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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.
Judge Affirms Dismissal of FDCPA Case Using New Test from Ninth Circuit
A District Court judge in Oregon has affirmed the dismissal of a Fair Debt Collection Practices Act lawsuit, determining that a recent ruling from the Court of Appeals for the Ninth Circuit is not an apples-to-apples comparison to the plaintiff’s case. More details here.
WHAT THIS MEANS, FROM XERXES MARTIN OF MARTIN GOLDEN LYONS WATTS MORGAN: More than a handful of FDCPA cases are filed each year based on an underlying collection suit. The short and concise Opinion & Order by Judge Aiken in the matter of Ingersoll v. Brandsness, Brandsness & Rudd, P.C., et al efficiently disposed of Plaintiff’s new argument and clipped the wings of any appeal. First, the Court covered the procedural shortcomings of Plaintiff’s timeliness. However, a “belt and suspenders” approach was applied, and the substance was also addressed.
In Ingersoll, Plaintiff alleged in the underlying collection lawsuit, he had filed an answer and the case was assigned to arbitration, but thereafter the collection firm moved for default (which was not granted) and then moved for summary judgment in the arbitration. There seemed to be some confusion as to where and how Ingersoll was served in the collection suit as Ingersoll alleged he did not live at the address where the summary judgment motion was served, but the record showed that the motion had been properly served by email. The motion for summary judgment was subsequently granted and a judgment was entered. Plaintiff’s FDCPA claims were that in the underlying suit, Defendants misrepresented the amount of the debt, and that moving for default was unfair and unconscionable.
The Court initially granted Defendants’ motion to dismiss based on Plaintiff’s claims regarding the amount of the debt as barred by the one-year statute of limitations, and that the erroneous motion for default did not constitute a violation as it was remedied by the state court denying the motion. In the original order dismissing the case in part on the statute of limitations, the Court applied Supreme Court case law that the limitations period begins to run on the date the alleged violations occurs, not when discovered. Further, the court applied a Ninth Circuit case, Naas v. Stolman, which held in similar cases based on collection lawsuit activity, the limitations period begins to run when the complaint is filed. Plaintiff argued the period should start when the lawsuit is served, but the Court rejected this argument.
The Opinion & Order at hand revisits the statute of limitations basis. Plaintiff newly argued the recent case of Brown v. Transworld Sys. Inc., changed the precedent relied upon by the Court. Brown asserted a modified test arising from the originally relied upon Naas case: “[w]hen the alleged FDCPA violation is the bringing of a debt collection lawsuit, we determine which actions constitute independent FDCPA violations by considering (1) the debt collector’s last opportunity to comply with the statute and (2) whether the date of the violation is easily ascertainable” and that “[t]here is a difference between litigating a case and committing affirmative FDCPA violations during the litigation.”
A key difference was present between Brown’s and Ingersoll’s situation — Brown was served before the filing of the underlying and argued discrete violations occurred after the service; Ingersoll was served after the filing of the alleged violations. Due to this, the Court in Ingersoll held “service is an act taken to reaffirm the legitimacy of the already-filed suit” and “[d]does not constitute a new violation of the FDCPA[.]” Therefore, Brown did not change the Court’s mind.
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Washington Appeals Court Overturns Ruling for Collector on Charity Care Disclosure
The Washington Court of Appeals has overturned a lower court’s ruling in favor of a collection operation that was sued because the original creditor — a healthcare provider — did not screen the plaintiff to see if he was eligible for charity care, but there is a lot of back-and-forth between both sides over the contract between the collector and the healthcare provider. More details here.
WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: Although this case is limited to Washington State, there are two lessons that can be gleaned from it. First, as more states expand charity care and medical debt continues to be a hot button topic, this case could serve as a blueprint for some consumer attorneys. Various states either already have charity care disclosures on the books or are primed to pass legislation or regulations putting such disclosures on the books. For any entity collecting medical debt, it is going to become critical that they understand not only their duties and obligations, but also that of their clients (typically hospitals). As shown by this case, the debt collector was on the hook for FDCPA violations because the hospital failed to screen the consumer for charity care.
Second, the case serves as a warning regarding collecting fees. This case highlights the risks (both litigation and regulatory) when debt collectors are not careful about what fees the underlying contracts (either with the creditor or between the creditor and consumer) allow.
Judge Certifies Class but Denies Preliminary Settlement in Data Breach Case Against Collection Operation
A class has been certified in a case involving a data breach at a debt collection operation that compromised the personal information of 640,000 individuals, but the judge denied a motion to settle the case because the proposed settlement — $2.45 million to those who were injured — did not include any reference to how much the plaintiff’s attorneys would receive. More details here.
WHAT THIS MEANS, FROM CAREN ENLOE OF SMITH DEBNAM: While the Order addresses approval of a proposed class action settlement, I want to turn the focus to the underlying incident that precipitated the action – a data breach. Compliance departments should have in place and continue to review and assess their written information security plans (or WISPs) to ensure they remain appropriately vigilant against cyber risks. As a reminder, the FTC recently amended its Safeguard Rule. As finalized, the amended rule will take effect in May of 2024. The rule, as amended, requires notification to the FTC within thirty (30) days after discovery of a triggering event where at least 500 consumers are involved. Under the amended rule, a notifying event would include “acquisition of unencrypted customer information without the authorization of the individual to which the information pertains.” Additionally, the Safeguard Rule, as amended, includes additional content for the notification. See 88 Fed Reg. 77499, 16 CFR Part 314. Compliance departments should similarly apprise themselves of state data breach statutes and ensure their WISPs appropriately provide for appropriate notification under state law.
