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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 MTD in FDCPA Case Over Refusal to Pay Sent to Creditor
A District Court judge in California has granted a defendant’s motion to dismiss after it was sued for violating the Fair Debt Collection Practices Act by sending a verification letter after the plaintiff send the creditor a refusal to pay statement. More details here.
WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: Common sense and straight-forward application of the FDCPA prevails. If a consumer writes to debt collector #1 that she refuses to pay, that refusal impacts debt collector #1 only going forward. The refusal to pay does not impact a new debt collector down the road (i.e., debt collector #2). Instead, pursuant to the FDCPA, a consumer must independently write to collector #2 to inform it that she is refusing to pay.
Hence, a straight-forward application of the actual language set out in the FDCPA doomed the consumer’s case because she never wrote to collector #2. The court declined the consumer’s invitation to re-write the FDCPA in order to “impute” the knowledge of #1 to #2. The age-old defense of “Bill is not Bob” still wins cases.
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Judge Grants MSJ for Defense in FDCPA Case Over Validation Requests
A District Court judge in Illinois has granted a defendant’s motion for summary judgment, ruling that the verification information it sent to the plaintiff was sufficient to validate and debt and that it was not a false or misleading act to place the account with another agency while it was being disputed with the original collector. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: The Summary Judgment order in this case is a relief for debt collectors who go out of their way to respond to multiple debt validation requests from consumers. Resurgent Capital Services had received a validation request from a debtor within the 30-day validation period following Resurgent’s debt validation notice and responded with a detailed summary of the account, including identification of the original creditor. Resurgent’s response letter included a second debt validation notice for reasons the opinion does not make clear. And in the interim, the holder of the account also placed it with another debt collector who sent another debt validation notice. The consumer complained that the response to her validation request was insufficient, and that the multiple debt validation notices were misleading and confusing. But the court did not buy it, correctly noting that there is just one window of 30 days for a debt validation request, and a corresponding single requirement for a debt collector to cease collections and respond to timely, written validation requests. The court observed that subsequent notices offering another opportunity to request validation are voluntary efforts not subject to the FDCPA’s debt validation rules. And citing numerous other cases, the court held that those subsequent debt validation notices do not hamper the consumer’s validation rights. There is discussion in the case noting that Congress did not design the validation notice requirement to allow consumers to avoid paying debts by simply requesting validation of the debt over and over again – a concept recently codified in Regulation F’s provisions about duplicative disputes. An important takeaway from the Order is the statement that consumers do not have multiple chances under the FDCPA to request validation and compel the debt collector to respond.
Appeals Court Affirms $50k Anti-SLAPP Attorney Fee Award for Collector
A California appeals court has upheld the attorney fees award of nearly $50,000 granted to a debt collector that was accused of interfering in the attorney-client relationship between the plaintiff and a client it represented in a collection lawsuit the defendant filed against the client, after the defendant filed an anti-SLAPP motion. More details here.
WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: This is a classic case of “it’s all about the fees”. It is a lesson that should be viewed with caution by both sides. When courts enter awards for attorney ‘s fees to one party, the amount of the fees determined by the Court are rarely disturbed, except for an abuse of the Judge’s discretion. Judges are held to possess substantial knowledge regarding attorney’s fees and the discretion of a Judge who makes such a determination upon a motion for fees is rarely disturbed. In determining the reasonableness of a fee award, Courts usually look at the number of hours spent times the reasonable hourly rate. If a Judge determines the hourly rate and the numbers of hours incurred are reasonable, that decision is rarely disturbed. Judges may take a 10-25% discount on the total amount of the fees claimed by a given party, but they rarely go further unless warranted under the specific circumstances of the case. Here, the plaintiff challenged the fee award but did so in an “rambling and disjointed” manner and had little chance of changing the outcome of the fee award. A colossal waste of time by the Counsel at issue.
Bill Introduced in House to Amend FDCPA, FCRA With Respect to Medical Debts
Overshadowed by the Appeals Court ruling on the CFPB’s funding structure and the enforcement action against Portfolio Recovery Associates late last week was the introduction of a bill in the House of Representatives that aims to amend the Fair Debt Collection Practices Act to institute a two-year prohibition on the collection of medical debt and amend the Fair Credit Reporting Act to exclude “medically necessary” procedures from being included on consumers’ credit reports. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER: Representative Tlaib has reintroduced H.R. 1773, which passed the Democrat-controlled House during the last term but failed to be taken up by the Senate. Now, with a Republican-led House, I think it is very unlikely this bill will go anywhere. But that may not matter at the end of the day as there continues to be ongoing pressure on medical debt collection and furnishing activities at the state level. For instance, numerous state legislatures are considered – or have recently passed – legislation limiting medical debt collection activities and furnishing. States also continue to consider legislation that is broad enough to extend to financing of medical debt by non-medical providers. It is critical for stakeholders to remain engaging with states and working to educate state legislators about the potential impacts and costs of these bills.”
