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.
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Miffed FCC Commissioner Releases Answers From Carriers Regarding Robocall Blocking Services
A month after writing to 14 different carriers seeking information on their plans to roll out automatic call blocking services for calls deemed to be robocalls, Geoffrey Starks, one of the five commissioners of the Federal Communications Commission has taken the unusual step of publishing all of the responses, most likely because he was less-than-pleased with what he heard. More details here.
WHAT THIS MEANS, FROM SCOTT WORTMAN OF BLANK ROME: The declaratory ruling issued by the FCC last month clarified that carriers and providers may deploy call blocking services by default on an opt-out basis, assuming the satisfaction of certain conditions. Recently, as reported by accountsrecovery.net, Commissioner Starks was critical of the lack of expediency in providing free and automatic opt-out call blocking services. Notwithstanding the Commissioner’s comments, the telecommunications industry has significant concerns about blocking legitimate calls – and the ARM Industry should take note.
There is a difference between illegal and unwanted calls, and a single solution to eliminating unlawful robocalls without erroneously blocking legitimate calls remains elusive. As pointed out by Century Link, “half of all [designated] robocalls are legitimate… [and] many calls cannot be authenticated at origination or received with certification at termination.” In essence, strict rules favoring automatic blocking over accurate call identification delivery information is potentially highly detrimental to the ARM Industry at large.
Fortunately, there are technologies in development that seem promising, such as issuing digital keys to legitimate callers. What’s more, carriers and service providers seemingly agree that consumers will benefit to the greatest degree once there is a definitive method of identifying illegal robocalls without improperly affecting valid traffic. Still, we shouldn’t discount the possibility of hydraulic pressure from the FCC leading to the blocking of legitimate calls. Therefore, it may be prudent for creditors to consider contractual provisions to secure irrevocable whitelisting. While not directly on point, this is somewhat analogous to the 2nd Circuit’s determination that “the TCPA does not permit a consumer to revoke its consent to be called when that consent forms part of a bargained for exchange.” Reyes v. Lincoln Auto. Fin. Servs., 861 F.3d 51, 57 (2d Cir. 2017), as amended (Aug. 21, 2017).
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Consumer Groups Seek Two-Month Comment Period Extension For Proposed Debt Collection Rule
A group of consumer advocacies have written to the Consumer Financial Protection Bureau seeking a two-month extension for the comment period to the agency’s proposed debt collection rule, arguing the complexities of what has been proposed, the wide variety of individuals who will be impacted by the proposal, and other CFPB initiatives seeking input taking up a lot of the groups’ bandwidth necessitate an extension of the comment period. More details here.
WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: The request by leading consumer advocates for a 60 day extension of the comment period for the proposed debt collection rule should be met with suspicion from industry. The advocates’ reasoning behind the request is even more suspect.
In their letter to the Consumer Financial Protection Bureau (CFPB or Bureau) dated July 9, 2019, the advocates expressed concern that due to the “lengthy and complicated proposal” it will be difficult and impossible to do an adequate job responding. However, the advocates have recently handled more. The length and density of the Notice of Proposed Rule (NPR) pales in comparison to the Payday rule which was well in excess of 2,000 pages. The actual proposed NPR and the official interpretation are each 45 pages and the section-by-section analysis of the NPR is 302 pages. The Bureau, by way of hyperlinks and footnotes, has also included various focus group studies as well as the SBREFA report in support of its proposals, but those additional materials do not otherwise complicate or muddy the intent or purpose of the NPR. In fact, many of the Bureau’s proposals mirror the text of the Fair Debt Collection Practice Act.
The advocates also argue that the NPR varies significantly from the Outline of Proposal (Outline) that was issued in June 2016. Other than the inclusion of the use of email and text messages and electronic disclosures, the NPR is not a vast departure from what the Bureau proposed three years ago. Call caps, a model validation notice, and a limited content message were very much a part of Outline in 2016. Furthermore, the Outline proposed a limit of six call attempts per week, while the NPR now proposes seven. However, the NPR proposed only one call per week after right a right party contact is established, which is a reduction from what was proposed in the Outline.
Is it the so-called complexity of the rule or the timing that has the advocates concerned? Since the NPR was issued by the CFPB, advocates have not held back on their vocal criticism of the proposal. Their friends on the Hill have been equally critical, calling the NPR anti-consumer and asserting that it will result in consumers being harassed by unlimited texts and emails. Of course, none of these critics mention the powerful “opt-out” tool the CFPB gave to consumers.
