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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.
Eleventh Circuit Overrules Itself, Now Says One Text Message Sufficient for Standing
In an en banc decision, the entire Court of Appeals for the Eleventh Circuit ruled yesterday that receiving a single unwanted text message is sufficient for an individual to have standing to sue the sender of the message in federal court for violating the Telephone Consumer Protection Act, and remanded the case back to a panel of Eleventh Circuit judges to consider the rest of the appeal. More details here.
WHAT THIS MEANS, FROM ETHAN OSTROFF OF TROUTMAN PEPPER: The Eleventh Circuit has now joined seven other federal circuit courts of appeals in holding that receipt of unwanted text messages constitutes a concrete injury for standing in federal court. On July 24, the full Eleventh Circuit unanimously held in an en banc decision that a plaintiff who receives a single, unwanted text message has standing to sue under the TCPA. The court departed from its earlier ruling in Salcedo v. Hanna, which held that a single unsolicited text message is but a “brief, inconsequential annoyance [] categorically distinct from those kinds of real but intangible harms” that confer Article III standing. Given this ruling, there likely will be an increase in the volume of TCPA cases filed in the Eleventh Circuit related to single unwanted text messages or calls.
In Drazen, the plaintiff brought a class action alleging that for over two years a company used an automatic telephone dialing system (ATDS) to make promotional calls and text messages to sell products and services to former customers in violation of the TCPA. The parties reached a settlement agreement resolving the class action. The plaintiff then filed a motion for a preliminary approval of the agreement which defined the class to include “all persons within the United States who received a call or text message to his or her cellular phone from” the company between November 2014 and December 2016. The district court issued an order directing the parties to brief how their case was distinguishable from Salcedo. Upon receipt of the parties’ briefing, the district court concluded that because one of the named plaintiffs only received a single text, he and the class members who also received one text lacked a viable claim. However, the proposed settlement was approved, dependent on the parties’ agreement to remove the named plaintiff who lacked standing. One class member, Pinto, objected to the final settlement amount based on the attorney’s fee award. The settlement was certified over the objection, and Pinto appealed. On appeal, the Eleventh Circuit vacated and remanded the case finding the class definition did not meet Article III standing to the extent it included individuals who received a single unwanted text message. Drazen then filed a petition for rehearing en banc.
The Eleventh Circuit observed that the trend among other circuits is to consider the kinds of harms associated with intrusion upon seclusion at common law and not the degree of offensiveness required state a claim. The court concluded that the harm associated with an unwanted text message “shares a close relationship with the harm underlying the tort of intrusion upon seclusion” as both harms represent “an intrusion into peace and quiet in a realm that is private and personal.” Therefore, receipt of a single unwanted text message causes a concrete injury.
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N.Y. State Court Judge Grants Summary Judgment for Defense in FDCPA Case Over Validation Response
In a case that was defended by Jonathan Robbin and the team at J. Robbin law, a state court judge in New York has granted a defendant’s motion for summary judgment and dismissed a plaintiff’s Fair Debt Collection Practices Act complaint that accused a collector of violating the statute for sending a letter that identified the current creditor on the account — which purchased the debt from the original creditor — which was allegedly deceptive and misleading and not supplying the information requested when the plaintiff sought validation of the debt. More details here.
WHAT THIS MEANS, FROM COOPER WALKER OF FROST ECHOLS: My guess is that this one resonated with many of us. There has been a relatively recent trend whereby a debtor sues under the FDCPA and supports his/her claim by making a conclusory statement that the debt isn’t owed. Here, Plaintiff alleged FRS violated the FDCPA by collecting on behalf of LVNV (who bought the debt) because “LVNV never offered to extend any credit to Plaintiff,” and “LVNV is a stranger to Plaintiff.” Judge Rupert Barry asserted that “stranger danger” did not rise to the level of an FDCPA violation and held that “Plaintiff’s conclusory lack of knowledge of the chain of title leading to the current debt holder’s acquisition of the debt, absent the allegation of specific facts suggesting that the purported current debt holder is not, in fact, the owner of the debt, is not a violation of the FDCPA.”
Make sure you have the right things in place to ensure you are receiving documentation to substantiate the debt. However, don’t forget that it is always the plaintiff who has the burden to prove his case. Use this to your advantage.
OCC Fines Amex $15M For Lax Oversight of Third Party Affiliates
In an announcement that is likely to have every creditor — especially those in the financial services industry — reaching out to their third-party partners, the Office of the Comptroller of the Currency yesterday announced that American Express National Bank has paid a $15 million fine for not properly governing or overseeing how a third-party affiliate was interacting with the bank’s customers. More details here.
WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: The recent Office of Comptroller of Currency (OCC) order against American Express (AMEX) for failing to properly oversee its outside vendors, should sound the alarm for all financial institutions. It is unclear which tail is wagging the dog, but it certainly appears that prudential regulators, like the OCC, Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board (FRB) maybe taking some cues from the Consumer Financial Protection Bureau (CFPB).
In May of this year, the OCC updated its Policies and Procedures Manual on Bank Enforcements (PPM). The updates to the PPM may have been partly due to the Silicon Valley and First Republic Bank failures, but it usually takes more than 60 days to update an examination manual. What is interesting about the latest PPM revision is that the last update was over 7 years ago in 2018. In its press release, the OCC stated that the new updates “reflect the [OCC’s] consideration of actions against banks that exhibit or fail to correct persistent weaknesses”. Sounds like the OCC is looking to go after repeat offenders. In 2012, the OCC in coordination with the CFPB, FDIC and the FRB, assessed a $6 million civil money penalty against AMEX for failing to properly manage vendors who engaged in deceptive debt collection practices. In 2013, the OCC assessed another $3 million civil money penalty against AMEX which included, among other things, deceptive marketing practices and required AMEX to improve its governance over third-party vendors.
This latest consent order is a bit of a head-scratcher. The consent states that a third party affiliate that was charged in retaining small business customers, failed to track and monitor customer complaints and failed to track employer identification numbers as required under the Customer Identification Program (CIP) regulations. The OCC found that the activities of the affiliate led to unsafe and unsound practices, however the conduct occurred between 2015-2017. Other than the obvious CIP violations, which are part of Anti-money Laundering regulations, it seems odd that a customers’ decision to no longer do business with AMEX rises to the level of an unsafe or sound practice. The consent order makes no mention of a high volume of charged-off debt or high loan balances that were not paid. It is probably no coincidence that the subject of this consent order was small business lending, which has been the focus of the CFPB and state regulators.
The OCC does not limit its bank oversight to just safety and soundness. In June of 2020, the OCC issued a Consumer Compliance Comptroller Handbook for Unfair or Deceptive Acts or Practices and Unfair, Deceptive, or Abusive Acts or Practices. The Handbook informs examiners about the risks of banks and their third parties engaging in lending, marketing, or other practices that may constitute UDAP or UDAAP, as well as provides expanded procedures to assist examiners in evaluating UDAP and UDAAP risks and in assessing associated risk management (including evaluating a bank’s Compliance Management Systems).
The crosspollination of financial services regulators is quickly becoming more evident. At the end of last month, the Minnesota Bankers Association sued the FDIC for updates to its Supervisory Guidance mandating that banks retroactively self-evaluate their practices for “risks” arising from charging multiple NSF fees which, the FDIC indicated, could result in UDAP violations. This coordinated effort is having and will continue to impact upon the ARM industry, especially for those that represent creditors subject to prudential regulator oversight. Downstream compliance expectations will continue to weigh heavily on expenses and costs of operations.
CFPB Spotlights Debt Collection, Credit Reporting in Latest Supervisory Highlights Report
The Consumer Financial Protection Bureau yesterday released the latest version of its Supervisory Highlights, which chronicles issues found during examinations conducted by the Bureau between July 2022 and March 2023. The issues are used to help drive the Bureau’s decisions regarding rulemaking and enforcement actions and have been cited as a great opportunity for those regulated by the CFPB to get a glimpse into what the CFPB is seeing and how it is likely to act on those observations. With respect to debt collection, the Bureau cited a couple of issues that merit attention. More details here.
WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS SUTHERLAND: The Consumer Financial Protection Bureau (CFPB) has long published “Supervisory Highlights” to alert the marketplace to its priorities and concerns. In its most recent issue the CFPB noted its first information technology findings and focused heavily on the detection of unfair or deceptive acts or abusive practices (UDAAP).
In its first ever mention of information technology findings, the CFPB found institutions to have committed a UDAAP by failing to “implement adequate information technology security controls that could have prevented or mitigated cyberattacks.” The CFPB explained that institutions are in the best position to avoid data security breaches with controls that thwart the efforts of botnet (malicious software) activity or by insisting upon reasonable multifactor authentication or its equivalent. The CFPB also explained that consumers are “harmed” and suffer “injury” when they spend time or resources signing up for credit monitoring services or changing their log-in credentials. Note this represents a quiet shift from other more traditional, historic “harms” or “injury” when data breaches are only thought to have caused harm, damage or injury when they have a direct effect on consumers’ financial or reputational interests.
