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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 Dismisses FDCPA Class Action With Prejudice
Seven years after the complaint was initially filed, a District Court judge in New Jersey has adopted a Magistrate Court judge’s recommendation to dismiss a Fair Debt Collection Practices Act class-action lawsuit because the plaintiffs lacked standing to sue after allegedly receiving initial collection letters that did not include the validation statement. More details here.
WHAT THIS MEANS, FROM MARISSA COYLE OF FROST ECHOLS: Plaintiffs filed a class action alleging violations of the FDCPA based upon receiving a letter without all the required 1692g language (upon the consumer’s written request within 30 days after the receipt of this notice, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor). The magistrate judge issued a Report & Recommendation recommending dismissal for lack of subject matter jurisdiction. Plaintiffs then objected to the R&R, the reviewing Court examined the R&R, and the Court adopted the R&R in full.
This case provides a detailed outline for the underlying court’s reasoning finding Plaintiffs did not have standing to pursue this matter. Ultimately, the magistrate judge determined that by simply receiving and reviewing the debt collection letters with the missing information, without more, does not confer standing. While the Court considered that intangible harm can create the basis for standing, Plaintiffs simply argued that violating 1692g gives rise to a concrete harm without demonstrating any additional harm. The magistrate judge did not buy this argument.
The reviewing court addressed the issue of whether Plaintiffs alleged a sufficient informational injury. The Court determined Plaintiffs failed to allege any adverse effects resulting from the “informational injury.” Even though Plaintiffs alleged they could have availed themselves of the right to request the name and address of the original creditor, Plaintiffs did not allege they would have done so. This was an important distinction for the Court.
Pay close attention to the language a plaintiff uses in his/her complaint as language choice (could have versus would have) can create a strong argument for lack of Article III standing.
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Judge Denies Competing Motions for Sanctions in FDCPA Case
A District Court judge in Illinois has denied competing motions for sanctions against the attorneys representing the plaintiff and the defendant in a Fair Debt Collection Practices Act case after the plaintiff’s attorney purportedly continued to prosecute the case after it became clear the plaintiff lacked standing and because the defendant’s sanctions motion was meritless. More details here.
WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: While it is common for clients to want to seek sanctions, it is uncommon for such motions to be granted even in cases in which it is clear that the consumer, or his or her attorney, acted improperly. Motions for sanctions often result in throwing “good money after bad money”, which was unfortunately the case in this decision, where the motion for sanctions was denied, even though the Court understood the defendant’s frustration. While this case may be a cautionary tale, it should not serve as a deterrent for debt collectors when considering whether to seek sanctions against consumer attorneys who continue to push baseless claims.
Judge Grants MSJ For Defendants in FCRA Claim, But Denies Motion on FDCPA Claim
In a case that was defended by Dale Golden and the team at Martin Golden Lyons Watts Morgan, a District Court judge in Alabama has granted a defendant’s motion for summary judgment that it did not violate the Fair Credit Reporting Act in how it conducted investigations of the plaintiff’s disputes, but denied the defendant’s motion that it violated the Fair Debt Collection Practices Act over how it dealt with accounts where identity theft was alleged. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: This interesting case involves both FCRA and FDCPA claims related to identity theft. There is more to come, because the court denied the collection agency’s motion for summary judgment on the FDCPA claims, finding that there were questions of fact related to the agency’s bona fide error defense. But first, the FCRA claims: the consumer claimed that someone opened a DirecTV account using her name, social security number and date of birth, and then did not pay for the service. The facts of this case are important to data furnishers, but they are too extensive for this summary (and we commend you to them). The short of it is that the facts established that when the agency furnished data on the account to the consumer reporting agencies and flagged the account as disputed because of the consumer’s claims of identity theft, the agency was operating on the information in its possession following a dispute investigation by the creditor (who told the agency that the debt was valid). The consumer’s FCRA claims failed because she did not demonstrate that the agency would have identified the inaccurate reporting if it had conducted an independent reasonable investigation into her claims of identity theft. The agency’s efforts and reliance on the creditor’s information were enough under the FCRA, especially because the agency reported the account as disputed. With respect to the FDCPA claims, the agency asserted the bona fide error defense and almost got there in the motion for summary judgment. The FDCPA claims survived summary judgment because the facts had not (yet) established that the agency had pre-collection procedures reasonably adapted and sufficient to identify accounts opened as a result of identity theft. Important to the denial of summary judgment for the agency was the fact that the plaintiff’s phone number and address were nowhere on the account opened with her name, social security number and date of birth – implying that the agency should have noticed that in the pre-collect review of the account. The agency may still prevail, but the court is looking for additional facts related to the bona fide error defense.
