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 MTD for Lack of Standing in FCRA Case Over Disputed Debt
It turns out that claiming a plaintiff lacks standing to sue just isn’t for Fair Debt Collection Practices Act cases; the argument can work on Fair Credit Reporting Act cases, too. A District Court judge in New York has granted a defendant’s motion to dismiss after it was sued for allegedly violating the FCRA because it furnished information to the credit reporting agencies that the account was more than 120 days past due even though it had been transferred to another creditor. More details here.
WHAT THIS MEANS, FROM LORI QUINN OF GORDON REES SCULLY & MANSUKHANI: Another District Court in New York has dismissed a case based on Article III standing. Defendant filed a motion to dismiss arguing the plaintiff lacked standing and defendant did not violate the Fair Credit Reporting Act. The Court granted defendants motion without prejudice ruling plaintiff’s claim of inaccurate reporting did not cause concrete harm because there was no third party disclosure and risk of future harm does not meet standing criteria. The Court found all four of plaintiff’s alleged concrete harms insufficient – soft pulls on plaintiff’s credit report had no impact on plaintiff’s credit since plaintiff did not show any actual credit denial, reputational harm or other adverse consequence; an alleged loss of credit was unsupported because there were only soft pulls and allegations of harm were conclusory and insufficient because there were no assertions of any impact on credit; possible future injury was not sufficient to confer standing; and finally, plaintiff could not have suffered emotional harm when there was no credit denial. This decision emphasizes New York Federal Courts’ unwillingness to confer Article III standing for alleged harms that are conclusory or those that allege a risk of harm without more. This case also shows that dismissals for lack of Article III standing will continue until plaintiff’s harms are plead with more detail and specificity.
THE COMPLIANCE DIGEST IS SPONSORED BY:
Judge Grants MSJ For Defendant in FCRA, FDCPA Class Action Over Reporting of Settled Debt
A District Court judge in New Jersey has granted a defendant’s motion for summary judgment in a Fair Credit Reporting Act and Fair Debt Collection Practices Act class-action case, ruling the plaintiff lacked standing to sue after having a settled debt reported to the credit bureaus as “owed in full, less the amount received for the settlement.” More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: While this case would appear to be a straight forward lack of standing case, “Plaintiff has not submitted any evidence that she was ever denied credit or suffered any other detriment as a result of the alleged inaccurate reporting,” There are several other interesting findings by the Court.
In regard to the inaccurate credit reporting, the court made it clear, that where “there is no evidence to support the contention that the claimed inaccurate information was disseminated to third-parties, there is no concrete harm.” This is a summary judgment standard distinguishable from a failure to plead standard, useful for a motion to dismiss based on lack of Article III standing.
Next point, establishing that the account is consumer related. Per the Court. the fact that the account was sued as a credit account established nothing. Equally unavailing was a Certification by Plaintiff that she only used the account for “personal expenses and purchases.” “When conducting a consumer debt inquiry, courts have explained that “what matters is the actual charges made that incurred the debt, not necessarily the original credit agreement.” This puts the onus on a Plaintiff to not only produce statements, but statements with activity sufficient to identify the charges.
The last issue was whether the attorney fees incurred by the Plaintiff to clear up the false information constituted actual damages sufficient to create Article III standing. The Court said no. “[T]he cost of bringing a suit and attorney’s fees do not give rise to Article III standing.” It is unclear whether that applies to an after the fact lawsuit alleging FDCPA violations or the Defense costs to what turns out to be a wrongfully brought collection lawsuit, examples of which are a suit for the wrong amount or against the wrong person, on time barred debt or any other infirmity. This could be a departure from prior decisions finding defense costs qualified as damages.
This is a District of New Jersey decision, by a relatively new Judge (Julien X. Neals, U.S.D.C, confirmed June 22, 2021) so we will have to wait and see what, if any, impact these findings have on other Courts.
Judge Undercuts MVN Safe Harbor in FDCPA Case Over Undated Notice
In one of the first cases to rule on whether leaving the date off the Model Validation Notice is a violation of the Fair Debt Collection Practices Act, a District Court judge in Florida has denied a motion to dismiss on three counts — granting it on the fourth — ruling that a “reliance on the Model Form overstates both the meaning and scope of the regulatory safe harbor provided by the” Consumer Financial Protection Bureau, and that a least sophisticated consumer might be confused by the document. More details here.
WHAT THIS MEANS, FROM MIKE FROST OF FROST ECHOLS: As an industry we have seen several similar cases filed where plaintiff’s counsel is arguing that by not including the date the letter was generated, on the letter, creates confusion to the least sophisticated consumer, was misleading, and ultimately caused Plaintiff to “expend time and money in an effort to mitigate the risk of future financial and reputational harm.”
In the instant case, the Defendant filed a motion to dismiss the issue related to the inclusion of the date on the letter under four separate provisions of the Fair Debt Collection Practice Act (FDCPA) and the Court granted in part, and denied in part, the motion. The Court found that the Defendant’s reliance on the CFPB’s Model Form [MVN] overstates both the meaning and scope of the regulatory safe harbor provided by the CFPB. The Court also stated:
“The parties competing arguments about the validity of the CFPB’s regulations largely miss the point. Plaintiff does not allege that Defendant violated any CFPB regulations; he alleges violation of the FDCPA.”
The Court went on to identify that the MVN might provide a safe harbor for some sections of 1692g’s statutory requirements, but the safe harbor for the form of provided information is different from a safe harbor for the substance of this information.
We can learn plenty from this case but in a nutshell, regardless of what rules or guidance that the CFPB provided in the Debt Collection Rulemaking, the “safe harbor” is not a “litigation exemption” and every communication with a consumer should be reviewed from a compliance perspective under both the FDCPA and CFPB rules.
