Compliance Digest – June 20

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 Denies Plaintiff’s Motion for Reconsideration in FDCPA Case

A District Court judge in Indiana has denied a plaintiff’s motion for reconsideration after partially granting a defendant’s motion for summary judgment, ruling that the Court did not make an error by misinterpreting Section 1692e(8) of the Fair Debt Collection Practices Act. More details here.

WHAT THIS MEANS, FROM COOPER WALKER OF MALONE FROST MARTIN: While I have the upmost respect for the attorneys handling this matter for Plaintiff, I cannot deny that it is a little sweeter than normal when there is a win against these guys. For a little background on the case, Plaintiff mailed Defendant a dispute letter and later sued because the account was not marked as disputed (this is a very common claim with this particular attorney). However, notably, these dispute letters are crafted in such a way that it is very difficult to find the consumer. For example, in this matter, the dispute letter came from Alicia Johnson while the collector’s account was for Alicia Price. The address in the dispute letter was a different location that what was on file with the collector. And, while the letter included the last 4 digits of Plaintiff’s SSN, a search with this information pulled up more than two hundred results. The Court denied both parties’ MSJ on Plaintiff’s 1692e(8) claim, granted Defendant’s MSJ on Plaintiff’s 1692f claim, denied that Defendant was entitled to the bona fide error defense, and granted Defendant’s MSJ as to Plaintiff’s actual damages claim.

Thereafter, the Plaintiff filed a Motion for Reconsideration with the Court which was denied. In short, a motion for reconsideration is typically only granted when there is newly discovered evidence that would preclude entry of judgment and/or there was a manifest error of law or fact. Here, Plaintiff argued that there was a manifest error of law or fact and the Court did not buy it.

As mentioned, these claims are very common with this particular attorney and there is a fairly high volume of these cases as well. Keep this case in mind the next time you are facing one of these suits.  While there is always risk in serving Rule 68 Offers of Judgment, doing so in this matter would have proven a wise move given that Defendant won summary judgment as to Plaintiff’s actual damages.

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Judge Denies Motion for Reconsideration in FDCPA Case, Ruling Inaccurate Info in Letter Enough to Confer Standing

A District Court judge in Pennsylvania has denied a defendant’s motion for reconsideration on the grounds that the plaintiffs in a Fair Debt Collection Practices Act lacked standing, affirming a summary judgment ruling that had previously been awarded in favor of the plaintiffs, ruling that the plaintiff’s decision not to act after receiving a collection letter because she was unsure of how much to pay is sufficient grounds to have standing to sue in federal court. More details here.

WHAT THIS MEANS, FROM JONATHAN ROBBIN OF J. ROBBIN LAW: In what has become a familiar battle due to a lack of clarity in the law and a divide in the circuits, a District Court judge in Pennsylvania denied defendant’s motion for reconsideration on the grounds that the plaintiffs in a Fair Debt Collection Practices Act lacked standing under TransUnion and affirmed its summary judgment ruling in favor of the plaintiffs. The Court held allegations that Plaintiff did not pay her bill because she did not know how much to pay, thus making her “unable to undertake reasonable action with the benefit of accurate information,” is sufficient grounds to have Article III standing to sue in federal court.  What is becoming clear in the post-TransUnion landscape is that merely alleging an informational violation of the FDCPA without more is not going to be enough to establish standing, rather there needs to be allegations of specific concrete “financial” harm.

CFPB Opens Inquiry Into Employer-Driven Debt

The Consumer Financial Protection Bureau yesterday announced it has opened an inquiry and is soliciting information from the public regarding debts that are owed by employees to their employers, often through requirements that employees pay for equipment, training, or other supplies. More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: If you are like me, the concept of a training repayment program (“TRA”) may not be well known. To better understand this probe, it is best to start with what a TRA is. A training repayment agreement refers to a provision included in employment agreements that provide the employer a right to demand repayment of the training. In most cases, it is claimed that the costs demanded to include massive interest and inflated fees with little to no disclosure at the time the “training” is offered or provided. The lobbying parties that urged the CFPB to make this inquiry claim it is becoming a nationally used practice and amounts to a predatory practice that must be stopped.

Why is this so important? When noncompete clauses are very difficult to enforce, this is a provision trying to “skirt” the system. The employer is not restricting the employee’s right to work but is instead requesting repayment for training that the employer provided. However, many reasonably argue that the TRA in practice is more effective at restricting work than the traditional noncompete clauses that companies have a hard time enforcing. The TRA effectively becomes a restrictive convenient on the employee’s right to work as leaving the job would result in a substantial financial burden. The idea is that the employees become hostage a debtor and cannot quit their jobs.  

