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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 MSJ for Defense, Sanctions Plaintiff in FDCPA Case
A Magistrate Court judge in Atlanta has recommended granting a defendant’s motion for summary judgment and granting the defendant’s motion for sanctions against the plaintiff in a Fair Debt Collection Practices Act case that you really have to read to believe. More details here.
WHAT THIS MEANS, FROM JACQUELYN DICICCO OF J. ROBBIN LAW: In Cairobe v. Zwicker & Associates, P.C., the District Court for the Northern District of Georgia, Atlanta Division, issued a report and recommendation granting summary judgment for defendant and recommending an award of sanctions against Plaintiff and her counsel Credit Repair Lawyers of America (“CRLA”) and Gary Hansz. 1:23-cv-486-CAP-JKL, 2023 U.S. Dist. LEXIS 178348 (N.D. Ga. Oct. 2, 2023). Plaintiff alleged, without any support or diligence, that defendant violated the FDCPA when it purportedly contacted plaintiff directly, despite her being represented by an attorney, by failing to validate the debt, and for attempting to collect the debt when she did not incur the debt. Id. at *2. Defendant moved for summary judgment arguing that the debt was outside the scope of the FDCPA because it was accrued in connection with a business account, that defendant sent plaintiff a written debt validation, and that plaintiff’s counsel informed defendant that the firm did not represent her in connection with the debt. Id. at *2-3. After briefing on summary judgment, defendant provided plaintiff with telephone recordings in which plaintiff admitted that the debt was hers and requested that plaintiff withdraw its response to summary judgment. Id. at *4. On the record before the Court, plaintiff’s counsel conceded that the account/debt belonged to the plaintiff. Id. at *7. Based on that representation, the Court granted summary judgment in favor of defendant, holding that plaintiff admitted to opening the account and that there were no issues of fact. Id. at *8. Regarding the request for sanctions, Plaintiff was represented by Gary Hansz’ of CRLA. When plaintiff failed to appear, defendant moved for sanctions seeking expenses and fees incurred by plaintiff’s failure to appear for the deposition. Id. at *13-14. The Court noted that, inter alia, despite having proper notice of the deposition for weeks, CRLA failed to ensure that an attorney would be available to defend plaintiff’s deposition, and “any fault lies with CRLA and its attempts to prosecute Plaintiff’s case in this District without the assistance of an attorney licensed to practice here.” Id. at *20-22. The Court, therefore, held that plaintiff’s failure to appear at the deposition were unjustified and, as a result, the Court granted defendant’s motion for sanctions. Id. at *24. This case is an example of a frivolous cases brought by CRLA and Mr. Hansz. When confronted with such a case, it is essential to not only demonstrate the frivolity of the case, but to create a record to be used for potential sanctions going forward.
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NYC Releases Amended Debt Collection Regs
In a development that was first reported by ACA International, the New York City Department of Consumer and Worker Protection has announced proposed amendments to its debt collection regulations and will be holding a hearing next month to discuss the changes. More details here.
WHAT THIS MEANS, FROM DON MAURICE OF MAURICE WUTSCHER: New York City’s Department of Consumer and Worker Protection’s latest proposed amendments to its debt collection regulations are more like a new set of proposed amendments when compared to what was proposed in 2022. Frankly, I was surprised to see substantial and material additions covering medical debt and the enforcement of foreign judgments. Neither were part of the original proposal and, if adopted, would cause significant harm to consumers and the financial services industry. It also contains onerous record keeping provisions and unique restrictions on any form of debt collection communication. I do see opportunities to lessen the burden, but they will require significant operational controls.
Judge Grants MSJ for Defense in FDCPA Case Over Docs Submitted as Part of Underlying Collection Suit
A District Court judge in Maryland has granted a defendant’s motion for summary judgment after it was sued for violating the Fair Debt Collection Practices Act because the plaintiff alleged the defendant did not supply the proper paperwork when it filed a collection lawsuit against the plaintiff. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: In this decision, the Maryland federal District Court rejects the consumer plaintiff’s restrictive reading of Maryland’s procedure rule for debt buyers’ collection litigation. Specifically, PRA’s collection complaint referenced a bill of sale for a portfolio that included plaintiff’s account. PRA attached the bill of sale as well as a computer printout from the electronic sale file provided by the creditor at closing that identified plaintiff’s account as exhibits to the complaint. The plaintiff in this case claimed that PRA did not provide sufficient proof of ownership of her account because PRA did not provide a single document evidencing ownership. She argued that the bill of sale and the printout from the sale file do not reference each other in detail and could not be considered a single document. But the court found the rule about proof ownership was not that restrictive. The court said that the reference in the bill of sale to the sale file that mentioned “computer files” was enough, because the file produced at closing did include specifics about the plaintiff’s account. The court also identified that the rule was designed to ensure that debt buyers can demonstrate ownership of accounts when they sue to collect, but that the rule was flexible about the nature of the evidence – and found that the combination of the bill of sale and the separate sale file was enough to demonstrate that PRA owned the debt and satisfied the rule. This is a good win for PRA because it confirms a rational reading of the rule and rejects a reading of the rule that would obviate a very common means of documenting a debt sale.
