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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 MSJ For Defendant in FDCPA Case Over Email Communications
We’re all busy people and time is one thing we don’t have enough of, so I try to be very conscious of that and keep the articles I publish as brief and to the point as possible. Sometimes — especially when writing about court rulings — it can be tough to summarize lengthy opinions into just a few hundred words, and today’s case definitely fits that description, but the brevity in which this case is summarized belies the comprehensiveness of the ruling and the defendant’s efforts to make its case why its motion for summary judgment in a Fair Debt Collection Practices Act case should be granted. More details here.
WHAT THIS MEANS, FROM JACOB BACH OF MARTIN LYONS WATTS MORGAN: It can be hard to justify the costs of taking what should a straightforward case through summary judgment. But when a case does go to summary judgment, it’s important to have counsel that fully understands the process. This case demonstrates the importance of having the right denials and admissions in your answers and discovery responses and holding a plaintiff to the claims alleged in the complaint. Further, it demonstrates that sometimes the most helpful witness in a case is the plaintiff themselves, as it’s all too common that they know the least about their own lawsuit.
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CFPB Releases Supervisory Highlights, Points to Issues with Credit Reporting, Debt Collection
The Consumer Financial Protection Bureau yesterday released its latest Supervisory Highlights report, which chronicles the issued uncovered during examinations conducted by the Bureau during the first half of 2022. The issues are used to help drive the Bureau’s decisions regarding rulemaking and enforcement actions and have been cited as a great opportunity for those regulated by the CFPB to get a glimpse into what the CFPB is seeing and how it is likely to act on those observations. More details here.
WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: The 28th edition of the Consumer Financial Protection Bureau’s (“CFPB” or “Bureau”) Supervisory Highlights (the “Highlights”) provided some interesting new nuggets of information in addition to providing the “same old, same old”. Any consumer financial services entity should use the Highlights as a tool to navigate and to connect the dots in order to understand the Bureau’s activities and focus. Past supervisory examinations build upon prior CFPB activities. For example, this past year the Bureau has been laser-focused on unfair, deceptive and abusive acts and practices (UDAAP). Therefore, it should come as no surprise that this edition found UDAAP violations for which prior guidance has already been issued. It is unclear from the Highlights which comes first: the examination or the guidance. How one fuels the other is still a mystery to many in the financial services industry and certainly makes it difficult to strategize a compliance infrastructure.
Let’s start with some good news for the ARM Industry with respect to debt collection. There were only two issues that the CFPB found “violations” of the Fair Debt Collections Practices Act (FDCPA). The first issue was engaging in conversation when the consumer said it was not a good time to speak. The other was speaking with a third person that had a similar or identical name. If both these issues are accurately portrayed, then such conduct by the debt collector is not acceptable an should be addressed by the examined entity. However, during the period between January 1, 2022 and June 30, 2022, if this is all the Bureau could uncover with respect to collection activity, even after six (6) months into Regulation F, then the ARM industry is in a very good place from a compliance perspective.
It comes as no surprise that credit reporting tops the list of findings in this edition of the Highlights. Since the beginning of the year and through June 30th, the CFPB has issued collectively 10 guidance documents, reports, amicus briefs, and research on credit reporting. This is in addition to initiatives on medical debt. The CFPB has been building upon this credit reporting initiative since last year. For example, on January 5, 2022, the CFPB released its Annual Report of Credit Reporting and Consumer Complaints covering a period from January 2020 to September 2021. In that report the CFPB found, among other things, that the CRAs were not reviewing complaints sent to them by the CFPB either by the consumer or a representative on their behalf. The CFPB found that the failure to investigate “raise[s] serious questions about whether they [CRAs] are unable – or unwilling – to comply with the law. Fast forward to the current Highlights and Section 2.2.1 which addresses the duty of CRAs to review and report determinations and actions taken in response to complaints. Clearly the Annual Report fueled the direction of the examination in this instance.
Finally, it should come as no surprise that the CFPB has created a Repeat Offender Unit. Director Chopra raised this issue in March 2022 in a speech at the University of Pennsylvania Law School where he used the term “recidivism”. Much of the CFPB’s enforcement focus since that speech has been on repeat offenders. Its disturbing to think that in the criminal arena, there is a perception that criminals can be rehabilitated but in the civil arena, especially in financial services, that perception, according to the CFPB, is futile.
