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.
Judge Dismisses FDCPA Claims Against Collection Law Firm Over Jurisdiction Dispute
A District Court judge in New York has granted a motion to dismiss filed by a collection law firm that was sued for violating the Fair Debt Collection Practices Act after filing a collection lawsuit in the wrong jurisdiction, ruling that the court lacked personal jurisdiction over the defendant. Judge Orelia E. Merchant of the District Court for the Eastern District of New York issued the ruling, determining that the plaintiff failed to establish sufficient connections between the law firm and the state of New York to justify her authority over the defendant. More details here.
WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: Plaintiffs are increasingly engaging in “forum shopping,” meaning they are trying to file lawsuits in jurisdictions they believe are most favorable to consumer plaintiffs. It’s important to assess the venue where lawsuits, whether threatened or actual, are being filed, as you might have grounds to dismiss the case due to a lack of personal jurisdiction. While such a dismissal may not end the case permanently, it forces the plaintiff to refile in a jurisdiction they likely wanted to avoid. As more jurisdictions dismiss cases without damages, plaintiffs’ forum shopping is likely to increase.
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BK Filings Surge in 2024, Continuing Rebound from Historic Lows
Total bankruptcy filings jumped 14.2% in 2024, continuing a multi-year rebound after more than a decade of decline. The 517,308 total filings for the year ending December 31, 2024, represent a significant increase from 452,990 in 2023, according to the Administrative Office of the U.S. Courts. More details here.
WHAT THIS MEANS, FROM LAURIE NELSON OF PAYMENT VISION: The surge in bankruptcy filings in 2024 presents both challenges and strategic opportunities. More bankruptcies mean higher charge-offs for creditors and increased reliance on third-party collection agencies. However, this also heightens compliance risks related to bankruptcy accounts.
With this uptick, regulatory scrutiny may rise, leading to more complaints and lawsuits under laws like the FDCPA (Fair Debt Collection Practices Act) and Regulation F due to errors in handling bankrupt debt. While the current administration may not prioritize enforcement, lawsuits will continue, resulting in costly defenses.
Now is the time for companies to review communication practices and bankruptcy scrubbing to mitigate risk. Regardless of economic conditions, businesses that proactively refine their strategies will be best positioned for success.
Eleventh Circuit Affirms Ruling Against Loan Servicer Over Convenience Fees
The Court of Appeals for the Eleventh Circuit has affirmed a lower court’s ruling for the plaintiffs in a Fair Debt Collection Practices Act case over convenience fees, ruling loan servicers are prohibited from charging anything not expressly authorized by the underlying agreement or permitted by law. More details here.
WHAT THIS MEANS, FROM NABIL FOSTER OF BARRON & NEWBURGER: The first rule of holes: stop digging once you realize you are in one.
The second rule of holes: if you hear “Fire in the hole” that isn’t an invitation to a BBQ so keep your head on a swivel.
The 11th Circuit’s recent opinion Glover v. Ocwen Loan Servicing, LLC, No. 23-12578, 2025 U.S. App. LEXIS 2481 (11th Cir. Feb. 4, 2025) is a consolidated opinion of two individual appeals about whether optional convenience fees for making expedited payments is a violation of the FDCPA (15 U.S.C. § 1692f(1)). This opinion means that the 11th Circuit has just shouted “fire in the hole” to everyone in the states of Florida, Alabama and Georgia when it wrote “… in the absence of express authorization in the agreement creating the debt, we find that [XYZ convenience] fees are not implicitly authorized by TILA, EFTA, or Florida contract law.”
The 11th Circuit is joining the 4th Circuit who shouted “fire in the hole” to everyone in Maryland, North Carolia, South Carolina, Virginia and West Virginia in 2022 when it wrote in Alexander v. Carrington Mortg. Servs., LLC, 23 F.4th 370 (4th Cir. 2022): “ While convenience fees are not explicitly enumerated, Congress certainly did not want debt collectors to skirt statutory prohibitions through linguistic sophistry. So we have no trouble in concluding that convenience fees are an “amount” under the FDCPA.” and “Nothing we have said prevents [Defendant] from extending this payment option to consumers. If it does so, however, it must do so without the imposition of a statutorily prohibited convenience fee.”
