Compliance Digest – April 11

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 Denies Defendant’s MSJ in FCCPA Case Over BK Filing, Attorney Representation

A District Court judge in Florida has denied a defendant’s motion for summary judgment while partially granting and partially denying a similar motion from the plaintiff in a Florida Consumer Collection Practices Act case over alleged attempts to collect a debt after the plaintiff had filed for bankruptcy protection and allegedly notified the defendant that she was represented by counsel. The case, which has already been to the Eleventh Circuit Court of Appeals and back, was originally filed nearly six years ago. More details here.

WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER BURNETTE: A lot of people will write a lot of things about this case, considering the number of important issues it tackles at once. But I want to point out a small but hugely significant sentence in this ruling—Judge Honeywell wrote, “A reasonably jury could read this letter and conclude that any reasonable debt collector would have known that counsel represented Medley regarding the debt DISH was trying to collect…” For those of us who defend debt collectors, this sentence is music to our ears! Consumer attorneys who (wrongly) believe that the FDCPA is solely a “strict liability” statute often argue that the debt collector’s understanding, its intent, or – as in this case — its knowledge simply don’t matter, because the mere existence of a violation entitles a consumer to recovery. Here, though, Judge Honeywell’s use of the phrase “reasonable debt collector” shows this isn’t the case, because her opinion as to the attorney representation claim turns entirely on how a “reasonable debt collector” could interpret the letter. Given the uncertainties of trials, language like this can be a powerful tool for encouraging settlement when needed.


Judge Grants MTD on Hunstein Claims in FDCPA Suit

A District Court judge in New Jersey has granted a defendant’s motion to dismiss four of the five counts it is facing in a Fair Debt Collection Practices Act suit after it was accused of disclosing information about the existence of the debt in question to a third party, namely a vendor that was used to print and mail collection letters that were sent to the plaintiff. More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: Before we jump to our feet in applause, the Court in this case dismissed the state law causes of action predicated on providing the data to a letter vendor.  The actual FDCPA claim (and accompanying class action count) has not been dismissed and remains an issue to litigate following discovery. Other than the trial court in Hunstein and the Colorado Supreme Court in Flood, no present-day court facing Hunstein-style claims has been willing to summarily declare that no cause of action exists under 1692c(b). There is a long road ahead if the ARM industry intends to push back, or, alternatively, decide to print all letters in-house.

Repeat Violators Risk Losing Licenses, Chopra Warns

The Consumer Financial Protection Bureau is planning to establish dedicated units aimed at detecting repeat offenses and corporate recidivism “to better hold them accountable” while also laying out a series of enforcement options that the regulator will consider when it finds financial services organizations committing the same types of violations over and over again, Rohit Chopra, the CFPB’s Director, said during a speech yesterday. More details here.

WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: Director Chopra’s speech on March 28th at Penn Law School was concerning if not a chilling reminder of how the CFPB views their seemingly unlimited authority. While the Director’s speech appeared to be a shot across the bow to big banks and large institutions, putting them on notice that “once an offender, always an offender”, the outline of the remedies the Bureau intends to seek with respect to this recidivism (the tendency to reoffend) requires all financial services entities, including the ARM industry to pay very close attention.

Here are a few examples of the reforms the Bureau looks to impose on repeat offenders.

  • Caps on size and growth by imposing asset caps including limitations on transferring or acquiring assets;
  • Bans on certain types of business practices including product lines;
  • Divestiture of certain product lines;
  • Limitations on leverage or requirements to raise capital;
  • Revocation of government granted privileges (licensing); and
  • Individual liability.

Throughout his speech, the Director seems to indicate that these consequences happen to small firms regularly and that large firms, despite repeat offenses, should now feel the same pain in enforcement actions. However, one should not take the Director’s statement to mean that small firms are now getting a hall pass from the CFPB. In the past 6 months, the Director has laid out his enforcement priorities. Now the CFPB is moving into the penalty phase. If you think the above reforms will only be left for larger firms, think again. Larger firms have the resources to fight the Bureau including whether the Bureau has the authority to impose such sanctions. For the little guy, an enforcement action may be an inflection point as to whether to fight or fold up the tent.

Retribution not recidivism is what the Bureau is looking for.

N.Y. AG Sends Warning to Collectors About New SOL, Court Filing Requirements, Requests Information About Complying with Reg F

The Attorney General of New York last week sent letters to “major” debt collectors operating in her state, making sure that those companies were aware of new regulations that have recently gone into effect, such as Regulation F from the Consumer Financial Protection Bureau and new state-mandated large-print disclosures, while also reminding them of changes to the statute of limitations that are going into effect next week. More details here.

WHAT THIS MEANS, FROM JOHN REDDING OF ALSTON & BIRD: We all know that Reg F presented significant compliance and operational challengs. New York, not to be outdone, added some hurdles of its own with the New York Consumer Credit Fairness Act and other amendments to New York’s General Business Law, which imposed additional restrictions and requirements addressing statutes of limitations, disclosure requirements, use of large type, and other items. And New York’s AG appears to be on the hunt for people to make an example of.

On March 23, the New York AG sent letters to “Major Debt Collectors” operating in New York reminding them of the changes imposed by Reg F and New York law. Those letters, however, are not just providing helpful information . . . they also call for the recipients to provide policies and procedures on various topics, training materials, and communications with consumers. Interestingly, they also seek information about collection attorneys used during the prior 3 years to collect debt in New York state and federal court. Whether a recipient of the AG letter or not, we should all take note of what has been requested and consider making any necessary updates to our policies, procedures, training materials and operations to address these areas of interest. The AG is unlikely to stop looking at the collection industry for opportunities to make examples and trumpet their success in protecting consumers, given it makes for good political theater.

Appeals Court Upholds Dismissal of FDCPA Suit Over Garnishment

The Court of Appeals for the Ninth Circuit has upheld the dismissal of a Fair Debt Collection Practices Act case in which a defendant was accused of violating the statute by garnishing the plaintiff’s wages to enforce a nonfinal judgment, ruling that alleging a violation of Washington’s state garnishment law is not a de facto violation of the FDCPA. More details here.

WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: An allegation that state law wasn’t followed did not state a FDCPA claim. That’s what the district court judge concluded. And that was also the conclusion in an affirmance by the 9th Circuit Court of Appeals.  The appellate court summed up the issue as follows (emphasis mine), and in doing so explained why the consumer’s claim was doomed.

“The issue is not whether [the agency] violated state law but whether they violated the FDCPA. The [Plaintiffs] do not address this question…  The [Plaintiffs] might have argued that [the agency] falsely represented the legal status of their debt by implicitly claiming in the garnishment application that the debt was subject to a final judgment. But they do not make this argument, so it is waived.”

In other words, words do matter. The words Plaintiffs used to describe their claim focused on the supposed state law mistake. They did not focus on the critical inquiry identified by the courts. That is, whether that supposed state law mistake rose to the level of a federal FDCPA mistake. Good lawyering by the agency’s attorneys, including their recognition of Plaintiff’s failure to properly plead a FDCPA claim, successfully put this claim to rest with an affirmance as the cherry on top.

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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