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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.
Defendant Wins FDCPA Case Over Purchased Debt
A District Court judge in Missouri has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case after the plaintiff claimed the defendant had no legal right to the debt and because it was not registered to do business in the state. More details here.
WHAT THIS MEANS, FROM CRYSTAL DUPLAY OF FROST ECHOLS: In Gallamore v. Portfolio Recovery Associates, LLC, the U.S. District Court for the Eastern District of Missouri granted summary judgment in favor of the defendant, dismissing the plaintiff’s Fair Debt Collection Practices Act (FDCPA) claims The plaintiff alleged that PRA lacked the legal right to collect on a debt originally owed to Synchrony Bank and further contended that PRA’s collection activity violated Missouri law because the company was not registered to do business in the state. The Court found that PRA had validly purchased the debt, supported by a Bill of Sale and detailed purchase agreement, and determined that the transaction met the legal standards for ownership. The Court further found that Missouri law expressly exempts foreign limited liability companies engaged solely in debt collection from the state’s business registration requirements. As PRA’s conduct did not violate either state or federal law, the Court concluded that no FDCPA violation occurred and granted summary judgment in PRA’s favor.
This decision reinforces the importance of maintaining complete, account-level sale documentation and underscores the need for debt buyers and collectors to understand and comply with varying state business registration laws.
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Judge Denies MTD in FCRA, FDCPA Case Over Collection Amount
A District Court judge in Maryland has denied a defendant’s motion to dismiss claims it violated the Fair Credit Reporting Act and Fair Debt Collection Practices Act, ruling the plaintiff has standing after the defendant allegedly attempted to collect more than what was owed. More details here.
WHAT THIS MEANS, FROM ISSA MOE OF MOE LAW GROUP: While we’ve seen plenty dismissals in no-injury cases for lack of standing, this decision is a reminder that the defense has its limits. Don’t get me wrong, it’s a savvy litigation strategy to attack claims based entirely on alleged hyper-technical violations of consumer protection statutes (like the FDCPA) early where a plaintiff clearly suffered no harm. Plaintiffs (and the attorneys who represent them) should not be rewarded for abusing the judicial process, often to extort an early settlement on the threat of costly litigation, by filing nonsense no-injury claims against agencies. Those claims should be and often are kicked on early dispositive motions. But before heavily investing in that defense strategy, litigants may want to keep an eye on the line to ensure it wasn’t crossed. And in this case, the court determined that seeking to collect and credit reporting a materially higher amount than was permitted under state law—tens of thousands of dollars, to be precise—did exactly that. Result: the case goes on.
N.J. Appeals Court Affirms Ruling Over Attempt to Vacate Judgment
A New Jersey appeals court has affirmed a lower court’s ruling denying a consumer’s motion to vacate a default judgment because she waited too long and took other legal steps before seeking to vacate the judgment. More details here.
WHAT THIS MEANS, FROM JACOB BACH OF MARTIN GOLDEN LYONS WATTS MORGAN: As this case shows, some plaintiff’s attorneys are willing to revisit old judgments based on new ideas. Sometimes even cases you think are long resolved can be brought back up in court. Often even when there is no basis for revisiting an old judgment, you may be required to defend the judgment either way. Courts are generally hostile to bringing up old judgments, and this case serves as good example to cite when debtors are trying to engage in strategic games to avoid having to pay a judgment.
Mass. AG Settles With Student Loan Lender Over Use of AI
I don’t check every state Attorney General website every day, but I am fairly confident in saying that this is one of the first consumer protection enforcement actions from a state related to the use of artificial intelligence. Massachusetts Attorney General Andrea Joy Campbell has announced a $2.5 million settlement with student loan provider Earnest Operations, marking a significant enforcement action at the intersection of AI, fair lending, and consumer protection. More details here.
WHAT THIS MEANS, FROM KIM PHAN OF TROUTMAN PEPPER LOCKE: This latest state enforcement action is further proof that the state attorneys general plan to act aggressively to address perceived consumer protection risks associated with the deployment of artificial intelligence (AI) tools that could have a financial impact on consumers. The settlement order makes clear that appropriate AI governance is expected, which should include conducting risk assessments, adequate testing of AI models, mitigating potential discrimination, and ensuring that any AI output can be sufficiently explained to consumers. The recent removal of the state AI enforcement prohibition in the federal budget bill leaves the door open for other states to join Texas and Massachusetts in pursuing these types of AI claims.
