Compliance Digest – March 21

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 Grants MTD in FDCPA Overshadowing Case

A District Court judge in Kentucky has granted a defendant’s motion to dismiss and denied a plaintiff’s request for leave to file an amended complaint after filing a Fair Debt Collection Practices Act lawsuit against a collection law firm for allegedly overshadowing the validation notice by mentioning in a collection letter that a lawsuit might be filed if the debt was not paid. More details here.

WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: This is a useful case for debt collectors that is predicated on an overshadowing claim but resolved, at least for now, on standing. The plaintiff argued that the “false threat of pending legal action” overshadowed statements in the debt validation notice about her right to dispute the debt (note – the law firm did sue her to collect the alleged debt). The court relied on the Spokeo and TransUnion cases on standing to find that the plaintiff’s claims of anxiety and confusion resulting from the law firm’s letter and alleged statutory violations did not amount to an allegation of concrete harm required for standing, because the claims did not sufficiently resemble harms that can traditionally serve as a basis for a lawsuit. Standing has been a big issue in the last year, with the critically important Hunstein case still to be resolved. This case emphasizes that an allegation of a statutory violation, without a corresponding allegation of concrete harm, is not enough to establish standing to sue.


Judge Denies MSJ For Defendant in TCPA Case Over Whether Consent was Revoked

A District Court judge in Kentucky has partially granted — and partially denied — a defendant’s motion for summary judgment in a Telephone Consumer Protection Act case, ruling that a plaintiff’s request to have information sent to him via the mail rather then delivered over the phone, coupled with refusing to talk to a collector and hanging up the phone on a subsequent call and not answering the phone when the defendant called after that raises a genuine issue of whether the plaintiff revoked consent to be contacted, even if he never specifically said so. More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: This is another case where the result is more about the judicial temperament of the judge rather than the facts of the case. Summary judgment should be granted where no reasonable jury would find in favor of the non-moving party. Here, the judge concluded that the totality of the conduct by the consumer – request to have information sent by mail, refusing to speak over the telephone, hanging up the telephone, not taking calls – could be construed by a reasonable to jury to constitute revocation of consent under the TCPA. Many judges would have concluded that no reasonable jury would conclude that this was revocation of consent to receive autodialed calls. This one did not. The risk of litigation always involves the possibility that a specific judge has a particular world-view that causes the litigation to continue when it could very well have been ended. These factors must be considered when deciding to take a case to a judge or jury.

Judge Awards $46k in Plaintiff’s Attorney Fees in FDCPA Case

A District Court judge in New York has reduced the amount of attorney’s fees to be paid by the defendant in a Fair Debt Collection Practices Act case by 80% of what the plaintiff’s attorney had requested, lowering both the hourly rate and the number of hours worked, while also eliminating the fee multiplier that the attorney had sought. More details here.

WHAT THIS MEANS, FROM CARLOS ORTIZ OF POLSINELLI: This was an individual FDCPA plaintiff action that was pending in the U.S. District Court for the Eastern District of New York. Plaintiff initially sued three defendants, but after one was dismissed via summary judgment, the remaining parties entered into a settlement whereby another defendant was voluntarily dismissed and judgment was to be entered against the one defendant that was left. The settling parties agreed to permit the court to conduct a telephonic hearing during which the magistrate judge heard testimony regarding alleged actual damages. Ultimately, the court awarded Plaintiff $50,000 after finding that the Plaintiff suffered emotional distress. Plaintiff’s counsel then submitted a fee petition where he requested $210,900.00, which consisted of 222 hours at an hourly rate of $475, plus a multiplier of 100 percent.

