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.
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 Denies MTD in FDCPA Case Over Texts Sent to Wrong Individual
A District Court judge in Texas has denied a motion to dismiss filed by the defendants in a Fair Debt Collection Practices Act and Telephone Consumer Protection Act case, ruling the plaintiff — who received three text messages from one of the defendants that appear to have been intended for someone else — has standing to sue. More details here.
WHAT THIS MEANS, FROM MIKE FROST OF FROST ECHOLS: This matter was filed in the Southern District of Texas alleging that the plaintiff received “numerous text messages over a short period of time” in violation of the Telephone Consumer Protection Act (TCPA), the Fair Debt Collection Practice Act (FDCPA), and the Texas Debt Collection Act (TDCA). As a result of the alleged numerous text messages received by plaintiff, she allegedly suffered invasion of privacy, aggravation, exhaustion of time and expenses contacting an attorney, and emotional distress with physical manifestations including increased blood pressure. Defendants provided an example of one (1) of the three (3) total text messages that were sent to the plaintiff, which were attempts to contact an unrelated person that owed a credit card debt. The Defendants filed a Motion to Dismiss (MTD) under Rule 12(b)(1) and 12(b)(6).
Under Rule 12(b)(1) the Defendants contended that both the FDCPA and TCPA allegations must be dismissed for lack of Article III standing. The Court was not convinced that the Plaintiff was wholly without standing stating that “While Plaintiff’s claim that she suffered emotional distress as a result of receiving a text message is weak, it is at least colorable.” The Court found that Plaintiff has standing and denied the Motion to Dismiss on this count.
Under Rule 12(b)(6) the Defendants urged the Court to dismiss the Plaintiff’s TCPA claims identifying that liability only exists for unsolicited text messages when the sender utilizes certain regulated technology, namely an automated telephone dialing system (ATDS). Defendants move to dismiss since Plaintiff failed to state a claim upon which relief can be granted because Plaintiff did not allege that Defendant used said regulated technology. The Court found that Plaintiff did allege that Defendants used technology regulated by the TCPA, suggesting that “the lack of Plaintiff’s obligations or connection to the debt at issue illustrates that Plaintiff’s cellular telephone number was roped into Defendant’s collection efforts through technology and calling processes that are prohibited by the TCPA.”
As an industry, we have seen success on an early-stage MTD under the TCPA when human intervention technology was used on outbound phone calls. Utilizing a similar system on text messaging, known as peer-to-peer (P2P) text messaging platforms will provide a similar early-stage option for dismissal argument. Furthermore, the Federal Communications Commission (FCC) provided a declaratory opinion regarding P2P text messaging platforms, opining that P2 text messaging platforms are not an ATDS under the TCPA. Utilizing a systems or infrastructure that has been previously determined to not be an ATDS under the TCPA by a court of law or a federal agency with regulatory authority over the specific statute, may assist in an early-stage MTD and greatly reduce monetary exposure, especially with wrong number text message communication attempts.
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Judge Denies MTD in FCRA Case Over Disputed Debt
A District Court judge in North Carolina has denied a defendant’s motion to dismiss a Fair Credit Reporting Act suit, ruling the plaintiff’s inability to subsequently get approved for an apartment sufficient for her to have standing, and questioned the defendant’s dispute investigation process is enough to keep the case alive. More details here.
WHAT THIS MEANS, FROM BRENDAN LITTLE OF LIPPES MATHIAS: Defendant-Debt Collector moved to dismiss Plaintiff’s cause of action pursuant to the Fair Credit Reporting Act (FCRA) arguing that the Court lacked subject matter jurisdiction and that Plaintiff failed to state a claim. Plaintiff’s Complaint contends that she and her ex-boyfriend applied for an apartment together, but by the time came for Plaintiff to sign the lease, Plaintiff had separated from the boyfriend. Plaintiff neither signed the lease nor lived in the apartment, but Plaintiff’s name was used on utility bills. The owner of the apartment complex placed the past due debt with Defendant and Defendant began furnishing data to Trans Union. In March 2023, Plaintiff applied for a credit card, but was denied credit citing her credit history. In October 2023, Plaintiff disputed the tradeline with Trans Union, which was reaffirmed as accurate. In December 2023, Plaintiff disputed the debt with Trans Union a second time and the tradeline was then removed in January 2024. In rejecting Defendant’s standing argument, the Court found the Complaint alleged an injury in fact and the Plaintiff’s injury could be traceable to Defendant at this stage in the case. As for the merits, the Court rejected Defendant’s statute of limitations argument because the FCRA cause of action accrues when Defendant purportedly failed to properly conduct a reinvestigation, not when Plaintiff discovered the tradeline on her credit report. Finally, the Court determined while the tradeline was eventually deleted in response to the December 2023 dispute, Plaintiff’s Complaint still alleges that Defendant improperly reaffirmed the account as a result of the October 2023 dispute and the reasonableness of an investigation is normally reserved for the trier of fact.
ACA International Sues CFPB Over Medical Debt Collection Guidance
For the second time in less than a month, ACA International has filed a lawsuit, this time accusing the Consumer Financial Protection Bureau of an “overtly political act” and overstepping its authority by issuing a rule couched in its October 1 Advisory Opinion related to the collection of medical debt. More details here.
