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Every week, AccountsRecovery.net 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 Denies Competing Motions in FDCPA Case Over Debt Incurred During Political Campaign
A case out in California is attempting to test the limits of what defines a consumer debt, at least as far as the Fair Debt Collection Practices Act is concerned. The issue is so thorny that a District Court judge has denied competing motions for summary judgment from both the plaintiff and the defendant, ruling that it is up to a jury to decide. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: Kershner v Hillcrest is odd on a number of levels. First, the facts are unique. The plaintiff was running for local office and hired a printer for some campaign related materials. He did not pay due to a mix-up with the printer. He subsequently sued the collector for not complying with the FDCPA. I am not familiar with many/any FDCPA cases arising out of political activity (unlike the TCPA, which has many cases rooted in political activity).
Second, the holding is odd. The court said there was a genuine dispute of material fact on whether there was a consumer debt. The judge said this even though the parties filed cross-motions for summary judgment and did not seem to argue on what were the facts. Each side applied those facts and the law and simply came to a different position, not surprisingly.
Third, rather than a judge deciding this issue, there will be a trial. The judge wants the jury to consider the facts and decide whether there was a consumer debt, which also does not happen too often. We’ll have to keep a look out on whether this goes to trial and how it is decided.
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Seventh Circuit Reverses Ruling for Plaintiff in FDCPA Suit, Continues Attack on Standing
Continuing its year-long attack on standing to file Fair Debt Collection Practices Act lawsuits, the Seventh Circuit Court of Appeals yesterday reversed a lower court’s ruling and ordered it to dismiss a case where the defendant did not send a written notice within five days of the initial contact and where one of the defendant’s representatives did not identify herself as a debt collector or indicated she was attempting to collect a debt during a conversation because alleging that the plaintiff suffered emotional harms as a result of the defendant’s actions is not enough to allege that the plaintiff incurred a concrete injury. The case was argued before the Seventh Circuit by Dennis Barton of The Barton Law Group. More details here.
WHAT THIS MEANS, FROM PATRICK NEWMAN OF BASSFORD REMELE: It is often remarked that history doesn’t actually repeat itself, though it does often rhyme. In the last 18 or so months, the Seventh Circuit seemingly has exhausted every conceivable way to make its FDCPA opinions “rhyme” with the Supreme Court’s admonition in Spokeo that a bare procedural violation of a federal statute, divorced from any concrete harm, does not confer Article III standing.
This decision repeats that refrain, adding for emphasis that the plaintiff admitted she never paid the debt in response to the collector’s challenged communications and her claimed “stress,” “embarrassment,” and “anxiety” were insufficient to establish standing.
The take home message on this one is simple (and itself repeats a song and dance you’ve heard from me before): if the case proceeds beyond the pleadings, depose your plaintiffs with an eye toward figuring out if they can articulate any “harm” that would keep the case in federal court.
Judge Grants MTD Over Offer of More Credit in Collection Letter
Debt collectors are conduits — vessels trying to help original creditors recover unpaid debts. Oftentimes, the creditors will make requests or want certain offers included in letters sent to individuals. What happens when a creditor wants to make an offer as a means of trying to get an individual to repay a debt? More details here.
WHAT THIS MEANS, FROM XERXES MARTIN OF MALONE FROST MARTIN: In correctly granting the defendant’s motion to dismiss, the District Court judge reaffirmed a central theme behind the FDCPA: promoting fair debt collection. This ruling allows creditors to maintain relationships with valued consumers by dissuading excessive litigation, thus fostering economic growth. Ultimately, the FDCPA was enacted to prevent unfair debt collection, not to punish honest debt collectors attempting to mediate for their clients, and Judge Briccetti’s decision endorses that.
Judge Denies Motion to Compel Over How ‘Receivable’ and ‘Account’ are Defined
Synonyms and semantics can be deadly when in the hands of a federal judge. A defendant is learning that lesson the hard way after a District Court judge in New Jersey denied a defendant’s motion to compel arbitration in a Fair Debt Collection Practices Act case, ruling that the words “accounts” and “receivables” mean different things and purchasing a receivable does not guarantee all of the rights that were assigned to the account. More details here.
WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: Courts have established that a collection agency can enforce an arbitration clause of an underlying agreement entered into between a consumer and the original creditor. However, as this case demonstrates, the question of whether a debt collector may enforce an arbitration clause largely depends on the language used by the original creditor in the underlying agreement. When deciding whether to compel arbitration, courts typically focus on the description of who the agreement applies to and whether the dispute at issue falls within the scope of the agreement.
Given the enormous benefits of arbitration, it is important for creditors to assist debt collectors in these scenarios whenever possible. As demonstrated by this case, a good starting point would be for creditors to clarify arbitration provisions in their credit agreements and explicitly state that the arbitration provision applies to debt collectors.
Top Maryland Court Overturns Lower Court Ruling on State Collection Law
The Maryland Court of Appeals — the top court in the state — has broadly interpreted a state debt collection law allowing plaintiffs to accuse collectors of violating one of the law’s provisions in instances where the collector attempts to collect amounts that “the debt collector, to its knowledge, does not have the right to collect,” overturning a lower court’s decision. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: In this case, the Maryland Court of Appeals decided that a consumer can make a claim about the amount of a debt under Maryland’s debt collection law. The focus of the statute is whether the debt collector has attempted to enforce a right the debt collector knows does not exist. The court said that charging post-judgment interest in an amount higher than the legal rate of interest was tantamount to trying to enforce a right the debt collector knew did not exist, finding that the debt collector should have known the legal rate was the appropriate rate.
