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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.
N.Y. AG Releases Guide to Help Protect Consumers’ Assets
Maybe it’s a coincidence or maybe it’s a sign of the expected ramp-up in enforcement and attention that state attorneys general are going to be paying to the financial services industry broadly, including companies in credit and collections, but the Attorney General of New York has issued a guide aimed at protecting residents of The Empire State from “predatory” debt collectors. More details here.
WHAT THIS MEANS, FROM JACQUELYN DICICCO OF J. ROBBIN LAW: After the New York Attorney General Letitia James (“NYAG”) recent crack downs on debt collectors’ violations of New York’s Exempt Income Protection Act (EIPA), the NYAG has provided debtors with a guide on their rights under the EIPA. Under the EIPA, certain listed funds are protected from a debt collectors’ ability to seize or freeze debtors’ assets. Specifically, under the EIPA, benefits, such as, Social Security, supplemental security income, disability benefits, unemployment insurance, workers compensation, veterans benefits, public assistance, spousal support, alimony, or child support, payments from public or private pensions and retirement accounts, and black lung benefits, are exempt from a debt collectors ability to seize of freeze the debtors’ funds up to a certain amount. Just as recent as January 2025, the NYAG secured over $1million from Ouro Global, Inc., owner of Netspend Corporation for violation of the EIPA and, as part of that settlement, Netspend was required to pay more than $735,000 to New York debtors who were affected and over $350,000 in penalties to New York State. The investigation into Netspend found that Netspend violated the EIPA by freezing and seizing debtors’ funds beyond the limit provided for. In addition, in April 2024, the NYAG secured over $700,000 from Pathward, National Association, a national bank formerly known as MetaBank because of an investigation that found Pathward froze accounts in violation of the EIPA. When obtaining a judgment in a debt collection action and, thereafter, seeking to enforce that judgment, debt collectors must be aware of the EIPA and proceed accordingly.
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Judge Dismisses FDCPA Suit Because Claims Weren’t Specific Enough
A District Court judge in Maryland has granted a motion to dismiss claims that a creditor and a collection law firm violated the Fair Debt Collection Practices Act and state consumer protection laws, ruling that the plaintiff’s allegations failed to plausibly demonstrate any unlawful conduct. More details here.
WHAT THIS MEANS, FROM JACOB BACH OF MARTIN GOLDEN LYONS WATTS MORGAN: Lawsuits brought by pro se plaintiffs can often be attacked early due to their inability or inexperience in pleading the required elements of certain claims. Early motions attacking the pleading standards can be an effective way to resolve these cases early, as even though pro se plaintiffs are often given the opportunity to amend their pleadings, many choose to abandon their claims or accept a settlement offer once they release a court will hold them to certain standards. Though a motion to dismiss might serve as a roadmap for a pro se plaintiff to address the issues missing in their complaint, they often are unable to turn this into a valid complaint that can survive a follow up motion. Pro se complaints should always be evaluated for early motion practice.
Judge Dismisses FDCPA Case Over Text Message for Second Time
A District Court Judge in Ohio has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act case that accused the defendant of sending a text message attempting to collect on a debt after the plaintiff had responded to an earlier text message declining to pay the debt, ruling that the plaintiff failed to sufficiently allege key elements of the claim. More details here.
WHAT THIS MEANS, FROM SARAH DOERR OF MOSS & BARNETT: Setting aside the question of whether it would have been best practice for the collector to process the consumer’s initial response to its text as a cease request, the McAfee case is instructive for parties on both sides of the ‘v.’ All elements of an FDCPA claim must be adequately pleaded in order for a case to proceed. Courts seem increasingly willing to cut poorly pleaded claims off in early motion practice, even in matters bought pro se. Defendants are therefore well-advised to carefully analyze complaints for pleading deficiencies.
Judge Denies MJOP in FDCPA Case Over Interest Accrual
A District Court judge in Michigan has denied a defendant’s motion for judgment on the pleadings in a Fair Debt Collection Practices Act case, ruling that the defendant’s attempt to impose a 5% interest rate on the debt without clear contractual or legal authorization may constitute a violation of the FDCPA. More details here.
WHAT THIS MEANS, FROM COOPER WALKER OF FROST ECHOLS: Charging interest and/or fees can improve your bottom line significantly. However, there has been a recent uptick in litigation regarding the charging of interest/fees. More specifically, plaintiffs attorneys appear to be focusing on interest being charged on the principle balance of a debt. Before charging interest, make sure you are confident in to your ability to do so. Weigh the risks and rewards. Every contract is different, and every state is different. Find out which states have the highest percentage of these types of claims as it could make sense to shut down charging interest entirely in that state depending on how much work you do there. Make sure you understand the nuances involved as even honest mistake can turn into a class action problem.
