Compliance Digest – November 14

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 Grants MSJ for Defense in FDCPA Case Over Letter Sent to Represented Individual

A District Court judge in Illinois has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case, ruling that a letter sent to the plaintiff in response to a dispute does not constitute a communication in connection with the collection of a debt. More details here.

WHAT THIS MEANS, FROM DALE GOLDEN OF GOLDEN SCAZ GAGAIN: This case presents an excellent example of the importance of having layered compliance procedures in place. After the consumer’s attorney sent a letter of representation disputing the debt to the agency, a “records custodian” for the agency sent a letter directly to the consumer. That letter indicated it was sent “solely to respond to [the] dispute” and was “not an attempt to collect a debt.” The consumer sued nonetheless. The court however granted the agency summary judgment, applying a “commonsense inquiry” to conclude the letter wasn’t “a communication in connection with the collection of a debt” because it did “not include a demand for payment, and nothing suggest[ed] the animating purpose of the letter was to induce payment.”

The agency was therefore able to overcome the error by its employee, who failed to properly code the account once the attorney representation letter was received, by having an additional safety net in place, namely the carefully crafted letter from its records custodian. Because that letter made clear that it was not seeking payment, but only advised the consumer that it “would investigate the dispute, and informed [him] that [the agency] requested that the credit reporting agencies delete the credit reporting,” the agency was able to escape liability. The decision illustrates the importance of assuming mistakes will be made and having layers of compliance procedures in place to nonetheless avoid liability.


Judge Grants Motion for Defendant in FCRA Case Over Reasonable Investigation

A District Court judge in Illinois has granted a defendant’s motion for judgment on the pleadings after it was accused of violating the Fair Credit Reporting Act by not conducting a reasonable investigation after an account was disputed, ruling that the plaintiff lacked standing because he did not allege to have suffered a concrete injury as a result. More details here.

WHAT THIS MEANS, FROM AKEELA WHITE OF HINSHAW CULBERTSON: In Angulo v. Truist Bank, an Illinois district court dismissed a plaintiff’s FCRA complaint, holding that a “bare allegation” of reputational harm and the humiliation of credit denial is not sufficient to satisfy the Article III standing requirement. Here, the plaintiff notified Equifax that he disputed the information in his credit report as inaccurately showing the pay status as 30 days past due at the time he paid the account in full and closed it. The CRA relayed the dispute to the defendant who allegedly failed to conduct a reasonable investigation of the account or correct or remove the disputed information. The plaintiff filed suit claiming that as a result the defendant’s conduct, the plaintiff suffered harm in the form of “loss of credit, loss of ability to purchase and benefit from credit, a chilling effect on applications for future credit, and the mental and emotional pain, anguish, humiliation, and embarrassment of credit denial.” The court held that these allegations lacked supporting facts necessary to clear the threshold Article III jurisdictional hurdle, and granted the plaintiff 30 days to amend the complaint to plead facts showing that he plausibly suffered a concrete particularized injury caused by defendant’s alleged FCRA violation. This opinion provides useful guidance on what types of allegations a court may consider sufficient pleading of concrete harms – such as an actual application for and subsequent denial of credit- necessary to establish Article III standing following Spokeo and TransUnion.

Judge Grants MSJ For Defense in FDCPA Case Over No-Longer Disputed Debt

A District Court judge in Florida has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case after it was accused of violating the statute because it did not remove a dispute flag from an account that was being reported to the credit reporting agencies after receiving a letter from an attorney indicating that the plaintiff was no longer disputing the debt. More details here.

WHAT THIS MEANS, FROM CAREN ENLOE OF SMITH DEBNAM: In Dukes, the consumer unsuccessfully tried to manipulate her credit report to improve her credit score and access to credit. The court rightfully concluded that the consumer could not “weaponize the FDCPA against a debt collector for declining to participate in a scam.” Aside from the great quotes found in the opinion, two things stand out and should be noted. First, having a reasonable and articulable justification for a debt collector’s actions or omissions is important.  Here, the debt collector did not change its reporting of the debt as disputed based upon a letter received from a third party which stated that the consumer no longer disputed the debt. The fact that the debt collector could articulate why it believed the letter to be a scam and what it would have done if it had believed otherwise, was helpful. That coupled with the discovery in this matter proved the debt collector correct and justified its actions and in the end, spelled defeat for the consumer’s claim. 

