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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.
Appeals Court Affirms Dismissal of TCPA Case Over Collection Calls
The Court of Appeals for the Sixth Circuit has affirmed the dismissal of a Telephone Consumer Protection Act lawsuit against a creditor over collection calls that were made to the plaintiff’s cell phone, saying the plaintiff did not provide enough facts to support his claim that the 800 calls he received over an 18-month period were made using an automated telephone dialing system or that the defendant used an artificial or prerecorded voice when making the calls. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER LOCKE: This case provided significant guidance as to what plaintiffs do need to allege to state a TCPA claim in the Sixth Circuit. While not precedential, if plaintiffs are paying attention, the Sixth Circuit laid out exactly how to allege sufficient facts to survive a motion to dismiss. Courts dismiss claims that merely parrot statutes routinely and without detailed commentary on how the complaint could have been pled in numerous other circumstances. While handing down a defense victory today, the Sixth Circuit may have opened the door to such claims having a better chance of surviving tomorrow.
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CFPB Publishes Plan for Handling Criminal Regulatory Offenses
The Consumer Financial Protection Bureau on Friday published a policy statement in the Federal Register describing how it will address criminally liable regulatory offenses, in response to an Executive Order issued by President Donald Trump last month. Criminal referrals for violations of consumer finance laws have historically been rare. More details here.
WHAT THIS MEANS, FROM AKEELA WHITE OF HINSHAW & CULBERTSON: The CFPB’s new policy statement marks a shift in its approach to criminal enforcement referrals related to violations of consumer financial laws, including the Truth in Lending Act, Real Estate Settlement Procedures Act, Electronic Fund Transfer Act, and the Fair Credit Reporting Act (which imposes criminal penalties for knowingly and willfully obtaining consumer information from a consumer reporting agency under false pretenses, 15 USCS § 1681q).
For the first time, the CFPB has specified the factors it will consider when deciding whether to refer alleged criminal violations to the Department of Justice. These factors include the harm caused, the potential gain to the offender, the individual’s specialized knowledge or licensing, and evidence of the person’s awareness that their conduct was unlawful. Notably, the emphasis on a defendant’s awareness of wrongdoing reflects the broader regulatory philosophy advanced by former Director Rohit Chopra, who, in his 2022 remarks at the University of Pennsylvania on “Reining in Repeat Offenders,” underscored the need for regulators to address corporate recidivism with remedies that go beyond monetary penalties.
Within a year, the CFPB will publish and annually update a list of all criminal regulatory offenses it enforces, including potential penalties and applicable mens rea standards. The Bureau is also reviewing whether to establish a default mens rea standard for all criminal regulatory offenses, which could increase consistency but may create uncertainty during the transition. As the CFPB evaluates whether to move away from strict liability or clarify intent requirements, companies may face ambiguity about which mental state standard applies to specific conduct. Compliance programs may need to be reassessed once the review is complete. While the policy does not create new legal obligations, it signals a more structured and transparent approach to criminal enforcement. You should monitor upcoming CFPB reports and be ready for changes in how criminal liability is determined and enforced, especially as the Bureau increases its focus on repeat offenders and structural remedies.
Appeals Court Affirms Ruling for Plaintiff in FDCPA Workers’ Comp Case
The Court of Appeals for the Eleventh Circuit has affirmed a ruling for a plaintiff in a Fair Debt Collection Practices Act case, rejecting the defendant’s arguments that the plaintiff’s medical bills did not meet the statute’s definition of a debt and that it should be entitled to the statute’s bona fide error defense because of the policies it had in place to try and prevent these types of situations. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: This decision reminds us of two key principles – first, blind reliance on your creditor client is not a wise move and second, if you’re going to raise the bona fide error” defense, you better make sure you have detailed procedures in place (and reliance on a client should not be part of those procedures).
Crawford suffered injuries while on the job for AdventHealth where he was subsequently treated. As the injuries were work related, Crawford was entitled to be covered by worker’s compensation. He advised AdventHealth of same and it appears that AdventHealth started the process to be paid via workers comp. However, AdventHealth sent Crawford bills for the post accident care, and AdventHealth then sent the bills to North American Credit Services, Inc. (“NACS”) for collection. Now I know what you’re thinking, medical providers never make billing mistakes, so clearly NACS could feel secure that if AdventHealth sent over something for collection, it was accurate and rightfully due.
The Court did not agree and in response to that argument as a prong in NACS’s BFE defense, it failed. The Court wrote: “To begin, NACS has not pointed to testimony or any other evidence supporting its claim that it “actually employed or implemented” relevant procedures.” NACS, instead, argued it relied on AdventHealth not to send work-related medical debts to it and also claimed it employed a document titled “insurance work instructions,” which appeared to provide instructions for assisting patients with making insurance or workers’ compensation claims. But that was document was never authenticated, so it had no evidentiary value. And, more importantly for this discussion, that document went out after the fact. The rationale for adequate processes and procedures which could support a BFE defense is to prevent the errors in the first place.
Let this decision be a reminder to check your processes and procedures for reviewing new claims, particularly when they are medical related. I continue to see complaints where there are attempts to collect on accounts covered by workers compensation.
Colorado Supreme Court to Hear Arguments in Collection Case
The Colorado Supreme Court has granted a petition filed by a consumer to hear arguments in a case she filed against a collection operation, alleging it violated Colorado’s Fair Debt Collection Practices Act when it attempted to recover an unpaid debt it had purchased from the original creditor. The Supreme Court will also decide whether the state court judge erred when it ordered a District Attorney’s office to pay the collection operations costs when responding to requests from the prosecutor. More details here.
