Compliance Digest – December 6

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 Denies MSJ in FDCPA Case Over Status of Verification Letter

Is a debt verification letter, sent in response to a dispute from an individual, an attempt to collect on a debt? A District Court judge in Georgia has ruled it is, denying a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: The exceptions for when a communication with a consumer do not constitute a communication in connection with the collection of a debt are extremely limited. Providing a response to a request for validation (i.e, prove to me I owe the debt) is a quintessential debt collection communication. In essence, the collector is saying, “Here is your proof, now pay.” The case entered on whether the consumer owed the debt. Defendant agency believed it could get out of the case on the technical basis that it never attempted to collect the debt within the statute of limitations, and did not seek summary judgment on the merits – showing that consumer did, in fact, owe the debt. The court denied summary judgment on the technical basis and set the case for trial. This is an example where bad facts make bad law.

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CFPB Releases Guidance For Dealing with Former Employees

One of the new shows I have watched and enjoyed recently is “Dopesick,” a limited series about the opioid crisis and how the drug was sold by its manufacturer. The series details a number of situations where individuals working for branches of the federal government end up working for the manufacturer, often at jobs that paid significantly more than they were making for the government. More details here.

WHAT THIS MEANS, FROM CHRISTOPHER MORRIS OF BASSFORD REMELE: Attorneys and compliance professionals have a general right to change jobs, including leaving a government regulatory position for the private sector (and vice versa). However, the government may impose limits on what information can be shared with a new employer, and attorneys have ethical duties to maintain confidences of former clients. Demonstrating a pointed concern over these issues, the CFPB has issued guidance regarding behavior of departed personnel, asking for suspected violations to be immediately reported. Specifically, Bureau staff are directed to report to the Ethics Office if a former employee “communicates to or appears before the Bureau in connection with a specific-party matter the employee worked on while employed by the federal government”; or “contacts the Bureau on behalf of any third party within the first year of the employee’s departure”; or if “a former Bureau attorney is providing behind-the scenes assistance on a specific-party matter in which the former attorney participated while at the Bureau”. In his announcement of the new guidance, the CFPB Director included a warning to regulated entities hiring former Bureau staff, stating in part: “We will be applying heightened scrutiny to matters and decisions where a party has employed or retained the services of a former employee to ensure that the CFPB is meeting the highest standards of ethics and integrity.”

Eleventh Circuit Announces Date, Topic for Hunstein Rehearing

The battle lines have been drawn. When it hears arguments in Hunstein v. Preferred Management & Collections — during the week of February 21, 2022 — the Eleventh Circuit Court of Appeals wants to hear from both sides on whether the plaintiff actually has standing to bring his lawsuit in the first place. More details here.

WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: What will the Eleventh Circuit do next, with the benefit of a vote from all of the Judges of the Court of Appeals? We’re all waiting (im)patiently to find out. What is clear from the Clerk’s November 23rd Memorandum to Counsel or Parties is that the next chapter in the Hunstein saga will focus on Article III standing, specifically addressing the question: “Does Mr. Hunstein have Article III standing to bring this lawsuit?” In other words, did Mr. Hunstein suffer a concrete harm? Briefing will be complete by January 18, 2022 and oral argument will take place in Atlanta during the week of February 21, 2022.

So, we end 2021 and begin 2022 building on a trend that started gaining traction in December 2020, when the Seventh Circuit dismissed a series of FDCPA cases on Article III standing grounds – i.e., a lack of concrete harm. That trend was further solidified in June 2021, when the United States Supreme Court in TransUnion v. Ramirez, an FCRA case, confirmed a fundamental rule of the federal courts: “No concrete harm, no standing.”

While the industry may disagree on where it ultimately would prefer to fight cases involving bare statutory violations – federal court or state court – a finding of “no harm” in Hunstein would still sound like a win to me.

