Compliance Digest – December 5

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 Sets Aside Default Judgment Against Defendant in FDCPA Case

A District Court judge in North Carolina has granted a defendant’s motion for relief from judgment on the grounds that a default judgment obtained by the plaintiff in a Fair Debt Collection Practices Act case is void due to lack of service of process. More details here.

WHAT THIS MEANS, FROM PATRICK NEWMAN OF BASSFORD REMELE: File this one to the Can-Versus-Should Desk. To start, two place-setting comments.

First, courts are loathe to enter judgment based on a procedural failure — they’re designed to render judgments on the merits. Second, service issues crop up with some frequency, and even defendants with the best of intentions can get sideways on the complaint response deadline. (Actually, make that two comments and a disclaimer: who knows what actually happened in this case. These are merely allegations at this point. The following observations are hypothetical.)

So, can you avoid service to prolong your time to respond to the complaint or participate in a lawsuit? I guess so. Could you further rely on the courts’ general disinclination to grant judgment by default when you eventually do participate? Theoretically, maybe.

But should you? Absolutely not — for several reasons. First and foremost, it’s a hell of a way to live. You’ll add years to your life by complying with the rules (in letter and spirit!), dear reader. Furthermore, by engaging your opposition in the early stages you can almost always control your deadline to respond to the complaint. Finally, first impressions matter. Starting the case off with a contested default motion doesn’t set the best tone with the court.

The take-home message is thus: you’re not going to win the case by avoiding service. Ultimately, nothing good will come of it.

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FCC Rules Consent Needed for Ringless Voicemails

The Federal Communications Commission yesterday announced it had issued a declaratory ruling that entities using ringless voicemail products must first obtain the consent of the consumer before using the product to drop voicemails into consumers’ voicemail boxes. The ruling, which the FCC said was unanimous, means that ringless voicemails are considered to be telephone calls as far as the Telephone Consumer Protection Act is concerned. More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: This “official” pronouncement should not be news to anyone who has been following relevant case law for the past several years. Compliance experts have cautioned users that ringless voicemails are subject to the TCPA as an “artificial/pre-recorded voice” and consent is needed. At least four trial courts have reached the same conclusion. Now, consent under the TCPA for this situation simply means that the consumer provided the number in question to the creditor or to the collection agency. Do not use skip-traced numbers for ringless voicemail. If you follow these simple rules, the FCC Declaratory Ruling should not be an issue.

Judge Grants MTD in FDCPA Case Over Collection of BK Debt

A Magistrate Court judge in Puerto Rico has granted a defendant’s motion to dismiss after it was sued for violating the Fair Debt Collection Practices Act because it sent a letter to an individual attempting to collect on a debt that had been included in a petition for bankruptcy, ruling it was not the defendant’s obligation to know that the bankruptcy had been filed. More details here.

WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: While certainly a good outcome for the debt collection agency, I would not rely on this case to change any policies a debt collector (agency or law firm) may have with respect to bankruptcy scrubs. The most interesting part of the opinion for me, however, was the fact that the Court relied heavily on thirty-year old opinion from the District Court of Delaware that was affirmed without opinion by the Third Circuit. It is a best practice to scrub any new account for a bankruptcy filing to avoid this type of lawsuit or worse, be hit with a claim that the debt collector violated the automatic stay from the bankruptcy. 

Judge Rebuffs CFPB Funding Argument in Denying MTD in CFPB Case Against TransUnion

A District Court judge in Illinois has rebuffed arguments from a defendant being sued by the Consumer Financial Protection Bureau that a recent Appeals Court decision invalidating the mechanism through which the Bureau is funded is sufficient grounds to have the lawsuit dismissed, denying the plaintiff’s motion. More details here.

WHAT THIS MEANS, FROM HEATH MORGAN OF MARTN LYONS WATTS MORGAN: Expect these types of decisions to continue to be more common in the next year or so before the Supreme Court takes up the Community Financial Services Association v. CFPB case on appeal. There has been and will likely continue to be a split in court decisions as defendants make their appeals following the 5th Circuit’s ruling that the CFPB is unconstitutional. And unfortunately the split in these decisions will likely come down political lines with Republican appointed judges following the 5th Circuit’s ruling and Democrat appointed judges declining to, such as this Clinton appointed District Court Judge. This trend will only highlight the political nature of the 5th Circuit Decision, and the CFPB itself, which was passed through single party legislation.

And in the season of this uncertainty for the CFPB, it only makes sense for defendants facing regulatory action or scrutiny from the CFPB to continue to raise legal objections over producing confidential, consumer, and other protected information to an entity that may, in fact, be declared to be illegal. That being said, I do expect that once the Supreme Court grants certiorari and agrees to hear the case, that future actions of this type should be stayed pending their ruling.

