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.
N.J. Appeals Court Reverses Arbitration Ruling for Defendant in Collection Case
A New Jersey Appeals Court has overturned a lower court’s ruling in favor of a defendant that had granted arbitration in a collection lawsuit more than a year after the complaint had been filed and litigated. The appellate court found that the defendant ultimately waived its right to arbitration due to its litigation activities. More details here.
WHAT THIS MEANS, FROM XERXES MARTIN OF MARTIN GOLDEN LYONS WATTS MORGAN: The notion of courts favoring sending matters to arbitration seems to be dwindling. Nearly every underlying contract has a differently worded arbitration clause, which can lead to inconsistent case law regarding timeliness and enforceability. To make things more complicated, if there is litigation to enforce the contract, a collection lawsuit, or defense of an FDCPA claim, does that impact effect enforceability of an arbitration clause based on the contractual language and the notion of waiver? Here, the trial court found no waiver, but the appellate court did. It seems to be coin flip odds lately on whether a court will grant a motion to compel arbitration, but consider that route as early as possible.
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Court Grants Stay in Medical Debt Credit Reporting Case Against CFPB as Consumer Groups Seek to Intervene
If the Consumer Financial Protection Bureau is not interested in defending itself against a lawsuit seeking to block the implementation of its medical debt credit reporting rule, consumer advocacy groups want to step in, according to a motion filed yesterday in federal court. At the same time, the judge in the case has granted the CFPB’s request for a 90-day stay in the proceedings. More details here.
WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: On February 6, the U.S. District Court for the Eastern District of Texas granted the CFPB’s unopposed motion for a 90-day stay in the litigation filed by Cornerstone Credit Union League and Consumer Data Industry Association (the “Plaintiffs”). The litigation relates to the Plaintiffs’ challenges of the CFPB’s Final Rule, which involves the CFPB’s prohibition on creditors and consumer reporting agencies concerning medical information. As we continue to see significant changes at the CFPB, including transitions in leadership, the CFPB’s decision to seek a stay in this case comes as little surprise and is consistent with its instruction to pause litigation and enforcement actions. Stay tuned!
California Appeals Court Reverses Judgment in Debt Buyer Case
A California Appeals Court has reversed a lower court’s ruling in favor of a debt buyer, determining that consumers do not need to show actual damages to pursue statutory damages under the Fair Debt Buying Practices Act (FDBPA). More details here.
WHAT THIS MEANS, FROM KHARI FERRELL OF FROST ECHOLS: In reversing the lower court’s ruling, the appellate court emphasized both the legislative history and the plain language of the Fair Debt Buying Practices Act (“FDBPA”) to support its conclusion that a plaintiff is not required to prove actual injury caused by an alleged violation.
This decision is significant because it appears to open the floodgates for plaintiffs to file lawsuits alleging violations of the FDBPA without needing to show any harm or concrete injury resulting from the alleged violation.
Washington Senate Committee Advances Medical Debt Collection Bill
A Senate committee in the Washington state legislature has advanced a medical debt collection bill that could significantly change how medical debt is reported and enforced. Senate Bill 5480, introduced in the 69th Legislature, aims to void and make unenforceable any medical debt that is reported to a consumer credit reporting agency or credit bureau. More details here.
WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: The bill introduced in the Washington Senate committee should not be a surprise to anyone in the industry. Medical debt and collection of medical debt continue to be a hot button issue. The committee already heard testimony from both proponents and opponents of the bill. The contents of the bill are similar to others that have been passed across the country, including limiting credit reporting of medical debt. With the significant leadership changes underway at the CFPB, companies should be prepared for states to take a more active role in these types of issues, especially medical debt.
Sixth Circuit Upholds Ruling in FDCPA Case, But On Different Grounds
The Court of Appeals for the Sixth Circuit has affirmed a lower court’s summary judgment ruling in favor of a defendant in a Fair Debt Collection Practices Act case, agreeing that the plaintiff lacked standing to sue, but on different grounds, even though the plaintiff suffered a monetary injury. More details here.
WHAT THIS MEANS, FROM NICK PROLA OF BASSFORD REMELE: It is encouraging to see the Sixth Circuit recognize that creditors and debt collectors have the right to access the courts. In an alarming trend, we are seeing more consumer actions being brought for “abandoned” litigation. Just as creditors have the right to use the courts to enforce debts, debt collectors and their attorneys should have the right to employ legal strategy in the collection of debts, including dismissing or abandoning litigation.
Failing to pay a debt and being subject to foreclosure, eviction, and litigation is understandably difficult for consumers. However, the natural consequence of failing to pay should not be the basis for standing in federal court.
CFPB Faces First Lawsuit Over Dismantling
The Consumer Financial Protection Bureau is being sued by the City of Baltimore and Economic Action Maryland Fund, challenging the administration’s actions to defund the bureau. Adding to the turmoil, the CFPB has also fired several expert witnesses critical to ongoing cases against financial institutions accused of consumer harm, according to a published report, suggesting a broader retreat from its mission of protecting Americans from financial abuse. More details here.
CFPB Fires More Employees as Union, Advocacy Groups Sue to Block Moves
The ongoing situation at the Consumer Financial Protection Bureau is now being engaged on two fronts — the actions being taken by the administration to dramatically downsize the scope of the agency and the legal challenges that are now being filed to try and stop the administration from taking these actions. There was news on both fronts yesterday. And there may be a “mass layoff” at the Bureau that could happen as soon as today, according to a claim made in a lawsuit filed against the CFPB. More details here.
WHAT THIS MEANS, FROM CAREN ENLOE OF SMITH DEBNAM: As anticipated, the most politicized regulator in U.S. history is getting another makeover. And while the nomination of Jonathan McKernan to be the new CFPB Director has been favorably viewed by many, the question remains: what will a much smaller CFPB look like. While much remains unknown, it’s fair to say the ARM industry should be on the lookout for the following:
- More robust enforcement activity by the states. Remember, that while Dodd Frank made the CFPB the primary regulator of consumer products, they are not the only one. And in May of 2022, the CFPB issued an interpretive rule reminding and encouraging states to use their enforcement powers. A moneymaker for state AG offices, consumer protection at the state level is likely to see a spike in activity and growth in their consumer protection divisions as they attempt to step in for a largely dismantled CFPB.
- A push from Congress to reassess and reform the CFPB. The CFPB is the primary regulator for much of the consumer finance industry. It’s current structure, however, has allowed both political parties to politicize what should be a non-partisan regulator. The time may be right for Congress to push through a restructuring of the CFPB.
- An unwinding of interpretive rules and advisory opinions issued by the Chopra led CFPB. The Chopra led CFPB used both informal and formal rulemaking. Much of what Chopra did was done without formal rulemaking. By doing so, the CFPB was able to push through much of its agenda quickly without any input from stakeholders. Those policy statements, bulletins, and advisory opinions, which were done informally and outside the formal rulemaking process, however, can be rescinded just as quickly – a concern expressed by consumer protection groups since 2022. Be on the lookout for the Trump Administration to repeal these fairly quickly once a permanent director is confirmed.
- Formal rulemakings are likewise expected to be reassessed – but when? For those rules issued through a formal rulemaking, it can be anticipated that those also will be reassessed. Many of these have not yet taken effect, leaving businesses in operational limbo as they review changes necessitated by the rules while waiting for formal action from the CFPB as to whether those rules will take effect.
For now, a great deal of uncertainty exists but one thing is clear: the pendulum has swung all the way from the left to all the way to the right, leaving consumers, businesses and the CFPB in limbo. With sweeping changes expected, it is critical that industry members stay informed and engaged with their trade organizations and legislators.
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.