Which brings us to our second point – discovery matters and depositions, while expensive, can be a powerful tool. Here, the consumer admitted in her deposition that she still disputed the debt and that she had retained a credit repair law firm to help her straighten out her credit so she could get a mortgage. Because the Federal Housing Administration “would not … allow us to move forward if any sort of dispute, dispute comments, or anything of that nature” was present on her credit report, the consumer wanted all dispute comments removed and authorized the credit repair law firm to send a letter stating she no longer disputed the amount. Because the consumer’s clear testimony was that despite the letter, the account in fact was still disputed, the Court concluded that testimony to the contrary contained in her declaration in support of summary judgment was a sham affidavit. The court therefore granted summary judgment in favor of the debt collector. 

Judge Grants Motion to Compel Depositions in FCRA, FDCPA Case, But Issues Warning to Plaintiff’s Attorney

A District Court judge in Indiana has granted a plaintiff’s motion to compel depositions in a Fair Credit Reporting Act and Fair Debt Collection Practices Act case that features a few interesting twists and turns. The judge also issued a warning to the plaintiff’s attorney because the defendant claims that the plaintiff has repeatedly refused requests for a settlement demand in the case. More details here.

WHAT THIS MEANS, FROM HEATH MORGAN OF MARTIN LYONS WATTS MORGAN: This is an unfortunate ruling for the industry that emphasizes the importance of keeping the status of a case up to date especially with regards to state court litigation and bankruptcies.  The opinion came down to the fact that the plaintiff prevailed in a state court matter against the agency, but that information had not been updated to the file.  So when the plaintiff disputed the account, the agency validated the debt in an effort to continue collections.  The arguments and the opinion cited Persinger vs. Southwest Credit Systems, L.P. which has a similar fact pattern and involved a bankruptcy case. 

The other take away for collection agencies is to have established written procedures that require notification, and as well as a special status for accounts that are involved in state court action and bankruptcy matters so if there is any delay upon notification, the agencies can help protect from potential liability from similar issues in the future.

Appeals Court Upholds Firing of Poor-Performing Customer Service Rep

The Court of Appeals for the Third Circuit has upheld a lower court’s ruling in favor of a company that was sued for firing a customer service representative who was hurt in a car accident and was one of the lowest-ranked employees in the office after it was accused of discriminating against the employee because of her disability and retaliating against her for the accommodations it had to make for her to continue working. More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: The case of Holmes-Mergucz v. Cellco Partnership d/b/a Verizon is not specific to the collection space but rather an issue that could apply to any industry, an ADA issue. The Americans with Disabilities Act (ADA) was enacted in July 1990. As a civil rights law, the ADA bans discrimination against people with disabilities in all areas of public life, which includes employment. Under the ADA, employers with 15 or more employees must provide reasonable accommodations for people with qualified disabilities, which just means they must provide adjustments that enable individuals to complete their job duties. The ADA does not ban employers from evaluating job performance using the same standards as everyone else, nor does it require employers to lower the standards of a job role.

In this case, the employee was not performing before a disability became an issue. When she was injured in a car wreck, she was granted medical leave for seven months, and when she returned to work, the employer approved her to work from home. Unfortunately, the bad performance continued, and as a result, she was let go from the company. While the employee claims she was dismissed due to her disability, the employer was able to point to the poor performance.   Again, the ADA does not prohibit employers from evaluating job performance using the same standards used for all other employees. 

To be clear, an employer can evaluate performance standards, such as teamwork, work output, and product quality, if the standards are job-related without the effect of discriminating based on disability. An employee with a disability should meet the same performance and production standards as all other employees doing the same job. Employers do not have to lower standards as a reasonable accommodation; they only must provide reasonable accommodations that might be required for the employees with a disability to meet the standards.  

However, always remember the importance of documenting the lack of performance as the employer, in this case, did well. If the employer could not provide proof to the court of the employee’s bad performance, the court may have given more weight to the employee’s claim of discrimination. 

Judge Grants MTD in FDCPA Class Action Over Judgment Renewals

A District Court judge in Nevada has dismissed – with prejudice – a plaintiff’s class-action complaint that a defendant violated the Fair Debt Collection Practices Act by filing renewals for a judgment on an untimely basis, ruling that the defendant renewed the judgments within the window set forth by state law. More details here.

WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: “Nonsensical!”  That’s what the Judge thought of Plaintiff’s claim. 

Oh, the nerve of the involved Agency giving the Plaintiff notice that Plaintiff deemed was “too early” – notice that the Agency would be renewing a judgment against him. The applicable Nevada statute on judgment renewals actually afforded the Agency even more time before notification was necessary. Nonetheless, the Agency chose not to wait until the last minute and instead alerted the consumer (now Plaintiff) that the judgment against him was going to be renewed in the near future. The Plaintiff curiously deemed this “earlier than required” notification as somehow being “unlawful” under Nevada law (it wasn’t, per the Court). And based on this fantasy the consumer saw dollar signs in the form of an ill-advised FDCPA claim.