Judge Grants MTD in State Court Class-Action Over Lack of License
In a case that was defended by Rick Perr and Monica Littman of Kaufman Dolowich, a state court judge in New Jersey has granted a defendant’s motion to dismiss a class-action lawsuit after it was sued for violating the Fair Debt Collection Practices Act and New Jersey state law by attempting to collect on a debt without having the proper license to do so. More details here.
WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: The plaintiff attempted to assert a creative argument here. Most jurisdictions reject the notion that a violation of a state licensing law is a per se violation of the FDCPA or state consumer statute. In the face of that jurisprudence, the plaintiff attempted to craft a claim based on the allegation that the defendant’s attempt to collect without a license effectively “voided” the debts. The Court disagreed and dismissed the claims, concluding that the plaintiff’s debt was not voided as a result of the failure to license and that she had not articulated any “ascertainable loss” as she had never paid any money or established any other injury. This state court dismissal is a well-earned win as the claim had originally been asserted and dismissed for lack of jurisdiction in federal court. Kudos to the defendant and defense team for continuing to fight this case and bringing it to a decisive (and successful) conclusion.
Judge Grants MSJ For Defendant in FDCPA Case Over Use of Local Phone Numbers
A District Court judge in Illinois has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case after it was sued for using a local phone number to try and get in touch with the plaintiff even though the defendant did not have an office in the area code it was using to make the calls. More details here.
WHAT THIS MEANS, FROM LORAINE LYONS OF MARTIN GOLDEN LYONS WATTS MORGAN: Who is Calling vs Where the Call is From. The defendant called the plaintiff using a local area code. The court first addressed Article III standing and found no harm due to the defendant’s use of local area codes. Importantly, the telephone numbers connected the plaintiff with the defendant and the defendant identified itself when the plaintiff called the numbers. The plaintiff never asked the defendant to stop calling. The court held simply calling back the debt collector was not a concrete, cognizable harm. Further, the Plaintiff did not spend time and money resolving fraudulent charges, instead, the plaintiff admitted she owed the debt, and the defendant was within its rights to call the plaintiff. The court then found in favor of the defendant’s motion for summary judgment on the 1692e and 1692d(6) claims.
This is a nice win, and the decision follows numerous courts holding that the use of local area codes rather than out-of-state area codes particular to a debt collector’s office location does not violate the FDCPA. The takeaway is when using local area codes to display true and accurate numbers that belong to the debt collector so that when the consumer calls back, she will reach the debt collector, who will then provide further information about the debtor collector’s identity during the telephone conversation.
Appeals Court Upholds Reduced Fee Award for Plaintiff’s Attorneys in FDCPA Case
The Court of Appeals for the Eighth Circuit has upheld a lower court’s ruling in determining how much to award the attorneys who represented a plaintiff in a Fair Debt Collection Practices Act case, agreeing that the amount originally sought by the attorneys was excessive and saying their argument in their appeal was absurd. More details here.
WHAT THIS MEANS, FROM CHAD ECHOLS OF FROST ECHOLS: The use of a Rule 68 offer of judgment can be tricky. It was a very good decision to make the offer in this case, as I cannot imagine how much the consumer attorneys would have requested had the defendants let the litigation drag on through actual discovery. In scenarios where liability is straight forward and consumer counsel is not being reasonable, it can be important to tender an early Rule 68 offer. There two aspects of making a Rule 68 offer that I often believe are not addressed clearly with agencies. First, go ahead and offer enough money to the plaintiff that you are confident you can come in under that number at trial. While you want the case resolved early and for a reasonable amount, it is important to remember the offer’s effectiveness is triggered by having the judge or jury award less than the offer that was tendered early in the litigation. Second, make sure the agency understands the actual offer. When offering some number to the plaintiff plus reasonable attorney’s fees and costs, the actual total amount of the offer is likely quite a bit higher than what the agency may understand. For example, in a case where the consumer attorney wants $7500 and you immediately tender a Rule 68 offer for $2500 plus fees/costs, then you are likely offering to pay at, or even above, the $7500 number provided by the consumer attorney. Finally, if any substantial discovery has been conducted, then the consumer attorney will have some basis for a pretty high fee award. Rule 68 offers are a good tool, but they need to be tendered with clarity as to what is actually happening and the goal of using the tool.
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.