Compliance Digest – July 18

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 Partially Grants MTD in FDCPA Case Over Different Account Numbers in Letter

A District Court judge in Michigan has granted a defendant’s motion to dismiss a class action on one of the claims accusing a company of violating the Fair Debt Collection Practices Act, but denied the motion to dismiss the remaining claims, ruling that using different account numbers when attempting to collect on the same debt and not responding to dispute requests is enough to classify the letters as deceptive and misleading. More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: This case is one of the clearest examples of how collection companies can easily and unintentionally find themselves violating the FDCPA. The Creditor’s process, in this case, appeared on its surface to be reasonable. It would send out a standardized letter for each account in the Creditor’s system, specifying the dollar amount and the account number. However, when the Court reviewed the process, an underlying issue was discovered that now leaves the Creditor defending the process used to send letters against the claim that it was used as an attempt to harass and abuse debtors.  

While letters have been found to violate the FDCPA in previous cases, the letters in those cases would often include threats of jail time, illegal garnishment, embellished balances, and/or profanity. In this case, however, the standardized letters did not contain threatening language. What caused the letters to be questioned as harassing and abusive resulted from the Creditor’s internal identification process. Specifically, the Creditor’s internal account numbers used to create the letters had no real significance to the Debtor. As a result, the Debtor received two letters for account numbers he did not recognize to collect for what he thought of as one debt. The letters were identical in wording except for the Creditor’s internal account numbers and the different balances, which correctly totaled the amount owed. That said, this alone did not amount to potential liability. Still, when the Creditor sent a second set of letters after it failed to respond to the Debtor’s request for verification, the Court found that in light of all, the sending of the letters could be held as an attempt to harass and abuse the debtors.  

Finding such a simple letter process potentially a form of harassment and abuse is a clear warning to all collection companies to audit and review all parts of the collection process properly. Letters, calls, or any part action of a collector could be made with the best intentions but, when reviewed as a whole, could lead to a claim. The letters in this case were standard and met the requirements under the FDCPA. Still, the letters find the Creditor in a complicated legal battle because the letters were issued using the Creditor’s internal reference system. Creditor always beware.


Judge Denies MSJ in FDCPA Case Over Cease Request

A District Court judge in Pennsylvania has denied a defendant’s motion for summary judgment, ruling that “reasonable juror” could determine that a collector acted with “requisite intent” when it made 12 calls to an individual after being notified that the individual no longer wanted to be contacted about an unpaid debt because he had been diagnosed with cancer. More details here.

WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: The agency in Beedle v PBCM had a strong summary judgment motion and it still may prevail at trial. The “bad” evidence for plaintiff was that two (not just one) of the letters he relied on were not received and, it appears, were not produced in discovery. The first letter supposedly was sent with a payment and stated plaintiff had cancer and made a cease request. There was no record of the letter. Later, plaintiff’s lawyer sent an attorney representation letter. However, there was no record of it being received and it apparently was not produced in discovery.

Nevertheless, the court denied summary judgment. A few factors were at play. First, it is defendant’s burden when filing summary judgment to show no genuine dispute as to any material facts. Second, the facts are considered in the “light most favorable to the” plaintiff-nonmovant. Third, “[w]hether a debt collector acted with the intent to harass under § 1692d(5) is a question of fact generally best left for a jury to decide.” These are high burdens. The court acknowledged the evidence was not strong, but held it was enough to survive for a jury determination.

The ruling may have been influenced by some additional unfavorable facts: (1) some calls were made even though there was a notation that plaintiff orally asked not to be phoned, (2) plaintiff’s health condition is serious, and (3) he did hire a lawyer, which gives more credence to his claims, even if there was a dispute about the lawyer letter. This is another example of the difficulty with dispositive motions. They often are worth pursuing, but prevailing is not as easy as we’d like to believe.

