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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 2 of 3 Claims in FDCPA Suit Over HOA Debt
A District Court judge in Missouri has partially dismissed a Fair Debt Collection Practices Act lawsuit against a collection attorney, leaving only one claim to proceed while dismissing others. More details here.
WHAT THIS MEANS, FROM HEATH MORGAN OF MARTIN GOLDEN LYONS WATTS MORGAN: This lawsuit was based on a third party who was responsible for the debt who received a collection letter without the initial disclosure language. This ruling found that two of the three claims were past the one year statue of limitations past the FDCPA, because the suit was filed three days after the initial date the third letter. However, the Court allowed the last claim to proceed because the statute of limitations for the five day requirement to provide the initial disclosures extended past the filing of the lawsuit. This case is a good reminder that when seeking to collect against third parties under the FDCPA, law firms and collection agencies should remember to include the initial disclosures to anyone who they plan to hold responsible for the debt.
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Judge Certifies Class in FDCPA Text Opt-Out Case
A District Court judge in Pennsylvania has granted a plaintiff’s motion to certify a class action in a Fair Debt Collection Practices Act suit where the defendant was accused of sending text messages to the plaintiff after the plaintiff allegedly opted out of receiving texts. More details here.
WHAT THIS MEANS, FROM COOPER WALKER OF FROST ECHOLS: For years mail and telephone were — by far — the most utilized ways in which debt collectors spoke with consumers. The prospect of texting a consumer is fairly new and exciting (and by exciting I mean cheaper). However, as with almost anything an agency does, it must be vetted through a solid compliance process. Texting is a great tool and should be utilized to maximize profit. Just make sure you are also implementing through policies and procedures to avoid the potential pitfalls the plaintiff’s bar is just waiting for someone to make.
Judge Denies Defendant’s Motion for Fees in Voluntarily Dismissed FDCPA Case
A District Court judge in Ohio has denied a debt collector’s motion for attorney’s fees and costs in a Fair Debt Collection Practices Act case involving the Credit Repair Lawyers of America, ruling that the plaintiff’s claim was “minimally colorable” and did not warrant such an award. The defendant had argued that the lawsuit was meritless and sought reimbursement for legal fees. More details here.
WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: While consumer attorneys seem to be able to rake in the attorneys fees for even thinking about an FDCPA or FCRA case, it is difficult for defense attorneys recover their fees—even in suits that are frivolous. And this case shows why. Almost a year after the defendant filed an answer, plaintiff moved to dismiss her own lawsuit, with prejudice. We do not know the facts, but it is easy to speculate that during discovery unfavorable facts came to light regarding plaintiff’s case, perhaps even facts that may have shown that either plaintiff was unaware of plaintiff’s counsel’s activities. This would not be the first case in which shady tactics were employed by Credit Repair Lawyers of America. The Court granted the motion to dismiss, but retained jurisdiction at the request of defendant to pursue fees. Defendant appears to have based its motion for fees on various discovery deficiencies which normally are not a basis for a fee petition brought under Fed. R. Civ. P. 54. Ultimately, the Court denied defendant its fees because it found a “minimally colorable” basis for plaintiff’s claim. Even though the defendant was unsuccessful, it is important to hold attorneys like Credit Repair Lawyers of America accountable for their actions through such efforts.
CFPB Releases Annual Report on Debt Collection
The Consumer Financial Protection Bureau yesterday released its annual report on debt collection, focusing on two critical areas: medical and rental debt. The report sheds light on what the CFPB describes as the “aggressive and illegal” practices undertaken by collectors, such as attempting to collect on debts that have already been satisfied by financial assistance programs. More details here.
WHAT THIS MEANS, FROM JOHN REDDING OF ALSTON & BIRD: On September 5, the CFPB released its annual report to Congress summarizing debt collection related activities. In terms of markets, the report focused heavily on medical and rental debt, both topics that have drawn the Bureau’s attention throughout 2024. Of particular note, the Bureau called out collectors attempting to collect debts that it alleges were not owed, debts for which the amounts sought were not accurate, and failing to respond to validation requests. It also, following up on recent action, addressed its allegations of price fixing in the rental market – a matter that seems more amenable to action by the FTC than the CFPB. While the Bureau is always willing to expand its jurisdiction, including into areas in which it should not, attempting to determine that rents are inflated and thus some portion of the amount of rent sought to be collected is incorrect, is likely a step too far.
The Bureau also, as it has in the past, offers up various statistics regarding the size of the industry, the types of debts being collected based on original creditor type, and similar types of information. Noteworthy is the fact that while they spend significant time discussing medical debt collections, statistics reflect a 22% decline from 2022, which they attribute as likely due to changes in credit reporting of such debt. They also note that the collection industry, in terms of number of entities engaged in collection, continues to decline.
