Compliance Digest – November 15

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 Plaintiff’s Motion to Remand FDCPA Class Action Back to State Court

Many in the industry have lauded a series of rulings released in the past year that have raised the bar for plaintiffs to establish they have suffered an actual, concrete injury in order to have standing to sue. This has created a new dynamic, where plaintiffs are opting to file lawsuits in state courts — which have different, often lower bars, to establish standing — while defendants try to argue that the plaintiffs did suffer a concrete injury and their cases should be heard in federal court. In many of those cases, like the class action in question here, judges are siding with the plaintiffs and granting motions to remand cases back to state court, from whence they came. This might be one of those unintended consequences that people talk about all the time. More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: Spokeo (and Ramirez) were never about deciding cases on the merits of the claims.  Rather, they were cases about where the lawsuits should be filed. No one in our industry should want cases filed in state courts where state court judges without extensive experience in this area will be making significant decisions on prevailing issues of law. Industry attorneys should begin to back-off of standing arguments and attempt to have cases resolved on the merits. Plaintiffs’ lawyers are going to file in state court if not allowed to file in federal court. They are not simply going to go away. That is wishful thinking.


Appeals Court Affirms Ruling for Law Firm in FDCPA SOL Case

The Court of Appeals for the Eleventh Circuit has upheld a summary judgment ruling in favor of a law firm that was accused of violating the Fair Debt Collection Practices Act by suing an individual who was allegedly responsible for a medical debt incurred by his wife, before they divorced. More details here.

WHAT THIS MEANS, FROM JASON TOMPKINS OF BALCH & BINGHAM: This is another tale as old as time-barred debts themselves: what limitations period applies and when did it start. In the Eleventh Circuit, the debate has continued to rage since Crawford and Johnson. Those decisions lent support to application of a six-year statute of limitations to consumer-related accounts, such as credit cards and medical debts, but did not decide whether suing for a time-barred debt violates the FDCPA. In this case, the Eleventh Circuit still declined to decide that last question, as did the Supreme Court in Johnson. But it gave more clarity to distinguishing between accounts stated and open accounts for purposes of the statute in way that should help consumer debt collectors.

Appeals Court Affirms Ruling For Defendant in Discrimination Case

The following is not directly related to the accounts receivable management industry, but does underscore the importance of making sure that employees and collectors are not able to use the information they have access to in other jobs that they may have outside of working at a collection agency. More details here.

WHAT THIS MEANS, FROM CHRISTOPHER MORRIS OF BASSFORD REMELE: There is a growing trend of Americans finding a “side hustle” to bring home extra money. But in this case, a bank manager’s attempt to block outside work that might create a potential to misuse consumer information resulted in a claim for racial discrimination. The plaintiff worked in the bank’s consumer lending department, with access to sensitive client information from loan applications. The bank denied her request to maintain a real estate business on the side, then fired her when she failed to deactivate her real estate license. A discrimination suit followed, in which the plaintiff argued that other bank employees, of a race different than hers, were allowed to possess real estate licenses while having similar access to client information. However, the Eleventh Circuit affirmed summary judgment in favor of the bank, concluding the plaintiff failed to present sufficient evidence demonstrating racial animus. While the bank prevailed in this instance, the case illustrates the concern that financial service firms may have regarding the potential of employees to misuse consumer information, as well as the need to apply prohibitions on “side hustles” consistently and fairly.

Judge Grants Plaintiff’s Motion to File Amended Complaint in Case Back From Appeals Court

Rather than dismiss a case as directed by the Sixth Circuit Court of Appeals, a District Court judge in Tennessee has decided to allow a plaintiff to file a second amended complaint against a collection agency for allegedly violating the Fair Debt Collection Practices Act because it did not use its true name during telephone calls and when leaving a voicemail for the plaintiff. More details here.

WHAT THIS MEANS, FROM SHANNON MILLER OF MAURICE WUTSCHER: In Ward v. NPAS, Inc., a District Court Judge in the Middle District of Tennessee granted in the Plaintiff’s post-appeal, post-judgment motion seeking leave to amend the complaint, and in doing so setting aside the entry of judgement and reopening the case. 

