Compliance Digest – August 22

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.

Appeals Court Upholds Dismissal of FDCPA Suit, While Tackling Issues With ‘Least Sophisticated Consumer’ Standard

The Court of Appeals for the Tenth Circuit has upheld the dismissal of a Fair Debt Collection Practices Act case, ruling that an alleged false or misleading communication must be material in order to be considered a violation of the statute, but also took a deep dive on the different definitions that have been created by courts related to the “least sophisticated consumer” and a “reasonable consumer” that make this opinion worth the read. More details here.

WHAT THIS MEANS, FROM DAVID SHAVER OF SURDYK DOWD & TURNER: Tavernaro is a breath of fresh air. It recognizes that not only can the oft-invoked “least sophisticated consumer” and “unsophisticated consumer” standards be difficult to apply, but that such standards are themselves somewhat misleadingly named because courts do not actually interpret and analyze collection letters from the bottom rung of the consumer sophistication ladder. Instead, Tavernaro opts to apply a “reasonable consumer” standard like that applied to claims under other consumer protection statutes, and it endorses the view that a statement or information in a collection letter must be material in order to be misleading to a consumer.

According to the panel in Tavernaro, a “reasonable consumer” standard more accurately reflects the already-existing requirements that consumers read collection letters in their entirety, with some care, and not in bizarre or idiosyncratic (i.e., unreasonable) ways. Applying this standard, the panel affirmed the District Court’s rejection of Mr. Tavernaro’s FDCPA claims because any reasonable consumer who read the collection letter at issue would understand who the collector and creditor were and would not be misled.

Though the “least sophisticated consumer” and “unsophisticated consumer” standards will undoubtedly continue to be applied by courts, agencies defending letter claims should find the language and reasoning in Tavernaro helpful, and the court’s analysis may be useful as persuasive authority outside of the Tenth Circuit. 


Judge Rules Plaintiff Who Claimed to Suffer Stress & Anxiety Over Collection Attempt Has Standing to Sue

A District Court judge in Georgia has denied a defendant’s motion to dismiss on the grounds that the plaintiff lacks standing to sue, ruling that his claims of being “stressed, anxious, and worried” after receiving a letter attempting to collect a debt he did not believe he owed was enough for him to have suffered a concrete injury, especially after the plaintiff mentioned having had a previous stressful experience with another unpaid medical debt that the plaintiff incurred when he did not have medical insurance. More details here.

WHAT THIS MEANS, FROM JONATHAN ROBBIN OF J. ROBBIN LAW: What qualifies as a sufficient injury to establish Article III standing has been a constant thorn in both the plaintiff and defense sides. In this case, the Middle District of Georgia determined that sworn allegations of stress and anxiety were sufficient to withstand an Article III inquiry.

Within his complaint, the plaintiff alleged that the defendants violated the FDCPA because the plaintiff did not owe the debt and the defendants were therefore not authorized to attempt collecting money from him. In opposition to a prior summary judgment motion (in which the issue of standing was not addressed) and in opposition to the defendants’ motion to dismiss for lack of standing, the plaintiff submitted affidavits stating that the collection efforts caused him to be confused, stressed, anxious, and worried.

Without providing factual support, the plaintiff stated that he felt the defendants would not stop their collection efforts “no matter what information [he] provided them,” and he had a prior bad experience with medical debt that exacerbated his stress and anxiety regarding the debt the defendants were attempting to collect. The court rejected the defendants’ argument that the plaintiff’s statements were conclusory and that worry, stress, and anxiety, without more, were insufficient to confer standing.  

The Court relied on various Eleventh Circuit decisions indicating that plaintiffs may rely upon sworn testimony to make emotional distress associated with debt collection efforts to comport with the tangible and concrete requirements for Article III standing. This once again demonstrates that on the one hand, plaintiffs can rely on simple un-factually supported statements of “stress” to create Article III Jurisdiction, but Defendants cannot use Article III to remove a case alleging a violation of the FDCPA without specific allegations of tangible harm.

