Compliance Digest – January 30

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 MSJ for Plaintiff in FDCPA Case Over Worker’s Comp Claim

A District Court judge in Arizona has partially granted a plaintiff’s motion for summary judgment after it was sued for violating the Fair Debt Collection Practices Act because it attempted to collect on a debt that was incurred as a result of a worker’s compensation claim, while also ruling that relying solely on the information provided by the client is not enough to meet the standards of the bona fide error defense. The judge also noted that spending money on sleeping pills is enough for the plaintiff to have standing to sue. More details here.

WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: What is frustrating about this opinion is the very narrow view the court took of the bona fide error defense; of course, this is part of the gamble when asserting and litigating this defense. While the Court relies heavily on 9^th Circuit precedent (Urbina v. Nat’l Bus. Factors Inc., 979 F.3d 758 (9^th Cir. 2020)), the court does not take a closer at what that opinion actually says. The 9^th Circuit said that it “previously rejected the contention that unquestioned reliance on a creditor’s information can suffice as a bona fide error defense.” Mercedes v. Nat’l Bus. Factors Inc., 979 F.3d 758, 763 (9^th Cir. 2020). But that is not the situation in this case. In this case, the debt collector did do more than unquestionably rely on the creditor information – it conducted a full keyword search for any language that would have indicated that the underlying debt was a workers’ compensation claim. In fact, the 9^th Circuit has recognized “that the procedures our sister circuits have approved for catching errors in creditor-clients’ data are significantly more likely to catch errors than a form contract requiring customer to provide only accurate information.”  Id., at 764. One of those cases cited by the 9^th Circuit was Abdollahzadeh v. Mandarich Law Grp., LLP, 922 F.3d 810, 818 (7^th Cir. 2019) which held that where a debt collector subjected client information to an internal scrub to cull accounts that were beyond the applicable statute of limitations, the debt collector can rely on the bona fide error defense. The scrub utilized in Abdollahzadeh sounds very similar to the one run by this debt collector (albeit for different keywords and information).  It will be interesting to see if the debt collector decides to appeal this decision because I am not sure what else the collector could have put into their procedures; especially since the Court admitted that Arizona does not have a public database for workers’ compensation claims.

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Appeals Court Upholds Anti-SLAPP Ruling for Defendant in RFDCPA Case

The Court of Appeals for the state of California has upheld a lower court’s ruling granting an anti-SLAPP motion against a plaintiff that accused a collection law firm of violating the Rosenthal Fair Debt Collection Practices Act in a case that the Appeals Court sought to answer whether a plaintiff must show materiality when alleging a violation of the RFDCPA that is premised on a violation of the Fair Debt Collection Practices Act. More details here.

WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: An anti-SLAPP motion (SLAPP, short for strategic lawsuits against public participation) is meant to remedy SLAPP suits. It is not something that is seen commonly in collection suits, so for that reason, it is interesting to see it applied in this case. To succeed in the SLAPP motion, the party in the case must show the Court that the claim arose from a protected activity which would then push the burden to establish the merit of their claim by showing a probability of success. 

Here the claim made by the Plaintiff arose from the collection action complaint itself, a protected ligation activity under CA Civil Procedure, which both parties concede met the first prong for the anti-SLAPP action. A substantial positive as in the prior collection cases where such a motion was filed, parties have not overcome the burden of meeting the first element needed for a successful anti-SLAPP motion. Therefore, the factor of the anti-SLAPP motion pushed the burden to Plaintiff to show the probability of success which could be viewed as a sort of summary judgment “in reverse” as Defendant is claiming that Plaintiff’s pleading is legally or factually meritless.

The appellate Court found that the trial court correctly found that the Plaintiff did not show a probability of success. They found that the complaint lacked minimal merit and granted the anti-SLAPP motion. A massive win for the Defendant as it avoided the costs and hours it would have had to put in to defend the claim.   In addition, CA, like many other states’ anti-SLAPP laws, provides that if the Court grants the motion, it must, in most cases, impose attorney’s fees and costs on the Plaintiff. Anti-SLAPP motions need to be part of any defensive plan’s consideration. 

Judge Grants MJOP in FDCPA Case Over Lack of Interest Disclosure on Settlement Offer

In a case that was defended by Cooper Walker and the team at Frost Echols, a District Court judge in New York has granted a defendant’s motion for judgment on the pleadings after it was sued for violating the Fair Debt Collection Practices Act because it did not state in a collection letter that interest was accruing on the unpaid balance and that a settlement offer without an expiration date was an “collection tactic” meant to “coerce” the plaintiff into paying the debt. More details here.

