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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.
Bills Introduced in House, Senate to Abolish CFPB
Not content with making small changes to the Consumer Financial Protection Bureau, like changing how it receives its funding or how many people are in charge, Sen. Ted Cruz [R-Texas] and Rep. Byron Donalds [R-Fla.] have introduced bills in the Senate and House of Representatives, respectively, to completely abolish the Bureau. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER: I agree it is unlikely that these bills will advance in any meaningful way as currently drafted. Nor is this the first time we have seen these types of bills introduced by Republican members of Congress in recent years. Personally, I think Congress is unlikely to take anything up in a serious way before the Supreme Court decides the pending CFSA appeal and we are through the 2024 election. And to many Senator Cruz’s statement that the CFPB has been “an utter and complete waste of government spending” rings of being nothing more than exaggerated political grandstanding, he does hit on an interesting question: has the CFPB done its job?
The CFPB has been in existence for almost 12 years. It was created as a direct result of the 2008 financial crisis with the mandate to ensure and oversee the overall stability of our financial system. Yet in the first five months of 2023, we witnessed three significant bank failures, including the second and third largest since 2008. These failures sent shockwaves across the global banking system and are contributing to reduced confidence in the dollar. The impacted banks had heavy concentrations in certain, rapidly growing financial industry sectors and to which the CFPB and prudential regulators paid regular attention. The issues that have been publicly disclosed as causing these failures were risks that are known and not unique to regulators. The regulators either failed to recognize these issues or did recognize them – but failed to act. This begs the question – what does the CFPB see its mission to be if it does not include avoiding bank runs and instability?
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Regulators Affirm Commitment to Policing AI in Financial Services
A number of federal regulators, including the Consumer Financial Protection Bureau and the Federal Trade Commission, yesterday affirmed their commitment to ensuring that artificial intelligence does not violate the rights or take advantage of consumers. More details here.
WHAT THIS MEANS, FROM HEATH MORGAN OF MARTIN LYONS WATTS MORGAN: Federal regulators have finally chimed in on AI in financial services, and unfortunately these joint statements don’t really provide much of new information. While the statements acknowledge the most important potential harms of AI – turbo charging consumer fraud – unfortunately the statements then revert back to secondary concerns of AI with regards bias or discriminatory practices. Certainly there are concerns with these, but majority of those potential harmful practices, if they are done, will be done by regulated entities for which there is existing relief.
The most important concerns the FTC and CFPB should be focused on is consumer harm from identity theft, reputational theft, and the ability of future AI to self-code and cause an onslaught of attacks on financial services systems. Once consumers name and likeness is stolen and replicated, and once certain self-coding features and algorithms are unleashed, they will not be able to be undone, similar to a “pandora’s box” scenario. Federal regulators should be assisting regulated entities with help in protecting consumer’s data and systems, and enacting enforcement laws against actors who launch self-coding AI rather than rehashed statements. AI is new technology and needs new ideas to address real concerns, not just the same old ideas and statements.
At the same time, consumers need to be mindful of any new state or federal government rules that seek to regulate these real concerns of AI and at the same time, give the government more authority and oversight over individual privacy. We need sensible regulations that allow to hold those responsible for initiating AI self-coding or systems liable for any harm created, but also that do not allow for government overreach in its access to consumer privacy data.
Appeals Court Affirms Dismissal of Assigned FDCPA Claims
The Court of Appeals for the Tenth Circuit has affirmed the dismissal of a pair of Fair Debt Collection Practices Act cases involving the assignment of claims, ruling that tort claims are not assignable under state law in Oklahoma. More details here.
WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: The 10th circuit applied common sense to affirm the dismissal of two claims. In two separate lawsuits, an individual claimed that he had been “assigned” claims by two other individuals. He alleged that those two individuals had disputed their debts with respect to certain credit reporting. He next alleged that the credit reporting was not updated appropriately and that the individuals who had disputed the reporting had assigned their claims to him to prosecute. Frankly, when will this nonsense end?
Apparently, it ends now. The 10th circuit wasn’t buying it. Because the claims alleged were deemed akin to tort claims, and tort claims were not assignable under Oklahoma law (where the cases were venued), the lower court dismissed the claims for lack of standing. The 10th circuit affirmed on the same basis. Accordingly, this nonsense ends here.
Judge Denies MTD in FDCPA Case Over Dispute Language in Letter
A District Court judge in Illinois has denied a defendant’s motion to dismiss a Fair Debt Collection Practices Act case, ruling the language in a collection letter overshadowed the plaintiff’s right to validate or dispute the debt in question, while also noting that the defendant’s attempt to invoke that the language complied with what the Consumer Financial Protection Bureau put forth in Regulation F does not apply, because the letter was sent before the rule went into effect. More details here.
WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: A federal judge in Illinois recently denied a motion to dismiss an FDCPA putative class action lawsuit. At issue was an August 2021 initial collection letter/validation notice sent to the plaintiff.
The letter tracked the required dispute instruction language in 15 U.S.C. § 1692g(a), but also included a statement encouraging the consumer to visit the company’s website to pay or dispute the debt. The plaintiff complained that this was confusing, contradictory and overshadowed validation rights, because the letter states disputes must be made in writing but then implies they can be made online and offers no explanation as to whether that would satisfy the written notification validation requirement. As pointed out in the Motion to Dismiss (among other defenses), at the time of this letter, the CFPB had already created the Rules in Regulation F, which permit debt collectors to invite online disputes. The Judge, however, rejected this argument without discussion by proclaiming Regulation F was not “relevant” to the motion to dismiss because those Rules did not become effective until after the plaintiff’s letter. Ultimately, the Judge determined that whether the letter would be confusing to an unsophisticated consumer is a question of fact that precluded a 12(b)(6) dismissal.
