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 Dismisses Remaining FDCPA Claim in BK Case
A District Court judge in Illinois has dismissed the remaining claim in a Fair Debt Collection Practices Act case against a defendant, citing a lack of subject matter jurisdiction because the plaintiff lacked standing to sue. The plaintiff, who initially alleged multiple violations of the bankruptcy provisions of the FDCPA, saw her case gradually dismantled until only the FDCPA claim remained. The court’s final ruling marked the end of the plaintiff’s legal battle, leaving the FDCPA claim dismissed without prejudice. More details here.
WHAT THIS MEANS, FROM DAVID SHAVER OF SURDYK, DOWD & TURNER: Magistrate Judge Jeffrey T. Gilbert’s Memorandum Opinion and Order in Sarah Henry v. Collection Professionals, Inc. is a great reminder for ARM defendants of all shapes and sizes that it does not matter how far along in a case you may be, issues of standing (which implicate the court’s jurisdiction) are always important. Whenever facts tending to show that the plaintiff has no standing reveal themselves, the issue becomes ripe for the court’s attention. Like so many other plaintiffs that we have all seen over the last few years, Sarah Henry claimed that she was injured by the attempts to collect from her but, when push came to shove, she couldn’t come forward with anything to demonstrate that her allegations were more than allegations. As it turns out, evidence still matters and someone (her counsel perhaps?) should have told her that the unsupported emotional distress dog stopped hunting in the Seventh Circuit. Without having taken any action to her detriment based on anything that Collection Professionals did (or allegedly did not do), the decision to dismiss Ms. Henry’s FDCPA claim on Article III grounds seems, in hindsight, an easy one for Judge Gilbert. Kudos to Collection Professionals and its counsel for staying the (long and winding) course on this case.
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Defendant in FDCPA Case Wins MSJ After Invoking Bona Fide Error Defense
A District Court judge in Arizona has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case, ruling that it is entitled to the statute’s bona fide error defense after garnishing a bank account where Social Security payments were deposited to satisfy a judgment. More details here.
WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: After a collection law firm garnished an Arizona judgment debtor’s bank account, the debtor raised FDCPA claims alleging that all funds in the account were social security benefits and, thus, exempt from garnishment. The law firm moved for summary judgment on its bona fide error defense – the position that any violation was not intentional and instead resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid this specific error. Although the court ultimately found that funds had been wrongly garnished, the court granted the Firm’s motion for summary judgment, finding that “the existence and purpose of the defendant’s procedures” as well as the defendant’s good faith had been established, and the debtor had failed to show any genuine dispute of fact in response.
To establish the existence and purpose of the Firm’s procedures the Firm (and its expert) relied on its written policies and procedure and testimony from four of its attorneys explaining the relevant policies and procedures the Firm had in place. This underscores the importance of maintaining and implementing written policies and procedures. Documenting internal collection policies and procedures formally in writing (and updating them regularly) is not just a necessary compliance and operational strategy, planning, and training tool. A written compliance management system can also be an important litigation tool. It is much easier to prevail on a bona fide error defense if the procedures the collector relied on are formally documented and can be admitted into evidence.
If your compliance management system has not been meaningfully updated recently, or if you know it has significant gaps, consider this your sign to make it a Q4 priority. And, for those of you neck-deep in trying to plan for New York City’s impending rule changes (which, among other horrors, will abolish the statutory bona fide error defense to liability in that jurisdiction), I feel your pain. Those amendments are yet another reason you’re going to need to make some updates soon.
Judge Denies MTD in FDCPA Case, Rules ‘Balance Seems to be a Little Off’ Counts as Dispute
A District Court judge in Pennsylvania has denied a defendant’s motion to dismiss a Fair Debt Collection Practices Act lawsuit, ruling that the plaintiff did in fact dispute a debt when, during a conversation with a representative of the defendant, he said, “the balance seems to be a little off.” More details here.
WHAT THIS MEANS, FROM BRENDAN LITTLE OF LIPPES MATHIAS: Plaintiff made a call to Jefferson Capital Systems, LLC (“Jefferson”) concerning his account because he “wanted to double check and verify everything” and indicated “the balance seems to be a little off.” A little more than one month after that call, Plaintiff checked his credit report and that revealed that Jefferson did not update the reporting on the account to reflect that the account was disputed. Accordingly, he commenced an action alleging a violation of Section 1692e(8). In denying Jefferson’s motion to dismiss, the Court found that viewing the facts in the light most favorable to the Plaintiff, the statement “the balance seems to be a little off” could be construed as a dispute. The Court stated “[w]hile this dispute language is not the strongest way in which to dispute the debt, it is sufficient tat the motion to dismiss stage of the case.” While the result may be different on a motion for summary judgment, the Court’s decision is another example that consumers continue to be creative on how they “dispute” accounts with the goal of manufacturing claims. Debt collectors that furnish data to the credit reporting agencies must continue to be extremely liberal as to what they construe as a “dispute” and always error on the side of notating the account as disputed even when the consumer is unclear that he/she is disputing the account.