This case is a classic example of an attempt to exploit the “no good deed goes unpunished” adage. Fortunately the Judge wasn’t buying any of it and summarily tossed the case with prejudice. Common sense once again prevailed. The consumer lost and the underlying judgment against him remains.

Judge Lowers Fee Award in FDCPA Case

A District Court judge in Pennsylvania has lowered the fee award in a Fair Debt Collection Practices Act case, almost ending up exactly in the middle between the amount sought by the plaintiff and the amount suggested by the defendant. More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: The evaluation of a fee award under the FDCPA after a finding of liability on the part of a collection agency is a fact intensive inquiry by the Court following the submission of the plaintiff’s attorneys fee petition and the defendant’s specific objection to each time entry. While you can sometimes use a fee decision to inform a court in another case, they are mostly reliant on the actual submission by a plaintiff – is the petition specific enough, is it bloated with excessive time, is an attorney’s proffered rate too high? In short, there is little to take away from this opinion other than the satisfaction that a plaintiff’s attorney did not get everything he/she asked for.

Respondents Use Fifth Circuit Ruling to Attempt to Quash CFPB Subpoena

A consulting company and its chief executive officer have filed a motion in federal court in New Jersey seeking to quash a subpoena and to prevent the CEO from being deposed today by the Consumer Financial Protection Bureau, using the recent ruling from the Fifth Circuit Court of Appeals that the CFPB’s funding structure is unconstitutional. More details here.

WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: The current motion filed by Christopher Gonzales and Apex Advising, LLC’s in the Federal District of New Jersey to quash a subpoena issued by the CFPB emanating from litigation in the Federal District of Central California raises multiple issues. While there are legitimate questions as to the scope of the subpoena directed to a non-party to the litigation, the real question here is what deference, if any, the Court gives to the recent 5th Circuit ruling regarding the legitimacy of the CFPB due to its source of funding. See Cmty. Fin. Servs. Ass’n of Am. v. Consumer Fin. Prot. Bureau, 2022 U.S. APP.LEXIS 29060 (5th Cir. Oct. 19, 2022). Given the stakes it is likely that the loser in this fight will attempt to appeal to the 3rd Circuit, creating either a split in the circuits or providing greater weight to the 5th Circuits position that the manner in which the CFPB is funded is unconstitutional. Of note is the fact that in an earlier 3rd Circuit District Court, albeit the Middle District of Pa, it was held that there was nothing “constitutionally concerning” about the CFPB’s funding. See Consumer Fin. Prot. Bureau v. Navient Corp., 2017 U.S. Dist. LEXIS 123825 (M.D. Penn. Aug 4, 2017)

By way of quick background, the CFPB alleges that Daniel A. Rosen, Inc., d/b/a Credit Repair Cloud, and Daniel Rosen (“CRC & Rosen”) “have provided substantial assistance or support to credit-repair businesses charging unlawful advance fees to consumers in violation of the TSR.” Basically, it appears that CRC & Rosen have developed software, along with templates, scripts and a customer-relationship management (“CRM”) system that violates the Telemarketing and Consumer Fraud and Abuse Prevention Act (“Telemarketing Act”), 15 U.S.C. §§ 6102(c), 6105(d); the Telemarketing Sales Rule (“TSR”), 16 C.F.R. pt. 310; and the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5536(a), 5564, 5565. CRC and Rosen sell their products to third parties who then in turn also violate the aforementioned statutes. While names are not provided, the Complaint references four companies, User A, User B, User C and User D who fight that description.  It would appear that Christopher Gonzales and Apex Advising, LLC, (“Apex”) doing business from Jersey City, New Jersey are one of the “Users.” Hence the subpoena “seeking, essentially, all documents and communications between Apex and its clients.” Assuming there is any veracity to the allegations in the complaint, producing the requested information is likely to lead to charges being brought against Apex. 

At this time, all we have is Motion to Quash, filed on November 2, 2022. No response has been filed by the CFPB as of yet. Curiously, there is no mention in Apex’s papers regarding the subject matter of the subpoena or its relationship to the litigation. Apex’s primary focus is on the 5th Circuit decision. However, there is also the issue of the scope and burden of the subpoena. Per Apex’s Motion to Quash, one of the requests “seeks all call recordings, which involves over 100,000 recordings collectively spanning 828,220 hours. It would take counsel approximately 34,509 days and 4,930 weeks to review all of these recordings before they were produced, which would amount to approximately $434,000 in attorneys’fees.” Requests like this could prove to supply a basis for the New Jersey Court to Quash or modify the subpoena, without having to address the constitutionality issue. 

This is another matter that bears industry attention. It will be interested in seeing how this plays out in New Jersey and where that may lead. 

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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