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.
Alaska Supreme Court Affirms Rulings for Consumers in Collection Lawsuit Cases
The Supreme Court of Alaska has affirmed rulings in three separate cases against the same defendant that made similar allegations, determining that the defendant, a debt buyer, violated state law because Alaska does not recognize “account stated” causes of action. More details here.
WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: This recent Alaska case highlights a growing trend in consumer litigation: after a debt collection suit is filed, consumers are counterclaiming under consumer protection laws, arguing there’s not enough evidence to back the debt. If your firm regularly files collection actions, now’s a good time to review your litigation practices. Be sure you have clear proof of debt ownership, a full chain of title, the original agreement, and legal support for any added fees or charges. Courts are increasingly finding that filing without this documentation can amount to deceptive or unfair practices under consumer protection laws.
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Washington Appeals Court Overturns Dismissal Against Collection Law Firm
A Washington Appeals Court has overturned the dismissal of a lawsuit against a collection law firm that was accused of violating a state collection law, ruling that the law firm’s actions as a collection agency were outside the scope of the litigation privilege. The ruling draws a distinction between actions taken by a law firm in its role as legal counsel and those taken in its capacity as a debt collector, which potentially opens the door for consumer protection claims against firms operating in dual roles. More details here.
WHAT THIS MEANS, FROM LORAINE LYONS OF MARTIN GOLDEN LYONS WATTS MORGAN: The litigation privilege is a question of law and is decided on a case-by-case basis. Generally, it protects lawyers and clients from civil liability for statements made in judicial proceedings. In this case, the law firm acted as the attorney for its client’s attempt to enforce a debt and as a debt collector. The Washington Court of Appeals focused on the law firm’s conduct, emphasizing that its primary role was debt collection. The Court reasoned that allowing the litigation privilege to shield improper debt collection practices would render the statutory remedies under the Washington Collection Agency Act meaningless. This decision narrows the scope of the litigation privilege and signals that regulated business activities by law firms are not insulated from statutory liability.
Appeals Court Affirms Ruling for Defendant, Holds Reasonable Investigation Doesn’t Need to be Accurate
The Court of Appeals for the Second Circuit has affirmed a lower court’s ruling for a defendant in a Fair Credit Reporting Act case over the reasonableness of a dispute investigation after the plaintiff claimed to be the victim of identity theft. The case was significant enough that it merited an amicus brief from the Consumer Financial Protection Bureau and Federal Trade Commission, who lobbied on behalf of the plaintiff. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: The Second Circuit sums up the resolution of this FCRA case nicely when it says that the FCRA “does not guarantee that the results of [] investigations [into consumer disputes] will favor the consumer lodging the disputes.” It does not. And the court confirmed that the furnisher’s obligation under the FCRA is to conduct a “reasonable investigation” of consumer disputes – not, using the court’s words, a “perfect” investigation. The details in the opinion of the creditor’s investigation of the consumer’s claim of identity theft reflect both a thorough effort on the part of the furnisher to get to the bottom of the consumer’s claim and a failure on the consumer’s part to comply with basic information requirements from the furnisher (including filing a police report related to the alleged identity theft). And the court gave us another useful industry finding when it confirmed that a consumer cannot prevail under the FCRA on a claim about the reasonableness of a furnisher’s investigation unless the consumer can demonstrate that a reasonable investigation would have yielded a result different from the outcome of the investigation the furnisher conducted. Consumer disputes are a fact of life for furnishers, but this is a good case for furnishers to reference when faced with claims about the FCRA’s investigation requirements.
Appeals Court Affirms Dismissal of FDCPA Case Against Creditor
The Court of Appeals for the Eleventh Circuit has affirmed a lower court’s ruling in a Fair Debt Collection Practices Act case involving the original creditor, while also denying the creditor’s motion for sanctions against the plaintiff, although it did caution him that future appeals regarding the same facts may lead the court to change its mind. More details here.
WHAT THIS MEANS, FROM MIKE FROST OF FROST ECHOLS: The Eleventh Circuit held that Discover Bank, as the originator of the debt, does not qualify as a “debt collector” under the FDCPA. This ruling is favorable for creditors and reinforces the long-standing idea that original creditors are generally excluded from FDCPA liability.
The opinion also confirms the ongoing reluctance to impose sanctions for frivolous appeals. Despite (in my opinion) compelling reasons to do so, the court declined to sanction Mr. Albert – illustrating just how high the bar remains for this type of relief in federal appellate practice.
Baltimore Dismisses Suit Against CFPB
The City of Baltimore yesterday voluntarily dismissed its lawsuit against the Consumer Financial Protection Bureau and acting Director Russell Vought, bringing an end to its challenge of the Trump administration’s alleged plan to defund the agency. More details here.
WHAT THIS MEANS, FROM BROOKE CONKLE OF TROUTMAN PEPPER LOCKE: The Baltimore case was one of many challenging the Trump administration’s changes to the CFPB, including efforts to defund the agency. The City dismissed the suit based on representations from the Bureau that it cannot transfer excess funds back to the Federal Reserve. Yet the dismissal may not be the end of the challenge, as consumer advocates cautioned that, should the Bureau reverse its representations, the City reserved the right to refile.
Illinois Legislature Passes Bill Prohibiting Collection of Coerced Debt
A bill is on the desk of Illinois Governor JB Pritzker that would allow victims of coerced debt to fill out a form that would be submitted to a collection agency and would then prohibit the agency from attempting to collect on the debt. The bill, House Bill 3352, would amend the Illinois Collection Agency Act to formally recognize “coerced debt” and outline a process for survivors of domestic violence, sexual assault, and human trafficking to assert that they are not liable for debts incurred through abuse, fraud, or manipulation. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: It can be hard for a collection agency investigating a dispute that seeks to remove the tradeline of a debt that the person claims was incurred through coercion. The Illinois legislation provides specific guidance for a person making such a dispute and for the collection agency investigating and otherwise handling the dispute. The governor likely will sign the legislation this summer.
The Illinois law is based on similar ones recently passed in Connecticut and Minnesota, though there are a few differences amongst them. In the past few years, there have been a number of state laws impacting debt collection. The most recent example has been the restrictions on collecting medical debt. We may expect to see a similar spread of “coerced debt” legislation. It is too early to tell, but these laws may make it easier for agencies when dealing with what currently is a difficult scenario.
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.
