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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.
Appeals Court Affirms Attorney Fee Award for Plaintiffs in FCRA Case Over Defendant’s ‘Burdensome’ Subpoena
The Court of Appeals for the Eighth Circuit has affirmed a lower court’s ruling awarding $93,243.50 in attorney fees and costs to the plaintiffs in a Fair Credit Reporting Act suit, arguing the defendant went too far with its discovery requests and for not taking reasonable steps to reduce the burden on the plaintiffs. More details here.
WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: Parties to litigation have the ability to issue subpoenas to non-parties to compel the production of documents and the testimony of witnesses. However, this power carries with it the duty to ensure that a subpoena does not impose an undue burden. In this case, a credit-reporting agency defending an FCRA case issued subpoenas to a consumer law firm to determine whether that firm was acting as a credit-repair organization and to learn about its process for creating and sending dispute letters on behalf of consumers. The consumer law firm sought protection in its local federal district court, which found that the subpoenas were unduly burdensome because they sought privileged information related to many of the firm’s clients and further found that this information was not relevant to the underlying FCRA case. The court then awarded attorneys’ fees incurred by the law firm in opposing the subpoenas, and the district court’s ruling and fee award was upheld by the Eighth Circuit on appeal.
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Judge Rules Debt Buyer Vicariously Liable for Actions of Collection Law Firm in FDCPA, RFDCPA Case
A District Court judge in California has denied a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act and Rosenthal Fair Debt Collection Practices Act case, ruling that the debt buyer defendant had the right to control the actions of the collection law firm defendant and can be held vicariously liable under the RFDCPA, while also partially granting the plaintiff’s motion for summary judgment that the collection law firm defendant meets the definition of a debt collector under the Rosenthal Act. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW & CULBERTSON:This case presents a fairly common scenario and at least one important issue. Here, the debt buyer referred an account to a law firm, who filed a collection lawsuit. The firm mistakenly communicated with the plaintiff while she was represented by counsel. In the subsequent consumer lawsuit, there were cross motions for summary judgment and the court made many rulings, concluding that there were issues of fact to be decided at trial.
One issue for trial is whether the debt buyer can be held vicariously liable for the collection law firm’s alleged FDCPA violation: “the Court finds that a reasonable jury could find that Velocity had the right to control MLG’s conduct in this case, and thus, can be held vicariously liable under the Rosenthal Act.”
Many of us have litigated vicarious liability. It seems the trend is to recognize the concept in an FDCPA (or Rosenthal Act) claim. This seems unreasonable. The FDCPA is a strict liability statutory law. It provides that the debt collector can be liable regardless of intent, negligence, etc (with few exceptions). The debt buyer was not the debt collector and it took no action in violation of the Act, yet it still faces exposure.
Vicarious liability comes out of tort and agency law – not strict liability statutory law. It should have no place in the FDCPA. The defense bar needs to continue to push this issue and preserve it for appeal. The “ship may have sailed” in some jurisdictions but there still are opportunities to prevail on the theory.
Judge Grants MTD in FDCPA Case Over Whether ‘Not a Good Time to Talk’ Made Future Calls Inconvenient
In a case that was defended by the team at Martin Golden Lyons Watts Morgan, a District Court judge in Oklahoma has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act case, ruling the defendant did not violate the statute when it contacted the plaintiff and left a voicemail at roughly the same time of day that the plaintiff had previously indicated that it wasn’t “a good time to talk.” More details here.
WHAT THIS MEANS, FROM NICK PROLA OF BASSFORD REMELE: Kudos to the agency and defense counsel for choosing to fight this case. The dismissal ruling expands upon the commonsense authority that holds calls to a consumer’s cell phone are not calls to a place of employment. The consumer’s statement that they were “at work[,] and it’s not a good time to talk” does not relay any prospect of future inconvenience. Agencies should not be expected to read a consumer’s mind or make assumptions about convenience, other than the time restrictions specifically outlined in the FDCPA or relevant state law. The court astutely observed that these calls were not so inconvenient that the consumer was unable to return the agency’s phone call at the same time of day the collection calls were received.
Still, this is a cautionary tale that can be used to train collectors on potential baiting calls and active listening. Though the agency clearly did nothing wrong here, this nuisance litigation may be avoided through a conservative approach to consumers that relay any inconvenience or a desire for phone calls to cease.
