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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 Orders Defendant to Provide Unredacted Manuals in FDCPA Case
A Magistrate Court judge in North Carolina has granted a plaintiff’s motion compelling the defendant in a Fair Debt Collection Practices Act case to provide unredacted copies of its compliance and procedure manuals and details of communications between the defendant and its clients, but did deny the plaintiff’s motion for attorney’s fees and costs. More details here.
WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: A debt collector’s compliance management system is at the center of a discovery dispute in a North Carolina FDCPA putative class action litigation. The defendant collector was ordered to produce, among other corporate documents, an unredacted and complete set of its collection procedures. While the defendant originally produced certain procedure documents, the dispute arose after depositions revealed that there were additional collection procedures that either had not been reduced to writing or existed within various informal electronic documents. Thus, the collector was required to gather and produce the “totality of documents functionally used as the procedure manual” even though they had not been internally or “formally collated into a single compendium” previously.
This discovery order underscores the importance of maintaining a formal written compliance management system (or CMS) that includes, in one place, a collection agency’s full set of written policies and procedures. Documenting internal policies and procedures formally in writing allows a collector to easily review its complete CMS for regular and meaningful quality control checks, audits, updates, planning, and training. If your company’s policies and procedures have not been meaningfully reduced to writing, compiled and organized, or if they have not been updated recently or you know there aresignificant gaps in the company’s written documentation, make this a priority for Q1 2025.
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CFPB Report Highlights Gaps in Financial Data Privacy Protections
The Consumer Financial Protection Bureau yesterday released a report examining the current state of privacy protections for consumers’ financial data, focusing on federal and state regulations. The findings reveal significant gaps in consumer privacy, especially for financial information. More details here.
WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS SUTHERLAND: The Consumer Financial Protection Bureau (“CFPB”), laser-focused on how consumers’ information is used, processed, disclosed, accessed, and even monetized released a report this month on gaps in consumer protections, particularly regarding digital tools and modern-day surveillance. Although the CFPB’s report confirms that over a third of the U.S. states have passed comprehensive privacy laws since 2018, companies can still monetize consumer data by building and selling business models.
Just weeks earlier, the CFPB issued Circular 2024-06 to highlight its concern about how consumers may be unaware that their non-public information is being monetized. In that circular, the CFPB confirmed that modern-day surveillance reports and dossiers collected about individuals and used for making employment decisions about them are and should be covered by the Fair Credit Reporting Act (“FCRA”) and that the companies assembling these reports (which are “consumer reports”) are “consumer reporting agencies.” Shortly before that, the CFPB issued its long-awaited “open banking” final rule with a proposed January 17, 2025, effective date imposing obligations and restrictions on three types of parties: data providers, authorized third parties and data aggregators. The CFPB’s new report on state privacy laws now highlightsgaps in states’ privacy laws that may potentially leave consumers unprotected.
In its report the CFPB urges states to consider whether consumers’ financial data is this fast-moving digital era is adequately protected if laws they enact exempt financial institutions or consumers’ nonpublic data that is covered by either the Gramm-Leach-Bliley Act (GLBA) or the Fair Credit Reporting Act (FCRA). The CFPB reports these findings:
• Lots of consumer data is being collected and monetized.
• Consumers value the privacy of their financial data and want it to be kept private but do not know about all the “novel and increasingly pervasive methods of collecting and monetizing data.”
• New state comprehensive privacy laws provide consumers with rights to know about data being collected about them, rights to correct it, and rights to be forgotten.
• Consumers will not be able to take advantage of these rights in new state laws if that data is subject to exemptions for either the GLBA or FCRA.
• States should take a closer look at gaps in consumers’ privacy protections resulting from GLBA and FCRA exemptions.
The CFPB explains it is addressing “emerging data privacy challenges” through all of its advisory and rulemaking actions this fall. Its strategy includes its Section 1033 open banking rulemaking, reporting out on how big tech companies comply with consumer protection laws, and potentially publishing further FCRA rulemaking related to data brokers.
With a new Administration and new Congressional control mere months away, an interesting question is whether some of the CFPB’s advisory work and rulemaking will be diluted by potential new CFPB leadership and/or subject to review by the next Congress under the Congressional Review Act (“CRA”) which allows for a lookback at rulemaking activities experts estimate has occurred on or after August 1, 2024.
What does this mean for the credit and collections industry? It is critically important for organizations to be mindful of how consumers’ nonpublic information is collected, accessed, used, and disclosed in their day-to-day operations. Even if the CFPB’s regulatory guidance or even rulemaking is rolled back, there are numerous state and federal privacy and information security laws with which compliance is expected related to consumers’ information.