Ninth Circuit Rules Accrued Interest on Refunded Fees Creates Standing to Sue
The Court of Appeals for the Ninth Circuit has ruled that the interest which could have accrued on $50 in convenience fees that a plaintiff paid when making payments on a debt and the time when the defendant refunded those fees after being threatened with a lawsuit is enough for the plaintiff to have standing to sue in federal court, affirming the lower court’s dismissal of the case. More details here.
WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH: The fundamental question in any analysis by a federal court to determine standing to bring suit is whether a plaintiff has suffered a concrete injury – a determined loss. Like most things legal, concrete injury remains open to interpretation. Some examples are easy – a consumer lost money directly by paying the debt (standing), or the collection letter omitted a date (no standing – informational injury only). But many other areas are gray and different judges will make different and sometimes contradictory decisions. Here, a court found that the interest lost on a paid (and later refunded) convenience fee was sufficient to constitute a concrete injury. Even though the amount in question is small, it is enough for standing.
Court Dismisses FDCPA Lawsuit Over Debt Ownership Challenge
If you’re going to accuse a collection operation of violating the Fair Debt Collection Practices Act by questioning whether the defendant actually owns the debt, acknowledging during a hearing that you aren’t alleging the defendant made any false statements is not going to help your case, which may be why a District Court judge in Minnesota granted the defendant’s motion to dismiss. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: When I read Mike’s summary above, I thought it was funny. I then started to read the court’s opinion and thought: “this has to be a pro se case.” Sure enough, on page 4, the court points out that plaintiff was pro se. That explains things.
Plaintiff in Williams v LVNV filed an FDCPA case over a couple collection complaints filed against. He claimed LVNV and the collection law firms violated 15 U.S.C. § 1692e(2)(A) by failing to attach evidence of the debt assignment to the collection complaints. He failed to assert that LVNV did not own the debts. The court thus held there were nothing to support that the character, amount, or legal status of Williams’s debt was falsely represented. He was challenging how debt ownership was represented but that failed to state a claim.
We’ve heard the line that bad facts make bad law. A spin on that seems to be that pro se plaintiffs can make bad law for consumers. Often in briefing a motion, the plaintiff’s lawyer will argue that the court should disregard a particular case because it was a pro se matter. I don’t recall judges saying: “I won’t follow that judge’s ruling because a pro se was involved.” This is a victory. It is helpful to the defense and can be used in the future.
Judge Grants Summary Judgment in FDCPA Case Over Lack of Standing
A District Court judge in Illinois has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case, ruling that the plaintiff lacked standing because she failed to demonstrate a concrete injury. More details here.
WHAT THIS MEANS, FROM ETHAN OSTROFF OF TROUTMAN PEPPER LOCKE: Plaintiff brought suit alleging violations of the Fair Debt Collection Practices Act (FDCPA) and the Illinois Consumer Fraud and Deceptive Practices Act (ICFA) related to debt collection efforts. The court dismissed the case for lack of subject matter jurisdiction, finding that Siddique did not demonstrate a concrete injury in fact necessary for standing. Siddique’s claims of stress-induced tea purchases and postage costs for mailing a dispute letter were deemed insufficient to establish standing. The court emphasized that emotional distress and minor expenditures do not meet the threshold for concrete injury under Article III. This ruling is noteworthy because it reinforces the stringent requirements, at least within the Seventh Circuit, for establishing standing in federal court, particularly in FDCPA cases, and clarifies that minor emotional and financial impacts are not enough to confer standing. Additionally, from a procedural perspective, while the court granted summary judgment, the result was a dismissal without prejudice, which could result in this case being litigated again in state court, where arguments regarding standing may not prove successful, and raises cross-jurisdictional tolling of the statutes of limitations issues.
Sorensen Reintroduces QUIET Act to Combat AI-Powered Robocalls
Rep. Eric Sorensen [D-Ill.] is renewing efforts to crack down on robocalls by reintroducing the Quashing Unwanted and Interruptive Electronic Telecommunications (QUIET) Act. The bipartisan bill, co-sponsored by Rep. Juan Ciscomani [R-Ariz.], aims to increase penalties for scammers using AI to impersonate individuals and require robocallers to disclose when AI technology is being used. More details here.
WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER LOCKE: Rep. Eric Sorensen [D-Ill.] has reintroduced the Quashing Unwanted and Interruptive Electronic Telecommunications (QUIET) Act to address the growing issue of AI-powered robocalls. The bipartisan bill, co-sponsored by Rep. Juan Ciscomani [R-Ariz.], seeks to increase penalties for scammers who use AI to impersonate individuals and mandates that robocallers disclose when AI technology is being utilized. This legislative effort aims to protect consumers from deceptive and intrusive robocalls.
The reintroduction of the QUIET Act by Rep. Eric Sorensen [D-Ill.] and Rep. Juan Ciscomani [R-Ariz.] has several practical implications for companies that place consumer-facing calls. Understanding whether prerecorded messages are considered AI will be an interesting part of this statute, but a few things to consider and think about:
Disclosure Requirements: Businesses must ensure transparency by disclosing the use of AI technology in their robocalls. This means updating scripts and communication protocols to inform consumers when AI is being used, which could involve additional training for staff and adjustments to automated systems.
Increased Penalties: Companies using AI technology for robocalls must be aware of the heightened penalties for non-compliance. This includes potential fines and legal repercussions for using AI to impersonate individuals without proper disclosure. While it is a little unclear what those penalties would be exactly, the fines would be double if disclosures are not provided.
Judge Grants MSJ for Defendant in FDCPA Case Over Whether Plaintiff Disputed Debt
A District Court judge in Maryland has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case that centers over the language used by the plaintiff and whether it constituted a dispute of the debt or not. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: The Hall v Cohn Goldberg decision provides two takeaways. First it reinforces how important it is to carefully review incoming communications from debtors. In a recent discussion on Accounts Recovery, there was discussion of new trends in FDCPA suits. One is the “hidden dispute” which is what we have here. After receiving correspondence from Cohn Goldberg the Plaintiff responding writing:
“the real kicker is I received and [sic] unwanted letter from you guys Cohn, Goldberg & Deutsch, I’m like what 10,511.29 I don’t remember apply [sic] for credit with a Cohn, Goldberg & Deutsch; I’m unwilling to pay this debt!!! I decline to pay this debt.”
After the law firm responded with verification of the debt (statements and transactional history) the pro se Plaintiff filed suit. The Court in its analysis agreed with the Defendant that the above cited language contained both a dispute and a refusal. “I don’t remember apply [sic] for credit” might have been missed as a dispute since it refers to the law firm and not the creditor but that is the pot hole set for an unwary collector. Had the law firm not understood that language to be a dispute and just filed suit, there could easily have been a different lawsuit against it, for violation of §1692g(b) (the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt). This just reinforces how important it is, now more than ever to triage all incoming correspondence.
The second takeaway is the Court’s brief discussion of what is need when a party seeks to convert an early Rule 12(b)(6) motion to dismiss to a Rule 56 motion for summary judgment. Here Cohn Goldberg brought the motion as a motion to dismiss or in the alternative for summary judgment. The main difference is that a motion to dismiss is based on the complaint alone, where in a summary judgment matters outside the pleadings are presented to and not excluded by the court, meaning you avoid discovery and get a final judgment early on. (A motion to dismiss is usually granted without prejudice, with leave to amend.) Something to consider when a new complaint comes in.
Judge Grants MSJ in FDCPA Case Over Validation Request
In a case that was defended by the team at Martin Golden Lyons Wats Morgan, a District Court Judge in Colorado has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act lawsuit, ruling that the debt collector did not violate the statute’s debt verification requirements. More details here.
WHAT THIS MEANS, FROM MONICA LITTMAN OF KAUFMAN DOLOWICH: The court here got it right in finding that there is a low standard for determining if a validation response by a debt collector complies with the FDCPA. Validation under Section 1692g of the FDCPA means that a debt collector is only required to confirm in writing that the amount being demanded from a consumer is the amount the creditor claims is owed. If an agency receives any written communication from a consumer that indicates that a debt is disputed during the validation period, an agency should treat this communication as both a dispute and a request for validation, even if the words “I dispute this debt” are not used. The account must be marked as disputed internally. Upon receipt of this communication from the consumer, all collection activity must immediately cease until the requested information is provided. If a consumer requests validation of the debt either in writing or orally after the validation period, an agency is not required to provide validation, but the account must be marked as disputed in the agency’s internal records.