FCC Banishes Telecom Company After Not Addressing Robocall Rules

The Federal Communications Commission yesterday announced it had excommunicated a telecom company for failing to take the necessary steps to block consumers from receiving robocalls, ordering other companies to stop accepting traffic from Global UC. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: The FCC has taken its efforts to stop robocalls and enforce the TRACED Act’s STIR/SHAKEN and robocall mitigation requirements to a new level, ordering companies to stop accepting traffic from a telecommunications company that disregarded the FCC’s warning about compliance deficiencies.

The FCC warned six companies last month that they needed to cure deficiencies in their robocall mitigation practices or submit proof that they were not deficient. One company, Global UC, had submitted an initial certification of compliance to be included in the Robocall Mitigation Database, but had not described any specific steps it was taking to avoid originating robocalls, prompting the FCC’s investigation. Global UC refused to substantively respond to the FCC’s warning and demand, claiming it did not need the FCC’s certification. The FCC then removed Global UC from the Robocall Mitigation Database. Since other companies are prohibited from accepting call traffic from any voice service providers who are not listed in the Robocall Mitigation Database, Global UC is effectively excommunicated unless other companies disregard the prohibition or Global UC comes back into compliance.

While the FCC also has the authority to impose fines for noncompliance with robocall mitigation requirements, the FCC’s decision to take the more drastic approach of delisting Global UC sends a clear message that the FCC is not afraid to use the full extent of its powers to enforce the TRACED Act. Companies that want to stay on the FCC’s good side should take note: if you play chicken with the FCC, it will not end well.

Judge Dismisses FDCPA Class Action for Lack of Standing

A District Court judge in New Jersey has dismissed a Fair Debt Collection Practices Act case, ruling the plaintiff does not have standing to sue after accusing the defendant of adding a collection charge to the amount owed before the debt was collected and because the defendant’s logo could be seen through the glassine window of the envelope used to send the communication. More details here.

WHAT THIS MEANS FROM ABIGAIL PRESSLER OF BALLARD SPAHR: “No concrete harm, no standing.” Since the Supreme Court’s decisions in Spokeo v. Robins and TransUnion v. Ramirez, federal courts have increasingly relied on standing to dismiss frivolous, hyper-technical claims under the Fair Debt Collection Practices Act (“FDCPA”) and other consumer protection laws. Having a court order saying “no concrete harm” is definitely a win, but sometimes it comes at a price that makes victory bittersweet. Case in point: Rodriguez-Ocasio v. IC System. After more than three years of litigation – including costly discovery, depositions, and motion practice – the court decided it lacked jurisdiction over the case because plaintiff’s FDCPA failed to allege a concrete harm sufficient to confer standing.

On June 5, 2019, plaintiff filed a putative class action lawsuit alleging IC Systems violated the FDCPA by sending a “misleading” letter claiming he owed $697.30, which it itemized as a combination of $593.45 principal plus a $103.85 “collection charge due.” Plaintiff argued this was false because the collection charge was not “due” when the letter was sent; it was based on a contingency fee of 17.5% of the amount actually collected. While plaintiff never paid the debt (or the collection charge), he alleged “receiving misleading information about the amount that they owe skews the consumer’s decision making process” and “gives Defendant an unfair competitive advantage because the honest debt collector who does not attempt to inflate a debt’s balance will receive less money than the Defendant.”

Over a year after the Supreme Court’s decision in TransUnion v. Ramirez, the New Jersey court issued an Order to Show Cause demanding plaintiff demonstrate he had standing. Despite plaintiff’s efforts, the court was not convinced. On November 8, 2022, the court dismissed the case for lack of standing because plaintiff did not allege that he personally experienced any adverse consequences from the letter and only asserted that the letter harmed “the hypothetical least sophisticated consumer by leaving such consumer uncertain as to the amount allegedly owed, how to properly prioritize their expenses versus their indebtedness and uncertain as to the actual amount…In short, Plaintiff appears to assert consumer confusion (although not necessarily confusion by Plaintiff). And the weight of authority in this district finds that under TransUnion, confusion alone is not enough.” Because plaintiff failed to satisfy his burden to show he had standing, the court concluded it lacked subject matter jurisdiction and dismissed the complaint without prejudice, leaving the door open for plaintiff to amend and re-file.

Unfortunately, dismissal for lack of standing isn’t necessarily the end. As federal courts lean more on standing for dismissal, the burden is shifting to state courts with overloaded dockets and less familiarity with these types of claims.

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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