Compliance Digest – February 21

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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.

Pa. Judge Denies Motion for Judgment on Pleadings in Hunstein Copycat Case

When it comes to the Hunstein case, the industry made two steps forward with the Eleventh Circuit Court of Appeals in finally getting the Court to agree to rehear the case, only to have a judge in the Eastern District of Pennsylvania make everyone take one giant step backward yesterday after denying a defendant’s motion for judgment on the pleadings and ruling that a collection law firm communicated information about a debt when it sent information to a vendor to print and mail a collection letter. More details here.

WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: This court’s reasoning in Khimmat was very similar to the reasoning applied by the the Eleventh Circuit panel in the two now-vacated Hunstein decisions. But the court in Khimmat did not address standing; instead, it noted that it might return to the issue of standing at a later point in the case. The Khimmat decision appears to be a bit of an outlier, as the majority of federal district courts outside of the Eleventh Circuit have dismissed “letter-vendor” claims due to lack of Article III standing. Indeed, exactly a week after Khimmat was decided, another judge in the Eastern District of Pennsylvania dismissed a similar letter-vendor claim because the plaintiff failed to allege a concrete injury and thus lacked standing. 


Judge Remands Three Hunstein Cases Back to State Court for Lack of Standing

A District Court judge in North Carolina has remanded three separate Hunstein cases back to state court, ruling that the plaintiffs in each did not suffer a concrete injury sufficient to have standing to sue in federal court. More details here.

WHAT THIS MEANS, FROM HEATH MORGAN OF MALONE FROST MARTIN: These decisions continue to show the discrepancy in how federal Courts want to handle copycat Hunstein cases in other jurisdictions, especially those that have been filed in state court. All three of these cases were filed in state courts in North Carolina to avoid standing issues. Upon removal requests to federal courts, Judge Eagles determined that none of the three plaintiffs showed standing in federal court and remanded the cases back to state court.    

We are getting closer to a new decision in Hunstein, and the federal courts have clearly demonstrated their frustration with these copy-cat Hunstein cases. However, unless we get a clear opinion from the 11th Circuit Courts, we will continue to see these cases keep populating in state courts for the immediate future. 

Senators Open Inquiry into Chase’s Alleged Resumption of Robo-Signing Credit Card Collection Affidavits

A group of six Democrats on the Senate Banking Committee, including Chairman Sen. Sherrod Brown [D-Ohio] and Sen. Elizabeth Warren [D-Mass.] released a letter they had sent to JPMorgan Chase seeking information on the mega-bank’s credit card collection process, citing reports indicating that the company is robo-signing documents when making the decision to sue individuals for unpaid debts. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: Six Democrats on the Senate Banking Committee announced last week that they sent a letter to JPMorgan Chase Bank requesting information about the bank’s credit card debt collection practices. The bank had previously been subject to a consent order with the Consumer Financial Protection Bureau (“CFPB”) that prohibited “robo-signing” litigation documents without engaging in proper verification processes under the Consumer Financial Protection Act, but the order expired in 2020. The Senators’ letter seeks documentation that the bank has not resumed any robo-signing activities and has established quality control measures to ensure that its debt collection efforts are based on accurate information, as well as that the bank applied its hardship policies equitably during the pandemic. Their efforts offer a concrete reminder that federal agencies like the CFPB are not the only entities taking an active interest in consumer protection these days and that expiration of consent orders does not always mean freedom from review. Financial institutions would do well to maintain robust documentation of their compliance policies so as to be ready if and when their turn comes.

Appeals Court Overturns Ruling Preempting State Credit Reporting Laws in Maine

The Court of Appeals for the First Circuit has overturned a lower court’s ruling that a pair of credit reporting laws in Maine governing how certain debts are reported to credit reporting agencies are preempted by the Fair Credit Reporting Act, remanding the case back to the District Court to more accurately determine the scope under which the laws might be preempted, if at all. More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: In our federal system, many laws enacted by the federal government pre-empt, or supersede, state laws touching on the same subject. While the Fair Debt Collection Practices Act specifically notes that it does not pre-empt state laws, the Fair Credit Reporting Act does pre-empt state law under certain circumstances. Here, the trial court found as a matter of law that certain provisions of Maine’s new credit reporting law were pre-empted by the FCRA. The Court of Appeals reversed that decision, indicating that the trial court did not use the correct analysis.  Instead, the appellate court directed the trial court to use the proper analysis, but did not indicate if the ultimate conclusion was right or wrong. This one will have to wait for an answer.