Law Firm to Pay $200k in Settlement with NY AG Over Data Breach
A law firm that represents hospitals and healthcare organizations in litigation will pay $200,000 in an enforcement action with the Attorney General of New York after being accused of maintaining “poor data security measures” that resulted in a data breach which compromised the personal information of 114,000 patients of the firm’s clients. The firm was also accused of failing to adopt measures required by the Health Insurance Portability and Accountability Act (HIPAA), which was required when working with hospitals. More details here.
WHAT THIS MEANS, FROM CARLOS ORTIZ OF POLSINELLI: A New York law firm agreed to settle with the state’s attorney general’s office based on allegations that the law firm failed to protect sensitive data of more than one hundred thousand individuals when it sustained a data breach. The law firm represents healthcare providers and in that capacity had patient information from clients. According to the state attorney general, the law firm neglected to apply a security patch that had been available for months when the law firm’s system was hacked and the patient’s sensitive data was stolen. The law firm agreed to pay $200,000 in penalties to New York while also agreeing to implement a patch management program and other cybersecurity measures designed to better protect its clients’ patient information.
Among the laws the state attorney general alleged had been violated is the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). While most assume HIPPA’s reach is limited to healthcare providers, it also applies to law firms that handle protected health information (“PHI”) from “covered entities,” such as certain healthcare providers. Under certain circumstances, law firms are considered to be business associates of covered entities under HIPPA and are charged with abiding by the Act’s privacy rules. In general, the privacy rules require that business associates implement comprehensive privacy and data safeguards to protect PHI, such as medical records, laboratory reports, or hospital bills. Examples of the measures that HIPPA’s privacy rules require are: (a) administrative safeguards, such as requiring ongoing risk assessments to identify potential vulnerabilities and risks; (b) physical safeguards, such as requiring physical measures to prevent unauthorized access and protect against environmental hazards; and (c) technical safeguards, such as requiring technical controls to ensure data security. Importantly, business associates are also responsible for their subcontractors. Therefore, law firms that are deemed HIPPA business associates should review their vendor contracts, such as those for cloud storage services, to ensure that they are also HIPAA compliant.
This matter serves as an important reminder to law firms to review their cybersecurity policies, and when law firms are subject to HIPPA, they should take necessary measures to ensure their compliance with the Act to avoid data breaches and costly penalties.
Judge Partially Grants MSJ for Defense in TCPA Case, But Leaves Door Open on Consent
A District Court judge in New York has partially granted a defendant’s motion for summary judgment in a Telephone Consumer Protection Act and denied the plaintiff’s motion, in a case that illustrates possessing an individual’s cell phone number is not guaranteed to prove consent to contact that number. More details here.
WHAT THIS MEANS, FROM KHARI FERRELL OF FROST ECHOLS: This case is significant in terms of highlighting the bar for effective consent in the context of the TCPA. Because consent is an affirmative defense under the TCPA, the defendant carried the burden of establishing that the plaintiff consented to receive the calls which allegedly used a prerecorded voice.
Here, the defendant relied on an intake form provided by the hospital-creditor, that included the plaintiff’s phone number, as the basis for asserting that the plaintiff “expressly consented to receiving calls—prerecorded or not.” The plaintiff, however, claimed that he did not recall giving his phone number to the hospital-creditor.
Notably, because there was a dispute of material fact as to whether consent was actually given to hospital-creditor, the district court did not reach what it described as, the “thorny” issue of whether an intermediary could effectively convey a consumer’s consent for the purposes of the TCPA.
Instead, the court concluded that simply establishing that the plaintiff’s number was somehow obtained by hospital-creditor, and not that it was provided by the consumer directly, was not enough to establish the affirmative defense of express consent at the summary judgment stage.
From a practical standpoint, this case reinforces the importance of having procedures in place, to verify that adequate consent has been provided by the consumer to either the creditor or your agency, before attempting to contact them using either prerecorded voice or an automatic telephone dialing system (“ATDS”).
Defendant in FDCPA Case Ordered to Pay $45k in Fees For Not Disclosing Subpoenaed Employee Had Suffered Stroke
A Magistrate Court judge in New York has ordered the defendant in a Fair Debt Collection Practices Act class action case to pay $44,895 in attorney’s fees to the plaintiffs for waiting six months to disclose that one of its employees — that the plaintiffs were seeking to depose — had suffered a stroke and resigned. The plaintiffs had been seeking more than $73,000 in fees. More details here.