WHAT THIS MEANS, FROM NICK PROLA OF BASSFORD REMELE: The CFPB’s October 1st Advisory Opinion on the “Deceptive and Unfair Collection of Medical Debt” is framed as a reminder to debt collectors of their obligation to comply with the FDCPA. In challenging the Advisory Opinion, the ACA and its members highlight that the CFPB is attempting to change the rules of the game for medical debt collection without engaging in the legislative process. ACA raises fair questions regarding the political motivation and timing of the Advisory Opinion, but it’s the CFPB’s apparently new interpretations of the FDCPA which cause the most concern and where ACA makes its strongest arguments. For example, impossible new standards for account substantiation and requiring debt collectors to determine the ultimate enforceability of a particular medical bill prior to collections leaves agencies with a Hobson’s choice. The Advisory Opinion also contradicts decades of case law and reinterprets “default” under the FDCPA, essentially eliminating any real meaning of the term, for the purpose of regulating thousands of billing companies who are not engaged in debt collection. The impact of the election and just how the new administration will react to ACA’s litigation has yet to be seen. All medical billing and collection companies should be watching this litigation closely.
Judge Denies FDCPA Claim in Elaborate Fraud Case
Before diving into the details, I originally decided to write about this ruling because I thought it would be helpful to detail the lengths to which the scammer went in this situation and how it’s not always the uneducated or unsophisticated who get taken advantage of. But on top of that, there is a Fair Debt Collection Practices Act angle to the case, too. A District Court judge in Pennsylvania has denied a credit union’s motion to dismiss a claim that it violated the FDCPA after the plaintiff was scammed out of nearly $5,000, ruling that the credit union could potentially be liable under the FDCPA because of its role in attempting to collect on a fraudulent debt. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: Hedden was the victim of a telephone scam that resulted in the transfer of $5000 from her credit union account. Hedden detected the fraud and alleges she contacted the credit union but it declined to stop the transfer. Plaintiff then filed a nine count complaint about the credit union and the “John Doe” scammer.
The last count in the complaint alleged an FDCPA claim. It raised a relatively obscure section of the Act. Hedden alleged the credit union’s payment withdrawal was from a debt collecting subsidiary. The FDCPA count relied, in part, on 15 U.S.C. § 1692(a)(6) where a creditor uses “any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.” In denying the motion to dismiss, the court said the theory was plausible.
The case highlights a section of the Act that does not come up very often and the relatively low bar to assert a plausible theory. We’ll see if the claim survives a summary judgment motion.
Judge Awards Attorney’s Fees to Both Sides in FDCPA Case
A District Court judge in Florida has been forced to rule on competing motions for attorney’s fees in a Fair Debt Collection Practices Act case in which both sides are claiming victory, ruling partially in favor of both the plaintiff and the defendant. The judge decided that the plaintiff is entitled to recover some attorney’s fees, while the defendants are also entitled to recover some costs, but only after a particular offer of settlement was made. More details here.
WHAT THIS MEANS, FROM ISSA MOE OF MOSS & BARNETT: This is a case of competing requests for fees and costs by a plaintiff and the two defendants he sued: a condo association and the debt collector it hired to collect fines from the plaintiff. While fee petition fights aren’t rare in our industry given the FDCPA’s fee shifting provisions, we don’t always get a front-row seat to a true Battle Royale. But this one had it all: offer of judgment (OOJ) for a hair above full statutory damages ($2,002, to be exact) that wasn’t accepted; trial resulting in a judgment that was just a hair under the OOJ ($2, to be exact); and cross-motions for fees and costs after trial by the plaintiff (under the fee shifting provisions of the FDCPA and Florida state statute) and the defendants (under the cost shifting provision of Rule 68 of the Federal Rules of Civil Procedure and the FDCPA’s bad-faith fee shifting provision). Quite the showdown!
So, who won this fight you ask? The plaintiff sort of won. He was the prevailing party against the debt collector because he recovered full statutory damages of $2,000 ($1,000 federal + $1,000 state). And since he was the prevailing party, he was able to recover his attorneys’ fees for the entire litigation from the debt collector.
The debt collector sort of won as well. The judgment was less than the OOJ, so the debt collector was able to cut off the plaintiff’s costs after service of the OOJ. And it could also recover its costs from the plaintiff after service of the OOJ. Unfortunately, however, the court found that under Circuit case law, Rule 68 OOJ’s do not serve to cut off attorneys’ fees in addition to costs given the FDCPA’s treatment of costs as a separate item from fees. As a result, the debt collector was on the hook for the plaintiff’s attorneys’ fee tab for the entire litigation. Ouch!
Finally, the condo association walked away with a victory. While the plaintiff got a judgment against the condo association, it was for $0. The court did not view the plaintiff as a prevailing party against the condo association on a $0 judgment. So, if that’s true, then the condo association must have been the prevailing party against the plaintiff, right? And if it was, it would’ve been entitled to its fees from the plaintiff under the association’s governing documents. Nope, the court called this one a tie. No fee shifting for either combatant in this mini-battle as a result.
Now back to the original question, who came out victorious in this war? Well, if you’re a fan of classic movie flicks like I am, this quote might ring true: “Sometimes when you win, you really lose. And sometimes when you lose, you really win. And sometimes when you win or lose, you actually tie. And sometimes when you tie, you actually win or lose. Winning or losing is all one organic mechanism, from which one extracts what one needs.” Thanks, Rosie Perez (aka Gloria). You nailed 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.
