Compliance Digest – November 29

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 Denies Plaintiff’s Motion to Remand FDCPA Case Back to State Court

A plaintiff has lost his battle to keep his lawsuit against a debt collector in state court, ruling that the plaintiff’s “explicit” allegations of violations of both the Fair Debt Collection Practices Act and the Federal Trade Commission Act, as well as his demand for damages under both of those statutes require that the case be heard in federal court. More details here.

WHAT THIS MEANS, FROM STEFANIE JACKMAN OF BALLARD SPAHR: This opinion is exactly correct – claims arising under federal statutes should be decided by federal courts. In order to keep some level of consistent application of federal laws across the nation, it is essential that federal courts exercise their original jurisdiction to define, develop and ultimately, determine the outcome of claims brought under federal statutes. The current Article III jurisprudence developing in some circuits in response to creative pleading strategies by plaintiffs is circumventing the very underpinnings of our federal judiciary. State legislatures have the ability to enact – and do enact – state versions of such laws. And perhaps federal courts should more frequently decline to exercise supplemental jurisdiction over state law claims. But looking forward, I can’t help but wonder how many Regulation F interpretations will emanate from state courts who had little to nothing to do with developing and finalizing the FDCPA or its implementing regulation.  It makes it even more essential for the CFPB to provide clear guidance as to its intent to guide state courts as they increasingly are tasked with deciding questions of federal law.


Judge Grants MTD in FDCPA Case Over Settlement Offer in Letter

Have you ever heard the phrase, “Never look a gift horse in the mouth?” If you had owed someone more than $3,500 and were sent two letters offering you the opportunity to settle that debt for 25% of what you owed, would you take the deal? Or would you turn around and sue the company that sent you the letters? You can likely guess which option the consumer in this situation chose, only to have a District Court judge from New York grant the defendant’s motion to dismiss. Not because the plaintiff should have taken the deal, but because mentioning that there was no obligation to renew the offer and then offering it again in a subsequent letter is not a violation of the Fair Debt Collection Practices Act. More details here.

WHAT THIS MEANS, FROM COOPER WALKER OF MALONE FROST MARTIN: We can all breathe a sigh of relief knowing that that safe harbor language provided in Evory actually provided safe harbor here. Plaintiff (or, perhaps, his counsel) got the bright idea to sue somewhere,  anywhere, outside of the 7th Circuit to see if the Evory language would hold up.  Plaintiff claims that UCB’s use of Evory’s safe harbor language “was clearly done as an attempt to strike fear in the hear of the Plaintiff to accept the offer as soon as possible.” The judge didn’t take the bait and dismissed Plaintiff’s claims. Kudos to the defense team for fighting the good fight and to UCB for letting them.

Eleventh Circuit Announces En Banc Rehearing in Hunstein Case

The Eleventh Circuit Court of Appeals announced today that the entire panel of judges will rehear arguments en banc in the Hunstein v. Preferred Management & Collections case, vacating the opinion that was issued last month, and giving the industry hope that the case may be reversed. More details here.

WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: The Court has set oral argument for the week of February 21, 2022 and has instructed the parties to focus their briefing on the standing issue. The industry would like to see the Circuit Court affirm the District Court’s decision that Hunstein failed to state a claim. However, the Eleventh Circuit does not need to reach the merits of Hunstein’s claim unless it finds that he has standing. In recent years, the Eleventh Circuit has published en banc opinions approximately six months after oral argument, so we could see a decision in late summer 2022. In the meantime, the panel’s substituted decision was vacated so it is no longer binding precedent in the Eleventh Circuit. 

State Appeals Court Reverses Ruling, Puts Agency on Hook for Debtor’s Legal Fees

For companies in the accounts receivable management industry, knowing when to settle a lawsuit or continue defending it is a decision that is never simple or straightforward. Settle and you save money now, but possibly paint a target on your back for more lawsuits. Fight and you may stop future lawsuits from being filed, but it will cost you a lot more to defend. A state court in Washington has reversed a lower court’s ruling that a collection agency is not liable for the attorney’s fees of an individual it sued to recover an unpaid debt because it did not accept an offer to pay a debt that did not include $213 in costs. More details here.

WHAT THIS MEANS, FROM CAREN ENLOE OF SMITH DEBNAM: Lesson 1: Be intentional in your settlement offer (and offers of judgment) language. This decision really drives home the need to be intentional in your language when making offers to settle, particularly where there is a fee or cost shifting statute in play as there was in this case. The creditor appears to have run afoul by making its offer for a lump sum which included the balance sought plus the Court costs expended. At summary judgment, the creditor was awarded the exact amount it offered in its settlement communication. In determining  the creditor was not the prevailing party, however, the Court took a literal construction of the statute at issue and determined the creditor was not the prevailing party because its recovery, exclusive of costs, was less than the amount offered in settlement. Moreover, the Court noted that even had the creditor segregated its offer into damages and costs, it would not have mattered because the costs has not yet been awarded. Ironically, the Court then determined the consumer, who had offered the full damages (exclusive of the court costs) was a prevailing party and remanded for a determination of the consumer’s attorney’s fees attributable to its defense of the collection action.

Lesson 2: Creditors and collection agencies should be taking careful note of the state Washington. This decision follows on the heels of the Attorney General’s settlement with Convergent a few months ago which was highlighted in the September 20th Compliance Digest. Taken together, I am seeing a very consumer friendly state with an aggressive attorney general and I would proceed with caution in litigation in Washington. It will be interesting to watch the litigation and enforcement trends in Washington once Reg F takes effect over the next year or two.