Judge Partially Grants MSJ for Defendant in Itemized Debt Case

A District Court judge in Pennsylvania has partially granted and partially denied a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act and Telephone Consumer Protection Act case that may offer a glimpse into how judges are going to address itemized debts once Regulation F goes into effect next week. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: In a mixed-bag summary judgment ruling last month, a federal district court judge for the Eastern District of Pennsylvania strictly applied the requirements for compliance with Section 1962g of the Fair Debt Collection Practices Act (“FDCPA”) in favor of the debt collector, though finding for the plaintiff on a broader FDCPA count. The class action case, Huber v. Simon’s Agency, Inc. (“SAI”), No. 2:19-01424, arose out of SAI’s attempt to collect on four separate debts owed by the class plaintiff. As SAI acquired each debt, it mailed an initial collection letter, which stated the amount of that particular account as well as the “total balance” of the plaintiff’s “various other acc[oun]ts” held by SAI. Plaintiff argued that SAI violated Section 1962g of the FDCPA by failing to itemize the other amounts owed, and violated Section 1962e of the FDCPA because the “total balance” language was open to more than one reasonable interpretation and constituted a deceptive letter under Third Circuit precedent. The court ruled that Section 1962g(a) “only requires a statement of the amount of the debt placed with the debt collector—the placement that triggered the collector to send the debt notice”—and the collector was not required to also itemize the other debts currently owed as well. Because the letter expressly and “intelligibly” stated the amount of the new debt, it did not run afoul of Section 1692g of the Fair Debt Collection Practices Act (“FDCPA”). Therefore, the court granted summary judgment to SAI on this claim, as well as on the two Telephone Consumer Protection Act claims. 

However, the court granted summary judgment to the plaintiff on her Section 1962e claim, ruling that while the collector had complied with the specific requirements of Section 1962g, the “various other acc[oun]ts total balance” language could be interpreted two different ways, one of which was incorrect and could mislead a reasonable person into thinking that they owed less than they actually did. This decision suggests that even as the more specific debt-collection regulations of Regulation F go into effect at the end of this month, debt collectors should be wary of mere check-the-box compliance and should be cognizant of the FDCPA’s more flexible consumer protection provisions.

DFPI Issues Draft Rules to License Four New Types of Industries, Including Debt Settlement Providers

The California Department of Financial Protection & Innovation is seeking comments on a proposed rulemaking that would require four different industries to be registered with the state in order to operate — debt settlement services, student debt relief services, education financing, and wage-based advances. More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: Thoughts on this news can be summed up simply, do not ignore!! If your company falls into one of the four industries, debt settlement services, student debt relief services, education financing or wage-based advances, you cannot not afford to comment on the proposed rulemaking.    

The proposed rule today will require those targeted companies, including branch offices, and those working in the targeted companies to register for individual licenses through the NMLS (Nationwide Multistate Licensing System and Registry). Each of these applications will require a nonrefundable application fee that is to be determined and will also be subject to an annual assessment. The annual assessment will be a pro rata share of all costs and expenses (proportion to that registrant’s gross income) incurred by the CCFP as it relates to the registrants.  

These costs alone could add up, and as such, do not consider the time and money that will go into completing the application and ongoing annual compliance requirements. The information outlined in  the proposed rule that will be required for an application is quite specific and may not be readily available today.  If the proposed rule goes into effect, the financial burden on the affected industries could be substantial.  Do not miss this opportunity to submit a comment which is due by December 20th

Complaints Drop, But Lawsuits Rise in October: WebRecon

Consumers continued to appear to have opposing reactions to their interactions with companies in the accounts receivable management industry in October, with fewer consumers complaining to the Consumer Financial Protection Bureau, but more consumers filing lawsuits, according to data released yesterday by WebRecon. More details here.

WHAT THIS MEANS, FROM SHANNON MILLER OF MAURICE WUTSCHER: WebRecon released its stats for October 2021, which showed a decline in CFPB complaints but a rise in lawsuits comprised of a drop in TCPA suits and an uptick in FDCPA and FCRA suits, with a near majority of all suits being brought by repeat filers.

The take-away for the industry is that the data suggests an upward trend in operational compliance across the industry based upon the decline in CFPB complaints. Although lawsuits were on the rise, 42% of all plaintiffs were repeat filers, up from roughly 35% according to WebRecon. This suggests that compliance controls are working and the industry is seeing more targeted lawsuits, brought by these repeat filers who aren’t necessarily aggrieved consumers but instead are savvy to the potential for exploitation of the industry pursuant applicable consumer protection statutes. 

