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.
Appeals Court Affirms Ruling for Defendants in FDCPA Case
Emerging victorious from a collection lawsuit is not enough for a plaintiff to also win a Fair Debt Collection Practices Act case, the Court of Appeals for the Third Circuit has ruled, affirming a lower court’s decision to deny a motion for reconsideration. More details here.
WHAT THIS MEANS, FROM HEATH MORGAN OF MARTIN GOLDEN LYONS WATTS MORGAN: This is a good win for the industry that clearly, at summary judgment and on appeal, establishes that just because a consumer who prevails at a collection litigation trial does not mean a debt collector is in violation of the FDCPA.
This scenario happens on a regular basis, as not every debt collector is able to establish a debt and prove the amounts owed at trial. Sometimes the debt collection attorney has a bad day, and sometimes even the court has a bad day. Unfortunately, there often a misunderstanding from consumers and consumer attorneys that a failure to present a case at trial means that the debt is not owed, and therefore an FDCPA violation occurs from the attempted collection. While most agencies, debt buyers, and law firms are able to persuade these consumers and consumer attorneys correctly, having this case law certainly enforces this widely held industry belief.
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Judge Remands Class Action Back to State Court
A District Court judge in Washington has remanded a class-action lawsuit back to state court because the plaintiff removed any claims related to the Fair Debt Collection Practices Act in an amended complaint and because the defendant was unable to convince the judge to keep the case in federal court under the Class Action Fairness Act. More details here.
WHAT THIS MEANS, FROM KHARI FERRELL OF FROST ECHOLS: As a litigator, this case is a stark reminder of the importance of fully reviewing the pleadings both prior to and after removing a case to federal court. Specifically, even after a case has been successfully removed, it is still crucial to review any subsequent amendments to a plaintiff’s original pleading—to confirm that the original basis for the removal still exists.
In this case, the original basis for the defendants’ removal of the case to federal court was the FDCPA violation alleged in the plaintiff’s complaint. However, by subsequently amending his complaint by abandoning his FDCPA claim, plaintiff effectively (and almost certainly intentionally) undercut the previously established removal jurisdiction of the Court. Thereafter, the plaintiff sought to remand the case back to state court.
At this point, rather than consenting to the remand back to state court, the defendants made the decision to fight to keep the case in federal court. From my experience counseling clients, the decision of whether or not to fight an attempt to remand a previously removed case can be a difficult one to make. On one hand, federal courts generally tend to be favorable venues for agency defendants in consumer litigation cases—more so than most state courts. In addition, federal judges are more likely to have more experience presiding over FDCPA, FCRA, and TCPA cases than most state court judges.
On the other hand, in the event a plaintiff attempts to remand a case, and is successful in doing so, there is a risk of the court awarding the plaintiff his or her legal fees associated with the remand.
In my opinion, while I do not totally disagree with the defendants’ choice to fight the remand in this case, it appears there should have been more time invested into fully understanding the scope and applicability of the Class Action Fairness Act. Based on the tone of the Court’s order remanding the case, I actually believe the defendants could have successfully raised the Class Action Fairness Act argument to prevent the remand. However, in order to do so, more attention needed to have been given to establishing the citizenship of both plaintiff and the defendants, in order to adequately establish diversity as requested by the Class Action Fairness Act.
Judge Partially Grants MTD in TCPA Case Over Prerecorded Calls
How do you know if a call that you received and answered contained a prerecorded message? Well, a District Court judge in Illinois has determined that if calls received by an individual sounded identical, had the same voice, used the same words, had the same intonation, had the same speech pattern, were commercial, were generic and didn’t mention the individual by name, were unsolicited, were incessant, and continued despite the individual’s express request that the calls stop, that’s more than enough to defeat the defendant’s motion to dismiss a claim it violated the Telephone Consumer Protection Act. More details here.
WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: The Honorable Judge Steven C. Seeger in the Northern District of Illinois is funny. As a lawyer who reads dry (sorry, but it’s true) legal opinions every day, I appreciate his recent TCPA opinion, which is thoroughly entertaining and still provides useful lessons. Judge Seeger artfully compares an unwanted robocall to “a pesky fly at a picnic” that may be swatted by call recipients with “a fly swatter” known as the TCPA. He explains that although some people, especially teenagers, “practically take up residence on their cell phones” and “live on them,” cell numbers are still not “residential” phone numbers. But, cell number or residential number, a caller still needs prior consent to leave prerecorded messages.
