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.
Judge Grants MTD on Most Claims in FCRA, FDCPA Suit Over Dispute
Sometimes, the legal system appears to make things harder than they need to be. Case in point — a Magistrate Court judge in Colorado has granted a motion to dismiss a Fair Credit Reporting Act and Fair Debt Collection Practices Act suit against a collection operation on all counts but one on the grounds that the evidence from the defendant that would exonerate it on the remaining count is inadmissible at this point in the proceedings. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: Dealing with a pro se is always a joy and when the Court steps in to help said pro se it gets even better.
Credit Control and its CEO were the subject of pro se complaint, and quickly moved to dismiss since the main allegation was failure to validate and Credit had copies of the validation letters they sent. But the Court said not so fast. On the one hand United States Magistrate Judge Kathryn Starnella dismissed the claims against Credit’s CEO and all the other claims contained in the complaint finding they lack any merit based on the lack of facts plead in the Complaint.
However, as to the one claim, the failure to validate based on a written demand that was clearly presented and to which Defendants had rock solid evidence to disprove it Judge Starnella declined to consider that evidence as this was a motion to dismiss.
Many courts would simply convert the motion to one for summary judgement and if necessary allow limited focused discovery to present a coherent opposition, the goal being to move the case to completion when the facts can be quickly ascertained. Perhaps because this was a pro se it went this way. As a wise man recently wrote “Sometimes, the legal system appears to make things harder than they need to be.”
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New Medical Debt Screening Law Now in Effect in Minnesota
A new law that went into effect last week in Minnesota requires hospitals to check whether patients are eligible for charity care before sending an account to a third-party collection agency, while also placing new requirements when seeking to collect on a medical debt by garnishing wages or bank accounts of individuals. More details here.
WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: As of November 1, 2023, a new set of statutes became effective outlining additional requirements for the collection of hospital medical debt in Minnesota. The new statutory requirements can be found under Minn. Stat. sec. 144.587 (Requirements for Screening for Eligibility for Health Coverage or Assistance), 144.588 (Certification of Expert Review), and 144.589 (Billing of Uninsured Patients). The application of these provisions only pertain to hospitals, licensed as hospitals, under Minnesota’s statute. The genesis of these statutes came out of a long-standing agreement between the Minnesota Attorney General and Minnesota hospitals, dating back to 2005. The Minnesota Attorney General Agreement provides comprehensive requirements regarding the method and manner of how hospital debts can be collected from the date of service to post-judgment efforts. The Agreement has been renewed four times (most recently in 2022) since its inception. The statutory requirements enacted under Minn. Stat. sec. 144.587-89 were initially thought to be a codification of the Agreement’s edicts. But it has since become clear that the statutory requirements go much farther than those outlined in the Agreement. One of the most notable inclusions is the expert certification requirement – which requires the hospital to certify that every account has been reviewed and meets certain proscribed requirements under the provision before placing the account for collections or initiating a lawsuit or garnishment action. The new requirements are onerous. The good news is that the statute exempts third-party collectors from being held liable for the hospital’s representations in the affidavit. But even with that express cover, there are aspects of the law that do not necessary exclude third-party collectors from liability for violations of the statute. Agencies and law firms collecting on Minnesota hospital debts should confer with their outside defense counsel to ensure that their policies and procedures are in alignment with the new laws and review their creditor contracts to strengthen language around the respective obligations and liability as between the agency and creditor.
CFPB Proposes Rule to Regulate Tech Payment Companies
The Consumer Financial Protection Bureau yesterday issued a Notice of Proposed Rulemaking that would give the Bureau the power to regulate tech companies like Apple and Google which are playing a larger role in the payments ecosystem in the United States. More details here.
WHAT THIS MEANS, FROM JONATHAN FLOYD OF TROUTMAN PEPPER: This is the next logical step in a broader strategy by the CFPB to monitor the incursion of large technology firms into the consumer finance market. In September, the Bureau released an analysis regarding the considerable influence Apple and Google exert over popular contactless payments options due to their dominance of the U.S. mobile phone market. The CFPB wants to ensure that Apple, Google, and their competitors are adhering to consumer protection laws in offering financial products through these digital payment platforms.
Citi Fined $26M for Intentionally Denying Credit Applications from Armenian Americans
The Consumer Financial Protection Bureau on Wednesday announced an enforcement action against Citibank in which the institution will pay $26 million because it discriminated against Armenian Americans by denying credit card applications in an area of the country where many Armenians lived because it thought they were criminals who were likely to commit fraud. More details here.
WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: The Consumer Financial Protection Bureau’s (“CFPB” or “Bureau”) recent consent order against Citi is concerning and puzzling. It is clear from the findings and conclusions that this action was the result of a whistleblower within Citi. This does not excuse the alleged conduct but it certainly highlights how the CFPB investigates and determines whether discrimination has occurred.
In the Citi case, the CFPB knew what they were looking for and it was not difficult to mine the data to confirm what had occurred. During the course of an investigation, the CFPB seeks documents and information from the entity. Included in the information request are written reports, prepared by the entity being investigated, but produced in a manner that the CFPB dictates. In essence the entity serves up the data to the CFPB in order to easily make the case against the entity. While it appears from the evidence that there was direct and overt discrimination against Armenian Americans, the consent order suggests there was disparate treatment as well.
It is important to critically analyze CFPB consent orders to understand where the truth lies. In the Citi case, the alleged conduct took place over a six year period (2015-2021) with respect to consumers within Southern California, specifically the Glendale area. Citi was ordered to pay $1.4 million in consumer redress. The Consent Order does not indicate how many consumers were impacted and how many were Armenian American consumers. “Affected Consumers” are defined in the Consent Order as those consumers who applied for a Citi Retail Services Credit Card and were denied based upon national origin, not just Armenian origin. Affected Consumers appears not to be limited to the Glendale, California area. Given this broad definition, the amount of redress was astonishingly small compared to the civil money penalty of $24,500,000.00.
