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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.
Appeals Court Overturns Ruling for Contact Center in ADA Case
In an Americans with Disabilities Act case, the Court of Appeals for the Seventh Circuit has reversed a lower court’s summary judgment ruling in favor of a company operating a call center that refused to accommodate a schedule change request from an employee who wanted different hours so he did not have to drive home at night because he had cataracts. More details here.
WHAT THIS MEANS, FROM LORAINE LYONS OF MARTIN GOLDEN LYONS WATTS MORGAN: The Americans with Disabilities Act (“ADA”) requires private employers with 15 or more employees to provide reasonable accommodations for applicants and employees with disabilities. Also, some states have different laws that may require smaller employers to provide reasonable accommodations. In this case, the Seventh Circuit acknowledged access to and from work is in most cases the responsibility of an employee, not the employer. However, the Court opened the possibility for employers to be held liable for accommodations related to a work schedule based on commuting concerns.
If you are a covered employer under the ADA (or state law) with an employee with a covered condition, the takeaway is to know these situations are very individualized. There is no fixed rule to determine whether specific accommodations are reasonable, and employers should consider all accommodation requests, even if they may appear to be outside the scope of the job duties.
THE COMPLIANCE DIGEST IS SPONSORED BY:
Judge Grants MSJ in FCRA, FDCPA Class-Action Over Disputed Debt Investigation
In a case that was defended by Martin Golden Lyons Watts Morgan, a Magistrate Court judge in Alabama has granted a defendant’s motion for summary judgment in a Fair Credit Reporting Act and Fair Debt Collection Practices Act class-action, ruling that the defendant did exactly as it should when it sought to have a tradeline deleted because it could not verify the information from the original creditor within 30 days after the plaintiff filed a dispute. More details here.
WHAT THIS MEANS, FROM CHRIS MORRIS OF BASSFORD REMELE: Plaintiff alleged class action claims for FCRA, FDCPA and negligence, attempting to piggyback off an earlier FTC charge that another collector up the chain operated a scheme to collect phantom debts by “parking” them on consumer credit reports, without attempting to communicate with the consumer. Plaintiff’s theory was that the defendant, who purchased assets of the prior collector and continued to credit report in the name of the earlier collector, had continued the same conduct. But the claims were all dismissed on summary judgment, rendering plaintiff’s motion to certify class moot, because the plaintiff simply failed to present evidence that the defendant itself violated federal law in any respect, and the common law claim was preempted. Trouble started when plaintiff failed to comply with the court rules in responding to the summary judgment motion, by neglecting to specifically respond to the defendants’ statement of material facts. While the plaintiff attempted to supplement his brief by offering a belated response, the court denied that request for lack of good cause shown and as tardy under the court ordered briefing schedule. Plaintiff was also chastised for attempting to amend the complaint with new theories argued in response to the summary judgment motion. But the plaintiff’s main problem was that the evidence simply showed the collector had good procedures, which were appropriately followed with respect to the dispute at issue. After plaintiff made a dispute through the bureaus, the defendant: (a) marked the debt disputed in its system, (b) reached out to the current creditor (a payday loan debt buyer) for supporting account documents, and (c) when the creditor failed to supply information within 30 days, the collector promptly requested that the credit reporting agencies delete the account. The account was then deleted. That evidence easily established a reasonable investigation as required by the FCRA, which contains no requirement for a data furnisher to investigate the validity of a debt before initially reporting an account to the credit bureaus.
Appeals Court Upholds Summary Judgment for Defendant in FDCPA Case Over Alleged Unlicensed Collection Activity
The Court of Appeals for the Tenth Circuit has affirmed a summary judgment ruling in favor of a defendant that was sued for violating the Fair Debt Collection Practices Act because it was not licensed as a collection agency when it filed a lawsuit to collect on an unpaid debt. More details here.
WHAT THIS MEANS, FROM CHAD ECHOLS OF FROST ECHOLS: This is a case that reads like a win, but I am sure it feels like a loss. Being properly licensed is a first and critical step when collecting consumer debt. In this case, the agency “wins” the case because the consumer should have brought forward the allegations regarding licensing in the state court lawsuit to recover the debt. When the agency won the state court case, they obtained a judgment that was likely for a few thousand dollars (this was a car loan deficiency debt). Now, they have expended a great deal in removing and defending the federal case up and through an appellate ruling. Also, I am certain Utah attorneys are now paying attention to potential claims that might involve other consumers and licensing allegations. I recognize specific licensing requirements and developments can be missed as the landscape seems to consistently shift (this seems especially true for debt buyers, medical debt, and private student loans). But, being accurately licensed in every jurisdiction applicable to your business is mission critical.