The result at this point in the lawsuit – an initial motion to dismiss based on the pleadings – is not surprising. Judge Seeger found that the plaintiff had alleged “a lot of reasons to think that the calls were prerecorded.” Included in that list are classical indicators of a prerecorded message, including that “the messages sounded identical” with “the same voice” using the “same words” with “the same intonation” and “speech pattern,” the messages were generic and “didn’t identify” the called party’s name, and several of the messages were incomplete, cutoff, or only included the last segment of the message. Facing those allegations (which is much more than most plaintiffs bother to allege in my experience) this is “the stuff of a motion for summary judgment, not a motion to dismiss.”
The first lesson here: get consent and don’t annoy people with repeated calls playing the same message. With that out of the way, there is a more interesting takeaway: The industry is developing communications strategies and technologies that far exceed and have outpaced the TCPA’s range of coverage and consideration – as written, the statute does not even reference text messages by name, although the FCC and Courts have confirmed they are covered. While developing new technologies, legal and technology experts should work together to avoid the list of classic “pesky fly” traits that prompted the TCPA’s enactment to begin with. The question to ask is how we can push (but stay within) the TCPA’s boundaries while developing communications strategies that are less annoying – i.e., less monotone and generic, more engaging and dynamic, and with real options to cease or change the content being received? There are multiple companies working on solutions like this, so when you are considering new communications technologies, don’t forget Judge Seeger’s roadmap of annoyances to avoid!
NCLC Report Criticizes State’s Inabilities to Protect Consumers from Judgments, Garnishments
Maybe it’s time the National Consumer Law Center (NCLC) lowers its standards. For the fifth year in a row, not one of the 50 states met all five of the advocacy group’s standards for protecting consumers and their property from asset seizures and garnishments. On top of that, the only state that earned a “A” grade last year had its mark slip to a B+ because of inflation. More details here.
WHAT THIS MEANS, FROM ARI DERMAN OF CLARK HILL: It’s interesting that the NCLC Report remains critical of State protections in the Judgement and Garnishment realm. Covid brought on extensive pre and post judgement restrictions at the state level in 2020, even culminating in outright garnishment bans in places like Illinois and other states that were repeatedly extended. While some of those more extreme prohibitions finally dissipated by the end of 2021, the trend of protecting consumers from collection litigation surely has not. In the past year, we have seen legislation in California, New York and other states further attempt to reign in legal collections, with even more state bills pending and on the docket for 2024. Just because the NCLC isn’t satisfied yet, doesn’t mean industry members aren’t being seriously impacted!
Debt Collector to Shut Down Under Enforcement Order with CFPB
The Consumer Financial Protection Bureau today announced that a medical debt collector — Commonwealth Financial Systems in Pennsylvania — is being shut down for failing to conduct reasonable investigations and failing to inform the credit reporting agencies that debts were being disputed by consumers. More details here.
WHAT THIS MEANS, FROM JOHN REDDING OF ALSTON & BIRD: In what really is a relatively rare occurrence, the CFPB last week entered a consent order that permanently shut down a debt collector based on findings that the collector (i) misrepresented the validity or accuracy of debts, (ii) attempted to collect upon receiving a valid dispute within the 30-day debt validation period, and (iii) failed to accurately furnish information to CRAs or properly investigate credit reporting disputes. In many instances over a period of years, the CFPB found the collector was put on notice of various issues and took no steps to address the issues. In addition, the CFPB imposed a $95,000 penalty based on the financial condition of the company and not based on the scale of alleged wrongdoing. In permanently banning the agency from the industry, the “Respondent” (limited to the agency and any successors and assigns) is prohibited from participating in any aspect of debt collection or receiving payment for such activities.
A number of lessons can be taken from this order. First, make sure dispute validation processes are appropriate and don’t allow continued collection prior to providing verification of the debt. Second, the CFPB continues to be very focused on credit reporting related activities, so it’s important to monitor and update policies, procedures and systems as issues are identified. Third, ignoring issues that arise, particularly in the areas of debt collection and credit reporting carry a higher risk of being banned from an industry than at least making good faith efforts to address those issues. Perhaps the one silver lining here for the owners, directors and officers is that no individuals were identified as being individually responsible for the agency’s actions and made subject to the ban as well (though they do continue to have obligations around post-order reporting by the agency).
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.