Compliance Digest – September 20

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.

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 Grants MSJ For Defendant in FDCPA Case Over Verification Documents

Is there a double standard when it comes to comparing what collectors need to show when suing a consumer for an unpaid debt and what they need to show when that consumer disputes a debt? Possibly, but that is not the grounds for a Fair Debt Collection Practices Act lawsuit, according to a District Court judge in New York, who has granted a defendant’s motion for summary judgment. More details here.

WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: The Honorable Judge Kiyo A. Matsumoto granted a defense summary judgment in a lawsuit alleging that validation documentation provided in response to a consumer’s dispute was insufficient. See Sandoval v. Credit Corp Solutions Inc., No. 19-CV-6475 (KAM)*SJB), 2021 WL 3931351 (E.D.N.Y. Sept. 2, 2021).

What constitutes sufficient validation under the FDCPA? The statutes don’t clarify, but courts around the country have weighed in. Although there are variations throughout different jurisdictions, the general consensus is that there is no precise formula or set of documents required, but a debt collector must provide sufficient written information to show the amount the debt collector is demanding is what the creditor claims is owed and that the debt collector is not dunning the wrong person.  

In this particular case, Judge Matsumoto concluded that the following information and documents (provided to validate a WebBank / LendingClub account) were sufficient, such that no reasonable jury could find an FDCPA violation:

Terms of Use, Truth in Lending Disclosure, Loan Agreement with WebBank, Borrower Membership Agreement with LendingClub, Loan Summary (including date and time various loan documents were signed), and a chart evidencing the amount borrowed, current balance and supporting calculations (dates & amounts of interest, fees, and payment applied).

Importantly, these documents were sufficient even though the plaintiff had requested (as part of two separate disputes) specific documentation that was not  provided. The plaintiff had demanded copies of “all … statements since the account was opened until it was closed” and a laundry list of other documents, some of which the consumer requested be verified under penalty of perjury.

In other words, a consumer does not get to dictate what constitutes sufficient validation or to enforce a demand for specific documents, as long as the basic requirements of FDCPA validation are satisfied. See Sandoval, 2021 WL 3931351, at *6 (“[T]he court is unaware of any [authority] entitling debtors the right under the FDCPA to demand specific types of documents from creditors when seeking validation of a debt.”); Ritter v. Cohen & Slamowitz, LLP, 118 F. Supp. 3d 497, 503 (E.D.N.Y. 2015) (The FDCPA does “not … impose upon debt collectors the effectively, sometimes, insurmountable burden of proving to each debtor’s individualized satisfaction the circumstances surrounding a debt.”).

This opinion is helpful for debt collectors when preparing validation information in response to consumer disputes and when responding to consumer-initiated CFPB portal and state Attorney General complaints, which frequently allege that a debt collector failed to “sufficiently” verify a debt and that the specific validation documents the consumer demanded were not provided.  

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Judge Denies Stay in Hunstein Copycat Case

A District Court judge in Mississippi has denied a defendant’s motion to stay a Hunstein case, ruling that it did not meet its burden of “establishing a clear case of hardship or inequity,” and because the Eleventh Circuit has not yet “agreed to take the rare step of” granting the petition to rehear the underlying case. More details here.

WHAT THIS MEANS, FROM COOPER WALKER OF MALONE FROST MARTIN: A Mississippi District Court’s refusal to stay a Hunstein case makes clear that attorneys hoping to delay similar cases outside of the 11th Circuit should not bank on the court slowing down the judicial process. In denying the stay, Magistrate Judge John Garguilo, not unsurprisingly, mentions that whatever happens in Hunstein is only persuasive authority. Be ready to litigate Hunstein cases outside of the 11th Circuit, as a stay of these cases seems less and less likely. Nevertheless, it is still wise to consider slow playing these cases as much as possible in hopes of a better ruling in Hunstein.

NDIL Judge Grants MSJ For Defendant in FDCPA Class-Action Over Duplicate Dispute Notices

A District Court judge in Illinois has used a recent series of rulings from the Seventh Circuit Court of Appeals on standing to sue under the Fair Debt Collection Practices Act to grant a defendant’s motion for summary judgment, after the judge had already certified a class in the case, ruling that even going as far as to dispute a debt does not meet the standard of concrete injury in order to pursue a lawsuit. More details here.

WHAT THIS MEANS, FROM JASON TOMPKINS OF BALCH & BINGHAM: Spokeo itself was never the silver bullet many thought it would be. Because it gave little concrete guidance, Plaintiffs often overcame standing challenges by simply alleging stress and confusion. Now, five years later, courts are giving Spokeo teeth—for both “procedural” and “substantive” violations. This decision follows a recent hit list from the Seventh Circuit to confirm that annoyance, stress, and the like—all emotions any debtor might feel from legitimate debt collection activities—alone are not enough for standing. The alleged violation must have a real world consequence on the debtor’s conduct with respect to the debt. As Judge Easterbrook put it in Brunett v. Convergent Outsourcing Inc., “Talk is cheap, but where’s the concrete harm?”