The Plaintiff had sued NPAS for violations of the FDCPA pursuant to 1692d(6), 1692e(11) and 1692e(14) because of an alleged failure to provide meaningful disclosures regarding its identity and that it was a debt collector attempting to collect a debt during three voicemails left by NPAS for the Plaintiff. NPAS had successfully moved for summary judgement based solely upon the argument that it was not a debt collector pursuant to the FDCPA because the debt in issue was not in default when placed with NPAS for recovery. The District Court granted summary judgement but on appeal to the Sixth Circuit, NPAS argued for the first time that the Plaintiff lacked Article III standing and the case should be dismissed on that basis. The Sixth Circuit agreed and remanded to the District Court to dismiss for lack of subject-matter jurisdiction. The Plaintiff then moved to amend the complaint to allege facts sufficient to confer Article III standing which, the Plaintiff argued, would allow the District Court to re-enter summary judgment for NPAS so that the Plaintiff could appeal again and this time have the Sixth Circuit reach the merits of the argument regarding whether NPAS was a debt collector based upon the status of the debt at the time it was placed. NPAS opposed, arguing that the Plaintiff could not establish standing based upon his prior deposition testimony which demonstrated no cognizable injury. Thus, NPAS argued, the amendment would be futile.

The Plaintiff latched onto language articulated by the Sixth Circuit regarding the potential that a concrete injury might be found in facts which appeared in the record but which were not “clearly allege[d]” in the complaint before it on appeal. Specifically, the Sixth Circuit identified that it need not decide whether the receipt of one of the three voicemails after the Plaintiff had sent a cease and desist letter to the wrong entity due to the alleged failure of NPAS to properly identify itself in the prior voicemails was a sufficient concrete injury due to the Plaintiff’s failure to so plead. In his proposed amended complaint, the Plaintiff now articulated the factual circumstances regarding the receipt of the last voicemail from NPAS and alleged that “NPAS’s failure to correctly and fully identify itself gave rise to a concrete injury: because the plaintiff was unable to verify NPAS’s identity, he sent a cease-and-desist letter to the wrong entity, as a result of which NPAS continued to contact him, thus invading his right to privacy.” This, the District Court found “would be sufficient to establish Article III standing and, therefore [the amendment] would not be futile.” As such, the motion was granted.

The take-away for the industry is to understand that the District Court granted Plaintiff’s motion to amend in part because, contrary to NPAS’s argument, there was no unreasonable delay in moving to amend in consideration that NPAS did not argue standing until the matter was on appeal to the Sixth Circuit. Had NPAS challenged standing earlier in the litigation, if it was not clear on the face of the complaint initially that Plaintiff lacked standing then after discovery revealed as much, perhaps the ruling might have been different. The other take-away is that Article III standing analysis will continue to be evolving as the courts continue to weigh in on the issue and interpret and apply TransUnion to specific factual patterns and allegations of harm.

Preferred Lawyer Confirms En Banc Rehearing Petition to be Filed in Hunstein Case

One of the attorneys representing the defendant in Hunstein v. Preferred Management & Collection Services confirmed yesterday that the defense will file another petition with the Eleventh Circuit Court of Appeals for an en banc rehearing of the case, seeking to vacate a ruling that was issued last week by the original panel of judges. More details here.

WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: Let’s put this into perspective. On April 21, 2021 the 11th Circuit issued its decision in Hunstein v Preferred Collection & Mgmt. Servs. Subsequently, on May 25, 2021, Preferred filed a Petition for Rehearing and for Rehearing en banc. Seventeen interested parties filed Amicus briefs in support of Preferred’s petition. 

On October 28, 2021 the 11th Circuit issued a new decision in the Hunstein v Preferred matter, replacing the previous 3-0 panel decision with a new extended decision, with a 2-1 split. The Court introduced this new decision writing:

Upon consideration of the petition for rehearing, the amicus curiae briefs submitted in support of that petition, and the Supreme Court’s intervening decision in TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021), which bears on one of the issues presented in the case, the Court sua sponte VACATES its prior opinion, published at 994 F.3d 1341 (11th Cir. 2021), and substitutes the following in its place. Id. at *1.