While an inquiry into an employer’s use of debt against employees may seem strange, if employers are found liable for the practices many claims, the CFPB would be in their right to enforce restrictions on the practice as a type of predatory lending. An example of the CFPB’s right to regulate all lending bodies.

Appeals Court Denies En Banc Request in FDCPA Case, While Dissenting Opinion Says Court Has ‘Strayed Far’ from Standing Threshold

The Court of Appeals for the Seventh Circuit has denied an en banc hearing request from a plaintiff after a panel of judges overturned a $350,000 award against a collector in a Fair Debt Collection Practices Act case, but a quartet of judges wrote a dissenting opinion arguing how the Court has “strayed far” from rulings issued by the Supreme Court on the threshold of what it takes for an individual to have standing to sue in federal court. More details here.

WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: Before I go into my rant regarding the hot topic here, the dissent in both cases, [1] I want to briefly address the language at the heart of the litigation.

“The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it, we will not report it to any credit reporting agency, and payment or non-payment of this debt will not affect your credit score.”

The lower court and the dissent in the two appellate decisions both thought that language was deceptive. Plaintiff argued in the lower court that she understood that while Midland would not sue her, she had a concern that if she didn’t pay they could transfer the claim to someone else who would. Problem number 1. There was no warning that a payment on the account could reset the statute of limitations on the account, Problem number 2. The question for the class is: could this have been written in such a way to avoid suit? There was a $350,000 judgment entered at the trial level. Ouch. Remember, this case was dismissed at the appellate level only for lack of standing.

My thoughts: instead of “we will not sue you for it” insert “you cannot be sued for it.” Before you cry, hey “that’s giving legal advice” think of whether you’d rather be sued for free legal advice vs. deceptive language. Feel free to come up with another variation.

There are three basic scenarios regarding SOL debt. Merely making a payment revives the SOL, where a payment does not revive the SOL without an explicit acknowledgment from the debtor that their payment will have that effect and third nothing revives the SOL. Come up with a game plan for your letters that fits each state you are writing to. Next, getting back to the issue of legal advice, the language regarding reporting to a credit agency is problematic. Why won’t payment affect a debtor’s credit score? Just make sure you know the answer.

The takeaway from the two appeals

In the initial appeal, the Chief Judge, the Hon. Diane Sykes, and one other ruled that because the debtor did nothing in response to the letter, she did not experience a concrete injury and therefore she lacked Article III standing. The argument that she was worried about what might happen in the future, i.e. that someone else could file a suit on the debt was deemed to be entirely speculative when all she was seeking was monetary damages. [A question left unasked and unanswered is, what if she sought injunctive relief regarding a future suit? Of course, if someone else did file suit, Pierre would have a slam dunk claim.] Of note, the decision was approximately six pages long.

The dissent, by Hon David F. Hamilton, however went almost forty pages. The Plaintiff sought an en banc rehearing of her appeal by the full panel which was simply denied 7-4 by all of the active Seventh Circuit judges. Judge Hamilton however, again wrote a dissent, which was a pared-down version of his prior dissent.

In the first decision Judge Hamilton started “Midland sent plaintiff Pierre a letter carefully designed to try to induce her to surrender her statute of limitations defense to an old debt, one so old it would be known in the debt collection business as “zombie” debt. The letter left Pierre confused and fearful.” In the en banc rejection Hamilton started off, “Defendant Midland Credit Management violated the rights of plaintiff Pierre and a plaintiff class under the Fair Debt Collection Practices Act in trying to collect so-called “zombie” debts — debts on which Midland knew the statute of limitations had expired.” Notice a trend here?

Judge Hamilton went to great lengths to make his displeasure known with the current trend in the Seventh Circuit which is “no harm, no foul.” His two dissents read more like briefs. And do not be surprised if they are widely quoted going forward. Hamilton makes clear that there are two sides here, and we’re the bad guys, on the wrong side. You know who you are.

“Congress made statutory findings that these abusive [debt collection] practices contributed to personal bankruptcies, marital instability, lost jobs, and invasions of privacy. 15 U.S.C. § 1692(a).” At the time they were referring to collectors calling late at night, threatening arrest, digging up the family dog (I heard that one from an old timer) and so forth. This however is not what we are seeing now. It seems to me that they are saying, that people that borrowed money or obtained services and failed to comply with their obligations are being psychologically harmed by requests that they do so. (I wish my parents knew that when I was young and I used my dad’s credit card. I’m scarred to this day.) 

