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.
N.Y. Governor Plans Expansion of Consumer Protections, Medical Debt Collection Limitations
She won’t officially give her State of the State speech until next week, but New York Gov. Kathy Hochul announced many of the components that she will address in her remarks, including expanding consumer protections and a plan to introduce legislation that limits medical debt collection in the Empire State. More details here.
WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS SUTHERLAND: As of today, lawmakers in states including Michigan, Arizona, South Carolina, Florida, Washington, Indiana, Nebraska, Virginia and Vermont have introduced more than a dozen bills designed to help relieve consumers’ burdens related to medical debt. 2023 drew to a close with New York’s governor signing into law New York’s prohibition against medical credit reporting and prompted state lawmakers to take another look at medical debt issues among other consumer protection issues in 2024. South Carolina and Vermont are already proposing to join Colorado and New York in prohibiting medical credit reporting – while other states like Florida, Washington, and Virginia are proposing to reduce the statute of limitations on medical debt or to otherwise restrict legal collections options available to collect medical debts. If the first couple weeks of 2024 are any indication, this will shape up to be a very active state consumer protection legislative year.
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CFPB Files Amicus Brief In FDCPA Case Before Appeals Court
The Consumer Financial Protection Bureau has weighed in on a Fair Debt Collection Practices Act case currently before the Court of Appeals for the First Circuit, filing an amicus brief that takes the position that collectors can and should be held liable under the FDCPA when they make a false statement, even if they claim the did not know the statement was false. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER: The CFPB’s brief appears to strategically advances the same type of strict liability that it established in Reg. F for time-barred debts. While we will have to see how the First Circuit rules, this highlights why proactively scrubbing accounts at placement for things like bankruptcy and active duty status is a best practice to reduce risk.
Ohio Appeals Court Affirms Summary Judgment for Collector
An Ohio Appeals Court has upheld a summary judgment ruling in favor of a collection operation that filed a lawsuit seeking to collect on an unpaid debt. More details here.
WHAT THIS MEANS, FROM LORAINE LYONS OF MARTIN GOLDEN LYONS WATTS MORGAN: This case is straightforward. The plaintiff initiated a collection lawsuit and obtained summary judgment in its favor. On appeal, the Court promptly affirmed the judgment. This case underscores the legal consequence of disregarding financial obligations. Unpaid obligations can indeed be legally enforced!
Judge Dismisses Defendants’ Crossclaims Against Each Other In Case Involving Active Duty Servicemember
A District Court judge in California has dismissed crossclaims filed against each other by three defendants which each blamed one of the other defendants for attempting to collect from a deployed active duty member of the United States Air Force, ruling that dismissal of the underlying suit renders the crossclaims moot. More details here.
WHAT THIS MEANS, FROM CHAD ECHOLS OF FROST ECHOLS: There are few things that frustrate industry clients more than paying an insurance premium only to have coverage denied. Well, it may frustrate an agency even more than having coverage denied if they work for an insurance carrier that brings them into a lawsuit as a third-part defendant. That is exactly what happened here. In this case the carrier places an outstanding account with an agency who subsequently places the account with a forwarding firm for litigation. The consumer brings the underlying lawsuit based upon a theory the carrier violated the Servicemembers Civil Relief Act. Instead of fully vetting the validity of the claim, the insurance carrier filed suit against the agency and the forwarding firm as third-party defendants. Eventually, the consumer’s case is dismissed because an entry of default was sought rather than a default judgment (as required to trigger the penalty provisions of the Servicemembers Civil Relief Act). Once the underlying case was dismissed, the third-party claims and crossclaims among the carrier, agency, and forwarding firm were dismissed as moot. The lesson here is that creditors, agencies, and forwarding firms should work together (whether they are named or not) to fully vet the validity of the underlying lawsuit prior to taking the adversarial step of drawing each other into litigation. It is always dangerous to “circle the wagons” then shoot the guns inside the circle. If the case can be defeated on a motion to dismiss, then many business relationships can be saved by obtaining the dismissal ahead of complicating the litigation by adding other defendants who are ostensibly good business partners.
California Appeals Court Affirms Ruling Granting Anti-SLAPP Motion in Malicious Prosecution and RFDCPA Case
A California Appeals Court has affirmed the dismissal of a malicious prosecution and unfair debt collection lawsuit against a creditor, the collection agency it used to recover the debt, and the attorneys who took legal action to recover the debt and also affirmed the award of attorney’s fees for the defendants on the grounds the plaintiff did not show a likelihood that the defendants acted with malice. More details here.
WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: A California State Court dismissed an action for alleged malicious prosecution and violations of the state fair debt collection practices act against Sacor Financial who sought to enforce a judgment from an underlying debt collection lawsuit. National Credit Acceptance (NCA) initially purchased the debt – a Wells Fargo line of credit – owed by Erick B. Larsen aka Bruce E. Larsen, the plaintiff. NCA filed the collection lawsuit in 2008 and obtained a default judgment against Larsen in 2009. NCA subsequently assigned the judgment to Sacor in 2013.
In 2020, Larsen successfully moved to vacate the 11-year old default judgment purely based upon a defect in service of the summons & complaint. However, Larsen also disputed that he entered into a line of credit with Wells Fargo or that he owed the debt. Shortly after the court denied Sacor’s subsequent motion for reconsideration, Sacor dismissed the collection lawsuit without prejudice. Plaintiff then filed an action for malicious prosecution and unfair debt collection practices against NCA, Sacor and their attorneys.
Since Sacor did not initiate the collection lawsuit and was only enforcing the judgment against Larsen, the lower court granted Sacor’s Anti-SLAPP Motion finding that plaintiff could not show a likelihood of prevailing on his malicious prosecution claim because there was no evidence that Sacor lacked probable cause or acted with malice. The lower court also awarded Sacor its attorney fees and costs. Larsen then appealed. (A different judge similarly granted an earlier Anti-SLAPP Motion filed by Sacor’s initial collection attorneys in the underlying collection lawsuit, but plaintiff only appealed the rulings for Sacor.)
In affirming the ruling granting Sacor’s Anti-SLAPP motion, the Court of Appeals agreed with the lower court that Sacor and its attorneys cannot be sued for malicious prosecution because it did not initiate or prosecute the underlying collection lawsuit, and their involvement was only to enforce the judgment that NCA obtained years earlier. The Appeals Court disagreed that Sacor, as an assignee of the judgment, had any obligation to investigate the merits of the underlying debt against Plaintiff because the debt ceases to exist as it is merged into & superseded by the judgment. Also, the Appeals Court noted that Sacor voluntarily dismissed the underlying collection lawsuit in a timely manner.
This is an excellent ruling by the California Court of Appeals, and the right decision.
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.
