Compliance Digest – March 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 www.bedardlawgroup.com, email John H. Bedard, Jr., or call (678) 253-1871.

Every week, AccountsRecovery.net 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 Grants MTD in FDCPA Case Against Alleged Scammers

A District Court judge in Michigan has dismissed a Fair Debt Collection Practices Act class-action against a collection law firm and three attorneys — who have been charged separately with multiple felonies for allegedly forging proofs of service in collection lawsuits — ruling that the plaintiffs lacked standing to sue because they did not suffer any harm from the claims made by the plaintiffs. More details here.

WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: No matter how reprehensible the alleged conduct, no injury means no standing. It’s hard to imagine that victims of charged felonies would lack standing, but that is the result when those purported victims fail to plead that they suffered a concrete harm. Of course, the defendants might face these claims again in state court, and the individual defendants were reportedly charged with felonies, so there is a very simple compliance lesson to take away from this story: Don’t file forged documents with a court. 

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Appeals Court Upholds Ruling for Defendant in FDCPA, FCRA Case Over ID Theft

The Court of Appeals for the Seventh Circuit has upheld a lower court’s summary judgment ruling in favor of a defendant that was sued for violating the Fair Debt Collection Practices Act and Fair Credit Reporting Act by attempting to collect on a debt that was allegedly incurred as a result of identity theft, ruling that the plaintiff should have known that the attempts were being made in error since he did not make the purchases in question. More details here.

WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: Common sense prevails from 7th Circuit. Agencies cannot be all-knowing and have a right to rely on creditor information. Here’s the interesting backdrop on this case. 

Agency begins collecting a debt. The involved consumer disputes the debt. The agency asks the consumer to “provide documentation and details in writing to support his dispute” (because the information the agency had on the account all matched up the disputing consumer). The consumer responds by sending the agency a “form letter from identitytheft.gov” on which he indicates that “an identity thief opened the account,” with no supporting information. The agency responds by sending account verification to the consumer. The consumer next contacts the original creditor. The original creditor in turn informs the consumer that its records show the debt was his, notwithstanding his identity theft claim.

Credit reporting next ensues, albeit with a “dispute” flag. Consumer continues to dispute. Agency continues to ask for proof of ID theft claim. Ultimately the consumer sends “proof” which consists of a police report that indicated the original creditor “had determined that the consumer was responsible for the debt.” Swing and miss … In the end, the original creditor inexplicably and subsequently determines that the debt was not the consumer’s. It informs the entity to which it had sold the debt which in turn informs the collection agency. Collections stop and the credit reporting is removed. And the consumer sues. He claims the letter was false since he didn’t owe the debt. And he claims the post-dispute credit reporting investigation was not up to snuff. 

The 7th Circuit affirmed the dismissal of plaintiff’s claims.  It held that the consumer knew the debt was not his and that the even an unsophisticated consumer therefore would have known the letters “were sent in error.” It concluded the letters were not “false” within the meaning of 1692e(10) because they would not have influenced the consumer’s decision to pay the debt. Good old common sense prevailed. As to the FCRA aspect, the court held that the investigation was reasonable as a matter of law under the circumstances. Despite repeated requests to the consumer for additional information following his credit reporting dispute, the consumer was silent. 

A word of caution though from the 7th Circuit. It instructed that “This opinion is no license for furnishers to offload their [FCRA] investigation obligations to consumers by spamming them with requests for additional information.” The facts were favorable to the agency in this case. Be sure they line up for you too if the decision is made to continue reporting a debt perhaps cloaked with potential ID theft.

Reg F Lawsuit Filed Over Alleged Calls Made After Cease Request Communicated

The trickle of lawsuits filed against companies in the accounts receivable management industry for allegedly violating Regulation F is continuing, with a case filed in California against a collection law firm and a healthcare provider. More details here.

WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: We are finally at the much-anticipated stage of Regulation F where we are starting to see lawsuits filed by consumer attorneys. In this Complaint, the plaintiff alleges, among other things, that the debt collector violated section 1006.6(3) of Regulation F by contacting the plaintiff’s place of employment “knowing it was inconvenient for the plaintiff to receive telephone calls.” While the industry was prepared for an increase in consumers requesting certain inconvenient time and place requests, this Complaint serves as an important reminder for collection agencies to ensure they are overseeing and re-training employees with respect to communicating with consumers and notating consumer requests.

CFPB Publishes Report on Credit Reporting and Medical Debts, Vows to Take Action Against ‘Questionable’ Medical Bills

I have no proof of this, but my gut tells me that Rohit Chopra is a pretty good chess player. All the proof I need are the press releases that the Consumer Financial Protection Bureau has been issuing over the past couple of months. To me, those releases are the CFPB putting all of its pieces into position before it starts taking action against companies in the form of enforcement actions. In the past two months, the CFPB has issued warnings and bulletins about “junk” convenience fees, illegal auto repossessions, student loan servicing, and credit reporting. Yesterday, it issued another report, this time on credit reporting of medical debts, asking the question whether medical debts should be allowed to be included on consumers’ credit reports. Anyone collecting and or reporting medical debts should be prepping their defenses, lest they get caught offguard if and when the CFPB takes action. More details here.

