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.
Minnesota Governor Signs Medical Debt Fairness Act Into Law
The governor of Minnesota this week signed the Medical Debt Fairness Act into law, but thankfully, the final version of the bill looks different than it was originally drafted. More details here.
WHAT THIS MEANS, FROM ISSA MOE OF MOSS & BARNETT: I’ll start off with a no-duh statement: healthcare impacts all of us. While many can manage the associated costs, that’s not true for everyone. It seems fair to say that some consumers are disproportionately burdened in this area for one reason or another. For that reason, it should come as no surprise to anyone that lawmakers and regulators are paying close attention to all aspects of and players in our healthcare system these days, from insurers, to service providers, all the way downstream to collection agencies. Given the amount of activity we’ve seen in this area this past year plus, it’s pretty much a foregone conclusion that most every state throughout the country will find a way to put their imprint on medical debt. Many have already done so, with Minnesota being one of the most recent states to join the party.
As for Minnesota’s law, it’s an understatement to say the State packed a ton in. This article provides an excellent summary of the provisions of the new law, which, at a high level, bans medical debt (as defined in the Act) from being credit reported and bans medical providers from withholding medically necessary care due to unpaid medical debt, among other changes. The law also imposes additional prohibitions, including contacting debtors about medical debt using an ATDS or an artificial or prerecorded voice after a cease request as to those communication methods, and creates various requirements, such as new disclosures, that will require collection agencies to update their compliance management systems for medical collections in Minnesota. Companies collecting medical debt in Minnesota should consult with their counsel about any necessary updates. This is especially important given that Minnesota’s law created additional enforcement rights for violations, including the right to recover actual damages, statutory damages up to $1,000 per violation, attorneys’ fees, and treble damages for willful and malicious violations. Collection agencies can’t afford to delay either, as many requirements go into effect this Fall.
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Court Denies Motions to Dismiss in FDCPA Case Involving Alleged Bankruptcy Violations
A District Court judge in Minnesota has denied motions to dismiss filed by the defendants in a case involving alleged violations of the Fair Debt Collection Practices Act and the automatic stay provision of the Bankruptcy Code. More details here.
WHAT THIS MEANS, FROM MIKE FROST OF FROST ECHOLS: First, the facts of the case as stated in relevant pleadings are interesting to say the least. The plaintiff files for Chapter 7 bankruptcy, five days later the defendant was notified of the bankruptcy filing, and fourteen days later the plaintiff was arrested on a bench warrant pursuant to the collection action.
Second, the District Court in Minnesota has ruled that the FDCPA claims can coexists with the Bankruptcy Code without conflict since those matters address entirely different aspects of the matter, even though the automatic stay of the Bankruptcy Code is the primary issue at bar. The Second and Ninth Circuits have ruled that when remedies are available within the Bankruptcy Code itself for violations of the Code, those remedies preclude plaintiffs from seeking to recover under the FDCPA while the Third and Seventh Circuits have adopted plaintiff’s position, that automatic stay violations may be subject to FDCPA liability. There is a split of authority on this issue, making this an interesting case for a potential appeal, although the facts as plead may not present in the best light.
One significant learning from this case is to ensure you have processes established to scrub for bankruptcy information on a regular basis. While the defendant in this case appears to have been notified of the bankruptcy action, a daily bankruptcy scrub would serve useful as a back up to direct notifications that are often times subject to human error in updating files through the receipt of correspondence.
Judge Grants MSJ For Defendant in Class-Action Over Dispute
A District Court judge in Florida has granted a defendant’s motion for summary judgment in a class-action lawsuit involving alleged violations of the Fair Debt Collection Practices Act and the Florida Consumer Collection Protection Act. More details here.
WHAT THIS MEANS, FROM BRENDAN LITTLE OF LIPPES MATHIAS: Plaintiff’s Complaint alleged violations of the Fair Debt Collection Practices Act (“FDCPA”) and Florida Consumer Collection Practices Act (“FCCPA”) because Defendant purportedly harassed him be repeatedly demanding a reason why Plaintiff wanted to dispute the debt. Defendant moved for summary judgment and Plaintiff failed to oppose the motion, which by Local Rule in the Southern District of Florida, means the motion is deemed unopposed. However, the Court was still required to analyze the motion and when doing so, granted Defendant summary judgment dismissing the Complaint. First, the Court found that Defendant Resurgent Capital Services, L.P. was not a debt collector under either the “principal purpose” prong or the “regularly collects” prong. Given that Defendant was not subject to the purview of the FDCPA, the Court did not need to consider whether the alleged conduct ran afoul of the statute. Second, the Court agreed with Defendant finding Plaintiff’s claim “woefully deficient” because there was neither evidence of telephonic harassment nor that Defendant neglected to honor Plaintiff’s dispute. Accordingly, the Court determined that Plaintiff failed to meet this prima facie burden that Defendant engaged in conduct tantamount to abuse or harassment and dismissed the FCCPA claim.