Both dissents attempt to equate the intentional infliction of emotional distress with the alleged distress caused by getting a dunning letter. Seriously. To allege emotional distress in the non FDCPA context you need to show extreme behavior. The Seventh Circuit described the tort of intentional infliction of emotional distress stating, “It is clear, however, that “the tort does not extend to ‘mere insults, indignities, threats, annoyances, petty oppressions, or other trivialities.” Instead, the conduct must go beyond all bounds of decency and be considered intolerable in a civilized community.”[2]

Right now, the majority of the Courts in the Seventh Circuit appear to have awoken to the fact that a large percentage of the FDCPA suits being filed are no more lethal than kids making faces at each other. Several of the Federal Courts in the Southern and Eastern Districts of New York seem to be going in the same direct, “no harm, no foul” and kicking cases out early. But “be careful what you wish for” this trend to review standing and whether there is any real harm caused does not mean fewer suits– what it really means is, start brushing up on your state law procedure.


[1]  Pierre v. Midland Credit Mgmt., 29 F.4th 934 (U.S. 7th Cir. 2022), Rehearing denied by, En banc, Rehearing denied by Pierre v. Midland Credit Mgmt., 2022 U.S. App. LEXIS 15759 (7th Cir. Ill., June 8, 2022)

[2] Honaker v. Smith, 256 F.3d 477, 490 (7th Cir. 2001)

Lawsuit Accuses Collector of Trying to Collect Inflated Amount, Not Including Required Itemization Info in Letter

A complaint has been filed accusing a collection agency of violating the Fair Debt Collection Practices Act and Regulation F because it apparently did not use a Model Validation Notice and allegedly did not provide the itemization information required when it sent its first written communication attempting to collect on a debt. More details here.

WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: We continue to see Regulation F included in new lawsuits. But, a recent case filed in the Western District of Texas continues to make me think that the industry has done an excellent job updating its practices to comply with the new Rules, despite plaintiffs’ lawyers best efforts to loop Reg F into new claims.

In Mercado v. I.Q. Data Int’l, Inc., the plaintiffs claimed the debt collector violated 12 C.F.R. § 1006.34(c) – the portion of the new Validation Information Rules that explains Itemization data requirements. The plaintiffs complained that the initial letter “inflated the amount of the obligation and failed to explain the justification for th[e] grossly inflated amount through the itemizations provided.”

Unfortunately (and maybe intentionally), the plaintiff did not attach the letter at issue to the lawsuit. So, while this is pure speculation on my part, I’d wager that no required itemization data is actually “missing” from the letter and that any increase in the amount owed since the Itemization Date is explained to the extent required. In fact, Plaintiff concedes the letter states, “[a]s of 12/13/21, you owed $749.15” and “Between 12/13/21 and today: You were charged this amount in interest: $8.62” and states a grand total of “$757.77.” That language mirrors the Model Validation Notice language. It provides an Itemization Date, the total owed on that date, the interest added since that date, and the new total. The required itemization data is included (as far as we can tell based on Plaintiffs’ selective letter quotes) and the math adds up to show how interest increased the amount owed “since the itemization date.”
Plaintiffs seem to really just be complaining that the stated amount owed as of the Itemization Date is incorrect: Plaintiffs “only owed $101.15 in connection with the subject debt as of 12/13/21” not the $749.15 stated. I don’t see this as an itemization failure. The Rules do not require an itemization starting from a debt’s initial creation up through the Itemization Date. The only itemizations required are those necessary to justify the change in amount “since the itemization date” up through the current date. 12 C.F.R. § 1006.34(c)(2)(viii). In other words, this appears to be a run-of-the-mill claim that Plaintiffs do not owe the amount stated, not an invocation of Regulation F’s new and “explicit and detailed” data requirements, as Plaintiffs refer to them.

Bipartisan Privacy Bill Unveiled by Leaders in House, Senate

A draft of a bipartisan, bicameral privacy bill has been released that would preempt some of the provisions of state privacy laws that have been enacted while establishing a national framework for how companies must treat the privacy of their customers. More details here.