Appeals Court Overturns Dismissal of FDCPA Suit Related to Balance on Statement

The Court of Appeals for the Eleventh Circuit has overturned the dismissal of a Fair Debt Collection Practices Act case, ruling that statements sent to the plaintiffs indicating that the balance on the debt was accruing when a settlement had been reached is enough for the plaintiffs to state a claim under the statute. More details here.

WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER: In my view, while frustrating, neither of the recent decisions from the Eleventh Circuit in Lamirands or Daniels are all that surprising.  In both cases, there was facially incorrect information sent to the plaintiff in various communications.  Trying to comply with one law often does not absolve you of your obligations to comply with another and both of these decisions appear to reiterate that position.  It is critical to try to be in compliance with both laws, especially so when including inaccurate information in disclosures or statements required by TILA.  It will always be a difficult position to defend in the face of a FDCPA claim that false information included in a disclosure required by another federal law should have be overlooked before any court or regulator.

Judge Grants MSJ for Defendant in FDCPA Case Over Disputed Debt

A New Jersey Appeals Court has upheld a ruling in favor of a debt collector that was sued for filing a collection lawsuit against an individual, after the individual claimed, among other issues, that the collector should not have been allowed to file suit during the pandemic because of a clause in the agreement with the original creditor barring collection actions in a disaster area. More details here.

WHAT THIS MEANS, FROM CAREN ENLOE OF SMITH DEBNAM: In Midland Credit Management v. Sipple, the New Jersey Court of Appeals affirmed a collection judgment in favor of the debt buyer on credit card debt. The case is unexceptional except that it addressed the pandemic and whether the debt buyer’s efforts to collect during the pandemic violated the FDCPA or otherwise precluded judgment in favor of the debt buyer. At issue was a provision in the cardmember services agreement for a revolving credit account which represented and warranted that the creditor would temporarily suspend collection activities in areas declared a disaster until such time as it was reasonable and practicable. The Court noted that the consumer failed to present any evidence of an Executive Order prohibiting litigation and then turning its attention to the contract provision determined that the consumer was only an incidental beneficiary of the provision and did not have standing to enforce it. The case is “not for publication,” meaning it has no precedential value; however, it does serve as a reminder that agencies and others in the ARM industry should be vigilant regarding natural disasters and aware of local orders which impact their collection activities.

Collector Accused of Violating Reg F, FDCPA by Failing to Include Opt-Out Message in Emails

When a consumer tells a collector that he or she is not responsible for a debt, the collector usually has a process that seeks to get to the bottom of whether the consumer is telling the truth. But how far is too far? A complaint has been filed against a collector, accusing it of violating the Fair Debt Collection Practices Act and Regulation F because the emails it sent did not contain an opt-out notice and because the documentation it asked for was too “onerous” and an attempt to “dissuade” the consumer from defending herself. More details here.

WHAT THIS MEANS, FROM CARLOS ORTIZ OF POLSINELLI: Plaintiff filed an individual action in the Northern District of Georgia alleging that the defendant collection agency violated multiple sections of the FDCPA and the Georgia Fair Business Practices Act. According to the Complaint, the defendant attempted to collect more than $7,700 that Plaintiff failed to pay related to a residential property. Among the violations that Plaintiff alleged was that the defendant failed to include so-called “opt-out language” when it emailed Plaintiff as part of its collection efforts.

Under section 1006.6(e) of Regulation F, a debt collector that communicates or attempts to communicate electronically with a consumer via email or text message regarding a debt must provide a clear and conspicuous statement describing a reasonable and simple method by which the consumer can opt out of further electronic communications or attempts to communicate by the debt collector to that address or telephone number. In the comments to section 1006.6(e), the following examples are provided for how to satisfy the opt out notice requirement, but the language used must be readily noticeable and legible to consumers:

  1. For a text message sent to a consumer’s mobile telephone number, the text message includes the following instruction: “Reply STOP to stop texts to this telephone number.”
  1. For an email sent to a consumer, the email includes one of the following:
    1. A hyperlink labeled: “Click here to opt out of further emails to this email address.”
    2. Instructions in a textual format explaining that the consumer may opt out of receiving further email communications from the debt collector to that email address by replying with the word “stop” in the subject line.

