Compliance Digest – January 17

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.

CFPB Calls Out Credit Bureaus in Report Diving into Consumer Complaints

The three major credit reporting agencies — Equifax, Experian, and TransUnion — are not treating consumers fairly, which is resulting in consumers suffering “serious harms,” according to a report issued yesterday by the Consumer Financial Protection Bureau. The report, along with pointing out how the three major bureaus are failing to meet their statutory obligations under the Fair Credit Reporting Act, also cited the “unnavigable quagmire” of medical debt as a problem that needs to be addressed. More details here.

WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: The Consumer Financial Protection Bureau’s (CFPB or Bureau) “Annual Report of Consumer and Credit Reporting Complaints: An Analysis of Complaint Responses by Equifax, Experian, Transunion” is both perplexing and concerning.  In years past, the CFPB has issued a Consumer Response Annual Report to satisfy its reporting obligations under the Fair Credit Reporting Act. The CFPB’s current report seems to take that obligation one step further, which could suggest that other financial services industries could face the same shaming.

The CFPB’s report acknowledges and recognizes that there is an increase in 3rd parties (credit repair organizations) who are submitting complaints on behalf of consumers. However, the Bureau’s report makes no conclusions or corollaries that the credit repair organizations (CROs) are the reason for the drastic increase in complaints. Those of us in the ARM industry know this to be the case. According to the CFPB there are “46,000 businesses offering credit repair services in the United States”. These are for-profit businesses and even if each CRO filed 10 complaints on behalf of their consumer clients, you can see how the numbers could easily increase.

The CFPB’s report finds that credit bureaus provided less than 2% of relief to consumers but it speaks nothing to the dispute and reasonable investigation process and the information furnished. Although credit bureaus can make a determination of accuracy, it is in conjunction with the information provided by data furnishers. The Bureau makes no mention of whether the 2% relief was before or after a data furnisher conducted a reasonable investigation.

Bottom line, credit reporting and data furnishing, especially of medical debt, are in the CFPB’s bull’s eye. Unfortunately ARM industry members must devote the necessary resources of responding to each and every credit reporting dispute regardless of where the complaint came from. Compliance processes must be in place to ensure appropriate investigation and appropriate response even in the event of a duplicate dispute.

This “Annual” report is just the beginning of the increased scrutiny of credit reporting.


Another Judge Grants Stay in Hunstein Case Until En Banc Ruling Issued

Similar to the named plaintiff in a class-action lawsuit being emblematic of the injuries suffered by everyone in the class, I’m using this case to point out that judges across Florida are granting stays in Hunstein copycat cases in anticipation of the en banc hearing and ruling that will be forthcoming from the Eleventh Circuit Court of Appeals. More details here.

WHAT THIS MEANS, FROM CAREN ENLOE OF SMITH DEBNAM: The Court’s decision to stay in Clarke and other Hunstein copy cat cases across the Eleventh Circuit is not unexpected.  Motions to stay serve the purpose of promoting judicial economy and preventing the expenditure of resources by the parties unnecessarily. While I think we can expect to see motions to stay be prevalent in the Eleventh Circuit, I don’t expect to see them be prevalent outside the Eleventh Circuit. Here’s why: by doing so, parties are giving some deference to whatever the Eleventh Circuit rules (which may not be favorable to their client). Stay tuned as rehearing has been set in Hunstein for February 22.

FTC Publishes Biennial Report to Congress About Do Not Call Registry

The Federal Trade Commission has published its biennial report to Congress detailing information about the national Do Not Call registry, which now has more than 244 million phone numbers on it, while also revealing that consumers filed more than 5 million complaints during the 2021 fiscal year, with robocalls being the source of the overwhelming number of complaints. More details here.

WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY & SHUSTER: If you look at the top complaint categories, several of these industries rely on purchased leads. The lead brokers who sell many of these leads have no real incentive to ensure that the leads comply with state and federal law. If a problem arises, they just disappear into the background leaving the purchaser to bear the brunt of the regulatory inquiry or TCPA class action law suit. Vet your leads!!

