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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.
Appeals Court Affirms Denial to Compel Arbitration in FCRA Case
I think, and please correct me if I am wrong, that this is a case the speaks to the importance of having your agreements reviewed not only to make sure that the language makes sense, but to make sure that if there is something that refers to someone or something else, that the language lines up with those other things, too. The Court of Appeals for the Third Circuit has denied an appeal from a defendant seeking to compel arbitration in a Fair Credit Reporting Act case because the plaintiff did everything she was supposed to do and the arbitrator dismissed the case after asking the defendant waive language in its underlying agreement with the plaintiff. Confused? Read on. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: Plaintiff applied for a loan and the lender used a MicroBilt product to obtain credit information. The loan was denied. Plaintiff filed in federal court an FCRA case against MicroBilt, claiming the information provided on her was not accurate. MicroBilt had a contract that included using AAA to arbitrate disputes. The contract also had a clause that required each party to pay for its own attorneys’ fees and precluded punitive and consequential damages. These provisions are not consistent with the FCRA.
Plaintiff agreed the contract allowed arbitration and she re-filed in AAA. However, AAA said it would not arbitrate the matter because the MicroBilt contract conflicted with AAA’s consumer rules, in particular on the remedies it could award. There were then a number of procedural twists and turns. The case ended up back in federal court, which agreed MicroBilt could not compel arbitration. The 3rd Circuit Court of Appeals affirmed the lower court’s ruling.
MicroBilt’s contact, as it turned out, was too favorable to it. MicroBilt now has a ruling that the contract may not be enforceable in AAA, the chosen arbitration entity. I suspect it will have to re-do the contract, if it hasn’t done so already.
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Judge Orders Plaintiffs & Their Attorney to Pay Defendant’s Attorney’s Fees in FDCPA Case
In a case that was defendant by the team at Gordon Rees, a Magistrate Court judge in Georgia has decided to award partial attorney’s fees and costs to the defendant that was sued by two plaintiffs for violating the Fair Debt Collection Practices Act, after the plaintiffs withdrew a voluntary motion to dismiss, only to file a second motion to dismiss months later, which required a second set of depositions of the plaintiffs among other activities, largely based on “untrue statements” made by the plaintiffs and one of their attorneys. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: Good for PRA and their lawyers for pursuing attorneys’ fees in this case where the plaintiffs could have and should have left well enough alone. As the Magistrate Judge points out, the plaintiffs had no good answers for why they withdrew their voluntary dismissal of the case when it became clear through deposition testimony that the plaintiffs had misrepresented facts to their counsel. According to this opinion, the plaintiffs (and counsel) continued to hide the ball after PRA asked for answers about the reversal of the decision to dismiss the case. The Magistrate Judge recites all the steps PRA had to take, and expenses PRA had to incur, to respond to motions and conduct depositions after the withdrawal of that voluntary dismissal and appropriately holds plaintiffs and counsel accountable for those expenses. It is a shame to see how counsel for the Plaintiffs in this case kept pushing a case that should not have been brought, but if it had to happen it is gratifying that the judge imposed that financial consequence to try and deter that kind of conduct in future cases.
Judge Grants MTD in FDCPA Case Over Phone Call Volume
A District Court judge in New Jersey has ruled that placing 16 calls during a 30-day period is not enough to rise to the level of abusive or harassing behavior under the Fair Debt Collection Practices Act and has granted the defendant’s motion to dismiss. More details here.
WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: The plaintiff did not allege that the defendant called more than seven times within seven consecutive days or that the defendant called within seven days of a telephone conversation with the plaintiff. Under Regulation F, the defendant would be presumed to have complied with 15 U.S.C. § 1692g(5) because the plaintiff did not allege that the defendant exceeded the call frequency permitted by 12 CFR 1006.14(b)(ii). However, the calls were made in April and May of 2021, which was before the effective date of Regulation F. Fortunately, the defendant did not need Regulation F’s presumption of compliance to obtain a dismissal of this case at the pleadings stage.
Mass. AG Proposes Rule to Regulate Junk Fees
The Attorney General of Massachusetts has proposed regulations to combat the unfair and deceptive business practices of assessing “junk” fees that raise the advertised prices of goods and services. More details here.
WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY & SHUSTER: States are following guidance from the White House and the FTC in proposing regulations around the use of fees businesses charge consumers. Anticipating that the FTC proposed rule will soon become law, states wanting to cover intrastate transactions are reaching out to their legislature to propose similar laws like the one the FTC wants to promulgate. Businesses who believe these fees are important to a transaction should recognize that it’s critical to clearly disclose them to consumers prior to purchase to avoid their appearance as a junk fee.
Judge Dismisses FDCPA Case Over ID Theft Disclosure Accidentally Sent to Plaintiff
If a collector sends an unprompted letter to an individual informing the recipient of the steps that can be taken if she is the victim of identity theft, then is the collector therefore liable under the Fair Debt Collection Practices Act for not providing full and accurate information? A District Court judge in New Jersey has ruled no, granting a defendant’s motion to dismiss a second time. More details here.
WHAT THIS MEANS, FROM COOPER WALKER OF FROST ECHOLS: As a litigator, I cannot help but notice that the Court has put this case on the “dismissal without prejudice loop” which has, in my opinion, caused this case to drag on far longer than it should. This case was removed to federal court on October 8, 2021 — more than two years ago. Since then, the Court has granted two (yes, two) motions to dismiss. One would hope that having a case dismissed not once, but twice, would put the proverbial fork in it. However, on both occasions, the Court dismissed the case without prejudice and gave the Plaintiff 30 days to file an Amended Complaint. So, as of December 13, 2023 — 26 months after this case was removed to federal court — Plaintiff has now filed his third complaint in the case. Defendant has yet to file a responsive pleading, but it will be interesting to see what is filed.
House Passes Resolution to Repeal CFPB Small Business Lending Rule
A proposal from the Consumer Financial Protection Bureau to require small business lenders to share information about the race and demographic data took another body blow on Friday when the House of Representatives approved a resolution to repeal the rule. The Senate had already approved a similar resolution, setting up a potential veto from President Biden and a potential veto override from the House. Meanwhile, two cases against the CFPB seeking to block the rule remain stayed pending the ruling from the Supreme Court on a case challenging the constitutionality of the Bureau’s funding structure. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER: The CFPB’s Small Business rulemaking has faced significant headwinds since its inception, culminating in the most recent resolutions passed by the House and Senate. While it is anticipated President Biden will veto the resolutions and the CFPB will continue forward with the rulemaking, legal action challenging the final rule seems unavoidable. The recent bipartisan resolutions raising Congressional concerns about the significant compliance costs and other aspects of the rule may provide additional support for those future challenges. In addition, it is widely anticipated that the Supreme Court will change the circumstances of when courts must defer to federal agency interpretations of the federal statutes under the Chevron doctrine in two pending appeals, Loper Bright Enterprises v. Raimondo (S. Ct. 22-451) and Relentless Inc. v. Department of Commerce (S. Ct. 22-1219). Assuming that happens, enforcement of any final small business rule will, at best, be uneven across the nation.
Student Loan Borrower Bill of Rights Introduced in Senate
A bill has been introduced in the Senate to create a student loan borrower bill of rights, which would limit the circumstances in which late fees can be applied, prohibit the use of mandatory arbitration provisions, and force servicers to create units that are dedicated to keeping at-risk borrowers from defaulting, among other requirements. More details here.
WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: As we head into what is called the “silly season”, expect proposed legislation like the “Student Loan Borrower Bill of Rights” and other party priorities to pop up throughout 2024. Much like medical debt, the issue of student loan debt has become another low hanging fruit that suffers from a lack of practical and well-thought out solutions to the larger problem. Both medical debt and student loan debt are the result of bad policies that fail to address the cost of services; in both instances these are services consumers must and should have but cannot afford. Yet we continue to bloat our health care system and higher education system with billions of dollars, with no accountability. Unfortunately it’s the ARM industry that pays the price.
First some reality. The latest bill, re-introduced by Senator Dick Durbin, is nothing new. It was originally introduced in 2019 and went literally nowhere. It has been assigned no number or has no specific text, other than a broad narrative from Senator Durbin’s press release. The likelihood that this legislation becomes law, even in its current form, is highly remote.
