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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 Motion to Compel Arbitration in TCPA Class Action
A Magistrate judge in New York has granted a defendant’s motion to compel arbitration in a Telephone Consumer Protection Act class-action case involving debt collection calls that were made to the plaintiff for a company credit card years after the plaintiff stopped working at the company. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: This decision is just the first step in deciding the case, but it is an important one. The individual using a corporate American Express card for business expenses during a time when her employer was subject to an agreement with American Express probably paid no attention to the cardmember agreement, likely assuming (correctly) that her use of the card within the scope of her employment and authority would be covered by her employer. But then she alleged that American Express called her three years after she left that job and turned in the card, seeking payment for charges on the account. Understandably, the plaintiff did not feel like she should have to talk to American Express because the business debt was not her debt, but she alleged that American Express continued to use an autodialer and pre-recorded message to try to talk to her about the debt. After the plaintiff sued under the TCPA, American Express sought to compel arbitration to resolve the dispute, referencing an arbitration clause in the cardmember agreement. The court reviewed the facts and did not decide the TCPA claims or whether the calls to the plaintiff were appropriate; but the court did note that the cardmember agreement governing the account included an arbitration provision that applied to all claims made under the agreement whenever either party chose to arbitrate the claim. The court noted that the plaintiff’s use of the card, which card included on its back a reference to the cardmember agreement, amounted to consent to the agreement’s terms (even if the plaintiff never read the agreement). So the court granted American Express’ motion to compel arbitration. Because the dispute will go to arbitration, which appears to be the right result in light of the facts and well-written arbitration provision, we will likely not see an ultimate resolution of the TCPA claims made in this case in a published opinion.
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Appeals Court Remands FDCPA Case to Determine if Plaintiff has Standing
The Court of Appeals for the Ninth Circuit has remanded a Fair Debt Collection Practices Act case back to the District Court to determine whether the plaintiff had standing to file his lawsuit in the first place. The plaintiff, who appealed nearly five years ago, will now have to prove he suffered a concrete injury in order for the case to proceed. More details here.
WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: I guess the proverb “Good things come to those who wait” applies here. Even though the issue of standing was never raised at the trial court (and why would it be as the whole federal court standing doctrine was not a prolific concern five years ago), after an appeal by the plaintiff following a dismissal on summary judgment, the court of appeals on its own remanded the appeal to the trial court for a factual inquiry into standing. It is quite clear that federal courts will go to great lengths to eliminate cases from the docket if there is even a small chance a plaintiff does not have a concrete injury sufficient to maintain standing. And, since subject matter jurisdiction can be raised at any point, as long as a case is still proceeding through the federal court system, it is subject to attack. (Shameless plug) Tune in to the Accountsrecovery.net webinar on Monday March 20 at 1 pm ET to hear an amazing panel of experts discuss standing and FDCPA litigation strategy. Click here to register.
Judge Grants MTD in FCRA Case Over Charged Off Status of Settled Debt
The codes and terms used when furnishing debt sometimes can mean more than one thing and can trip up even the savviest of credit reporting experts. But that doesn’t mean that they are inaccurate. A District Court judge in Nevada has granted a defendant’s motion to dismiss a Fair Credit Reporting Act case, ruling that the defendant did nothing wrong when it continued to report a closed account as charged off and conducted a reasonable investigation when the debt was disputed. More details here.
WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: Here’s yet another case where the plaintiff is challenging the “accuracy” of the pay status code on a credit report. These pay status code challenges are the claims du jour for the plaintiff’s bar at the moment. Here, the plaintiff argued that the “pay status” section should have been characterized as satisfied on the credit report rather than charged off because the plaintiff had settled the debt. But the district court disagreed, concluding the defendant’s reporting was not false or misleading because it was “not inaccurate to continue to report an account as charged off after a debtor settled the account for less than the full balance” and dismissed the plaintiff’s claims. In reaching its decision, the court thoroughly analyzed the FCRA and case law interpreting pay status code claims – which makes this an excellent case to have in your arsenal when defending against such a claim.
Appeals Court Overturns Dismissal of FDCPA Suit
There is a lot of background details to unpack here and I will try to get them all, but this may be one of those cases where you need to read the full ruling to get all the information you’re going to need to fully understand what is going on. The Court of Appeals for the Sixth Circuit has overturned a lower court’s dismissal of a Fair Debt Collection Practices Act lawsuit, ruling that one of the claims brought by the plaintiff was within the FDCPA’s one-year statute of limitations. More details here.
WHAT THIS MEANS, FROM LORI QUINN OF GORDON REES: After examining all of the details in this decision, what remains is the strict construction of the FDCPA. The Sixth Circuit allowed one of multiple causes of action under the FDCPA to move forward finding that one violation was not outside the one-year statute of limitations. While that may sound like tolling it was not where, as in this case, an alleged false contract was filed with the Court months after the underlying suit was filed. The Sixth Circuit’s holding was quite clear; the FDCPA creates an independent statute of limitations for each violation and to support its position, the Sixth Circuit points to the plain language of 1692k(d).