NCLC Publishes Guide of State Consumer Protection Laws Going Into Effect in 2022

The National Consumer Law Center has published a guide of all the state consumer laws that are currently scheduled to go into effect at some point in 2022, providing a handy reference to anyone who needs to be aware of such changes. More details here.

WHAT THIS MEANS, FROM STEFANIE JACKMAN OF BALLARD SPAHR: At the state level, the introduction and passage of legislation expanding consumer protections and which directly impacts the receivables industry is anticipated to continue for the foreseeable future. Coming into the midterms, we anticipate additional bills directed at student loan servicing and collections, medical debt, statutes of limitations, documentation for collection lawsuits, and consumer privacy to be introduced, debated and in some instances, signed into law throughout the country again this year. Over the last decade, states have consistently developed and expanded their existing consumer protection statutes. Now, collectors find themselves dealing with a panoply of varying standards and requirements at the state level that shows no sign of abating any time soon. Adding to that is the fact that these state laws often are somewhat ambiguous and there is little to no interpretive guidance or case law. This presents compliance challenges because how and when state law applies may not be clear, often is not consistent, and leaves room for significant potential regulatory and litigation risk. It is important to invest in state law compliance and legislation monitoring to give your organization the best chance at realizing state-level changes and evolving to remain compliant.

FDCPA Class-Action Complaint Accuses Collector of Overshadowing

Does threatening to permanently disconnect an individual’s suspended cell phone service constitute overshadowing? That particular individual is alleging that it does, accusing a collector of violating the Fair Debt Collection Practices Act in a class-action lawsuit. More details here.

WHAT THIS MEANS, FROM LORAINE LYONS OF MALONE FROST MARTIN: This case reminds us that collection letters are subject to scrutiny for a possible claim / class claim. We know the compliance disclosures that must be in collection letters and at times, additional language is helpful for the consumers. Unfortunately, when this additional language is added to the initial validation notice letter, it can provide an opportunity for a claim that the required disclosures were overshadowed. Bottom line: When drafting collection letters, remember letters are prime targets for litigation.

FCC Makes Changes to Reassigned Numbers Database to Improve Usefulness

The Federal Communications Commission last week issued supplemental guidance related to the Reassigned Numbers Database that updates the information included in the database in an attempt to make it more useful, after reports were surfacing that users were expressing concerns and were reluctant to use it. More details here.

WHAT THIS MEANS, FROM ETHAN OSTROFF OF TROUTMAN PEPPER: The FCC’s release of Public Notice with supplement guidelines for the Reassigned Number Database allows the Administrator to use all of the data available to it going back to January 27, 2021, resulting in callers having increased ability to rely on the safe harbor when a query receives a response of “no.”  With this increase of the timeframe of data available to the Administrator, users of the Database can now expect to receive a “yes” or “no” from the Administrator as long as the permanent disconnect date and the “date of consent, which is either the date when the caller obtained consent from the consumer to call the number or a date when the caller could be reasonably certain that the consumer could still be reached at that number,” both occurred after January 27, 2021 – not October 15, 2021 as has been the case since the Database became active a few months ago.

The Database is intended to help callers by returning one of three responses to explain whether a number has been permanently disconnected (i.e. reassigned) since the date provided: “yes,” “no,” or “no data.”  Prior to these guidelines coming out, callers were receiving an unexpectedly large number of “no data” responses when the reassigned and consent dates were not both after October 15, 2021. Now, if the date of consent is after January 27, 2021, callers should no longer receive “no data” responses and be able to rely on the Database. According to the FCC, “[a]t a high level, the meaning of the results, as prescribed by the Reassigned Numbers Order, remains unchanged: ‘yes’ means the number has been disconnected subsequent to the caller having received prior express consent to call the number, ‘no’ means the number has not been disconnected (and would have been in the database if it had been disconnected), and ‘no data’ means the database does not contain the relevant data to determine whether the number has been disconnected during the time of the query.” It is important to keep in mind, however, that the Database does not help with dialing wrong numbers as a result of anything other than reassignment of a number.  

Calif. Appeals Court Affirms Ruling Prohibiting Bail Company From Collecting on $38M

The California Court of Appeals last week upheld a lower court’s ruling barring a company from collecting on $38 million of unpaid debt because consumers were not provided the proper disclosures in advance. More details here.

