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.
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.
California AG Goes on Attack Against Medical Debt
The Attorney General of California yesterday sent a letter to a number of federal agencies, including the Consumer Financial Protection Bureau and the Department of Health & Human Services, calling for federal regulations on medical payment products, such as medical credit cards, saying the products “can leave users with crushing debt and long-term financial hardship, often in situations where they might have been eligible for payment reductions or charity care.” The AG is calling on the CFPB to use the Fair Debt Collection Practices Act, among other options, to hold medical credit card issuers accountable for making sure a consumer is able to repay and not eligible for other financial assistance programs. More details here.
WHAT THIS MEANS, FROM ARI DERMAN OF CLARK HILL: On July 11, the Consumer Financial Protection Bureau (“CFPB”) held a hearing on issues surrounding medical debt and specifically, payment products. Unsurprisingly, the hearing was highly critical of the current state of affairs in the space, yet representatives from the healthcare and financial services sectors were not on the invite list – and therefore couldn’t rebut any of the volatile claims made. However, California AG Rob Bonta, the author of the September 11th letter at issue, was a featured speaker at the event and fervently voiced his support for the Bureau’s investigation into these matters (CFPB Hearing on Medical Billing and Collections ). Therefore, it is not surprising to see him carry the torch here in responding to the CFPB’s subsequent Request for Information on these issues. In recent years, we have witnessed an aggressive partnership take place between the Bureau’s enforcement arm and many state regulatory agencies, which is something the industry must always be mindful of when analyzing CFPB policy statements and rulemaking (such as the SBREFA outline related to the FCRA the Bureau released late last week).
THE COMPLIANCE DIGEST IS SPONSORED BY:
Report Spotlights States’ Efforts to Combat Medical Debt Problem
Nobody will argue with the fact that the amount of medical debt in the United States has surged to new levels. In what could become a difficult situation for companies in the accounts receivable management industry, a growing number of state legislators are actively seeking to address the problem and create their own versions of remedies. In anticipation of a lack of consensus at the federal level, numerous states are pushing forward their medical debt laws to protect consumers from the financial burdens and the subsequent consequences that can impact their credit scores and overall well-being. More details here.
WHAT THIS MEANS, FROM KHARI FERRELL OF FROST ECHOLS: This article highlights the ever-changing nature of regulatory activity surrounding medical debt. In doing so, it highlights several states that have taken significant steps to regulate, and in most cases limit, the scope of collection activity on medical debts.
Out of all the laws and/or proposed legislation highlighted in the article, North Carolina’s proposed legislation is arguably the most expansive. This proposed legislation would place a cap on interest on medical debt collections, prevent collectors from foreclosing on properties or garnishing wages when collecting on medical debt, and regulate the manner in which medical debts are reported to credit reporting agencies (“CRAs”).
For agencies, the takeaway is the importance of keeping up with current legislation related to the collection and reporting of medical debt in each state in which the agency conducts business. With states taking different approaches to shield consumers from mounting medical debt in the U.S., an agency’s diligence in remaining up to date on each state’s relevant laws is the only way to ensure continued compliance as the regulatory landscape of medical debt continues to shift.
Judge Rules in Favor of Plaintiffs in Suit Against CFPB
A District Court judge in Texas has granted the plaintiffs’ motion for summary judgment in a lawsuit filed against the Consumer Financial Protection Bureau that accused the Bureau of overstepping its authority when it warned companies about engaging in activities that could be found to be discriminatory in an update to its supervisory manuals. More details here.
WHAT THIS MEANS, FROM JONATHAN FLOYD OF TROUTMAN PEPPER: It undoubtedly increases regulatory uncertainty and compliance costs in the financial services industry when the CFPB attempts to expand its powers in novel ways. Luckily, Texas continues to be one of the CFPB’s biggest adversaries and ruled that the Bureau does not have open-ended power to examine alleged discriminatory conduct. This instance of overreach was particularly egregious given that Congress rarely authorizes disparate-impact liability, and when it does, it does so only in narrow circumstances to avoid constitutional questions.
