in kind (though not in degree) to the historically recognized harm of intrusion-upon-seclusion based upon the receipt of repeated and “hounding” calls.  

Ultimately, Ward confirms that issues of standing are still front-and-center in the Sixth Circuit. When defending FDCPA claims, an agency and its counsel must continue to closely analyze the harm that allegedly flows from the purported violation(s) throughout the course of the litigation. Even if the agency’s primary argument in the district court is not one based on a lack of standing, as here, issues of standing are foundational and remain critically important at all stages.        

Judge Rules for Defendants in Two FDCPA Current Creditor Cases

A District Court judge in New York has ruled in favor of the defendants in two separate Fair Debt Collection Practices Act cases, determining that entities that purchase debts do not have to disclose the chain of title detailing how they came to acquire those debts in the initial collection letters. More details here.

WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: Sanctions against attorneys are Really, Really, Really Hard to Get.

In Rosenberg v Frontline Asset Strategies, LLC et al and Ortiz v Asset Recovery Solutions, LLC et al we[1] had the perfect storm. The cases were before the Hon Brian M. Cogan, in the Eastern District of New York who has written more quotable passages lambasting Barshay & Sanders (Plaintiff’s attorneys) than any other ten Judges combined. He evidenced his feelings towards the identical causes of action brought in the two cases by inviting an immediate motion for summary judgment in the Ortiz matter, which had been filed after Rosenberg, stating he saw no need for discovery. Finally, Judge Cogan, didn’t even think enough of the claims raised in both cases to give them separate decisions, how often do you see that?

One of the arguments raised in Ortiz to support the request for sanctions pursuant to 28 U.S.C. § 1927, vexatious litigation, was that Plaintiff’s counsel had already raised, and lost, the same argument before a number of other courts in the district including Judge Cogan just weeks prior to filing the Ortiz lawsuit. The question was thus posed to the Court: “At what point does raising the same rejected claim become frivolous?” Judge Cogan’s response: “The arguments discussed above are not frivolous; they are just not meritorious.” (Not sure that’s a good thing) Judge Cogan went on to point out “Not every or even most judges in this district have rejected the arguments” but then added “it may be seem fatuous to note, but the only judges who have rejected these arguments are those to whom the arguments have been presented.” Ouch! But no sanctions against counsel.

Providing a ray of hope for the future however, Judge Cogan concluded by writing:

[A] point in time may come, and that point may be now by virtue of the instant opinion — when making the same losing arguments over and over again constitutes the kind of vexatious litigation that § 1927 and the inherent power of the Court are designed to prevent.

In the end, the moral of the story is, you can lead a Judge to sanctions, but you can’t make him issue them.

[1]  By way of full disclosure I represented the Defendants in the Ortiz matter.

Did He or Didn’t He? Judge Grants MSJ For Defense in FDCPA Suit Arguing Attorney Did and Did Not Review Case Before Sending Letter

You’ve all seen those videos where a driver suddenly realizes he or she missed their turn and tries to immediately double back, only to end up getting into an accident? In a case defended by Mitch Williamson at Barron & Newburger, a District Court judge in New Jersey has granted a collection law firm’s motion for summary judgment after a plaintiff accused the firm of sending a collection letter without having an attorney meaningfully review the case — even though the letter said so — and then accusing the firm of making such a disclosure when he found out later that an attorney did review the case. More details here.

WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: Pleading alternative theories in a lawsuit is allowed, but ….

A New Jersey plaintiff has stretched the limits of this rule. While pleading in the alternative makes sense in some cases, especially at the outset before all of the facts come to light, this plaintiff continued to advocate polar opposite positions to the Court regarding the same debt, even after fact discovery revealed what had actually occurred. The claims were pled as follows:  

(1) The collection letter, printed on firm letterhead, falsely implies that an attorney reviewed the debt, but no attorney actually reviewed the debt.

(2) The collection letter falsely represented that an attorney did not review the debt, but an attorney did actually review the debt.

Wait, what?

Thankfully, attorney Mitch Williamson of Barron & Newburger, PC, and his client, Forster Garbus & Garbus, persisted to a final ruling and shut this circus down. We now have a roadmap to defend both claims (and hopefully they won’t be pled in the same case in the future). See Heerema v. Forster Garbus & Garbus, No. 15-07252, 2021 WL 3579025 (D.N.J. Aug. 13, 2021) (Salas, J.).   

As to the first (misleading implication) claim, the court noted that it must review a collection letter “in its totality” to determine if it implies an attorney review. FG&G’s letter, while printed on firm letterhead as stressed by plaintiff, was not signed by an attorney and included a clear and conspicuous disclaimer (normal size, on the front, in a separate paragraph): “At this time, no attorney with this firm has personally reviewed the particular circumstances of your account. At this time, no determination has been made as to whether a lawsuit will be commenced.” The court found that, considered as a whole, the letter would not indicate to the least sophisticated consumer that “anyone drafted it in his or her capacity as an attorney” or that an attorney had reviewed the debt. Plaintiff’s contrary interpretation was rejected as “unreasonable.”

As to the second (misrepresentation) claim, the evidence confirmed that no meaningful attorney review occurred prior to letter’s approval. The FG&G attorney performed a cursory review of the account file, which included “biographical information such as [a] name, address, and social security number, and, possibly, limited information concerning the debt.” That review was performed only to approve the account “to go into collection.” But, the attorney did not review a charge-off statement or transaction; the account notes showed that to be impossible because FG&G had not yet received them. The court distinguished a “cursory” and “ministerial” review – i.e., “work of the kind debt collectors ordinarily perform,” and “an attorney’s individualized assessment of the status or validity of the debt.” Because the latter clearly did not occur at the time of the letter,  the review disclaimer (“no attorney with this firm has personally reviewed the particular circumstances of your account”) was true.     

Collector, Plaintiff in $267M TCPA Case Notify Appeals Court of Settlement

Thanks to Eric Troutman at for noticing this first … A collector that appealed a $267 million ruling against it in a Telephone Consumer Protection Act case has notified the Ninth Circuit Court of Appeals that it has reached a settlement with the plaintiff. More details here.

WHAT THIS MEANS, FROM JONATHAN HOFFMANN OF BALCH & BINGHAM: You can’t underestimate the power of certainty and playing the long game. This case started pre-Barr, pre-Facebook, and pre-Creasy. To say the TCPA landscape has changed since the original 2019 judgment came down against Rash Curtis & Associates would be the understatement of the century. But even with some rare positive news on the TCPA front, open questions remain. Most importantly here, a decision from the Sixth Circuit on the Creasy reasoning (via Lindenbaum) can be expected this year. But who knows how? And how would the Ninth Circuit treat the issue if the parties here went to the mat on decision? If the two circuits come down on opposite sides, is that enough for a successful Supreme Court bid? No doubt the parties here grew weary of reading those tea leaves and have settled on a number that falls in line with those we’ve grown accustomed to seeing for cases in the 500,000 call range. As for Creasy, all eyes now turn to the Sixth Circuit.

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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