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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.
Supreme Court Agrees to Hear Arguments in Second Chevron Deference Case. Here’s What it Means For You
I’m not a lawyer, but I do love saying chevron deference, even if I barely know what it means. I do know that the Supreme Court on Friday agreed to hear arguments in a second case this term that will tackle the topic of chevron deference, which is making me learn more about it, because it has application to the accounts receivable management industry. More details here.
WHAT THIS MEANS, FROM JONATHAN FLOYD OF TROUTMAN PEPPER: Applying “Chevron deference,” a court defers to reasonable agency interpretations of ambiguous statutes. This low standard tips the judicial scales in favor of federal agencies, at least so far as statutory interpretation is concerned. Repudiating Chevron would encourage more challenges to agency interpretations of statutes even in situations where courts have previously upheld agency positions. The Supreme Court’s conservative majority has already began limiting agency power such as in West Virginia et al. v. Environmental Protection Agency et al., where the Court invoked the “major questions doctrine” to strike down an EPA regulation. If the Supreme Court’s forthcoming decisions limit Chevron in any way, it could have significant implications for future interpretations of regulations issued by all federal agencies, including the CFPB, FTC, and federal banking agencies.
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Judge Certifies TCPA Suit Over Calls to Wrong Numbers
A District Court judge in Washington has certified two classes in a Telephone Consumer Protection Act case against a healthcare provider that was accused of violating the statute by making calls using an artificial or prerecorded voice to individuals that had not provided their consent to receive calls and by making calls to individuals whose accounts had been flagged as those not to be called. More details here.
WHAT THIS MEANS, FROM TONI GARRETT OF MESSER STRICKLER BURNETTE: Tides are changing! This case is one in a line of recent cases that have reversed course on the courts previous thought process around the certification of TCPA wrong number cases. Only a few years ago, there was a trend of courts holding that wrong number class actions are fatally plagued by individualized inquiries of consent where a defendant intends to call actual consenting customers. As of late, more courts are siding with the court in this case and finding that issues of consent do not defeat the class because class members, by definition, are non-customers who did not consent to being robocalled.
Judge Grants Plaintiff’s Motion to Remand FDCPA Case Back to State Court
A District Court judge in Wisconsin has denied a defendant’s attempt to keep a Fair Debt Collection Practices Act case in federal court, and granted the plaintiff’s motion to remand the case back to state court on the grounds that the plaintiff did not suffer a concrete injury and thus has no standing to sue in federal court. The judge didn’t buy the defendant’s argument that the plaintiff made a “plausible inference” to suffering an actual injury by claiming a collection letter allegedly miscalculated the amount of interest that was owed on an unpaid debt. More details here.
WHAT THIS MEANS, FROM PATRICK NEWMAN OF BASSFORD REMELE: The defense bar has followed a “tried and true” playbook in these cases for a number of years. And for good reason — it worked!
But recent decisions have changed the game. Thus, a new playbook is needed in certain situations. This may well be one of them. Running the old plays presents risks, folks!
Judge Grants Defense’s MSJ in FDCPA Case Over DOFD
A District Court judge in Kentucky has granted a defendant’s motion for summary judgment and denied a plaintiff’s motion for the same in a Fair Debt Collection Practices Act case that centers around the Date of First Delinquency and its materiality in inducing the plaintiff to pay off the debt in question. More details here.
WHAT THIS MEANS, FROM DAVID SHAVER OF SURDYK DOWD & TURNER: Judge Rebecca Grady Jennings’ Memorandum Opinion and Order in Long v. Nationwide Recovery Service, Inc., et al. should be helpful to agencies furnishing credit information.
First, Judge Jennings makes clear that calculating a date of first delinquency (“DOFD”) is a legal question that is governed by the Fair Credit Reporting Act. Though the issue of whether a furnisher acted reasonably in selecting a DOFD presents a question of fact, a consumer challenging a furnisher’s reported DOFD must come forward with evidence to demonstrate that the furnisher’s selection was unreasonable. In this case, Long failed to carry his burden. Second, and again based on the FCRA, Judge Jennings makes clear that the time period for debts to age-off a credit report is 7 years plus 180 days. This undermined Long’s argument that he would not have paid the account at issue if the correct DOFD had been reported. According to Long, the account at issue would have aged-off his credit report if the correct DOFD had been reported. Judge Jennings easily dispensed with this argument, concluding that even if Long’s proffered DOFD had been used, the account at issue would have still appeared on his credit report at the time he decided to pay it. Therefore, even if the DOFD that was reported was incorrect, it did not have a material impact on Long’s decision-making.
Agencies furnishing credit information should continue to take care to ensure that the information they report is as accurate as possible, including DOFDs. Find out (before furnishing) if the creditor previously reported the account. If it did, what DOFD did it report? If the creditor did not report the account, when did the creditor deem the account delinquent? If agencies are acting reasonably and have processes in place to help ensure the accuracy of the information they report, including DOFDs, favorable summary judgment outcomes, like the one in this case, should be attainable.
CFPB Cites ‘Pay-to-Pay’ Fees as Problem in New Supervisory Highlights on Junk Fees
The Consumer Financial Protection Bureau (CFPB) recently issued a new edition of its Supervisory Highlights that included a section on debt collectors’ collection of pay-to-pay fees. The CFPB has affirmed that federal law often prohibits debt collectors from charging “pay-to-pay” fees, which are commonly described by debt collectors as “convenience fees.” More details here.
WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: On October 11, 2023, the Consumer Financial Protection Bureau (“CFPB”) published a special edition of its Supervisory Highlights report (the “Report”). In the Report, the CFPB highlighted certain issues which were considered most significant by examiners during their supervisory activities, most of which are issues that appeared in prior editions of the CFPB’s Supervisory Highlights. Notably, one of those issues – which the CFPB references as one “of the most salient supervision program developments that implicate[s] junk fees”– includes the June 29, 2022 advisory opinion affirming the prohibition regarding debts collectors collecting “pay-to-pay” or “convenience fees” unless they are expressly authorized by agreement or permitted by law. While the CFPB does not provide any new guidance regarding this well-known prohibition, the CFPB’s inclusion of this issue reiterates the CFPB’s continued position with regard to fees. Therefore, if anything, this serves as a reminder for debt collectors to review their payment processing agreements to ensure compliance with the CFPB’s interpretation of the prohibition on these types of fees.
Judge Denies Summary Judgment Motions from Both Sides in FCRA, FDCPA Case Over ID Theft Debt
A District Court judge in Wisconsin has decided to let a jury decide whether a defendant satisfied its obligation to investigate an identity theft claim by sending a letter to the plaintiff asking for proof of residence — which the plaintiff claims never to have received — or whether it needed to do more when the plaintiff disputed the debt before filing a lawsuit alleging violations of the Fair Credit Reporting Act and the Fair Debt Collection Practices Act. More details here.
WHAT THIS MEANS, FROM HEATH MORGAN OF MARTIN GOLDEN LYONS WATTS MORGAN: One highly scrutinized issue in the collection industry over the past few years his how collection agencies, collection law firms, and debt buyers respond to fraud and identity theft disputes. Notably, the CFPB has brought several enforcement actions against debt collectors asserting that there are additional and affirmative steps in how the handle, process, and follow up to consumers who raise fraud and ID theft disputes that they are not currently doing. To date, the industry has not seen too many FDCPA cases following these consent decrees, but we are starting to.
This case is an anticipated consequence of the CFPB consent decrees where consumers, who do not feel like their fraud or ID theft disputes were properly responded to or handled, are bring FDCPA actions against debt collectors under similar theories. And we are seeing that the Courts are justifiably responding that it will take more than dispositive motions and case law citations to resolve these issues. And until more case law is established, it will often come down to an issue of fact whether a debt collector responds lawfully under the FDCPA to a fraud or ID theft dispute.
To avoid a jury trial on the facts over whether a fraud or ID theft response was reasonable, debt collectors should follow the guidelines set forth in the CFPB consent decrees against FCO Holdings, PRA Group, and Phoenix Financial Services to understand some of the expectations. This especially pertains to specific markets of debt collection that have a higher rate of fraud and ID theft disputes, like the landlord tenant and property management industry.
This case serves as a good reminder that debt collectors should have strong and updated policies and procedures in place when responding and handling fraud and identity theft disputes, to 1) help resolve consumer disputes, but also 2) to help document their processes to quickly dispose of litigation or regulatory scrutiny.
Judge Recommends Dismissal of FDCPA Case
A Magistrate Judge in Ohio has gone to great lengths to recommend that a Fair Debt Collection Practices Act lawsuit filed against a creditor and the law firm it used to collect on an unpaid debt be dismissed on the grounds that the plaintiff’s complaint fails to state a claim against any of the defendants “no matter how liberally” the claims are considered. More details here.
WHAT THIS MEANS, FROM MIKE FROST OF FROST ECHOLS: If I had a nickel for every time I have heard “we could be sued for that” I would likely be living on an island somewhere. This case is a good example of the fact that agencies can be sued for just about anything. This case hinged on the fact that the consumer disputed the debt and the creditor selected to go “legal” on the account. A judgment was rendered against the consumer in the underlying legal collection action. Subsequently, a lawsuit was filed by the consumer (Plaintiff, in the present case) against the creditor (Defendant, in the present case) for violations of the FDCPA and two criminal statutes. The Court found that the FDCPA does not apply to creditors and that there is no private right of action for a consumer to try and enforce a criminal statute against another person or entity. The FDCPA action is often confused by pro se plaintiffs believing it applies to creditors, which is inaccurate but something we have seen before. However, it is a rare occasion that a consumer attempts to prosecute a criminal action in a civil complaint. The Judge granted the Motion to Dismiss on the grounds that the plaintiff’s complaint fails to state a claim “no matter how liberally” the claims are construed.
Bills Introduced in House, Senate to Change CFPB’s Funding Structure
Not content to rely and wait for the Supreme Court to issue its ruling on whether the funding structure of the Consumer Financial Protection Bureau is constitutional or not, companion bills were introduced in the House of Representatives and Senate yesterday that aim to put the Bureau under the Congressional appropriations process. More details here.
WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY & SHUSTER: Republicans don’t want the CFPB to spend money like this year’s $3.47 billion budget without answering to them. During that same time period, the CFPB claims $19 billion as recoveries for consumers. As a former regulator, I frequently see enforcement agencies claiming recoveries that although a court ordered, consumers never see because the company goes out of business or bankrupt. Seems kind of unfair or deceptive to me.
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.