As the CFPB prepares to begin formal rule-writing under the Fair Credit Reporting Act, attention to some of the areas noted in this edition of Supervisory Highlights related to credit reporting. The CFPB focused on consumer reporting agencies (CRAs) falling short of their FCRA duties by allowing entities access to consumers’ credit information even when those CRAs had reason to believe that the requests were suspect and fell short of demonstrating a permissible purpose. In regard to data furnishers, the CFPB noted concern in a number of areas, notably including these:
- Failing to review and update policies related to data furnishing, disputes, and investigations on a regular basis and/or as circumstances change;
- Providing a dedicated address for disputes and failing to comply with the FCRA by failing to update the CRAs when disputes arrive at the dedicated address and demonstrate an issue with the completeness or accuracy of information being credit reported – or by insisting consumers send disputes to yet another address after consumers have sent disputes to a dedicated dispute address;
- Failing to clarify in a validation notice whether a debt validity dispute address could also be used for notices relating to inaccurately furnished consumer report information;
- In regard to frivolous direct disputes, failing to advise consumers regarding the reasons for the “frivolous or irrelevant” determination – or insisting on an unreasonable amount of information to be supplied to clear up a “frivolous” dispute situation (e.g., data furnisher insisting a consumer must provide an entire unredacted credit report for an investigation when “an excerpt of the relevant portion of the credit report would have sufficed.”
A final note about the Supervisory Highlights featured debt collection finding: pursuing collections against individuals whose debt resulted from a work-related injury. In states like Florida, litigation over FDCPA and state consumer protection laws is significant in instances in which consumers now facing collections allege their bills are the responsibility of their employers due to workplace injuries or illness. The CFPB recommends that debt collectors employ significant controls for gathering information from consumers (and creditors) that may signal a medical bill resulted from a workplace illness or injury including training collections staff to listen for any such information from consumers, assuring creditors share information about workplace injuries or illnesses,
Calif. Appeals Court Upholds Vacating Default Judgment Against Collector Who Claimed Attorney Abandoned Them
A California Appeals Court has upheld the vacating of a default judgment against a debt collector, ruling the circumstances under which the company failed to respond to the complaint — the company’s former attorney had effectively abandoned his position — meet the definition of a satisfactory excuse. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: Antich v Captial Accounts is an unpublished ruling from a California state appellate court and the facts are a bit unique. Nevertheless, it is a reminder of some important best practices. As to the case, Capital Accounts had an in house counsel to handle claims. The lawyer developed some health and family emergencies and, according to the lawyer and the court, effectively abandoned his client Capital Accounts. During this time, a consumer lawsuit was filed and a judgment was entered. The neglect situation existed for about a year and there were multiple similar defaults against the company.
The company eventually hired another lawyer to investigate the status of claims. It then worked to resolve them. In this instance, the plaintiff-debtor objected to vacating the judgment. Fortunately, the trial and appellate courts agreed to vacate the judgment. The appellate court applied the CA three-pronged test, reviewing if there was: (1) a satisfactory excuse for not presenting a defense, (2) a meritorious defense, and (3) diligence in seeking to set aside the default.
The debt collection industry generates a high volume of complaints, which may be lawsuits, demand letters, and tradeline disputes. They can be lodged with BBB, licensing agencies, and regulators at the local, state and federal levels. These have to be addressed in order to avoid significant, and sometimes costly, problems.
Antich v Capital Accounts highlights a few issues to consider relating to disputes and lawsuits. First, this task should not fall on one person who does not have some form of help and is not being supervised closely. Even if a company cannot have two employees addressing these complaints, the person who handles them needs a back-up or a person to turn to if problems develop. Second, agencies should review how well things are handled that are served on their registered agents. I’ve seen many circumstances where things fell through the cracks with the agent or in the transmission of the claims. Agencies should review if the registered agent reliably and timely provides information. They should review how they internally handle items the registered agent provides. In particular, are the items going to a former employee’s email address, what happens when the person processing these is on vacation, and do the items get processed correctly? Third, it helps to check the court dockets in which an agency regularly gets claims, or have a process of getting notice of suits that are filed. Fourth, it helps to try and maintain a civil relationship with the plaintiff-debtor lawyers because that can help avoid defaults. I’ve seen many situations where plaintiff lawyers reach out to companies or their counsel if a response has not been filed to a lawsuit. I’m sure there are other takeaways from Antich v Capital Accounts but these seem like some key ones.
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.