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.
Resolution Introduced to Overturn Medical Debt Credit Reporting Rule Via CRA
Republican lawmakers are using the Congressional Review Act (CRA) to try to overturn a Biden-era Consumer Financial Protection Bureau rule that prohibits medical debt from being included on consumer credit reports. The resolution, introduced by Sen. Mike Rounds [R-S.D.] and Rep. Ralph Norman [R-S.C.], would nullify the rule before it takes effect. More details here.
WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: In light of the majority in both the House and Senate, it is no surprise that many of the CFPB’s final rules would be subject to the Congressional Review Act (CRA). For the ARM industry, the Medical Debt Credit Reporting Rule (the “Rule”) was the one we all were following closely. Given the change in the CFPB director and the “dismantling” of the CFPB, at present, it’s unlikely that this CFPB administration would even enforce this Rule. However, the CRA is important for the simple reason that should Congress approve a resolution to repeal the Rule and the President signs it, the CFPB or any other agency for that matter, are prohibited from promulgating a substantially similar rule in the future. This is an important check by Congress on administrative agencies.
There are two other CRA resolutions currently in Congress that look to repeal rules that the CFPB finalized at the end of 2024.
- Large Market Participant Rule for Supervision of Digital Apps (Apple, Google, Venmo etc.). A CRA joint resolution passed in the Senate with a companion provision pending in the House; and
- Overdraft Rule. The House Financial Services Committee passed as CRA resolution. Both the House and Senate are actively pursuing resolutions in both chambers.
Unfortunately the Late Fee Rule was finalized in March 2024 and the opportunity for a CRA resolution has passed. The rule is still pending in the Texas court, but there are indications from the industry Plaintiffs (The U.S. Chamber, American Bankers Association and Consumer Bankers Association) that the CFPB is “re-evaluating the rule”. However, unlike a CRA, even if the rule and the litigation go away, a CFPB under a different administration, could pursue a similar rule.
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Judge Grants MTD in FDCPA Case Over Failure to Remove Dispute Flag from Account
A District Court judge in Michigan has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act case on the grounds that not removing a dispute notification on the plaintiff’s credit report is not a false or misleading statement in connection with the collection of a debt. More details here.
WHAT THIS MEANS, FROM MARISSA COYLE OF FROST ECHOLS: It’s not often I want to do a Tiger Woods’ fist pump when I read a case, but this one had me considering such a move (and I loathe golf)! We’ve all seen these cases – a consumer disputes an account, the agency marks the account as disputed, and then the “consumer” (usually the consumer’s attorney) changes course and wants the dispute notation removed. That happened here. Plaintiff took issue with the fact the agency did not remove the dispute notation from her credit report. As a result, the consumer sued the agency under the FDCPA. At LVNV’s behest, the Court analyzed whether marking a debt as disputed on a credit report is done in connection with the collection of any debt. The Court found that “no”, such notation is not done in connection with the collection of any debt; therefore, the dispute notation was not a false or misleading statement made in connection with the collection of a debt. Thus, no FDCPA violation as alleged.
While it’s probably not best to ignore consumers’ requests to remove a dispute notation from the credit report, hopefully we will see this theory further develop across the country.
Court of Appeals Upholds Ruling Against Lender’s Arbitration Clause
The Court of Appeals for the Fourth Circuit has upheld a lower court’s ruling in favor of plaintiffs who sued a lender over the terms of the arbitration clause in a contract because the language was “so one-sided as to deprive the purported contract of any meaningful idea of reciprocity that a contractual bargain is meant to embody.” More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: The plaintiffs in this case got into some standard cardholder agreement language and made a case out of it. And like cases with difficult industry outcomes before this one (think of Foti and Hunstein), there is something to the findings that requires our attention. The dissent correctly identifies the “universal practice of allowing credit card companies to make changes as long as they provide card holders with notice and the opportunity to accept or reject the changes…” and takes issue with the majority’s holding that the practice is inconsistent with Maryland law. But even though the practice is widespread and accounted for in open-end credit rules in the Truth in Lending Act and Regulation Z, the Fourth Circuit’s majority decision is impactful. The case came out of a motion to compel arbitration, but the outcome calls into question the creation of the entire cardholder agreement – not just the arbitration provision – because of the rights the change-in-terms provision reserved to the creditor. The parties may decide to litigate the issue of contract formation in the courts (or the creditor might appeal), but that will take time. In the interim, banks and other creditors should review their open-end credit agreements (closed-end agreements do not include a mechanism to change terms during the life of the agreement) – especially credit card agreements – in Fourth Circuit states to see if their agreements are affected by this case.