So why the need for the delay? Simply put, it is because of the Congressional Review Act (CRA) and its timeline. The (CRA) requires agencies to submit all final rules to Congress, who may then pass a joint resolution of disapproval which the President will sign resulting in the invalidation of the rule, assuming no veto. If the rule is disapproved, the agency may not issue another rule in substantially the same form. This occurred with the Arbitration Rule. After the House voted to disapprove the bill, the Senate by a 51-50 vote also disapproved of the Arbitration Rule.
In April 2019, the White House issued a memo and guidance on the CRA, which interprets the term “final” rule more expansively and gives the Office of Information and Regulatory Affairs (OIRA) more authority to make final rule determinations. According to the White House, as of May 11, 2019, all rules, whether proposed or final, as well as any other potential guidance issued by an agency, are required to first be submitted to OIRA for a final rule determination. If a final rule determination is made, then the Government Accountability Office (GAO) is required to issue a report. This requirement will delay the effective date until after Congress considers disapproval under CRA. This extends the prior CRA timeline of 60 days from the issuance of the final rule to put forth a joint resolution.
So what does this mean? Let’s say the CFPB grants the advocates’ request for an extension and the comments are now due October 19, 2019. Consensus among industry experts is that it will take at least a year for the CFPB to go through the comments before it publishes a final rule. A year puts the potential issuance of the final rule very close to the 2020 election. The final rule would be submitted to OIRA and GAO report will be triggered. The process could carry over to early 2021. If the Senate and the White House flip and the House of Representatives retains its majority in the 2020 election, it appears likely that in early 2021 joint resolution will be introduced seeking to disapprove the final debt collection rule. If passed in Congress, any one of the current 2020 Democratic Presidential candidates will more than likely sign it. In that scenario, the final debt collection rule will be void with the CFPB having no opportunity to issue a substantially similar rule. The industry is back to square one.
The NPR is not perfect and the final debt collection rule will not be as well. However, the status quo is not acceptable and industry must be given formal guidance in order to operate and move into the 21st Century. The advocates’ position is disingenuous and, quite frankly, does nothing to help consumers. The debt collection rule needs to get to the finish line.
Judge in FDCPA Case Questions Why Defendant Kept Calling if Plaintiff Never Answered The Phone
A District Court judge in California has partially granted and partially denied motions for summary judgment filed by a defendant accused of violating the Fair Debt Collection Practices Act by making excessive calls after she had allegedly revoked consent to be contacted. More details here.
WHAT THIS MEANS, FROM DENNIS BARTON OF THE BARTON LAW GROUP: In Muzyka v. Rash Curtis & Associates, (E.D. Cal. July 3, 2019), a consumer alleged three violations: (1) whether the collector violated § 1692d of the FDCPA by contacting the consumer after she made an oral cease and desist request; (2) whether the collector violated § 1692d(5) by calling excessively; and (3) whether the collector violated § 1692f by calling excessively and threatening to sue when it had no intent to do so. The Court denied Defendant’s Motion for Summary Judgment as to the first two claims and granted the third (on technical grounds). Resolution of the first two claims are where we find the biggest lessons from this case.
Section 1692c(c) requires a consumer to send a written request to cease communication. Muzyka alleged a violation of § 1692d, however, claiming RCA engaged in harassing behavior by calling after being told not to call. While such an allegation may seem like an attempt to circumvent the expressed requirements of § 1692c(c), many courts find a violation of § 1692d when a collector calls after only a verbal request not to call. The frustrating takeaway here is that a call made after even a single verbal request for calls to stop may be enough to give rise to a § 1692d argument even though § 1692c(c) requires a written request. Therefore, collectors’ procedures should address verbal cease and desist requests and to stop calls after they are made.
Regarding the second violation, we have all seen that courts are inconsistent with what constitutes “excessive” calling. The FDCPA is a strict liability statute meaning that intent is not needed to prove a violation (of which we are all hand-wringingly aware). A claim for excessive calls falls under § 1692d(5), which is the sole exception to the “strict liability” standard. It is the only provision of the FDCPA where intent is an element of a claim. A consumer must prove that the collector intended for calls to be harassing, oppressive, and abusive. In the end, if the number of calls is high, this will be a question of fact for the jury as to whether the collector intended to harass the consumer. The judge in Muzyka asks an interesting question that, to me, should make us look at both the legal aspect of this issue and the business practically of repeatedly calling consumers who do not respond: “If, as defendant maintains, it never made contact with plaintiff, why did it persist in calling her after dozens and dozens of unanswered calls?” The court was probably implying that calling someone who does not respond may be to harass them into responding. From an operation’s standpoint, another way to ask this question is, “why spend the time calling someone who is unlikely to ever pay?” Therefore, collectors’ procedures should address the number of calls that should be made in absence of a response and potentially limit them to a number the collector has historically found to the maximum amount of calls that after which consumers rarely respond.