A good deal of mind-reading must occur in order to stay ahead of the CPFB. The Highlights are a helpful tool that must be read in conjunction with all other CPFB activity.
Appeals Court Tosses TCPA Case Based on Footnote in Facebook Ruling
The Court of Appeals for the Ninth Circuit, in affirming the dismissal of a case at the District Court level, has held that in order for technology to meet the definition of an automated telephone dialing system, it must generate and dial random or sequential telephone numbers, based on how the Supreme Court interpreted the definition in the Telephone Consumer Protection Act. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: Facebook v Duguid went a long way to limit TCPA claims based on the use of an automatic telephone dialing system (ATDS). It held that a necessary feature of an ATDS is the capacity to use a random or sequential number generator to either store or produce phone numbers to be called. The opinion injected a small amount of uncertainty based on its Footnote 7, which included in it a statement that “an autodialer might use a random number generator to determine the order in which to pick phone numbers from a preproduced list.”
The plaintiff in Borden v eFinancial relied on that sentence to allege a TPA violation, claiming the defendant used a “sequential number generator” to pick the order in which to call customers who had provided their phone numbers. The Ninth Circuit Court of Appeals rejected the theory. It said that the portion of Footnote 7 relied on was “an acontextual reading of a snippet divorced from the context of the footnote and the entire opinion.” Pretty firm statement. It then explained that Footnote 7 explained how an ATDS could both “store” and “produce” telephone numbers without making the two terms superfluous.
The ruling was concise and it should put to an end the “Footnote 7 theory.” We’ve already seen it being cited as additional authority in pending TCPA cases.
CFPB Files Petition with Supreme Court for Hearing on Constitutionality of its Funding Case
The Consumer Financial Protection Bureau has made its decision — it will fight to maintain its current funding mechanism before the Supreme Court — choosing to file a petition for the highest court in the land to hear its appeal rather than file a petition for an en banc review of the ruling before the entire Court of Appeals for the Fifth Circuit, a panel of which released a ruling last month saying the way in which the Bureau gets the money it needs to operate is unconstitutional. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER: While requesting an expedited review is unusual, given the real-world implications for the financial industry highlighted in the petition if the decision is upheld, many think there is a real possibility that the case will be decided this term, i.e., by June 2023. The CFPB’s decision to highlight just how similar its funding structure is to other agencies could serve to encourage broader challenges in the future with regard to those agencies.
It also bears remembering that even if the Court ultimately were to uphold the funding provision, the possibility remains that the CFPB’s exercise of its rulemaking authority with be curtailed. CFSA surely will preserve its cross-appeal with respect to the rest of the opinion that many commentators think gave short thrift to CFSA’s arguments. Ultimately, that very well may be the battle CFSA cares about the most – and which could more broadly influence future rulemaking by the CFPB.
But at least for now, uncertainty will remain with respect to actions taken by the CFPB – and possibly others – for the foreseeable future.
FTC Delays Safeguards Rule Compliance for 6 Months
The Federal Trade Commission announced today that it is delaying the deadline to comply with proposed changes to its Safeguards Rule for six months, because there is a shortage of qualified personnel to implement the changes. The deadline to comply will now be June 6, 2023. More details here.