Court Hearing: Tensions Over the Future of the CFPB
Testimony from CFPB employees in a federal court hearing earlier this week painted a stark picture of the agency’s internal turmoil and the Trump administration’s intentions to dismantle the agency. Adam Martinez, the agency’s Chief Operating Officer, provided a detailed account of the chaos that ensued when the Department of Government Efficiency (DOGE) arrived in early February, triggering what he described as a “hostile takeover.” More details here.
In a testimony yesterday, Adam Martinez, the CFPB’s chief operating officer, provided a detailed account of the chaos within the agency over the past month following President Donald Trump’s appointment of a new acting director and the intervention of the Department of Government Efficiency (DOGE). Martinez’s testimony marks the first time a senior official from the CFPB has spoken in a public court case regarding the Trump administration’s attempts to dismantle the agency. More details here.
WHAT THIS MEANS, FROM BROOKE CONKLE OF TROUTMAN PEPPER LOCKE: In Washington, the only certainty has been uncertainty. The Bureau is in flux at the moment, and that flux is not only affecting the Bureau’s current (and former) employees, but also industry. Enforcement isn’t the only thing that is unpredictable right now, as several rulemakings have either had compliance dates or comment periods extended in response to the ongoing changes. The hope for all involved is that, if Jonathan McKernan is in fact confirmed as the next Director, he will bring a steadying hand that will bring a little predictability back to the agency.
Washington Senate Passes Medical Debt Credit Reporting Ban Bill
A medical debt credit reporting bill has been passed by the Washington state Senate and is one step closer to becoming law. More details here.
WHAT THIS MEANS, FROM AYLIX JENSEN OF MOSS & BARNETT: A medical debt credit reporting bill, Senate Bill 5480, has passed the Washington state Senate and is now one step closer to becoming law. While the CFPB’s rule to remove medical bills from credit reports has been paused by the Trump administration and faces legal challenges, this state legislation may push forward similar restrictions on reporting. The Washington bill not only prohibits medical debt from being reported but also introduces protections against the repossession of certain medical devices. As the bill moves to the House for consideration, furnishers will need to monitor these developments closely to ensure compliance while navigating medical debt recovery.
Court Dismisses FDCPA Case, Rules Plaintiff Lacked Standing
A District Court judge in New York has dismissed a Fair Debt Collection Practices Act case and denied a motion to remand the case back to state court, ruling the plaintiff lacked standing after receiving an email from the defendant the day after the plaintiff refused to pay the debt. More details here.
WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: A district court in New York recently dismissed an FDCPA lawsuit arising from a collection email sent the day after the consumer responded to a prior email with a refusal to pay. The Court did not address the claim’s merit, but instead assessed two jurisdictional issues: Article III standing and personal jurisdiction.
After the plaintiff filed in state court, the defendant removed the action to federal court. In a tactic seen frequently in recent years, the plaintiff moved to remand, alleging that her own allegations failed to assert the type of harm required for injury-in-fact standing, a prerequisite for subject matter jurisdiction in federal court. The Court, pointing to plaintiff’s laundry list of physical and emotional harm pled in the Complaint (arguably included for the sole purpose of claiming damages beyond mere statutory harm), rejected this argument.
The Court then tackled the second jurisdictional hurdle, this one raised by the defense: a lack of personal jurisdiction over the collection agency. The Court found that the plaintiff had failed to plead facts to demonstrate that the defendant, a California limited liability company, was at-home in New York (general jurisdiction) and had repeatedly refused to disclose her state of residence at the time of the email to attempt to establish that the alleged violation occurred in New York (specific jurisdiction). This argument was well-handled by the defense team, who asserted that the consumer was a resident of Texas and pressed the issue to a final decision before an attentive federal judge.
Although not a merits decision, the opinion highlights a few important reminders for collection agencies facing FDCPA claims. First, don’t overlook jurisdictional defensesand pay attention to associated pleading deficiencies, which may be intentional. Second, if you send electronic collection communications, there must be a process to review and take action on response emails or text messages. Whether the process is manual, semi-automated, or fully-automated, there must be a reliable and accurate system in place to, within a reasonable amount of time, recognize and trigger action to address cease demands, disputes, and other requests to exercise statutory rights. The cadence of electronic campaigns should account for the amount of time an organization requires to identify and process consumer responses.
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.