The propose legislation appears to codify some existing Department of Education regulations with an emphasis on student loan servicer conduct. Private student loans would be covered under this legislation including discharge in the event of death or disability. Much like the legislation in the CARES Act, any record of a default would be removed from a borrower’s credit report. The ability to charge late fees would be extremely curtailed. Further, servicers would be charged with the responsibility of identifying at-risk borrowers and implementing procedures to prevent them from defaulting, without putting them into forbearance. This ironically is a significant departure from the “wisdom” of the CARES Act. The legislation also borrows from many states that have already passed student loan servicing laws. Whether there would be pre-emption with respect to the federal law is unclear. The current federal proposal on top of existing state laws would certainly have any servicer or agency rethinking their business strategy.
There is no dispute that the student loan system is broken. Fixing it from the bottom up instead of the top down ultimately harms consumers the most. Expect more ill-conceived proposals from Congress leading up to the election. In the meantime, like medical debt, expect Congress, the CFPB and the states to dictate policy through press releases and enforcement orders, rather than providing long-term solutions for all stakeholders.
Proposed Settlement Reached in FDCPA Class Action Over Deceptive Letters
A proposed settlement has been reached in a Fair Debt Collection Practices Act class-action that will see the defendants pay $60,000 in compensation to the members of the class as well as plaintiffs’ attorney’s fees and costs of up to $150,000. More details here.
WHAT THIS MEANS, FROM JOHN MAREES OF MESSER STRICKLER BURNETTE: This case is an example of the high risk and high reward nature of filing a motion to dismiss in the early pleading and pre-discovery stages of litigation. And, unfortunately, this one did not go in the ARM defendant’s favor. In this case, a law firm which advertised itself as a landlord advocacy firm argued that it was not a debt collector under the FDCPA because a communication sent to a tenant which stated, “you have 10-Days to either work it out with your landlord or move-out…working it out almost always means paying” did not involve an obligation to pay money but was merely a communication regarding the possession of the property. The Court, construing the facts in the light most favorable to the consumer (which the Court is required to do on a motion to dismiss), found the law firm’s argument “unavailing” and held that they were, in fact, a debt collector under the FDCPA. This case underpins the advice our firm often gives ARM clients — you should exercise caution in filing motions to dismiss given the presumptions afforded a consumer when these types of motions are filed.
Judge Grants MSJ for Defendant in FDCPA Case Over Interest Disclosure in Statement
Telling a consumer that signing up for a payment plan will reduce the interest rate on the underlying debt, then sending a letter that informs the individual that interest is accruing on the debt may be confusing to this particular individual, but it is not confusing enough to defeat a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case. More details here.
WHAT THIS MEANS, FROM BRENDAN LITTLE OF LIPPES MATHIAS: The Defendant’s collection efforts in this matter were by the book, consistent with requirements outlined by the Second Circuit and should be commended. The Defendant properly articulated that interest would continue to accrue on the account as part of the settlement terms as required by the Second Circuit in Avila and nothing articulated by the Defendant was deceptive or contradictory to the safe harbor language. Similar to his prior decisions, Judge Cogan recognized that this theory of liability was a lawyer attempting to manipulate the FDCPA and articulated that there is nothing in the statute that precludes a debt collector from offering to settle an account on terms that are favorable to the consumer. Judge Cogan further explained that if the Court were to find liability under these facts, it would disincentive a debt collector from offering a settlement to the consumer, which would ultimately harm the consumer by forcing the consumer to pay higher interest rates, collection costs and depriving the consumer of access to credit.
Judge Grants MTD in FDCPA Case Over Undated MVN
It might be a ruling on standing instead of the merits of the argument, but another brick has been placed in the wall being built up around the argument that undated Model Validation Notices are in violation of the Fair Debt Collection Practices Act. More details here.
WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH: Put a date on your letter. There’s no reason not to do it. Here, the defendant collection agency delayed the inevitable by obtaining a decision by a federal court that the plaintiff did not suffer a concrete injury sufficient to maintain standing in federal court. Plaintiff will surely re-file in state court and may very well obtain a judgment in the consumer’s favor. Most of the time a standing win is a Pyrrhic victory. The only ones who win are the attorneys.
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.