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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 Balance Discrepancy in Letter
Who gets a collection letter saying that you now owe less than what you originally did and chooses to file a lawsuit claiming the discrepancy was too misleading and confusing? While the District Court judge didn’t get to address that issue, she did grant the defendant’s motion to dismiss on the grounds the plaintiff lacked standing to sue. More details here.
WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: Here is yet another example of the Seventh Circuit dismissing a case for lack of Article III standing because the plaintiff failed to allege any concrete harm. The Court rejected the plaintiff’s contention that his “increased heartrate” amounted to a “physical manifestation” of harm that was “concrete” enough to confer standing. Of course, the plaintiff can try to pursue the case in state court as it was dismissed without prejudice. But the language in this order (and absurdity of suing over a debt that decreased) provides great ammunition for a coinciding state court dismissal (if the plaintiff even decides to further pursue the claim at all). Best of all, this case provides another signal from the federal courts that the prototypical ticky-tacky claims of the past will not survive without an actual harm alleged.
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Judge Denies MTD in FDCPA Case Over Reporting of Debt
A District Court judge in California has denied a motion to dismiss filed by a collection operation in a Fair Debt Collection Practices Act case on the grounds that furnishing information about a debt to a credit reporting agency constitutes debt collection activity, but did grant motions to dismiss for two officers of the operation that were also named in the lawsuit. More details here.
WHAT THIS MEANS, FROM MARISSA COYLE OF FROST ECHOLS: This case is important to demonstrate how a court will bend over backwards when deciding whether to dismiss a complaint filed by a pro se litigant. It’s not an easy task to obtain a dismissal at the outset of a case when an attorney is opposite you; however, throw in a pro se plaintiff and courts tend to further scrutinize your request for dismissal.
Pro se Plaintiff alleged claims against an agency as well as two of its officers. The officers sought to dismiss the claims against them for lack of personal jurisdiction. The Court noted pro se Plaintiff did not address the officers’ jurisdictional challenge in his Response to their Motion to Dismiss which would normally serve as a sufficient basis to dismiss them from the action. Due to the plaintiff’s pro se status, the Court decided to review the jurisdictional issue on the merits. Since pro se Plaintiff did not include any allegations in his complaint concerning the officers’ roles related to the challenged conduct or their relationships with the agency, the Court considered the officers’ statement they were managers of the agency (although not in the form of a properly-submitted affidavit) along with the limited information pro se Plaintiff alleged (for the first time) in his Response regarding their involvement with the agency. Even on the merits and despite providing pro se Plaintiff a long runway, the Court found it did not have jurisdiction over the officers.
A takeaway from this case is to be prepared with your legal arguments when you have a pro se litigant opposite you. Courts tend to give extra care to unrepresented parties.
Judge Approves $500k Settlement in FDCPA Class-Action
A District Court judge in Ohio has approved a settlement in a Fair Debt Collection Practices Act class-action lawsuit that will see the defendant pay $500,000 in fees and costs after it was accused of pursuing collection activity against individuals who had participated in a separate settlement of an FDCPA case in which the defendant agreed to refrain from undertaking certain collection activities against the members of the class. More details here.
WHAT THIS MEANS, FROM LORI QUINN OF GORDON REES: The District Court Judge adopted the report and recommendation of the Magistrate Judge certifying the class for judgement on a proposed settlement agreement. The certified class consisted of 238 persons who were part of and protected under a separate Final Order. The Court found the prerequisites under Rule 23(a) were satisfied with the Settlement Agreement providing for $500,000 to the class less class counsel fees and the class representative fee.
Judge Finds Plaintiff has Standing, but Still Grants MSJ for Defendant in FDCPA Case Over Disputed Debt
Is this yet another sign that the attack on standing has reached its tipping point? A District Court judge in Illinois has ruled that a plaintiff in a Fair Debt Collection Practices Act case has suffered a concrete injury based on the communication of inaccurate information to a credit reporting agency, which created an “intangible, reputational injury.” Even though the plaintiff did have standing, the judge did, though, grant the defendant’s motion for summary judgment, ruling it did not know or should have known that the debt was previously disputed with another creditor. More details here.
WHAT THIS MEANS, FROM DAVID SHAVER OF SURDYK DOWD & TURNER: Relying on Ewing v. Med-1 Solutions, LLC, 24 F.4th 1146 (7th Cir. 2002), Judge Sara Ellis of the United States District Court for the Northern District of Illinois determined that Plaintiff Michael Wood (“Wood”) had Article III standing to bring a claim for an alleged violation of 15 U.S.C. 1692e(8). Wood claimed that Defendant Security Credit Services, LLC (“SCS”) had reported an account that he previously disputed without reporting the fact of his dispute. Addressing the issue of Article III standing as a threshold matter, Judge Ellis stated that the communication of inaccurate information to a credit reporting agency, by itself, supports finding “‘an intangible, reputational injury’ that is sufficiently concrete for purposes of Article III standing.”
