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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 Grants MSJ For Defendant in FCRA Reasonable Investigation Case
In a case that was defended by Dale Golden and the team at Martin Golden Lyons Watts Morgan, a District Court judge in Florida has granted a defendant’s motion for summary judgment in a Fair Credit Reporting Act case, determining that the plaintiff did not provide any evidence to support his claim that the defendant — a collection operation — did not conduct a reasonable investigation when the plaintiff disputed the debt. More details here.
WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: In this case, the court granted the defendant’s motion for summary judgment, focusing primarily on the plaintiff’s lack of evidentiary support. Specifically, the court found that the plaintiff’s mere reliance on his own opinion that the defendant failed to conduct a reasonable investigation, without the submission of any depositions, affidavits or declarations in support, was insufficient to support his claims. This case highlights the importance of understanding the burden of proof when filing a dispositive motion – as was the case here, the defendant was able to shift the burden to the plaintiff by pointing to the absence of evidence and exposing the plaintiff’s evidentiary shortcomings.
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Judge Partially Grants MSJ for Defendant in FCRA Case Over Dispute Investigation
A District Court judge in New York has partially granted a defendant’s motion for summary judgment in a Fair Credit Reporting Act case, ruling it did not knowingly violate the statute, but denied the motion on the grounds it recklessly violated it as a result of its dispute investigation procedures. More details here.
WHAT THIS MEANS, FROM LORAINE LYONS OF MARTIN GOLDEN LYONS WATTS MORGAN: Consumer statements in the Automated Credit Dispute Verification (ACDV) filed with the Credit Reporting Agencies (CRAs) often contain limited information. In this case, Defendant interpreted the ACDVs as disputes on whether Plaintiff ever made a late payment, instead of whether her late payment should have been reported. Consequently, the Defendant’s investigation focused on reviewing the Plaintiff’s payment history.
In one of the ACDV’s, the Plaintiff reiterated she was never late paying the account and that she had “already file[d] this to the CFPB.” The account records contained a note regarding a complaint the consumer filed with the CFPB, and the Defendant’s response included sending a tradeline deletion request to the CRAs via an automated universal data form (AUD). Since Defendant’s investigation focused on reviewing Plaintiff’s payment history, the note regarding the CFPB complaint and the Defendant’s response were not included in the investigation.
It is important to document the investigation of an ACDV and clearly define the scope of the investigation. This documentation is crucial to demonstrate that sufficient records were examined to determine the accuracy of the dispute. To help mitigate challenges to the reasonableness of the investigation, if the ACDV or account notes contain information suggesting that an external complaint has been filed, such as with regulatory bodies like the CFPB, review the relevant account records. Taking external complaints into consideration during the investigation of the ACDV may provide insight into the consumer’s dispute.
NJ Appeals Court Upholds Dismissal of Suit Against Debt Buyer
In a case that was defendant by Mitch Williamson at Barron & Newburger, a New Jersey state Appeals Court has upheld the dismissal of a class-action lawsuit against a debt buyer that was accused of unlawfully purchasing the debt of the plaintiff and others without first obtaining a business license to operate as a consumer lender or finance company as required by the New Jersey Consumer Finance Licensing Act. The plaintiff missed her chance to raise her arguments when she chose not to do so during other proceedings when the defendant filed a collection lawsuit against the plaintiff. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: Sometimes, a great defense does not rely on a nuanced interpretation of a regulatory requirement – it can be procedural, and a procedural defense that results in dismissal with prejudice is just as gratifying as a win that requires a complicated reading of a statute. In this case, the consumer plaintiff did not answer the collection complaint or move to vacate (or appeal) the judgment in her collection action. A couple years after she had her wages garnished to satisfy the judgment, the plaintiff filed this putative class action claiming that the debt buyer who sued her did not have the appropriate license in New Jersey to own and enforce her debt. Rather than focus on an interpretation of the New Jersey licensing law, the trial court decided that the plaintiff should have raised licensing as her defense in the original action. The procedural “entire controversy” doctrine requires the parties to a lawsuit to raise all claims related to their dispute in the same action. The appeals court agreed with the trial court’s decision, noting that the plaintiff appeared to have made a conscious choice to wait to file this lawsuit. The court rejected the plaintiff’s arguments about licensing (in the context of a what appears to be a poorly-worded licensing requirement) and affirmed the dismissal of the plaintiff’s claims with prejudice, ending the action.