Judge Partially Grants MSJ For Defendant in FCRA, FDCPA Case Over Validity of Debt
A District Court judge in Texas has partially granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act and Fair Credit Reporting Act, especially on a claim that would have awarded the plaintiffs punitive damages, in a case involving the legal validity of a debt. More details here.
WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: The situation described here is all too common in the collection space – a creditor assigns an account to a collection agency, informing the agency that an obligation is owed. After collection efforts by the agency, a dispute by the consumer is received claiming that no debt is owed. The collection agency reaches out to its creditor client and asks for it to investigate the dispute and the creditor responds that the obligation is owed.
What is the agency to do? Accept the dispute? Believe it’s own client, instead?
Here, the court concluded that believing it’s own client and continuing to collect on the obligation, was sufficient for the agency to avoid a willful violation of the Fair Credit Reporting Act, and, thus, preclude the potential of any punitive damages. However, the court determined that there was an issue of fact regarding the move out date of the tenant, and if that move out date was the date proffered by the plaintiff, then the continued reporting and the continued collection activity would be a violation of the FDCPA and a negligent violation of the FCRA.
The lesson here is believing your client may be a partial defense, but not a total defense to liability.
Judge Denies Motion to Remand FDCPA Case Back to State Court
In a case that is being defended by the team at Frost Echols, a District Court judge in Florida has denied a plaintiff’s motion to remand a Fair Debt Collection Practices Act case back to state court, ruling the plaintiff’s demand for actual damages in the complaint, coupled with implication of the actual offense that was allegedly committed, indicated that the plaintiff suffered a concrete injury and thus has standing to sue in federal court. More details here.
WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: The industry may begin to see more decisions that try to nuance the issue of standing as this judge does. Despite being in the same circuit as Hunstein, where a 1692c violation was alleged, the judge here found standing for a 1692d claim. The consumer alleged that the debt collector continued to call them after being told to stop which the judge likened to the tort of intrusion upon seclusion. The tort of intrusion upon seclusion has been commonly analogized in the TCPA context and the judge found that, in the TCPA context, a single unwanted telephone call was enough for TCPA standing. Therefore, according to the judge, the single unwanted phone call under the FDCPA context could also result in a concrete harm giving the Plaintiff standing. It is interesting because this was a situation were the Plaintiff sought to have their case remanded after removal, resulting in additional briefing and legal fees for all involved. This is certainly something defendants need to consider when deciding whether or not to remove a case.
Judge Temporarily Blocks Enactment of CFPB Small Lending Rule
A federal judge in Texas has issued an injunction prohibiting the Consumer Financial Protection Bureau from enforcing a rule designed to combat gender and racial discrimination in small business lending. The injunction was made pending a Supreme Court review of the constitutionality of the CFPB’s funding structure. The American Bankers Association praised the ruling, arguing that it spared its members the unrecoverable costs associated with complying with a rule that the CFPB may not have had the authority to enforce. More details here.
WHAT THIS MEANS, FROM ARI DERMAN OF CLARK HILL: The Small Lending Rule is yet another example of the CFPB taking on a well intentioned mission that industry members actually support, such as rooting out discrimination in various marketplaces, but doing so without proper analysis or regard for the massive operational challenges it presents for covered institutions. While Rio Bank and members of the Texas Bankers Association and American Bankers Association were fortunately granted a reprieve from the Rule by Judge Crane’s injunction, it is important to note that the relief is limited to them alone and is not a nationwide order. If other courts continue the trend of issuing geographically or plaintiff limited relief as we see here, while waiting for the Supreme Court to review of the constitutionality of the CFPB’s funding structure, we might be looking at a pretty confusing enforcement roadmap across the country in short order. That alone might have wide-ranging strategic ramifications for covered entities and create an uneven playing field.
Judge Grants MTD in FDCPA Case for Lack of Standing
A District Court judge in New Jersey has granted a defendant’s motion to dismiss, ruling the plaintiff who received a debt collection letter that allegedly violated the Fair Debt Collection Practices Act does not have standing to sue because she never did anything after receiving the letter. More details here.