On Nov 9, 2021 Preferred Collection and Management Services, Inc., the Defendant-Appellee filed a motion for a fifteen-day extension of the time to file its petition for re-hearing en banc up to December 1, 2021, and also to stay the issuance of a mandate. 

So where are we now. There was no movement on the request for an en banc hearing after five months. Did the three judge panel advise the full bench that they were going to revisit their decision and to hold off? To some extent we are back where we were in June seeking a full en banc hearing. Certainly, the fact that there is now a 2-1 split has to strengthen that request. Next, what about all the amicus briefs? Do all the parties file new briefs or simply re-file their previous briefs.  Would it make sense to have several parties join together and file joint amicus briefs. We know that the amicus briefs were read (or at least some of them) because Manny Newburger’s brief filed on behalf of NCBA is cited to in the October 28th decision. There are ongoing discussions right now between the interested parties to explore these questions. Based on the current timeline, any amicus briefs will need to be filed by December 8th (assuming Preferred files on the 1st. It will not be surprising if we are still talking about this case next fall. Clearly, if you are collecting in Florida, Georgia or Alabama, there’s no relief in sight. Hope, but no relief. The good news for the rest of the country – no southern fried judging for us. Courts outside the 11th circuit do not appear to be rushing to adopt the Hunstein courts position vis a vis using vendors.

N.Y. Judge Grants MTD in Meaningful Attorney Involvement Case

A District Court judge in New York has granted a defendant’s motion to dismiss after it was sued for violating the Fair Debt Collection Practices Act because the plaintiff believed that a collection letter he received which was signed by an attorney was not actually signed by the attorney and that the attorney was not meaningfully involved in reviewing the account before signing or sending the letter. Ultimately, the judge ruled, the plaintiff has to do more than just make assertions in order to substantiate his claims. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: In a win for third-party debt collection law firms, the Western District of New York applied basic pleading standards to dismiss claims for lack of meaningful attorney involvement and improper threats of legal action under 15 U.S.C. § 1692. The lawsuit, Braun v. Relin, Goldstein & Crane, LLP, No. 21-cv-6071 (W.D.N.Y. Nov. 1, 2021), was prompted by a collection letter signed by an attorney. The plaintiff alleged “on information and belief” that the attorney had not actually signed the letter or reviewed the account. He also alleged that the validation notice was placed on the letter “in an inconspicuous manner” overshadowed by the “potential threat of legal action” communicated by the use of law firm letterhead.

The court dismissed both claims out of hand and closed the case. Noting that the letter contained both a signature and a check-marked box next to the signing attorney’s name in the same color of ink, the court ruled that the complaint’s allegations regarding lack of meaningful attorney involvement were conclusory. The plaintiff had not alleged a “sufficient factual basis” to satisfy the IqbalTwombly plausibility standard for pleadings, and needed to assert facts beyond mere “information and belief.” Additionally, the court held that the validation notice was sufficiently conspicuous, since the second and longest paragraph of the letter “exclusively … advis[ed] the debtor of his validation rights,” and there was no reference in the letter to any legal action. 

CFPB Issues Advisory Opinion Related to ID Matching Under FCRA

The Consumer Financial Protection Bureau yesterday issued an advisory opinion affirming its position that consumer reporting agencies using only the first name and last name of an individual to determine whether a particular piece of information relates to that individual — and not using other information, such as a date of birth, address, or Social Security number — “falls well below the statutory mandate” to assure the accuracy of information under the Fair Credit Reporting Act. More details here.

WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: Pursuant to its Advisory Opinions Policy issued November 30, 2020, the CFPB has issued an Advisory Opinion on consumer reporting agencies’ matching practices under the FCRA. Presumably, the CFPB issued this opinion on its own initiative in response to the high volume of consumer complaints about inaccurate reports, as the opinion does not include a description of any incoming request for FCRA interpretation or guidance.