Appeals Court Overturns Ruling in FCRA Case Over ‘Clickwrap’ Disclosure
The Court of Appeals for the Eleventh Circuit has overturned a lower court’s denial to compel arbitration in a Fair Credit Reporting Act case, ruling the “clickwrap” process under which the plaintiff signed up for was clear and explicit. The decision reinforces the enforceability of clickwrap agreements and clarifies that disputes about waiver, when properly delegated, must be decided by an arbitrator. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW & CULBERTSON: A powerful tool in defending class actions is the ability to compel arbitration. In internet transactions, a question often arises if the user agreed to Terms & Conditions, including arbitration rights and other relevant provisions. Some websites have a browsewrap system, arguing the terms are accepted by using the website. Other websites require the person to click and accept the terms, i.e, clickwrap. It is easier to enforce the T&C’s with a clickwrap process.
Lamonaco v Experian will be helpful for defendants. It reversed the trial court, endorsed use of clickwrap, and ruled that whether Experian waived arbitration rights via litigation is an issue for the arbitrator to decide due to the T&C’s delegation clause. It thus hits on arguments plaintiff’s also raise in opposing a motion to compel.
Members of the ARMs Industry often do not control what is in the T&C’s or how they are implemented. However, to the extent industry members can influence creditors, this case gives guidance on some key aspects of internet arbitration rights.
Judge Vacates CFPB Medical Debt Credit Reporting Rule
A federal judge in Texas has vacated the Consumer Financial Protection Bureau’s rule prohibiting the inclusion of medical debt in consumer credit reports, siding with industry trade groups and the Trump administration in a high-profile legal battle over the Bureau’s regulatory authority. More details here.
WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS SUTHERLAND: Although the confusion resulting from the growing number of state laws banning medical credit reporting continues, on July 11, 2025, the U.S. District Court for the Eastern District of Texas vacated the Consumer Financial Protection Bureau’s (CFPB) Medical Debt Credit Reporting Rule in the case of Cornerstone Credit Union League et al. v. CFPB. This decision has immediate implications for credit reporting agencies, lenders, and healthcare providers—but it may not slow state lawmakers down from taking action closer to home.
What Happened in Cornerstone Credit Union League v. CFPB
In early January, 2025, the CFPB finalized a rule prohibiting consumer reporting agencies from including medical debt in credit reports and barred lenders from considering such debt in credit decisions. The rule was challenged by the Cornerstone Credit Union League and the Consumer Data Industry Association (CDIA), who argued that the CFPB exceeded its authority under the Fair Credit Reporting Act (FCRA).
Over objections of consumer intervenors, the court agreed, finding that the rule conflicted with the FCRA’s express provisions allowing the reporting of medical debt. The court approved a consent judgment between the CFPB (under new leadership) and the plaintiffs, effectively vacating the CFPB’s rule.
What This Means for Credit Reporting Medical Debt
The ruling restores the status quo under federal law: medical debt may once again be reported to credit bureaus and considered by lenders. However, proceed with caution. This ruling does not mean that credit reporting medical debts, even if permitted by the FCRA, is lawful – especially in states that have enacted their own restrictions.
State Laws Still Restrict Medical Debt Reporting
As part of a multistate medical debt protection consumer lobbying effort, at least a dozen states have enacted laws banning or curtailing the reporting of medical debt to consumer reporting agencies and prohibiting lenders from considering consumers’ medical debts when underwriting extensions of credit. Examples of states that have enacted these laws include the following:
- California
- Colorado
- Connecticut
- Illinois
- Maryland
- Minnesota
- New Jersey
- New York
- Rhode Island
- Vermont
- Virginia
- Washington
Many of these laws differ considerably making compliance challenging from state to state. Some laws wipe out medical debts if a data furnisher credit reports them – while others limit dollar thresholds or timing for credit reporting. Meanwhile, the consumer reporting agencies stopped accepting medical debt tradelines under $500 several years ago, which debts typically represented consumers’ co-pays or deductibles. Other state laws restrict how medical debt can be used by landlords, employers, and insurers.
Federal Preemption: A Looming Question
What remains to be decided is whether or not courts will now determine that the FCRA pre-empts states in enacting medical debt credit reporting ban laws. The FCRA’s preemption provisions are complex and while they can override state laws in certain areas, courts historically uphold state laws that afford consumers greater protections. A few years ago the First Circuit upheld a state law when testing it against the FCRA’s preemption provisions. See, Consumer Data Indus. Ass’n v. Frey. 26 F.4th1 (First Circuit 2022).
Stay tuned for further developments in this area.
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.