No minimum type size is required for any of the above examples.

When sending emails or text messages to a consumer, collection agencies should ensure that they include compliant opt out language that is readily noticeable and legible to consumers.

CFPB Issues Guidance on FCRA’s Permissible Purpose Requirements

The Consumer Financial Protection Bureau yesterday issued another advisory opinion yesterday with respect to the Fair Credit Reporting Act, this time tackling the permissible purpose requirement of the statute, while also issuing a reminder that there are circumstances under which violators of the FCRA could face criminal prosecution. More details here.

WHAT THIS MEANS, FROM LESLIE BENDER OF CLARK HILL: Noting that the “FCRA’s permissible purpose provisions are … central to the statute’s protection of consumer privacy,” the Consumer Financial Protection Bureau (CFPB) released an advisory opinion on July 7, 2022, affirming that unless an FCRA-identified circumstance is present, information from a consumer report may not be provided to a user. To illustrate, the CFPB notes that it would be impermissible for a consumer reporting agency to provide reports on multiple people with the same or similar name because a user would then receive information on at least one consumer for which the user had no permissible purpose. Interestingly the CFPB explores “matching procedures” in its advisory opinion cautioning that “poor matching procedures” using incomplete or insufficient identifiers potentially runs afoul of the FCRA’s accuracy provisions. Moreover, the CFPB notes that “disclaimers” in consumer reports about the potential for inadequate matching procedures do not “change the fact that the consumer reporting agency has failed to satisfy the requirements of [the FCRA] and has provided a consumer report about a consumer to a person lacking a permissible purpose with respect to that consumer.” It is important to note that the CFPB also explained that users of consumer reports must also adopt appropriate controls to assure they are not violating consumer privacy by obtaining consumer reports without a permissible purpose to do so.  Based upon this advisory opinion, which is consistent with a wealth of Federal Trade Commission enforcement activity, any user of consumer reports should review and if needed update its policies and the use of consumer reports and any accompanying verification procedures to assure that controls are adequate to assure that consumer reports being requested relate to persons for whom a user has a permissible purpose.

Complaint Accuses Collector of Violating Reg F Because of Size of Opt-Out Disclosure in Email

A complaint has been filed, accusing a company of violating the Fair Debt Collection Practices Act and Regulation F for not making the opt-out disclosure in an email sent to a consumer clear and conspicuous enough and for mentioning in the email that paying a debt “may improve” the individual’s credit score even though the debt was not being reported to a credit reporting agency. More details here.

WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: Cue the consumer lawsuits designed to test technical spaces the CFPB left open for interpretation in Regulation F.  In this case, the plaintiff who received collection emails from a debt collector appears to be concerned that the opt-out in the e-mail was not “clear and conspicuous” because it was in the smallest font size of any text in the email.  Regulation F (in the Commentary to Section 1006.6(d)(4)(ii)(C)) says that “clear and conspicuous” means “readily understandable.  In the case of written and electronic disclosures, the location and type size also must be readily noticeable and legible to consumers, although no minimum type size is mandated.” There is a copy of the email in the Complaint, though, and the opt-out is in the same font size as several other lines of text – and it is plainly worded (“Click here to opt out of further emails for this account”) and appears to be pretty easy to understand.  If this case does not settle and makes it to the motions stage, it will be interesting to see where the court lands on this question of interpretation.  The initial collection email also mentioned that paying the debt “may improve” the plaintiff’s credit score and “boost” the debtor’s financial fitness.  The Plaintiff alleged that nobody was furnishing data about her debt to the consumer reporting agencies, which she claims made the statement that paying the debt “may improve” her credit score misleading.  But the letter does not, of course, say that paying her debt “will improve” her credit score.  This will be a good case to watch.

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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