In evaluating the fee petition, the court mentioned more than once in its opinion, that Plaintiff’s counsel showed an “overall lack of care” in preparing it, and, as examples identified the petition’s lack of specificity, the failure to include background information regarding a law clerk for Plaintiff’s counsel, the lack of clarity, and the numerous supplementations needed due to deficiencies in the submissions. The court ruled that the time Plaintiff’s counsel claimed he incurred, along with the hourly rate he requested, was excessive and unwarranted. Ultimately, the court declined to allow for a multiplier and awarded Plaintiff forty percent less than the base amount of attorney’s fees her attorney requested. This case is a good example of a judge declining to award a consumer lawyer for attorney’s fees that were never warranted.

Judge Rules Collector Can’t Leave Messages When Making Location Information Calls Under FDCPA

A Magistrate judge in New York has recommended that a defendant be found to have violated the Fair Debt Collection Practices Act by making a second location information call to a debtor’s mother and by asking the mother to have her daughter — the debtor — call the defendant back during both conversations. More details here.

WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: This case illustrates my belief that collecting debt is akin to playing ball in a minefield, the only difference is that collectors have a map which provides guidance to avoid the majority of those mines, the FDCPA. That means constant review of processes and procedures. The facts in this case reenforce that need for constant vigilance, especially regarding activities over which management has less control. Letters and other written correspondence can much more easily be standardized and reviewed to make sure they are compliant. There is less control over direct communications, i.e. phone calls. (I put phone messages into the former category as even if not pre-recorded, a script can be provided to ensure uniformity and compliance)

Let this case provide a teachable moment. There were two calls both made to a phone number identified as the debtor’s mother’s phone line. The first call, seeking location information, started out fine, the collector asked to “confirm location information,” yet did not provide the location he wanted to confirm, and asked the mother if she wanted to assist. She said “I really can’t” and then asked what the collector needed her daughter for. The response was that they had a “required document going out to the address we have on file.” But again, he did not provide the address. The mother then responded “Well eventually it was forwarded. I can’t give out any information about her.” Unclear why she said eventually “it was forwarded” but the second statement was extremely clear. So far so good. At that point it was time to say thank you for your time and hang up. Instead, the collector went on to ask the mother to take a message. Violation no. 1.  

Notwithstanding the fact that the mother had already declined to confirm her daughter’s address, a second call was made and the same error was made, asking the mother to take a message. Lets look as the guide.

Section 1692b(3) provides that:

Any debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer shall . . . not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information. (emphasis added)

My question, at a minimum should the second call have been made without actually listening to the first one? And if it was listened too, should the decision to make a second call gone to a manager for further review? When the Court reviewed the transcripts, it found nothing in the transcript of the 1st call that fell within the above exception. Violation no. 2 of §1692b(3)

Unfortunately, this became a “twofer.” By asking the mother to take a message, the Court also found there was communication with a third party without consent. Violation of §1692c(b). 

My take, when you make calls, the MOST IMPORTANT thing is to listen carefully to what the person on the other side of the line is saying, and how they are saying it, and weigh what you hear against those mines (prohibited acts) identified by the FDCPA. One idea – create a bullet point chart for parties making outgoing calls to reinforce avoiding those mines. While not an issue in this case, these precautions could also help when you have someone on the other side trying to bait a collector into a violation.

Lastly, the Court made the following concerning statement in referring the case back for a hearing on damages and attorney fees:

Defendant went beyond seeking location information for Plaintiff by leaving messages requesting Plaintiff call back Defendant, for which Plaintiff may be entitled to actual damages and maximum statutory damages in the amount of $ 1,000 for each violation. 

The case law I’m familiar with is that “the statute has been construed as permitting a maximum recovery of statutory damages of $1,000 per plaintiff per proceeding.” Hopefully, defense counsel will clear that up in the subsequent hearing.

Bill Introduced in Senate to Ban Arbitration Clauses

A bill has been introduced in the Senate by Sen. Sherrod Brown [D-Ohio], the chairman of the Senate Banking Committee, that would ban forced arbitration clauses in the financial services industry. More details here.

WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: The Arbitration Fairness for Consumers Act, S. 3755 seeks to eliminate arbitration provisions including class action waivers from consumer financial services agreements. The bill seems to piggy back on a broader measure, HR 963, The Forced Arbitration Injustice Repeal Act of 2022 or “Fair Act of 2022”, which just passed the House and which bans  mandatory arbitration provisions in employment, antitrust, consumer, and other matters. On March 3, the President signed into law a bill banning mandatory arbitration in certain sexual harassment claims (#MeToo Legislation). This multi-prong attack suggests that Congress is squarely focused on banning arbitration provisions in all context.

The industry will recall that the CFPB issued a final rule in July 2017 to regulate and effectively ban arbitration agreements in consumer contracts. However a few months later, Congress repealed the final rule by a joint resolution pursuant to the Congressional Review Act. Clearly Congress sees a priority to bring legislative change to pre-dispute arbitration provisions prior to the mid-term elections.

Many banks agreed to drop arbitration provisions from their agreements as part of a 2009 nationwide class action lawsuit. Prior to 2017, several large financial institutions like JPMorgan Chase and Bank of America also agreed to remove arbitration provisions from their agreements. However in 2019, Chase reintroduced the provision in new agreements going forward and it appears that more banks are willing to do so as well.

None of this legislation repeals the Federal Arbitration Act. Recent Supreme Court decisions like New Prime Inc. v. Oliveira, that looked at the arbitrability of employment, suggest that Congress’s intended legislation may make its way through the courts for the ultimate determination. The Supreme Court has been reluctant to disturb agreements to arbitrate where there is clear and unmistakable evidence.  Expect the debate to begin again as to the viability of class actions where consumers get a coupon and plaintiff’s lawyers reap the benefits in fees.  

Judge Remands FDCPA Case Back to State Court

A District Court judge in New York has disagreed with both the plaintiff and defendant in a Fair Debt Collection Practices Act case and remanded the case back to state court for lack of standing, ruling that the plaintiff did not suffer a concrete injury based on the claims that he alleged in his amended complaint. More details here.

WHAT THIS MEANS, FROM CHRISTOPHER MORRIS OF BASSFORD REMELE: Once again, a federal district court has remanded, sua sponte, an FDCPA lawsuit removed from state court. On this occasion, the parties agreed that the allegations were sufficient to establish concrete injury, and at first glance that seemed correct. The Complaint alleged actual damages from allegedly inaccurate credit reporting, including negative impact on attempts to obtain financing, severe annoyance, emotional distress, and lost sleep. Yet the court found that these allegations were too vague and did not include specific facts sufficient to plausibly conclude there existed emotional distress, or that inaccurate information was distributed to a potential creditor. 

Class-Action Lawsuit Accuses Collector of Violating FDCPA By Including Credit Reporting Language in Letter

A class-action lawsuit has been filed in New Jersey alleging a collector violated the Fair Debt Collection Practices Act by overshadowing the validation notice in a collection letter when it made reference to furnishing information to a credit reporting agency once the validation period expired. More details here.

WHAT THIS MEANS, FROM JOHN REDDING OF ALSTON & BIRD: In yet another letter case involving a disclosure of the potential for adverse credit reporting, the plaintiff has asserted that providing the required disclosure without something more spelling out what will happen if the consumer disputes the debt overshadows the debt validation notice.   Interestingly, the plaintiff even offers some alternative language they claim would have solved the perceived problem.  One thing I find interesting is that the disclosure provided refers to expiration of the time period below, which should necessarily encompass the entire time period.  In other words, the 30-day dispute period and the period during which the debt collector will obtain verification and mail a copy to the debtor.  But, of course, such a plain and simple reading wouldn’t allow the plaintiffs’ attorney to assert their claim and seek to recover attorneys’ fees. 

This will be an interesting one to watch and see how the parties and the court deal with this particular claim.  As always, this serves as a stark reminder that no matter what we say in our letters, plaintiffs’ counsel will always find something to try and turn into a class action for which they can recover fees.

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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