California Appeals Court Upholds Ruling Against Defendant in FDCPA Case
A recent ruling by the California Court of Appeal has upheld significant violations of the Fair Debt Collection Practices Act and California’s Unfair Competition Law by the defendant and related entities. The ruling has critical implications for collection practices, particularly those involving homeowner associations (HOAs). More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: This long California Court of Appeal opinion is worth a read for any collection agencies and law firms working with HOAs in California. The court reviewed collection letters that talked about foreclosure as a potential outcome (using conditional terms like “If the foreclosure process begins…”) for non-payment of delinquent HOA fees and describing how the law firm would file a Notice of Default” if the debtor did not make a payment within 10 days and found that the least sophisticated could those letters to threaten imminent foreclosure. But the debtor’s case had not yet reached the dollar amount ($1800 delinquent) and time (12 months delinquent) thresholds required by California to allow HOAs to foreclose on the property as opposed to going through the small claims court to get a money judgment to levy against the property – so the court upheld the lower court’s finding of an FDCPA violation based on those letters. That is a reminder to be very careful with collection letters that talk about the consequences of non-payment.
Also interesting – the debtor in this case entered into a payment arraignment after she was delinquent on her payments, and in the agreement she waived her right under California law to have her payments applied to principal and interest before fees and costs. The court upheld the lower court’s ruling against the HOA and law firm here, too, agreeing that the state rule requiring application of payments to principal first served the important public purpose of protecting homeowner equity and rights by preventing “cascading” fees and charges from causing a foreclosure over a relatively small dollar amount. The court voided the consumer’s waiver of the payment application rule because it was against public policy. The Appeals court reviewed legislative history to confirm that legislators intended to make the application of payments rule to be mandatory specifically to curb abuses by some law firms and HOAs that would lead to foreclosure, and that was that. California HOAs should have policies that take into account that payment application rule to avoid at least part of the outcome in this case.
Judge Dismisses FCRA Case Against CRAs Involving Bankruptcy & Disputes
A District Court judge in Indiana has dismissed claims against one credit reporting agency and granted another a motion for summary judgment in a Fair Credit Reporting Act case involving credit reporting, disputes, and bankruptcy. The suit centered around allegations that the CRAs violated the FCRA by inaccurately reporting a reaffirmed automobile loan as included in bankruptcy. More details here.
WHAT THIS MEANS, FROM DALE GOLDEN OF MARTIN GOLDEN LYONS WATTS MORGAN: Whether “legal disputes” can form the basis of FCRA claims continues to be a difficult issue to pin down. The Eleventh Circuit Court side-stepped the issue in its recent ruling in Holden v. Holiday Inn by holding that disputes that are objectively and readily discernible are subject to the “reasonable investigation” requirement of the statute, period. Courts in Seventh Circuit however continue to draw a line between “legal disputes” and “factual inaccuracies,” with only the latter being fertile ground for an FCRA suit. In Dulworth v Experian/Equifax, a federal judge in Indiana ruled that Equifax was not required to “determine[e] the validity of the Reaffirmation Agreement” between the creditor and the plaintiffs to comply with the FCRA. And while the court recognized that the Agreement was available to the CRA, it held that to determine the “validity of [the Agreement] would require Equifax to delve into applicable bankruptcy rules and contract law.” Relying on the Seventh Circuit’s ruling in Denan v Trans Union, the court held that requiring Equifax to take on a task that “exceeds the competencies” of the CRAs is more than the FCRA requires.
One take-away from this case is that the “legal dispute” vs. “factual inaccuracy” debate in FCRA cases is far from being settled. But the ruling serves to buttress the argument that CRA — and likely debt collector furnishers are no required to wade into the fray and settle legitimate disputes between creditors and their customers.
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.
