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.
Appeals Court Vacates Award for Defendant in FDCPA Case to Determine if Plaintiff had Standing in the First Place
The Court of Appeals for the Third Circuit has vacated a judgment on the pleadings in favor of a defendant and remanded a Fair Debt Collection Practices Act case back to the District Court in order to determine whether the plaintiff had standing to sue in the first place. More details here.
WHAT THIS MEANS, FROM PATRICK NEWMAN OF BASSFORD REMELE: A law school professor of mine once described litigation as a “dance with a gorilla.” Some thirteen years later, I’ve concluded his point was basically that the parties won’t always be in complete control of their destiny. And the sooner you accept that, the sooner you can formulate a more effective strategy (or “dance moves” if you like).
Here we have a (literal) case in point. Defendant gets a merits decision on the claim, only to have the court of appeals ask a completely different question when the plaintiff appealed — i.e., should this matter even be decided in federal court?Likely NOT what the defendant wanted. Cue the waltz, because we’re going dancing.
A positive spin/strategy: defendant now has an opportunity to lock up another order (in addition to the first district court order ruling there was no legal claim) that says plaintiff doesn’t have any cognizable injury either. Double whammy; having your cake and eating it too; glass half full.
Or: Dance. With. The. Gorilla.
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Judge Grants MTD in FDCPA Class-Action Over Lack of License
A District Court judge in New Jersey has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act class-action case, ruling the plaintiff lacked standing to sue after receiving a letter that referenced a current creditor which was purportedly not licensed to collect in The Garden State. More details here.
WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: Another day, another FDCPA case dismissed for lack of standing. The Defendant in this case had the benefit of an order from a different judge in the same district that dealt with nearly identical claims brought by the same Plaintiff. Because Plaintiff was unable to show any actual harm as a result of receiving a letter from an allegedly unlicensed entity, the district court was faced with an easy decision to dismiss the case. However, I would not be surprised if the consumer refiled in state court in this matter because of the alleged violation of NJ law and NJ’s more relaxed view of standing.
Second Circuit Rules CFPB Funding Structure is Constitutional in Affirming CID Against Collection Law Firm
The Court of Appeals for the Second Circuit today issued a ruling that upheld a lower court’s decision to grant a petition from the Consumer Financial Protection Bureau to enforce a Civil Investigative Demand against a collection law firm, determining in the process that the funding structure of the Bureau is constitutional. The ruling conflicts one that was issued by the Court of Appeals for the Fifth Circuit and is now waiting for the Supreme Court to hear arguments. More details here.
WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS SUTHERLAND: Upholding the constitutionality of a civil investigative demand (“CID”) the Consumer Financial Protection Bureau (CFPB) issued against a law firm, the Second Circuit Court of Appeals expressly disagreed with the conclusions drawn by the Fifth Circuit in a case that will be heard by the U.S. Supreme Court later this year. In brief, the Second Circuit Court found that because Congress expressly approved the funding of the CFPB it would be illogical to determine its funding mechanism violates the Constitution’s Appropriation Clause. Specifically the court stated “that the CFPB’s funding structure does not offend the Appropriations Clause.” Interestingly the Second Circuit court looked at the Fifth Circuit’s ruling and came to a different conclusion – namely that what the Constitution’s Appropriation Clause requires is that a statute authorize the payment of money from the Treasury. In short, the Second Circuit determined it believes that is what Congress did in establishing the CFPB as a more or less independent agency consumer watchdog. Interesting the bottom line in the lawsuit is that the law firm that received the CID must comply with the CID. Industry experts are watching these cases challenging the constitutionality of the CFPB for some clarity on if or how industry should continue to take heed of bulletins, rulemaking, and other interpretations and enforcement actions issued by the CFPB. The Second Circuit appears to issue a cautionary note about this very topic by citing to Justice Kagan’s logic from Seila Law. In other words, for actions of the CFPB to be subject to a constitutional challenge, “but-for causation … [must match[ the constitutional injury to the requested remedy.” In this case the Second Circuit dispensed with the Seila Law constitutionality argument because in this case there was no dispute about the bona fides of the process(es) by which the CFPB Director who issued the CID (or any of the several that followed). For now, the practical implications of the Second Circuit / Fifth Circuit split are that CFPB regulated entities should consider staying the course.
