There is a joke that if you ask 10 lawyers for their opinions on something, you’ll get 10 different answers (or 10 different attorneys each saying, “it depends.”). Asking a handful of industry compliance experts for what they will remember most about 2024 and how it shaped the ARM industry turned out to be a similar exercise. And that speaks to just how much happened in 2024 and how important a lot of it was. Here are the most impactful compliance topics and caselaw that shaped 2024 for companies in the credit and collection industry, and one sneak peek into a case that may make the list for 2025.
David Kaminski, Carlson & Messer
One of the most fascinating cases from 2024 that will likely have the biggest impact in the Financial Services sector is the Supreme Court’s decision in Loper Bright . That decision just about eviscerated the Chevron Deference rule that courts must defer to regulatory agency rulings that interpret vague statutes. What has happened over the years is that various regulatory agencies began making rules concerning existing statutes even when the statute itself was not in need of legal interpretation. Regulatory agencies also started a quest of making new laws and new interpretations as to existing statutes that previously went unchallenged due to the unbridled power that the Chevron rule gave to regulatory agencies.
With the Loper Bright decision, rulemaking by regulatory agencies can be challenged and attacked at the federal district court level, the first tier of the federal court system. The Supreme Court is aggressively pushing against allowing agencies to make law whenever they feel the need to do so. The Supreme Court’s position is that laws should be made by Congress and individual courts applying and interpreting the law in individual cases.
The unbridled powers of agencies such as the FCC and the CFPB are now in question, and it is game on. Recently, the CFPB has made various pronouncements that mark a trend in its increasingly expansive exercise of authority. The CFPB aims to continue to pursue the financial services sector with a vengeance. Since Loper Bright, we have seen an increase in industry and advocacy groups’ challenges to broad agency rules that could have sweeping implications for the CFPB and other agencies’ ability to regulate under their authorizing statutes. And, such trend will continue. Loper Bright will likely cause agencies to more carefully consider (or reconsider) their potential interpretations of a statute, as they may no longer receive unchecked deference from the courts.
Heads up – let’s see what happens in the upcoming Supreme Court hearing in McLaughlin Chiropractic Association v. McKesson Corp. case, set for oral argument on Tuesday, January 21, 2025. The issue there is whether the Hobbs Act requires federal district courts to accept the FCC’s legal interpretation of the Telephone Consumer Protection Act. Could this be the death of the Hobbs Act – i.e., the rule that limits how and when a final FCC ruling can be challenged? The FCC has traditionally been given broad authority to interpret the TCPA and it has made countless rules and regulations that are now law. Some of those rules have clearly gone too far. McLaughlin Chiropractic will be a further test of the scope of Loper Bright that could change the landscape of regulatory agencies’ powers for years to come.
So, sit back and watch – the games have begun!!!
Justin Penn, Hinshaw & Culbertson
One trend on the litigation front is the shift to claims under the Fair Credit Reporting Act. This shift has caused a few ripple effects in defending the industry on consumer cases. First, many FCRA cases also name the credit bureaus as defendants. Debt collectors and debt buyers have been very shrewd on which cases to fight, and the industry has done a very good job of keeping the settlement value of cases more reasonable. While the bureaus will litigate some cases, when they settle, they tend to offer substantially more than our industry has offered in the past. We have seen these settlements drive the settlement range up for the other side or alternatively result in the bureaus settling out, potentially funding the litigation against the ARM industry remaining defendant. Somewhat relatedly, in the event the FCRA cases do not settle, there is more discovery to be done, including from the settling codefendants. This additional discovery if not properly managed can drive up both the defense costs as well as the potential exposure in the event of an unfavorable ruling. The good news is that when the right cases are defended, discovery often reveals no damages to the consumer, which makes the FCRA cases good candidates for summary judgment in the absence of willful violations. But unfortunately, presenting the defense of lack of damages in an FCRA case (and the related, if appropriate, lack of standing defense) is not usually ripe until summary judgment. The ultimate take away from this trend is to make sure you have a solid plan at the beginning of the defense of the case to both manage costs of defense and mitigate for damages. The risk of unpredictable trial outcomes can increase with these cases.
Meghan Jean, Sequium Asset Solutions
Given that we prepared for its December 1, 2024 enactment, despite its delay, I believe that the most impactful regulation of this year was the New York City Amended Debt Collection Rules. This rule sets a tone within the debt collection community of how far regulators will go to protect consumers. Regardless of one’s opinions, the Amended Rules are a foreshadowing of what’s to come in other states and cities, especially after the results of the presidential election. While the reins of the CFPB may loosen, we should be prepared to see similar rules go into effect across the country. Now, one would hope that those cities and states would take better care than in New York City in the actual protection of consumer rights, debt collectors – including creditors – should be prepared to deal with the worst case scenarios.
The Amended Rules leaves open the door for consumer attorneys to file suit against debt collectors and/or to absolve their clients of obligations they have incurred. Prior to attempting to collect upon any debt, or placing any debt for collection efforts, it is imperative that creditors cooperate with their debt collector firms and agencies in the production of all original account level documentation. Additionally, in those cases where simply providing OALD to consumers is insufficient to respond to their dispute, creditors should be prepared to communicate and respond to disputes in a timely manner to assist the debt collector in their own response to the consumer and/or their attorney within the shortened 45 day window. Please note, these suggestions are without consideration for medical debt and the concerns around it.
It would behoove us within the industry to take advantage of the delay to the enforcement of the Amended Rules. We must educate ourselves on the requirements, follow the direction of our compliance experts, and create policies and procedures to ensure that we are fully prepared to collect outstanding debt owed by New York City residents.
Wade Isbell, Professional Credit
For compliance professionals in the debt collection industry, 2024 may have felt like a never-ending barrage of legal and regulatory changes. This was especially true for those of us collecting medical debt throughout the country, where we continued to see efforts at a state-level to place restrictions on the collection and credit reporting of medical debt. However, even with all those state-specific changes, nothing seemed more impactful than the CFPB’s Medical Debt Advisory Opinion.
There were portions of the Advisory Opinion that didn’t come as too much of a surprise. For instance, the CFPB has previously warned debt collectors that they might be violating the FDCPA if they were collecting accounts in violation of the No Surprises Act or if they were attempting to collect amounts that were already paid. But the Advisory Opinion went well beyond some of those prior pronouncements and suggested new substantiation requirements that would impose significant obligations on medical debt collectors. This included, among other things, a potential requirement to obtain (1) payment records; (2) records of a hospital’s compliance with any applicable financial assistance policy; and (3) copies of executed contracts, or, in the absence of a contract, documentation that the creditor can use to establish the amounts are “reasonable” or consistent with “market rates.”
While much remains to be seen regarding the viability of the Advisory Opinion, both due to the pending legal challenges and the anticipated change in leadership at the CFPB, I tend to agree with others in the industry who have suggested that we will see a handful of states pick up any slack and carry forward the CFPB’s initiatives related to medical debt in 2025 and beyond.
