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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.
FCC Taking More Steps to Block Illegal Text Messages
The Federal Communications Commission will discuss and vote on an order at its December meeting that would give wireless carriers the power to block all text messages from a particular number when notified by the Commission of illegal texts from that number and reinforce that the Do Not Call registry extends to text messages among other proposals. More details here.
WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS-SUTHERLAND: The Federal Communications Commission (“FCC”) is meeting on December 13, to discuss proposed rulemaking to rein in robotexting. Taking aim at lead generators who provide consumers’ contact information to a wide range of potential marketing clients when consumers attempt to avail themselves of comparative shopping opportunities, the FCC proposes to require lead generators to either offer specific and individual one-to-one consent checkboxes or to have lead generators offer a clickthrough opportunity where consumers can review specific sellers’ disclosures and consent on individual sellers’ websites. Any consents obtained must meet two standards says the FCC. First, consents must be clear and conspicuous – meaning they’d make sense to a reasonable person. Second, consents must be logically and topically related to the website where they are solicited. The FCC offers some practical examples and advises the public that “when in doubt, …err on the side of limiting the content to what consumers would expect.”
The FCC noted it is making an important distinction and is honoring its ACA declaratory ruling – but makes it clear that in so doing – the ACA declaratory ruling says only this: “the provision of a cell number to a creditor … reasonably evidences prior express consent by the cell phone subscribed to be contacted at that number regarding the debt….” when the number sourced by the consumer to the creditor happened “during the transaction that resulted in the debt owed.” In the debt collection industry it is not uncommon for collection agencies to potentially update demographics on consumer accounts when newer information is obtained. It will be important, should the FCC proceed with this rulemaking, for collection agencies to be sure they can trace numbers to specific account instances in which they are calling and texting – and not sharing numbers across multiple accounts. Another concern for the credit and collections industry is a topic under the microscope by a number of consumer groups and federal regulators: medical credit cards. It is not uncommon for healthcare providers to contract with medical credit card issuers and then to ask their collections agencies to offer these medical credit cards to consumers who may need an extended period of time to repay a medical bill. Again, should this rulemaking proceed – there is a question about whether or not offering a medical credit card or any other product or service in connection with collection calls would fall outside of the proposed anti-robotexting regulations and would require a separate and distinct consumer consent.
For more information tune in on December 13, at 10:30AM ET.
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Judge Partially Grants MTD in TCPA Case Over Calls to Wrong Number
A District Court judge in Arizona has partially granted a defendant’s motion to dismiss a Telephone Consumer Protection Act lawsuit in which it was accused of placing 10 calls to the plaintiff’s cell phone in an attempt to reach someone other than the plaintiff. More details here.
WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER BURNETTE: Sometimes, striking out early at claims such as those at issue here is an effective way to narrow the scope of the issues. Although defendants should always take care with Rule 12 motions because of their propensity to invite copycat claims, calculated challenges can yield early fruit. Here, the defendant was able to knock out any effort to pursue treble damages by taking aim at the plaintiff’s “willfulness” claims which, apart from reducing the plaintiff’s recovery, may have the secondary effect of curtailing discovery such that the defendant has a strong argument against requests designed to explore areas of inquiry normally designed to address punitive damages. Even partial successes can have long-standing impacts on a case’s trajectory!
Judge Grants MTD in FDCPA Class Action Over Undated MVN
A District Court judge in New York has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act class-action, ruling that the lack of a date on a Model Validation Notice is not a violation of the statute and is not confusing to the least sophisticated consumer. More details here.
WHAT THIS MEANS, FROM DAVID GRASSI OF FROST ECHOLS: The consumer brought this action on an undated model validation notice, contending the lack of a date made the letter seem illegitimate and rendered the use of words like “today” and “now” confusing. The Court saw through these strained interpretations, concluding “only a consumer in search of an ambiguity … would interpret defendant’s failure to date the Letter as a deceptive attempt to collect the dated amount of the debt.” The Court therefore dismissed Plaintiff’s claims regarding the letter’s contents and also quickly dispensed with plaintiff’s 1692d claim because sending one letter is not harassing or oppressive.
While an overall positive ruling, not all issues fell in favor of the collection industry. Specifically, the Court noted Regulation F’s safe harbor provision for use of the model validation notice “applies only to alleged violations of Regulation F, not alleged violations of the FDCPA.” It is also important to remember that not courts agree with the conclusions drawn here. See Roger v. GC Servs. L.P., 655 F.Supp.3d 1201 (S.D. Fla. 2023). The difference in these opinions points to the conclusion that dating a letter, including a model validation notice, is the better practice.