Judge Grants MTD in FDCPA Case Over Collection Lawsuit Issues
A District Court judge in Oregon has granted a defendant’s motion to dismiss after it was sued for violating the Fair Debt Collection Practices Act, ruling that the law’s statute of limitations precludes one of the plaintiff’s claims while the other — a “minor procedural misstep” as described by the judge did not meet the threshold of a violation. More details here.
WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: On March 21, 2023, the United States District Court for the District of Oregon granted defendants’ – a collection agency and its law firm – motion to dismiss, finding that one of the plaintiff’s Fair Debt Collection Practices Act (“FDCPA”) claims was time-barred and the other failed to state a claim because it was only a “minor procedural misstep.”
The lawsuit arose after a medical facility referred the plaintiff’s account to the defendant collection agency. After the collection agency unsuccessfully attempted to collect the unpaid medical bills from the plaintiff, the defendants filed a collections lawsuit against the plaintiff in state court. Although the plaintiff filed an answer in the underlying collections lawsuit, the defendants filed a motion for default, which the state court denied. This underlying action is pending and has been scheduled for trial.
In the meantime, the plaintiff filed suit against the defendants for violations of the FDCPA, alleging that the defendants are attempting to collect amounts not owed and inappropriately sought default judgment against him in the underlying suit. In response, the defendants argued that the claim associated with collecting an amount not owed is barred by statute of limitations and that the plaintiff fails to state a claim based on an erroneous motion for default.
The court granted the defendants’ motion to dismiss the FDCPA claims. The court dismissed the plaintiff’s time-barred claim that the amount of the debt was misrepresented, finding that the one-year statute of limitations begins to run on the filing of the complaint, not from the date of service. The court further rejected the plaintiff’s allegation that the defendants’ motion for default in the underlying case was an attempt to collect a debt in violation of the FDCPA. The court found that not only was the motion for default rejected by the state court, necessitating no remedial measures by plaintiff, but the motion also “amounted to a minor procedural misstep . . . that was quickly resolved by the state court.”
Litigants nationwide should treat this case as a reminder to focus on the technical and procedural details of litigating in both state and federal court, although not all mistakes carry the same costs. The decision reaffirms the Ninth Circuit holding that the statute of limitations for violations of 15 U.S.C. § 1692k begins to run on the filing of the complaint, not from the date of service. Further, the decision clarifies that a procedural misstep by a defendant does not always give rise to an actionable claim, especially where the mishap was quickly resolved by the court in which the mishap occurred.
Judge Denies MTD in FCRA Case Over Canceled Debt
A District Court judge in Louisiana has denied a motion to dismiss filed by two defendants sued for allegedly violating the Fair Credit Reporting Act, ruling that the plaintiff has sufficiently alleged that one of the defendants willfully violated the relevant provisions of the statute and that the other defendant’s failure to respond to a dispute is sufficient for the case against it to continue. More details here.
WHAT THIS MEANS, FROM XERXES MARTIN OF MARTIN LYONS WATTS MORGAN: In Holliday v. U.S. Bank, et al some of the allegations were as follows:
- U.S. Bank issued a Form 1099-C to Plaintiff, extinguishing her $22,219.00.
- This debt was being reported thereafter on her credit report.
- On a phone call, U.S. Bank confirmed the bank was not attempting to collect it.
- She disputed the debt through credit bureaus.
- U.S. Bank and TransUnion failed to investigate her dispute.
In analyzing an FRCP 12(b)(6) Motion to Dismiss for failure to state a claim, a court must accept Plaintiff’s allegations as true. Seeing these allegations followed by a 12(b)(6) motion made me have a reaction similar to this:
Getting a court to dismiss a case under FRCP 12(b)(6) is usually an uphill battle, and only certain cases fit the bill. This was not one of them. Even if you win a 12(b)(6) motion, a court can still allow a plaintiff to amend their complaint to survive this standard. While evidence in Holliday may very well show there was no violation of the Fair Credit Reporting Act, you cannot present evidence in support of a 12(b)(6) motion. As the Court stated it “easily determine[d] that Plaintiff’s second amended complaint clearly meets the necessary threshold to survive Defendants’ motions to dismiss.” It is important to fully understand the legal standard of each type of motion you can file to try to win a case. The most common motions we use are motions to dismiss, motions for judgment on the pleadings, and motions for summary judgment, all with different standards. Know what the court needs to fully dispose of a case, and file the appropriate motions rather than filing all of them to efficiently manage your litigation budget.