Judge Dismisses TCPA Claim Over Collection Calls Allegedly Made Using ATDS
A District Court judge in Nevada has preemptively dismissed a plaintiff’s Telephone Consumer Protection Act claim against a defendant that was attempting to contact the plaintiff to collect on an unpaid debt, ruling essentially that the likelihood of randomly or sequentially receiving calls to collect on a specific debt os “implausible.” More details here.
WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: This is a very common sense ruling by a Federal Judge (on her own accord), in dealing with a plaintiff representing herself (in pro per) in Federal Court. Plaintiff McDonald is getting a notorious reputation and has filed countless (frivolous and non-frivolous) claims on her own behalf.
The Judge here, on her own, without any motion filed by the Defense, “Screened” the complaint to determine whether the complaint failed to state a claim on which relief may be granted or sought monetary relief from a defendant who is immune from such relief. 28 U.S.C. § 1915(e)(2). Judges don’t “screen” complaints themselves on a regular basis. The court then went on to dismiss most of the claims, either with or without prejudice. The Judge allowed one or two claims to survive. She also gave the plaintiff the right to amend certain claims to try to state a claim upon which federal relief could be granted. However, the plaintiff will not likely be able to amend the failed claims.
As to the TCPA claim, the Judge noted that where the number called at issue was a number specifically provided by the consumer, such allegations did not meet the TCPA’s “random or sequential number generator” requirement to qualify as a valid claim under the TCPA and she dismissed the claim.
The Bottom Line — It would be wise of most Judges to engage in the federal screening process, as this Judge did here, to weed out nonsensical claims by plaintiffs filing claims on their own behalf that do not pass pleading requirements in federal court. The Screening process also upholds the Court’s own duty to identify cognizable claims and dismiss those claims that are frivolous, malicious, fail to state a claim on which relief may be granted or seek monetary relief from a defendant who is immune from such relief under the law. 28 U.S.C. § 1915(e)(2).
Courts generally do not take the time to do what our Judge in Nevada did here as they will claim they don’t have the resources to do this in every case. It would be a great use of federal resources if Judges follow our Judge here, especially in pro per cases, to stop the deluge of nonsensical claims that have no place in federal Court and which cause thousands of dollars in defense expenses to fight them in federal court.
Judge Grants MSJ For Defendant in Case Over Failure to Remove Dispute Notification
A District Court judge in Michigan has gone to great lengths to determine that a plaintiff who filed a Fair Debt Collection Practices Act lawsuit does not have standing to sue after the defendant failed to remove a dispute flag from the plaintiff’s credit report, ruling that the anxiety, humiliation, embarrassment, and stressed the plaintiff allegedly suffered was more due to his “general financial woes” than anything related to what the defendant did or did not do. More details here.
WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: This is another strong case illustrating that a “ticky-tacky” procedural violation does not necessarily amount to a claim (at least in federal court). The court concluded that the plaintiff lacked standing because he failed to articulate any “concrete injury” and because he could not establish that the alleged harm was actually traceable to the defendant’s conduct. There is some great language in this order. The court rejects the plaintiff’s “bare assertions” of emotional distress, stating that the plaintiff must do more. The plaintiff must establish “severe” emotional distress – not just rely on garden variety emotional distress (i.e., anxiety, embarrassment, stress) or some other traditional cognizable harm (i.e., defamation). The court concluded the plaintiff proved neither here. But even more helpful, the court also stated that the plaintiff must also establish that the alleged harm is actually traceable to the defendant’s conduct. There was evidence in the record that the anxiety and stress was likely related to his financial woes – not the failure to remove the dispute flag. Of course, virtually every plaintiff who is in debt experiences stress and anxiety – but those harms are not connected to the defendant’s conduct and cannot form the basis of a claim. Ultimately, the court dismissed the claims for lack of subject matter jurisdiction. While the plaintiff ostensibly could bring this claim in state court, the language in this order would make it pretty easy for a state court to dispose of it, as well. The court takes pains to point out the plaintiff’s failures in establishing any harm and uses striking examples from the record to do it. This is a great case to keep in your back pocket to defend against the myriad of technical claims we are seeing under the FCRA. It places the burden on the plaintiff to do more than just allege a procedural violation and claim emotional distress – it requires the plaintiff to prove it.
