Compliance Digest – January 24

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 Sets Aside Default Against Defendant Because of COVID-19 Restrictions

A District Court judge in Ohio has granted a defendant’s motion to set aside a default and default judgment that was entered against it in a Fair Debt Collection Practices Act lawsuit after it was unable to respond to the complaint in a timely manner as a result of lockdown provisions that were instituted as a result of the COVID-19 pandemic. More details here.

WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: The federal court rules for vacating defaults are fairly reasonable. When the rules are paired with a national disaster (Covid), it is not too surprising that the court agreed to vacate a default judgment. This is especially true when the facts show that service occurred while the agency was shut down by a Nevada state order and the wife of the small business owner was suffering from Covid.

With those basic facts, I was a bit surprised that plaintiff put up such a fight in opposing the motion to vacate. The briefs and numerous exhibits teach a good lesson and likely influenced the court. The exhibits were numerous emails between plaintiff’s counsel and the business owner and later the defense lawyer. At times, plaintiff counsel was reasonable and polite. However, in numerous exchanges he was a bit over the top. Plus, the judgment motion sought the maximum statutory damages under the FDCPA and Ohio law and $2000 in emotional distress for what were not particularly serious claims. The business owner and counsel were generally reasonable and polite in their communications and tried to settle for fair amounts. That record surely helped.

What will now be interesting to see is whether plaintiff can prevail and obtain an award greater than the offers. If not, the fees incurred may not be recoverable. 


NACA Calls for FDCPA, FCRA Penalties to be Increased

Statutory penalties under the Fair Debt Collection Practices Act and the Fair Credit Reporting Act should be tied to inflation and are being devalued because they represent monetary amounts that have not kept up with the times, according to an essay published by the National Association of Consumer Advocates. More details here.

WHAT THIS MEANS, FROM PATRICK NEWMAN OF BASSFORD REMELE: Let’s file this one to the “Be Careful What You Wish For” desk. Given the federal courts’ apparent willingness to dispatch FDCPA claims for lack of any real injury, it seems a very strange time indeed to suggest that the price of poker should go up in these cases.

In any event, the higher the available statutory damages, the greater the settlement demands in these cases will become. That in turn will simply encourage the industry to defend nuisance cases with greater vigor. Be careful what you wish for. (That for which you wish? You take my point.)

CFPB Warns Medical Debt Collectors About Not Complying With No Surprises Act

Companies that collect medical debt were put on notice yesterday by the Consumer Financial Protection Bureau to make sure that the debts they are trying to collect are not prohibited under the recently enacted No Surprises Act. Collectors that attempt to collect debts that exceed the amount permitted under the No Surprises Act could be found in violation of the Fair Debt Collection Practices Act, while those that furnish inaccurate information about unpaid medical debts in which the amount owed exceeds the amount permitted under the No Surprises Act could be found in violation of the Fair Credit Reporting Act. More details here.

WHAT THIS MEANS, FROM LESLIE BENDER OF CLARK HILL: Patrick Lencioni wrote, “life is full of surprises: new opportunities come up; that’s part of the fun – the adventure of life. The thing is, chaos doesn’t allow us to enjoy the adventure.” When it comes to the complexity of billing for medical services and the steps involved in seeking payment or reimbursement for care, in recent years we’ve seen waves of regulatory and legislative attempts to rein in the chaos. The NCLC launched a state legislative initiative in 2019 which has been successful in attracting the support of a wide range of stakeholders and state law makers. Concurrently, a number of federal legislative efforts have focused on the turmoil from a consumer’s perspective of receiving “surprise” bills. In its recent pre-publication of its Bulletin 2022-01, the Bureau explains that the FDCPA would prohibit a debt collector from attempting to collect debts the No Surprises Act would prohibit. In short, a debt collector would need to undertake some form of due diligence when receiving medical debts to evaluate whether or not all or a component of an overdue bill stems from “out of network” charges for emergency services in violation of the No Surprises Act or undisclosed out of network medical charges rendered in an “in network” facility or site. Moreover, debt collectors that furnish data to consumer reporting agencies must similarly assure that they are not furnishing information to consumer reporting agencies that are “inaccurate” insofar as they would violate the No Surprises Act (and thus are not the obligation of a consumer).

Director Chopra has committed that the “Bureau will closely review the practices of those engaged in the collection or reporting of medical debt” and “will hold debt collectors accountable for failing to comply with the FDCPA and Regulation F, and it will hold CRAs and furnishers accountable for failing to comply with the FCRA and Regulation V.” Stay tuned as we see how the Bureau will “use all appropriate tools to assess whether supervisory, enforcement, or other action may be necessary.”

Navient to Cancel $1.8B in Student Loans Under Deal with State AGs

A deal was announced yesterday between student loan servicer Navient and 39 state attorneys general that will see the company pay $145 million in restitution and cancel $1.7 billion in delinquent private student loans to settle claims it took advantage of individuals when servicing and collecting on their student loans. More details here.

WHAT THIS MEANS, FROM CARLOS ORTIZ OF POLSINELLI: Thirty-nine state attorneys general have settled claims against Navient where the student loan servicing company will cancel $1.7 billion in student loan debt and pay $142.5 million in restitution to borrowers. The settlement will resolve allegations that Navient engaged in predatory lending and unfair collection practices, such as approving loans for students it knew were unlikely to be able to repay them. This settlement shows that state attorneys general are focusing on the borrower’s ability to repay as a basis for investigations of and claims against loan servicers.  The loan servicing industry should expect greater scrutiny regarding its practices in screening borrowers at the time of loan origination and whether servicers knew or should have known that the borrower would be unable to repay based on factors like low credit scores and attendance at schools with poor graduation rates. The settlement resolves several lawsuits filed by attorneys general in California, Illinois, Mississippi, New Jersey, Pennsylvania, and Washington, however, it does not impact lawsuit that the CFPB filed against Navient in 2017 involving similar allegations.

BK Appeals Court Overturns Attorney’s Fee Award Over Time-Barred Claims

The Bankruptcy Appellate Panel, Ninth Circuit, has overturned a bankruptcy’s court ruling that awarded a debtor attorney’s fees after a debt collector filed proofs of claim that were time-barred. More details here.

WHAT THIS MEANS, FROM ALAN HOCHHEISER OF MAURICE WUTSCHER: What it means is that creditors do not need to fear filing proof of claims that comply with the law and are subject to an objection. It is the act of filing the claim that could subject the creditor to an award of fees. The court found that under certain statutes, a court may award attorney fees if provided for in the contract. Here the court found, no such provision in the Nevada statute. While this case may have been limited to the 9th circuit, its application should provide a defense to claims for fees based on fee-shifting statutes in other jurisdictions. The language of the statute will determine if fees can be awarded. Hopefully, creditors who do not prevail on objections to proof of claims, will not need to defend actions for attorney fees.  

It should be noted that the court also reiterated the Supreme Court of the United States’ ruling in Midland v. Johnson that filing an out of statute claim is not a “groundless” claim but one subject to an affirmative defense. The court overturned the bankruptcy court’s decision and did not remand for a determination if the claim was “groundless” which was a win for creditors.  

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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