WHAT THIS MEANS, FROM LESLIE BENDER OF CLARK HILL: The CFPB is not alone in its interest in medical debt. Interestingly because the formulas for calculating credit scores are proprietary, the exact weight accorded consumers’ medical trade lines in figuring their credit scores is not publicly known.  According to LendingTree, “credit-scoring models from VantageScore and FICO do not weigh unpaid medical debt as heavily as other accounts in collections. Once a medical collections debt is paid, it no longer factors into your score calculation.” In addition under the National Consumer Assistance Plan or “NCAP” initiated in 2015 by Equifax, Experian and TransUnion, there is a minimum of a 180-day waiting period to allow insurance payments and adjustments to be applied before a medical debt can appear on a consumer’s credit report and medical bills that are resolved by health insurance must be deleted. The complex topic of how medical debt is handled is also a top priority for many state and federal law makers and law enforcers as they chart a course of recovery from the pandemic. In July, 2021 the Federal Trade Commission passed a resolution focusing more generally on the potential for unfair, deceptive, or abusive acts or practices in healthcare markets. Last month the Department of Veterans Affairs announced some changes to reduce financial distress for veterans by requiring all other methods of debt collection to be exhausted before a veteran’s bill is reported to credit reporting agencies. Federal legislative attempts to allow medical data furnishers to delete paid medical bills after payment or to otherwise change how medical debt is credit reported have been unsuccessful so far [see, most recently Sen. Merkley’s “Medical Debt Relief Act of 2021”]. Finally, it is notable that the CFPB has been interested in preventing consumer harm flowing from medical debt collection and medical credit reporting since long before the pandemic. In 2015 the CFPB brought an enforcement action against a large medical debt collection company for allegedly mishandling consumer credit reporting disputes, among other things

Law Shortening SOL on Medical Debt in Virginia One Step From Governor’s Desk

A bill in the Virginia legislature is one step away from reaching the governor’s desk to be signed into law that would create a statute of limitations for collecting medical debt in the state. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: Virginia’s House of Delegates and Senate have passed a bill that would shorten the statute of limitations for actions on contracts for health care services to three years, two years fewer than the standard statute of limitations for written contracts. The proposed legislation, H.B. 573, amends Va. Code §§ 8.01-246 and -249 and would apply to any health care services contract action, including those brought by the Commonwealth. For actions on contracts between a patient and a provider, the statute of limitations would begin to run 30 days from the date the patient is invoiced or 30 days after default on an agreed payment plan. The bill is slated for one more procedural vote in the House of Delegates before it can be sent to the Governor’s desk.  

The bill’s sponsor aims to provide consumers with greater peace of mind by minimizing unexpected litigation on forgotten debts, consistent with other pro-consumer efforts by the Virginia legislature to limit balance-billing in recent years. If enacted, the bill’s July 1, 2022 effective date will likely lead to a surge in collections litigation in the short term. In the long term, however, it is unclear whether its net effect will help consumers avoid litigation or simply force them into court sooner.

Bill Introduced in California to Lower Judgment Interest Rate, Restrict Renewals

A bill has been introduced in the California legislature that would significantly lower the amount of judgment interest that can be assessed on unpaid consumer and personal debt while also restricting the renewal of judgments. More details here.

WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY & SHUSTER: The bill sponsor, Sen. Skinner, cites solely the consumer issues at stake. Certainly, with debt such as medical, focusing on only the consumer impact makes more sense. With credit card debt, where the consumer buys things when they want, not so much. This bill fails to make a distinction between different types of debt.

Appeals Court Vacates Dismissal of FDCPA Case to Give Plaintiff Chance to Replead

The Second Circuit Court of Appeals has vacated a lower court’s dismissal of a Fair Debt Collection Practices Act case and remanded it back to the District Court to give the plaintiff the opportunity to replead her claims because three days after the original case was dismissed, the Supreme Court issued its ruling in TransUnion v. Ramirez, which has significantly impacted the standing that plaintiffs have to sue in federal court, even though standing never came up in the original case. More details here.

WHAT THIS MEANS, FROM AMANDA GRIFFITH OF BERMAN BERMAN BERMAN LOWARY & SCHNEIDER: Standing is a constant issue that debt collection agencies have been battling since Spokeo. While TransUnion gave more clarity to the issue, it likely still will not be determinative and we will see varying rulings on its application – much like we did with Spokeo.

Noticeably, in this case, the Court has remanded the case to allow the plaintiff to plead allegations of an injury. At this stage, whatever allegations are pled will be taken as true. It will be up to the defendant in discovery to fetter out the truth of the allegations.

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 www.bedardlawgroup.com, email John H. Bedard, Jr., or call (678) 253-1871.

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