Compliance Digest – January 31

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.

Debt Buyer Sues Citi for ‘Bait and Switch’ When Selling Portfolios

A debt buyer has filed suit against Citigroup, accusing the mega-bank of a “classic ‘bait and switch’ ” by promising to sell delinquent credit card portfolios containing accounts with certain characteristics, but instead putting accounts into the portfolios that had a much lower chance of recovery. More details here.

WHAT THIS MEANS, FROM SHANNON MILLER OF MAURICE WUTSCHER: Earlier this month, debt buyer Absolute Resolutions Investments (“Absolute”) commenced a civil action against Citibank, N.A. (“Citi”) in the federal District Court for the Southern District of New York seeking redress for causes of action including fraud, negligent misrepresentation, breach of contract, and breach of covenant of good faith. Absolute alleges that Citi misrepresented the nature and quality of pools of charged-off delinquent credit card debt which Absolute had contracted to purchase from Citi by offering Absolute sample account portfolios during the bidding phase of the contracting which reflected higher quality accounts than those which were ultimately delivered to Absolute. Absolute alleges that this was an intentional strategy implemented by Citi to “offload[] its undesirable debt accounts to Absolute” and “keeping for itself” “the more desirable accounts with a higher likelihood of recovery”.

Specifically, Absolute claims in its lawsuit that as part of the debt buying process, prospective buyers are given a sample portfolio by Citi to assist them in pricing their bids which contains account-level information about debts to be included in the sale portfolio, including the amount owed by the debtor, the charge-off date, last payment date, whether there has been a first payment default, the state of residence of the account holder, whether the account is eligible for assistance from a debt settlement company, and other important information about the account. Absolute alleges that the sample portfolio information, allows a prospective buyer such as itself to see key characteristics of the accounts that enable the buyer to conduct its own analysis of the likelihood of collecting on those accounts and the likely aggregate value of those accounts to the prospective buyer. Absolute alleges further that Citi was contractually obligated to provide accounts “substantially similar” to those as reflected by the sample portfolio information, meaning that “the key account characteristics in the purchased account bundles should substantially match, in all material respects, the key account characteristics in the sample portfolio that is presented to bidders such as Absolute to solicit their bids”.

However, Absolute alleges that although Citi held a right to retain up to 20% of eligible sale accounts and remove them from the portfolio to be purchased for very limited circumstances, Citi intentionally “’cherry-pick[ed]’quality accounts, despite its statement that the selection and removal process would be randomized”. This is alleged to be at Absolute’s detriment, as the portfolio ultimately sold to Absolute allegedly contained a materially lower percentage of high-value accounts and a materially higher percentage of low-value accounts than what had been previewed in the sample portfolio information.

In new twist, on January 19 the Court issued an order directing Absolute to file an amended complaint to correct issues with what the Court perceived as defects in Absolute’s invocation of jurisdiction based upon diversity of the parties. Thereafter, on January 21, Absolute dismissed its lawsuit without prejudice. It is unknown at this time whether an amended pleading will be filed in the federal court or if Absolute will pursue its claims in state court.

The take-away is that it is yet to be seen if this lawsuit is simply a reflection of a disgruntled debt buyer or a larger and systemic issue within the debt buying industry that may lead to attempts by the industry to modify the usually standardized terms by which they purchase debt from originators like Citi, who traditionally hold significant power over setting the contractual terms in issue.


Appeals Court Affirms Ruling for Defendant in TCPA ATDS Case

The Court of Appeals for the Ninth Circuit has affirmed a lower court’s ruling in favor of a defendant that was accused of violating the Telephone Consumer Protection Act by contacting the plaintiff using an automated telephone dialing system. More details here.

WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: Courtesy of the Ninth Circuit Court of Appeals in an unpublished decision, Meier v. Allied Interstate LLC, another nail has been added to the coffin of footnote #7 in the Supreme Court’s Facebook v. Duguid TCPA decision. The plaintiff’s bar has seized upon the now infamous footnote #7 to argue that telephone equipment which sequentially dials a mere “preproduced list” of telephone numbers constitutes an autodialer (ATDS) under the TCPA. WRONG, according to the Ninth Circuit. 