Appeals Court Blocks Student Loan Repayment Program
The Court of Appeals for the Eighth Circuit on Friday issued a preliminary injunction against President Biden’s SAVE income-driven repayment plan, which was designed to reduce monthly payments and expedite debt relief for approximately eight million student loan borrowers. This legal decision follows a temporary stay placed on the plan in July, initiated by a lawsuit from Missouri’s Attorney General. More details here.
WHAT THIS MEANS, FROM JOHN REDDING OF ALSTON BIRD: On August 9, the Eighth Circuit issued a preliminary injunction preventing the SAVE income-drive repayment plan from taking effect at the request of 7 states. Noting that prior similar types of plans had been approved by Congress, were more limited in scope, and less generous overall, the proposed SAVE plan would, in some instances, reduce payment amounts to as little as $0. It also provided for forgiveness in as little as 10 years.
After addressing questions of standing, which it decided in favor of the states, the court turned to the likelihood of success on the merits and determined the SAVE program’s interpretation of the authorization for the magnitude of loan forgiveness is questionable. Ultimately, also taking into account the likelihood of irreparable harm and balancing of equities, enjoined the government from forgiving principal or interest, or failing to charge accrued interest, as well as implementing the SAVE payment threshold provisions. While the federal government has shown a willingness to forgive student loans, it doesn’t appear the SAVE program is likely to survive this most recent challenge to loan forgiveness. That, however, may not stop future efforts to do so if recent history is any indication, which can certainly impact those in the ARM industry who may have been and wish to be in the business of collecting on federal student loans.
CFPB Tasked To Make it Easier for Consumers to Reach ‘Real Person’ When Seeking Assistance, Scour Chatbot Usage
The Biden-Harris Administration has launched the “Time Is Money” initiative, a new government-wide effort aimed at reducing the unnecessary headaches and hassles that many Americans face when dealing with corporations. Whether it’s excessive paperwork, frustrating hold times, or navigating complex systems to cancel a subscription, the administration is stepping in to make life easier for consumers. More details here.
WHAT THIS MEANS, FROM NABIL FOSTER OF BARRON & NEWBURGER: “I’ll get you my pretty, and your little AI-chatbot too!” — We only have a preview of the new and improved government initiative entitled “Time is money.” Some, understandably, cannot help but see only irony emerging from this government initiative. Like with most legislative or cinematic previews, we are only told / shown tantalizing parts of the full-length feature creation. For example, who are the bad guys, who are the good guys and where does the epic battle take place. Since we know little about what will emerge as the final cut or even what the dailies look like, we cannot yet tell if “Time is money” will be more like King Lear or Much Ado About Nothing.
The stated goal of this initiative is to eliminate practices by companies that “add unnecessary headaches and hassles to people’s days and degrade their quality of life” (see White House Fact Sheet published Aug 12, 2024). The initiative names some easily recognized types of bad acts such as customer service “doom loops”, hard to cancel subscriptions, and ineffective AI chatbots. This list calls to mind the first of a few quotes from the 1939 classic film, The Wizard of OZ, which is: “Lions, and tigers and bears! Oh my!”
However, as the cures for these bad acts are cooked in different regulatory caldrons of good intentions, one must recall the advice that “These things must be done delicately, or you hurt the spell.” Indeed, “Some people without brains do an awful lot of talking, don’t they?” and despite the obvious appearance of incongruities, we are often told to “Pay no attention to that man behind the curtain!” All too often, this leaves us with a distinct feeling, just like Dorothy Gale, that “Toto, I’ve got a feeling we’re not in Kansas anymore.” We can only hope when we compare the final full-length feature creation from the “Time is Money” initiative, with what we were led to believe from its preview, that we do not find ourselves thinking “That, my dear, is a horse of a different color.” For those of you who know music more than cinema or literature, we know so little about “Time is money” that it is hard not to see the applicability of the chorus from the 1988 classic hit from Public Enemy, called “Don’t believe the hype!” (for now).
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.
