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.
N.D. State Court Affirms MVN’s Safe Harbor in Case Over Dispute Notification
In a case that was defended by Jessica Klander and Nick Prola at Bassford Remele, a state court judge in North Dakota has granted a defendant’s motion for judgment on the pleadings in a Fair Debt Collection Practices Act case, ruling that its use of the Model Validation Notice entitled it to the safe harbors afforded by the Consumer Financial Protection Bureau over the plaintiff’s claims that it did not provide the required 30-day notice to dispute the debt. More details here.
WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: Somehow Palpatine the MVN safe harbor returned. While the majority of court opinions addressing the MVN safe harbor all but killed it, those were federal court decisions. And if the glut of Article III standing cases has taught the industry anything it is that state court FDCPA jurisprudence does not have to follow federal court FDCPA jurisprudence. My friends over at Bassford Remele appear to have used this to their advantage in this case from North Dakota.
This is the first case I have seen since the United States Supreme Court ruled on Loper-Bright v. Raimondo, 603 U.S. 369 (2024), (which killed Chevron deference) to face the issue of the MVN safe harbor. Due to the judge’s lack of explanation in their ruling, we do not know whether either Chevron or its fall played a role in this decision. While this is certainly a good outcome for the industry, unfortunately it is only a single case without much explanation from the judge as to their reasoning.
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Judge Grants MTD in FDCPA Class Action Over Alleged Missing Disclosure
A District Court judge in North Dakota has granted a defendant’s motion to dismiss a class action lawsuit that accused it of violating the Fair Debt Collection Practices Act by failing to disclose in a collection notice whether interest was continuing to accrue on the debt, ruling the plaintiff lacked standing because she did not suffer a concrete injury. More details here.
WHAT THIS MEANS, FROM JUSTIN PENN OF HINSHAW CULBERTSON: It is always gratifying to rid yourself of a case at the motion to dismiss stage, but it is even more gratifying when the case is a class action and the judge clarifies an emerging issue in the industry’s favor. Both happened in this case. The issue of standing continues to develop, and courts continue to set forth the metes and bounds of the minimal requirements. Cases this this are helpful because they set those boundaries in such a way that even if the allegations here were true, the Court explained they were still insufficient. From the good facts make good law, the letter sought $.28 cents in interest, and the consumer alleged she was substantially confused and emotionally harmed. The Court soundly rejected those assertions, astutely explaining that confusion is itself not an injury, and rejecting the bare conclusion of emotional harm absent some factual or evidentiary enhancement. Both of these reasonings should be helpful in cases where, like here, the facts simply cannot bear out claims for confusion and emotional distress, hopefully giving more traction on dispositive motions at the pleading stage before costly discovery.
Court: Fraud Reporting Not Always Clear-Cut in FCRA Cases
The Court of Appeals for the Eleventh Circuit has affirmed the dismissal of a Fair Credit Reporting Act lawsuit that claimed a credit reporting agency was publishing inaccurate information about the plaintiffs, ruling that differentiating between the victim of a fraud and the perpetrator of that fraud is not always as easy as it sounds. More details here.
WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: The Eleventh Circuit Court of Appeals recently affirmed the Southern District of Florida’s dismissal of two FCRA claims against a consumer reporting agency.
The dispute centered around a fraudulent check deposited into the Plaintiffs’ joint checking account. One of the Plaintiffs claimed that he was unaware at the time of depositing the check that he was participating in a scheme, and believed it was a legitimate expense check from his new employer. After becoming suspicious, however, he reported the potential fraud to the FBI and alerted the Bank. The Bank closed the account, reporting it was closed due to “checking account fraud.” Plaintiff disputed the fraud notation, claiming he was an unwitting victim of the fraud, but the Bank and the consumer reporting agency – Early Warning – confirmed the notation.
Plaintiffs raised FCRA violations, which the district court dismissed at the pleadings stage, finding: (1) The consumer report contained no inaccurate or misleading information; and (2) Any allegedly inaccurate or misleading information was not objectively and readily verifiable by the credit reporting agency. The Eleventh Circuit affirmed dismissal on the second ground, with no need to consider the first. A consumer reporting agency, it held, could not objectively and readily verify whether theaccountholder intentionally defrauded the Bank when he deposited the fraudulent checkand Plaintiffs failed to explain how Early Warning could have easily determined who was the perpetrator and who was the victim. Although the FBI report was provided, to rely on it, the CRA would have needed to confirm the veracity of its allegations.
This is a good reminder that, as the Court noted, “fraud schemes are often complex.” If you are a furnisher, this is a good time to review your policy and procedure for investigating and responding to disputes—particularly those involving fraud and identity theft. Ensure that decision-making and reporting processes (1) follow reasonable procedures to ensure maximum possible accuracy to avoid untrue and misleading reports, and (2) consider objectively and readily verifiable data provided and available to you in connection with a dispute, especially in cases of fraud. While unraveling fraud claims may not be always be possible with the information available, ensuring the existence and implementation of a robust policy and procedure for those situations can help support a defensible and good faith position in connection with fraud disputes.
Judge Dismisses FDCPA Class Action
A District Court judge in Pennsylvania has dismissed a certified Fair Debt Collection Practices Act class-action, ruling the plaintiffs did not have standing after alleging the defendants misrepresented the balance that was owed when filing a proof-of-claim related to the plaintiff’s bankruptcy. More details here.
WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH: With the advent of the rejection of federal court standing to parties who do not suffer concrete injuries, the case law has turned to exercises in determining exactly what constitutes concrete injury. These are particularly fact intensive discussions that inevitably involve a certain amount of discretion by each trial judge (and appellate panel) that are called upon to evaluate the purported injury. In this case, the question before the court was whether an alleged misrepresentation about the characterization of the balance of an obligation (what amount is principal and what amount is interest, fees, and costs) contained in a proof of claim filed in a bankruptcy court is a concrete injury to the plaintiff. The court ultimately concluded that how the obligation was characterized is an informational injury which does not confer standing. This conforms to the almost universal finding by federal courts that informational injuries are not concrete injuries absent the actual emergence of damages.
Judge Grants MSJ for Defendant in FDCPA, TCPA Case Over Texts, Calls to Wrong Number
A District Court judge in Texas has granted a motion for summary judgment filed by the defendants in a Fair Debt Collection Practices Act and Telephone Consumer Protection Act case, ruling that three text messages and three phone calls over the span of eight weeks were not harassing even though the attempts were intended for someone else, and even a least sophisticated consumer would not have been confused because the messages referenced someone with a different name than the plaintiff’s. More details here.
WHAT THIS MEANS, FROM COOPER WALKER OF FROST ECHOLS: If you’re going to fight a case, this one was the one to do it. Here the Plaintiff received three (3) text messages over the course of a about a month. Plaintiff requested texting to stop after the third text message was received and this request was honored. Plaintiff also received three (3) phone calls over the course of about a month as well. All three calls went to voicemail. Plaintiff then filed suit alleging that “harassing” and/or “unconscionable” conduct occurred. As the Court pointed out, the case law is pretty favorable to the industry on this issue (which is a nice change). Good on the agency for taking a stand on this one.
CFPB Files Motion to Resume Case Against Debt Relief Defendant
The Consumer Financial Protection Bureau filed a motion yesterday to vacate the stay and proceed with a lawsuit it had filed against a student loan debt relief operation that was accused of charging consumers millions of dollars in upfront fees in violation of federal law. The lawsuit was paused when the leadership of the Bureau changed in February, but now the Bureau has decided to move forward. This is one of the few cases that were filed under former Director Rohit Chopra that the new leadership of the Bureau has not dismissed. More details here.
Judge Rejects CFPB’s Request to Vacate Settlement
A District Court judge in Illinois has rejected a request by the Consumer Financial Protection Bureau to vacate a settlement reached with a mortgage lender after it was accused of racial discrimination, saying that doing so would open a “Pandora’s box” that he refuses to unlock. The CFPB back in March filed a motion seeking to vacate the $105,000 settlement that it reached with Townstone Financial, claiming the case lacked merit. More details here.
WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: In December 2024, the CFPB entered a stipulated judgment with the other individual defendant in this case. In February 20225, after the resignation of former Director Chopra and the appointment of Acting Director Vought, the CFPB asked to stay the case until it could obtain guidance from the Bureau’s new leadership. The CFPB has now decided to resume the enforcement action against the remaining individual defendant, but had this decision gone the other way it would have been interesting to see whether the CFPB asked to set aside the stipulated judgment entered in December.
Oregon Passes Medical Debt Credit Reporting Ban
The Oregon legislature has passed a bill banning medical debt credit reporting, and while it explicitly applies to credit cards issued under plans offered specifically for the payment of medical services, it does not address mixed-use credit products. More details here.
WHAT THIS MEANS, FROM JIM SANDY OF MCGLINCHEY STAFFORD: Oregon joins a growing list of states which seek to curb the reporting of medical debt on consumer’s credit reports with its passage of Senate Bill 605. We expect to see more states join in on this trend, especially as the federal government, and the Consumer Financial Protection Bureau particularly, scales back its regulatory agenda under acting Director Vought and the Trump Administration. This is especially true with respect to medical debt as the Bureau’s Final Rule to remove medical bills from credit reports is currently on hold pending litigation in federal court. Notably, and while S.B. 605 seeks to regulate many of the same things as the Bureau’s Final Rule, S.B. 605 appears to go even further, as it makes collection of medical debt in a manner that violates the act an unlawful act or practice which could give rise to civil liability, including attorney’s fees.
Collector Didn’t Violate FCRA or FDCPA by Using Credit Report to Obtain Mailing Address, Judge Rules
A Magistrate Court judge in Nevada has recommended claims made by a plaintiff alleging a collection operation violated the Fair Credit Reporting Act and Fair Debt Collection Practices Act when it used the plaintiff’s credit report without her permission to access her contact information and send her a collection letter. The judge also ruled on a motion for sanctions filed by a credit reporting agency that was also named as a defendant, saying that the fact that the plaintiff was representing herself was enough of a reason not to recommend a grant of attorney’s fees. More details here.
WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER BURNETTE: While the Report and Recommendation reiterates several important points and is definitely worth a read, it’s the Court’s ruling on Trans Union’s Rule 11 motion that bears further discussion here. The Court’s stated bases for declining to award sanctions—Plaintiff’s pro se status and accompanying lack of legal sophistication—just don’t hold up anymore. Every creditor’s rights defense attorney in the country can name at least one (and probably more) pro se litigant who litigates as much as lawyers do, who sets up claims for later pursuit, or (and/or??) who assists others in their own endeavors, perpetuating the myth that consumer protection litigation is the best path to debt forgiveness and tradeline deletion. Once upon a time, perhaps the description of a pro se FDCPA and FCRA litigant as unsophisticated may have been accurate—now, though, with the amount of information available to everyone on various online resources, I think it does a huge disservice to litigants overall when courts simply conclude that a litigant’s pro se status, and nothing more, justifies the denial of a fee award.
A great way to start turning the tide on this issue is through discovery. Ask who wrote dispute letters and emails. Ask where purportedly pro se consumers got their form pleadings. Ask who is assisting them with their litigation. Sometimes, the best way to ward off future would-be plaintiffs is to show them that defendants won’t simply fold just because they are facing a self-represented plaintiff.
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.