Judge Grants MSJ in Separate FDCPA Suit Filed Over Same Account

A District Court judge in Missouri has granted a defendant’s motion for summary judgment after a plaintiff filed two separate lawsuits related to two different collection letters that she received five months apart attempting to collect on the same debt. More details here.

WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: You have to admit, we Jersey lawyers like to share. We are currently sharing what I call the “Jersey Slice” with others throughout the country. The “Jersey Slice” not to be confused with “a slice” which is pizza done right, is where a plaintiff’s attorney tries to see how many slices he can get out of a single matter. 

One of the most prolific NJ practitioners of this method recently took his show on the road to Missouri and it did not go so well. As happens on occasion, a debtor gets a questionable letter, goes to an attorney or rather the attorney contacts him or her after receiving the letter from an aggregator, and a suit is filed. And, while the suit is pending, a second letter gets sent, also questionable. The suit is amended to add the second violation. 

But here, counsel tried the “Jersey slice” and waited until both letters were received and then filed the lawsuits, one at time, with a few months in between to multiply the statutory damages and fees. [Least you ask how he knew there would be a second letter – a common tactic of plaintiff’s counsel is to wait 364 days before filing the first suit to see what else might come in.] In Missouri, the “show me” state, the tactic did not go unnoticed by the Court. “[I]t appears plaintiff’s tactic is at best an attempt to evade the statutory cap on recovery and does not arise from a different nucleus of operative fact.” 

The Court pointed out that “statutory damages for violation of the FDCPA in § 1692k are limited to actual damages, plus maximum statutory damages of $1000 per action, not per violation,” defining action as an account. So only one litigation, or in this case arbitration, per account.

This same principle can be argued when multiple suits are filed against a law firm and its client for a letter that the law firm sent. The Courts rarely like it when it’s brought to their attention.

On a last note, Plaintiff’s counsel argued that the two cases were different because they rely on two “different theories” of liability. I’m sorry, but when I hear that (and I hear it often from several New Jersey attorneys) I understand that to mean, “there’s really no violation but I’m searching like hell for something I can sue on.” These are the kinds of guys you want to put in a round room and tell them there’s a $100 in the corner and watch what they do.

Judge Grants MSJ for Defendant in FDCPA Case Over Pandemic Voicemail

A District Court judge has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case, ruling that a voicemail it sent out to all its customers a few months after the start of the COVID-19 pandemic was not a communication in connection with the collection of a debt, even though it included instructions for making payments and a representative of the defendant testified that it hoped customers would make payments after receiving the message. More details here.

WHAT THIS MEANS, FROM CHRIS MORRIS OF BASSFORD REMELE: A third-party mortgage loan servicer reacted to increased call volumes and long hold times during the COVID pandemic by sending automated voice messages to all customers, reminding them that account and payment information was available via its website. One customer who received such messages had filed bankruptcy, and alleged in a class action that the voice message violated the FDCPA by failing to disclose that the servicer was a “debt collector.” Reasoning that a communication is not collection of a debt unless an “animating purpose” is to induce payment, and noting that the messages did not reference the amount of the debt or make any direct demand for payment, the Court reached a common sense conclusion that the essential purpose of the communication was to provide all customers – not just those in default – with information about alternative methods to contact the servicer during the pandemic. Thus, the voice messages were ruled not subject to the FDCPA, and the claim was dismissed.

Appeals Court Affirms Ruling for Defendant in FCRA Case Over Disputed Debt

The Court of Appeals for the Fourth Circuit has affirmed a lower court’s ruling in favor of a defendant that was accused of violating the Fair Credit Reporting Act for how the pay status notifications were being displayed for a number of plaintiffs, determining that while the reports could have been clearer, that does not mean they were not clear enough. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: In a victory for credit reporting agencies (“CRAs”), the Fourth Circuit ruled earlier this month that credit reports that described the pay status of student loans as “Account 20 Days Past Due” but also stated that they were closed, transferred, and had a $0 balance, satisfied the Fair Credit Reporting Act’s “maximum possible accuracy” requirement. Plaintiffs admitted they had become delinquent on their loans, and following nonpayment, the lenders closed the accounts and transferred them to new holders. The lenders then reported the loans as closed to the CRA, but in a delinquent state at the time they were closed, with a maximum delinquency of 120 days. The defendant, TransUnion, reported the loans’ status accordingly. 