Judge Denies Motion for Reconsideration, Interlocutory Appeal in FDCPA Rent Eviction Case
A District Court judge in Colorado has denied a defendant’s motion for reconsideration and a motion to certify a matter for interlocutory appeal in a Fair Debt Collection Practices Act class-action lawsuit, disagreeing with the defendant’s argument that there has been a change in the controlling law since the original motion to dismiss was denied. More details here.
WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: The change in controlling law asserted by the defendant was the Tenth Circuit’s decision in Shields v. Professional Bureau of Collections of Maryland, Inc. In Shields, the Tenth Circuit held that a plaintiff who alleged that a collection letter caused confusion and misunderstanding, but who failed to allege that she took any detrimental action in response to that letter, failed to assert a concrete injury necessary for Article III standing. However, the District Court in this case found that Shields was inapplicable because the plaintiff alleged that she vacated her residence early in reliance on representations made by the defendant. The court also declined to reconsider an earlier decision finding that the plaintiff sufficiently alleged conduct governed by the FDCPA, and the court refused to certify that issue for an interlocutory appeal.
PRA Group to Pay $24M Under Consent Order with CFPB
PRA Group will pay more than $24 million in fines and restitution to consumers as part of a consent order announced yesterday by the Consumer Financial Protection Bureau for violating the terms of a 2015 enforcement order by engaging in a number of prohibited collection-related actions. More details here.
WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: While PRA Group reflected on the stipulated judgment on the CFPB’s claim that it violated the 2015 CFPB Consent Order as not having a material adverse impact on the company’s financial condition or results of operations, $24 million is a substantial amount. The $24 million total reflects $12 million in refunds to qualifying defrauded consumers and a $12 million dollar fine in penalties to be paid to the CFPB. But it’s not the amount of the judgement that should stand out to all, it’s the fact it relates to an order agreed to almost 8 years ago.
In March of 2022 when the Director stated that the CFPB would not stand for repeat offenders, it is clear the agency was serious. To quote the CFPB press release for the PRA Stipulated Order, “CFPB orders are not suggestions, and companies cannot ignore them simply because they are large or dominant in the market.” While PRA Group could show improvement from the processes in place in 2015, the CFPB is making it clear that good efforts will not be acceptable, the terms of the order must be met, not attempted. In addition, The CFPB makes it clear that the use of third party vendors does not eliminate liability, companies are responsible for the overall compliance of any vendor used within their process. Company and third-party processes need to be reviewed ongoing and include new regulations as they apply to the industry.
Lastly, a part of this order that is interesting is the fact that the CFPB order requires more on the part of the collection company to prove debt prior to ligation than what would be required by state or federal law. As PRA Group agreed to this requirement in the 2015 Consent Order, they cannot push back on this requirement to defend noncompliance. A very important fact that should be thoroughly vetted by any company when reviewing and agreeing to any CFPB requirements. If you agree to go above and behind, then that will be the ongoing standard through the life of the CFBP agreement or you could be subject to the CFPB fines that apply to violating the agreement.
Judge Denies Defendant’s MSJ in FCRA Case Over Duplicate Reporting
A District Court judge in Illinois has denied a defendant’s motion for summary judgment in a Fair Credit Reporting Act case, determining that the defendant did not conduct a reasonable investigation into the plaintiff’s dispute because it did not actually read the dispute and look into what the plaintiff submitted. More details here.
WHAT THIS MEANS, FROM MONICA LITTMAN OF KAUFMAN DOLOWICH & VOLUCK: The court here determined that the case can go to the jury. Whether a re-investigation is reasonable under the FCRA is all fact-based. The consumer’s dispute in the ACDV stated “duplicate.” Certain disputes require different types of re-investigations. In cases like this, the creditor has to be involved in preparing the response to the dispute. It is important to have procedures that specify when a re-investigation has to go beyond verifying the information in the furnisher’s internal system.
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.