But, the 11th Circuit outlined a way to get out of this hole in the opinion’s next to last paragraph when it wrote that: “Courts have interpreted debt agreements to authorize fees through simple, broad language, such as the addition of the words “including collection fees,” or a provision specifying a collection fee might be percentage based. The banking industries who create these uniform agreements are better positioned to rectify this issue than the consumers the FDCPA seeks to protect.” [Translation: to CYA, you need better original creditor contracts.]
Finally, before you apply any responsive DIY hole repair or DIY hole prevention plans, phone a friend to get some advice so that you don’t create a sinkhole that swallows almost everything around you.
See this vivid sinkhole video from July 2024.
Judge Grants Defendant’s Motion to Set Aside Default Judgment in FDCPA Case
A District Court judge in California has denied a plaintiff’s motion for default judgment and granted a defendant’s motion to set aside default in a Fair Debt Collection Practices Act case, ruling that the defendant was not properly served and had demonstrated a meritorious defense. Judge M. James Lorenz of the District Court for the Southern District of California found that the defendant did not engage in culpable conduct, had a valid defense, and that allowing the case to proceed would not prejudice the plaintiff. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: This case is the mirror image of the facts we usually see in cases with debt buyers and debt collectors, where the consumer defendant challenges service of process and the court (and, most often, the plaintiff) agrees to vacate a default judgment and allow the defendant to present a case. Here the service on Midland of the consumer plaintiff’s suit went to the wrong suite in the right building but the details of service were vague and Midland had no record of service. The plaintiff’s lawyer was not accommodating of Midland’s lawyer’s request to stipulate to vacating the clerk’s default, though, so Midland had to argue its position both about the bad service of the complaint but also its meritorious defense. Midland successfully argued both and the court set aside the clerk’s default to allow Midland to present its defense to the consumer’s claim. That is the right result, and it was gratifying to read an opinion where the court granted a corporate defendant the same grace courts so often allow for a consumer defendant.
Treasury Secretary Named CFPB Acting Director, Orders Halt to Enforcement Actions, Rulemaking, Litigation
Treasury Secretary Scott Bessent was appointed acting director of the Consumer Financial Protection Bureau by President Donald Trump today, and subsequently ordered a broad shutdown of the agency’s operations, signaling a potential shift in the agency’s direction. More details here.
New Acting Director Named at CFPB as DOGE Incursion Raises Questions About Bureau’s Future
The Consumer Financial Protection Bureau is under increasing pressure as Elon Musk’s Department of Government Efficiency has descended on the regulator and obtained access to some of its key information and departments. This development follows President Trump’s decision to place Russell Vought, a key figure behind Project 2025 and the newly confirmed Director of the Office of Management & Budget, as the new Acting Director of the CFPB. The developments have happened fast and furious in the past 36 hours and have created a mounting sense of uncertainty at the Bureau. More details here.
WHAT THIS MEANS, FROM VAISHALI RAO OF HINSHAW CULBERTSON: More change at the CFPB and several other federal agencies is inevitable. Don’t believe anyone who says they can predict the Bureau’s future! There have been multiple lawsuits filed against the administration regarding the termination of federal employees without requisite notice, and also regarding DOGE’s ability to obtain data and information from the Bureau. The administration has been successful on some of it, and not others. I expect courts of appeal or the US Supreme Court to resolve some of it. Since there is so much in flux, I am keeping my clients focused on what matters in compliance right now: First, rules that have already been finalized and put in place prior to an administration change exist and are enforceable regardless of what agency is administering them. Second, wild swings in compliance are not economically advantageous to most businesses. Finally, compliance risk is simply shifting to state-side.
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.