WHAT THIS MEANS, FROM LESLIE BENDER OF CLARK HILL: Since the ChoicePoint breach when California and then 46 other states passed their own unique privacy and data security laws, industry and privacy groups alike have urged Congress to develop a bill that would set a national standard for data privacy and protection. At long last a bipartisan group from each of the House and Senate spent countless hours drafting a bill called the American Data Privacy and Protection Act (“ADPPA”). The public got a chance to see this well-thought out bill that would pre-empt some features of state laws, establish clear guidance on express and knowing consent, and potentially pave the way for blockchain and other technology advances – while allowing consumers to know if and how their information is being collected, sold and used or disclosed. Sadly while there has been much praise for the effort of a bipartisan bill that could win approval from all parties and in both sides of Congress, privacy advocates and business groups alike have already raised concerns about the bill. Over eighty prior attempts at a national data privacy bill have failed in the last decade or two. This legislation will come to the House of Representatives for  hearing beginning next Tuesday so stay tuned. 

Meanwhile, there are some key features of this proposed law that merit a lot of consideration. Here are a few:

  1. The bill would allow for a limited private right of action and gives the Federal Trade Commission or state attorney generals authority to enforce the law. If any government regulator chooses to enforce, there would be no opportunity for individuals to also sue.
  2. The bill offers additional protection for data collecting on minors. We’ve seen some new TCPA lawsuits alleging that minors’ information or minors’ permissions are associated with activities requiring “consent” under the TCPA – so as minors become more tech-savvy, clearer guidance on minors’ data and consents would be critical.
  3. Pre-emption. Hallelujah! While not complete and there are some civil rights areas and other key areas where states remain free to legislate more protections for their citizens, having an overall national baseline for data privacy protection would allow for not only comprehensive and consistent compliance efforts but also for consumer education regarding how companies may and may not use and disclose their non-public information.

Judge Sanctions Defendant, Certifies Class of 300k Who Did Not Have Credit Reports Updated After BK Discharge

A Bankruptcy Court judge in New York has certified a class of nearly 300,000 consumers for whom a furnisher failed to update their credit reports to discharged via bankruptcy from charged off while also sanctioning the furnisher for “repeated, lengthy, and willful discovery failures” including the submission of false affidavits and repeated misrepresentations to the Court. More details here.

WHAT THIS MEANS, FROM CHRIS MORRIS OF BASSFORD REMELE: This lengthy decision analyzes the legal standards for imposing non-compensatory sanctions under the Bankruptcy Code, for a bank’s alleged violation of the discharge based on failure to update consumer credit tradelines from “charged off” to reflect a bankruptcy filing, and when such claims can be pursued on behalf of a class. The Court reasoned that monetary sanctions for technical or unintended violations of the discharge, promptly corrected, are generally not warranted. On the other hand, systematic refusal to correct credit tradelines to reflect debtors’ discharges, intended to pressure obligators to pay the debts, merit sanctions. But the main practical take-away from this decision is the importance of treating discovery obligations seriously, especially in the context of a consumer class action, and especially when a federal judge warns on the record that “there will be hell to pay” if it turns out that representations by a party and its counsel that all responsive documents have been produced is incorrect. Because defense counsel later conceded that the client had not even attempted to search for potentially responsive emails (among other concerns), the Court imposed a default, deemed the allegations of the Complaint admitted, certified a class that will apparently number into the hundreds of thousands, and announced an intent to impose civil sanctions in the range of $500 to $1,000 for the plaintiff as well as each class member who does not opt out. 

Bill Introduced in House to Allow CROs to Dispute Debts Directly With Furnishers

A bill has been introduced in the House of Representatives that would allow credit repair organizations to file direct disputes with furnishers on behalf of consumers, and require furnishers to respond directly to credit repair organizations with the results of a dispute investigation. More details here.

WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER: This lengthy decision analyzes the legal standards for imposing non-compensatory sanctions under the Bankruptcy Code, for a bank’s alleged violation of the discharge based on failure to update consumer credit tradelines from “charged off” to reflect a bankruptcy filing, and when such claims can be pursued on behalf of a class. The Court reasoned that monetary sanctions for technical or unintended violations of the discharge, promptly corrected, are generally not warranted. On the other hand, systematic refusal to correct credit tradelines to reflect debtors’ discharges, intended to pressure obligators to pay the debts, merit sanctions. But the main practical take-away from this decision is the importance of treating discovery obligations seriously, especially in the context of a consumer class action, and especially when a federal judge warns on the record that “there will be hell to pay” if it turns out that representations by a party and its counsel that all responsive documents have been produced is incorrect. Because defense counsel later conceded that the client had not even attempted to search for potentially responsive emails (among other concerns), the Court imposed a default, deemed the allegations of the Complaint admitted, certified a class that will apparently number into the hundreds of thousands, and announced an intent to impose civil sanctions in the range of $500 to $1,000 for the plaintiff as well as each class member who does not opt out. 

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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