WHAT THIS MEANS, FROM KAT O’BRIEN OF BARRON & NEWBURGER: On November 15th, the FTC announced a 6-month extension to the implementation date of the Safeguards Act from December 9, 2022, to June 9, 2023. And a collective sigh of relief was heard around the country. Probably. The FTC acknowledged that by expanding the definition of financial institutions to include those business entities that are “incidental to” financial activities, this now included a lot of new people to comply with a lot of new things. As more and more of those organizations are scrambling to get the necessary equipment & personnel in place to comply, reality hit: we have a shortage of both. As stated in the Concurring Statement of Commissioner Christine S. Wilson, “Supply chain issues have led to delays in obtaining necessary requirements for upgrading systems. These factors are outside the control of financial institutions and have complicated efforts by companies to meet the requirements.” Additionally, she notes the shortage of qualified cybersecurity professionals. Given past experiences, (i.e. 2017 Experian Data Breach) it is understandable why the FTC created the “Qualified Individual” role for oversight and accountability. However, finding someone who can adequately fill those shoes is a very limited commodity, especially for smaller businesses. The FTC further explained that they extended the deadline based on reports and specifically mentions a letter from the Small Business Administration’s Office of Advocacy as a foundation for their decision. This letter requested an extension with clearly articulated reasons & supporting data and the FTC agreed. Six more months does provide some additional breathing room to continue to implement the Safeguard requirements, but unfortunately only time will tell if supply chain issues can be resolved in the same time period. The real take away here is how important our continued advocacy efforts are and proof that we can make a difference.
Judge Grants MSJ For Defendant in FDCPA Case After Plaintiff Claims to Lose Out on Promotion
A District Court judge in New York has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case in which the plaintiff alleged — too little, too late it appears — that she lost out on a promotion because her employer learned that the defendant was attempting to collect on the debt in question — a hospital bill for injuries suffered while the plaintiff was working, ruling the plaintiff lacked standing because she did not suffer a concrete injury. More details here.
WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: Courts across all jurisdictions are continuing to dismiss technical violation cases on the grounds that the plaintiff lacks standing. While it is true that the claim could be still pursued in state court, this trend leans in favor of the industry. It is an expensive endeavor for the plaintiff’s attorney to pursue such a claim after dismissal, and the chances of success (for the plaintiff) are low – especially in the face of an order that says the plaintiff has “suffered no concrete injury.” Defendants should feel emboldened to continue the defense and secure state court victories to further dampen “no injury” cases.
Appeals Court Upholds Ruling for Hospital in ADA Case Over Call Center Supervisor with MS
The Court of Appeals for the Eighth Circuit has upheld a summary judgment ruling in favor of a hospital that was sued for violating the Americans with Disabilities Act and state law in Missouri for not accommodating a supervisor in the customer service department who trained and managed agents who assisted patients over the phone when the supervisor was diagnosed with multiple sclerosis and sought to be able to work from home when his condition flared up. More details here.
WHAT THIS MEANS, FROM CARLOS ORTIZ OF POLSINELLI: In Mobley v. St. Luke’s Health Sys., Inc., the U.S. Court of Appeals for the Eighth Circuit affirmed a district court’s decision to grant summary judgment in favor of the defendant-employer after the plaintiff-employee claimed it failed to reasonably accommodate him under the Americans with Disability Act (“ADA”), 42 U.S.C. § 12101, et seq. The plaintiff began working for the defendant in 2012 and in his role trained and managed a team of approximately 20 employees to assist patients over the phone in verifying insurance coverage and determining out-of-pocket healthcare costs. Although a majority of his team worked remotely, a handful worked in the office. The defendant’s policy permitted the plaintiff to work remotely up to 2 days a week. In 2016, the plaintiff learned that he suffered from multiple sclerosis (“MS”) and began to have difficulty walking, standing, and breathing, and experienced fatigue and burning sensations in his eyes and hands, particularly when his MS flared. The plaintiff requested that he be permitted to work remotely when he suffered a flare-up, but his supervisor stated that she would consider his accommodation request on a case-by-case basis and suggested that he should consider using paid-time-off or leave under the Family Medical Leave Act.
While the plaintiff made several additional requests for a blanket authorization to work remotely whenever he suffered a flare-up, the defendant denied each request. Instead, the plaintiff continued to make requests on a case-by-case basis, and could recall only one instance when his supervisor denied a request to telework during a flare-up and required him to take time off instead. Fearing that he would be terminated, the plaintiff resigned from his position and then filed suit for alleged violations under the ADA.
The Eighth Circuit disagreed with some of the district court’s reasoning in why it granted summary judgment, but ultimately affirmed the dismissal of the case. Specifically, one requirement to survive summary judgment was that the plaintiff needed to show that the defendant failed to engage in the interactive process in good faith regarding the request for a reasonable accommodation. The Eighth Circuit held that the plaintiff failed to establish a genuine issue of material fact regarding that requirement because it was undisputed that the defendant offered to consider requests for remote work on a case-by-case basis. That, coupled with the plaintiff recalling only one instance when the defendant refused to allow plaintiff to work remotely during a flare-up and required him to take paid time off, were sufficient to show that the defendant acted in good faith when considering the plaintiff’s request for a work accommodation.