Appeals Court Reverses Ruling in TCPA Constitutionality Case

The questions and situations that judges must decide on a daily basis can be fascinating. Case in point — when the Supreme Court ruled that an exemption which had existed for five years in the Telephone Consumer Protection Act that allowed the use of automated telephone dialing systems when contacting individuals on their cell phones without obtaining prior consent to collect on debts that were owed to, or guaranteed by, the federal government — did that mean that the TCPA as a whole was unenforceable? Or just the parts that were deemed to be unconstitutional? More details here.

WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: Well, the Constitutionality over the TCPA never seems to end. In 2015, Congress amended the TCPA to add an exemption for calls placed to collect debts owed to the U.S. Government, otherwise known colloquially as the “government debt exemption.” Because this exemption was clearly “content-based”,  i.e., because it unfairly exempted only calls made by or on behalf of the U.S. government from the TCPA’s consent requirements, it was inevitably ruled unconstitutional by the Supreme Court five years later in Barr v. American Association of Political Consultants, Inc., 140 S. Ct. 2335 (July 6, 2020).

Ever since the Supreme Court’s ruling, the lower federal district courts have struggled with the logical follow-up question after the Barr decision: i.e., whether the unconstitutional government debt exemption in the TCPA rendered the entire TCPA unconstitutional for the 5-year period that it was in effect. If that was true, then there was no Federal Court Jurisdiction (i.e., no right to bring a TCPA lawsuit) for any TCPA case filed between 2015 up until the Barr decision was issued by the Supreme Court in July 2020. Usually, if a portion of a statute is unconstitutional, then the entire statute may be deemed invalid unless the offending section can be “severed” from the entire statute, leaving the remainder of the statute intact. But, most courts have gone out of their way to find that the 2015 unconstitutional exception in the TCPA never affected the remaining provisions of the TCPA. In other words, a Court can “sever” the bad portion of a law, thus leaving the remainder intact. 

One such ruling is the recent Sixth Circuit Court of Appeals ruling in Lindenbaum v. Realgy, LLC, on September 9, 2021. As several other lower federal district courts have found, the Sixth Circuit rejected the argument that the government debt exception rendered the entire TCPA unconstitutional between 2015 and July 2020. Although a few courts have held otherwise, the argument that all TCPA provisions were invalid between 2015-2020 is getting weaker and weaker. The 6th Circuit decision will likely resonate will other Federal Courts of appeal that may address this issue. At least for now, it appears the TCPA between 2015 and 2020 will be deemed a valid and enforceable law.  

The fun never ends!!!  

Collector Settles With Mass. AG, Pays $2.25M Fine

The Attorney General of Massachusetts has reached a settlement with a debt collection that will see the collector pay $2.25 million and agree to change its business practices after it was accused of violating the state’s law on call frequency, collecting on time-barred debts without disclosing that the debts were time-barred, and using false and misleading affidavits in lawsuits filed against consumers to collect on unpaid student loans. More details here.

WHAT THIS MEANS, FROM DAVID SHAVER OF SURDYK, DOWD & TURNER: Like consumers, state regulators will continue to seek to aggressively enforce consumer protection laws where and when they can. Consequently, agencies must not only maintain robust compliance operations but must also continuously evaluate those operations to keep them up to date with respect to federal requirements and the states and localities where they collect. And agencies can learn from Transworld’s experience. By voluntarily conducting regular examinations of their own compliance practices, like the bi-annual random sampling checks that Transworld has agreed to, agencies can proactively identify and correct any potential compliance missteps before they grow into something bigger. Counsel can also be an effective tool for agencies when it comes to the ever-changing compliance landscape. Talk with your counsel about best compliance practices in order to make sure that you are doing everything you can to stay compliant and avoid consumer complaints and investigations from state regulators.    

