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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.
Bill Banning Social Media Debt Collection Passes N.Y. Legislature
A bill is before New York Gov. Kathy Hochul, that if signed, would prohibit the use of social media platforms to collect debts, for creditors or the collection agents working on their behalf. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER: A significant impact of this proposed legislation is the ban against using any information on a public or semi-public social media website for any collection purpose – including skip tracing activities or seeing who is connected to the consumer. Essentially, New York seeks to change the rules on how information that consumers knowingly and intentionally put out into the public domain can be used, while ignoring that such information is routinely used for a multitude of other things, like background checks, job and college applications, and so forth. Consumers can also make their online profiles private and mask their connections with others. This bill does far more than is necessary to avoid the potential for problematic collection techniques. By going beyond just limiting any direct outreach to consumers via social media, it is possible this bill unfairly discriminates against collectors in a way that might support a future legal challenge?
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Appeals Court Affirms Ruling for CRA in FCRA Case, But Dissenting Opinion Says ‘Critical’ Evidence was Overlooked
Dates or dashes. What do they mean and how are they to be used in a consumers’ credit report? The Court of Appeals for the Seventh Circuit has affirmed a ruling for a defendant — one of the credit reporting agencies — that was sued for violating the Fair Credit Reporting Act because it allegedly reported inaccurate late payments on the plaintiff’s credit report, although a dissenting opinion argues that the majority overlooked and misunderstood “critical” evidence and speculated in favor of the defendant. More details here.
WHAT THIS MEANS, FROM NICK PROLA OF BASSFORD REMELE: Before we talk about dates and dashes (the Olympic Village is now closed) let’s talk about “tri-merge” reports. We’ve all seen compilations of credit reports from consumers and their attorneys, alleging that inaccuracies exist in a furnisher’s reporting based on a compilation of reports from the three credit bureaus. While easier for consumers to read and understand, these compilations are not primary sources. It’s encouraging to see the court recognize that credit bureaus and data furnishers are not necessarily responsible for the information compiled and provided by these third parties as secondary sources. When dealing with tri-merge FCRA claims, go to the actual reports created by the bureaus.
The real issue in Frazier is that the tri-merge report showed Equifax reporting “90-119 Days Past Due” for months after the date the loan was closed in a short sale – the “dates”. The court really sidesteps the inaccuracy question and finds that Equifax is not responsible for the content of the tri-merge report. Further, the court finds that the post-sale delinquencies aren’t material to the report’s readers – the loan was reported as “settled for less than total payoff”. Truthfully, Equifax should have been showing no reporting after the short sale – the “dashes”.
The dissent raises some good points in evaluating the actual reporting and attacks the majority’s review of the inaccuracy, taking issue with reporting so wrong it is not really misleading. Equifax could have (and likely should have) recognized the error in reporting dates instead of dashes upon receipt of the dispute. However, there was never a showing that such information was truly reported by Equifax.
Reliance on Frazier as to inaccuracies in reporting seems perilous. Instead, the takeaway should be that claims based on tri-merge reports should require a review of the primary reporting and be defended accordingly.
Bills Introduced in House, Senate to Amend EFTA and Boost Consumer Protections For Wire Transfers, P2P Platforms
A bill backed by Rep. Maxine Waters [D-Calif.], the Ranking Member of the House Financial Services Committee, and Sen. Elizabeth Warren [D-Mass.], among others, is being introduced in Congress that aims to amend the Electronic Funds Transfer Act to protect consumers when making payments via wire transfers and apps like Venmo and Zelle. More details here.
WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: The recent introduction of bills in both the House and Senate to amend the Electronic Fund Transfer Act (EFTA) is a significant development with far-reaching implications, particularly for the collections industry. As the financial landscape continues to evolve with the widespread use of wire transfers and peer-to-peer (P2P) platforms, the proposed amendments are set to reshape how collection agencies operate, raising important considerations about compliance, consumer protection, and the future of debt recovery.
As with any push for regulation, this means an increased focus on current processes and due diligence for collection agencies. If passed, agencies must ensure that their systems can handle these enhanced requirements, potentially leading to higher operational costs and the need for more sophisticated technology solutions. Failure to comply with these new standards could result in legal repercussions, financial penalties, and damage to an agency’s reputation.
For example, a critical aspect of the proposed amendments is the enhancement of consumer protections, especially in the context of unauthorized or erroneous transactions. Consumers will likely have greater recourse to dispute transactions, leading to more frequent challenges and potential delays in the collections process. Collection agencies must be prepared to handle an increase in disputes and inquiries, necessitating improved communication and documentation practices. Moreover, agencies may face additional scrutiny in how they manage and resolve these disputes, requiring a more consumer-centric approach to collections.
Collection agencies should begin preparing now by reviewing their current practices and fostering a culture of transparency and consumer protection. As the legislative process progresses, it will be essential for the collections industry to stay informed and engaged, ensuring that it is prepared to meet the demands of this new regulatory era.
Judge Grants MSJ For Defendant in FDCPA Case Over Business Debt
A District Court judge in Pennsylvania has granted a defendant’s motion for summary judgment, while also denying a motion for summary judgment from the plaintiff, ruling that sending a collection letter for a business debt to the plaintiff using the plaintiff’s name and not the name of the business is not a violation of the Fair Debt Collection Practices Act. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW & CULBERTSON: In Johnson v Credit Control, plaintiff had a business account with Bank of America that went into default. He claimed the debt was for consumer purposes and defendant failed to comply with the FDCPA. However, he failed to present sufficient evidence on the debt at the summary judgment stage. One of the facts he relied upon was that the collector addressed collection efforts to him as opposed to the company. That was not sufficient.
