Compliance Digest – February 14

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.

Collector Accused of Violating Reg F’s 7-in-7 Prohibitions

A plaintiff in Illinois has filed a lawsuit against a payment processor and debt collector, alleging it violated the Fair Debt Collection Practices Act and Regulation F by making repeated phone calls to his cell phone after the plaintiff had asked for communications to be ceased. More details here.

WHAT THIS MEANS, FROM CARLOS ORTIZ OF POLSINELLI: According to the Complaint in this recently filed lawsuit, the so-called “7-in-7 Rule” identified under section 1006.14(b)(2)(ii) of Regulation F is at issue. Under that rule, a debt collector is presumed to have violated the FDCPA if it “places a telephone call” to the same person regarding the same debt more than seven times within a seven consecutive day period, or within seven consecutive days after engaging in a phone conversation with that person about the same debt. Placing a telephone call includes a limited content message, unanswered calls and ringless messages. The rule does not apply to text messages, emails, and other types of media. In addition, the rule applies to a particular debt. Thus, in a situation where a debt collector has multiple debts regarding the same individual, the rule is applied on a per debt basis as long as the call is limited to only one debt.

The rule has exclusions. For instance, a call for which the recipient requested does not count if prior consent was given directly to the debt collector and placed within seven days of consent. In addition, not counted towards the seven placed calls are those that do not connect to the dialed number, as well as calls placed to the person’s attorney.

This rule can be tricky so careful training and compliance are necessary.


Judge Denies MTD in FDCPA Class Action, Rules Postage Confers Standing

For more than a year, judges across the country have been attacking the issue of standing and whether plaintiffs suing collectors for violating the Fair Debt Collection Practices Act have suffered a concrete injury. In many of those cases, judges have indicated that a concrete injury is more than just anxiety or emotional distress; there needs to be a financial component. A District Court judge in Hawaii has determined that the price of paying for postage to mail a dispute letter is enough of a concrete injury for a plaintiff to have standing to sue, and has denied a defendant’s motion to dismiss as well as a motion to decertify a class action. More details here.

WHAT THIS MEANS, FROM CHRISTOPHER MORRIS OF BASSFORD REMELE: While federal courts have often dismissed consumer claims over the last year, where a plaintiff’s allegations involve technical statutory violations unaccompanied by any imaginable injury, a recent decision from the District of Hawaii shows that even nominal monetary loss can be enough to establish constitutional standing. In Viernes, the consumer was sued by an agency not licensed to do business in Hawaii, and alleged violation of the FDCPA (seeking to collect a debt without legal authority) and Hawaii state law, which claims were certified as a class. The underlying collection lawsuit had been filed, served, and resulted in a default judgment in favor of the unlicensed agency. In response to that underlying lawsuit, the consumer had sent two dispute letters to the agency, incurring postage of $13.70. The federal court declined the agency’s motions to dismiss and to decertify the class, reasoning that standing existed due to the agency’s underlying collection lawsuit alone, and also because paying postage for two letters “is a concrete harm” traceable to the agency’s commencement of a collection suit without being licensed.

Judge Grants MSJ for Defense in FDCPA Case Over Calls to Consumer’s Grandmother

After already granting a motion to dismiss on one claim that a collector violated the Fair Debt Collection Practices Act when it contacted a plaintiff seeking to collect on a debt that was actually owed by her granddaughter, a District Court judge in Florida has granted the defendant’s motion for summary judgment on the remaining state and federal claims as well. More details here.

WHAT THIS MEANS, FROM JONATHAN HOFFMANN OF BALCH & BINGHAM: O’Guin reminds us of the simple concept that debt collection is something you attempt on a “consumer” — i.e., the person obligated to pay. We often hear from the uninitiated that the FDCPA is a strict liability statute. Respectful disagreement on that score aside, even if it were true, any given claim still has to meet the base definitions. After all, if it’s not a “debt” or the plaintiff isn’t a “consumer”, the allegations are all smoke and no fire. For outside counsel, it’s a lot of fun to knock down novel theories or push those of our own. But, O’Guin shows that getting back to the basics — the definitions underpinning the statute — can be just as effective of a strategy.