Judge Denies MSJ for Defendant in TCPA Case Over Calls Made After Consent was Revoked
Presented with either believing a defendant claiming it never contacted a plaintiff after she retained counsel and revoked consent to be contacted or a plaintiff who said that the defendant did call four more times, a District Court judge in Nevada is siding with the plaintiff for now, choosing to put her trust in what the Better Business Bureau says on its website. Adding another layer of complexity into the situation is the fact that two collection agencies with roughly the same name may have been trying to get in touch with the plaintiff at roughly the same time. More details here.
WHAT THIS MEANS, FROM DALE GOLDEN OF MARTIN GOLDEN LYONS WATTS MORGAN: Defending consumer cases is difficult enough without having the court provide an assist to the consumer. Yet that’s what seems to have happened in this TCPA case. The defendant submitted evidence demonstrating that it hadn’t made the offending calls and didn’t even own the telephone number used to place them. In denying summary judgment, the court relied not on evidence submitted by the Plaintiff, but on evidence the court itself apparently located on the BBB’s website associating the outgoing phone number with the defendant. In a footnote, the court supported its decision to engage in fact-finding outside the parties’ evidence, stating it was “permitted to take judicial notice of [the BBB] records sua sponte.” The court then dispatched with the defendant’s argument that it was another company with essentially the same name that called the plaintiff finding that because the voicemail recordings disclosed the name belonging to both the defendant and the entity the defendant claimed was the actual caller and the voicemails mentioned a creditor whose debts the defendant “appears to have the exclusive legal title to collect,” it wasn’t unreasonable to infer that the defendant placed the calls.
These are the types of rulings that create pre-maturely gray defense attorneys. We struggle to rationalize the court’s decision-making and have a devil of a time explaining the outcome to our clients.
Appeals Court Vacates Dismissal of FDCPA Class Action Because Plaintiff Lacked Standing
The technicalities of the legal system can be fascinating and unanticipated. To wit, the Court of Appeals for the Third Circuit has vacated a District Court’s dismissal of a Fair Debt Collection Practices Act class-action lawsuit against a collector because the plaintiff lacked standing to sue, and remanded the case back to the lower court to determine whether the plaintiff should be allowed to amend her complaint or whether the case should be dismissed for lack of jurisdiction instead. More details here.
WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: This is an interesting case. While the district court concluded the case should be dismissed on the merits, the Third Circuit reversed the dismissal and, instead remanded the case back to the district court to determine whether jurisdiction existed. The central question posited by the Court of Appeals was whether the plaintiff alleged a justiciable claim (i.e., does the plaintiff have standing to assert the claim). The Third Circuit doesn’t appear to think so. Federal courts are definitely on quite a run of kicking cases based on lack of standing. The takeaway here is that “confusion” alone does not establish standing to sue. Although a lack-of-jurisdiction determination doesn’t dismiss the case with prejudice, it’s still good news. IMHO (i.e., in my humble opinion), the onslaught of dismissals based on lack of standing may well be the reason that FDCPA claims are down. It is getting harder and harder for the plaintiff’s bar to prove a viable FDCPA claim – a technical violation just isn’t enough to get a claim to the starting blocks, much less across the finish line. So while it isn’t a clean victory in isolation, it definitely points to a sea change in federal jurisprudence.
Judge Denies MTD From Credit Repair Org’s Owner in FTC Suit
The owner of a credit repair organization, who alongside a number of corporations, was sued by the Federal Trade Commission for violating the FTC Act, the Credit Repair Organizations Act, the Telemarketing Sales Rule, the Fair Credit Reporting Act, and the Gramm-Leach-Bliley Act has had his motion to dismiss denied by a federal judge. More details here.
WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: As many know, creating a non-profit entity does not guarantee that a company will work in good faith, nor that the structure of such would prohibit members from profiting from the non-profit organization. The FTC’s oversight, therefore, has been held by Courts to regulate certain non-profits. Courts have held this right when members could likely receive economic benefits or even more broadly when compliance under the FTC Act is questioned. The non-profit categorization will not protect a company or its members from prosecution under the FTC Act.
This case is not the only non-profit organization the FTC has acted against. A quick search on the FTC’s site found several other pending cases against non-profits. In this case, the non-profit was accused of charging consumers for worthless credit repair services with a type of pyramid scheme. Non-profit abuse in credit counseling is an issue that has been around for a long time. In 2004, the Homeland Security of Government Affairs issued a Subcommittee Staff Report entitled ‘‘Profiteering in a Non-Profit Industry: Abusive Practices in Credit Counseling.” Other common issues non-profits are accused of include deceptive fundraising, overpricing and illegal telemarketing activities.
