Compliance Digest – December 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, 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 For Lack of Standing Over Hunstein Claim

Judge Cathy Seibel of the District Court for the Southern District of New York gets it. Judge Seibel is the latest in a growing line of judges across the country who are ruling that plaintiffs filing Hunstein claims do not have standing to sue in federal court because they did not suffer a concrete injury. In Judge Seibel’s case, she understands why collection agencies use third-party vendors to print and mail envelopes, and she understands the process in which that operation is completed, which is why she granted the defendant’s motion to dismiss in the case in question. More details here.

WHAT THIS MEANS, FROM CAREN ENLOE OF SMITH DEBNAM: In Sputz, the S.D.N.Y. follows in the steps of the E.D.N.Y. and dismisses another Hunstein matter for lack of Article III standing.  Relying in part on the Supreme Court’s decision in TransUnion v. Ramirez, and looking at the facts as pled, the Court when faced with a Motion to Dismiss, determined that the plaintiff had failed to plead sufficient facts to support concrete harm. Key to the Court’s conclusion was the fact that the plaintiff failed to allege facts that reflected the disclosure of is information was publicly disseminated.  In fact, the Court keyed in on the fact that the process was automated. So is the news all good for industry? Not necessarily.    In certain situations, a determination that there is no subject matter jurisdiction may simply result in a remand to a state court which is less experienced with debt collection claims. Simply put, it depends upon the procedural posture of the case and the claims included within the complaint (for instance, the inclusion of claims under state law). As courts across the country continue to deal with the onslaught of Hunstein copycat actions cluttering their dockets, many are looking to quickly resolve cases and clear those dockets. Standing provides those courts with an exit strategy. 


Judge Denies MTD in FDCPA, TCPA Class Action Over Orally Made Cease Request

A District Court judge in Florida has denied a defendant’s motion to dismiss a class-action after it was sued for violating the Fair Debt Collection Practices Act, the Telephone Consumer Protection Act, and the Florida Consumer Collection Practices Act for making calls to the plaintiff’s cell phone and leaving voicemails using pre-recorded messages after the plaintiff had asked for the calls to stop. More details here.

WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHSAW CULBERTSON: Nieves v Preferred represents a fairly common consumer TCPA complaint since the Supreme Court narrowly interpreted ATDS in Diguid v Facebook. The plaintiff did not pursue an ATDS claim. Instead, he claimed pre-recorded calls were left without consent. In the past year, we are seeing fewer ATDS claims but many more pre-recorded message cases. Based on the same facts, plaintiff alleged an FDCPA claim and a copycat count under the state equivalent – Florida Consumer Collection Practices Act. Again, it is not unusual to see this combination of claims based on the same factual allegations.

Two odd parts of the case are how the parties chose to litigate these facts.  First, plaintiff is trying to make a class action out of the TCPA claim. However, the debt is for medical services and the lack of consent was based on an alleged oral revocation.  Medical debt often comes with a phone number provided by the patient and oral revocation makes it hard to identify a class of similar people. Second, defendant tried to knock out all three claims with a Rule 12 motion to dismiss. It wasn’t too difficult for the court to determine that the allegations were sufficient to survive at the motion to dismiss stage. We’ll have to see how this one plays out.

Chopra Urges States to Enforce Federal Consumer Protection Laws

Rohit Chopra, the Director of the Consumer Financial Protection Bureau, urged state Attorneys General to bring their own enforcement actions when they think federal laws have been broken, especially when federal law is stronger than a state statute, asking only that AGs give the CFPB a heads up before filing a complaint. Chopra, who delivered his remarks in a speech before the National Association of Attorneys General conference this week, not only asked the AGs to be more alert and watchful of incidents of unfair, deceptive, or abusive acts or practices, but said the CFPB is looking for ways to allow states “to get more out of the remedies available” under the Consumer Financial Protection Act. More details here.

WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: Director Chopra’s speech to the National Association of Attorneys General is a foreshadow of the CFPB’s enforcement approach and focus moving into 2022. The speech also shows us that Chopra is crafting his battles carefully.

We should not be shocked that Chopra has hit the ground running. Acting Director Ueijo staffed up the CPFB during his tenure and laid the ground work to the position the Bureau to be extremely active when it came to enforcement. Chopra’s speech therefore is an indicator that there is no intention to take their foot off the gas.

