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.
Appeals Court Upholds Denial of Class Certification in TCPA Debt Collection Case
The Court of Appeals for the Fourth Circuit has upheld a lower court’s denial to certify a class and not to allow testimony from an expert witness used by the plaintiff in a Telephone Consumer Protection Act case against a creditor that was attempting to collect on an unpaid debt. More details here.
WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: This is an excellent decision and an excellent outcome from the 4th Circuit Court of Appeals. It is important for several reasons. First, it involved a TCPA class certification Motion that was denied involving a reassigned phone number, a purported reassigned phone number class, and prerecorded messages.
Second, the decision heavily criticized purported Expert Vehkhovskaya’s incredibly problematic voodoo methods about how she could ascertain a viable class. The 4th Circuit agreed with the lower court that her methodology was severely flawed. She has been one of the plaintiff’s Bar’s favored experts for years. She has, at times, gotten away with her failed and incredibly flawed methods in the past, but not this time – NO. She has been challenged in the past by the defense with success, and so it is striking the Plaintiff used her in this case.
Also, the reason why this ruling is so critical is that it deals with a reassigned number class action involving prerecorded messages. Note that all of the defense arguments came together here for Defendant Capital One. But, several of the skilled plaintiff’s attorneys throughout the US have been successful as of late in certifying similarly themed TCPA class actions. This time, with this expert, the door has been shut. Hopefully, this ends the plaintiff’s bar’s use of this expert and paves the way for these type of Class actions to be shut down.
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Illinois Appeals Court Rejects Arbitration in FDCPA Case
An Illinois state Appeals Court has affirmed a lower court’s ruling denying a motion to compel arbitration in a Fair Debt Collection Practices Act case filed by a collection agency and creditor, ruling that the alleged violations do not fall within the scope of the agreement between the plaintiff and the original creditor. More details here.
WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: The court denied the motion to compel arbitration, ruling that the arbitration provision did not apply to the FDCPA claim. The court found that the claim arose from the alleged unfair debt collection practices, not from the underlying contract with Verizon. The arbitration clause was deemed too generic to cover statutory claims under the FDCPA – which the court concluded were unrelated to the contract. The decision emphasized that the FDCPA claim was independent of any contractual rights or obligations. When seeking to compel arbitration due to a provision in the underlying contract, be aware that a broad clause may be a bar to moving the case into arbitration. Better yet, make sure your creditor clients are aware of this decision. If they want to maintain the option to adjudicate these claims in arbitration, their arbitration provision should expressly include reference to statutory claims and that the provision will remain effective even after the contract ends.
Litigation Privilege Shields Collections Actions in Oregon FDCPA Case
In a case that was originally filed nearly a decade ago and is finally seeing the light of day after other suits filed by the same plaintiffs were played out in District Court and before the Court of Appeals for the Ninth Circuit, a District Court judge in Oregon has adopted a Magistrate Court judge’s recommendation not to allow the plaintiffs to file a second amended complaint in a Fair Debt Collection Practices Act case. More details here.
WHAT THIS MEANS, FROM JENNA WILLIAMS OF FROST ECHOLS: Creditors and law firms can face state unfair or deceptive trade practices (UTPA/UDAP) claims when pursuing lawsuits against consumers. It’s an easy counterclaim for a consumer to file. The good news is that most states recognize a litigation privilege.
In practice, this means creditors and law firms are generally shielded from UTPA/UDAP claims based solely on filing a collection lawsuit, so long as the lawsuit was not filed in bad faith or with malicious intent.
As further good news, UDAP and UTPA statutes are designed to protect the public at large. To succeed on a claim, a consumer usually must show that the conduct has the potential to harm the broader public or market, not just an individual.
Bloomberg: CFPB Accelerates Closure of Supervisory Issues Amid Impending Mass Layoffs
The Consumer Financial Protection Bureau is closing nearly all of its roughly 2,000 outstanding “matters requiring attention” (MRAs), a move driven by the potentially imminent firing of nearly 90% of the agency’s employees, according to a published report. These MRAs, which flag compliance issues at supervised entities like banks, fintechs, and debt collectors, are being resolved, often without full remediation verification or examiner input, which is raising concerns among industry insiders. Some closures follow company requests or token changes, bypassing standard protocols, according to the report. Internally dubbed “death memos,” documents justifying these closures reflect the agency’s push to clear backlogs amid significant upheaval. More details here.
