Compliance Digest – October 3

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.

Appeals Court Upholds Dismissal of FDCPA Suit Over Alleged Lack of License

The Court of Appeals for the Third Circuit yesterday upheld a lower court’s dismissal of a Fair Debt Collection Practices Act case, ruling that a debt buyer was not required to be licensed under a state law in Pennsylvania when it attempted to collect interest that had accrued at a rate of 23% under the original creditor. More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: The United Stares Court of Appeals for the Third Circuit upheld a trial court opinion concluding that a debt buyer/debt collector was not required to possess a license related to bargaining interest rates on financial products. The Appeals Court correctly held that a subsequent purchaser of paper did not negotiate the interest rate – the original creditor did. Since no license was needed, the debt purchaser did not violate the FDCPA when it collected interest in excess of 6%. While specific to this particular licensing statute, it is an important victory for the industry when courts at the trial and appellate level refuse to expand on the plain meaning of licensing statutes. 

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Judge Largely Grants MSJ for Defendant in FCRA, FDCPA Case Over Combined Utility Accounts

A District Court judge in Maryland has largely granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act and Fair Credit Reporting Act case, but did deny the motion on two counts, dealing with how the plaintiff alleged she was treated by representatives of the defendant, which include allegedly calling the plaintiff a liar. More details here.

WHAT THIS MEANS, FROM DAVID SHAVER OF SURDYK, DOWD & TURNER: “Help me help you.” Judge Chasanow’s lengthy Memorandum Opinion in Oyathelemi is a good reminder for agencies and other ARM defendants to develop as clear and concise a factual record as possible when planning to move for summary judgment. By doing so, ARM defendants can “help courts help them,” particularly where the non-moving party’s briefing and submissions leave much to be desired. Judge Chasanow’s frustrations with the development of the record in Oyathelemi are evident, and those frustrations, along with some possible sympathies for Oyathelemi’s situation (she was apparently victimized by some squatters), may have contributed to her decision to find a couple questions of fact for trial. Certainly, convoluted fact patterns and vague allegations can present challenges for ARM defendants in this regard. Oyathelemi is a good example of that. But, if ARM defendants can help courts efficiently sort through the vague and nonsensical, they can help increase their chances of convincing courts to find in their favor.

Judge Grants MTD in FDCPA Case Over Issue with Statement in Letter

A District Court judge in Kentucky has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act case, ruling the plaintiff’s anxiety and confusion after receiving a collection letter does not give the plaintiff standing to file her lawsuit. More details here.

WHAT THIS MEANS, FROM KAT O’BRIEN OF BARRON & NEWBURGER: This is a good one. Plaintiff filed an FDCPA action attempting to distinguish it from the 2021 Garland case that put the 6th Circuit squarely in the circuit-split box that “confusion and anxiety” alone is not enough for federal standing. The Judge here, relying heavily on Garland & Spokeo, was rightfully unpersuaded by the outside circuit decisions presented by Plaintiff and this Court did not create a factual carve out on “confusion” as the Plaintiff was hoping.  Standing continues to be a hot topic across the country, as more and more Federal courts are still making these standing distinctions. See for example, Toste and Hunstein in the 11th Circuit.  Keep in mind, these cases are not necessarily over, but it’s nice to know that *maybe* it’s keeping some of the more frivolous cases from being filed, at least in Federal Courts. The silver lining there is that there are still Plaintiff attorneys who do not want to be in state court for these matters either.

Dismissal of Collection Lawsuit Not Enough for Plaintiff to Pursue FDCPA Suit

Winning a collection lawsuit because the judge ruled there was not a sufficient chain of custody to prove the account was transferred by the original creditor to the entity purchasing the account is not enough evidence that a juror could use to conclude a false statement was made, ruled a District Court judge in Pennsylvania, who granted a defendant’s motion for summary judgment. More details here.

WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: This is a great ruling from a district court summarily rejecting a faulty argument commonly lodged by consumer-plaintiffs. The argument goes something like this: “They brought a collection action against me and the court dismissed it so therefore there must be a FDCPA violation.” Of course, a court’s determination that there is a “lack of evidence” does not equate to a wrongdoing. The court got this ruling right and it will be useful in defending similar future claims. That being said, beefing up your chain-of-custody evidence is still a worthwhile endeavor because it can prevent valid collection actions being dismissed due to an evidentiary technicality.

FTC, CFPB File Joint Brief in FCRA Case Over How Disputes are Investigated

Given the increased scrutiny and shifting landscape surrounding credit reporting, furnishers would do well to pay attention to a brief filed by both the Federal Trade Commission and the Consumer Financial Protection Bureau in a Fair Credit Reporting Act case before the Court of Appeals for the Third Circuit, which centers around how disputes are investigated. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: In a joint amici brief filed earlier this month, the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) pushed the Third Circuit to require furnishers to investigate all indirect disputes under the Fair Credit Reporting Act (FCRA), even those which the furnisher deems to be frivolous or where the consumer does nothing to substantiate his claim of identity theft.