Additionally, no surprise that TCPA suits are falling given the holding from Facebook v. Duguid and the Supreme Court’s clarification of the definition of an ATDS which vastly shrunk the TCPA’s potential reach. The correlation is that, as noted by WebRecon, FDCPA and FCRA suits are up; when one door closes consumer plaintiff attorneys will undoubtedly seek to open up another. Moving forward, and in light of Reg F being implemented last month, the industry can likely expect to see FDCPA suits continue to climb as plaintiff attorneys test the courts and how they will apply and interpret Reg F to the industry. Litigation continues to be dominated by the Illinois, Florida and New York Federal Courts, with the attorneys who operate in those jurisdictions topping the list of most active filers. 

Collection Operations Banned From Industry, to Pay $1.2M in Fines

The Attorney General of New York announced yesterday a settlement with three debt collection companies owned by Andrew Fanelli that will permanently ban them from any future debt collection activities while also paying $1.2 million in fines and restitution to individuals impacted by the collectors’ tactics. More details here.

WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: This case represents the industry’s worst nightmare. Illegal activities performed by alleged member of the collection industry. It raises again the question of self-policing. All of the organizations have codified standards and codes of conduct, and that’s been advantageous to the industry when dealing with legislators. But does it counter the bad press when a story lie this breaks the news. We know that the New York Attorney General Letitia James will publicize this win for maximum effect. Did I forget to mention she has announced she will be running for the democratic nomination to run for the office of Governor of New York? So I raise a question – is it time to form a task force within the industry to discuss ways we, as an industry, can be more proactive to expose bad actors? I know it goes against the grain of many, but maybe, just maybe, we can come up with a way to garner some good publicity and demonstrate we also care about consumers. 

As to this specific case, while the Assurance of Discontinuance bars the individuals involved from engaging in any bad acts in the future and bans them from engaging in Consumer Debt Collection, Debt Brokering, Consumer Lending, Payment Processing, Debt Settlement and Credit Repair it doesn’t seem to be enough of a deterrent. 

There is also the monetary penalty, a $1,200,000. Payment for costs, penalties, damages and disgorgement. Sounds like a lot but put it in perspective. David Fanelli, the principal bad actor here, started his activity on or about August 20, 2012. He and his assorted companies and cronies were active for at least eight (8) years before the NY AG stepped in. So, the penalty amounts to roughly $150,000 a year in penalties. Want to guess what the profits were each of those eight years. Before levying the money penalty, the NY AG reviewed the parties financials. Do you think maybe along with their other crooked activities, they also cooked their books to hide their ill gotten gains? 

CFPB Goes After Repeat Offender for Scamming Military Families

The Consumer Financial Protection Bureau on Friday announced it had filed a lawsuit against a national chain of pawnshops, accusing it of violating the Military Lending Act (MLA) by imposing interest rates that were higher than allowed by law, including provisions requiring mandatory arbitration — also prohibited, and for not making required loan disclosures. The lawsuit marks the second time that the CFPB has engaged in an enforcement action against this particular company, further illustrating Director Rohit Chopra’s assurances to go after repeat offenders. More details here.

WHAT THIS MEANS, FROM MONICA LITTMAN OF KAUFMAN DOLOWICH & VOLUCK: Director Rohit Chopra meant what he said about focusing enforcement actions on repeat offenders. The CFPB recently filed a lawsuit against pawnshop operator FirstCash, Inc. and its subsidiary, Cash America West, which alleged that they violated the Military Lending Act (“MLA”) by issuing loans with interest rates that regularly exceeded 200 percent between June 2017 – May 2021. The CFPB previously warned Cash America in 2013 about overcharging on interest rates. This case should serve as a warning. If your company has previously been the target of a CFPB inquiry or an enforcement action, the CFPB will be aggressive in future enforcement actions if you are not in 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 www.bedardlawgroup.com, email John H. Bedard, Jr., or call (678) 253-1871.


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