Coming from the FTC, Chopra understands how enforcement actions can craft and develop the scope of UDAAP. One of Ueijo’s first actions was to rescind the January 24, 2020 UDAAP policy statement and instead return the CFPB’s authority to  supervise and enforce consistent with the definition of UDAAP under Dodd-Frank. Chopra’s speech suggests that he wants states to assist in that priority.

It is also apparent that Chopra used his speech to assert his dislike (as well as that of the Bureau) of federal pre-emption, calling it “fundamentally wrong”. Using the mortgage crisis of 2008 as a example where states recognized the crisis prior to the federal government, his speech was a shot across the bow and in some ways a battle cry to say that state and federal consumer protection laws and regulations going forward will be equally as relevant. Federal pre-emption will not be a “get out of jail free” card in Chopra’s eyes.

The ARM industry has already seen a ramp up of state activity with respect to debt collection. States like New York are creating new laws and amending regulations (it seems like hourly) to go around or bypass Regulation F. As industry comes out of the Reg F haze, it is no time to be apathetic. Diligence in compliance will be more important than ever in 2022.

Happy Holidays.  

Judge Denies MTD in FDCPA Case Over Disputed Debt

A District Court judge in Louisiana has denied a defendant’s motion to dismiss and denied a motion for summary judgment was premature in a Fair Debt Collection Practices Act case over an alleged disputed debt that the defendant claims it did not receive notification for. More details here.

WHAT THIS MEANS, FROM AMANDA GRIFFITH OF BERMAN BERMAN BERMAN LOWARY & SCHNEIDER: While this is a loss for the particular agency, do not count them out just yet. Defendant attempted to take advantage of a procedural vehicle which allows a motion to dismiss to be filed at the same time as a motion for summary judgment.  The   ruling denying the motion for summary judgment made no findings as to whether the letter was or was not received – it was just too soon to tell. 

Essentially, Defendant sought to argue the rebuttable presumption known in common law as the “mailbox rule” which has been recognized in virtually every circuit.  Thereunder, a letter that is properly addressed is presumed to be received unless evidence can be shown to the contrary.  Agencies often use their policies and procedures to rebut the presumption of receipt in these exact situations where a debt is allegedly disputed but no record of the dispute if found. Often, after discovery, these arguments are successful.

Judge Rules Plaintiff Lacks Standing on Hunstein Claim

A District Court judge in New York has granted a plaintiff’s motion to remand a Hunstein case back to state court, ruling that the plaintiff does not have standing to sue in federal court because the complaint does not allege that the communication of his information by the defendant to a letter vendor was seen by the “broader public, or even a large group of people.” More details here.

WHAT THIS MEANS, FROM STEFANIE JACKMAN OF BALLARD SPAHR: In many of these Hunstein cases, dismissal for lack of Article III standing may not end the matter. Instead, it may just delay litigating the claim until the claim is refiled in state court. But no matter the ultimate outcome, when a federal judge dismisses a claim based on a federal statute for lack of standing, gratuitous statements about why the claim ultimately is not what the statute seeks to protect against – even in dicta – is appreciated and can be useful in any subsequent state court litigation on the claim. While the state court is not bound by the federal court’s opinion, it may be persuasive to the state court judge who likely does not litigate the federal claims as frequently in their courtroom.”

Judge Grants MTD in FDCPA Case Over Alleged Refusal to Honor Payment Plan

Does allegedly agreeing to a payment plan only to back out of it constitute an unfair or deceptive practice under the Fair Debt Collection Practices Act? Not according to a District Court judge in Pennsylvania, who granted a defendant’s motion to dismiss last week, largely because the plaintiff never identified anything the defendant did that was misleading. More details here.

WHAT THIS MEANS, FROM PATRICK NEWMAN OF BASSFORD REMELE: File this one to the “Strange Allegations Desk.” 

Refusing money won’t keep you in the collection business very long. It’s hard to believe this defendant did that. So what was really going on here? The Judge had the same question and, because the plaintiff bears the burden of alleging sufficient facts to state a claim, dismissed the complaint.

From a compliance standpoint, I offer you this thought, dear reader: if you commit a settlement offer to writing, the stakes do go up in terms of honoring it because you’ve documented your contract. In the unlikely event that you’re tempted not to accept the consumer’s payment under a written agreement (for whatever strange reason), reconsider.

