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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 Remands FDCPA Case Back to State Court
A District Court judge in Florida has granted a plaintiff’s motion to remand a Fair Debt Collection Practices Act case back to state court where it was originally filed and denied a defendant’s motion to dismiss as moot, ruling the claims made by the plaintiff were not sufficient for the case to have standing in federal court. The judge also denied a motion from the plaintiff for attorney’s fees and costs. More details here.
WHAT THIS MEANS, FROM LORAINE LYONS OF MARTIN LYONS WATTS MORGAN: Because federal courts are courts of limited jurisdiction, there is a presumption against removal jurisdiction, and the Defendant removing an action has the burden of establishing Article III standing. In Plaintiff’s motion to remand, Plaintiff argued he only plead statutory damages, which is insufficient to support standing in federal court. Defendant argued the complaint alleged concrete harm, but the court agreed with the Plaintiff and remanded the case to state court. The court also found Defendant’s removal was based on a reasonable argument and denied the Plaintiff’s request for attorney’s fees.
The Plaintiff gets to keep his case in state court, but the merits of the claim are yet to be determined.
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Judge Remands FDCPA Case Back to State Court
A Magistrate Court judge in New York has ruled that a defendant in a Fair Debt Collection Practices Act case failed to show that the plaintiff suffered a concrete injury after removing the case to federal court, and has remanded the case back to state court where it was originally filed. More details here.
WHAT THIS MEANS, FROM JENNA WILLIAMS OF FROST ECHOLS: While not a Hunstein claim, this decision continues the trend of district courts inquiring about Article III standing early in a case. If it is not clear from the face of the complaint that the consumer alleged sufficient injury in fact, then know the risks of remand. Especially in New York.
In this case, the Notice of Removal filed by defendant included strong and particularized arguments for Article III standing. Defendant even included a side-by-side analysis of Plaintiff’s alleged damages and quoted portions of the complaint. It did not work for this particular judge, but it could certainly work for other judges and/or other jurisdictions.
Judge Grants Partial MSJ For Plaintiff in FDCPA Case
A District Court judge in Washington has adopted a Magistrate Court judge’s recommendation to grant a plaintiff’s motion for partial summary judgment on a Fair Debt Collection Practices Act claim against a collection agency, ruling the defendant had no valid defense to the actions it took against the plaintiff. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: The facts in this case are not great for the debt collector, who allegedly continued to report a medical debt as delinquent even after voluntarily dismissing a collection lawsuit against the consumer. The consumer moved for summary judgment on her FDCPA claims, alleging that the debt collector made false representations about the legal status of her debt, and that the debt collector used false or deceptive means to collect a debt (among other federal and state claims). The consumer plaintiff argued that she had insurance that should have paid her medical debts, and the debt collector argued that she owed the money because insurance had not paid those debts. The debt collector attempted to raise a bona fide error defense in an amended Answer to the Complaint, but the court denied that attempt as untimely because the debt collector’s filing did not comport with the court’s scheduling order. So in response to the plaintiff’s motion for summary judgment the debt collector claimed “reasonable reliance” on information from the creditor to excuse its alleged violations of the FDCPA, but the court said that was the same as a bona fide error defense. Specifically, the court said that the debt collector was misreading a Ninth Circuit case that the debt collector said distinguished the bona fide error defense from an alternative “reasonable reliance” defense. The federal court in Washington State in this case said that the defenses were one and the same; that the “reasonable reliance” defense was effectively a form of bona fide error defense, and reiterated that it was too late to raise that defense. The court pointed out that the creditor upon which the debt collector purported to rely did not compel the debt collector to continue reporting the consumer’s debt as delinquent after dismissing the lawsuit, and that the creditor did not compel the debt collector to file suit. And because those were the activities that gave rise to the consumer’s FDCPA claims that the court found valid, the “reasonable reliance” defense failed. The important takeaway here is that a debt collector’s FDCPA defense centered on reliance on the creditor is tantamount to a bona fide error defense. Debt collectors defending FDCPA claims should identify and raise any such defense early in response to a consumer’s FDCPA complaint.
Illinois Appeals Court Shuts Down Consumer For Missing Info in Brief
Remember when you were in school and your teachers had all those rules when it came to writing reports and essays? The font had to be the right size and you needed annotated footnotes and a bibliography (did I just date myself with that one?), among a host of other things you thought were silly. An Illinois Appeals Court has dismissed a plaintiff’s appeal of a judgment awarded to a debt collector because the brief that was filed failed to include a table of contents and other statutory requirements. More details here.
WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: Most attorneys can tell you that when litigating against pro se parties (people who represent themselves without an attorney) courts will bend over backwards to accommodate the legally untrained from the arcane nature of legal rules. This leads to extensions, delays and bending of rules so that the pro se is given their day in court. One thing, however, that will always be mandatory regardless of who brings a case is sufficient facts and law to support the party. While the consumer here ignored every procedural requirement in the appeal (format of brief, headings, appropriate pagination), the appeal was fatally flawed because it was not supported by either facts or law – it consisted of rambling and relatively incoherent statements that didn’t support the legal relief sought. In short, the pro se did not show the appellate court that she was entitled to the judgment being overturned.
Group Petitions CFPB for FCRA Rulemaking on Medical Debt
A petition has been filed by a health advocacy organization asking the Consumer Financial Protection Bureau to begin a rulemaking under the Fair Credit Reporting Act that would prohibit the reporting of medical debt on credit reports if the debt was incurred for medically necessary services. Medical debt, accounting for over $88 billion, is the most common type of consumer debt in collection and disproportionately affects low-income individuals and people of color. It causes financial strains such as damaged credit, barriers to employment and housing, reduced savings capacity, and health effects like stress-related illness and diminished access to health care. More details here.
WHAT THIS MEANS, FROM JOHN REDDING OF ALSTON & BIRD: On April 5, 2023, the CFPB received a petition from Community Catalyst, seeking a rulemaking under the FCRA that would prohibit reporting of medical debt if the debt arose from medically necessary services. Interestingly, just last Thursday, the CEOs of Equifax, Experian and TransUnion testified before the Senate Banking Committee and this same issue was raised by Senator Warren and others, asking if the CRAs would agree to omit medical debt if the CFPB found that medical debt, as reported was so full of errors that it no longer belonged on credit reports.
Given the attention and political pressure being brought to bear, we may ultimately find ourselves in a situation where furnishing information about medical debt is effectively prohibited. If that becomes the case, and particularly if limited to “medically necessary” as opposed to voluntary procedures, we should expect any number of fights over the types of services deemed necessary – insurance companies seem to have a very limited definition compared to some others – and what types can be reported. If not life or death, is the ambulance “necessary”? And if this comes to pass, we will also find out whether credit reporting materially impacts collectability, though we’re going to learn that for amounts below $500 already.
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.