Details About Visa’s New Rule for Collection Agencies and Repaying Debts
Visa is planning on introducing a new Merchant Category Code for debt collection agencies and imposing new rules for entities collecting debts or overdue receivables on behalf of another entity, but it’s still not entirely clear if the new code will be applied retroactively or only new new merchant applications. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER: The Visa/Mastercard Network Rules have prohibited acceptance of a credit card to pay a defaulted debt for some time. But in practice, the only time the practice seemed to get any attention was when a credit card was used to pay off another defaulted credit card debt. I can’t help wonder if that will continue or if this development will result in more robust enforcement of that provision by the card network providers, as well as related regulatory requests for data connected to transactions involving the new collection code.
Judge Denies Plaintiff’s Motion for Fees in FDCPA Case Removed and then Remanded Back to State Court
We have seen defendants get taken to the woodshed for removing cases filed in state court to federal court, only then to file motions to dismiss, arguing the plaintiffs lack standing. But, much like a plaintiff needing to show a concrete injury in order to show he or she has standing, if a defendant attempts to defend a case before seeking to have it dismissed for lack of standing, that is an entirely different ballgame. A Magistrate judge in Missouri has denied a plaintiff’s motion for attorney’s fees and costs in a Fair Debt Collection Practices Act case, ruling the defendant had an objectively reasonable basis for removing the case in the first place. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: Nothing new here, just reaffirms that when removing cases from state to federal, do not turn around and then ask for dismissal for a lack of federal standing. That’s not what happened here. The Court, on its own, before Defendant could respond to the Plaintiff’s request for fees after the matter was remanded back to state court pointed out that at the time the case was removed “Defendant had an objectively reasonable basis for the removal.”
Just to be clear, the Defendant moved to dismiss due to the failure to state a claim right after removal but did not raise standing at that time. The Court pointed out it was only a year later as part of a motion for summary judgment that standing was raised.
The case reiterates that the basis for removal is pleading a federal statute. And, as happened here, once removed one can move to dismiss, just not for a lack of standing. By definition, removal followed by a claim of a lack of standing, where the remedy is a remand right back to state court is more likely than not seen by the Court as frivolous. The trend is for plaintiffs not to pled actual damages, in order to defeat removal if tried. And they will get fees if the case goes through a revolving door. See Morgan v. Bank of Am., N.A., 2020 U.S. Dist. LEXIS 123707, 2020 WL 3979660 (E.D. Wash. July 14, 2020) and Mocek v. Allsaints USA Ltd., 220 F. Supp. 3d 910 (N.D. Ill. 2016)
Bill Introduced in House to Require Cost-Benefit Analysis at CFPB
Maybe this is the time where it finally makes it. For the second time, Rep. Alex Mooney [R-W.V.] has introduced a bill that require the Consumer Financial Protection Bureau to conduct a cost-benefit analysis prior to issuing any regulation as a means of trying to limit the CFPB’s “regulatory overreach,” the Congressman said. More details here.
Previewing Thursday’s House Hearing on Reforming the CFPB
I have said it on numerous occasions that hearings before the House and Senate committees are little more than theater, especially when the director of the Consumer Financial Protection Bureau is in the house, but tomorrow, the House Financial Services Subcommittee on Financial Institutions and Monetary Policy will talk about the CFPB without inviting anyone from the Bureau to participate. More details here.
WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: The punching bag and political football that is the Consumer Financial Protection Bureau (“CFPB”) continues. In the wake of the United States Supreme Court’s grant of certiorari in the case of CFPB v. Community Financial Services Association of America, Limited, et al., both sides of the Congressional aisle are lining up to poke the bear, but for different reasons. Further, both sides have only themselves to blame for this mess.
First, and to be clear, the CFPB is an important regulatory agency. Many in the ARM industry would disagree, but having a regulatory agency oversee the non-depository portion of our financial services industry is an important task. The disagreements have always been with the “how” and not the “why”. Both sides of the CFPB debate have failed to understand that consumer protection is an important if not crucial element of safety and soundness; both standards are necessary for a healthy banking system.
The CFPB has been given extraordinary powers and under the Obama administration and the current administration it sought to go outside the lines of what Congress had intended. The Supreme Court said as much. However, under the prior administration, the party in power did little to correct the CFPB. Why wasn’t there a real push to form a commission instead of a single director? The reason is simple; the CFPB has resulted in an agency where the majority is happy when “their person” is in charge. Thus the basic tenant of the CFPB, to be an independent agency, is nothing more than a convenient tongue in cheek mantra.
There is nothing wrong with the bill being proposed by Rep. Alex Mooney [R-W.V.] or the inquiries by the House Financial Services committee regarding the funding structure of the CFPB. These are valid questions that need to be posed upon this agency. The ARM industry needs a CFPB that is going to be effective and not obtrusive but getting rid of the CFPB is not the answer. While Reg F may have clumsy aspects, it did provide much-needed clarity. Industry would be foolish to think that life would be better without many of the regulations for which the CFPB is responsible. At the same time, supporters of the CFPB must recognize that the refusal to compromise on structure or funding or any other accountability upon the CFPB could lead to ruin for many in the financial services industry. Whether there are appropriations or even a commission (instead of a single director), the mission remains the same. Nothing about the CFPB’s work will change nor should it.
Although wishful thinking, I am hoping the adults in the room will work to fix the CFPB. I am hoping the ARM industry does the same.
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.
