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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.
Eleventh Circuit Blocks FCC Rule Seeking to Redefine ‘Prior Express Consent’ Under TCPA
The Court of Appeals for the Eleventh Circuit blocked a rule from the Federal Communications Commission (FCC) that was set to go into effect today interpreting the definition of “prior express consent” under the Telephone Consumer Protection Act. More details here.
WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: The IMC v. FCC decision is a great decision by the 11th Circuit Court of Appeals. It is the 11th Circuit flexing its judicial muscle against the FCC after the Supreme Court’s Loper Bright decision. That decision just about eviscerated the old “Chevron Deference” rule that held courts must defer to regulatory agency rulings that interpret vague statutes.
What has happened over the years is that regulatory agencies began making rules concerning existing statutes even when the statute itself was not in need of legal interpretation. Regulatory agencies had run amok in their rulemaking and literally have sought to rewrite countless federal statutes, something agencies have no authority to do. Enter the Supreme Court’s Loper Bright decision that held Federal Courts are the final arbiters of whether regulatory agencies have exceeded authority in their rulemaking and no longer will their rulemaking go unchallenged.
Exceeding its authority is exactly what the FCC has done with its 2023 rulemaking and the TCPA. The FCC for years has obsessively exceeded its authority and run afoul of the law in its rulemaking concerning the TCPA. The FCC has issued Declaratory rulings and orders anytime it felt like doing do in order to comport with what the FCC believes is “good policy”. Here, the 11th Circuit held the FCC went too far.
The 11th Circuit, in a stunning rebuke of the FCC’s 2023 TCPA Rule, stated the following to show just how far the FCC exceeded its authority: In its attempt to “implement” the TCPA, the FCC overstepped statutory boundaries. “Agencies have only those powers given to them by Congress, and ‘enabling legislation’ is generally not an ‘open book to which the agency [may] add pages and change the plot line.’”
Better yet, the 11th Circuit stated: “Congress drew a line in the text of the [TCPA] statute” between “prior express consent” and something more burdensome. Rather than respecting the line that Congress drew, the FCC stepped right over it. (That about says it all, folks.)
NOTE: We are going to see a plethora of further legal challenges to rulemaking not only by the FCC, but as to rulemaking by the FTC and the CFPB based on the Loper Bright decision. Sit tight, as the games have just begun!!!
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Seventh Circuit Affirms Ruling for Defendant in FDCPA Case
The Court of Appeals for the Seventh Circuit has affirmed a lower court’s ruling in favor of the defendant in a Fair Debt Collection Practices Act and Telephone Consumer Protection Act case, ruling that the plaintiff failed to provide sufficient evidence to support his claims. The plaintiff alleged that a debt collector violated federal and state laws by calling his cellphone 240 times during an eight-month spam, attempting to reach someone else who used to have that number, leading to physical and psychological harm. However, both the district court and the appellate court found that the evidence did not support the plaintiff’s claims. More details here.
WHAT THIS MEANS, FROM JUSTIN PENN OF HINSHAW CULBERTSON: The Arora case was filed ten years ago. Consider the changes in the complexion of the law concerning the TCPA over that time period. The case is a testament to putting in the effort until the end, resulting in a zero verdict for the plaintiff. It went to multi-district litigation for five years, during which the law on the TCPA evolved, and therefore so did Plaintiff’s theory. There were multiple district judges, motions to compel, motions for summary judgment, motions to reconsider, a bench trial, and ultimately an appeal. And in the end, a complete victory for the defendant.
The case is notable for its rulings, as well. First, the case illustrates that discovery is not unlimited. As if often the case, plaintiff’s sought additional needed discovery at the conclusion of the case. This court controlled discovery, no doubt in part due to the length of the case, and placed reasonable limits on the additional requests. In addition, the case is notable because it underscores a legal defense usually neglected in consumer cases – the burden is on the plaintiff to prove the elements of his claims. Too often we take for granted that the plaintiff will prove that a debt is a consumer debt, or that there were prerecorded voice messages or an ATDS used. In this case, when pressed, plaintiff could not prove with evidence the perquisites to his claims (that the debt was a consumer debt and that the caller used an ATDS). Finally, the Seventh Circuit reinforced a reasonable evidentiary requirement on damages – that a plaintiff cannot rely on speculation, but must come forth with evidence of concrete harm “such as medical care, an inability to sleep or work, or a loss of reputation and integrity in the community.” The plaintiff and plaintiff’s attorney had a lot investing on winning one of the fee shifting claims in this lawsuit, and after ten years of work, Defendant prevailed on all claims.
Seventh Circuit Overturns Ruling for Defendant in FDCPA Case Involving Disputed Debt
The Court of Appeals for the Seventh Circuit has overturned a lower court’s ruling in favor of the defendant in a Fair Debt Collection Practices Act case, ruling that the defendant’s lack of knowledge about a prior dispute did not absolve it of its obligations under the FDCPA. The case highlights the interplay and confusion between disputes under the FDCPA and the Fair Credit Reporting Act. More details here.
