Compliance Digest – October 10

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 Grants Motion to Remand Hunstein Class Actions Back to State Court

A District Court judge in Illinois has granted motions in two separate Fair Debt Collection Practices Act class-action lawsuits to remand the cases back to state court, ruling the plaintiffs lacked standing to sue in federal court. More details here.

WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: United States District Judge Robert M. Dow, Jr. of the Northern District of Illinois recently remanded two Hunstein cases back to Cook County, Illinois Circuit Court. These decisions come on the heels the Eleventh Circuit Court of Appeals issuing its latest en banc opinion. Hunstein v. Preferred Collection & Mgmt. Servs., Inc., – F.4th –, 2022 WL 4102824, at *6 (11th Cir. Sept. 8, 2022).

For those of you that refused to settle Hunstein claims last year, you probably have similar activity in your cases right now. Many federal district courts stayed (or otherwise informally waited to rule on motions to remand or to dismiss) lawsuits with Hunstein claims late last year after the Eleventh Circuit vacated the second Hunstein opinion and decided to hear the matter en banc. Now that we have that ruling, those cases are becoming active again.

While most courts seem ready to remand the cases back to state court (if the case was removed) or dismiss the claims (if the case was originally filed in federal court), the defense bar is seeing mixed reactions from plaintiffs’ counsel. Some claim to be happy to go back to state court and battle out the merits. Others appear to be attempting to liquidate their remaining Hunstein claim inventory for nuisance value. Finally, some plaintiffs are seeking to amend their lawsuit allegations (or threatening to do so) to attempt to add an allegation of publicity of private information, in an apparent effort to stay in federal court.

While we expect to see at least a handful of Hunstein claims continue to be litigated, there are still merits defenses and a potential lack of harm/damages defense even in state court, depending on the relevant state’s case law. More importantly, the wave of new Hunstein-claim filings appears largely to have stopped. Hunstein claims are no longer an easy payday for the plaintiffs’ bar. The industry rallied, put on a strong defense at the appellate level, and the component of panic and fear driving fast settlements disappeared. Let’s do the same thing when the next (sorry, but it is inevitable) creative FDCPA claim theory explodes!

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Judge Grants MTD in FDCPA Case Over References to Attorney Review in Letter

A District Court judge in New York has granted a defendant’s motion to dismiss after it was sued for allegedly violating the Fair Debt Collection Practices Act because a collection letter included five references to an attorney potentially reviewing the account in question to pursue legal collection activities, which allegedly overshadowed the validation notice. More details here.

WHAT THIS MEANS, FROM LORAINE LYONS OF MARTIN LYONS WATTS MORGAN: This is a case with a carefully drafted letter. There were several references to a potential attorney review, and the letter included additional statements to avoid a claim of overshadowing the validation notice.  This is a great win for the industry, but it should also be noted that this case involved a pre-Regulation F initial demand letter.  When making changes to the initial demand letter, it is best to have a compliance professional review the changes.

Court Rules Collector Owes Finder’s Fee

The Court of Appeals for the Third Circuit has overturned a summary judgment ruling in favor of a collector, ruling that it does owe a finder’s fee to a company it hired to help it secure a contract to collect on debts owed to the federal government. More details here.

WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: This is an old-school contract dispute case between two companies regarding the issue of a finder’s fee. It is also the second time this case went up on appeal to the Third Circuit. Perhaps the reason the contract went up again on appeal is because it is not very clear, something the Third Circuit alludes to in this opinion. The underlying takeaway here is that parties should try to make their contracts clear and readable.  While nobody ever thinks their contract is going to end up at the center of a federal case, every contract should be drafted with that in mind. 

Groups Sue CFPB Over Anti-Discrimination Policy

A group of financial services organizations, along with the U.S. Chamber of Commerce, yesterday sued the Consumer Financial Protection Bureau, alleging the regulator overstepped its statutory authority when it warned companies about engaging in activities that could be found to be discriminatory and claiming that it is acting outside of the powers that it was given by Congress. More details here.

WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER: When originally announced in March, many questioned the validity of the CFPB’s position that its Dodd-Frank UDAAP authority allows interpreting the word “unfair”to prohibit discrimination. This was because this position seems to ignore the legislative choice made by Congress to explicitly limit the reach of anti-discrimination concepts to specific areas when it passed legislation like ECOA, the Fair Housing Act, Title VII, the Americans with Disabilities Act. The Supreme Court reinforced this skepticism in issuing its ruling in West Virginia v. EPA this summer. So it stands to reason that there is a real opportunity for some level of injunctive relief in this new litigation. However, this suit also has teed up yet another challenge to the constitutionality of the CFPB itself by asserting the funding issue in the complaint. In the event of an appeal from any substantive district court opinion, the Fifth Circuit has at least one judge whose prior concurring opinion suggests a sympathetic ear to this argument. A holding that the CFPB is unconstitutionally funds stands to undo much more than just the UDAAP-based position on fair treatment. For instance, Regulations F, X, and other actions by the CFPB all could become subject to further challenge.  It certainly will be a case worth watching! 