FCC Seeks Comment on Ringless Voicemail Petition

The Federal Communications Commission has announced it is seeking comments from the public related to a petition for declaratory ruling that asks the regulator 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 LAUREN BURNETTE OF MESSER STRICKLER: This petition’s arguments will be familiar to anyone who has faced litigation regarding the use of ringless voicemail — in this petition, Purdue For Senate argues ringless voicemails are not “functionally equivalent” to a call, they do not use wireless networks to deliver their messages, and recipients are not billed for receiving messages. But from there, Purdue adds a unique public policy argument, suggesting that ringless voicemail allows “non-profit organization GOTV campaigns” to provide messages to members of the electorate in a way that “respects and preserves” their privacy.  ARM industry members have advanced similar arguments in the past—ringless voicemails specifically eliminate the often-cited examples of repetitive robo-calls interrupting dinner, for example. But while the ARM industry has traditionally discussed this issue in the context of the consumer-debt collector relationship, this petition approaches the argument from a different perspective. It argues that all non-profit and advocacy organizations will benefit by reaching people who lack land-line phones, while all recipients will benefit by receiving “critical communications in a non-intrusive and efficient manner.” Public comment closes on October 2, and it will be interesting to see if presenting these arguments from the standpoint of a non-profit’s efforts to provide a public service will have any substantial effect on the FCC’s evaluation of ringless technology.  

Washington AG Reaches $1.6M Settlement With Convergent

The Attorney General of Washington has reached a settlement with a collector that it sued last year, which will see the collector pay $1.6 million in fines and restitution to consumers for allegedly deceiving them by making settlement offers in collection letters even though the collector could not enforce the debt in court. More importantly, the collector has agreed to stop using the words “settle” or “settlement” when attempting to collect on time-barred debts without disclosing that the statute of limitations has expired. More details here.

WHAT THIS MEANS, FROM CAREN ENLOE OF SMITH DEBNAM: This settlement caught my eye as soon as it came across my newsfeed because it involves two issues of particular interest right now: settlement letters and time barred debt disclosures. What should catch everyone’s attention is that the Washington Debt Collection Statutes (specifically, RCW 19.16.250) do not require on their face require time-barred debt disclosures or bar non-litigation efforts to collect time-barred debt. In fact, the only reference to the statute of limitations is in subsection 23 which prohibits the bringing of an action or arbitration proceeding on  claim when the licensee knows or should know that such suit or arbitration is barred by the applicable statute of limitations. 

So how did the Attorney General (the “AG”)  get a $1.6M Order? They brought suit alleging that the term “settle” impliedly threatens litigation and then tied that to a threat of action that cannot be taken. As hindsight is 20/20 vision, what can others learn from this settlement? For those collecting in Washington state, there are a couple of things. First, I think it is fair to say that time barred debt disclosures are now implicitly required in the AG’s eyes. Debt collectors should make a conscious decision as to whether they will pursue time-barred debt in the state of Washington and if they intend to do so, amend their strategies in Washington. Secondly, I’d be very careful about using the word “settlement” in Washington or delete it from my vocabulary. The AG’s office equates the word “settlement” with litigation and any use of that word in the state of Washington, particularly in letters where there is a paper trail,  should be intentional and with that understanding. Finally and here is the biggest takeaway, I think it is fair to say that this is not the end of the story. I’d expect more regulatory actions in Washington. It’s important to note that the majority of the settlement ($1,320,000) in this matter was not a disgorgement to consumers – it was paid to the AG for “its costs and attorney’s fees… future enforcement of the CPA…” This is a state to keep an eye on!

Collector to Pay $65k to Settle Religious Discrimination Lawsuit

A debt collector has agreed to pay $65,000 to settle a religious discrimination lawsuit filed against it by the Equal Employment Opportunity Commission after it fired a Christian employee for refusing to submit to fingerprinting as part of a background check. The employee argued that having his fingerprints captured was contrary to his religious beliefs. More details here. 

WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: In a time where the question of what an employer can require is a very hot topic, all must not forget the rights provided by the Civil Rights Act. In this case, an employee hired for the role of a client service representative claimed it was against his religion to have his fingerprints taken. As no accommodation was offered, the company was found liable and imposed a $65,000 file in addition to the requirement of ongoing training on the Civil Rights Act which must be preapproved by the EEOC.

Whenever an employee makes a claim that a request is against that individual’s religion, an employer must provide reasonable accommodations. What is reasonable would be defined by the situation at issue. In this case, if an employee refused fingerprints for a background check, what other methods of background checks could the company have utilized? Here the employee was hired as a client service representative at $16.00 an hour. The company’s position to take a hard stance approach with a fingerprint background rather than providing an alternative name-based background check, cost the company more than the employee would have made in a year. If you consider possible attorney fees, court costs and the costs of the ongoing training, it could possibly cost the company more than two years of the employee’s salary.

Per data provided by the Office of Enterprise Data and Analytics complied from the EEOC’ Charge Data System, in 2020, 2,404 charges were filed based on religious discrimination. This number does NOT include charges filed with state or local employment practice agencies. Regardless of what an employee claims is against their religion, take the claim seriously.  There are many religions in this world and many different religious beliefs.  To disregard any such claim is foolish as this company can attest.

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.


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