Compliance Digest – October 11

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 Grants MTD in FDCPA Case Involving Overheard Voicemail Message

A District Court judge in North Carolina has granted a defendant’s motion to dismiss after it was accused of violating the Fair Debt Collection Practices Act by leaving a voicemail message on an individual’s cell phone that was overheard by the plaintiff’s sister, ruling that cell phone voicemails are intended to be private and if a message is inadvertently heard by a third party, especially when the recipient of the message is responsible for disseminating it, it does not constitute a third-party disclosure under the FDCPA. More details here.

WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: Zortman re-visited, perhaps. In a fact pattern similar to Zortman, a “third-party” relative listened to/overheard a debt collection message left on the consumer’s cell phone. The Court summarily tossed the case. In short, the Court viewed messages left on a consumer’s cell phone just like letters addressed to the consumer. The Court reasoned that if someone other than the consumer listened to or overheard personal cell phone messaging, that is no different than if a third-party opening mail addressed to the consumer.

This represents a nice bright line rule. While not appellate authority, this decision is in line with a number of other cases that provide direction to collectors who choose to leave voicemail messages on cell phones. On the other hand, the Court noted that if a message is left on a typical in-home answering machine, the risk of a third-party overhearing that type of message is a very real risk such that doing so could give rise to a viable third-party disclosure claim. In the end, the court summed its ruling up nicely — using good old common sense — as follows:

“Like a letter that is personally addressed, a targeted voicemail message left on a personal cell phone that is disseminated by the debtor cannot be a third-party communication. To do so would make debt collectors liable whenever a personalized communication to a debtor is disseminated to a third-party by the debtor himself. Such a scenario runs afoul of the FDCPA’s intended purpose to prevent debt collectors from utilizing truly offensive means to collect a debt.”


Judge Grants MTD in FDCPA Case Over Alleged Conflicting, Overshadowing Language in Letter

In a case that was defended by the team at Malone Frost Martin, a District Court judge in Illinois has granted a defendant’s motion to dismiss after it was sued for violating the Fair Debt Collection Practices Act by allegedly making conflicting and overshadowing claims in a collection letter. More details here.

WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: Chisom v AFNI has some great quotes for defending lawsuits that raise “ticky tacky” language claims, especially relating to initial letters and out of statute language. The lawsuit challenged AFNI’s initial letter, which had fairly standard language about what it would send in response to a verification request and added carefully crafted language for the out of statute debt. Plaintiff’s raised a litany of 1692e, f and g alleged violations.  The court did not buy any of them and did a thorough job of citing relevant 7th Circuit authorities.

A few of the quotes that I thought were particularly helpful (without internal quotations and cites) are:

(1) as to validation information, “[Collector} would obtain either verification of the debt or a copy of a judgment, depending on which circumstance obtained. That is how ordinary English speakers, sophisticated or not, use the word ‘or’…. [The collector] used the phrase ‘a judgment,’ not ‘the judgment,’ and no formal education is needed to understand that the indefinite article ‘a’ leaves unaddressed whether or not a judgment exists.”

(2) as to overshadowing, “Language encouraging debtors to pay their debts by notifying them of the potential negative consequences of default does not, without more, overshadow; indeed, during the validation period, the debtor’s right to dispute coexists with the debt collector’s right to collect.”

All totally commonsense interpretations, as opposed to the hyper-techincal allegations.

The CFPB Regulation F language should help for initial letters. Unfortunately, it did not provide suggested language for out of statute debt. This case helps with that language.

Judge Grants MTD in FDCPA Case Over Calls to Debtor’s Mother

A District Court judge in Georgia has dismissed claims that a collector violated the Fair Debt Collection Practices Act by calling the mother of an individual with an unpaid debt more than 15 times after the mother had asked not to be contacted, and that the collector meaningfully disclosed its identity in a voicemail left with the mother, ruling that the collector does not have to give the full mini-Miranda notice when leaving messages. More details here.

WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: In this case, the consumer’s mother brought claims against a debt collector alleging that it violated sections 1692c(b), 1692e(11) and 1692d of the FDCPA. Dismissing the plaintiff’s sections 1692c(b) and 1692e(11) claims, the court concluded that the plaintiff was not a “consumer” as defined by the FDCPA and therefore, the claims were not for the consumer’s mother to bring.

The district court acknowledged that the FDCPA allows consumers and non-consumers alike to bring claims for abusive debt collection practices generally, but noted that the specific sections of the FDCPA alleged to have been violated by the debt collector cannot be brought by non-consumers such as the plaintiff in this case. Specifically, the district court highlighted that those two sections are expressly limited to communications with the consumer. The district court also dismissed the section 1692d claim, agreeing with the magistrate that the voicemail at issue provided meaningful disclosure contemplated by section 1692d(6).

This case serves as an important reminder that a debt collector can be liable under the FDCPA for actions directed at someone other than the consumer. 

Judge Grants MTD in FDCPA Case Over Lack of Verification Notice

A District Court judge in Arkansas has granted a defendant’s motion to dismiss for lack of standing and failure to state a claim in a Fair Debt Collection Practices Act case even though it failed to send a timely validation notice, ruling that am underlying collection lawsuit provided the plaintiff will all the information he needed. More details here.

WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: This was an interesting case, especially because it is one of the few cases addressing standing outside of the Seventh Circuit. I would be wary of using this case to support a lack-of-standing argument though because the facts are specific to this case. The consumer won the debt collection case against him, but I have to wonder if the judge would have ruled differently if the debt collector prevailed. The Judge went out of their way to say: “Mr. Cheatham won the state court lawsuit. His debt was legally erased.  His attorney was paid for by his former creditor. Article III does not allow Mr. Cheatham and his attorney to treat the FDCPA as a green light to take a victory lap in federal court.”

Judge Grants MSJ for Defendant in FDCPA Class-Action Over 1099C Language in Letter

In a case that was defended by Rick Perr of Kaufman Dolowich & Voluck, a District Court judge in New Jersey has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act class-action lawsuit over the 1099C language in a collection letter, ruling that the disclosure used was not a false, deceptive, or misleading representation when attempting to collect on a debt. More details here.

WHAT THIS MEANS, FROM CARLOS ORTIZ OF POLSINELLI: In Bordeaux v. LTD Fin. Servs., L.P., et al., the court granted summary judgment in favor of the defendant and held that informing the debtor in writing of possible income tax consequences that may arise where $600 or more is forgiven as part of a settlement is not false, deceptive, or misleading when there is a possibility that the collection agency would need to report the settlement to the IRS. At issue in this case was the following language:

Whenever $600.00 or more of a debt is forgiven as a result of settling a debt for less than the balance owing, the creditor may be required to report the amount of the debt forgiven to the Internal Revenue Service on a 1099C form, a copy of which would be mailed to you by the creditor. If you are uncertain of the legal or tax consequences, we encourage you to consult your legal or tax advisor.

Plaintiff filed a putative class action alleging that the use of the subject language violated sections 1692e and f of the FDCPA. Specifically, Plaintiff alleged that (1) the Form 1099-C language in the collection letter regarding reporting to the IRS was designed to intimidate the debtor into paying the outstanding debt; and (2) reporting to the IRS is only required when $600 or more of the principal — and not the entire account balance – is forgiven. In ruling in favor of the collection agency defendant, the court reasoned that use of the 1099-C language was not false, deceptive, or misleading because the account balance at issue was more than $4,000 and, therefore, forgiveness of $600 or more as part of a settlement was a possibility. The court distinguished this case from precedent in the Third Circuit’s opinion in Schultz v. Midland Credit Mgmt., Inc., 905 F.3d 159 (3d Cir. 2018) where the use of similar language was found to be false or misleading because the account balance was for less than $600. Thus, reporting was not an event that would never occur in Schultz. The court rejected the plaintiff’s argument that reporting was only required when $600 or more of the principal was forgiven because the plaintiff failed to provide the court with any legal authority to support that position. Finally, the court dismissed the 1692f claim because the plaintiff based it on the same theory as her 1692e claim.

This case underscores the importance for collection agencies to review their letters to ensure that the language applies to the account balance at issue. This case also shows the importance of sometimes having to wait until summary judgment to file a dispositive motion.

Judge Grants MTD Over Settlement Language in Letter

Have you seen those videos, where someone painstakingly takes clips from actors saying different words and assembles them into recreations of songs or famous speeches? Well, at the end of the day, what is recreated is still a song or a famous speech? Similarly, plaintiffs can’t parse words in collection letters and accuse a collector of violating the Fair Debt Collection Practices Act, ruled a District Court judge, who has granted a defendant’s motion to dismiss. More details here.

WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: At issue in this case is the characterization of a satisfied account as “settled in full,” a term that we get from the consumer reporting world that reflects that a consumer satisfied a debt by paying less than the full balance. The consumer argued that an account cannot both be “settled” (for less than the full balance) and satisfied “in full,” which suggests that the customer paid off the debt completely. The court reviewed that phrase in the letter in context and found appropriately that the least sophisticated consumer could not misunderstand that the account had been satisfied because the letter stated the balance owed as $0, and that the letter was not misleading. This is a good result for the debt collector in a case where the plaintiff’s lawyers tried to make a claim on a strained, technical reading of a straightforward letter acknowledging that the consumer did not owe anything because she had paid a negotiated amount to satisfy her account.

Report Calls Collection Litigation ‘Broken,’ Makes Suggestions to Reform Process

A nonprofit organization in Washington, D.C. has published a report on the debt collection litigation market, outlining a series of recommendations to state and federal lawmakers to make the process “safer and fairer” for everyone. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: A consumer-oriented nonprofit, the Aspen Institute, recently published a report calling for additional restrictions on attempts to collect debts in order to make the litigation process “safer” and “fairer.” The report argues that the debt collection system is “systemic[ally] biase[d] against individuals,” particularly minorities. It identifies four problems in the litigation system: 1) Debt collectors initiate litigation on invalid debts; 2) debtors are given insufficient notice of the suit; 3) such litigation disproportionately impacts unrepresented debtors who do not understand the legal system; and 4) judgments and settlement agreements may be too onerous and make the debtor’s situation worse. To address these issues, the report lays out a number of recommendations, including placing affirmative duties on creditors to prove that a debt is not time-barred and that they own the debt, expanding the Federal Trade Commission’s enforcement authority, and limit creditors’ ability to garnish wages before or after deposit into a bank account.

The report is likely to find a sympathetic audience with the Federal Trade Commission and Consumer Financial Protection Bureau. However, the objections to the current system are not new, and it remains to be seen whether sympathy will translate into policy change.

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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