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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.
EDPA Judge Rules Subrogation Claims Not Subject to FDCPA
In a case that was defended by Rick Perr and the team at Kaufman Dolowich & Voluck, a District Court judge in Pennsylvania has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act case, ruling that insurance subrogation obligations do not meet the definition of “debt” under the statute. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER: This decision gets it exactly right. The FDCPA requires the existence of a consumer “debt”. Generally, a debt is understood to be something that arises from a mutual agreement for one party to receive something of value from another party in exchange for making a promise to repay that party at some future time. As the court correctly notes, a car accident certainly does not fit this type of scenario, and therefore, any resulting claims for compensation – including subrogation – are not “debts” within the meaning of the FDCPA. This is a welcome reminder that there are limits to the FDCPA’s reach and that the mere fact that an amount is alleged to be owed by a consumer may not, in and of itself, bring the claim within the FDCPA.
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Banned Collector Loses Bid to Work in New Locale
You have no doubt seen or read about how individuals who are the subject of enforcement actions at the state and federal level are often permanently banned from engaging in those activities moving forward. But do those bans apply only to the states in which they were signed? Or does it apply everywhere? An individual who previously agreed to a permanent ban from the collection industry tried to argue he should be allowed to work elsewhere, but lost a lawsuit he filed against the Attorney General of New York that sought to clarify whether the ban applied just within the borders of New York State or if it meant everywhere. More details here.
WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: This story should serve as a reminder to everyone that words (or the lack thereof) matter. The individual in question agreed to a clear ban on consumer debt collection and consumer debt brokering, among other things. This agreement was reached via an assurance of discontinuance with the New York Attorney General’s office. There was nothing in the agreement limiting the geographic scope of the bans. While it may seem intuitive to believe that such a ban is limited to New York, and there strong arguments that it should be, the fact that there was no limiting language in terms of the scope of the ban is problematic.
Judge Denies Defendant’s Bid for Sanctions in FDCPA Case Over Failure to Remove Dispute Notification
A District Court judge in Georgia has denied a defendant’s motion for sanctions in a Fair Debt Collection Practices Act case that went all the way to summary judgment before the plaintiff voluntarily dismissed the suit, which was over the defendant’s failure to remove a dispute from the plaintiff’s credit report. More details here.
WHAT THIS MEANS, FROM CHELSEY PANKRATZ OF FROST ECHOLS: This case demonstrates that while seeking sanctions can be a useful tool in defending against seemingly frivolous FDCPA cases, it should be employed strategically. Defendant here sought sanctions against Plaintiff and his counsel after Plaintiff voluntarily dismissed his case while the parties’ cross motions for summary judgment were still pending. Defendant argued that sanctions were warranted because the Plaintiff’s claim that he was unable to obtain a mortgage was factually untrue. However, the Court did not agree that this meant that Plaintiff’s claim was frivolous or filed in bad faith. The Court emphasized that it had not ruled on the merits of the claim, and that Plaintiff voluntarily dismissed the case, despite some split among courts regarding Plaintiff’s standing arguments.
Class Action Filed Against CRAs Over $500 Medical Debt Reporting Floor
A dermatologist in northern California has filed a class-action lawsuit against the three major credit reporting agencies — Equifax, Experian, and TransUnion — accusing them of violating the Sherman Antitrust Act because their decision to not include medical debts under $500 on consumers’ credit reports is a “transparent conspiracy” that is diminishing access to medical care by driving providers out of the market. More details here.
WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: The flurry of regulatory activity and controversy surrounding medical debt has expanded yet again with a class action lawsuit against the big three CRAs: Experian, Equifax and TransUnion. In August, a medical provider raised antitrust claims based on the theory that, by agreeing to not include medical debts under $500 on consumer credit reports, the CRAs have conspired to unlawfully restrain trade. Allegedly, this harms medical providers because they will now lack a way to persuade patients to pay smaller overdue bills by virtue of a desire to avoid a negative credit impact. The plaintiff claims this will drive medical providers out of business. The docket indicates a motion to dismiss is forthcoming.
This is a new twist on an increasing popular theme amongst regulators and litigants – medical debt reporting. It will be interesting to see if any interested parties seek to intervene or brief the issues. The CRA agreement to restrict medical debt reporting would seem to be in line with, for example, the CFPB’s general views. Just last year, the CFPB issued an interpretive rule encouraging states to enact laws that would forbid CRAs from including in consumer reports any information about medical debts at all (and/or forbid furnishers from sending medical debt information to CRAs in the first place). Yet, the lawsuit cites select provisions from other recent CFPB reports as support for the medical provider’s claims – as those reports indicate the large volume of medical debt entries existing in consumer reports that fall below the $500 threshold.