Judge Certifies Class in FDCPA Case

A District Court judge in Pennsylvania has certified a class in a Fair Debt Collection Practices Act case over a 1692e claim that the manner in which a series of debts were itemized in a collection letter was misleading, disagreeing with the defendant that there is no evidence that other members of the class were confused by the letters that they received. More details here.

WHAT THIS MEANS, FROM CARLOS ORTIZ OF POLSINELLI: Sometimes, less is more. That is, placing too much information in a collection letter can backfire, as was the case in Huber v. Simon’s Agency, Inc. There, a U.S. District Court judge in Pennsylvania held that a collection letter violated section 1692e of the FDCPA when it included two different amounts owed and the court concluded that it was unclear to the least sophisticated debtor which was the true total. The plaintiff had incurred multiple medical balances with the same provider and each balance was assigned a unique account number. The subject collection letter included an amount owed for one of the balances, but also included the sum of the other balances being collected. The judge reasoned that the least sophisticated debtor could read the letter and believe that either both balances listed were owed or just the sum for the “other balances being collected.” 

In addition to granting the plaintiff summary judgment on the 1692e claim, the court also ruled in favor of her motion for class certification, pursuant to Fed. R. Civ. P. 23. The court found that the plaintiff satisfied numerosity, commonality, typicality and adequacy. In regards to numerosity, the size of the putative class was alleged to be 676. As to commonality, the judge concluded that each member of the putative class received the same form letter with a box marked “Amount” (representing the total on the single account) and a box marked “Various Other Accts Total Balance.” Therefore, according to the court, the question of whether the letter violated 1692e is common to the entire class. With respect to typicality, the court concluded that the plaintiff’s 1692e claim arose from the same course of the defendant’s conduct that gave rise to any 1692e claim of the class. According to the judge, the legal theory of the claims was likewise identical. The judge also concluded that the plaintiff and her attorneys would fairly and adequately represent the class. In addition, the court also found that predominance and superiority were satisfied.

In hindsight, perhaps most conservative approach would have been to not mention the other balances owed in the collection letter or to more clearly state what each balance represented.

Consumer Groups, CFPB Settle Suit Over Consumer Law Taskforce

The Consumer Financial Protection Bureau has settled a lawsuit filed against it by a group of consumer advocates, who alleged that the previous leadership of the CFPB “stacked” a taskforce that was created to modernize consumer protection laws with representatives from the financial services industry, stipulating that it failed to comply with the requirements of a federal law governing committees that advise federal agencies and adding a disclaimer into the taskforce’s final report. More details here.

WHAT THIS MEANS, FROM ETHAN OSTROFF OF TROUTMAN PEPPER: The CFPB’s 180-degree shift on the Taskforce and its report give an indication of the CFPB’s willingness, under current Director Rohit Chopra, to distance itself from its work in the Trump administration. It’s worth keeping an eye on what else the CFPB seeks to change about its past as Director Chopra continues to spread his influence at the Bureau, and in recent days with the FDIC as well.

The Taskforce was formed in October 2019 by then-CFPB Director Kathy Kraninger to examine the existing consumer financial services legal and regulatory environment, and to report the Taskforce’s recommendations for improving and strengthening consumer financial laws and regulations.

The National Association of Consumer Advocates (NACA) filed its lawsuit in June 2020, alleging that the CFPB violated the Federal Advisory Committee Act (FACA) in the formation and operation of the Taskforce by, among other things, failing to meaningfully consult with the General Services Administration and failing to post preliminary findings in the Federal Register.

In January 2021, the Taskforce released a two-volume report of its recommendations, some of which included:

  • Authorizing the CFPB to issue licenses to nondepository institutions that provide lending, money transmission, and payments services;
  • Considering the benefits and costs of preempting state law where conflicts can impede the provision of products and services, such as the regulation of fintech companies engaged in money transmission;
  • Identifying competitive barriers and making appropriate recommendations to policymakers and regulators for expanding access to the payments systems by nonbank providers;
  • Exercising caution (a recommendation for the Bureau, Congress, and other federal and state regulators) in restricting the use of nonfinancial alternative data; and
  • Imposing monetary award limitations on class actions under the Fair Credit Reporting Act (FCRA).

The CFPB fought the lawsuit during former Director Kraninger’s tenure, but the CFPB walks this back in the settlement, now admitting the Taskforce was subject to FACA and that the CFPB failed to comply with FACA’s requirements. In the settlement, the CFPB also agreed to release certain Taskforce records and to put a disclaimer on the report that it was developed in violation of FACA.

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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