Citing the adverse impacts an inaccurate consumer report can have generally, and referencing a heightened concern in light of economic and health impacts for “prospective renters and job seekers” still “struggling to recover from the impacts of the COVID-19 pandemic,” the opinion interprets the FCRA’s “accuracy of report” compliance prong. See 15 U.S.C. 1681e(b) (requiring a consumer reporting agency (“CRA”) to “follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates”). The CFPB attributes one cause of the inaccuracies to errors during the “matching” process: when a CRA assigns information it obtains from public records or a furnisher to a specific consumer. In particular, the Bureau blames “name-only matching,” which occurs when a CRA matches using only a first and last name without verifying using an additional personal data point such as an address, date of birth, or social security number, to avoid a false positive.

The CFPB opines that name-only matching is insufficient and “multiple additional elements beyond names may often be required to meet the FCRA standard of ‘reasonable procedures to assure maximum possible accuracy.’”

This makes a lot of sense, as most in the financial services industry likely would agree. There is a reason we do not confirm a right party contact using only a name. Living in a “Rodriguez” household myself – one of the common names called out in the Advisory Opinion – I can attest to the amount of mail and calls my family receives for a Rodriguez that does not actually live here. While that is a mere annoyance, the opinion provides examples of name mismatches that could have far-reaching consequences, such as a false positive name match for a criminal record, the OFAC list, or a sex-offender registry.

The takeaway? CRAs: no more name-only matching. And, while the rule formally applies to CRAs and the FCRA, let’s consider this a broader warning for the industry. If you are matching with just a first and last name, stop now.

NYDFS Issues Amendments to Debt Collection Rules; Comment Period Open Until Next Week

The New York Department of Financial Services has issued a series of amendments to its debt collection rules for third-party debt collectors and debt buyers that could change how consumers are communicated with, including the information that must be provided after an initial communication is made. Comments on the proposed rule are due by Monday, November 8. More details here.

WHAT THIS MEANS, FROM DALE GOLDEN OF GOLDEN SCAZ GAGAIN: The new law benefits delinquent consumers, while exposing others to the law of unintended consequences by increasing the cost of credit long-term. And it potentially wreaks havoc on the marketplace for entities in the buy/sell debt market for New York credit accounts. There are several factors that impact the cost of purchasing consumer debt including the availability of consumer contracts. Because New York now requires creditors to attached to the complaint a copy of the contract with the consumer, the price for available New York debt is likely to increase as buyers seek documents needed to file suit. Plus the halving of the statute of limitations renders an untold amount of defaulted debt uncollectible through litigation. New York is often on the forefront of new legislation, so we can expect to see similar laws proposed in other states — mainly those with a Democrat in the Governor’s mansion.

CFPB Enforcement Activity Increased Under New Regime, But Less Than Kraninger

Probably to the surprise of nobody, the number of enforcement actions undertaken by the Consumer Financial Protection Bureau increased during the 2021 fiscal year — according to a published report. What may surprise you, though, is that the increase was not as significant as the increase that occurred in the 2020 fiscal year. More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: Numbers can be deceiving. It is clear that the statistics reflect a much lower increase in investigations from when President Trump’s appointee as CFPB director, Kathy Kraninger, left office, compared to the growth we saw when Kraninger came into office. However, does a lower increase reflect a less aggressive approach? If so, this would be very surprising as Dave Uejio’s first action as acting Director was to rescind policies that restricted its enforcement more generally immediately. And if we look more into the result of Kraninger’s actions, the idea that a lesser increase in investigations should equate to the notion that the leadership will be less aggressive would be even more incorrect if the aggression of the actions is measured by the fines issued.  

During Kraninger’s most active year, the total settlement cash returned to consumers amounted to approximately $783 million. During Kraininger’s fiscal year, 2020, the total fines collected totaled roughly $34 million, made up substantially by one hefty fine of $25 million. Compare this with the most active year under democratic President Obama in 2015, where it collected $6 billion; it may appear that while an increased number of investigations were opened, much less focus was on the remedy of financial resolution.  

I would expect that we will continue to see an increase in investigations under Uejio’s leadership. Regardless of whether the level of such actions increases as much as it did when Kraninger took leadership, all should expect to see a significant increase in fines issued. In other words, this information should not be used as a means to relax on ensuring compliance.  

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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