Judge Denies Motions in FDCPA Case That is Getting Personal
A Magistrate Court judge in Utah is calling for civility and professionalism from both sides in a Fair Debt Collection Practices Act case, noting that arguments between the two sides is getting personal. Despite the bad feelings, the judge denied motions from both sides — a motion for sanctions filed by the plaintiff and a motion from the defendant for a protective order limiting the scope of discovery during a deposition. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: The judge in this case effectively called the competing motions – one for a protective order limiting discovery and the other for sanctions based on counsel’s performance at a deposition – a push, and told the lawyers to behave themselves. This is not a typical debt collection or FDCPA case. The consumer plaintiff is suing a Utah constable, whose public duties typically involve serving papers and skip tracing, for alleged FDCPA violations in connection with the constable’s efforts to collect a debt from the plaintiff. Counsel for the constable did not want to allow discovery about the constable’s typical debt collection work and attempted to limit discovery to the constable’s efforts to collect specifically from the plaintiff in this case. But the Magistrate Judge noted that because there was a threshold question about whether the constable was a “debt collector” as defined in the FDCPA, the plaintiff could seek discovery (including deposition testimony) designed to elicit information related to that question. And counsel for the plaintiff wanted sanctions for the frequent and numerous objections from counsel for the constable during the deposition for the constable, but the judge noted that it was not out of line to object in good faith when counsel believed the line of questioning related to the constable’s broader collection activity went too far.
This Order tells the parties to get back to work and denies both motions, but with an admonition for counsel to comply with the Utah Standards of Professionalism and Civility – evidently a second such admonition to counsel who appear to be getting on each other’s nerves. Sanctions may be coming if that conduct continues, but there could also be some interesting decisions about how a public official’s collection conduct can exceed her or his official duties and make the otherwise exempt official a “debt collector” subject to the FDCPA. Stay tuned.
California Legislature Sends Medical Debt Credit Reporting Bill to Governor for Approval
California is poised to become the eighth state to ban medical debt from appearing on credit reports, pending Gov. Gavin Newsom’s signature. Both houses of the state legislature have passed SB 1061, although there were some amendments, to the disappointment of the bill’s sponsor, that changed how medical debt is defined under the proposal. More details here.
WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: This legislation by California on the proposed banning of credit reporting of medical debt is typical of trend in California for overbroad legislation allegedly designed to protect consumers. It is now in the hands of the California Governor. It is likely he will sign the bill into law. If and when passed, it will be the eighth state to ban reporting of medical debt to the national credit bureaus. The effective date of the California legislation is: January 1, 2025.
The Cal. Assoc. of Collectors, in addition to other trade groups, fought this battle valiantly and sought concessions that were balanced for both consumers and health care providers. The impact of this legislation on health care providers will be staggering.
On June 11, 2024, the Consumer Financial Protection Bureau (CFPB) proposed a rule to amend the Fair Credit Reporting Act (FCRA) by removing medical debt from most credit reports. The proposed rule is not that far off from the CA legislation and that of seven other states who have enacted similar legislation. Unfortunately, the trend is riding a wave.
This is why we need to continue strong advocacy on every level to seek to combat dangerous legislation. We may not always prevail, but at least we will have a seat at the table and our voices will always be heard. Semper fi.
Supreme Court Opts Not Intervene in Latest Student Loan Forgiveness Attempt
The Supreme Court yesterday rejected the Biden administration’s request to temporarily reinstate its new student debt relief plan, dealing another blow to the White House’s efforts to provide widespread loan forgiveness. The Supreme Court upheld an order he obtained from the Court of Appeals for the Eighth Circuit, which blocked the Biden-Harris administration’s attempt to implement its Saving on a Valuable Education (SAVE) plan. A group of state Attorney Generals — all Republicans — filed suit against the government, accusing it of overstepping its authority by creating the SAVE plan. More details here.
WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: The United States Supreme Court’s (“SCOTUS” or the “Court”) decision to bar the latest attempt by the Biden Administration to forgive student loan debt is not unexpected. The high Court has been clear that debt forgiveness cannot be unilaterally granted by the Executive Branch without going through the appropriate administrative process. Previously, in Biden v. Nebraska, the Court ruled that the Administration overstepped its authority to utilize the HEROES Act, a law passed in the wake of the Sept. 11th that gives the secretary of education the power to respond to a national emergency by waiving or modifying any statutory or regulatory provision governing the student-loan programs. In response to that decision, the Administration implemented another rule, the SAVE Plan, an effort to provide loan forgiveness and debt relief, by modifying a borrower’s “discretionary” income (which is used to determine the repayment amount) from 10% to 5%, among some other provisions.