Judge Denies Defendant’s MSJ in FCRA Case Over Disputed Tradeline
A District Court judge in Illinois has denied a defendant’s motion for summary judgment in a Fair Credit Reporting Act case, ruling that it did not meet its burden proving it conducted a reasonable investigation after the plaintiff submitted a dispute regarding an item on her credit report. More details here.
WHAT THIS MEANS, FROM MONICA LITTMAN OF KAUFMAN DOLOWICH & VOLUCK: This case illustrates the importance of having written policies and procedures that explain all of the steps a furnisher takes to investigate and document disputes. The judge could only grant summary judgment for the furnisher if the furnisher could show that it its procedures for investigating a dispute were reasonable beyond question. However, the furnisher did not provide anything about its inquiry into the consumer’s dispute or how it verified that the account information was correct. This case also illustrates that there is a risk in filing for a motion for summary judgment before expert discovery has concluded. The court indicated that expert testimony may have been helpful on the issue of the interpretation of the “Payment Rating” field on the credit report. The court found that a question of fact existed on this issue as there was no binding caselaw or any evidence to support the furnisher’s interpretation of the field.
Judge Grants MTD in FDCPA Claim that Using Process Server Violated Third-Party Disclosure
A District Court judge in Michigan has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act case, ruling the third-party disclosure provision of the law was not violated when the defendant hired a process server to serve the plaintiff with a summons and complaint in a separate collection lawsuit. More details here.
WHAT THIS MEANS, FROM DAVID SHAVER OF SURDYK DOWD & TURNER: In Usevicz v. Weltman Weinberg & Reis, Co. of Michigan, Judge Sean Cox of the United States District Court for the Eastern District of Michigan decided the issues in exactly the way they should have been decided – in favor of the law firm. Judge Cox determined that the law firm did not violate 15 U.S.C. 1692c(b)’s prohibitions on third-party communications when it provided a copy of its creditor-client’s state court summons and complaint to a process server so that the process server could serve the summons and complaint on the consumer as required by Michigan court rules. Because serving the summons and complaint on the consumer was a requirement under the court rules, and personal service was an authorized manner of meeting that requirement, Judge Cox determined that the law firm did not engage in a prohibited communication with a third-party. Instead, the law firm’s delivery of the summons and complaint to the process server for the purpose of having it served on the consumer was a communication with “the express permission of a court of competent jurisdiction[.]”
Notably, this was the second time this process server theory had been tried in the Eastern District of Michigan by the attorney representing the consumer. It had been previously rejected by Judge Linda Parker as well. I think the lesson for ARM defendants from Usevicz is a simple one: continue to exercise care and caution when it comes to safeguarding information about consumers and their accounts and be confident that, when you are following the rules, creative theories of liability will be seen by the courts for exactly what they are.
Appeals Court Affirms Ruling for Defendant in Collection Attorney Case
The Court of Appeals for the Second Circuit has upheld a summary judgment ruling in favor of a defendant that was sued for violating the Fair Debt Collection Practices Act, determining that the subjective nature of whether an attorney conducted a meaningful review of an account before deciding whether to file a collection lawsuit or not is sufficient and that a disclosure was not required indicating whether an attorney was meaningfully involved in collecting the underlying debt. More details here.
WHAT THIS MEANS, FROM CHRISTOPHER MORRIS OF BASSFORD REMELE: This non-precedential summary order takes on the conundrum as to what constitutes “meaningful involvement” for purposes of sending an initial consumer collection notice on a law firm letterhead. After repeating that there is no “bright line” test, this appeals court decided that evidence in the record was sufficient to meet the amorphous standard. Here, the collection law firm had adopted a formal procedure which involved a review of each file prior to each stage in the collection process, albeit through use of a computer platform. The law firm also offered evidence that it reviewed various documents pertaining to the consumer account at issue and reached legal conclusions as a result of that analysis, including that the creditor client owned the account, that a balance was owed, and that there were no circumstances (such as bankruptcy) that prevented the client from seeking collection. The existence of a formalized procedure, combined with testimony about work actually performed (even if each task was brief in terms of time), was deemed sufficient to meet the standard such that no special “disclaimer” was required for the collection letter, and summary judgment in favor of defendant was affirmed.
CFPB Spotlights Trends in Debt Collection Credit Reporting
The Consumer Financial Protection Bureau yesterday released a report that looked at the volume of third-party debt collection tradelines being furnished on consumers’ credit reports, and found that the number of collection tradelines dropped by one-third between 2018 and 2022. Contingency-fee-based debt collectors furnished 38% fewer tradelines during that period, according to the report. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER: Furnishing on medical debt continues to decline – both as a result of pressure from regulators like the CFPB and state legislatures, but also because of continuing potential exposure to potential FCRA lawsuits for which there are no solutions. Medical debt is generally regarded as different from other types of consumer debt in that it usually does not arise from a choice made by a consumer to purchase a good or service. Rather, it arises out of necessity in most instances. But it remains a fact that significant medical debt does change a consumer’s credit profile and risk. The CFPB seems to be focused on improving consumer credit scores, thereby presumably increasing access to credit, without regard to the consumer’s true debt load when it comes to medical debt. But at the same time, the CFPB does not want other negative tradelines deleted because of the need for consumer credit profiles to be as accurate as possible. These two positions seem to be in conflict, at the very least. What is the ultimate goal? Improving credit scores as a result of some debts being removed but not others? Relieving consumers of negative tradelines that are deemed irrelevant because it isn’t voluntary deb There have been a number of inconsistent and contradictory approaches to furnishing issues in the last two years that many are struggling to reconcile.
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.