This case underscores the importance for employers to establish a written policy of how they will comply with the ADA and to properly train members of management on how to respond to requests for work accommodations. While each case is different, training members of management to involve human resources and employment counsel on all requests for work accommodations is best practice, especially in larger companies where employers may struggle to apply work policies uniformly due to the size of their workforce.
NCLC Issues Reg F Report Based on Survey of Consumer Advocates
The National Consumer Law Center has released a report evaluating the impact of Regulation F in the six months after the rule went into effect on November 30, 2021. The report was based on the results of a survey of 117 consumer advocates nationwide, which included in-depth follow-up interviews with 22 of the survey’s respondents. More details here.
WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS SUTHERLAND: Just in time for Thanksgiving the National Consumer Law Center (NCLC) released a six month report accumulating anecdotal and survey information from over 110 consumer lawyers, public and private. It is noteworthy that the research was conducted in June and July, 2022, and does not include information after that timeframe. The findings should not surprise any of the report’s readers and while they reaffirm the NCLC’s commitment to positions its has held about Regulation F’s provisions needing tightening up, the report includes some good news about the conduct of the credit and collections industry. For example, the report notes that debt collectors are generally complying with Regulation F’s call frequency limits; however, the NCLC believes Regulation F’s limits allow for too many calls. In reporting that there is a marked increase in attempts to communicate via electronic means, the NCLC expresses concern that the methods for “opting out” of these communications is not as prominent as the NCLC would like (perhaps foreshadowing the NCLC’s perspective on topics like dark patterns and commercial surveillance that are undoubtedly priorities for further fact-gathering by the Federal Trade Commission and Consumer Financial Protection Bureau). A final observation as folks plan their 2023 omnichannel communications strategy: the NCLC reports text messages are “particularly disruptive to consumers” – which friction should signal an area for industry compliance folks to focus on to assure that any digital engagement strategies are undertaken with full and conspicuous disclosures of how to “opt out” as well as “opt in” and that industry folks have the support teams in place to capture and react to those consumer responses promptly.
N.C. Supreme Court Splits on Debt Collection Case
The Supreme Court of North Carolina voted three-to-three — with one justice abstaining — in a case involving a consumer suing a debt buyer alleging it violated the North Carolina Economic Protection Act when the debt buyer sued to collect on an unpaid debt but allegedly did not submit all the paperwork it needed to when it filed the lawsuit. The tie vote in the Supreme Court means the ruling from the state Appeals Court stands, but also means the decision can not be used as a precedent in other litigation. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: In this short but impactful per curiam decision, the Supreme Court of North Carolina affirmed a 2020 decision from the Court of Appeals in a divided opinion. The impact of the decision is to leave the disposition below in place – but the Supreme Court was split 3-3 in the case, making the decision below without precedential value (i.e., parties to litigation cannot cite to the Court of Appeals decision as precedential for any of its holdings). The case below (Townes v. Portfolio Recovery Associates, LLC, 854 S.E.2d 146 (N.C. App. 2020)) involved a debt buyer who sued to a consumer to collect a debt and obtained a default judgment and ultimately moved to set aside the judgment because of alleged shortcomings in the filings under North Carolina law. The consumer then sued the debt buyer for alleged violations of North Carolina’s Consumer Economic Protection Act and won partial summary judgment and $500 in statutory damages for each of two of the alleged violations. The Court of Appeals focused on the itemization of the debt required under North Carolina law in support of a debt collection complaint, finding that the debt buyer’s charge-off statement filed with its complaint did not break down the original purchased credit card balance to account for creditor-imposed fees and charges and the part of the balance attributable to cash advances and purchases made with the card. While the decision can no longer serve as precedential, it can still be useful for an interpretation of North Carolina’s requirement for debt buyers to itemize the debts they seek to collect through litigation.
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.