Judge Grants MSJ for Defendant on 8 of 9 Claims in FDCPA Case
A District Court judge in Pennsylvania has granted a defendant’s motion for summary judgment on seven of the nine violations of the Fair Debt Collection Practices Act it allegedly committed, denying the motion on the other two counts because the defendant failed to discuss one of the claims in its motion and because the judge said she was unable to make a credibility determination at this stage of the proceeding, regardless of how “dubious” the plaintiff’s testimony may have been. More details here.
WHAT THIS MEANS, FROM LORAINE LYONS OF MARTIN GOLDEN LYONS WATTS MORGAN: This case illustrates the expense and challenges of defending against a Pro Se litigant who disregards procedural rules and asserts multiple claims in hopes that some may succeed. The Plaintiff brought several claims under the FDCPA as well as claims under various federal and state statutes. The Defendant was successful in its motion except for the 1692e(2)(A) claim. Despite the Court recognizing the questionable nature of the Plaintiff’s testimony, it could not make credibility determinations during summary judgment, leading to a factual dispute regarding the 1692e(2)(A) claim. The case is now headed toward mandatory arbitration.
CFPB Notes Issues With Collectors Not Investigating Disputes
The Consumer Financial Protection Bureau has once again put credit reporting square in its crosshairs, focusing exclusively on the practice in its latest Supervisory Highlights report. While the headline to the CFPB’s press release and the quote from Rohit Chopra mentioned the implications for victims of human trafficking, the report identifies deficiencies in how furnishers and the credit reporting companies are complying with the Fair Credit Reporting Act. More details here.
WHAT THIS MEANS, FROM JONATHAN FLOYD OF TROUTMAN PEPPER: The Supervisory Highlights’ focus on consumer reporting issues was likely influenced by the CFPB’s recently published Consumer Response Annual Report, which reflects that consumer reporting was the most-complained-about financial product or service in 2023 – accounting for more than 81% of all consumer complaints sent by the CFPB to companies for review. Debt collectors should understand that, although credit reporting remains a valuable collections tool, it increasingly draws the attention of the CFPB, FTC, and consumer attorneys across the country. Debt collectors should report, investigate, and thoroughly document direct disputes from consumers, even when the ultimate result will be tradeline deletion.
Judge Grants MSJ For Defendant in FDCPA Case Over Communications After Cease Request Made
A Magistrate Court judge in Maryland has granted a defendant’s motion for summary judgment in a case that related to how to communicate with a consumer who has ceased communications with a collector, only for the collector to have another separate debt placed with it for the same individual. More details here.
WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER BURNETTE: In a lot of ways, when Reg F green-lighted the use of email and text in the debt collection process, it also hit the “reset” button as far as court precedent goes. Fortunately, the foundation to make new precedent is solid, especially in the context of claims that aren’t dependent upon the communication method. The trick going forward is going to be convincing the court that old logic applied to old methods of communications — like letters — apply just as well to texts and emails. This case was the perfect opportunity to do just that—Plaintiff’s text was no different than an old-school letter asking the debt collector that it cease communications regarding a debt, not all debts. Also key to victory in this case was the fact that the text that started it all — the text from Resurgent to Mr. Evans—conspicuously identified the account with which it was concerned, which undermined the Plaintiff’s ability to argue it was somehow unclear. From start to finish, the facts of the case lent themselves perfectly to summary judgment, and hopefully began construction of a new foundation for similarly beneficial case law to come.
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.