Appeals Court Re-Affirms Ruling for Defendant Accused of Collecting Without License
Asked for a do-over, a panel of judges from the Court of Appeals for the Tenth Circuit decided they were right the first time and affirmed a District Court ruling in favor of a creditor 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 LORAINE LYONS OF MARTIN GOLDEN LYONS WATTS MORGAN: Plaintiff alleged that the Defendant was not licensed as a collection agency when it attempted to collect a debt, and this violated the FDCPA and Unfair Claims Settlement Practices Act. However, before Plaintiff brought this case, Defendant filed a debt collection lawsuit in Utah state court and summary judgment was awarded in Defendant’s favor. At issue before the Circuit Court was whether claim preclusion applies to claims arising at the time the initial complaint was filed. (The Court avoided using the term “res judicata” and instead applied the type of preclusion, claim preclusion.) The Circuit Court interpreted Utah law to preclude claims that arose at the time of filing of the initial complaint. Because Plaintiff’s claims arose at the time the initial complaint was filed, claim preclusion applied.
It is important to note that the Court did not address the licensing issue, and the decision “is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel.”
Judge Grants MTD in FDCPA Case, But Notes Allegations ‘Reflect Poorly’ on Defendant
A District Court judge in Tennessee has ruled a plaintiff lacks standing to pursue a Fair Debt Collection Practices Act case against a defendant that was accused of misrepresenting that a payment plan would be offered and whose representative was rude and aggressive, allegedly going as far as to say that the plaintiff would never be able to repay the debt and did not deserve respect because she owed the debt in the first place. More details here.
WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: There are a couple of takeaways from this case and this decision. Aside from the fact that limited emotional distress is not the basis for Article III standing, which has become a commonplace ruling throughout the federal courts, this case may not have ever been filed had the plaintiff perceived the defendant’s representative to be more sympathetic and customer service oriented instead of being disrespectful (again as perceived by the consumer). Lawsuits tend to originate for two main reasons – either the consumer already has a lawyer and intends to file suit regardless, or the consumer is so upset with the outcome or behavior of the agency that she feels compelled to seek relief from a court. The first area is out of an agency’s control other than to employ litigious consumer scrubs to avoid contacting such consumers. The second area is mostly within the control of the agency. Treating the consumer with respect regardless of the circumstances or even how the consumer treats the agency representative will go a long way in avoiding spite litigation.
Another takeaway from the opinion is the court’s observation that an agency is not obligated to accept a payment plan. While a payment plan may make resolution of an obligation easier and keep the statute of limitations alive, an agency is not required to offer a payment plan or even accept a partial payment. These are business decisions for the creditor and the agency.
Judge Remands Hunstein Copycat Back to State Court
A District Court judge in New York has not been convinced by a defendant that a Fair Debt Collection Practices Act case filed against it should remain in federal court and has remanded the case back to state court where it was originally filed, disagreeing with the defendant’s argument that the final ruling in Hunstein actually confers standing for the plaintiff. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW & CULBERTSON: Pearl v DCM Services is a bit of Déjà vu: Hunstein case filed in state court, defendant removes it and argues there is an injury, court holds no Article III standing, and case remanded. The case was filed in 2021 so the defendant – like all of us – could not know how this Article III issue would play out. Even though the defendant’s remand was not successful, it received some helpful statements that can be used in the state court defense of the Hunstein claim, including: “disclosure of private information to a mailing vendor and other third-party entities by using skip trace services, bankruptcy, probate, and scrubbing services does not involve publication and therefore does not have a sufficiently close relationship to public disclosure of private facts to confer Article III standing.” (Internal citation and quotes omitted).
We see fewer Hunstein claims and now they more often are an add-on count filed in state court actions. We likewise are seeing even fewer federal court discussions on the issue. Both of these developments seem to be good signs that the defense strategies have worked.
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.