Passive Debt Buyer Meets Definition of Debt Collector Under FDCPA, Indiana State Law, State Appeals Court Rules
This is one of those cases that when I, a non-lawyer, reads it, seems really important and something people need to pay attention to, but I’m likely glossing over or missing something that any lawyer would pick up in five seconds and point out why this case isn’t a very big deal at all. The Court of Appeals of Indiana has upheld a lower court’s ruling that determined a debt buyer that purchased a portfolio of defaulted student loans and placed an account with a collection agency meets the definition of “debt collector” both under Indiana state law and the Fair Debt Collection Practices Act. More details here.
WHAT THIS MEANS, FROM JENNA WILLIAMS OF FROST ECHOLS: The Indiana Court of Appeals ruled (among other things) that a passive debt buyer meets the definition of “debt collector” under the FDCPA. The court reasoned a passive debt buyer’s principal business purpose is the collection of debts (indirectly via a third-party collection agency or by filing lawsuits). As opposed to an original creditor where lending money is the principal purpose.
The 2024 Indiana Appeals Court was highly influenced by the 9th Circuit’s 2020 McAdory v. MNS & Associates opinion (“an entity that otherwise meets the ‘principal purpose’ definition of debt collector cannot avoid liability under the FDCPA merely by hiring a third party to perform its debt collection activities”).
This is an unfortunate decision for passive debt buyers in Indiana and across the country.
Report Ranks States Based on Consumer Debt Litigation Benchmarks
The National Center for Access to Justice has released a report and created a benchmark index that ranks each of the 50 states “on their adoption of best policies promoting fairness in consumer debt litigation” and reached the conclusion that “no state should consider that its work reforming consumer debt litigation is done.” More details here.
WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: The National Center for Access to Justice, an independent organization that makes its home at Fordham Law School, regularly releases Justice Index reports that rank states based on multiple dimensions of policy governing fairness in state legal systems. Earlier this month they released a report focused on fairness in consumer debt litigation. The NCAJ’s goal is spur progress and incentivize states to enact laws that will result in fairer treatment and outcomes for consumers and a reduction in case filings.
The Report ranks states against a set of 24 benchmarks that fall into 9 categories of goalsto: “(1) help people know when they are being sued and where to find help; (2) make it easier to respond to a lawsuit; (3) require the creditor to provide evidence of a valid debt claim; (4) require consumer debt collection actions to be brought within a reasonable time of non-payment; (5) prohibit attorneys’ fee shifting and cap interest; (6) reduce the likelihood that consumer debt collection actions will leave people homeless, impoverished, or perpetuate a cycle of debt; (7) eliminate debtors’ prison; (8) prevent government from undue intervention on behalf of creditors; and (9) collect data to improve the system.” Each benchmark is weighted based on importance, with more weight on factors that may reduce filings and default judgments.
The results? Washington D.C. scored the highest. Hawaii, Louisiana, and Montana tied for last place. Political slant had no apparent impact on rank. The Report revealed that multiple states still require a consumer defendant to notarize an Answer or pay to file it, creating barriers to responding. The majority of states still may impose jail time for contempt or missing a debtor’s examination (even without a finding a willfulness). And, only 4 states publish data on the number of consumer debt lawsuits filed, which inhibits tracking and data analysis efforts overall.
Whether this Report actually will compel low-ranking states to develop policies to help climb the ranks and encourage them to identify laws that are ripe for change is an open question. However, I can definitely see this Report being cited by the CFPB in upcoming releases that, assuming the trend continues, urge states to take more regulatory, legislative, and enforcement action. To that end, I propose a game. Drink (grab a milkshake if shots aren’t your thing) for each CFPB direct quote to the Report, and here are my top picks to watch for: (1) “[T]here is much more that is needed in all states.”; (2) “No state should consider that its work reforming consumer debt litigation is done.”; (3)“[T]he overall landscape of consumer debt litigation law is bleak.”; and (4) “[N]o state scored higher than 53 on the Index’s 100 point scale.”
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.