WHAT THIS MEANS, FROM BRENDAN LITTLE OF LIPPES MATHIAS: Plaintiff disputed his account with Pentagon Federal Credit Union (“PenFed”) and PenFed responded to Plaintiff indicating that it determined the account was valid. Thereafter, PenFed sold Plaintiff’s account to Security Credit Services, LLC (“SCS”). When PenFed sold the account, PenFed did not provide any information to SCS that Plaintiff had disputed the account with PenFed. SCS reported the account to the bureaus without a reference to Plaintiff’s prior to dispute to PenFed. Plaintiff commenced the subject action claiming that SCS violated the Section 1692e(8) because it did report that the account as disputed by Plaintiff. The District Court granted SCS’s motion for summary judgment dismissing Plaintiff’s claim. On appeal, the Seventh Circuit agreed with the District Court that Plaintiff had Article III standing to proceed in federal court. However, the Seventh Circuit reversed the District Court determining that there were factual issues that needed to be resolved at trial. Specifically, the Seventh Circuit held that Section 1692e(8) created a negligence standard because it prevents a debt collector from reporting credit information which it knew or should have known to be false. While the record was undisputed that SCS did not have actual knowledge of Plaintiff’s dispute with PenFed, the Seventh Circuit determined a jury needed to decide whether SCS should have known about the prior dispute. The Court indicated the question was whether SCS used reasonable care to obtain information whether the debts it purchased were disputed citing “[t]he record evidence is mixed as to whether has SCS known of the [prior dispute], it would have shared PenFed’s perspective that [Plaintiff’s] failure to respond meant that he no longer disputed the debt.” This decision should be read carefully so that original creditors and debt buyers can structure the terms of agreements accordingly to avoid situations like this one moving forward.
Fourth Circuit Reverses Ruling on Arbitration of SCRA Claims
The Court of Appeals for the Fourth Circuit reversed a lower court’s ruling related to whether claims filed under the Servicemembers Civil Relief Act (SCRA) can be arbitrated or must be tried in court. The decision provides a significant precedent for the credit and collection industry as it navigates the intersection of arbitration agreements and protections under federal law. More details here.
WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: Arbitration remains a powerful tool for defeating class actions. Here, the plaintiffs attempted to avoid arbitration by arguing that the Servicemembers Civil Relief Act (SCRA) displaced the Federal Arbitration Act (FAA). The plaintiff’s prevailed in the federal district court, but the Fourth Circuit reversed that decision because the SCRA does not explicitly override the FAA’s requirement to enforce arbitration agreements. However, the plaintiffs were able to avoid arbitrating claims brought under the Military Lending Act because that law contains specific language prohibiting the enforcement of arbitration agreements.
Nevada Court Dismisses Wage Garnishment Lawsuit Due to Lack of Jurisdiction
A District Court judge in Nevada has granted a defendant’s motion to dismiss after it was accused of garnishing the plaintiff’s wages without first domesticating the judgment in that state. Judge Andrew P. Gordon of the District Court for the District of Nevada ruled that the defendant, a debt collection law firm, lacked the necessary minimum contacts with Nevada to establish personal jurisdiction. More details here.
WHAT THIS MEANS, FROM MARISSA COYLE OF FROST ECHOLS: This is another example of “details matter.” Plaintiff alleged an FDCPA case against a collection law firm for garnishing her wages in Nevada based upon an undomesticated judgment obtained in Tennessee. In response, the collection law firm moved to dismiss on the basis the Nevada court in which Plaintiff filed the FDCPA claim did not have personal jurisdiction. Because the law firm obtained the writ of garnishment in Tennessee and served it on Plaintiff’s employer’s Tennessee registered agent rather than attaching the garnishment to Plaintiff’s Nevada bank account (among other actions which didn’t result in the required minimum contacts being established), the Court granted the collection law firm’s motion to dismiss for lack of personal jurisdiction. Why is this important? Given the factual scenario, there may be tools available to fight claims the industry regularly sees that don’t require diving deep into the actual claim itself. There are questions to ask when reviewing a complaint. Is the matter filed in the correct court? Does the court in which the matter was filed have jurisdiction? Are there arguments available that would result in an early dismissal? Even if you obtain a dismissal and it is without prejudice, you’re sending a message and making it more difficult on the plaintiff.
Tenth Circuit Upholds Ruling in FDCPA Case, Finding No Dispute Was Made
In a case that was defended by Martin Golden Lyons Watts Morgan, the Court of Appeals for the Tenth Circuit has affirmed a lower court’s ruling in favor of the defendant in a Fair Debt Collection Practices Act case, ruling that the plaintiff’s statements during a phone call with a debt collector did not constitute a dispute under the law. The decision reinforces the standard that merely questioning a balance does not necessarily trigger the reporting requirements of Section 1692e(8) of the FDCPA. More details here.
