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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.
3rd Circuit Issues Precedential Ruling on Standing; Vacates Certification of Class in FDCPA Suit
In a case that was defended by David Shaver at Surdyk, Dowd & Turner, the Court of Appeals for the Third Circuit yesterday ruled that a plaintiff must allege more than being confused by a collection letter to have standing to sue, but also ruled that the plaintiff in this particular case did have standing and that the letter that was sent did violate the Fair Debt Collection Practices Act. The Court did however, vacate the lower court’s grant of class certification and remanded the case back to the District Court to determine whether the other members of the class have standing under this new ruling. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER: The opinion in Huber v. Simon’s Agency, Inc. provides some much needed clarity to Third Circuit district courts grappling with the standing doctrine articulated by the Supreme Court in Transunion v. Ramirez. We see three key take-aways from Huber.
First, plaintiffs alleging informational injury — a harm not traditionally recognized at common law — must show they were denied information to which she was legally entitled. A defendant’s alleged failure to disclose such information “clearly and effectively” does not suffice and confuses the merits of an action with standing.
Second, to establish standing based on receipt of misleading and/or deceptive information, a plaintiff must show that he suffered a harm traditionally actionable at common law — i.e., some consequential action or inaction following receipt of the misleading and/or deceptive information. “[C]onfusion, without more, is not a concrete injury.”
Third, even though some unnamed class members may lack standing, the class representative’s standing is sufficient to satisfy Article III’s case or controversy requirement. That said, at the certification stage, a class representative must submit evidence demonstrating how many class members (or what proportion of them) have standing. If only a small percentage of class members have standing, the class action is subject to attack under Rule 23’s predominance requirement.
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Judge Grants MTD in FDCPA Case Over Imputed Knowledge of Representation
In a case that was defended by the team at Martin Golden Lyons Watts Morgan, a District Court judge in Missouri has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act case because the plaintiff could not provide enough evidence to support his claim that the defendant knew the plaintiff was represented by an attorney after the original creditor had been notified of the representation. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: At first glance this appears to be a straight forward case where the Plaintiff, with no actual knowledge, tries to impute the knowledge of the original creditor that the debtor has legal representation, to a debt collector further down the road. And as is usual in these cases, the allegations were merely conclusory with no factual support pled in the complaint. So, no cigar. But there was something I found more notable in the complaint: allegations of Negligence Per Se and Negligence. As a New York practitioner those claims rang a bell and I pulled the Lexis version of the decision to see who Plaintiff’s attorneys were. Surprisingly, given this case is venued in Missouri, Long Island attorney David Barshay, is listed as co-counsel. These are his favorite claims, not withstanding his lack of success with them. In any event, the Court dismissed those claims and provided a number of citations to decisions in other jurisdictions, which “refused to recognize negligence per se claims that are based on a violation of the FDCPA.
Judge Denies MTD, Motion to Strike Class Allegations in Case Over Debt Parking
A District Court judge in Illinois has denied a healthcare provider’s motion to dismiss a claim it violated the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA) and a collection agency’s motion to strike class allegations it violated the Fair Debt Collection Practices Act in a debt parking case on a medical debt. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW & CULBERTSON: It is hard to win a motion to dismiss under FRCP 12 standards and to strike a class allegation before you get to discovery. There are reasons to push these efforts. Even if unsuccessful, the defense has brought to the court’s attention defects in the case that will be raised later. In this case, the court initially granted a motion to dismiss the consumer fraud count against the hospital so a second shot on the amended pleading may have made sense. This time around, the court found sufficient facts were alleged.
Whenever you get a new ruling, the introduction often lets you know where the court is going. The District Court in Jackson v Jersy Community Hospital said in the first sentence that the plaintiff was “haunted” by her debt. Not a good sign. The judge went on to characterize the conduct of the collection agency as “debt parking,” said plaintiff’s credit took a “nosedive” and a “devastating hit,” and referred to the defendants as being engaged in a “nefarious scheme.” These seem like hyperbole, especially at the motion to dismiss stage when the court does not yet know the real facts. Fortunately, by the end of the opinion, the tone moderates and the judge basically says that the parties should conduct discovery.
It will be interesting to see how the case unfolds. It is somewhat unusual for a hospital and the agency to be sued together in a consumer fraud and FDCPA case. Plus, the class definition seems flawed. The judge even said plaintiff may need to amend it.