FTC Accuses Student Loan Debt Relief Operation of Scamming $23 Million From Duped Consumers
The Federal Trade Commission has filed a complaint in federal court against a student loan debt relief company, alleging it bilked $23 million from consumers by demanding illegal upfront payments and not remitting all of the funds consumers gave to the company to be paid toward their outstanding balances. More details here.
WHAT THIS MEANS, FROM JUDD PEAK OF FROST-ARNETT: This enforcement action against a debt relief “company” illustrates that the FTC will not abide illegal conduct against consumers, regardless of the purported service. A dive into the specific allegations in this complaint are startling. According to the FTC, the defendants induced consumers to make loan payments to them instead of directly to the creditors. Then, they would solicit federal student loan PINs from consumers and use them to change the contact information and mailing addresses on file with lenders. Often the loans would go into default, but the consumers never knew because communication attempts were unsuccessful.
This action comes on the heels of the enforcement operations by the CFPB and a variety of state Attorneys General against Lexington Law (doing business as a variety of consumer credit repair organizations, including CreditRepair.com). This problem is rampant with “repair” or “relief” companies (not to be confused with credit counseling organizations), who often make empty promises to have negative tradelines removed from a consumer’s credit report, or resolve valid debts at a fraction of the balances, if the consumer pays an upfront fee. Too often the fee is lost, and the consumer is no better off.
With this action and recent others, the word is getting out that so-called credit repair organizations do not provide much in the way of service to consumers. A credit repair organization cannot do anything (such as submit a dispute on a debt) that the consumer cannot do him/herself. This leads to a lot of lost fees, miscommunications and broken promises. Per the U.S. PIRG, consumer complaints against these credit repair companies comprise 43% of total complaints in the CFPB’s complaint portal. Within the past several months, the FTC, the CFPB, and state enforcement agencies are ramping up efforts to stop these illegal activities. I believe enforcement actions like this against Federal Direct Group, et al, are a harbinger of things to come.
Appeals Court Overturns Dismissal of FDCPA Case Over Failure to Identify Creditor in Letter
The Court of Appeals for the Third Circuit has overturned a lower court’s dismissal of a lawsuit that alleged a debt collector violated the Fair Debt Collection Practices Act by not accurately identifying the creditor when it send the plaintiff a collection letter. More details here.
WHAT THIS MEANS, FROM LINDSAY DEMAREE OF BALLARD SPAHR: Although non-precedential, the Third Circuit’s decision underscores the need for debt collectors to use everyday language to communicate with consumers about their debts. While creditors and debt collection professionals may understand the meaning of “represent” and “assignee,” using these types of legal terms can invite problems under the FDCPA’s least-sophisticated-debtor standard. Debt collectors should consider reviewing their correspondence to make sure they explicitly spell out – in plain English and simple sentences – the requirements of 15 U.S.C. § 1692g(a).”
Granting Defendant’s MSJ, Judge Has Candid Remarks For Plaintiff in FDCPA Case Over Collection Letter
A District Court judge in New York has granted a defendant’s motion for summary judgment after it was sued for allegedly violating the Fair Debt Collection Practices Act by not properly identifying the current creditor in a collection letter. More details here.
WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: Who doesn’t know Walmart! Apparently Plaintiff’s attorney. Because Plaintiff’s lawyer thought it was good idea to sue the collection agency who had the nerve to state that the creditor was “Synchrony Bank Walmart MC.” As the Court, which kicked this piece of garbage lawsuit to the curb, aptly noted – “This is her Walmart credit card; it simply cannot be anything else.”
Well that is, unless you are a consumer lawyer trying to gin up a case to make a buck for yourself. Again the Court had some choice words here too noting this case represented nothing more than an ill-advised attempt to create “a defect of which only a sophisticated lawyer, not the least sophisticated consumer, would conceive.” Now there’s a breath of fresh air – much like the smiling welcome one receives from the Greeter when entering a Walmart Store . . .