Judge Denies Motion to Certify Class in FDCPA Suit

I’m not a lawyer, but it seems to me that if you are going to propose a definition for a class in a lawsuit, the first rule is to make sure that the definition includes you. A plaintiff seems to have made that mistake, which is why a District Court judge in Florida has denied her motion to certify the class — the third such time the motion has been submitted. More details here.

WHAT THIS MEANS, FROM LAUREN VALENZUELA OF ACTUATE LAW: SMH! If you don’t know what that stands for, it means “shaking my head.” Plaintiffs have the upper hand when it comes to defining and shaping a proposed class, so it is a little shocking that we are seeing a case like this. In some ways, recent cases out of the 11th Circuit are reminding industry lawyers on both sides to go back to standing basics – and this case is no exception.

Pa. Judge Denies Stay Request in Hunstein Case

A District Court judge in Pennsylvania has denied a defendant’s motion to stay a Hunstein case pending the outcome of the en banc rehearing scheduled later this month before the Eleventh Circuit Court of Appeals, ruling that regardless of how the Eleventh Circuit rules, it will not have “binding precedence” with respect to the claims being made by the plaintiff. More details here.

WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: In this February 3, 2022 decision, Judge Mannion from the Middle District of Pennsylvania denied a motion to stay in a Hunstein case, finding that the Eleventh Circuit’s en banc decision will not be binding precedent with respect to its consideration of the plaintiff’s case. Eleven days later, on February 14, 2022, Judge Leeson from the Eastern District of Pennsylvania granted the defendant’s motion to stay in a Hunstein case on the basis that the plaintiff did not allege sufficient facts to establish standing and the court lacked subject-matter jurisdiction. These rulings, which are based on nearly identical facts, demonstrate the lack of clarity surrounding this issue. Notwithstanding, it appears that the majority of federal district judges are skeptical regarding whether they possess subject-matter jurisdiction in these Hunstein cases and that consumers will likely have to litigate these cases in state court with an uncertain outcome. While the Eleventh Circuit could resolve the issue of standing in the rehearing en banc in Hunstein, unfortunately, that would not address the underlying issue of whether a debt collector may use a letter vendor.

Bill Introduced in California to Expand Definition of Collection Agency Under State Licensing Law

The Debt Collection Licensing Act in California has been in effect for a month and already changes are being proposed, in the form of expanding the definition of what constitutes a collection agency. A bill has been introduced in the state Assembly that would broaden the definition of a collection agency and make other nonsubstantive changes to the law. More details here.

WHAT THIS MEANS, FROM PATRICK NEWMAN OF BASSFORD REMELE: Nobody is going to celebrate being brought under the collection-agency-regulation tent. But our industry needs to embrace the fact that peripheral participants in the ARM space are being regulated at an increasing clip. Developments like this proposed bill provide agencies the perfect opportunity to position themselves as compliance and subject-matter experts in all things Consumer Law Regulation with their creditor clientele. “Hey, we’ve been there and done that. We can help you navigate these waters and continue to provide solid collection performance.” Not bad, as far as service-industry service pitches go.

Judge Grants Motion for Judgment in Favor of Creditor Sued in FCRA Case

Objectivity is supposed to allow things to be black or white. There aren’t supposed to be shades of grey. Those are for objectivity’s cousin, subjectivity. But even standards that are supposed to be considered objective can sometimes be open to interpretation. At least that is what a plaintiff unsuccessfully attempted to argue in a Fair Credit Reporting Act case in which a District Court judge in Florida granted a defendant’s motion for judgment on the pleadings. More details here.

WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: The FCRA requires data furnishers to report accurate information to the consumer reporting agencies – a fairly straightforward statutory mandate. The Court in this case had plenty of 11th Circuit case law to pull from where under identical facts the conclusion was the same: just because a consumer report includes several fields of information about the consumer’s payment performance on an account, as long as the information in those fields is accurate there is no FCRA violation. The consumer in this case argued that reporting that she was late on her payments at the time when the creditor closed her account for nonpayment was somehow inaccurate, but the court appropriately focused on the bigger picture to conclude that there was nothing inaccurate or misleading about the information furnished or the information in the consumer report. Specifically, the reporting of that delinquent payment status was accurate as of the date the creditor closed the account, as was the reporting of a $0 balance and the fact that the creditor closed the account for less than payment in full. This FCRA case came out right and is a good win for data furnishers who provide accurate information to the agencies.

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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