The plaintiff in Meier argued that LiveVox’s HCI system was an autodialer because it uploaded a customer’s list of numbers and then dialed them in the same order they were provided, i.e., sequentially. The Ninth Circuit rejected this aggressive ATDS interpretation and stated that such an expansive interpretation of an autodialer was contrary to the Supreme Court’s autodialer definition. Bottom Line: The Ninth Circuit held that the LiveVox HCI system does not produce the numbers it dials “using a random or sequential number generator” and therefore the LiveVox system is not an ATDS. Further, a dialing system that merely stores pre-produced lists of telephone numbers in the order in which they are uploaded is not an ATDS. Random and sequential number generation in the production or storage of the numbers is key. 

Next, the Ninth Circuit held that the footnote #7 discussion in Facebook was not relevant to the Ninth Circuit’s analysis as to whether dialing equipment is an ATDS under the law. This analysis differs from other favorable federal court decisions holding that the plaintiff’s bar completely misconstrues Facebook’s footnote #7. Either way, the arguments plaintiffs have made as to the impact of footnote #7 on the autodialer interpretation has virtually all but collapsed. 

The Ninth Circuit also held that the LiveVox HCI system was not an autodialer because the system does not “automatically dial” calls. Bottom Line: The LiveVox HCI system is NOT automatic. The word “automatic” is the main word in “automatic telephone dialing system”.  NOTE: the Ninth Circuit never  mentions the word “human intervention” as the Facebook case rejected human intervention as a test to determine if calling equipment is an autodialer. 

Although unpublished, this decision provides an instructive guide for a Court to reject the Footnote #7 analysis used by the plaintiff’s bar and helpfully restores meaning to the word “automatic” in “automatic telephone dialing system.” 

Meier v. Allied Interstate LLC, No. 20-55286, 2022 WL 171933, at *1 (9th Cir. Jan. 19, 2022)

Bill Introduced in N.Y. to Ban Social Media Communications When Collecting

A bill has been introduced in the New York legislature that would ban debt collectors from attempting to collect debts using social media platforms, which would directly contradict what is allowed under the provisions of the Consumer Financial Protection Bureau’s Regulation F. More details here.

WHAT THIS MEANS, FROM LAUREN VALENZUELA OF ACTUATE LAW: While I appreciate that this piece of proposed legislation is attempting to protect consumers, it misses the mark. As a millennial, I can tell you I’m more faithful about checking my social media direct messages than I am about checking my mail or answering my phone – and I am not alone. According the Pew Research Center seven-in-ten Americans use social media. That is a lot of people! In the modern day and age we live in, the fact of the matter is that social media has become, and will remain, a mainstream way consumers communicate and connect with the world. In order for consumers to make informed decisions about their finances they need information. If social media, used within the bounds of the law, is a communication medium that works for some consumers, why take it away? In my humble opinion, social media is not an area where consumers need protection from debt collectors because consumers already have a lot of control over who, when, and how they communicate on social media platforms. For example, social media platforms allow consumers to report activity they do not like, they allow consumers to simply ignore or delete messages, and they allow consumers to block users from communicating with them.  Furthermore, Regulation F already provides sufficient protection when it comes to social media (e.g., debt collectors can only communicate with consumers by private direct messages, a consumer can inform a debt collector that social media is a prohibited type of media and the debt collector must honor the consumer’s request to not use it, debt collectors cannot use any deceptive or misleading practices when attempting to collect a debt full stop, etc.) So while I applaud the assemblywoman’s efforts, I think it misses the mark.

I wish all legislators across the country would give Regulation F a little bit of time to “do its thing” – so we can see how it is, or is not, protecting consumers and law abiding debt collectors (don’t forget, one of the main purposes of the Fair Debt Collection Practices Act is “to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged”). If state legislators waited for more data to be gathered under Regulation F, it would allow them to better pin point areas where their states may fill any gaps. This would allow them to design laws that are more meaningful for consumers – period.

Judge Grants MSJ For Defendant in FCRA Case Over Accessing Credit Report When Collecting on Debt

In a case that was defended by David Schultz and the team at Hinshaw Culbertson, a District Court judge in Arizona has granted a defendant’s motion for summary judgment after it was accused in a class action of violating the Fair Credit Reporting Act for accessing an individual’s credit report in order to obtain a mailing address so it could attempt to collect on a debt. More details here.

WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: We’ve seen an increase in FCRA lawsuits over the past few years. As with any bourgeoning area of litigation concerning a particular statute, plaintiffs work to expand the scope of protections afforded to the consumer. Here, the plaintiff attempted to assert that the collection firm accessed her credit report without a proper purpose because assessment of the HOA fees did not constitute a “credit transaction.” Fortunately, the court agreed with the defendant’s apt analysis of the law and declined to unnecessarily expand the scope of protections under the FCRA. This is a great defense win and helps to better define the confines of a “credit transaction” under the FCRA.

Judge Grants MSJ in FDCPA Cases Over ‘Not an Attempt’ to Collect Disclosure in Letter

When is a communication from a debt collector not an attempt to collect a debt? If it says so in a letter to an attorney representing a consumer, is that enough? A District Court judge in Pennsylvania thinks so, and has granted a defendant’s motion for summary judgment in three consolidated Fair Debt Collection Practices Act lawsuits that accused a collector of violating the statute by saying “this communication is from a debt collector but is not an attempt to collect a debt” in a letter providing validation information that was requested. More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: Can a communication from a debt collector not be an attempt to collect a debt? This simple question is vital as to succeed in an FDCPA lawsuit, a plaintiff must prove four things. First, they are the consumer; second, the defendant is a debt collector; third, the issue at hand involves an attempt to collect a debt; and lastly, that the defendant violated a providing of the FDCPA when the defendant was attempting to collect a debt.   If a plaintiff cannot show the debt collector was attempting to collect a debt, then an action under the FDCPA would be unsuccessful. 

While this may seem simple to distinguish, as the Court points out, to show an attempt to collect a debt, it is not necessary to prove an actual demand for payment. An attempt to collect a debt can be as simple as showing that the letter included a discussion of the debt’s status, options to avoid default, or even a request for financial information. In this case, the defendant’s letters did not include any such information or requests. Instead, the letters in this case only identified the Defendants as a debt collector and provided the balance information requested by Plaintiff; the latter part of that statement, requested by Plaintiff, is a crucial element. 

So, what this case tells us is that a debt collector can send correspondence that is not an attempt to collect a debt. However, if correspondence is sent in response to a consumer’s request and provides only a simple overview limited to the information directly requested by the consumer, add one more piece of information, including a number to make a payment, and a different conclusion by a Court could be found. 

Judge Grants MTD in FDCPA Case on All Claims But One

When a collector is informed that a consumer is being represented by an attorney, there are not many exceptions allowing the collector to contact the consumer directly. One of those exceptions is when the attorney fails to respond within a reasonable period of time to a communication from a debt collector. But how long is reasonable? A District Court judge in Georgia has granted a defendant’s motion to dismiss all claims except for one in a Fair Debt Collection Practices Act case, ruling that not responding within eight months is not something that can be resolved at this stage in the case. More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: This case is instructive, but not dispositive of the issue of when you can re-contact the consumer.  It was probably properly decided in that the decision was based on a motion to dismiss where the court has to accept all of the facts in the complaint as true. I suspect, however, that the agency will ultimately win on summary judgment. One would have liked the court to say that not responding for eight months is a reasonable period of time, and maybe the judge in the next case will.

Bill Introduced in House to Abolish CFPB

A bill has been introduced in the House of Representatives that seeks to abolish the Consumer Financial Protection Bureau, accusing it of being an “overreaching government agency with no Congressional oversight.” More details here.

WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: On its face this bill seems futile and supercilious. The full text of the bill was published this week and says, in its entirety, the following:

HR 6409


This Act may be cited as the “Repeal CFPB Act”.


The Consumer Financial Protection Act of 2010 (12 U.S.C. 5481 et seq.) is repealed, and the provisions of law amended or repealed by that Act are restored or revived as if the Act had not been enacted.

Let’s be clear, the CFPB is not going away. Both the D.C. Circuit Court and the Supreme Court had the opportunity to do that and chose not to. Sadly, going down the path of seeking elimination makes little sense and only emboldens those that support the agency to dig in their heels even more.