While the Court avoided any analysis of Regulation F at this juncture, if this lawsuit proceeds it likely will be raised again. The putative class includes Illinois residents who were sent an initial collection letter for the year prior to the August 17, 2021 filing of the lawsuit. Presumably, that would include many consumers who received a materially different version of the letter that may be subject to materially different and undeniably relevant post-Regulation-F defenses. Regulation F became effective on November 30, 2021 and it is likely that, around that same time, the collection agency started to use a letter that mirrored the Model Validation Letter designed by the CFPB pursuant to its Rules. It will be interesting to see if and how this Judge will interpret the scope of protections offered by Regulation F and the Model. This lawsuit is one to watch.
Appeals Court Affirms Dismissal of FDCPA Case for Lack of Standing, But Dissent Argues Otherwise
The Court of Appeals for the Seventh Circuit has affirmed the dismissal of a Fair Debt Collection Practices Act case because the plaintiff lacked standing to sue, but one of the three judges wrote a dissenting opinion arguing that receiving collection letters from the defendant after having the debt discharged in bankruptcy is enough for the plaintiff to have standing to sue. More details here.
WHAT THIS MEANS, FROM CHELSEY PANKRATZ OF FROST ECHOLS: This case is seemingly another in a line of positive outcomes for debt collectors regarding plaintiffs’ standing to sue, and the sufficient type of injury required for same. Consistent with other recent Seventh Circuit cases regarding standing, here two of the three judges held that the allegations in Plaintiff’s pleadings —ʺconfusion,” “stress,” “concern,” and “fear”— are not sufficiently concrete to result in an injury in fact that would give him standing to sue. This reasoning was particularly focused on the fact that a risk or threat of some future harm is not enough to establish standing, especially after the ruling in TransUnion LLC v. Ramirez, 210 L. Ed. 2d 568, 141 S. Ct. 2190 (2021).
However, the third judge assigned to the appeal dissented, arguing that the majority erred in basing its holding “on the number of letters and the degree of the intrusion”. The dissent argues that the focus of the inquiry into whether or not an injury is sufficient to maintain Article III standing should not be on whether or not a successful intrusion-upon-seclusion claim could be made, but instead on whether or not the allegations “set forth a comparable type of injury that the claim could remedy at common law.” The dissent further asserts that the majority erred in characterizing Plaintiff’s allegations of harm as only the risk of future harm, and instead asserts that Plaintiff “actually suffered concrete emotional injuries—confusion, aggravation, alarm” and that such “current emotional harm…is enough to confer standing.” Lastly, the dissent acknowledges that recent Seventh Circuit decisions have also held that that “emotional harms…are per se insufficiently concrete to satisfy standing…[and] allegations of confusion and aggravation cannot alone provide a basis for injury‐in‐fact.” However, the dissent argues that these rulings have “overstate[d] what TransUnion requires.”
This is an important distinction regarding the analysis of what Courts may deem constitutes a “concrete injury” and thus, Article III standing. So, while overall this is a positive ruling regarding Article III standing, the reasoning illustrated in the dissent should be noted.
Appeals Court Affirms Dismissal of FDCPA Suit Related to Serving Complaint in Person During Pandemic
The Court of Appeals for the Sixth Circuit has affirmed the dismissal of a Fair Debt Collection Practices Act case for lack of standing, ruling that the plaintiff was not injured when he was served in person with a collection lawsuit during the initial months of the COVID-19 pandemic nor because the defendant failed to include an additional disclosure on the summons that the 21-day period to answer the complaint had been waived because of the pandemic. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: The first thought that came into my head after reading this decision regarding Article III standing took me back to my childhood. I remember sitting at the dinner table with the family and one of my brothers yelling “Mom, Mitchell’s making faces at me.” My mother’s response: “then close your eyes and you won’t see him.” In the same vein, as the Court noted, Van Vleck’s behavior was a significant contributor to any “injury” he suffered. The claim was relatively simple, due to his physical condition, during the height of the COVID-19 season Van Vleck apparently feared exposure to the unknown, another old reference to the John Travolta TV movie, “The Boy in the Plastic Bubble” (1976) (the premise of which, for you young’ns, was a teen born with immune deficiencies who lived in an actual plastic bubble). But assuming he had that fear, what self-protection did he take? Keep in mind his mother answered the door and told him the process server was outside with papers for him.
While the process server arrived at Van Vleck’s residence during a stay-at-home order, the interaction solely occurred outside. Despite his immunocompromised condition, Van Vleck went to the door unmasked and took the papers from the process server, and he admits that he does not recall whether the process server was wearing gloves or even masked.
Happily, the court, instead of relying on textualism or some other legal analysis, relied on “common sense.” Since TransUnion v Ramirez, the courts have started to review alleged injuries with a more discerning eye and many that might have passed muster 5-10 years ago are now getting tossed. What I find to be troubling is the amount of time and money it took to resolve this matter. I have to wonder if the courts would have less patience if it was an attorney rather than a pro se prosecuting the case.
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.