Judge Grants MTD in FDCPA Case Over Dismissed Collection Suit
Filing a collection lawsuit without including all the proper documentation and then voluntarily dismissing the suit is not a violation of the Fair Debt Collection Practices Act, a District Court judge in Illinois has ruled, granting the defendant’s motion to dismiss. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: In a matter defended by two of Barron & Newburger’s best, the Defendants prevailed based on three questions. The first two are oldies but goodies. The first question: Is filing a collection suit without the immediate means of proving it a violation? Turning to Harvey v Great Seneca, 453 F.3d 324 (6th Cir. 2006) and the long list that followed it, the Court said no.
The next question: is the failure to attach admissible evidence to the complaint, allegedly required under Section 8b of Illinois’s Collection Agency Act (“ICAA”), 205 ILCS 740/8b, an FDCPA violation? Whether there was compliance with the Act however, was not the focus of the Court. It did not investigate that claim writing “the FDCPA is not an enforcement mechanism for matters governed elsewhere by state and federal law.” The Court also provided further clarification citing to Washington v. North Star Capital Acquisition, LLC, 2008 U.S. Dist. LEXIS 78256 (N.D. Ill. Sept. 15, 2008)”the FDCPA will not be used as a vehicle to litigate claims arising under the Illinois rules of civil procedure.” Whether this finding is limited to the 7th Circuit or is more wide spread is something for defense counsel to review when defending allegations based on state court litigation proceedings.
The third question addresses the old claim, that was prevalent when it was tough to get documentation from the original creditors, that collection law firms would file law suits with the primary hope they would obtain defaults. When an answer was filed, many of those cases suddenly got dismissed. (Don’t deny it, we all know that was true once upon a time). Without too much discussion, the Court here simply stated “It is undisputed that Illinois law permits a plaintiff an absolute right to dismissal without prejudice, for any reason or for no reason, any time before trial.” Be aware that in may jurisdictions that would only be true for dismissal with prejudice.
Judge Grants MTD in FDCPA Class Action Over Credit Reporting Language in Letter
It is very uncommon for a ruling at the District Court level in a Fair Debt Collection Practices Act case to not only have a Table of Contents, but one with sections and subsections, even if it is a class action. At the start, that’s a sign that this is not your ordinary ruling. But, in what is good news for the industry, at the end of that 28-page ruling is the judge granting the defendant’s motion to dismiss because the plaintiffs lacked standing to sue. More details here.
WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: While this case provides what will likely be a useful analysis and decision for other debt collectors facing similarly creative arguments, it is not over yet for the parties involved in what the Court described as a novel theory. The plaintiffs’ claim was brought under a common law theory of unreasonable debt collection, which the New Jersey Federal Court determined only existed in Texas, resulting in a finding that it was not a “traditional” tort and the plaintiffs lacked standing. On December 7, 2023, following the dismissal, the plaintiffs submitted a letter to the Court advising that it is their position “that th[e] Court’s dismissal based on lack of jurisdiction triggered wrong-forum tolling of their individual and class FDCPA claims as of March 23, 2020, the date th[e] action was commenced.” As a result, the plaintiffs commenced a new action in the Superior Court of New Jersey asserting the same claims against the same debt collector. It will be interesting to see how the matter plays out in state court given the different standing requirements in federal court versus state court.
Appeals Court Affirms Dismissal of FDCPA Suit Against Creditor
As I have stated, on numerous occasions, I am not a lawyer. That being said, this case seems to — to my non-legal eyes — to be something that doesn’t necessarily rise to the level of needing a Court of Appeals to weigh in on, but, hey, they did, so I am going to let you know about it. The Court of Appeals for the Third Circuit has affirmed the dismissal of a Fair Debt Collection Practices Act case against a creditor, agreeing with the lower court that the creditor is not subject to the statute. More details here.
WHAT THIS MEANS, FROM JONATHAN ROBBIN OF J. ROBBIN LAW FIRM: Not much to add to this decision out of the Third Circuit. It is black letter law that communications from a creditor acting on its own behalf do not fall within the FDCPA’s purview. Nevertheless, creditors are forced to defend frivolous claims. For example, earlier this year, a consumer filed a complaint in the Pennsylvania Eastern District Court alleging that the defendant-creditor violated the FDCPA by communicating with her about an unverified alleged debt.
The District Court concluded that the allegations demonstrated that the defendant was a creditor and that the communications only concerned the collection of a debt owed to the defendant. On appeal, the Third Circuit agreed with the District Court because the plaintiff’s allegations and exhibits demonstrated that the defendant-creditor’s communications with the plaintiff “concerned a debt owed to itself in connection with financing [plaintiff’s] car.” As such, the Third Circuit also held that amendment would be futile. This case, though not making new law, rightly reaffirms the longstanding principle that creditors seeking to collect a debt owed to themselves are not governed by the FDCPA because such creditors are not debt collectors under the FDCPA.
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.