If the last decade has shown us anything its that the CFPB is not apolitical and not independent. The one issue both industry and advocates agree upon is that the CFPB has become a political football. The vast swings of policy depending upon the administration in office serves no purpose. If this group of Congressmen wanted to do something productive they should have continued the pursuit of making the CFPB a commission similar to the FTC.

For the time being, and while the CFPB is still in existence, industry must continue to engage and work with the Bureau especially to address challenges brought on by Regulation F.

State Court Judge Grants MSJ For Defendant in FDCPA Case Over Complaint Filed in Wrong Venue

In a case that is emblematic of the type of debt collection cases now finding their way into state courts across the country, which was defended by Christopher Morris from Bassford Remele and Danielle Savington from Savington Law Offices, a state court judge in Nebraska has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case because it was entitled to the bona fide error defense after allegedly filing a collection lawsuit against the plaintiff in the incorrect venue. More details here.

WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER BURNETTE: One of the most frustrating things about 1692i venue claims is that they’re almost always the product of a bona fide error, but it often makes little economic sense to push the defense through discovery to summary judgment. But this case serves as a great reminder that when a defendant asserts an affirmative defense like bona fide error, and offers sufficient evidence to meet its prima facie burden, the burden shifts back to the consumer to produce evidence showing the violation was not unintentional, and was not the result of a bona fide error. As this opinion shows, this is a burden many consumers will be unable to meet. As such, my take-away from this opinion is that the bona fide error is not only a powerful defense, but can be a powerful settlement tool too—defendants need only remind their opponents that eventually, the burden will shift back to them.  

Preferred Files Brief With Eleventh Circuit in Advance of En Banc Hearing

Congress made a mistake when it drafted Section 1692c(b) of the Fair Debt Collection Practices Act, which prohibits communicating information about a debt with third parties because the way the statute is written, “there would be no corporate debt collectors because debt collectors would violate the FDCPA ever single time they communicated about a debt with any employee, independent contractor, or other agent — i.e., the very people a corporation needs to do anything,” argues the defendant-appellee in its brief to the Eleventh Circuit Court of Appeals in advance of next month’s hearing in Hunstein v. Preferred Collection & Management Services. More details here.

Groups File Amicus Briefs Supporting Preferred in Advance of En Banc Rehearing

Five groups have filed amicus briefs with the Eleventh Circuit Court of Appeals in support of the defendant-appellee in Hunstein v. Preferred Management & Collection Services, each laying out their arguments why the Court should rule that the plaintiff-appellant does not have standing to sue in a Fair Debt Collection Practices Act case that alleges using a vendor to print and mail collection letters constitutes a communication under the statute. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: The Eleventh Circuit is set to hear arguments en banc next month in a landmark Fair Debt Collection Practices Act (“FDCPA”) case regarding whether a corporate debt collector violates the prohibition against communicating about a debt with third parties when it uses a vendor to send collection letters to debtors. The debt collector, Preferred Collection & Management Services, and numerous amici curiae filed their briefs last week, asking that the Eleventh Circuit affirm the district court’s decision dismissing the plaintiff’s complaint for lack of standing or on the merits. The amici include RMA International, the U.S. Chamber of Commerce, the Mortgage Bankers Association and similar financial services associations, nineteen state Creditors Bar Associations, and the Third Party Payment Processors Association.

The debt collector and industry amici argue that contrary to the ruling of the three-judge panel, more than just “some level of disclosure” was necessary to establish an intangible harm supporting standing, or to state a claim under 15 U.S.C. § 1692c(b). They argue that because the debt collector only transmitted the information to its vendor, not the public at large, plaintiff’s injury did not have a common-law analogue as in required for intangible harms after the Supreme Court’s ruling in TransUnion. Furthermore, they argue that a vendor is not a third party within the meaning of Section 1692c but acts as an agent or arm of the debt collector. As explained in the briefing, the panel’s ruling would mean that corporate debt collectors violate the FDCPA every time they communicate with any employee, independent contractor, or agent, making it impossible for them to operate legally — a result Congress could not have intended.

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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