WHAT THIS MEANS, FROM DAVID SHAVER OF SURDYK, DOWD & TURNER: For those ARM defendants that find themselves before Judge Nelson Roman in the United States District Court for the Southern District of New York, his Opinion & Order in Felberbaum should give you some comfort that logic and reason still matter to him.

In his Opinion & Order, Judge Roman rejected the speculative allegations that often permeate consumers’ pleadings and with which we are all so familiar.  Instead, he decided that Sequium’s collection letter could only be interpreted in one way: to mean what it says. Shocking, right? In a well-reasoned and straightforward way, Judge Roman dispensed with Felberbaum’s allegations under 1692e, 1692f, and 1692g.  It was not false, deceptive, or misleading for Sequium to tell Felberbaum that his account could be resolved for a sum certain when that sum certain would be accepted to resolve the account. Sequium was not required to disclose anything further about the balance owed if the amount identified on the letter would be accepted to resolve the account. Additionally, the fact that the offer to resolve the account was open-ended was simply not unjust, unfair, or unconscionable. And, finally, if Sequium was going to accept the sum certain identified in the letter to resolve the account as it said it would, it also discharged its obligations under 1692g.

As we all know, consumers and their counsel will try to twist anything in a letter into a potential claim, even if it is straightforward and something that stands to benefit the consumer. Judge Roman’s Opinion & Order in Felberbaum evidences that, at least in his courtroom, such nonsense isn’t going to be entertained.

Judge Grants MTD in FDCPA Class Action Over Letter

A District Court judge in New Jersey has granted a defendant’s motion to dismiss a class-action Fair Debt Collection Practices Act case, ruling the plaintiff lacked standing for any of the six claims that he made, including alleging that his information was shared with a letter vendor and unlawfully disclosed his status as a debtor. More details here.

WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: For a while it seemed there was a dismissal for lack of Article III standing coming out the Seventh Circuit on an almost daily basis. That wave started even before the Supreme Court decided TransUnion v. Ramirez, and since Ramirez courts in other parts of the country have been dismissing more and more cases in which plaintiffs failed to allege a concrete injury. The District of New Jersey, which has issued a number of opinions like this one over the past few months, is a good example. Simply put, the federal courts are no longer receptive to cases involving mere technical violations with no actual consumer harm. 

CFPB Releases Guidance on ‘Tricks’ Used by Companies to Keep Consumers Enrolled in Subscription Services

The Consumer Financial Protection Bureau yesterday released guidance advising companies that taking advantage of consumers by making it too hard to cancel subscription services or trial periods where a reduced fee is charged for a period of time could run afoul of federal law. These types of services, called “negative option” services essentially “interpret a person’s silence or failure to cancel an agreement as continued acceptance of the offer,” according to the CFPB. More details here.

WHAT THIS MEANS, FROM VAISHALI RAO OF HINSHAW CULBERTSON: Although there is nothing really new in the Bureau’s circular regarding negative option marketing, it is the clearest the expression of the Bureau’s take on the topic. Two things stand out to me: First, the Bureau’s articulation of different types of negative option programs is note-worthy. The explanations regarding automatic renewals, continuity plans, and trial marketing plans broaden the applicability of negative option programs into areas that many reputable companies use, not just “scams.” Second, the explanation regarding “erecting unreasonable barriers to cancellation” is important for companies to consider. The examples used like long wait time, delays in processing cancellation requests, etc… demonstrate that simply having operational ineffectiveness with respect to cancellation procedures can lead to significant legal risk. A strong and effective cancellation procedure, including adequate documentation, is critical to anyone taking recurring payments. 

Subcommittees Demonstrate McHenry’s Priorities as House Financial Services Chair

If you are curious what the priorities of the House Financial Services Committee will be under new Chair Rep. Patrick McHenry [R-N.C.], look no further than the decision to change the Subcommittee on Consumers Protections and Financial Institutions to the Subcommittee on Financial Institutions and Monetary Policy. Rep. McHenry announced the subcommittees and their chairs last week. More details here.

WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER: The continuing pattern of a midterm splitting control in Washington continues. It is doubtful that the parties are likely to align on anything in the consumer financial services world. Much like under Presidents Obama and Trump, the political party in control of the House will send multiple requests for information to the opposite-party controlled CFPB. And as before, it would not surprise me if the CFPB was not always quick to heed such requests. The gridlock will slow existing initiatives that were put in place under the last Congress and many bills that were introduced to provide for an expansion of the FDCPA’s coverage to include commercial collections, provide student loan relief, and others are not expected to move forward.

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.