WHAT THIS MEANS, FROM ISSA MOE OF MOSS & BARNETT: I love this Tenth Circuit decision for two reasons. First, it’s no longer than it needs to be — just under four pages to be precise. We don’t always get that out of a legal opinion. Second, it’s a common sense holding. A consumer asked a question regarding the components of a debt owed to Sprint; i.e., whether the debt included equipment charges because it was higher than the monthly bill. And the debt collector provided a clear and direct answer; namely, that it included equipment plus a final service bill. In affirming the district court’s ruling in favor of the collector, the Tenth Circuit explained that a question posed by a consumer regarding the components of a debt, in response to which a collector provides a clear and direct answer, does not result in a dispute requiring an update to the consumer’s credit report. And while acknowledging precise language isn’t necessarily required to dispute a debt, the Tenth Circuit determined that no reasonable factfinder (aka a judge or jury) could possibly consider the exchange at issue a dispute.
What’s the takeaway? Two things immediately come to mind. First, the collector who handled the call in this case deserves a raise because they nailed it, at least according to the Tenth Circuit (and that’s worth rewarding). And second, we’re seeing a lot of these baiting call cases, so make sure your collectors are trained on how to spot and handle a possible set up. While that’s extra time in the training room (and less time on the phones), the investment could save you a lot of money in the long run.
CFPB Voices Support of State-Level Medical Debt Legislation Efforts
The Consumer Financial Protection Bureau is actively supporting state legislation aimed at prohibiting the reporting of medical debt to credit bureaus — a move that underscores the agency’s ongoing efforts to reshape how medical debt impacts consumers’ financial health. The CFPB sent letters to lawmakers in Massachusetts, South Dakota, Oregon, and Washington, commending their efforts to ban medical debt from consumer credit reports. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER LOCKE: In light of all CFPB activities being halted by the combined pronouncements of former CFPB Acting Director Bessent and current Acting Director Vought, industry members should anticipate that states are likely to continue with their own consumer protection-related initiatives, particularly regarding the reporting and collection of medical debts. Currently, the CFPB’s final rule prohibiting the reporting of medical debt appears to be dead in the water, and it is doubtful it will ever take effect. But state legislatures around the country continue to introduce and pass legislation impacting medical debt collection activities, with some laws defining what constitutes “medical debt” much more broadly than the CFPB did in its medical debt furnishing rule. In addition, in January, the CFPB provided states with a compendium of materials to support these efforts. I anticipate that some states will take full advantage of these resources to bolster their consumer protection initiatives. Now more than ever, it is crucial to remain attentive and responsive to state legislative and regulatory activities to minimize potential impacts and disruptions to existing business strategies.”
Bills Introduced in House, Senate to Defund CFPB
Bills have been introduced in both the House of Representatives and Senate this week that would defund the Consumer Financial Protection Bureau and Republicans are reportedly looking to use a special procedure that would allow the bill to pass with just a simple majority in the Senate. More details here.
Barr Reintroduces Bill to Push for Greater CFPB Accountability
Rep. Andy Barr [R-Kent.], the chairman of the House Financial Services Subcommittee on Financial Institutions, last week reintroduced H.R. 654, the Taking Account of Bureaucrats’ Spending (TABS) Act, aiming to bring the Consumer Financial Protection Bureau under the Congressional appropriations process. The bill would replace the CFPB’s current funding model, which relies on the Federal Reserve, with a more traditional process involving direct Congressional oversight. More details here.
WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS SUTHERLAND: With Valentine’s Day around the corner, there has been a lot of attention on the CFPB including Director Chopra’s departure and the arrival of Acting Director Scott Bessent – but not a lot of love. According to Politico, Congress has until May 12 (or whatever day ends up as the 60th full day of the legislative session) to get joint resolutions of disapproval passed for agency rules. It is no surprise that Congress has put their top Congressional Review Act (“CRA”) targets on paper with discussions featuring CFPB rules. Senator-elect Bernie Moreno, an Ohio Republican, has told the media to “give our companies certainty,” it is the Senate Banking Committee’s goal to prioritize CRA challenges to CFPB rules.
Meanwhile, CFPB history buffs may recall that when Mick Mulvaney was brought in as the acting Director of the CFPB in 2018, he proposed a $0 budget for the CFPB. In a revisit of that effort, on January 29, Sen. Ted Cruz, with five co-sponsors, reintroduced Senate Bill 303 to revise the Consumer Financial Protection Act to effectively “de-fund” the CFPB. The bill has been referred to the Senate’s Committee on Banking, Housing, and Urban Affairs. A companion bill, H.R. 814, was proposed in the House on January 28, by Texas Rep. Keith Self, with five co-sponsors. Rep. Self’s bill was referred to the House Committee on Financial Services.
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.
