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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.
Court Calls Out Defendant for ‘Rubber Stamping’ Investigation, Denies MSJ in FCRA Case
Issues with identity theft and reasonable investigations can be very complicated. Case in point — the forensic analysis detailed in this ruling in which a District Court judge in California partially denied a defendant’s motion for summary judgment in a case alleging violations of both the Fair Credit Reporting Act and the Rosenthal Fair Debt Collection Practices Act, among other claims. More details here.
WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH: It is the cardinal rule of Fair Credit Reporting Act claims to tailor your investigation to characteristics of the dispute. “Not his/hers” is vastly different than “Identity theft.” Additionally, in order to get a court to grant summary judgment, the facts must be such that no reasonable jury could decide for the other side. This is a heavy burden and most trial judges will defer to a jury if there is even a scintilla of a difference of opinion. Here, it appears that the credit union should have given more credence to the possibility that the transaction was the result of identity theft. If it had done more than simply rely on a premise that an historic payment method was used a single time to validate multiple transactions, perhaps it would have obtained summary judgment. The FCRA requires a reasonable investigation, not an absolutely certain investigation. The trial court found that a jury could conclude that the investigation was not reasonable under the circumstances.
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Court Grants Motion to Dismiss FDCPA Case for Second Time, Denies Sanctions
A District Court judge in Oregon has granted — for the second time — a defendant’s motion to dismiss a Fair Debt Collection Practices Act lawsuit, while also denying the defendant’s motion for sanctions. The decision, made by Judge Michael H. Simon of the District Court for the District of Oregon, comes after the plaintiff, representing herself, filed an amended complaint alleging the defendant falsely marked her account as disputed when furnishing information to the credit reporting agencies. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: In this relatively unremarkable decision, there are two takeaways worth remembering.
“What is objectively reasonable for a pro se litigant and for an attorney may not be the same” As frustrating as it is, and as strong as the desire may be to ask for sanctions, taking a deep breath and repeating that sentence may help to put the matter into perspective. In this case the Court initially dismissed the case, without prejudice, for lack of standing and failure to state a claim gibing the opportunity to Bonneville to file an amended complaint that might cure the rationale for the initial dismissal. Bonneville made an attempt to do that but as the Court pointed outrepeatedly, it was a lack of understanding of the legal issues rather than bad faith that doomed her attempt.
One concrete example of “misunderstanding” leads to the second takeway, “what is a dispute.” Bonneville complained that her credit report was marked disputed and she never disputed the debt. What she did was send a letter stating she “refused” to pay it. The Court found that a refusal constitutes a dispute. This is just a reminder that disputes come in many guises and collectors need to constantly be on the alert to avoid running afoul of the FDCPA prohibition of false reporting.
N.J. Appeals Court Upholds Ruling Denying Motion to Vacate Default Judgment
A New Jersey Appeals Court has affirmed a lower court’s ruling denying an individual’s motion to vacate a default judgment obtained in a collection lawsuit, agreeing that the individual chose to wait too long to file the motion to vacate. More details here.
WHAT THIS MEANS, FROM XERXES MARTIN OF MARTIN GOLDEN LYONS WATTS MORGAN: Wrong choices were made by the defendant in LVNV Funding v. Scott Diana. The “facts” in this matter are somewhat interesting. Plaintiff filed suit in 2017 to collect an outstanding debt. Defendant did not file an answer, and a default judgment was entered. Six years later, he tried to vacate the default claiming he had moved to Pennsylvania, however, the trial court was not buying it. While Defendant’s worker’s compensation payments were going to the address where service was made, he claimed he didn’t live there but provided no credible evidence of living elsewhere. The evidence also showed he and his attorney were aware of the lawsuit in 2019 but waited until 2023 to move to vacate the judgment. Fortunately, the trial court and appellate court upheld longstanding rules of proper service and did not find the delay in moving to vacate the judgment reasonable.
CFPB to Scale Back Supervision, Shift Focus to Combatting Consumer Fraud
The Chief Legal Officer of the Consumer Financial Protection Bureau yesterday published a memo detailing a major shift in the Bureau’s enforcement and supervision priorities for 2025. According to the memo sent to staff, the bureau will significantly cut the number of its supervisory exams and refocus its efforts on addressing tangible harms to consumers, particularly those affecting service members, veterans, and their families. More details here.
CFPB to Review All ‘Weaponized’ Guidance
The acting director of the Consumer Financial Protection Bureau has announced a plan for the Bureau to undertake a comprehensive internal review of its regulatory guidance documents, such as the medical debt collection guidance it announced in a court filing last week that it was planning to revoke. In a memo that was circulated last Friday, Russell Vought, the CFPB’s acting director, announced the agency would stop issuing sub-regulatory guidance documents and would rescind prior guidance deemed unlawful. This move aligns with the Trump administration’s ongoing push to curb what it calls “weaponized” regulatory practices and to ensure that all regulations go through the proper rulemaking process under the Administrative Procedure Act. More details here.
CFPB to Revoke Medical Debt Collection Guidance
The Consumer Financial Protection Bureau announced in a court filing on Friday that it plans to revoke guidance it issued last year over how medical debts are collected, likely bringing an end to two lawsuits that were filed by the industry against the regulator. This guidance, originally issued last October, is separate from the CFPB’s rule on medical debt credit reporting, which is still being challenged in the courts. More details here.
WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS SUTHERLAND: While the plan to layoff roughly 1,500 Consumer Financial Protection Bureau (“CFPB”) employees, some of whom are receiving scathing unsolicited emails from the public, has been paused by a federal judge, an 11-point priorities setting memorandum authored by the CFPB’s chief legal officer was circulated (without any public press release or announcement). Instead of prior years’ CFPB’s more formal public announcements of its goals for the year ahead, this document, an internal staff memo, contained fairly detailed information about top priorities: mortgage lending, data furnishing, debt collection related to consumer debt. On the de-prioritization list was, among other things, medical debt. The CFPB confirms that its 2025 focus will be on depository institutions, while reducing overall examination activity. Further the CFPB announced it will not be stepping into areas enforced at the state level while at the same time the CFPB will coordinate on enforcement with potentially other federal agencies. In brief, the CFPB promises that its lens will focus on areas that cause actual consumer harm.
In other CFPB news, Acting Director Russell Vought followed in the path of both the Federal Communications Commission and Federal Trade Commission in announcing the CFPB will undertake a comprehensive review of its regulatory guidance documents to rescind prior guidance resulting from “weaponized” regulatory practices. Vought confirmed the CFPB would stop issuing sub-regulatory guidance documents. Concurrently, the CFPB announced in a court filing last week that it planned to revoke its medical debt advisory guidance – which document drew thousands of comments from the public. Meanwhile, the pending litigation in Texas brought by the Consumer Data Industry Association (“CDIA”) and Cornerstone Credit Union related to whether or not to enjoin the CFPB from enforcing its medical debt credit reporting prohibition regulation may come to a head in the next couple of weeks. The medical debt credit reporting prohibition rule is currently scheduled to take effect June 15, 2025. The CDIA litigation has been on pause by the parties’ mutual consent but that pause should end by May 6, 2025, with consumer groups’ requests to intervene in the litigation temporarily frozen but facing stiff opposition by other parties to the suit.
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.