The appeal, Ingram v. Waypoint Resource Group, LLC, challenges the district court’s grant of summary judgment to the defendant. After the original creditor placed it with a collection agency, Plaintiff disputed the reporting of a debt with the original creditor, arguing that he was the victim of identity theft. The original creditor notified the Plaintiff that it needed him to provide additional information to investigate the dispute, including an affidavit of fraud and identity theft, proof of identity and residence, and a police report. The plaintiff did not provide those documents, and the account was subsequently referred to a second collection agency, the defendant Waypoint. The plaintiff disputed the debt two more times through credit reporting agencies, but the first dispute did not mention fraud or identity theft, and Defendant deleted the tradeline until the creditor responded that the dispute was “invalid,” at which point it referred the account back to the creditor. Plaintiff never provided the requested documents until after the litigation was initiated and had no direct communication with Waypoint.

Nevertheless, Plaintiff sued Waypoint, alleging that Waypoint had failed to conduct a reasonable investigation of the indirect disputes in violation of the FCRA. At summary judgment, the district court ruled that Plaintiff had not raised the “bona fide dispute” necessary to trigger any duty under the FCRA, citing 15 U.S.C. § 1681s-2(a)(8)(D), which requires consumers to “include all supporting documentation required by the furnisher.”

On appeal, the FTC and CFPB have weighed in on the side of the consumer, arguing that nothing in the FCRA allows for the filtering of frivolous disputes by furnishers, and that credit reporting agencies (CRAs), not furnishers, are responsible for determining whether a dispute is frivolous before forwarding it to furnishers. Additionally, the agencies argue that consumers are entitled to notice of the dispute outcome and an opportunity to cure deficiencies.

The FTC and CFPB’s position is in tension with CRAs’ incentive to forward all disputes to furnishers without assessing the frivolousness of the dispute, in order to avoid exposure to litigation. CRAs may feel that furnishers are in a better position than CRAs to assess whether supporting documentation is necessary (particularly where allegations of fraud have not been made directly). Regardless, industry participants will want to monitor the Third Circuit’s response, and consider the FTC’s and CFPB’s stated position when reviewing compliance policies or responding to agency investigations.

Top House Republicans Demand Answers from Chopra

A pair of Republicans in the House of Representatives have written a letter to Rohit Chopra, the Director of the Consumer Financial Protection Bureau demanding proof that justifies the Bureau’s authority to take action on rulemakings and initiatives it has announced. The Republicans — Rep. Patrick McHenry [R-N.C.], the ranking member of the House Financial Services Committee, and Rep. James Comer [R-Kent.], the ranking member of the House Oversight and Reform Committee, say that Chopra and the CFPB are acting outside its authority and keeping everyone “in the dark.” More details here.

WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS SUTHERLAND: On the heels of a letter from two House republicans challenging activities of the Consumer Financial Protection Bureau (CFPB) that exceed its Congressional delegation of authority, financial services groups led by the Consumer Bankers Association (CBA) have now filed a lawsuit against the CFPB in a Texas federal court. 1 – Cmplt, CCS, Ex A-G.pdf (consumerbankers.com) The past week began with House Republicans Patrick McHenry and James Comer, challenging a handful of recent actions by the CFPB. In so doing, the House representatives relied upon a recent Supreme Court decision, West Virginia v. EPA, 142 S. Ct. 2587 in which the Supreme Court applied the “Chevron deference” doctrine to some actions of the federal environmental regulator.  In West Virginia v. EPA the Supreme Court ultimately held that “the Constitution does not authorize agencies to use pen-and-phone regulations as substitutes for laws passed by the people’s representatives.” Financial services experts have speculated for months about the potential for applying West Virginia v. EPA to the actions of the CFPB under its director Rohit Chopra. Representatives McHenry and Comer stated that the House Committees for Financial Services and Oversight and Reform “intend to exercise robust investigative and legislative powers to not only forcefully reassert our Article I responsibilities, but to ensure that neither [the CFPB] nor the Biden administration can continue to exceed Congressional authorizations.” Before the week ended, the CBA joined by the American Bankers Association, the U.S. Chamber of Commerce, the Independent Bankers Association of Texas, the Texas Bankers Association, the Longview Chamber of Commerce, and the Texas Association of Business jointly filed a lawsuit against the CFPB challenging the legality of recent changes made by the CFPB to the Unfair, Deceptive, or Abusive Acts or Practices (UDAAPs) examination manual. Commenting on the lawsuit, CBA’s President & CEO Lindsey Johnson said, “[w]e wholeheartedly support fair, objective, and transparent enforcement of civil rights and fair lending laws, but recent changes made to the UDAAP Exam Manual by the CFPB represent an enormous self-expansion of the agency’s authority that stands contrary to law and the intent of Congress.” CBA, Leading Financial Groups Pursue Legal Action Against CFPB For Unlawful Changes To UDAAP Exam Manual | Consumer Bankers Association The CBA lawsuit attaches dozens of pages of CFPB materials the suit alleges demonstrate the CFPB has exceeded its authority. 

What’s the bottom line for the credit and collections industry? Over the short run there may be no immediate impact on industry because courts and Congress take some time to act – but stay tuned to see whether or not other challenges to the CFPB’s authority are forthcoming.

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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