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.
NYC Amends Collection Regulation to Clarify Debt Collection Definition Includes Creditors
In a development first announced by ACA International, the New York City Department of Consumer and Worker Protection (DCWP) has proposed an amendment to its new debt collection regulation. The amendment aims to clarify that the definition of a “debt collector” under the city’s Consumer Protection Law (CPL) explicitly includes creditors collecting their own debts. More details here.
WHAT THIS MEANS, FROM NABIL FOSTER OF BARRON & NEWBURGER: California dreamin’
On such a winter’s day…
Depending on your perspective, this well-known song lyric from California Dreamin’ (1965) and the sentiment expressed by the Mamas & the Papas may or may not be how you perceive the recent “clarification” by the New York City Department of Consumer and Worker Protection (“DCWP”). The “clarification” is that the definition of “debt collector” in Section 6 RCNY § 5-76 of the rules includes “creditors collecting on their own debts.” This proposed rule “clarification” anchors the NYC regulators as East Coast brothers-in-arms with regulators in California. All creditors doing business in NYC will need to make some adjustments to their operations and risk abatement measures. There will be no shortage of advisors eager to help you prepare, so find someone who has a nice demeanor for explaining things, have a few cups of coffee and if you start to feel a little verklempt, just talk amongst yourselves… (This “clarification” is neither clear nor a f’n-cation. Discuss.
In keeping with a West Coast theme, for those not enthralled by the idea of original creditors and subsequent owners of a debt becoming subjected to the regulations of the DCWP, this proposed rule clarification feels like that moment in the classic film, The Wizard of Oz (1939), when the Wicked Witch of the West says to Dorothy: “And as for you, my fine lady, it’s true I can’t attend to you here and now as I’d like; but just try to stay out of my way – just try! I’ll get you, my pretty, and your little dog too!”
The DCWP is accepting comments on this rule clarification amendment until Dec. 12, 2024. Although the implementation of these new rules has already been postponed to April 1, 2025, it seems highly unlikely that the progression of regulation regarding who fits within the DCWP’s definition of a “debt collector” will be deterred. So, close your eyes, tap you heels together three times and think to yourself “there’s no place like home.” Maybe, just maybe, you will find an easier way to handle this messy avocado-toast-on-an-everything-bagel being served up by the DCWP. Remember on April 1, 2025, “order up!” will be echoing the streets of NYC and no, it isn’t an April Fool’s joke! But do try to keep your sense of humor as it will help alleviate some of the stress.
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Judge Dismisses FDCPA Suit After Defendant Doesn’t Respond to Validation Request
A District Court judge in Maryland has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act lawsuit after it was accused of not responding to a validation request from the consumer, pointing out that the defendant doesn’t necessarily have to respond, as long as it doesn’t attempt to collect on the debt. More details here.
WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: The court found that the debt collector’s actions did not violate the FDCPA because an agency is not legally required to respond to a dispute so long as it has ceased collections. This point is worth emphasizing: You don’t have to respond to a dispute if you stop collections. Agencies often forget this is an option. The FDCPA clearly provides an offramp for agencies that are unable or unwilling to respond to a dispute if collection activity stops. If you do choose to stop collections rather than respond, be sure you close down the account and send it back to the creditor – you don’t want it hanging around in your system – that is the kind of account that can rise from the dead to haunt you.
Judge Grants MSJ for Defendant in FDCPA Case Over Time that Email Was Sent/Received
In a case that was defended by John Marees at Messer Strickler Burnette, a District Court judge in Florida has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case surrounding a common claim being made against collection operations that are communicating with consumers via email — regarding the time that the message is received or read by the consumer being outside the FDCPA’s permissible contact window. More details here.
WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: The defendant sent an email within the hours presumed to be convenient under § 1692c(a)(1) but the consumer’s email service provider did not deliver the email until 10:14 p.m. The court rejected the CFPB’s interpretation that a “communication” by email occurs when the email is sent, but the court also rejected the consumer’s argument that the “communication” occurs when the email is delivered. Instead, the court found that the “communication” occurred when the consumer opened the email at 11:44 a.m. the following day, thus there was no violation for communicating with the consumer at an inconvenient time. But what if a consumer opens an email at midnight? The court didn’t need to answer that question in this case, though it noted that the purpose of § 1692c(a)(1) was to protect consumers from “after-hours noisy telephone rings — not emails sitting in one’s e-mail box (silently) overnight.” Should a consumer bring a claim over an email opened at midnight, that claim should fail because the time a consumer chooses to open and read an email cannot be an inconvenient time for that consumer.
CFPB Delays Enactment of Medical Debt Collection Guidance
The Consumer Financial Protection Bureau yesterday announced in a court filing that it has agreed to postpone the effective date of its controversial medical debt collection guidance from December 3, 2024, to January 2, 2025. This delay comes in response to a legal challenge from ACA International and other plaintiffs, who filed for a temporary restraining order and preliminary injunction against the CFPB’s advisory opinion. More details here.
WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: On November 21, 2024, the Consumer Financial Protection Bureau (“CFPB”) announced it had agreed to postpone the effective date of the medical debt collection guidance from December 3, 2024, to January 2, 2025. The CFPB had issued this guidance on October 1, 2024, and introduced new requirements for medical debt collection practices. Following its issuance, ACA international and other plaintiffs filed for a temporary restraining order and preliminary injunction against this guidance, arguing that it was too burdensome and exceeded the CFPB’s authority. CFPB maintains that its guidance did not create binding legal obligations, while plaintiffs argue the guidance imposes undue burdens on debt collectors, requiring extensive validations and audits of medical debts. By agreeing to delay the effective date, the court will have additional time to consider the pending motions before it.
New CFPB Rule Brings Major Payment Apps Under Federal Oversight
While other regulators have announced plans to stop issuing new rules or guidance during the transition period before President Trump goes back into office, the Consumer Financial Protection Bureau yesterday announced a final rule to supervise the largest nonbank companies offering digital funds transfer and payment wallet apps. These platforms include Apple, Google, Amazon, PayPal, Block, Venmo and Zelle, according to published reports. More details here.
WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: It is clear that the CFPB is going to push forward its agenda until January 20th and is not dissuaded by the election or the rhetoric coming from either the incoming administration or its surrogates like Elon Musk and Vivek Ramaswamy. However, the payments space is an area where there may be some bi-partisan alignment.
First, President-Elect Trump has oscillated between calls for the stricter regulations for some and a hands-off approach for others. Clearly AI is going to take front and center but a populist agenda suggests that other sectors of the technology sphere may not get the love they hoped for.
Second, legislation co-sponsored by Vice-President Elect JD Vance has specifically targeted the biggest banks and card issuers, Visa and Mastercard included, which will require retailers a choice between another card network in addition to the other current available networks. Recently, representatives from Visa and Mastercard appeared before Congress and their reception was icy from Republicans as well as Democrats. Both sides want competition in the payments space. Congressional leaders basically said if they don’t figure out an alternative framework Congress will do it for them.
The CFPB’s larger market participant (LMP) rule of Big Tech and their infiltration into the payments space, is a culmination of work that started in 2022. That being said its only an LMP and it will be up to the next director of the CFPB to decide whether supervising Google, Venmo or Apple Pay is a priority. Financial technology trade groups say they will challenge the rule but it is not expected that Congress will use its resources to repeal it under the Congressional Review Act (CRA) given higher priority CFPB rules and guidance like overdraft, late fees and others.
Payments will occupy an unique place in Trump world. On the one hand, digital wallets and apps represent the efficiencies and cost-savings which has been part of the vernacular since the election. On the other hand, the lack of competition and costs to consumers run contrary to populist sentiment. The needle will need to be carefully thread to ensure the demand of the consumer is met while not having a significant impact on the economy. For the ARM Industry, if payments can become quicker, faster and cheaper, that will only benefit and enhance the ability for consumers to resolve and pay their debts that much quicker. Whether it’s the CFPB or Congress who drives that bus will remain to be seen.
Judge Grants MTD in FDCPA Case Over Attempt to Collect on Discharged Debt
A District Court judge in California has granted a defendant’s motion to dismiss after it was accused of violating the Fair Debt Collection Practices Act and the Rosenthal Fair Debt Collection Practices Act by attempting to collect on a debt that had been discharged in bankruptcy. More details here.
WHAT THIS MEANS, FROM JENNA WILLIAMS OF FROST ECHOLS: This case highlights the complex relationship between debt collection and bankruptcy discharge orders. The creditor was lucky.
The debt (judgment) was discharged in bankruptcy. The creditor (wrongfully) renewed the judgment despite the discharge. The creditor was in contempt of the discharge order. However, the consumer made a mistake by filing a separate civil lawsuit against the creditor alleging violations of the automatic stay, the discharge order (section 524), and the FDCPA. This is not allowed. The automatic stay was lifted upon entry of the discharge order and there is no private right of action under Section 524. The consumer should have filed a contempt action within the bankruptcy court itself.
*Regarding the dismissal of the FDCPA claim, the Court concluded the claim was based on Section 524 (violation of the discharge injunction). Per the Court, “to permit a simultaneous claim under the FDCPA would allow through the back door what Plaintiff cannot accomplish through the front door – a private right of action.”
Main Points:
- The Court dismissed the claims without prejudice. The consumer may file a contempt action in the Bankruptcy Court (assuming there are no statute of limitations issues).
- Do not attempt to collect a debt (or judgment) that has been discharged in bankruptcy.
- The Bankruptcy Court resolves problems in its own court – not outside.
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.