Although not articulated in the one-page unsigned order, it is not unreasonable to think that the recent decision in Loper-Bright as well as prior decisions under the Major Questions Doctrine made SCOTUS’s decision a simple one. The Court has been clear in its disfavor with administrative agencies and the Executive branch taking liberties beyond what the law provides. The Administrative Procedures Act requires a period of notice and comment, a clear cost-benefit analysis and a mandate against the promulgation of rules that are arbitrary and capricious. While student debt relief is an important priority, adherence to the process is equally important. Expect to see this continued push-pull between all three branches of government to continue well beyond the current election cycle. In the meantime, consumers as well as industry participants who assist student loan servicers remain in state of flux and confusion while both sides try to score political points.
Judge Grants MTD in FCRA Case Over Missed Payments
A District Court judge in California has granted a defendant’s motion to dismiss a Fair Credit Reporting Act lawsuit, ruling that the plaintiffs failed to establish the necessary elements to proceed with their claims after accusing the defendant of inaccurately reported delinquent payments on a loan used to purchase a recreational vehicle (RV), which led to negative marks on the plaintiffs’ credit reports. More details here.
WHAT THIS MEANS, FROM DALE GOLDEN OF MARTIN GOLDEN LYONS WATTS MORGAN: The plaintiffs traded their old RV in for a new one and believed their obligations for the traded-in RV had been satisfied as a result of the purchase of the new RV. The lender/defendant didn’t share that view and credit reported the debt. When the plaintiffs disputed with the CRAs, the lender/defendant confirmed the accuracy of its credit reporting. In response to the plaintiff’s FCRA complaint, the defendant moved to dismiss arguing its credit reporting was accurate because the complaint admitted the plaintiffs failed to make payments, claiming they weren’t due. The court rejected the plaintiffs’ argument in response and labeled it “misleading” because the plaintiff’s claimed that the required payments had been made. The victory for the defendant turned pyrrhic, however, when the court granted the plaintiffs leave to file an amended complaint. My takeaway here is that patience is often the better part of valor. The wiser choice for the defendant may have been to wait until the amendment to pleadings deadline passed and then, file a motion for judgment on the pleadings. That may have resulted in the dismissal being with prejudice.
Judge Grants MTD in FDCPA Case, Rules Defendant Not Collector
A District Court judge from the District of Columbia has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act case, ruling that the plaintiff’s claims were insufficient to meet the legal standards required under the FDCPA. More details here.
WHAT THIS MEANS, FROM NABIL FOSTER OF BARRON & NEWBURGER: Although this 5-page court opinion may itself be as useful as a square-wheel, it is a very good reminder that good legal advocacy matters. This court opinion turns on the meaning of what has been appropriately called a “thorny section of statutory text,” i.e., the definition of “debt collector” under 15 U. S. C. §1692a(6). Obduskey v. McCarthy & Holthus LLP, 586 U.S. 466, 481 (2019). The 5-page opinion in Knight v. Exeter Finance LLC, No. 23-cv-2850 (D.D.C. Aug. 20, 2024) is the result of good advice to remove the case, subject to appropriate Article III standing for removal, to a Federal Court where the defense’s arguments, about the grammatically complex statutory definition, would be more likely to succeed. It also helped that the plaintiff was pro se and the debt was not in default when the installment contract was assigned to a new owner.
Retailers Making Millions on Cash Back Fees: CFPB
Consumers are paying “tens of millions” of dollars in fees to “access their own money” when getting cash back at retail operations, according to a report released yesterday by the Consumer Financial Protection Bureau. The CFPB estimates that three retailers are making as much $90 million in cash back fees, and that companies are significantly marking up the margin between what it costs them to process the transaction and what they are charging consumers. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER: In taking aim at retailers’ cash access fees, the CFPB continues its long-standing objection to businesses profiting from providing fee-based services at amounts the CFPB thinks are disproportionate to what it actually costs each business to provide those services. The CFPB’s message is clear – profiting from consumer fees remains highly disfavored and will be scrutinized in all circumstances. That doesn’t mean no fees can be charged, but businesses are well-advised to be prepared to directly correlate the fee to the actual cost of the service or not offer it at all.
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.