WHAT THIS MEANS, FROM JACQUELYN DICICCO OF J. ROBBIN LAW: The District Court of New Jersey continued the trend of rejecting FDCPA claims based on Article III standing. In Valentine v. Mullooly, Jeffrey, Rooney & Flynn LLP, et al., a Fair Debt Collection Practices Act (FDCPA) case, the Court dismissed an action on the basis that plaintiff lacked Article III standing. 2023 U.S. Dist. LEXIS 13187, 2023 WL 4867398 (D.N.J. July 31, 2023). In Valentine, plaintiff alleged that the creditor of the debt “impermissibly bought and assigned the [d]ebt without first obtaining a license as a ‘consumer lender’ or ‘sales finance company’ from the New Jersey Department of Banking and Insurance (‘NJDOBI’), as required under the New Jersey Consumer Finance Licensing Act (‘NJCFLA’).” 2023 U.S. Dist. LEXIS 13187, at *3. Plaintiff argues that creditor’s unlicensed attempts to collect the debt rendered it void, and, therefore, the letter sent by defendant misstates the amount of debt owed and the creditor to whom it is owed. Id. After the filing of the amended complaint, defendant moved to dismiss, arguing that the Court lacks subject matter jurisdiction because “[p]laintiff has not alleged that she suffered concrete harm sufficient to establish Article III standing under the Supreme Court’s recent decision in TransUnion LLC v. Ramirez, 141 S.Ct. 2190, 210 L. Ed. 2d 568 (2021).” Id. When analyzing the complaint under the TransUnion standard, the Court held that plaintiff failed to allege a concrete injury-in-fact sufficient to establish Article III standing because: (1) the letter was not disseminated to third parties; (2) plaintiff failed to allege that she experienced “downstream consequences” or “adverse effects” as a result of the letter or that she took any “action or inaction in reliance on it.” The Court held that “merely receiving a ‘misleading’ collection letter, as alleged here, is insufficient to establish a concrete injury, absent some action or inaction taken in response or other form of inquiry.” Id., at * 9. Importantly, this case reaffirms the Third Circuit (amongst others) from allowing FDCPA claims without any actual injury. And Counsel must continue to challenge these types of merely procedural violations in an effort to thwart plaintiff counsel’s frivolous claims.
Bipartisan Medical Debt Collection Bill Introduced in Senate
A bipartisan bill has been introduced in the Senate to strengthen consumer protections and improve transparency related to medical debt collection, including waiting 180 days after an initial bill is sent to an individual before engaging in “extraordinary” collection activities. More details here.
WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: Two U.S. Senators have introduced a bipartisan bill, S. 2483, to increase consumer protections and transparency around medical debt collection by providers and their agents. The bill would do the following:
- Require the Department of Health and Human Services to create a database to track whether providers use collection agents, the process used, and the number of “extraordinary collection actions,” as defined by the IRS, among other data points.
- Require providers to confirm that insurance coverage appeals have been resolved and determine whether a patient qualifies for financial assistance before sending the debt to third party collectors.
- Prohibit healthcare entities and collectors from beginning extraordinary collection activities for 180 days after sending the initial bill and confirming the individual’s identity.
- Require providers to give consumers itemized statements and detailed payment receipts within 30 days.
- Create a private right of action for individuals, with statutory damages up to $1,000 and actual damages.
The bill represents the latest effort by lawmakers to protect patients from overzealous attempts by providers to recoup payment for services. Providers can also expect that information collected in the database will be used to identify additional areas for reform. Payors may also see downstream effects in the form of increased pressure from providers to resolve coverage appeals.
Judge Rules Plaintiff Has Standing to Sue in FDCPA Case; Allows for Amended Complaint
A District Court judge in Pennsylvania — at the behest of the Court of Appeals for the Third Circuit — has ruled a plaintiff has standing to pursue a Fair Debt Collection Practices Act case against a collector, determining that feeling “overwhelmed” and making the decision to file for bankruptcy protection, and has allowed the plaintiff to file a second amended complaint. More details here.
WHAT THIS MEANS, FROM CAREN ENLOE OF SMITH DEBNAM: Not surprisingly, the Third Circuit continues to stand out as a circuit where there is a seeming reluctance to dismiss FDCPA claims on grounds of Article III standing. District courts in the Third Circuit have taken divergent views of Article III standing. Some have maintained their pre-TransUnion stance that an informational injury is enough to create Article III standing while others have taken a more restrictive view.
A couple of point to make here:
- At first glance, the court in Lezark continues to buck the national trend by suggesting emotional harm may be enough to get past the Article III barrier. The court even acknowledges that its decision “may be in tension with out-of-circuit precedent regarding the extent to which emotional or psychological harm can be a concrete injury.”
- A closer look indicates, however, there may be more at play here – Lezark additionally alleges that the debt collection letter at issue contributed to their decision to file bankruptcy. To me, this is the tipping factor and the court acknowledges the same by suggesting this consequential harm tips the scales in favor of standing.
- Finally, its important to remember that the debt collector lives to fight another day. This particular decision is only as to the plaintiff’s motion to amend complaint and addresses the issue of whether amendment is futile (it’s not – at least according to the court – because it determined there was standing). The standing decision, therefore, is not the end of the story and the case should be closely monitored for further dispositive motions on the merits (keeping in mind that the debt collector previously prevailed on the merits as to the original complaint).
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.