WHAT THIS MEANS, FROM JUNE COLEMAN OF MESSER STRICKLER BURNETTE: In a decision that should be a warning for any creditor who obtains co-signers in California, a California Appellate Court held that the bail bond company could not recover against a co-signer under a premium financing agreement because the bail bond company had not provided a statutorily required notice to the co-signer. In BBBB Bonding Corp. v. Caldwell, appellate case no. A162453 (Dec. 29, 2021), the bail bond company contacted Caldwell to inform her that her friend had been arrested and so Caldwell could bail her friend out, Caldwell would need to sign a contract where she would become liable for the bond, an indemnity agreement for the surety bail bond, and an indemnitor/guarantor check list that would allow her be a guarantor of the premium for the bond over time, where Caldwell acknowledges that she would be responsible for making the premium payment, and the contract states that Caldwell’s friend would also sign an agreement to make such payments for the bond premium. In other words, Caldwell would become the guarantor of her friend’s bond premium payments. When Caldwell’s friend did not make payments, BBBB began to take collection efforts against Caldwell, which ultimately included a collection lawsuit. Bad Boy Bail Bonds, otherwise known as BBBB, appears to have filed approximately 150 lawsuits, and it is purported that BBBB was attempting to collect approximately $38 million from co-signers through these lawsuits over the preceding 18 months prior to the filing of the instant lawsuit. The Caldwell collection lawsuit resulted in the filing of a class action cross-complaint alleging violation of California’s Unfair Competition Law for failing to provide a consumer protection notice required when there is a co-signer involved in a credit transaction. 

In California, generally speaking, Civil Code section 1799.91 requires a specific notice to a co-signer if a creditor (1) obtains the signature of more than one person (2) on a consumer credit contract, (3) the co-signer does not receive any of the money, services, property , or other consideration under the contract, and (4) the signatories are not married. The transaction must also fall within one of the following six broad categories:

  1. Retail installment contracts;
  2. Retail installment accounts;
  3. Conditional sales contracts;
  4. Loans or extensions of credit unsecured or secured by other than real property;
  5. Loans or extensions of credit that are subject to certain Business and Professions Code provisions related to real property loans; and
  6. Lease contracts

While some people can afford the bail bond premium, others sign a credit agreement where they will pay off the bail bond premium over time. Caldwell entered into one of these latter types of agreements to finance the initial premium for the bond. Caldwell’s friend signed a separate agreement that was for all intents and purposes identical to the one signed by Caldwell. 

BBBB tried to distinguish this premium finance agreement from other credit transactions because bail bond companies are licensed and highly regulated. The Appellate Court rejected this argument because the argument was not supported by any statutory authority under either the consumer credit transaction statutes or the bail bond regulatory scheme and licensing provisions that would preclude the enforcement of all regulatory and statutory schemes. BBBB also argued that these premium finance agreements were more like insurance contracts, in an attempt to distinguish these premium finance agreements from other credit transactions. The Appellate Court disagreed, recognizing that the bond may be more like an insurance contract, but the finance agreement for the initial bond premium was a credit transaction, extending credit to obtain the bond now, even though the premium had not been paid in full at the time of the contract, but would be paid over time. Moreover, the guarantee is expressly between the bail bond company and the guarantor – the insurance company that carries the bond is not a party to the premium financing agreement. The Appellate Court concluded that the premium finance agreement arose from a credit transaction. 

BBBB also argued that the premium finance agreement was not signed by both parties as required under section 1799.91, but rather identical agreements were signed by each party.  Since the agreement did not contain both signatures, BBBB argued, the statutory notice did not apply. The Court found that to allow such a work around would defeat the purpose of the consumer protection statute. BBBB also argued that since Caldwell received services in the form of the personal benefit of bailing her friend from jail, the notice provision did not apply. The Court was not persuaded by this argument either. 

