Compliance Digest – January 10

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.

Appeals Court Affirms Dismissal of FCRA Suit Over No-Longer-Disputed Debt

This is a case that should look familiar to anyone who has ever played a game of telephone and learned why firsthand if you need to pass on a message, it’s best delivered to the source, instead of an intermediary. The Eleventh Circuit Court of Appeals has affirmed a lower court’s dismissal of a Fair Credit Reporting Act case in which a furnisher was accused of failing to investigate a dispute, when in fact it was being notified by two credit reporting agencies that the account was no longer being disputed. More details here.

WHAT THIS MEANS, FROM HEATH MORGAN OF MALONE FROST MARTIN: The order from the 11th Circuit is a positive ruling the industry because it upheld the lower court’s dismissal of an FCRA case where the consumer was attempting to no longer dispute the account. The plaintiff sent in a form letter that is commonly used by consumers asking the dispute to be removed the disputed comments from the account. This letter was sent to the agency, not the credit bureau, and when the dispute was not named from the tradeline, the consumer sued the agency. 

Thankfully the Court dismissed the case upon the agency’s dismissal and the Circuit court affirmed the dismissal. This should hopefully provide good case law in the future for agencies who are sued under similar frivolous situations.


Appeals Court Affirms Summary Judgment for Collector in FCRA Case

In a case that was defended by the team at Malone Frost Martin, the Court of Appeals for the Seventh Circuit has affirmed a lower court’s summary judgment ruling in favor of a defendant that was sued for violating the Fair Credit Reporting Act for accessing an individual’s credit information via a soft inquiry for determining a propensity to repay an unpaid debt. More details here.

WHAT THIS MEANS, FROM MONICA LITTMAN OF KAUFMAN DOLOWICH & VOLUCK: The Seventh Circuit provided a commentary here on the role of Congress vs. the role of the courts in evaluating a concrete injury for standing. Common law history and Congressional aims are required to evaluate whether a plaintiff has Article III standing. Although the Seventh Circuit found that the plaintiff had standing in this case for her FCRA claim, the court stated that “Congress cannot transform a non-injury into an injury on its say-so.” Even if Congress meant to elevate conduct to a harm under common law, Congress cannot create an injury where one does not exist. The Seventh Circuit’s decision illustrates that Congress’s powers cannot override the limits of the Constitution. 

Deal Proposed in CFPB Structured Settlement Action

The Consumer Financial Protection Bureau and defendants it sued over allegedly unfair, abusive, and deceptive practices related to the transfer of consumers’ future structured settlement payments have reached a proposed settlement that will see the defendants pay $50,000 in fines and penalties and be permanently banned from making any referrals related to structured settlement transaction advice. More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: This case is a perfect example parties can use regarding the continued need for CFPB enforcement. This settlement is a result of a lawsuit filed by the Maryland Attorney General in May of 2016, which would concern anyone when reading through the facts of the case. The defendants were accused of “reap(ing) immense profits” from lead poisoning victims, “many of whom were mentally impaired” by using manipulation to persuade the victims to sell their payouts awarded at a discounted price of only 25% to 30% of the amount owed. Is $50,000 a reasonable penalty for these types of actions? I say no and am saddened to see that the resolution took five years. However, the defendants did not walk away unscathed if there is any truth in these accused actions and will hopefully deter others from participating in these types of dealings. 

Hunstein Files Brief With Eleventh Circuit in Preparation for En Banc Hearing

By using a mail house to print and mail a collection letter, thus “exposing … non-public information to an unauthorized third party,” the plaintiff-appellant in Hunstein v. Preferred Collection & Management Services suffered a concrete injury and thus has standing to sue, his attorney argued in a brief that was filed last week with the Court of Appeals for the Eleventh Circuit in preparation for an en banc hearing in the case. More details here.

WHAT THIS MEANS, FROM DALE GOLDEN OF GOLDEN SCAZ GAGAIN: The Plaintiff has filed his initial brief with the Eleventh Circuit in the Hunstein en banc proceeding that has the ARM industry gripped. The brief itself offers little more than a regurgitation of the 2-1 majority’s ruling in Hunstien II. That ruling, of course, quickly gave birth to a sua sponte Order from the Court vacating Hunstein II in favor of the en banc review. And the Court then ordered the parties to brief the issue of whether Hunstein possessed Article III jurisdictional standing. In his zeal to convince the Court he suffered a “concrete injury” when the agency sent data regarding his debt to a letter vendor, Hunstein oddly compares his claimed injury to that of “a woman who sees the flash of a peeping tom’s camera as she gets out of the shower.” This seems to be quite a stretch and—at least in my mind—a bridge too far for any of the circuit court judges that may be fence-riders in this case. The abrupt, sua sponte Order vacating Hunstein II suggests a number of judges were unhappy with the ruling. And it’s likely that they did not find the majority’s decision to analogize the 1692c(b) claim to the common law tort of publication of private facts by essentially laying waste the necessary element of publication. Since the Eleventh Circuit made clear in Trichell that when determining whether standing exists for a statutory claim by examining whether the claim is closely analogous to a common law tort claim, the court cannot jettison bedrock elements of the tort claim, it seems reasonable to conclude the en banc review is likely to reject Hunstein II and find no jurisdiction because there was no “publication” — which requires communication to the public at large and not just to a third person.