However, even though Wood had standing, Judge Ellis determined that there were no genuine issues of material fact and that Wood’s 1692e(8) claim against SCS should be dismissed. Because SCS had purchased a portfolio of accounts and, based on the creditor’s representations, reasonably believed that none of the accounts were the subject of an ongoing dispute, Judge Ellis found that SCS did not violate e(8) because it did not know that Wood previously disputed his account. Judge Ellis was not persuaded by Wood’s argument that his prior dispute to the creditor should have been reported by SCS. This is because the creditor had responded to that dispute and informed Wood that its investigation revealed the account was valid and proper, a communication that Wood never responded to. Judge Ellis found that Wood’s silence in response to the creditor’s response to his dispute was reasonably understood by the creditor to mean that the dispute was resolved. Accordingly, it was not unreasonable for the creditor to include Wood’s account in the portfolio that SCS purchased (which was expressly limited to accounts that were not the subject of an ongoing dispute).
Judge Ellis’ Opinion and Order seems to have a little something for both sides. Consumers and their counsel will likely approve of Judge Ellis’ standing analysis, while agencies and their counsel may find the substantive e(8) analysis helpful when defending against similar claims in the future. Wood has appealed, though, so Judge Ellis’ pronouncements on these issues will not likely be the final word in this case. ARM defendants, especially those working in Seventh Circuit states, should continue to monitor this case to see whether the Seventh Circuit ultimately weighs in and, if it does, what it has to say. The Seventh Circuit has been holding consumers’ feet to the fire on Article III standing issues more than perhaps any other Circuit so it will be interesting to see whether that trend continues or if the pendulum will start slowly swinging back in the other direction.
Indiana Appeals Court Overturns Ruling for Defendant in FDCPA Case
The Indiana Court of Appeals has reversed a lower court’s summary judgment ruling in favor of a defendant in a Fair Debt Collection Practices Act case, determining that the defendant should not have been allowed to invoke the FDCPA’s bona fide error defense. More details here.
WHAT THIS MEANS, FROM JONATHAN ROBBIN OF J. ROBBIN LAW: The question in a bona fide error defense case whether an error is one of law or mistake, is often walking a tight line. Confronted with that question in Rockey v. Med-1 Solutions the Indiana Court of Appeals reversed summary judgment in favor of defendant holding that Defendant error was simply in misunderstanding the law, which cannot shield it from liability under the strict FDCPA. In remanding the case, the Court of Appeals called into question the threshold issue of whether plaintiff had standing. Specifically, in Rockey, plaintiff alleged that defendant failed to cease communications with her regarding a debt in violation of the FDCPA. The trial court granted Med-1’s summary judgment motion, concluding that “any violation of the FDCPA by [Med-1] was unintentional [and] resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid the error.” On appeal, the Indiana Court of Appeals concluded that Med-1 violated the FDCPA when it sent the letter and three voicemails to Rockey after receipt of the dispute letter. The Court further held that the bona fide error defense is inapplicable because Med-1 read the letter, incorrectly believed that the letter was a request for validation, and purposely entered a disposition code for a dispute and request for validation. As a result, the “misinterpretation of the letter was a mistake of law, not a mistake of fact” and, therefore, the bona fide error defense is not available. But, despite the Court concluding that Med-1 violated the FDCPA, the Court still remanded the Action back to the trial court for further proceedings as to whether Rockey lacked standing to sue in the first place. On one hand, this case continues to highlight the difficulty in using a bona fide error defense as protection in a FDCPA case, but importantly, it continues to show the current positive trend to reduce the number of FDCPA cases by calling into question Plaintiffs underlying standing. In the post-Ramirez world, even state courts are limiting purely statutory actions with no damages from proceeding.
Nevada Governor Vetoes Debt Collection Legislation
The governor of Nevada this week vetoed a bill that would have required collectors to provide payoff letters and satisfaction letters to individuals who request them while also creating a private right of action against collectors that failed to provide those letters, and revising the way collectors were required to notify individuals with unpaid medical debts prior to initiating any collection activity. More details here.
WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: As always, even unanimous bipartisan support will not guarantee a bill. In this case, Nevada Gov. Lombardo vetoed the debt collection bill not due to his belief that consumer protection is unnecessary but rather due to his concerns that creating an additional private right of action for a debtor was unnecessary. This type of action is not the first time we have seen a Governor veto such a bill with the same concern.
Another recent example can be found in the state of VA. In 2022 Gov. Youngkin’s vetoed a similar collection bill, SB297, that provides a cause of action against healthcare provider collections if activities to collect the debt occurred prior to the issuance of an award or determination that a claim is not compensable by the Criminal Injuries Compensation Fund. Gov. Youngkin justified his veto with the same concern, the additional legal liability that the bill proposed.
While many may see additional causes of actions as a reasonable effort to deter bad actions by collection agencies, as these governors point out, the costs and legal burden such can create could outweigh the benefit. The costs could ultimately be passed on to the debtors, creating a high price paid by all.
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.