Judge Grants MSJ for Defense in FDCPA Case Because Plaintiff Didn’t Disclose Suit in BK Filing
Judges don’t take kindly to parties failing to disclose details, especially involving other legal activities, one plaintiff has learned. A District Court judge in Ohio has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case because the plaintiff failed to disclose this suit when she filed for bankruptcy protection. More details here.
WHAT THIS MEANS, FROM MIKE FROST OF FROST ECHOLS: As we kick off the New Year in 2024, a football analogy seems appropriate after watching the Michigan Wolverines and Washington Huskies advance to the NCAA National Championship game next week. This case should remind litigation managers and defense counsel how important blocking and tackling is to success in litigation, as it was for both successful football teams yesterday.
One of the first things that should be done when a new matter is received after locating and locking down an account is researching the plaintiff. What is the plaintiff’s current or past litigation history? In that quick research the defendants identified that the plaintiff had filed for Chapter 13 bankruptcy protection.
In all consumer bankruptcy actions, the petitioner is required to disclose all assets, including a potential cause of action. When a consumer fails to disclose such potential civil claims against a third party in a bankruptcy proceeding, they may be judicially estopped from later filing that claim. In the present case, the plaintiff failed to disclose the potential civil claim in the bankruptcy filing as well as at the meeting of creditors. The Court concluded the plaintiffs claims against the agency under the FDCPA were judicially estopped from proceeding since those claims should have been appropriately identified and handled in the bankruptcy action.
Those long touchdown passes are exciting to watch, but they do not happen without the proper blocking and tackling. In 2024, remember to block and tackle with each and every new litigation matter filed against your company.
Appeals Court Affirms Dismissal of FDCPA Case Over Auto Repossession
We don’t normally write about automotive repossessions here, but it is a Fair Debt Collection Practices Act case and it is the Court of Appeals for the Second Circuit, so it’s probably got something worthwhile for companies in the accounts receivable management industry to know, right? The Second Circuit has upheld the dismissal of an FDCPA case against a repossession company that the plaintiff claims breached the peace and thus made the repossession unlawful. More details here.
WHAT THIS MEANS, FROM PATRICK NEWMAN OF BASSFORD REMELE: Repossession agents are like cousins to the third-party collection industry. Very similar but also very different. (Fun fact: a well known national association of debt collectors founded in Minnesota actually included repossession agents as members until they split off into their own association in the mid-sixties.)
In our experience, repossession agency owners and other industry stakeholders are some of the sharpest and innovative business owners we have the pleasure of working with. Really!
For a while now, Supreme Court precedent has mandated that only a tiny sliver of the FDCPA (the 1692f(6) prohibition against seizing collateral through nonjudicial means without a present right of possession) applies to entities attempting to enforce security interests — e.g., automotive repossessors. Your author believes this extends well beyond the context of repossessions (and looks forward one day to vindicating that viewpoint in court). In any event, the other requirements and proscriptions of the Act do not apply to repossessors or other security interest enforcers. So, for example, you won’t find a repossession agent sending a g-notice or giving the mini-miranda.
The current state of wrongful repossession law is, frankly, all over the place, the FDCPA component included. The two consistent concepts are present right of possession and breach of peace. This sound appellate authority regarding what does and does not constitute a breach of peace (at the pleadings stage no less!) will prove very useful for repossessors across the country in defending these claims. Always feels good to report on a win!
Ruling in N.Y. State Court Opens Door to Challenging Default Judgments
A ruling in New York state court could have the potential to upend a decade’s worth of default judgments while also having a “huge” impact on future cases, according to a published report. Earlier this month, the State’s Appellate Division issued a ruling on when a consumer relinquishes the right to attempt to fight a default judgment without taking any action. More details here.
WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: A state appeals court in New York has made it easier to challenge default judgments in debt collection cases. In Esgro Capital Management, LLC v. Banks, a debt collector had been garnishing a woman’s wages for three years after the woman failed to appear in court to defend herself. Even though a 2007 state case held that an individual waives the right to challenge a default judgment after their wages have been garnished for a full year, the Appellate Division in Banks held that the “mere fact that a defendant, like defendant here, was subject to payments pursuant to a wage garnishment order for more than one year without taking some action is not, without more, a proper basis for finding waiver of the ability to seek relief.” The defendant challenged the judgment on personal jurisdiction grounds, which the court determined was not waived by her failure to appear or her failure to challenge the garnished wages earlier. Rather, waiver of a personal jurisdiction defense “results from the taking of some affirmative action evincing the intent to accept a judgment’s validity – such as the making of voluntary payments.” Based on the Appellate Division’s ruling, defendants in New York can now challenge default judgments years after their wages have been garnished, at least in certain cases.
State Court Judge Dismisses Undated MVN Suit
In a case that was defended by Patrick Newman and the team at Bassford Remele, a state court judge in Wisconsin has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act lawsuit on the grounds the plaintiff lacked standing to sue because he did not suffer a concrete injury after receiving an undated Model Validation Notice. More details here.
WHAT THIS MEANS, FROM CHANTEL WONDER OF MCGLINCHEY: State courts and federal courts continue to focus on whether Plaintiffs can show actual damages resulting from alleged consumer violations. In his Amended Complaint in this case, the Plaintiff included detailed preliminary allegations about the statutory liability and damages under the FDCPA and alleged only statutory damaged, attorney’s fees and costs. The Court still found that the Plaintiff had no injury and lacked standing. The order also states that the challenged letter fully complies with the FDCPA. This decision differs from states in other courts that have found claims based on undated MVN letters do state a claim. In Roger v. GC Servs. Ltd. P’ship, No. 22-23192-CIV, 2023 WL 2124298 (S.D. Fla. Feb. 9, 2023), the Court found that compliance with Regulation F does not guarantee compliance with the FDCPA and denied a Motion to Dismiss for a claim based on an undated MVN letter.
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.