Judge Grants MTD in FDCPA Case Due to Lack of Standing

Saying that you expended “time, money, and effort” trying to identify what to do when you are confused as to whom the original creditor was after receiving a collection letter is not enough for a plaintiff to have standing to sue, ruled a District Court judge in Maryland, who has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act class-action lawsuit. More details here.

WHAT THIS MEANS, FROM CHRISTOPHER MORRIS OF BASSFORD REMELE: In Whitfield, the plaintiff received correspondence from a third party collection agency, which she alleged was confusing as to the identity of the creditor. She sued for violation of FDCPA. Although the complaint included express allegations that plaintiff suffered emotional distress and spent time and money to sort out the confusion, the district court nevertheless granted defendant’s motion to dismiss based on lack of Article III standing. Citing both the Twombly pleading standard and the Ramirez test for standing, the court reasoned that it was simply not plausible that deciding to do nothing in response to a confusing letter caused plaintiff to expend time and money or caused emotional harm. The court also noted as significant that the plaintiff did not allege actual reliance on statements in the collection letter. This case illustrates that federal courts may be willing to go beyond allegations of actual damage, and consider the common sense context of the situation presented, in deciding on a Rule 12 motion to dismiss whether the allegations of a complaint are sufficient to establish standing.

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

A default judgment obtained in an underlying collection lawsuit is enough of a concrete injury for a plaintiff to have standing in a Fair Debt Collection Practices Act case, a District Court judge in California has ruled, disagreeing with the plaintiff’s contention that he does not have standing and denying his motion to remand the case back to state court. More details here.

WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: Following the current general trend where everything seems to be topsy turvy (a legal term of art) we have another in the current line of cases where a plaintiff files an FDCPA suit seeking damages because of grievous injury and then subsequently takes the position that there was only “a bare procedural violation.” Initially, two questions come to mind – if the plaintiff believes that then why is he/she wasting the Court’s time and resources with this, and secondly, can you spell “materiality?” 

To step back a sec, since the Supreme Court issued its decision in TransUnion LLC v. Ramirez, the question regarding federal Article III standing has become a major issue in regard to FDCPA claims brought in the federal courts. After a significant number of Judges have ruled Plaintiff’s lack Article III standing and dismissed cases without prejudice, some without a defendant even requesting same, leaving Plaintiffs to refile in state court, we saw a change in practice by the Plaintiffs’ bar. Those same attorneys realized they could save the $420 filing fee, and time, by simply bringing the cases directly in the state courts where Article III does not apply. Given the common belief among defense counsel that “we don’t want to be in state court,” many counsel moved to remove those state filed cases to federal courts based on a federal question, i.e. the alleged FDCPA violation. So far, so good. 

However, we were back to the gateway question of Article III standing. Plaintiffs’ counsel, knowing defendants in general did not want to be in state court moved to “remand,” return the case to the state court from whence it came. To do that they were forced to admit their cases were, dare I say it, bordering on the frivolous, only “a bare procedural violation.” Equally absurd, defendants, if they wanted to stay in the federal court now had to argue that a plaintiff could show “that he/she suffered an actual injury in fact that is concrete, particularized, and actual or imminent.” As the saying goes, be careful what you ask for.

Coming back to the instant case, here the basic claim was that sewer service led to a default judgment which then needed to be dealt with and legal costs were accrued. Courts have found that money spent defending debt collection actions qualify as an actual injury and therefore this Court found there was Article III standing and the case will proceed. 

As a final thought to my fellow defense counsel, going forward I think a lot of us are going to be in the local state courts more than we ever imagined. Happy New Year.

Florida CFO Asks CFPB to ‘Reevaluate’ Reg F’s Communication Provisions

Add the state of Florida to the list of those opposed to Regulation F’s provisions allowing debt collectors to privately communicate with individuals over social media networks as well as text messages and email to attempt to collect unpaid debts. The Chief Financial Officer of the state sent a letter to Rohit Chopra, the Director of the Consumer Financial Protection Bureau, asking the agency to “reevaluate the merit” of the provisions because he “seriously” doubts how effective those channels will be. More details here.

WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER BURNETTE: Change is hard, and changing a statute that hasn’t been meaningfully updated since its inception makes change even harder. But I think Mr. Patronis’s letter buys into the narrative that debt collectors can now casually slide into a consumer’s DMs and deceive them into paying the debts. In reality, debt collectors have a series of guidelines they must follow when contacting consumers through these means: they must clearly identify themselves, they must offer opt-out options, and any social media messages must be private. The letter similarly gives short shrift to the power consumers hold over their electronic footprints: Facebook users, for example, can ignore or decline friend requests; cell phones and service providers offer numerous options for blocking unwanted calls or texts; and consumers can opt out of electronic communications.

It’s not surprising that opening new channels for debt collection is giving some folks pause—and to be sure, we’ve all received our fair share of phishing emails and junk texts. But as we all know, these schemes existed long before the new rules took effect. Depriving debt collectors of the ability to legally utilize modern means of communication is not the solution.

Judge Awards $265k to Plaintiffs’ Attorneys in FDCPA Case

A District Court judge in Nebraska has rejected a defendant’s objection to the award of attorney’s fees in a Fair Debt Collection Practices Act case, and has agreed to the plaintiff’s request to award more than $265,000 while also denying a request from the defendant to stay the injunction while the ruling is being appealed to the Eighth Circuit Court of Appeals. More details here.

WHAT THIS MEANS, FROM JASON TOMPKINS OF BALCH & BINGHAM: It’s no mystery why plaintiffs’ attorneys continue to file class actions where the consumers they represent don’t have any real damages and stand to recover nothing more than statutory damages. Here, the court awarded $50,000 in statutory damages (after rejecting a jury’s defense verdict), and then granted the plaintiffs’ attorneys more than five times that amount in fees. In doing so, the judge engaged in very little analysis and did not address the defendants’ arguments that the fees were disproportionate to the result, that hours were duplicative and unreasonable, and even that some of the billed tasks were for a separate case.  When litigating cases like this, debt collectors must estimate their exposure not just by statutory damages, but also taking account of the possibility that the attorneys could recover for every hour, regardless of how disproportionate that may be. Awards like these will incentivize plaintiffs’ attorneys to continue to file class actions with little actual relief to consumers, but great benefit to themselves.

Appeals Court Partially Affirms Ruling in FDCPA Case, But Overturns Award of Attorneys’ Fees & Costs

The Court of Appeals for the Ninth Circuit has partially affirmed and partially overturned a lower court’s ruling in a Fair Debt Collection Practices Act case, determining that the defendant was not entitled to fees and costs from the plaintiff because the District Court judge incorrectly applied a legal doctrine. More details here.

WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: The Ninth Circuit Court of Appeals recently reversed a judgment from the District Court of Oregon that had awarded a prevailing FDCPA defendant over $65,000 in attorneys’ fees. See Bjornsdotter v. Suttell & Hammer, P.S., 2021 WL 6118166 (9th Cir. Dec. 27, 2021); Bjornsdotter v. Suttell & Hammer, P.S., 2020 WL 2840245 (June 1, 2020). While that may sound like bad news, there are positive takeaways. 

First, the Ninth Circuit still found that Suttell & Hammer, a creditors-rights law firm, was entitled to a summary judgment on the plaintiff’s various FDCPA claims. The Court merely found that the defense should prevail for a different legal reason (issue preclusion) than the one ultimately relied upon by the district court (the Rooker-Feldman doctrine). 

Second, while the Ninth Circuit reversed the defense fee award, it did not find the award of fees under the FDCPA to be necessarily improper. Instead, the Ninth Circuit pointed out that the fee award had, in part, been based upon  the district court’s finding (now rejected by the Ninth Circuit) that the claims were barred by the Rooker-Feldman doctrine, and remanded so the district court could “reevaluate whether attorneys’ fees remain warranted” considering the alternate reasoning for barring the claims (issue preclusion). 

So, this case may still end with an FDCPA defense fee award. That is not a typical or easy-to-obtain result, as any industry defense attorney will tell you. To obtain a defense fee award pursuant to 15 USC § 1692k(a)(3), the defendant must do more than just prevail. A court also must find that the plaintiff’s claims were “brought in bad faith and for the purpose of harassment.” In this defense attorney’s view, that provision should be applied by district courts and result in a defense fee award much more frequently than actually occurs. So, the fact that the Oregon District Court made such a finding and award to begin with, and that the Ninth Circuit did not outright reject the fee award, is positive industry news.           

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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