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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.
Judge Grants MSJ, Partial Fees for Defendant in FDCPA Case Over Rental Property
A District Court judge in Hawaii has granted a defendant’s motion for summary judgment and partially granted its motion for costs and fees in a Fair Debt Collection Practices Act case dealing with a dispute over the collection of maintenance and cable fees for an investment property and escalating attorney’s fees that were charged after the debt had been paid. More details here.
WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH: It is a fundamental tenet of consumer litigation that the obligation at issue be a consumer debt – the principal purpose of which is for personal, family or household use. This should be the first question asked in any lawsuit against an agency. In almost no circumstances will the agency ever know the purpose of the extension of credit since it was not present when the credit was used and does not know the intent of the transaction. Caselaw provides some guidelines. One such holding is that owning investment property does not qualify as a consumer transaction. As an example, if one person owns a condominium and lives in the property, collection efforts directed at the owner are subject to the FDCPA. However, if an owner owns for the purpose of renting to another and making money, the same condominium assessments are not covered by the FDCPA.
In this very rare situation, the trial court awarded fees and costs against a debtor for litigating an obligation clearly not a consumer obligation. This was the right result and similar suits in other jurisdictions should be met with same outcome.
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Appeals Court Overturns FCRA Dismissal Over Reasonableness of Investigation
The Court of Appeals for the Fourth Circuit has overturned the dismissal of a Fair Credit Reporting Act case in favor of the defendant, ruling whether a dispute is legal or factual has no bearing on the furnisher’s duty to investigate the dispute. More details here.
WHAT THIS MEANS, FROM SHELLY GENSMER-CLEEK OF FROST ECHOLS: This case underscores critical compliance risks of inadequate dispute investigation processes under the Fair Credit Reporting Act (FCRA). Here, the court pointed out that simply asking for validation from the creditor or owner of the debt The petition to delay the FCC ruling on Revocation of Consent is a very good first step. However, we don’t know if the FCC is listening. With the new administration pushing back on so much regulation, the FCC will likely stick to its gun and maintain the new ruling in place.
The new FCC revocation of Consent rule is a mess and is fraught with so many problems. The ruling only pertains to robocalls and robotexts. The FCC defines Robocalls and Robotexts as calls that are prohibited from being made unless the calling party has prior express consent. Robocalls and robotexts constitute “autodialed” calls under the TCPA. In order to have a robotext, such calls at issue would have to have a random and sequential number generator as part of the calling platform. Very few if any companies in the US today employ random and sequential number generators as part of their calling/texting platforms or calling strategies.
The FCC should take head and put the revocation of consent rule on hold until the multiplicity of inherent problems are resolved. is not sufficient. A furnisher must review relevant information and report those results back to the credit bureau. This ruling heightens the investigative obligations for furnishers and signals increased litigation exposure for collection agencies that rely solely on creditor confirmation to validate disputed debts.
Reputational Risk Takes Center Stage
Reputational risk in the financial services industry has become a popular topic in Washington, D.C. in the past couple of weeks, with both a bill and an announcement from a federal regulator aimed at removing that from consideration. More details here.
WHAT THIS MEANS, FROM CAREN ENLOE OF SMITH DEBNAM: The announcement by the OCC and the pending legislation regarding reputational risk signal and attempt to unravel the concept of “reputational risk” from bank regulation. This should be particularly beneficial to fintech organizations who were targeted during the Biden administration as creating reputational risk for their bank partners and for crypto-friendly banks. The expectation is that the elimination of “reputational risk” from bank examinations will remove a subjective, amorphous standard that can be molded to fit either party’s political agenda.
Judge Grants MSJ for Defendant in FDCPA Case Over Dismissal of Collection Lawsuit
Is the choice made by a collection operation to dismiss a collection lawsuit against a consumer a decision in the consumer’s favor? Not necessarily, ruled a District Court judge in Pennsylvania, who granted the operation’s motion for summary judgment after it was sued for allegedly violating the Fair Debt Collection Practices Act. More details here.
WHAT THIS MEANS, FROM NICK PROLA OF BASSFORD REMELE: The industry should fight for the notion that collection counsel are still attorneys, even though they collect consumer debt. The regulatory framework governing collections (or at least the consumer bar’s interpretation of that framework) appears, at times, to prohibit the zealous advocacy and independent legal judgment afforded to the rest of our brethren.
There has been a recent influx of “abandoned litigation” claims, arguing that the dismissal of a collection action somehow equates to bringing a claim in bad faith. It is well settled that advancing a debt collection claim that is ultimately unsuccessful does not, in and of itself, rise to an FDCPA violation. Heintz v. Jenkins, 514 U.S. 291, 296 (1995). However, the nature and timing of collection counsel’s dismissal of an action can lead to liability. As highlighted in the Kinner decision, a dismissal without prejudice alone is not determinative of whether the collection action terminates in favor of the consumer. Collection counsel should take care to avoid dismissals on the eve of trial or only in the face of imminent defeat. Where plausible, it may be a good idea to seek a settlement agreement with the consumer and forego future collection efforts to eliminate any “favorable termination” arguments.
Judge Grants MTD in FDCPA Case Over Assigned Debt
We’ve seen this ruling in other jurisdictions, so it’s not necessarily a surprise, but I don’t think we’ve seen a ruling on this type of case in North Carolina yet. A District Court judge there has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act lawsuit on the grounds that the plaintiff lacked standing because he had the claim assigned to him by the individual who actually owed the debt in question. More details here.
WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER BURNETTE: It’s always good to add another jurisdiction to the list of courts that have rejected these claims. And candidly, any other conclusion would make absolutely no sense under the FDCPA’s stated statutory purpose. Consumer plaintiffs love to talk about the harms caused by debt collectors, including the personal bankruptcies, marital instability, loss of jobs and invasion of privacy Congress cited in the FDCPA’s opening provisions. But the “personal” part of this statement too often gets lost in that conversation—meaning that while consumer plaintiffs bemoan these harms purportedly caused by debt collectors, they themselves have actually experienced none of those. Assignment of an FDCPA claim takes the absurdity of awarding “damages” to an uninjured, unaffected party one step further, by claiming that a consumer can assign claims caused by such “personal” experiences to uninvolved third parties. Courts are correct to reject these claims, whether as a matter of state law or otherwise.
Unfortunately, though, litigation trends like this one highlight the “creativity” consumer plaintiffs are known for in terms of their far-reaching theories of liability under the FDCPA. The court may shut this door, but a window is sure to open elsewhere.
Judge Denies Motion from Plaintiff to Reconsider Standing in FDCPA Case
A Magistrate Court judge in Wisconsin has denied a plaintiff’s motion to alter a judgment which ruled he did not have standing to pursue claims the defendant violated the Fair Debt Collection Practices Act, finding that the plaintiff failed to demonstrate a concrete injury that could be linked to the defendant’s alleged misconduct. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: In this case the Plaintiff filed Motion to Alter Judgment pursuant to Federal Rule of Civil Procedure 59(e), also known as a motion for reconsideration. When seeking reconsideration there are two paramount questions the Court is going to ask. Can the movant point to controlling law or pertinent facts ignored by the Court or to present newly discovered evidence. Emphasis on “newly discovered” in both scenarios. Here, Verdecias raised new arguments in his recon motion, but they could have been raised previously-they were not new. The judgement in question was entered as a result of dueling motion for summary judgment. When a motion for summary judgment is filed, the movant is essentially telling the Court no more investigation/discovery is needed and everything is on the table. One can’t hold them in reserve for later use as Verdeciasattempted to do here.
In responding to a motion for reconsideration, the quickest way to defeating the motion is to point out when a party tries to raise facts or law which had been available at the time the initial motion was made. And also, as with Verdecias when the movant simply repeats the same argument originally made. Arguments are not like fine wine, they don’t get better with age.
Trade Groups Petition FCC to Delay TCPA Rule Amid Deregulation Push
A number of trade groups from across the financial services industry, including ACA International, have petitioned the Federal Communications Commission to delay the enactment of a rule related to the Telephone Consumer Protection Act that is scheduled to go into effect next month. Meanwhile, the FCC has launched a deregulation initiative and is seeking comment on all existing FCC rules that may create unnecessary regulatory burdens. More details here.
WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: The petition to delay the FCC ruling on Revocation of Consent is a very good first step. However, we don’t know if the FCC is listening. With the new administration pushing back on so much regulation, the FCC will likely stick to its gun and maintain the new ruling in place.
The new FCC revocation of Consent rule is a mess and is fraught with so many problems. The ruling only pertains to robocalls and robotexts. The FCC defines Robocalls and Robotexts as calls that are prohibited from being made unless the calling party has prior express consent. Robocalls and robotexts constitute “autodialed” calls under the TCPA. In order to have a robotext, such calls at issue would have to have a random and sequential number generator as part of the calling platform. Very few if any companies in the US today employ random and sequential number generators as part of their calling/texting platforms or calling strategies.
The FCC should take head and put the revocation of consent rule on hold until the multiplicity of inherent problems are resolved.
FCC Seeks Comments on Petition to Address TCPA ‘Quiet Hours’
The Federal Communications Commission has released a new notice inviting comments on a petition aimed at clarifying and potentially waiving certain provisions of the Telephone Consumer Protection Act related to when calls and text messages can be sent. More details here.
WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER LOCKE: The Ecommerce Innovation Alliance and other stakeholders filed a petition with the Federal Communications Commission (“FCC”) to address the Telephone Consumer Protection Act (“TCPA”)’s “Quiet Hours” rule, which restricts telemarketing calls and text messages to between 8 a.m. and 9 p.m. local time. Petitioners argue that businesses which have obtained prior express written consent from consumers to receive marketing text messages should not be liable for TCPA violations if such messages are sent outside of the Quiet Hours. Businesses are also often unable to determine the exact location of a recipient at the time a text is sent, so it is difficult to ascertain the relevant local time. Petitioners identified a law firm that is exploiting the TCPA’s provisions by advertising that text messages sent outside of Quiet Hours are “illegal,” regardless whether prior express consent was granted. Without clarification from the FCC, businesses face heightened risk of TCPA litigation, often arising from claims that are based on frivolous allegations. Should the FCC issue a declaratory ruling to confirm that text messages sent to consumers who have provided prior express written consent are not subject to TCPA claims based on the Quiet Hours rule, we anticipate that litigation risk and cost will decrease. The FCC has released a notice inviting comments on the petition, with a deadline of April 10.
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.