California DFPI Proposes Changes to Definitions Under New Licensing Law

The California Department of Financial Protection & Innovation has issued another set of proposed modifications to its licensing application and procedures for applying for a license, and is seeking comments between now and the end of the month on those proposed changes. More details here.

WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY & SCHUSTER: DPFI is California’s new “CFPB” like cop on the block. It’s proposing changes that sweep more broadly than previous licensing rules. Now is your opportunity to comment on these proposed rules. It’s most effective if you have specific examples of why you object to a rule. It’s also helpful to suggest language that alleviates your concerns. If you don’t want to get involved directly, bring your concerns to organizations like the California Association of Collectors, Inc. who may include your comments and examples in its response.

Bank Settles Collection Call Lawsuit for $3.5M

A coalition of District Attorneys from across the state of California have reached a settlement with Synchrony Bank that will see the creditor pay $3.5 million in fines and restitution after it was sued for making “unreasonably frequent and harassing” phone calls to individuals in California attempting to collect on unpaid debts. More details here.

WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: On November 15, 2021, the Los Angeles County District Attorney announced that a collection agency will pay $3.5 million to settle a civil lawsuit alleging that the collection agency made frequent or harassing phone calls to debtors in California. The California Debt Collection Task Force, which included district attorneys of several counties, investigated and prosecuted the matter. Notably, the judgment was entered without an admission of wrongdoing by the collection agency.

This settlement agreement is worth paying attention to, especially if you are a collection agency. In light of this recent announcement, we can expect to see county attorneys in California and other jurisdictions pursue cases against collection agencies for alleged violations seeking restitution and other relief.

Judge Grants Defendant’s MSJ in FDCPA Case Over Alleged SOL Violation

Questions about which statute of limitations can apply to different types of debt can plague a collection operation. Take retail-branded credit cards, for example. In the case below, there is a genuine issue whether the statute of limitations on retail-branded credit cards is four years, or six years. A District Court judge in Oregon has granted a defendant’s motion for summary judgment, ruling it is entitled to the Fair Debt Collection Practices Act’s bona fide error defense because it did everything it could to try and figure out which statute of limitations applied before sending collection letters to the plaintiff — letters that did not include a disclosure that the debts were time-barred. More details here.

WHAT THIS MEANS, FROM JOHN REDDING OF ALSTON & BIRD: Determining the correct statutes of limitations can be challenging, and while the bona fide error defense will generally be unavailable for mistakes of law, the ability to demonstrate a concerted effort to get things right can pay dividends as demonstrated by the recent decision in Sprayberry v. Portfolio Recovery Associates. Plaintiff, after defaulting on two separate credit card debts, claimed violations of the FDCPA based on alleged collection efforts outside what plaintiff asserted was a 4-year statute of limitations. The collector, noting the claims were subject to Oregon’s 6-year statute of limitations but that the question was unsettled, argued that even if the 4-year limitations period applied it had a valid bona fide error defense. The court, acknowledging the question of what limitations period should apply under Oregon law was undecided and that the court itself was struggling with the question, found the collector had taken reasonable steps to determine the appropriate limitations period and, even if it was mistaken (which the court did not accept), should be entitled to rely on the bona fide error defense.

Two key lessons come from this case. First, be prepared to demonstrate the good faith efforts undertaken to demonstrate the reasonableness of actions taken in support of the bona fide error defense. Second, remember that the “mistake of law” carve out from the bona fide error defense is applicable to mistakes regarding interpretation of the FDCPA itself and not necessarily a mistake regarding the applicable statute of limitations or the legal effect of other state law requirements, at least in the 9th Circuit. 

Appeals Court Upholds $150k Ruling Against Defendant in FDCPA Case

The Court of Appeals for the Eleventh Circuit has upheld a ruling in favor of the plaintiffs in a Fair Debt Collection Practices Act case, saying the argument raised by the defense is “too little, too late,” and that the defendant remains responsible for nearly $150,000 in damages and attorney’s fees. More details here.

WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER: I think every litigation attorney gets what we call the 2:00 a.m. scaries — that’s when we wake up in the middle of the night petrified that we’ve missed a deadline somewhere, and we have to open up our calendars to quadruple-check before we can fall back to sleep. This opinion gave me ALL the 2:00 a.m. scaries! I beg all defendants out there, please take two important messages from this opinion: first, even if you suspect some fundamental flaw — such as with service, as was the case here — do not wait to give your attorney whatever documentation you’ve received. Sometimes, waiting is the right answer — but as this opinion shows, that’s not always the case, and when it’s NOT the case, waiting can really come back around to bite you, and hard. Although courts are usually lenient in allowing parties to assert claims or defenses somewhat late in the litigation process, there’s still a point at which “late” becomes “too late.”

Second, the point above goes double for court orders. The Magistrate’s Report and Recommendation and the Eleventh Circuit’s opinion both specifically note that Equity Experts failed to follow court orders, and offered no excuse for its delay in appearing. This clearly colored the district court’s ruling on Equity Experts’ request to set aside the default judgment. If you receive a court order, be sure to give it your prompt attention—otherwise, as was the case here, it may simply be too late to change the course of litigation, to your detriment.

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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