The case highlights some basic FDCPA concepts. The FDCPA plaintiff has the burden to plead and later prove: (1) plaintiff is a consumer, (2) there is a consumer debt, (3) defendant is a debt collector, (4) there is a violation of an FDCPA provision, and (5) plaintiff is entitled to some amount of statutory or actual damages. In the past few years, we can add Article III injury to the list.
The cases typically focus on #4. #2 sometimes is overlooked or is so obviously true that not much attention is paid to it. Damages are usually left to the (rare) trial, though they may be the focus of discovery if plaintiff claims actual damages.
Defendants usually deny or state insufficient knowledge about whether there is a “consumer debt.” Just because the debt is in an individual’s name is not determinative. Defense lawyers need to explore the debt further. I had a case in which the debt was in plaintiff’s name for painting equipment. In most instances that will be for a personal, family or household purpose. However, the plaintiff/debtor turned out also to have a painting business. We won by investigating the debt. This case addresses the sufficiency of evidence on the consumer debt issue, which is a less common issue than the other elements.
Judge Grants Partial Summary Judgment to Both Sides in FDCPA Case Over Judgment
A District Court judge in Nevada has granted partial summary judgment to both the plaintiff and the defendant in a Fair Debt Collection Practices Act case, ruling that while the defendant’s actions in obtaining a default judgment were improper, the subsequent attempts to collect the debt were permissible under the law. More details here.
WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: This case is particularly disturbing because despite the court acknowledging that the consumer admitted her purpose in bringing the FDCPA lawsuit was a collateral attack on the underlying state court judgment, the court allowed the FDCPA lawsuit to proceed. An example that nothing in guaranteed before a court, even when the law appears to be on a particular litigant’s side. The court tried to split the decision, by holding that the post-judgment activity was subject to the Rooker-Feldman doctrine, but that brings little solace to the defendants who are now stuck going to trial.
Judge Sanctions Plaintiff’s Attorneys for ‘Campaign of Deception’ Related to Dispute Letter Forgeries
When writing summaries of legal rulings, I usually try to find a quote from the judge, to either summarize the situation or provide color or because what the judge wrote was funny or clever. When it comes to the ruling you’re going to read about in this case, though, I want to just copy and paste all 16 pages of it. A District Court judge in Pennsylvania has ordered the attorneys representing a pair of plaintiffs in Fair Debt Collection Practices Act cases to pay all of the attorney’s fees, expenses and costs for the defendant, calling out the attorneys for engaging in a “campaign of deception designed to line their own pockets” by handwriting “stream-of-conscience” dispute letters on behalf of clients. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: This opinion is a gratifying read for industry lawyers. The plaintiffs’ attorneys were up to no good: they had their staff handwrite vague letters to PRA and buried some arguable dispute language in the body of these odd handwritten letters. The staff signed the letters on behalf of the consumers. The Memorandum and Order describe a clear, bad-faith attempt to set PRA up to miss the arguable dispute language and then sue them for failure to honor the dispute. The judge saw right through it and rung the plaintiffs’ attorneys up for their bad faith and ordered them to pay PRA’s attorneys’ fees (all of them – she was very clear about that). And having called the attorneys out for their “unscrupulous” tactics (she describes these tactics in detail and rightfully states in the opinion that the absurdity of the situation described in the case might be humorous “were the subject matter less serious.”), the judge requires them in the Order to write a written apology to the plaintiffs and attach a copy of the Order. She also requires the attorneys’ law firm and its lawyers to attach a copy of the Order to every case filed in or removed to, the U.S. District Court for the Western District of Pennsylvania. That all sounds like the appropriate result. And I might have a new favorite Pennsylvania judge.
Judge Denies Motion to Compel Arbitration in FDCPA Class-Action
A District Court judge in Connecticut has denied a defendant’s motion to compel arbitration in a Fair Debt Collection Practices Act class-action lawsuit, ruling the defendant — a debt buyer that purchased the account from the original creditor — did not have specific documentation reflecting the assignment of the plaintiff’s account. More details here.
WHAT THIS MEANS, FROM MARISSA COYLE OF FROST ECHOLS: If you want to push a matter into arbitration based upon an agreement between a consumer and original creditor (and you are not the original creditor), you should consider providing more than the Bill of Sale and Assignment and an accompanying Declaration to support your position. You need to show the Court you were assigned the right to enforce the arbitration clause at issue.
In this case, the Court found that while the Bill of Sale and Assignment stated the terms and conditions of the Master Purchase and Sale Agreement provided for the transfer, sell, assign… of the Accounts, the actual Master Purchase and Sale Agreement was not provided. Therefore, the Court could not determine what rights related to the arbitration provision were actually assigned. As a result, the Court denied the Motion to Compel Arbitration (without prejudice, at least).
Help the Court meet the two-part test to determine whether you can arbitrate a matter: 1) Do the parties have a valid agreement to arbitrate, and, if so, 2) does the dispute at issue fall within the scope of the arbitration provision? Provide the best evidence you can to show the arbitration agreement applies to you even though you weren’t an original party to it.
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.