Concluding that the notice statute applied, the Court issued a preliminary injunction preventing BBBB from filing any additional lawsuits, prosecuting any pending lawsuits, or even enforcing any judgments already obtained. In addressing enforcement efforts on existing judgments, the Appellate Court took the view that the preliminary injunction was temporary, and forestalled collection and enforcement efforts while the case proceeded to an adjudication of the class claims, without disturbing or reversing any prior judgment. This is an interesting facet, as there are many cases that have held that a court cannot disturb and re-litigate a judgment.  It will be interesting to see how this aspect unfolds.

We in the credit industry are used to consumer protection notice requirements in typical retail sales circumstances, such as auto purchases, leases, or other types of loans. But the receivables industry, from creditors to collection professionals, should keep an eye out for other credit situations which fall within the consumer protection arena. For those that work with the bail bond industry, the Plaintiff’s bar appears to be focused now on this industry.

N.Y. Enacts Law Lowering Judgment Interest on Consumer Debts

The Governor of New York last week signed a bill into law that will lower the interest rate that can be charged on unpaid money judgments to 2%. The law not only applies to new judgments, but also will be applied retroactively to any judgment that is not fully paid or satisfied when the law goes into effect. The law is scheduled to go into effect on April 30. More details here.

WHAT THIS MEANS, FROM JOHN REDDING OF ALSTON & BIRD: Effective April 30, New York will lower the interest rate on unpaid money judgments for consumer debts, including consumer credit transactions, from 9% to 2%. While claiming this change is being made because debt collectors will eventually buy debts stemming from COVID-19 and use “extraordinary means to seek legal judgments,” the justification is  questionable at best. If this were really about COVID-19 debts and extraordinary measures – apparently filing suit to recover amounts validly extended to the consumer that they refuse to pay is “extraordinary” in New York – there would be no need for this to be retroactive and apply to any judgment not fully paid as of April 30. Let’s call this what it is – a paternalistic effort by the state to force creditors to recover less than they otherwise would from consumers who refuse to work with those creditors or their collectors to resolve unpaid debts. All the while, the legislature and governor conveniently ignore the fact this will ultimately work to the detriment of those who pay their bills or are trying to get back on their feet through higher cost of credit and an increased unwillingness to extend credit to the marginally creditworthy given anticipated reduced recoveries and the costs associated with making those recoveries.

FDCPA Class Action Alleges ‘Contradictory’ Statements in Letter Misled Consumer

A class-action complaint has been filed against a collector for allegedly violating the Fair Debt Collection Practices Act because it mentioned at the top of a collection letter that the letter’s recipient could call the collector for further assistance, while disclosing at the bottom of the letter that if the recipient wanted to dispute the debt, it had to be done in writing. The allegedly contradictory statements were misleading and confusing to the individual, according to the complaint. More details here.

WHAT THIS MEANS, FROM AMANDA GRIFFITH OF BERMAN BERMAN BERMAN LOWARY & SCHNEIDER: The class action complaint concerns a pre-Regulation F letter sent in August of 2021. However, the allegations may have some Regulation F implications down the road given the overshadowing allegations. Albeit early in the case, the primary allegations concern whether the language to “call” about the debt overshadows the FDCPA notice that the debt must be disputed in writing. The CFPB’s model validation notice under the heading “How can you dispute the debt?” specifically states “Call or write to us by ______ to dispute all or part of this debt”; thus, giving the debtor two choices. It is unknown at this stage in the litigation whether the collector would have honored a called-in dispute.

Collector Accused in Class-Action of Not Deleting Tradeline as Promised

A class-action complaint has been filed against a debt collector for violating the Fair Debt Collection Practices Act because it allegedly offered to delete a debt from an individual’s credit report if the individual accepted a settlement offer, but instead reported the debt as “paid” with a $0 balance instead. More details here.

WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: At this point, the claims asserted in this lawsuit are just allegations. The defendant will have an opportunity to refute those allegations and to assert a number of potential defenses. Because it is too early to comment on the validity of plaintiff’s claims, I will just note that as a general rule payers are not plaintiffs. That is, most consumers who pay or settle their debts are not looking to file FDCPA suits. There are, of course, exceptions to this rule and one way that a payer might become a plaintiff is if the file is not accurately coded and closed following payment. 

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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