California Legislature Passes Debt Collection Assignment Notification Bill
The California legislature has approved SB 531, a measure that will require collectors to have proof they have authority to collect a debt prior to doing so, and gives consumers the right to request that proof and other basic information about the debt. The bill now heads to the desk of California Gov. Gavin Newsom for his signature or veto. More details here.
WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: Great new topic and important for compliance and tie in to other laws and new CA Licensing act.
The State of California has long had its own version of the Federal FDCPA, commonly referred to as the California Rosenthal Act. The Rosenthal Act incorporates most FDCPA provisions, and also contains certain unique requirements. In addition, the Rosenthal Act applies to both debt collectors and creditors, whereas the FDCPA only applies to debt collectors.
Nevertheless, the California Legislature has now decided that the existing Rosenthal Act provides insufficient protections to debtors. The result is an amendment which requires the debt collector to provide to the debtor, within 30 days after request by the debtor, a written statement that includes a wide variety of information, such as:
- (1) that the debt collector has the right to seek collection of the debt;
- (2) the debt balance, including an explanation of any interest charges and additional fees;
- (3) the date the debt became delinquent or the date of the last payment;
- (4) the name of the creditor and the account number associated with the debt;
- (5) the name and last known address of the debtor as it appeared in the creditor’s records prior to assignment of the debt;
- (6) the names of all persons or entities other than the debt collector to which the debt has been assigned, if applicable;
- (7) the California license number of the debt collector; and
- (8) a copy of the contract or other document evidencing the agreement to the debt.
The amendment to the Rosenthal Act also requires a new notice about the foregoing to be provided with the first written communication with the debtor. Additionally, the amendment prohibits a debt collector from making a written statement to a debtor unless it has access to a copy of the contract or other document evidencing the debtor’s agreement to the debt, with certain exceptions.
Unless the California’s Governor (G. Newsom) vetoes the bill (very unlikely), it goes into effect on July 1, 2022. Debt collectors and creditors operating in California should begin to prepare for these changes already now. Consumer protection attorneys will undoubtedly monitor this amendment closely, and start to file their inevitable lawsuits (individual and class) against non-complying businesses as soon as they are able.
So, you ask … where does it end? How much regulation is too much? How much can this industry endure? Aren’t we there already? States are proliferating new consumer protection statutes or amendments to existing statutes in order to strengthen and bolster laws against creditors and debt collectors. They seek to make it more difficult to collect debts which each passing week. Think Nevada’s SB 248. In response, we must continue to coalesce and unite as one to push back against over-burdensome and cost prohibitive legislation that is forcing many to close their doors.
More to follow.
D.C. Mayor Signs Collection Bill Into Law
Muriel Bowser, the Mayor of Washington, D.C., has signed into law a bill that overhauls how debts can be collected in the nation’s capital for 225 days starting later this month, while the authors of the legislation work on permanent changes. This information was first reported by ACA International. More details here.
WHAT THIS MEANS, FROM CARLOS ORTIZ OF POLSINELLI: Collectors and creditors beware! Those who engage in collection efforts against individuals in Washington D.C. should quickly become familiar with the “Protecting Consumers from Unjust Debt Collection Practices Temporary Amendment Act of 2021,” which goes into effect on September 23, 2021. While this new law has provisions that apply to collection agencies, creditors and debt buyers, some of the more noteworthy sections:
- Prohibit debt collectors from making more than three total phone calls to a consumer in a seven day period regardless of the number of accounts for that consumer (unless the debtor requests additional calls);
- Require that before collection efforts commence that complete documentation related to the debt be available;
- Provide consumers with a complete schedule or agreement for any payment plan.
- Require itemized notices of the amount claimed to be owed by the consumer with additional requirements if the debt arises from a credit card; and
- Require debt collectors to send a notice to consumers stating information on their account, such as the name of the original creditor, as well as the name of the current creditor or owner of the debt, is available.
Non-compliance with this new law can be costly with consumers being eligible for statutory damages of anywhere between $500 and $4,000, plus actual and punitive damages, and attorney’s fees. This is a temporary law that will be in place at least through March, 2022. Some version of it is anticipated to be enacted permanently.
CFPB Denies Petition From Debt Buyer to Amend CID
The Acting Director of the Consumer Financial Protection Bureau has denied a petition from a debt buying company to set aside or amend a Civil Investigative Demand that was alleged by the company to be overly broad, rejecting all of the company’s arguments. More details here.
WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN SANDERS: Recently, the CFPB denied a debt buying company’s petition to narrow the scope of the Civil Investigative Demand (“CID”) issued to it by the CFPB in May. The company, Debt Management Partners (“DMP”), argued that the CID was vague and unduly burdensome because it did not identify the nature of the conduct at issue and sought debt-collection information outside of DMP’s control, since DMP does not engage in any debt collection activities, as well as irrelevant information.
In rejecting these arguments, the CFPB set up a high burden for petitions to narrow CIDs, stating that the CFPB could issue subpoenas to third parties who “may” have relevant information even if they are not the target of enforcement activity, cited to provisions of the TCPA to generally identify the conduct at issue, and was not unduly burdensome absent a showing by the responding party that it would “unduly disrupt or seriously hinder normal operations of a business.” The decision signals that the CFPB is indeed ramping up its enforcement activity and may widen its information-gathering net to anyone in the debt industry, not only debt collectors.
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 www.bedardlawgroup.com, email John H. Bedard, Jr., or call (678) 253-1871.