Finally, the CFPB spent time addressing volumes and types of complaints received. On a positive note, companies responded to 97% of complaints forwarded, the vast majority of which were resolve as “Closed with explanation” – approximately 80%. Interestingly, when attempting to identify the category of debt being complained of, the largest percentage was attributed to “I don’t know” – reflecting a lack of awareness on the part of consumers. As in the past, the largest complaint issue was alleged attempts to collect debt the consumer claims was not owed. As always, it is important to keep in mind that consumer complaints are not vetted by the Bureau so should never be interpreted as “valid” simply because they were made.
Judge Dismisses FDCPA Suit for Second Time Over Failed Promise to Pay Offer
For the second time, a District Court judge in Tennessee has dismissed a Fair Debt Collection Practices Act lawsuit because the plaintiff lacked standing, ultimately ruling that the defendant’s decision not to honor a statement it made to the plaintiff that indicated a payment plan would be available in the future is not a violation of the statute. More details here.
WHAT THIS MEANS, FROM DAVID SHAVER OF SURDYK DOWD & TURNER: Judge Samuel H. Mays, Jr.’s Order Granting Motion to Dismiss for Lack of Jurisdiction (“Order”) in Hall v. I.Q. Data International is a very interesting decision. The plaintiff, Denise Hall, claimed that I.Q. had violated the FDCPA because it allegedly told her she could enter into a payment plan on an account but then later, when she called back to enter into the plan, told her she could not. Judge Mays granted I.Q.’s first motion to dismiss – finding that, without clearer allegations, Ms. Hall could not show any injury traceable to I.Q.’s conduct – but gave Ms. Hall an opportunity to amend to add additional allegations to support her theory that I.Q.’s alleged breach of its own promise could serve as the basis for an FDCPA violation.
After Ms. Hall amended, I.Q. again moved to dismiss. Judge Mays’ Order details how Ms. Hall’s new allegations were sufficient to support a conclusion, at the evaluation of standing stage, that she had suffered an injury. In his analysis, Judge Mays found that the new allegations in Ms. Hall’s Amended Complaint would be sufficient, when taken as true, to show that I.Q. had made a clear promise that she could enter into a payment plan and that that promise had later been broken. Based on additional interest that had allegedly accrued because Ms. Hall was ultimately unable to enter into a payment plan, Judge Mays determined that these facts would be sufficient to show that Ms. Hall had suffered an injury.
However, because I.Q. was not obligated to offer a payment plan to Ms. Hall and Ms. Hall could not point to any binding or persuasive case law to support her belief that I.Q.’s alleged broken promise gave her a cause of action under the FDCPA, Judge Mays found that Ms. Hall could not connect the injury to the conduct of I.Q. (another prerequisite for finding that standing exists). To this writer, Ms. Hall’s allegations seemed to support, if anything, a claim for breach of an oral contract and not for a violation of the FDCPA. Accordingly, Judge Mays determined that Ms. Hall did not have standing to sue I.Q. in federal court for an alleged violation of the FDCPA.
As we all know, decisions on standing issues are frequent and many are similar to one another. Though Judge Mays’ Order addresses familiar topics, the arguments being made, and the required analysis of those arguments, were more novel. Often we’ll see courts determine that no concrete injury exists and the standing inquiry ends. Here, enough was alleged to support the injury, but it was the second step in the analysis that proved too high of a hurdle for Ms. Hall to overcome.
Petition Submitted to Amend FDCPA to Require ID Theft Disclosure in Communications with Consumers
The Consumer Financial Protection Bureau has received a petition to amend the Fair Debt Collection Practices Act in order to require collectors to include a disclosure in communications to consumers regarding what to do if a debt was incurred as a result of a fraudulent transaction. More details here.
WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: On September 1 the CFPB received a rulemaking petition asking the agency to amend the Fair Debt Collection Practices Act (FDCPA) – presumably, the Rules implementing the FDCPA – to require debt collectors to include an identity theft disclosure with certain collection communications. The CFPB accepted and posted the petition and set a deadline of November 1, 2024 to submit public comments pursuant to Section 553(e) of the Administrative Procedure Act. After the comment period closes, the CFPB will review the petition and any comments and issue a final response.
The petition was submitted by “Andrew James Gonzalez,” presumably an individual consumer, or an alias for a consumer, but with no stated address or company/interest group affiliation.
The petition includes proposed disclosure language (restated below) that is, at first blush, not entirely unreasonable, although it would need to be revised to, at minimum, address a wider variety of debt categories, etc.
“If any transactions regarding this credit product were fraudulent, whether you owned or did not own the debt, you have protections under the Fair Debt Collection Practices Act and may file a report at https://www.identitytheft.gov/ and send us a correspondence of the FTC Affidavit/report so we can further investigate this debt.”
It will be interesting to review the comments and see how the CFPB ultimately responds. Will the agency propose a rule with some type of mandatory disclosure language, or might it just issue a bulletin pressuring the states to develop their own disclosures and fraud protocols through state legislation that is faster? How much weight would a new CFPB Rule even carry now that courts are not required to pay Chevron deference to agency rulemaking that interprets the FDCPA? We are not likely to have concrete answers to these questions anytime soon. If you are interested in tracking this petition, you can access updates here.
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.