Maryland Appeals Court Ruling Limits Litigation Privilege in Debt Collection Cases
A Maryland Appeals Court has vacated the dismissal of a class-action complaint accusing a healthcare provider of violating state collection law, ruling that the common law litigation privilege does not shield debt collectors from liability under the Maryland Consumer Debt Collection Act (MCDCA) and the Maryland Consumer Protection Act (MCPA). The ruling emphasizes that collectors are not immune from liability when attempting to collect debts they allegedly know are not owed by consumers. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: In this case of (in part) first impression in Maryland, the court makes clear that there are lines around what activity can qualify for the common law litigation privilege that typically serves primarily to protect witnesses, parties and judges from statements made in litigation. With respect to attorneys’ statements in litigation, the privilege applies to such statements as long as there is some “rational relation to the matter at bar.” The consumer plaintiffs in this case alleged that the collection attorney’s conduct violated two Maryland consumer protection statutes when he attempted to collect payments the plaintiffs allegedly did not owe, and when he claimed entitlement for fees for preparing a motion he never filed. The appeals court reversed the trial court’s dismissal of the plaintiffs’ claims, finding that the Maryland General Assembly displaced the common law privilege by enacting statutes proscribing certain conduct and providing remedies for that conduct. And the court said that reading the statute to allow the common law litigation privilege to obviate the remedial impact of the statutes was inconsistent with the enactment and purpose of the statute. In the end the court made clear that attorney conduct is not absolutely protected by the common law litigation privilege – and specifically not in the context of consumer claims that the attorney’s conduct violated provisions of consumer protection laws. It feels like a rational outcome, especially given the court’s summary statement in the Conclusion that the statutory remedies in Maryland’s consumer protection statutes are there to hold “debt collectors accountable for filing lawsuits to demand payment of money they know is not owed” (emphasis added).
Judge Grants Motions from Both Sides in FDCPA Case
It’s not often that both sides in a Fair Debt Collection Practices Act lawsuit get their motions granted at the same time, but a District Court judge in New Jersey pulled off the feat, ultimately remanding the case back to state court after the defendant was accused of attempting to collect on a debt without being properly licensed to collect in the state. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: What’s the takeaway here? Defendant was lucky to avoid sanctions in the way of having to pay Plaintiff’s attorney fees. Defendant removed to the case to the federal court on the basis that there was a federal question involved (the FDCPA) which provided the federal courts jurisdiction. The Defendant then filed a motion to dismiss for lack of jurisdiction. Huh? The Plaintiff then made the obvious move and asked the Court to remand (send back) the case to the state court where it belonged all along. Note, Plaintiff could have done nothing and simply refiled in the state court.
Why do I say the Defendant was lucky? Two reasons. First, per the decision, the Complaint alleged no actual damages and these “no damage” cases have been getting kicked out of the New Jersey District (along with other districts) courts for some time now. Second, the Defendant took contradictory positions regarding the issue of jurisdiction.
Conclusion, if you are going to remove a case to federal court and intend to move to dismiss, why not make sure you have a basis other than lack of jurisdiction so you have a fighting chance to prevail.
Judge Denies Defendant’s Motion to Dismiss in FCRA Case While Also Issuing Warning to Defense Attorney
A District Court judge in Maryland has denied a defendant’s motion for partial dismissal or summary judgment and also denied the plaintiff’s motion to strike affirmative defenses in a Fair Credit Reporting Act case, in which the judge also warned the defendant’s attorney of her “ethical and professional responsibilities” regarding misrepresentations that were made. More details here.
WHAT THIS MEANS, FROM JOSHUA HOWELL OF TROUTMAN PEPPER: Hall serves as a good reminder of the FCRA’s nuanced preemption provisions—there are two—which courts have long wrestled over and about which there is still much disagreement. Fourth Circuit courts generally hold that the FCRA preempts only state statutory claims and a limited set of rights of action at common law. Contract claims such as that asserted in Hall are not preempted by the FCRA under Fourth Circuit precedent.
Appeals Court Overturns Ruling for Defendant in FDCPA Case Over Medical Debt
The Court of Appeals for the Ninth Circuit has affirmed a ruling in favor of a credit reporting agency sued for violating the Fair Credit Reporting Act but overturned a ruling in favor of a collection operation for allegedly violating the Fair Debt Collection Practices Act on the grounds of whether the plaintiff actually owed the debt to the creditor — a hospital. More details here.
WHAT THIS MEANS, FROM DALE GOLDEN OF MARTIN GOLDEN LYONS WATTS MORGAN: In this case, the collection agency obtained summary judgment on the plaintiff’s FDCPA claim alleging she wasn’t responsible for the medical debt it sought to collect. In reviewing the agency’s motion for summary judgment, the trial court analyzed the factual evidence presented by both parties and concluded that the plaintiff “failed to adequately support her argument that she did not owe the debt.” On appeal, the Ninth Circuit Panel reversed finding that it was “unclear” who was at fault for the actions that led to the hospital claiming the plaintiff was responsible for the debt.
The take-away here from my perspective, is that FDCPA cases based on claims the debt is not due are often difficult to win on summary judgment. Reliance on evidence from the creditor may only create a question of fact due to the evidence offered by debtor in opposition to the creditor’s evidence. And the bona fide error defense can be difficult to win on summary judgment because courts typically rule that the issue of the reasonableness of the agency’s policies and procedures presents a jury question.
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.