It will be interesting to see how this lawsuit plays out. For those of us in the industry, this lawsuit does not challenge the act of furnishing medical debt information to the CRAs. However, it would be wise to continue to use caution and err on the side of overcompliance when it comes to medical debt credit reporting.
CFPB Calls Out Apple and Google as ‘Choke Points’ in Mobile Payments
It might not seem terribly relevant to how you collect right now, but the next generation of payments is already out there and becoming more popular, which probably explains why the Consumer Financial Protection Bureau is starting to pay attention and make some waves. The CFPB released a report yesterday, coinciding with a speech from Director Rohit Chopra at a fintech conference, on the role that big tech companies like Apple and Google are playing in the area of mobile payments. Those two companies are “choke points” to the overall payment system (sound familiar to anyone in the ARM industry) and are stifling competition and innovation. More details here.
WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS SUTHERLAND: Foreshadowing rulemaking expected from the Consumer Financial Protection Bureau (“CFPB”) within a month’s time, Director Rohit Chopra stated last week that “we will be proposing rules to activate a dormant authority authorized by Congress in 2010 that will give consumers more personal financial data rights. We hope to intensify competition across financial products by allowing consumers to securely permission their transaction data and switch more easily.” Intensely committed to fostering a fair, transparent “open, interoperable, and decentralized banking and payments system” that levels the playing field for consumers while supporting the economy, Director Chopra is drawing attention to whether or not consumers are knowingly trading their financial and commercial data for convenience of modern “banking in an app” and “touch to pay” opportunities. In April, 2023, Director Chopra released a lengthy final report of the Small Business Review Panel on options under consideration for rulemaking on personal financial data rights under Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). In brief, Section 1033 requires a “covered person” to make available upon consumer request any information in the control or possession of the covered person concerning products or services the consumer obtained from the “covered person.” Roughly a year ago the CFPB released its outline of proposals. What could be especially interesting here might be a perfect storm of rulemaking under the Fair Credit Reporting Act (“FCRA”) that would dovetail with Section 1033 rulemaking. The CFPB is also expected to release its outline of proposals for new FCRA rules that may modernize and expand the definition of who is considered to be a “consumer reporting agency” and subject to the FCRA’s guardrails. It is speculated that the CFPB may want to rein in a wide range of data brokers and potentially even tech companies because those entities are collecting and processing consumers’ financial and commerce information when consumers avail themselves of payment and banking options that are coupled with retail and other apps. These dual rulemaking efforts could have a significant impact on self-service portals, financial and retail apps, and some of their tech hosts who present these convenient resources to consumers on their smartphones, tablets, and when surfing the net. Stay tuned this fall as Notre Dame remains in the NCAA top ten and it shapes up to be a very lively regulatory season. Wishing ND defensive captain Bertrand a full and speedy recovery from his head injury, too!
Calif. Appeals Court Overturns Dismissal of RFDCPA Class Action
A California Appeals Court has reversed a lower court’s ruling in a Rosenthal Fair Debt Collection Practices Act class-action case, determining that as long as a debt is alleged to be due or owing — whether or not it, in fact, is due or owing — is sufficient to state a claim. More details here.
WHAT THIS MEANS, FROM XERXES MARTIN OF MARTIN GOLDEN LYONS WATTS MORGAN: State legislatures are on a trend of updating their laws and regulations to be broader than their federal counterparts. Hagey v. Solar Service Experts is an example of this. The primary focus in Hagey is on whether the debt can be considered a “consumer debt” or a “consumer credit transaction” under California’s Rosenthal Act if both parties take the position that the plaintiff or alleged debtor does not owe the debt. Unsurprisingly, the appellate court found the debt does qualify under the definitions to give rise to a claim, stating “the plain statutory language makes clear the Legislature did not choose to protect only those who owe money.” citing Fausto v. Credigy Services Corp. 598 F.Supp.2d 1049, 1053 (N.D. Cal. 2009).
California amended its Rosenthal Act in 2020 with the above language and expanding what qualifies as a debt collector. Companies need to constantly monitor these changes to update any policies and procedures, whether at the broadest level of coverage to the state level, and even sometimes the city level. And do not get caught off guard by these changes, either. While the law or regulation can take effect overnight, there is usually a long period of review and approval when it is out in the public forum. Be ready to make any letter, script, or timing changes necessary for compliance.
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.