WHAT THIS MEANS, FROM NICK PROLA OF BASSFORD REMELE: The Colorado legislature has enacted more stringent requirements for bringing debt collection lawsuits applicable to both purchased debt and medical debt. Specifically, as to purchased debt:
(2) A debt collector or collection agency who brings a legal action on a debt owned by a debt buyer shall attach the following materials to the complaint or form:
- (a)
- (I) A copy of the contract, account-holder agreement, or other writing from the original creditor or the consumer evidencing the consumer’s agreement to the original debt;
- (II) In the case of a medical debt, a copy of a redacted itemization of charges incurred;
- (III) If a signed writing evidencing the original debt does not exist, a copy of the document provided to the consumer while the account was active, demonstrating that the debt was incurred by the consumer; or, for a credit card debt, the most recent monthly statement recording a purchase transaction, payment, or balance transfer; or
- (IV) If a claim is based on an electronic transaction for which a signed writing evidencing the original debt never existed, a copy of the records created during the transaction evidencing the consumer’s agreement to the debt and recording the date and terms of the transaction and information provided by the consumer during the transaction; and
- (b) A copy of the assignment or other writing establishing that the debt buyer is the owner of the debt. If the debt was assigned more than once, each assignment or other writing evidencing transfer of ownership must be attached to establish an unbroken chain of ownership, beginning with the original creditor to the first debt buyer and each subsequent sale.
Colorado Revised Statutes § 5-16-111.
Wright v. Portfolio Recovery Associates, Inc. examined both the evidence presented as to the purchase and assignment of the debt, as well as the monthly billing statements provided in lieu of a signed contract. Although the trial court found “inconsistencies” in the debt documents, the Colorado Court of Appeals affirmed that these inconsistencies did not undermine the authenticity of the documents and that the statutory requirements had been met.
The takeaway for debt litigators is that the plaintiffs’ bar (and the Colorado AG in recent CIDs) are focusing on strict adherence to the documentation requirements for collection suits. Further, Colorado has been attempting to pass a version of the Uniform Consumer Debt Default Judgments Act. Over the past several legislative sessions, industry advocates have been working to ensure a fair and feasible approach to consumer collection litigation and it is clear that some version of the model act will ultimately be enacted. As the legislature works to apply the documentation requirements to the collection of all consumer debt, agencies should ensure that their clients possess and are able to provide the documentary evidence needed to comply with statutory requirements.
Collector Petitions Supreme Court to Hear Arguments in FDCPA Standing Case
A petition has been filed with the Supreme Court to hear arguments in a Fair Debt Collection Practices Act case over whether the receipt of a letter is enough for an individual to have suffered a concrete injury and thus have standing to sue. More details here.
WHAT THIS MEANS, FROM JOHN MAREES OF MESSER STRICKLER BURNETTE: Fortunately, a close read of the Ninth Circuit’s opinion shows that if it stands, its impact is arguably limited. The consumer’s receipt of direct communication after notifying the debt collector of his representation by counsel was central to the Ninth Circuit’s determination that the consumer sustained “injury”—that is, standing exists here because of the specific factual events in this case. Should the Supreme Court deny the debt collector’s Petition, it does not mean that any recipient of a letter automatically has standing. The circumstances surrounding the letter are important to consider when evaluating the viability of a standing argument.
Judge Reduces Attorney Fee Award in FDCPA Case by More than 50%
A District Court judge in Minnesota has reduced the amount of attorney’s fees awarded to a pair of lawyers representing a plaintiff in a Fair Debt Collection Practices Act case by more than 50%, pointing out that the only major issue in the case was figuring out how much the lawyers should get paid. More details here.
WHAT THIS MEANS, FROM MIKE FROST OF FROST ECHOLS: In McKayla Cheesman v. Williams & Fudge, Inc., Judge Patrick J. Schiltz of the U.S. District Court for the District of Minnesota issued a significant decision concerning the reasonableness of attorneys’ fees in a Fair Debt Collection Practices Act (FDCPA) case. The dispute centered not on the merits of the underlying claim, which Judge Schiltz described as a “run-of-the-mill” FDCPA matter, but on the amount of attorneys’ fees sought by the prevailing plaintiff’s counsel. The key holdings from this ruling are as follows:
- The Court found the hourly rates charged by plaintiff’s attorneys to be excessive for the simplicity of the case and the legal market involved. One attorney’s rate was reduced from $650/hour to $600/hour. The second attorney’s rate was reduced from $500/hour to $400/hour. In addition, the Court excluded all hours billed after the Rule 68 Offer of Judgment was made and accepted, as these hours were deemed unnecessary to the resolution of the matter.
- The Court applied an across-the-board 10% reduction to the remaining fees, citing duplication of effort and inefficiencies, including the unnecessary involvement of two senior attorneys on a straightforward case.
- The Court criticized plaintiff’s counsel for disregarding an earlier $25,000 settlement offer for fees made by the defendant, which could have resolved the fee dispute without extended litigation.
- The Court awarded a total of $26,568 in attorneys’ fees and $502.35 in costs, significantly lower than the amount originally sought. In doing so, Judge Schiltz emphasized that fee applications under fee-shifting statutes such as the FDCPA should not devolve into “a second major litigation,” observing that in this case, the fee dispute became “the only major litigation.”
This decision underscores the judiciary’s gatekeeping role in ensuring that attorneys’ fee requests in statutory fee-shifting cases remain reasonable and proportionate to the nature of the litigation. The ruling also serves as a cautionary reminder that courts may take a dim view of fee inflation, inefficiency, and failure to resolve fee disputes early when reasonable settlement opportunities are available.
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.
