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.
Appeals Court Affirms Dismissal in Fraud Case Over Collection Contract
The Court of Appeals for the Fourth Circuit has affirmed the dismissal of a case filed by a contact center against a collection operation and its owner for allegedly concealing criminal activity by the owner that led the contact center to lose a contract with one of the nation’s largest financial institutions. More details here.
WHAT THIS MEANS, FROM HEATH MORGAN OF MARTIN GOLDEN LYONS WATTS MORGAN: This is an unfortunate case where a partnership and joint venture between two collection entities went sour. The takeaways and lesson that can be learned from this are the importance of conducting due diligence prior to a merger or partnership, and in the pursuit of a mutual business opportunities like the parties in the case, it is always important to engage in a non-disclosure agreement that provides both parties with fiduciary duties and rights to protect confidential information.
Had the entity done either of these, it would have either discovered the criminal investigation against the owner of the other company, or had documentation to be able to plausibly allege a breach of duty for the non-disclosure of the criminal indictment. Unfortunately, without either of these, the entity was not able to sustain plausible allegations to survive a motion to dismiss.
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Senate Republicans Introduce Bill to Change CFPB Funding Source
A number of Senate Republicans, including Sen. Tim Scott [R-S.C.], the Ranking Member of the Senate Banking Committee, are introducing legislation that would place the Consumer Financial Protection Bureau under the congressional appropriations process. More details here.
WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: There are six (6) months left for the 118th Congress and approximately 54 days left in the Congressional calendar. Senate Bill 4521 was introduced on June 12 and referred to the Senate Banking Committee. It should be noted that this bill is the same bill introduced in 2021. However with only nine days left where the Senate is in session only, it is highly unlikely that Sen. Sherrod Brown [D-Ohio], will hold a hearing on this bill. That is not to say that the House Financial Services Committee could not introduce a companion bill, but as they say “it takes two to tango” when it comes to the passage of legislation. Cue Schoolhouse Rock.
The important takeaway here is that elections have consequences. If there is a change in administration and the makeup of the House and Senate, resulting in a super majority, then and only then will Dodd-Frank be amended. Keep in mind that how the CFPB is funded is irrelevant, if the goal is real change. As Justice Sotomayor correctly pointed out during oral argument in the CFPB v. CFSA case, the amount of money that the CFPB draws from the Federal Reserve is minuscule compared to the amount given to other agencies and regulators, let alone financial services regulators. The CFPB needs to be a commission, set up similarly to the FTC, FCC and others. As we have seen over the last decade, the vast swings in agenda and priorities from administration to administration are simply ill-suited for effective compliance, let alone credit access. Let’s hope the 119th Congress and the next President (who ever that may be) can work together to bring the CFPB into check of ensuring that consumer markets work effectively for all stakeholders. A Commission is the only chance for that objective to be achieved.
Judge Partially Grants MSJ for Defendant in FDCPA Case Over Dispute of Multiple Debts
A District Court judge in Alabama has partially granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case, ruling that an ambiguously worded dispute letter from the plaintiff’s attorneys could have indicated to the defendant that multiple debts were being disputed instead of just one and that the defendant is not entitled to the FDCPA’s bona fide error defense. More details here.
WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH: This case highlights the major barrier to getting a matter dismissed by a court – if there are two competing sets of facts, the court will always allow a jury to decide which set to believe. Here, the dispute letter used both he phrase debt and debts. The court concluded that a jury has to conclude whether the agency should have looked for more than one debt for the consumer when investigating its inventory. Additionally, the court also found that a jury has to weigh whether the agency’s procedures were reasonable for purposes of the bona fide error defense. The consumer argued that the procedures were not reasonable because no protocols existed to discover a consumer’s obligation when a date of birth and social security were absent from the data file. The agency argued that every conceivable search was not required, only a reasonable search. This is why the bona fide error defense is difficult to prevail on at a pre-trial stage – reasonableness is traditionally the province of the jury.