McKernan: CFPB ‘Suffers from a Crisis of Legitimacy’
For those who think the Consumer Financial Protection Bureau’s pendulum has swung too far in one direction, the song being sung by Jonathan McKernan during his prepared remarks before the Senate Banking Committee today at his nomination hearing to be the Bureau’s next director will feel like listening to a greatest hits anthology. McKernan will say that the Bureau has “pushed beyond the limits of its statutory authority,” “seized opportunities to expand its jurisdiction and power,” “offended our basis notions of fairness,” and that it “suffers from a crisis of legitimacy.” More details here.
Breaking Down McKernan’s Confirmation Hearing
I came to the realization about midway through yesterday’s Senate Banking Committee hearing vetting four nominees for posts in the federal government, including Jonathan McKernan to be the next director of the Consumer Financial Protection Bureau that the best use of the hearing was not to hear the viewpoints and objectives of the nominees — because they largely refused to say anything — but to serve as a drinking game. Next time you’re watching one of these hearings, take a shot every time someone says that he or she is going to “follow the statute” or any time that a pre-hearing meeting was referenced — that is probably the only way you’re going to enjoy what you’re watching. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER LOCKE: It goes without saying that much remains in flux in D.C., whether involving the CFPB or otherwise. But what is certain is that no matter the outcome of McKernan’s nomination (which I anticipate will be approved) or the CFPB’s future, the states are where the action will be on the regulatory, compliance, and litigation fronts for the next four years. Developing a comprehensive strategy for identifying and managing expansive legislative initiatives that result in a proliferation of more restrictive state laws across financial products is critical.
Appeals Court Overturns Dismissal of FDCPA Suit, Rules Receipt of Letter Confers Standing
In a ruling that — to this non-lawyer appears to take the issue of standing and turn it on its head — the Court of Appeals for the Ninth Circuit has reversed a lower court’s dismissal of a Fair Debt Collection Practices Act suit, ruling that the receipt of a letter after being informed that the individual was represented by an attorney — a tangled situation in this case — is enough for the plaintiff to have standing to pursue a lawsuit in federal court. More details here.
WHAT THIS MEANS, FROM BRENDAN LITTLE OF LIPPES MATHIAS: Defendant acquired Plaintiff’s debt and was the recipient of a letter from Plaintiff’s counsel informing Defendant that Plaintiff disputed the debt and that Plaintiff was represented by counsel. While Defendant processed the letter and updated its system to reflect that communication with Plaintiff shall cease, Defendant still sent a letter directly to Plaintiff with verification of the debt. While the District Court dismissed Plaintiff’s Complaint for lack of Article III standing, the Ninth Circuit disagreed remanding the case back to the District Court to adjudicate the merits of the parties’ cross-motions for summary judgment. The Ninth Circuit determined that that receipt of one letter was akin to the kind of harm recognized at common law – an unwanted intrusion into Plaintiff’s peace and quiet and thus analogous to the harm caused by intrusion by seclusion. The Ninth Circuit’s decision creates a circuit split with the Seventh Circuit that in Pucillo in 2023, determined that the receipt of two letters was too far afield from the traditional tort of intrusion by seclusion to establish a concrete injury. The circuit split may set the stage for the Supreme Court to address the Seventh Circuit’s aggressive stance on the lack of Article III standing in FDCPA cases. Finally, while the Ninth Circuit did not officially weigh in on the merits of Plaintiff’s claim, it did offer the following commentary in a footnote: “Indeed, the minimal amount of time between [Defendant]’s processing of the letter from [Plaintiff]’s attorney’s (sic) and [Defendant] mailing of the disputed letter, coupled with the fact that [Plaintiff] asked [Defendant] for information to be sent to him, raises serious questions about [Defendant]’s liability.”
Appeals Court Affirms Dismissal of FDCPA Suit
The Court of Appeals for the Tenth Circuit has affirmed a lower court’s dismissal of a Fair Debt Collection Practices Act suit, ruling that the defendant, a property owners association, was not considered a “debt collector” under the statute. The plaintiff, a property owner, had argued that the association violated the FDCPA in its attempts to collect unpaid fees by using different names and acronyms to make it appear as though a third party was attempting to collect on the debt. More details here.
WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: The FDCPA generally does not apply to a creditor collecting its own debt, but a creditor can place itself under FDCPA coverage by using a false name that indicates the involvement of a third-party collector. The creditor in this case had a very long name, so it is understandable that it used various abbreviated and truncated names in its correspondence. Perhaps it didn’t help that the creditor was inconsistent with the names it used, but none of those names gave the impression that a third-party collector was attempting to collect the debt. The Tenth Circuit declined to opine on whether the “least-sophisticated-consumer” or the “reasonable-consumer” standard should be applied to the debtor’s FDCPA claims because those claims failed under both standards.
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.