NCBA Meets With CFPB To Discuss Meaningful Involvement Provision of Proposed Rule
In the midst of a wave of more than 1,000 comments that have been filed in the past two days protesting the Consumer Financial Protection Bureau’s proposed debt collection rule comes the details of a meeting between a number of representatives from the National Creditor’s Bar Association and senior staffers from the CFPB. More details here.
WHAT THIS MEANS, FROM HELEN MAC MURRAY OF MAC MURRAY SHUSTER: NCBA is rightly concerned about another expansion of regulation in the debt collection space. As the CFPB itself notes in its comments, its language is “similar” to the requirements set forth in the Federal Rules of Civil Procedure. “Similar” is different, opening debt collection attorneys up to yet another interpretation of their conduct. The Federal Rules give judges the right to address inappropriate attorney conduct and what could be the unauthorized practice of law by those not properly supervised by an attorney.
CFPB Reaches $25M Settlement With Debt Relief Company
The Consumer Financial Protection Bureau yesterday announced a $25 million settlement with Freedom Debt Relief, the nation’s largest debt settlement company, after alleging the company was alleged to have charged advance fees and by not settling debts as promised. More details here.
WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN SANDERS: They’re at it again. Although some hoped the CFPB’s investigations would slow as a result of Director Kraninger’s appointment, that hasn’t proven to be true. This past week, the Consumer Financial Protection Bureau (CFPB) reached a settlement with Freedom Debt Relief in which the company, while not admitting guilt, agreed to pay a $5 million civil penalty as well as $20 million in restitution to affected customers.
The lawsuit alleged that the company violated the FTC’s Telemarketing Sales Rule by charging people in advance of debt-relief as well as the Consumer Financial Protection Act — when it charged debtors without actually settling their debts. Further, the CFPB alleged that Freedom charged fees even when borrowers negotiated settlements on their own with their creditors. As a result of the settlement, Freedom has stopped certain debt relief practices, although Freedom spoke about the settlement and observed that it had previously stopped such practices prior to the Complaint being filed.
This is a stark reminder that the CFPB continues to push forward and aim for “offenders” in the consumer marketplace. While the Trump administration had reined in some of the CFPB’s aggressive tactics, Director Kraninger appears determined to use the CFPB’s enforcement powers to go after certain sectors – most notably, debt relief companies and payday lenders.
Judge Grants MSJ for Defense, Denies Certification in FDCPA Suit
Fool me once, shame on you, the old saying goes. Fool me twice, shame on me. Did you know there was a third part? Fool me a third time, then that gives you the right to sue me for allegedly violating the Fair Debt Collection Practices Act. More details here.
WHAT THIS MEANS FROM MATT KIEFER OF THE PREFERRED GROUP OF TAMPA: With regard to McCoy v. Midland Funding, LLC, Midland Credit Management, Inc., and Encore Capital Group, Inc, it is refreshing to see a judge rule in favor of our industry when, given the process of being offered to correct a deficient payment plan three times, the Plaintiff tried to get creative using the “least sophisticated standard” alleging they were confused. (The plaintiff alleged that because the financial disclosure form was similar to the form that a court would use that an unsophisticated consumer would be confused by it.). One would think that through the process of being in collections, agreeing to a payment plan, defaulting, going to court, reestablishing a payment plan and agreeing to a judgment if another default occurred, that the least sophisticated consumer becomes more educated along the way. Certainly the Plaintiff understood the agreement and consequences when they signed the stipulation. Otherwise, he/she could have (should have) asked their counsel. But we are increasingly playing the victim card in this country and refusing to accept personal accountability. If there were provisions in the law for attorney fees for prevailing parties, I believe that we would see less of these garbage frivolous lawsuits and we could chip away at this niche market that unscrupulous lawyers are exploiting. It is nice and refreshing to see wins and common sense prevail which seems to be less common these days, unfortunately.
Report Calls on States to Enact Student Loan Borrower Protections
A non-profit organization focused on student loans and higher education is calling on Massachusetts and all states to enact legislation aimed at protecting student loan borrowers “from profit-seeking predatory actors.” More details here.
WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: Consumer advocates perceive that the federal agencies are not as aggressive under current leadership, so they are calling on states to implement additional consumer protections. A number of states are responding by placing new restrictions and obligations, including new licensing requirements, on debt collectors. State laws can change quickly, thus it is important to monitor these developments. There are a number of ways to stay informed on new state laws. Get involved with your trade association, read industry news from sources like AccountsRecovery.net, and contact your compliance counsel to discuss how changes in the law affect your business.
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