Judge Grants MSJ for Defendant in FDCPA, FCRA Case Over Disputed Debt
A District Court judge in Michigan has granted a defendant’s motion for summary judgment in a Fair Credit Reporting Act and Fair Debt Collection Practices Act case, ruling that the plaintiff failed to provide sufficient evidence to support her claims. The defendant successfully argued that the plaintiff’s allegations were either factually unsupported or involved legal disputes that could not be resolved under the FDCPA. More details here.
WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: The court did not go so far as to draw a line between factual inaccuracies and questions of law. Instead, it followed recent decisions from the Second Circuit and the Eleventh Circuit and examined whether the disputed information was “objectively and readily verifiable.” It appears that the court also applied a test from the Eleventh Circuit’s 2018 decision in Felts v. Wells Fargo Bank, N.A. by looking to whether the plaintiff was able to point out facts that the furnisher, in conducting its investigation, could have uncovered that would have established that its information was inaccurate. The plaintiff argued that the furnisher could have uncovered those facts by contacting the doctor’s office, but the court was skeptical that a collector who took that step would have been able to determine whether the doctor properly billed the plaintiff for an office visit.
Judge Dismisses Suit Alleging Wrongful Garnishment and Improper Service of Summons
A District Court judge in Ohio has granted a defendant’s motion to dismiss in a case involving allegations of wrongful garnishment and violations of the Ohio Consumer Sales Practices Act (CSPA). The plaintiff claimed that the defendant wrongfully obtained a default judgment and garnished her wages based on incorrect service of process and that her wages were exempt from garnishment under Ohio law. The court ruled that the plaintiff’s claims were either time-barred or failed to state a claim upon which relief could be granted. More details here.
WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: While the Court found that each garnishment disbursement was not a discrete violation of the Ohio Consumer Sales Practices Act, other courts may find differently based on the state’s garnishment proceedings. In short, while this is a good decision, it is not clear how useful it would be in other jurisdictions since it relies on Ohio’s garnishment process and case law.
That being said, many FDCPA claims are spawned by claims of “wrongful garnishment” based on alleged defects of service of the underlying collection complaint. These cases become tricky for debt collectors to defend because in many cases the challenges come years after the underlying judgment was entered. In many cases, when a consumer files a FDCPA claim on such facts, they simultaneously file a petition to open a default judgment. It is also common that the debt collector attempting to garnish the consumer’s wages or bank account is not the same debt collector who obtained the judgment. As a result, some debt collectors may not have the underlying documents needed to prove the judgment if the underlying judgment is opened. These are dangerous cases and debt collectors should have clear policies and procedures in place regarding the retention of the underlying documents needed to prove a judgment in case it is opened.
Judge Certifies Class Action in FDCPA Case Over Hurricane Grants
A District Court judge in Louisiana has granted class certification in a lawsuit involving alleged violations of the Fair Debt Collection Practices Act. The case centers on attempts to recover overpayments from a grant program established to aid homeowners affected by Hurricanes Katrina and Rita. This development follows a ruling from the Court of Appeals for the Fifth Circuit that overturned the lower court’s dismissal of the lawsuit. More details here.
WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: This case involves the interesting question of what constitutes a “debt” under the FDCPA. The Fifth Circuit Court of Appeals ultimately concluded that the Hurricane Katrina grant overpayments did constitute “debts” under the FDCPA. With that question answered, getting a class certified was a smaller hurdle as the claims all involve the contents of the collection letters sent to the consumers. In particular, the plaintiffs allege claims based on collection letters including threats of legal action and recovery of attorney’s fees even where the debts were time-barred or the underlying contract did not include a right to attorney’s fees. It is worth noting that the court’s order seemed sympathetic to the class – emphasizing the “devastation these hurricanes caused” and the purpose of the grants to “compensate” victims and “mitigate” against future disasters. This is a case worth keeping an eye on.
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.