VA Sets New Threshold For Reporting Medical Debt to Credit Bureaus

The Department of Veterans Affairs has published a final rule detailing how delinquent debts owed to the VA are reported to credit reporting agencies. The new rule, which establishes a minimum threshold for what will be reported, goes into effect on March 4. More details here.

WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY & SHUSTER: The new rules will dramatically decrease the amount of uncollectible medical debt that the VA reports to credit reporting agencies. CFPB Director Rohit Chopra predicts others in the medical industry may follow suit. The medical debt collection industry should review these rules with the expectation that many of these rules may become the standard in the industry.

Judge Certifies Class in Wrong Number TCPA Case Involving Collection Calls

A District Court judge in Arizona has certified a class in a Telephone Consumer Protection Act case that alleged a financial institution made collection calls using an artificial or prerecorded voice to more than 1 million non-customers on their cell phones without first obtaining consent. More details here.

WHAT THIS MEANS, FROM MONICA LITTMAN OF KAUFMAN DOLOWICH & VOLUCK: The Head case illustrates the massive exposure TCPA wrong number class actions can provide for even the most innocent collection activity — in this case possibly over a billion dollars. The Defendant only called numbers that were placed in its system by its customers, but the frequent reassignment of cell phone numbers requires stringent compliance procedures and protocols to prevent such errors. Importantly, the Facebook decision had no effect on the issues here, as the certified class plead the use of artificial or pre-recorded messages only. Nor did the presence of an arbitration provision defeat certification. Collectors should make use of the FCC’s Reassigned Number Database and review their data and process concerning wrong number calls to mitigate the risks of these types of class actions.

Appeals Court Affirms Ruling in One Case, Overturns Ruling in Another, Over BFE Defense

The Court of Appeals for the Seventh Circuit affirmed one summary judgment ruling in favor of a defendant that was sued for violating the Fair Debt Collection Practices Act yesterday while overturning a separate summary judgment ruling, concluding that one defendant was entitled to the FDCPA’s bona fide error defense while the other should not have been entitled to it. The Court — which has issued a number of rulings in the past 14 months limiting the standing that plaintiffs have to sue in FDCPA cases — did rule that the injuries suffered by the plaintiffs, which involved disputes that were not communicated to credit reporting agencies, were concrete enough for them to have standing to sue. More details here.

WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: The 7th Circuit Ewing opinion packs a lot into it and is a real mixed bag. The opinion combines two cases that presented similar standing and bona fide error issues. At the heart of both suits were claims that agencies did not update credit reports with a dispute, to which the agencies argued they had a BFE – a pretty common claim and defense response.

The 7th Circuit ended a streak of finding no standing in FDCPA cases. It found standing here after first admitting that a key pre-Ramirez v Transunion standing of its was wrong. It then went on a somewhat tortured analysis to distinguish Ramirez and hold that there was sufficient injury by communicating the trade line to the bureau without a dispute notation. It seems questionable that the Supreme Court will agree with the analysis.

On the bona fide error defense, it ruled in favor of one agency and against another. These were fact specific rulings but emphasized reasonable procedures that are subsequently followed. A nice tidbit was the discussion of the first element of the defense – “unintentional.” The court ruled: But Receivables needed to show only that its FDCPA violation was unintentional, not that its actions were unintentional. That is a low bar.

The standing ruling is a head-scratcher but the BFE ruling has some good guidance.

Judge Grants MTD in Hunstein Copycat Case

A District Court judge in Wisconsin has granted a defendant’s motion to dismiss a Hunstein lawsuit, ruling the plaintiff lacked standing to sue because “[a] debt collector that outsources the mechanical tasks of preparing and mailing letters that the debt collector itself is authorized to send does not inflict any concrete injury on the debtor.” More details here.

