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 Defendant, But Says Plaintiff Could Have Had Standing
The Court of Appeals for the Seventh Circuit has affirmed a lower court’s ruling in favor of a defendant that was sued for violating the Fair Debt Collection Practices Act, agreeing with the lower court that the plaintiff lacked standing because she declined to provide additional information to justify how the defendant’s actions interrupted the plaintiff’s loss of income as a result of being self-employed. Although, the Appeals Court did provide an example as to how the plaintiff could have shown a loss of income, perhaps providing a blueprint for other self-employed individuals to do so in the future. More details here.
WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: The Seventh Circuit concluded that “hypothetical” or “imaginary” harms are insufficient to confer standing. This is yet another brick in the wall of the lack-of-standing defense issued by the Seventh Circuit, further pushing would-be FDCPA claimants out of federal courts. The avalanche of dismissals based on lack of standing in FDCPA cases has created many roadblocks for plaintiffs attempting to maintain the claims in federal court. And while some plaintiffs are moving to state court, its plainly decreased the number of overall FDCPA filings. But with fewer FDCPA cases being filed, FCRA cases are on the rise. It’ll be interesting to see if the lack-of-standing trend starts to catch hold on FCRA cases in the future.
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Appeals Court Affirms Dismissal of FDCPA Case
The Court of Appeals for the Eleventh Circuit has upheld a lower court’s dismissal of a Fair Debt Collection Practices Act case, agreeing with the lower court that the plaintiff failed to state a claim because he did not connect the dots to show that the defendant was a debt collector as defined by the statute. More details here.
WHAT THIS MEANS, FROM SARAH DOERR OF MOSS & BARNETT: We often see cases where pro se plaintiffs make baseless arguments surrounding the mechanics and technicalities of pleadings and response deadlines. Unfortunately, even baseless complaints require responses and expenditures of time and resources. We continue to advise our clients that it is best practice to respond to all complaints, ideally with some cushion before a hard deadline, so as to leave no question of timeliness and compliance with the applicable rules. Equally important is ensuring that the Plaintiff has adequately pleaded that the FDCPA applies in the first place.
FCRA Suits Hit New Record, FDCPA and TCPA Also Up Big in January: WebRecon
Consumers held nothing back in January, filing lawsuits and complaints with the Consumer Financial Protection Bureau at a pace that hasn’t been seen in the accounts receivable management industry for a long time, according to data released yesterday by WebRecon. Not only were the number of lawsuits and complaints higher, whether on a month-over-month or year-over-year basis, but the size of the increases was also noteworthy in and of itself. More details here.
WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: As expected, these record-breaking number of lawsuits and complaints make it clear it will likely be a very active year of litigation. The actions brought in January were against 681 different collection firms and creditors. If the same number of new actions are filed in the remaining 11 months of the year, over 8,000 collection firms and creditors could find themselves defending their actions in court.
This aligns with the CFPB’s statements at the end of 2023, which announced they significantly expanded the enforcement capacity in 2024. This year is not a time to reduce efforts on compliance but rather a year where compliance needs to continue to be, first and foremost, important. One lawsuit, especially a class action lawsuit, could result in a business failing, which is not a risk that anyone in this industry should take when such risk is avoidable.
If one wants recommendations on where to start a review, debt verification is an important area to focus on, as it was the topic of over half of the almost 7,000 complaints made with the CFPB in January. A second important area to focus on as the second most complained upon topic to the CFPB in January is written notifications. Written notifications must be timely and precise and include all necessary disclosures and information.
Judge Denies Attorney’s Fees for Defense in FDCPA Case
A District Court judge in Florida has adopted the recommendations of a Magistrate Court judge and declined a motion from a defendant for attorney’s fees in a Fair Debt Collection Practices Act case, ultimately ruling that the plaintiff’s claims were deficient, and not frivolous. More details here.
WHAT THIS MEANS, FROM JAY TILLMAN OF FROST ECHOLS: Here, an attorney patient sued his chiropractor and his chiropractor’s attorneys for bringing a lawsuit against him to collect the unpaid bill for his treatment. Unfortunately, the chiropractor’s attorneys failed to adjust their arguments when the FDCPA claim of the attorney was dismissed on summary judgment. The court determined that to show the FDCPA claim was frivolous and filed for harassment purposes, the chiropractor’s attorneys needed to do more than speculate and infer, based on the plaintiff’s lack of pursuit of discovery and insufficient pleadings, that the claim was filed for an improper purpose. The court stated that negligence in bringing a claim for violation of the FDCPA is not enough in the 11th Circuit to receive fees pursuant to 28 USCA § 1692(k)(a)(3). A flawed FDCPA case is not enough to substantiate frivolity and harassment as the FDCAP is not a “loser” pays statute. The movant must show that the party knew or clearly should have known that the legal theory undergirding the FDCPA cause of action “was so patently devoid of merit as to be frivolous.”
CFPB, FTC File Brief in FDCPA Convenience Fee Case
The Consumer Financial Protection Bureau and the Federal Trade Commission have filed an amicus brief in a Fair Debt Collection Practices Act case before the Court of Appeals for the Eleventh Circuit over the defendant charging convenience or “pay-to-pay” fees when consumers made payments by phone or online, arguing that the defendant is incorrect in stating that Section 1692f(1) of the FDCPA doesn’t apply to convenience fees and that the fees in question are permitted by law. More details here.
WHAT THIS MEANS, FROM MTCH WILLIAMSON OF BARRON & NEWBURGER: I’m convinced that once the dust clears on the recent law suits challenging lowering late fees, the next target of the CFPB will be convenience fees. A careful reading of the CFPB’s amicus brief might prove helpful to those companies that wish to charge those fees without running afoul of the FDCPA.
The CFPB’s amicus brief spends a lot of time focusing on the language of 15 U.S.C. §1692f(1) which prohibits “The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” In part because it appears that the Appellants want to argue the language does not mean what it says. Appellant’s argument that “agreement” can mean the debtor agrees to pay a fee when they use a credit card or check by phone simply ignores the plain language of the statute, i.e. “the agreement creating the debt.” There is also much discussion whether convenience fees are “incidental” to the debt. The CFPB’s brief easily points out the falsity of these arguments.
But there is something to be gained by considering those arguments as a roadmap to support charging convenience fees, which is that the collector does not collect/receive those fees. Any fee charged, is paid to the payment processor and not the collector.
Here, per the record, Appellant was charging the two plaintiffs between $7.50 and $12 for online or phone payments, and the company hired to process those payments was keeping only $0.40 of each fee. Gee, you think that might be a problem. There is a striking similarity to the rationale for the recent CFPB rule cutting late fees charged by banks down from an average of $32. to $8, where the issue of the actual costs were a major issue. And the argument that debtors don’t have to pay with a credit card online or check by phone and incur the convenience fee, rather they can mail in a check or money order with no charges is specious and ignores reality. If I’m a debtor and I want to make sure I don’t get calls, I want the quickest and most secure way of making my payments – anybody out there disagree?
The moral of the story is that you can’t make additional fees a profit center, if you do you will paint a target on your companies back and know for sure there are plenty of regulators and Plaintiff’s attorneys that enjoy nothing more than target practice.
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.