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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.
N.M. Supreme Court Rules CU Employees Engaged in Unauthorized Practice of Law When Filing Collection Suits Against Members
The Supreme Court of New Mexico has ruled that employees of a credit union engaged in the unauthorized practice of law by filing collection lawsuits to recover unpaid debts. More details here.
WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: These allegations are troubling. And it is important to remember that right now that is all that these are — allegations. The New Mexico Supreme Court decision was based on an appeal stemming from a motion to dismiss where the court must accept all allegations by the plaintiff as true.
To the extent they are true, the law in New Mexico seems clear that corporations cannot act on their own and must have an attorney to represent them in court. The credit union in this case was having employees who lacked a law license file these actions. It serves as a good reminder that while the credit union may able to keep these legal actions in house, the person filing them must still be an attorney.
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Judge Rules Health Insurer Must Face Collection Suit
A District Court judge in Florida has ruled that a defendant — a health insurance company — must face claims it failed to make appropriate payments to healthcare providers who subsequently assigned their claims to the plaintiff, Healthcare Ally Management of California, LLC, denying the defendant’s argument that the plaintiff needed to be licensed as a debt collector in the state in order to pursue its claim. More details here.
WHAT THIS MEANS, FROM XERXES MARTIN OF MARTIN GOLDEN LYONS WATTS MORGAN: Creative argument by the defendant here. In short summary, out-of-network medical providers provided medical services to patients. Since the medical providers were out-of-network, there was no contract between them and the patients’ insurer. However, it is customary the insurers pay reasonable or customary value to the medical providers so their insureds receive the services and benefits. These medical providers then got paid pennies on the dollar so they sued the heath insurer under a negligent misrepresentation theory, that they were suppose to be paid fairly. It reminds me of Disney’s brief attempt at enforcing its streaming service’s arbitration clause over a wrongful death suit. The Court aptly wiped out the consumer debt collector licensing theory with this great line—“It goes without saying that a large insurance company like UHC isn’t a ‘natural person’ and that, therefore, its debts aren’t ‘consumer debts’ under this law.” So, while this court finds these business-to-business transactions aren’t subject to Florida’s collection licensing requirements, we also get to see one of the reasons heath insurance costs a small fortune.
Judge Grants MTD in FDCPA Case Over Multiple Disputes, Complaints
A District Court judge in Georgia has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act case, ruling that despite multiple disputes and complaints with the Consumer Financial Protection Bureau, the plaintiff failed to adequately state a claim for relief in the original or amended complaint. More details here.
WHAT THIS MEANS, FROM DAVID GRASSI OF FROST ECHOLS: This case highlights the importance of understanding the full picture when defending against consumer protection lawsuits. The plaintiff here may very well have had a good claim but certainly did not adequately explain that to the court. She filed an amended complaint with extensive exhibits but, critically, she failed to include sufficient factual allegations that the defendant was a debt collector under the FDCPA. The plaintiff also included vague conclusions of defendant’s supposed wrongdoing but without specifically identifying what acts defendant took in violation of the FDCPA. Ultimately, the court dismissed this for failing to state a claim and because the amended complaint represented an impermissible “shotgun pleading.” This was a “shotgun pleading” because it included numerous allegations which were vague, conclusory, and immaterial, and because it failed to separate each claimed violation into a separate claim.
The most useful take away from this case does not come from reading the opinion but, rather, comes from understanding the context. The plaintiff here was pro se. Courts will often bend over backwards to let a pro se plaintiff amend until he or she can get it right. That did not happen here. Although the court does not explain why, a search of the docket shows this same plaintiff filed a half dozen other actions, all of which were pending before the same judge. When a pro se party becomes a serial filer who may be trying to game the system, courts often become far less sympathetic to filing deficiencies. In deciding which cases to fight and how hard to fight them, it is important to take a critical look at the larger picture in addition to the case at hand.
CFPB, CMS Issue Guidance on Collecting from Certain Medicare Recipients
The Consumer Financial Protection Bureau and the Centers for Medicare & Medicaid Services yesterday issued a joint statement reminding and warning companies in the credit and collection industry that millions of low-income Medicare recipients, known as Qualified Medicare Beneficiaries (QMBs), are protected by federal law from being charged for Medicare cost-sharing, such as co-pays and deductibles. More details here.
WHAT THIS MEANS, FROM ARI DERMAN OF CLARK HILL: With this CFPB and CMS Guidance, the longstanding “war on medical debt” continues at all levels of government, state and federal. And it remains unclear if this sentiment will change or not on the federal side under the incoming administration. This joint-guidance specifically continues the unfortunate trend of holding debt collectors responsible for upstream billing issues at providers that they cannot control. The CFPB and CMS indicate that “debt collectors may violate the FDCPA by falsely claiming that a consumer is liable for costs that are covered by states based on QMB status” and could face strict liability for attempting to collect debts that aren’t owed or for furnishing incorrect information to credit agencies. This aggressive approach disregards the traditional tenet that a debt collector can rely on the reasonable representations of its client, provided it has adequate policies and procedures to ensure that discoverable errors can be identified. It remains to be seen how this will operate in practice and what changes we might see to this edict in 2025.
Judge Rules Defendant Meets FDCPA’s Definition of Debt Collector
A District Court judge in California has denied a defendant’s argument that it does not meet the definition of a debt collector under the Fair Debt Collection Practices Act and ruled that the plaintiff’s claims can proceed. The defendant, who argued that it was exempt from the FDCPA, failed to convince the court, which found sufficient allegations that the defendant was operating as a debt collector when it attempted to collect a debt from the plaintiff. More details here.
WHAT THIS MEANS, FROM MONICA LITTMAN OF KAUFMAN DOLOWICH: The defendant in this case tried to argue on an early motion to dismiss that it was not a debt collector as defined by the FDCPA because it was a loan servicer that acquired the debt before it was in default. The court followed the rule that evidence beyond the four corners of the complaint regarding the defendant’s argument on this issue could not be considered on a motion to dismiss. When evaluating a case to see if an early motion to dismiss is appropriate, you should consider if evidence beyond the complaint will be necessary to support your argument. If the answer is yes, you will likely have to develop those facts first during discovery and then file a motion for summary judgment. It is a plaintiff’s burden to establish that a company is a debt collector as defined by the FDCPA. However, you should affirmatively put forth all of the evidence in discovery to show that your company does not meet the definition of a debt collector under the FDCPA even if Plaintiff does not specifically seek that information. You want to make sure that you have produced all of the information in discovery that you need to support this defense so you can use this information in a motion for summary judgment or at trial.
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.