WHAT THIS MEANS, FROM DALE GOLDEN OF GOLDEN SCAZ GAGAIN: It seems like it’s only a matter of time before the Seventh Circuit Court is forced to weigh-in on Hunstein. The District Courts continue to disagree on the issue of whether using a letter vendor creates Article III jurisdictional standing for § 1692c(b) claims. In Nabozny, the court found the Defendant’s use of RevSpring to send the Plaintiff a letter did not “harm” the Plaintiff. The opinion furthers the divide between judges that have found standing and those that have not in Hunstein copy-cat cases in the Seventh Circuit. 

The court in Nabozny determined that the Plaintiff’s attempt analogize the harm suffered to the tort of invasion of privacy, was off base finding instead that “the best comparator is publicity given to private life.” And because the disclosure was limited to RevSpring — as opposed to the public at large or friends and family — that comparison was fatally flawed.

While the court could have stopped there, it didn’t, instead proceeding to cite the “suggestive footnote in TransUnion” questioning whether “disclosures to printing vendors were … publication[s]” and noting that the CFPB is aware of this practice yet didn’t address in Reg F — a tactic acknowledgment “that disclosure to a third-party provider of clerical services does not harm an interest the FDCPA was designed to protect.” The division on this issue goes well beyond the Seventh Circuit. And it’s therefore fair to surmise that regardless of the outcome of Hunstein at the Eleventh Circuit, this issue will continue to be litigated in other circuits thereby creating uncertainty for those ARM members using third-party vendors for letter sending and other services.

The Chairwoman of the Federal Communications Commission yesterday announced the release of a Declaratory Ruling that classifies ringless voicemail messages to consumers’ cell phones as calls under the Telephone Consumer Protection Act, meaning that consumers would have to provide their consent prior to receiving such messages. More details here.

WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: Ringless voicemails have been a hot topic in the TCPA arena for some time. The FCC is now poised to label ringless voicemail or direct drop voice mail a “call” as that word is used in the TPCA so that prior express consent would be required before sending direct drop voice mail to consumers. 

As background, the Telephone Consumer Protection Act (TCPA), which seeks to protect consumers from unwanted robocalls, prohibits making any non-emergency call using an automatic telephone dialing system or an artificial or prerecorded voice to a wireless telephone number without the prior express consent of the called party. 47 U.S.C. § 227(b)(1)(A). The question therefore becomes: Are direct drop voicemails “calls” within the meaning of the TCPA?

Common sense dictates that a ringless voicemail is not a “call.” The purpose of direct drop voicemail is to avoid the constant ringing of a cell phone by unwanted robocallers. And, as the FCC concedes, the law requires that to be considered a “call” under the TCPA, the call must be made to a wireless telephone number as the FCC states in the second paragraph of its own press release. The direct drop voice mail platform call is a landline-to-landline connection, a business-to-business connection that does not involve any wireless network and there is no monetary charge to the recipient. The whole point of the TCPA was to prevent unwanted calls to cell phones made through the wireless network. A direct drop voicemail sends the direct drop message to the physical servers at a telephone company’s central office via a landline connection, not to any cell phone directly.

Nevertheless, the FCC has now proposed the instant not-very-common-sense-oriented declaratory ruling, which would classify all ringless voicemails as “calls” for purposes of the TCPA. The FCC stated that it is targeting “robocalls” and bad actors. Again, the FCC’s overbroad attempt to sweep in all direct drop voice mail as a call, brings within its fold legitimate businesses using the platform for a proper business purpose, i.e., to attempt to communicate with their customers/consumers. 

The effect of this proposed ruling, if it is in fact voted through, will likely be that the use of legitimate ringless voicemails will decrease dramatically, whereas the scammers and those perpetrating fraud will continue to flourish unabated. This appears to be yet another problematic initiative by the FCC that is long in false rhetoric and short on facilitating common sense 21st century business communications for both consumers and businesses. En Garde!!!

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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