Plaintiffs argued that it was inaccurate to report accounts that had a balance of $0 as having a late balance because no payments were now owed to the former owner of the student loans. TransUnion moved for judgment on the pleadings, arguing that the reports accurately reflected both the account’s current closed status and the historical pay status at the time it was closed. The district court agreed with TransUnion, and the Fourth Circuit affirmed, ruling that it was reasonable to treat the pay status of a closed account as historical information. Furthermore, the Fourth Circuit explained that “[t]he possibility of further clarity is not an indication of vagueness” and therefore, the fact that a report could potentially be made clearer did not mean that the CRA had not satisfied the FCRA’s requirement for employing reasonable efforts to achieve maximum possible accuracy.

The decision offers a welcome legal reprieve for both furnishers and CRAs, who may now have the tools to dispense with similar litigation on an early motion. Practically speaking, it also means that those relying on credit reports to evaluate consumers will continue to be able to consider an individual’s pay history without the potential for being misled by an unqualified “closed” account status.

CFPB Warns Companies About ‘Shoddy’ Data Security

The Consumer Financial Protection Bureau unequivocally announced yesterday that companies with “insufficient data protection or information security” are violating federal law while providing examples of “widely implemented data security practices” that companies can use as a guide to avoid such an accusation. More details here.

WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS SUTHERLAND: That a company’s failure to keep the privacy and data security promises it makes to consumers is an unfair or deceptive act or practice is not a new or novel interpretation of either “UDAP” or “UDAAP” laws. In its Consumer Financial Protection Circular 2022-04 published by the Consumer Financial Protection Bureau (CFPB”) this month, the CFPB warned that it too will regard cases of insufficient data protection or security for consumer information as an unfair act or practices. This is consistent with the work and interpretations of the Federal Trade Commission (“FTC”) who has been, along with the U.S. Department of Health and Human Service’s Office of Civil Rights, the pre-eminent federal privacy regulators. It was just over 20 years ago, that regulatory visionary Tom Pahl, then at the Federal Trade Commission (“FTC”), innovated the approach in the precedential and far-reaching enforcement action against Eli Lilly Eli Lilly Settles FTC Charges Concerning Security Breach | Federal Trade Commission. The FTC then clearly explained this legal use of the FTC’s one-A “UDAP” authority, by saying that “companies that obtain sensitive information in exchange for a promise to keep it confidential must take appropriate steps to ensure the security of that information … even the unintentional release of sensitive … information is a serious breach of consumers’ trust.” Eli Lilly Settles FTC Charges Concerning Security Breach | Federal Trade Commission.

What does this new circular 2022-04 mean for the credit and collections industry? This is the third important signal this year for how important it is for all non-bank organizations to take a hard look at both their privacy and data security practices. The FTC’s new and improved Safeguards Rule finalized in late 2021, takes effect Dec. 9, 2022, FTC Strengthens Security Safeguards for Consumer Financial Information Following Widespread Data Breaches | Federal Trade Commission and requires organizations to have thorough and up-to-date written information security programs. In addition, earlier this month the Conference of State Bank Supervisors (CSBS) released detailed tools to be used by state examiners nationwide to assess the cyber-preparedness of nonbank entities. CSBS Releases Nonbank Cybersecurity Exam Procedures | CSBS 

As Q3 draws to a close and Q4 approaches, steps including the following are a must:  first, set aside sufficient resources to  conduct a data security gap assessment to identify any vulnerabilities in your organization (and plan remedial steps) before the new Safeguards Rule takes effect and before state examiners conduct your data security inspection; and second, tune-up your written information security program using the CSBS tools or even the HIPAA data security tool recently updated by NIST 800-66 SP 800-66 Rev. 2 (Draft), Implementing the HIPAA Security Rule | CSRC ( or

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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