FTC Issues Proposed Rule Banning ‘Junk Fees’
The Federal Trade Commission yesterday announced the release of a proposed rule that it claims will save consumers more than $10 billion during the next decade by requiring businesses to include all mandatory fees when telling consumers a price and banning any hidden or bogus fees. More details here.
WHAT THIS MEANS, FROM JOHN REDDING OF ALSTON & BIRD: On October 11, the FTC took another step in the federal government’s assault on “junk fees” (whatever that may actually mean), issuing a proposed rule to, in its own words, “Ban Junk Fees.” While nobody likes paying fees, and clarity around what fees may be charged and when is important to avoid consumers being misled, it is the FTC’s headline that is misleading in this instance. The proposed rule does not ban fees, but instead requires more disclosures. Specifically, the rule requires clear and conspicuous disclosure of the total price a consumer will pay for a good or service and, with respect to fees or charges not included in the total price, the nature and purpose of any amount to be paid along with information about refundability.
The goal of the proposed rule – to avoid unexpected surprise fees – is laudable. And the breadth of industries impacted is significant, reaching well beyond financial institutions to include event ticketing, short term lodging (e.g., hotels, Airbnb), restaurants, and many others. But for those in financial services, including receivables management, this is a further assault on our ability to recover for costs incurred, recognizing any action by the FTC will revolve around whether the disclosures were clear and conspicuous, timely disclosed, and correctly described the good or service for which they are imposed. While there does not appear to be any private right of action for a violation, one still has to wonder if a claimed violation could support some kind of state UDAP claim by an enterprising plaintiff and accommodating court.
TransUnion to Pay $23M to Settle Enforcement Actions with CFPB
The Consumer Financial Protection Bureau and the Federal Trade Commission yesterday announced a settlement with TransUnion Rental Screening Solutions, a unit of TransUnion, that will see the company pay $15 million after it was accused violating the Fair Credit Reporting Act by failing to ensure the accuracy of tenant screening reports and withheld from renters the names of third parties that were providing the inaccurate information. In a separate matter, the CFPB fined TransUnion $8 million for failing to remove security freezes and locks on consumers’ credit reports in a timely manner. More details here.
WHAT THIS MEANS, FROM MONICA LITTMAN OF KAUFMAN DOLOWICH: The CFPB and FTC were both involved in obtaining the settlement of $23 million against TransUnion Rental Screening Solutions (“TURSS”). Under the Fair Credit Reporting Act (“FCRA”), when a consumer reporting agency (“CRA”) prepares a consumer report, it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates. The CPFB and FTC alleged that TURSS did not follow reasonable procedures to assure maximum possible accuracy of eviction proceeding records in its Tenant Screening Reports. The maximum possible accuracy standard is higher than the standard for a data furnisher (which many collection agencies fall under) where the requirement under the FCRA is to reasonably investigate a consumer’s dispute. The CFPB has pursued four prior enforcement actions against TransUnion since 2017. The TURSS case, which involved the joint efforts of two agencies, shows that regulators continue to scrutinize the actions of credit bureaus.
CFPB Issues Guidance on Fees Charged for Responding to Consumer Requests for Info
The Consumer Financial Protection Bureau yesterday released guidance reminding financial institutions that they are not allowed to charge consumers for “basic information” about their accounts. Some banks, for example, are charging consumers for information that is used to manage their finances or fix problems with their bank accounts. More details here.
WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: This advisory opinion, while only applying to large banks and credit unions, clearly indicates that the CFPB will continue its initiative to scrutinize back-end junk fees. To emphasize this position, on the very day this opinion was published, the CFPB published a special edition of its Supervisory Highlights, which focused on these efforts specifically and claimed that because of actions to date, approximately 140 million were being refunded to clients. So again, while this specific advisory opinion only applies to large banks and credit unions, all should note that the CFPB is making it clear that it intends to continue its efforts.
All companies subject to the CFPB should take this opportunity to immediately access fee structures, especially any fees charged to customer service. Companies should implement regular reviews of all customer charges and ensure that any fees are clearly communicated to consumers in advance with detailed explanations. No fees should be accessed for “basic information.” These reviews should already be in place for those in the collection space. The CFPB has already made it clear it was interested in collection company fees, as evidenced by its June 29, 2022, advisory opinion.