FCC Starts Rulemaking Process to Block Unwanted Text Messages

The Federal Communications Commission yesterday announced a Notice of Proposed Rulemaking that seeks to crack down on illegal and fraudulent text messages, finally taking action more than a year after initially announcing the proposal. More details here.

WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS SUTHERLAND: On September 27, 2022, the Federal Communications Commission (FCC) issued a Notice of Proposed Rulemaking (NPRM) announcing it wants mobile wireless providers to take more action to block illegal text messages. The FCC states this is a logical next step in its efforts to halt illegal and unwanted robocalls. More specifically, the FCC believes that wireless carriers should adopt authentication strategies ro verify whether or not texts are from invalid, unallocated, or unused numbers and numbers on a Do-Not-Originate (DNO) list. The timing seems notable given the extensive unsolicited texting related to political campaigns as we head to the midterm elections. In its NPRM the FCC notes it does not receive as many complaints about robotexts as robocalls; however it states there is “evidence of an emerging problem.” Concerning in the NPRM is the FCC’s use of the term “unwanted” in a way it implies is potentially synonymous with illegal.  Industry may recall that in the context of robocalling, the FCC used the word “unwanted” to characterize presumably illegal calls that it wished to prohibit. Industry argued that “unwanted” was not equivalent to the term illegal. While industry is in full agreement that illegal calls (and texts) are vexatious and invasive of privacy, “unwanted” as a descriptor was potentially too broad, particularly in situations in which called parties have a pre-existing relationship with a caller (or in the case of debt collection, a pre-existing relationship with the creditor for whom a debt collector is calling) and may not be expecting a specific call or calls.  In the past industry urged the FCC to use caution in seeking to bar “unwanted” calls and we will see if industry again will urge the FCC to use a more definitive qualifier than “unwanted” when it crafts regulations to prohibit robotexting. An example of a use of the term “unwanted” which could prove to be problematic in the long run can be found here when the FCC states that “unwanted text messages … invade consumer privacy, and are vehicles for consumer fraud and identity theft.”  Ideally some regulatory wording that distinguishes “permitted” from “unpermitted” calls or texts may prove more workable. In issuing the NPRM, the FCC reminds the public that the TCPA not only applies to calls made by an automatic telephone dialing system, it applies to texting and VoIP calls – internet to phone text messages because internet to phone messaging is functionally equivalent to phone-to-phone messaging – and in any event “the potential harm is identical to consumers; unwanted text messages pose the same cost and annoyance to consumers, regardless of whether they originate from a phone or the Internet.”   

What is important from the credit and collections industry’s perspective is to keep an eye on the call blocking features in the NPRM which could impose call blocking requirements on carriers and service providers before robust and dynamic call or text labeling technology is in place. While the FCC’s NPRM focuses heavily on pressuring carriers to halt illegal robotexting by expanding call blocking efforts – hopefully the NPRM will help identify more rigorous and reliable methods of authenticating outbound texts when traditional enforcement remedies “may not be sufficient deterrents” to robotexting. Call blocking and text blocking without reliable line/call/text labeling and authentication could lead to unintended consequences for industries dependent upon outbound calling or texting strategies to deliver exceptional customer service. While some meaningful methods for carriers to authenticate callers and associate them with valid numbers are noted – some expansion of the Truth in Caller ID rules, the NPRM is soliciting extensive information on the pros and cons of call (text) blocking and how erroneous blocking might be identified and mitigated. The NPRM specifically asks whether the STIR/SHAKEN framework for IP networks would apply logically in the context of texting – and what could be done to spur standards groups to complete development of standards immediately. More specifically, the FCC asks whether it should include deadlines in its proposal – and if so, what should they be. Finally, the FCC asks what types of consumer education make sense and how it can pursue this robotexting initiative while advancing digital equity for all – including people of color, persons with disabilities, persons who live in rural or tribal areas, and others who are or have been historically underserved, marginalized, or adversely affected by persistent poverty or inequality. This NPRM will provide an important opportunity for industry to comment – particularly as to text blocking and text labeling features of this potential rulemaking. Finally, it will be interesting to see if the NPRM surfaces any innovative solutions to the challenges service providers, carrier and legitmate calling parties face in distinguishing permitted from illegal texts.

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.