Clearly there were some very egregious facts, that if true, are unconscionable. The lesson learned here is that data analysis is at the core of how the CFPB is going to connect the dots on discrimination. As to discriminatory conduct directed to Armenian Americans, the evidence seems undisputable but with respect to discriminatory conduct directed to other national origins, the Consent Order is not so forthcoming. It is quite possible that the Bureau concluded that Citi engaged in wide spread discrimination based upon the evidence of discrimination as to one particular group. This is where the Bureau’s analyses and theories become fuzzy. Industry must ensure that their compliance management system (CMS) can detect deficiencies and remediate. A weak CMS allows the Bureau to tell the wrong story, which appears to be evident in Citi’s case.
Appeals Court Reverses Ruling on FCRA Damages
The Court of Appeals for the Eleventh Circuit yesterday overturned a lower court’s ruling that the Fair Credit Reporting Act and followed a number of other Appeals Courts in ruling that the Act does not require individuals demonstrate proof of actual damages in order to recover statutory damages. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: Santos v HRRG and Experian is an FCRA class action in which plaintiff and class only sought statutory damages, which is pretty typical in an FCRA class claim. The relevant damage provision provides a consumer can recover: (a) any actual damages sustained by the consumer as a result of the failure, or (b) damages of not less than $100 and not more than $1,000. Section 1681n(a)(1)(A).
The trial court denied class certification based on the predominance prong of R. 23. It held that in order to recover statutory damages, the class member needed some actual damages, which could not be determined on a class-wide bases. A R 23(f) appeal followed.
There are two main rulings from the 11th Circuit. It first addressed Article III standing, which this Court made more famous due to its Hunstein rulings. This time the Court held there was standing. Two of the judges were in the 11th Circuit majority en banc ruling in Hunstein that held there was no standing. Here, the Court said plaintiff alleged an intangible harm and such harms are concrete if they bear a close relationship to harms traditionally recognized as providing a basis for lawsuits in American courts. It then held that violating the FCRA by reporting inaccurate information about a consumer’s credit has a close relationship to the harm caused by the publication of defamatory information.
The second ruling was that a consumer alleging a willful violation of the Act does not need to prove actual damages to recover the $100 to $1000 damages. The Court referenced similar holding from the 7th, 8th, 9th and 10th Circuits.
The second ruling is not too controversial, but we’ll see if there is an en banc or certiorari petition on the Article III issue.
Videos Sent via Text Not a Prerecorded Message Under TCPA, Judge Rules
There are two types of text messages — SMS and MMS. SMS messages are traditional text messages in that they only contain text. MMS messages are similar to SMS, but they can contain multimedia, like video. A District Court judge in Arizona has granted a defendant’s motion to dismiss a Telephone Consumer Protection Act suit after the plaintiff received a video file from the defendant via text and filed suit, claiming the message contained an artificial or pre-recorded voice on the grounds that the plaintiff had to make the choice whether to play the video or not. More details here.
WHAT THIS MEANS, FROM DAVID SHAVER OF SURDYK DOWD & TURNER: Though Crawford v. National Rifle Association of America does not involve an ARM defendant, it does involve a legal issue relevant to the ARM industry. In Crawford, Judge Steven P. Logan of the District of Arizona was tasked with evaluating whether a single MMS text message sent by the NRA to Crawford, which contained a video file with an audible component, was a violation of the TCPA’s prohibition on using prerecorded voices to call cell phones. Because the video did not play automatically and Crawford made the conscious decision to play it, Judge Logan determined that it was “different from what the TCPA intended by ‘make a call’ using [a] ‘prerecorded voice.’” Judge Logan supported this conclusion by noting that “Congress’ concern for intrusive telemarketing” did not give him the authority to “define the TCPA so broadly as to find potential liability for every single video sent via text message.” Had the video played automatically, however, the conclusion here may very well have been different.
As consumer preferences shift and text messages become an even more prevalent channel of communication in the industry, agencies sending text messages must continuously evaluate what they are sending, how they are sending it, and where they are sending it. Agencies should consult with their legal and compliance teams on the risks and benefits of text messaging and the nuances of doing so across different states and regions. Like many things, what may be permissible in one state may not be permissible in another. As always, appropriate due diligence on the front end should help to avoid legal issues and expenses on the back end.
Judge Grants MTD in FDCPA Case Over Letter with ‘Minimum Payment’ and ‘Balance’
Anyone who has ever had a credit card and received a statement will know that there are two amounts that matter – the balance that is owed and the minimum payment that is due. If that is not confusing to anyone, why would a collection letter that featured the same figures be? A District Court judge in Pennsylvania agrees with me and has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act case. More details here.
WHAT THIS MEANS, FROM MONICA LITTMAN OF KAUFMAN DOLOWICH: If your letters seek to collect the minimum amount due on credit card debt that is not static, this opinion provides guidance for making sure your letter complies with the FDCPA. The judge correctly noted that it is permitted under the FDCPA for a collection letter to provide both a total account balance and a minimum payment due to provide detailed information to a consumer regarding the status of their debt. The judge also recognized that this is necessary and common in credit card collection letters. This is a very common-sense opinion which rejected the plaintiff’s contention that providing language regarding the account balance being subject to change somehow meant the consumer had to pay more than the “Minimum Payment Due.” The judge also noted that the placement of the language regarding the accrual of interest in the letter was important as it was separate from the “Minimum Payment Due.”
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.