Report Calls for Overhaul to Minnesota Legal Collections System
The Minnesota State Bar has released a report calling for an overhaul of the legal collections process in the Land of 10,000 Lakes. Consumers are too often confused about how to pay back debts and collection lawsuits disproportinately affect consumers with low-incomes and minorities. More details here.
WHAT THIS MEANS, FROM CHRIS MORRIS OF BASSFORD REMELE: A recent report authored by the Minnesota State Bar Association’s “Access to Justice” Committee reminds us that the states have become increasingly active in developing rules or changes in the law designed to assist consumers. The report notes various unique features of the Minnesota court system that can potentially disadvantage consumers, provides statistics regarding the volume of collection lawsuits in the state and disparate impacts on various groups, and recommends four general solutions: (1) to develop special procedural rules to better manage consumer debt cases, such as requiring cases to be filed in small claims court; (2) create resources to enable pro se litigants to better help themselves without a lawyer, such as a plain language Answer form; (3) ensure that funds sufficient to cover a consumer’s basic needs are protected from garnishment; and (4) expand services for lower income consumers struggling with debt, such as by strengthening legal aid services. Some of these recommendations would require action of the state legislature; some would require rule changes or development of forms provided by the state judicial system, and some might be achieved through financial donations to legal aid service organizations. While a state bar association alone does not have authority to implement the changes this Committee proposes, it can certainly propose rule changes to the state supreme court or lobby the state legislature for court funding and statutory amendments. So it is worth staying tuned for potential rule changes that may be adopted over the next couple years in Minnesota, in response to this report and likely follow-up efforts to achieve some of the recommendations.
Using Credit Reporting to Get Consumers to Repay Debts is ‘Deliberate Misuse’ of System: CFPB GC
The General Counsel and Senior Advisor to the Director of the Consumer Financial Protection Bureau game a speech yesterday to consumer advocates in New Jersey where he discussed in great detail the Bureau’s efforts to regulate medical debt and the new proposal to eliminate medical debts from consumers’ credit reports, while also sharing some comments about the hearing on Tuesday before the Supreme Court to determine whether the Bureau’s funding structure is constitutional or not. The remarks spell out how the Bureau is “very concerned that the credit reporting of medical bills is being used inappropriately as a debt collection tool” which is a “deliberate misuse of the credit reporting system” by collectors. More details here.
WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS-SUTHERLAND: October has seen sustained CFPB attention on consumer reporting issues. Last week, the CFPB refocused public attention on the research it released this past January regarding complaints against the major consumer reporting agencies while announcing enforcement actions against TransUnion for alleged illegal rental background check and credit reporting practices. Just days before, Director Chopra’s senior advisor Seth Frotman addressed a consumer advocacy summit in New Jersey lauding the CFPB’s accomplishments on “crucially important issues that affect people’s lives” including “giving more than four million people a voice to address their problems through consumer complaints.” Mr. Frotman’s message reiterated Director Chopra’s challenge to the states to take advantage of their own substantial legislative powers to address their citizens’ challenges by passing laws regarding consumer reporting. To support his call to action, Mr. Frotman reported that two-thirds of medical debts result from a one-time or short-term medical expense caused by an acute medical need (e.g., major disease diagnosis, personal injury, or family member illnesses or injuries). Some of the now-familiar healthcare finance or revenue cycle ecosystem opportunities Mr. Frotman highlighted included challenges non-profit hospitals have in engaging with patients to discuss free or low cost care alternatives, the hidden impact of medical credit cards, challenges servicemembers and veterans face when their TRICARE or other military benefits are not accessible.
Sidestepping some of the confusion on Capitol Hill, Mr. Frotman’s message to consumer advocates was clear that states themselves “have substantial flexibility to pass laws involving consumer reporting to reflect emerging problems affecting their local economies and citizens.” 2023 has been a busy legislative year for the states on consumer reporting and medical debt collection issues and bills brought but not yet passed in the states are expected to be reconsidered in the upcoming 2024 legislative sessions. Industry should fully expect and be prepared for continued scrutiny of medical debt collection and consumer reporting practices as state and federal lawmakers alike struggle to find solutions to this very complex challenge: how to finance Americans’ much needed wellness and healthcare goods and services?
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.