WHAT THIS MEANS, FROM JACQUELYN DICICCO OF J. ROBBIN LAW: The Southern District of New York, in a Fair Debt Collection Practices Act (FDCPA) case, awarded plaintiff $44,895 in attorneys fees on the basis that defendants failed to disclose facts and played games concerning the status of a witness for deposition testimony. In Seaman v. Nat’l Collegiate Student Loan Trust 2007-2, et al, plaintiff noticed the deposition of an employee of defendant, Transworld Systems, Inc. (TSI). TSI moved to quash the subpoena on the basis that the employee developed stress-induced epilepsy, which the Court denied. As a result, TSI objected to the Order, but did not seek a stay pending resolution of the objections. Id at *6. Three days later, the employee suffered a stroke and resigned from the company, but these facts were not disclosed to plaintiffs or the Court for more than six (6) months and, instead, the parties continued to expend time and money litigating the objections. After the Court overruled defendant’s objections, TSI disclosed at that point, that the employee suffered a stroke and was no longer employed at TSI. Plaintiffs moved for monetary and non-monetary sanctions, seeking fees in excess of $73,000, on the basis that TSI delayed a key witness’s deposition for over a year with the intention of preventing plaintiff from being able to take the witness’s testimony. This was further evidenced by defendants delayed disclosure of the employee’s stroke. As a result of these violations, the court awarded plaintiff sanctions and ordered defendant to pay $44,895 in attorneys fees for its actions. Specifically, the Court held, “TSI’s sanctionable conduct consisted of ‘[keeping] the issue of the Employee’s new health challenge in reserve, for use if and when their pending objections (based on his prior health challenges) were overruled,’ which obliged plaintiffs to ‘continue litigating objections based on an outdated set of facts,’ multiplied proceedings unnecessarily, and further delayed the Employee’s deposition.” Importantly, this case shows that Courts have a low tolerance for delays in discovery and a party’s failure to disclose facts in a timely manner.
Pa. Appeals Court Affirms Ruling That SOL Disclosure Not Required in Late Letters
A collector is not obligated to include a notification that the statute of limitations on a debt has expired as long as it does not initiate or threaten legal action on the debt, the Pennsylvania Superior Court ruled yesterday in affirming a lower court’s decision. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: The decision in Matteo v EOS USA was rendered in the Court of Common Pleas and affirmed by the Superior Court of Pennsylvania (one of Pennsylvania’s two appellate courts, the other being the Commonwealth Court). Notwithstanding the fact that this decision would have limited value to cite in other state jurisdictions or federal courts, if your agency or law firm is sending letters on time barred debt, it provides a useful discussion of where the line may be regarding what can be said in a letter to a debtor.
We know that many courts have drawn a bright line with the use of the word “settle.” Indeed, this decision references Buchanan v. Northland Group, Inc., 776 F.3d 393, 395 (6th Cir. 2015) to explain the significance of the term:
As the Buchanan court’s survey of sources suggests, multiple dictionaries define “settle” to refer not only to “settling accounts,” but also to the avoidance or resolution of litigation. See [Buchanan,] 776 F.3d at 399. Moreover, the chance that the letter could mislead the least-sophisticated debtor increases with the use of phrases such as “settlement offer,” which Black’s Law Dictionary defines as “[a]n offer by one party to settle a dispute amicably (usu[ally] by paying money) to avoid or end a lawsuit or other legal action.” (10th ed. 2014). Cited in Tatis v. Allied Interstate, LLC, 882 F.3d 422, 429-430 (3rd Cir. 2018)
The letter in Matteo does not contain any form of the term “settlement” and also “does [not] encourage Matteo to “take advantage” of the offer to “resolve” the debt by remitting a specific amount or create any sense of urgency by including a deadline for doing so. The letter merely suggests that Matteo call EOS, at which time options can be discussed.”
There is also some discussion regarding standing, an examination of which is now de rigor as a first line of defense. Consider: if a Plaintiff takes no action after receiving a “settlement” letter, are there any concrete damages? This case was not decided on standing but when the standard is could a letter “deceive or mislead even the least sophisticated debtor into believing she had a legal obligation to pay the time-barred debt or that EOS was threatening litigation should she fail to do so” and the debtor takes no action, where is the concrete injury?
It should be clear that drafting letters for time barred debt is akin to walking a tight rope, easy to fall to one side or another. Here, in part due to skillful lawyering on the part of defense counsel, the Court found that EOS USA walked the line successfully.
Judge Denies Plaintiff’s MSJ in FDCPA Case Over Interest Statement in Letter
A District Court judge in New Jersey has denied a plaintiff’s motion for summary judgment in a Fair Debt Collection Practices Act case, ruling that the plaintiff’s attempt to introduce a new theory at the summary judgment stage of the proceedings — after a Magistrate Court judge had already denied a motion to amend the complaint — is a non-starter. More details here.
WHAT THIS MEANS, FROM LORI QUINN AT GORDON REES: The Court denied Plaintiff’s Motion for Summary Judgment finding that Plaintiff attempts to reargue a theory that the Judge precluded in a previous motion to amend and motion to reconsider. Thereafter, Plaintiff filed a motion for summary judgment arguing the subject letter was misleading and deceptive despite the original complaint alleging the statements in the letter were false. The Judge noted the Court’s generosity – allowing Plaintiff six chances to get it right. In denying Plaintiff’s summary judgment the Court included an analysis of the underlying motion practice, the lack of new evidence or new facts ultimately finding moving for summary judgment on a claim that was previously rejected was barred.
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.