WHAT THIS MEANS, FROM NABIL FOSTER OF BARRON & NEWBURGER: The flashy headlines about the changes at the CFPB use the words “death memo.” Articles indicate that most of the CFPB’s “matters requiring attention” (“MRA”) are being closed. Educated guesses about these MRAs coalesce around confidential pre-enforcement Bank exam cases, not debt collection cases. But is this a sign of what is to come from a diminished and hollowed out CFPB?
History can sometimes help us make sense of the present and help us calibrate our reactions to events of change. After a stinging defeat of the French forces at the Battle of Rossbach in 1757, Madame de Pompadour allegedly said to King Louis XV of France “Après nous, le deluge.”(translation: After us, the flood). That nihilistic statement was a bit premature as it was allegedly said almost 31 years before the Frech Revolution (1798 to 1799) which included the Reign of Terror, and which also created the conditions for the rise of Napoleon. Almost one hundred years later, Mark Twain wrote in a newspaper article “The report of my death was an exaggeration.” New York Journal, June 2, 1897 (the misquote you probably know is “Reports of my death have been greatly exaggerated”). But, what is the take-away point of these two unrelated events? Don’t believe everything that you read and human beings are really bad at predicting a future set of events, even really bleak ones.
The quiet erasure of MRAs and the downward revision of the CFPB’s “larger participant” rules are clear signals of change. The restriction of funding to the CFPB further encourages some to imagine the ultimate demise of this independent bureau within the Federal Reserve System, which is the central bank system of the US. The CFPB is certainly down, but it is not out of the picture. The old saying is “be weary of what you wish for.” In this context, instead of one mostly predominant flavor of regulation, you could end up with 51 flavors of regulation. A shrinking CFPB creates lanes for other state-based regulators to push forward through the field of competing regulatory directives.
The checkered flag has not come out yet, three laps is a lifetime, and no one likes the bind corners ahead. So, what can you do? Talk to your team, be disciplined on your fundamentals, and ask for help from those you trust. If you do these three things, you will feel more confident in your decisions and you will be better prepared to adapt to any obstacles in your way as you exit the blind corners ahead.
NJ Appeals Court Upholds Denial of Class Certification in FDCPA Voicemail Case
A New Jersey appeals court has affirmed a lower court’s ruling denying certification of a class in a Fair Debt Collection Practices Act lawsuit, on the grounds the plaintiff did not have enough evidence that the proposed members of the class received the message in question from the defendant. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUSDON COOK: It is strange to think that the plaintiff’s lawyers in this putative class action were hoping to get their class certified without some record evidence that anyone but the plaintiff got a voice message from the defendant law firm. It is stranger still that the plaintiff’s lawyers indicated in their petition to serve as class counsel that they actually had such evidence gained through discovery. The motion for class certification relied entirely on the plaintiff’s experience with an allegedly non-compliant voice message (think back to the claims in the typical Foti cases), conclusory statements about the number of affected New Jersey consumers and the law firm’s standard voice message script. The appeals court took few words to affirm the lower court’s denial of class certification and sent the plaintiff back to the drawing board. Good result.
CFPB Proposes Rule to Tighten Standards for Nonbank Supervision
The Consumer Financial Protection Bureau has proposed a new rule that would establish a binding definition of “risks to consumers” under the Consumer Financial Protection Act, limiting the agency’s ability to designate nonbank entities for supervision. Published in the Federal Register today, the proposal aims to ensure consistency and clarity in how the CFPB exercises its authority over nonbanks engaged in consumer financial products or services, including those in credit, collections, and debt buying. More details here.
WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: The Consumer Financial Protection Act gives the CFPB broad authority to supervise nonbanks, including debt collectors, requiring only that the Bureau have “reasonable cause” to determine that a nonbank poses risks to consumers. The CFPB proposes to define “risks to consumers” so that this authority can be exercised only when the nonbank’s conduct “presents a high likelihood of significant harm to consumers” and when that conduct is “directly connected to the offering of a consumer product or service” as defined in the CFPA. Current CFPB leadership intends to focus the Bureau’s supervision efforts on larger banks, and this proposed rule restricting supervisory authority over nonbanks is consistent with that regulatory priority.
Appeals Court Rejects Bias Claims in Lawsuit Against Collector and CRAs
The Court of Appeals for the Eleventh Circuit has affirmed the dismissal of a suit filed against a collection agency and two credit reporting agencies on the grounds that the District Court improperly denied his request for accommodations and was biased against him. More details here.
WHAT THIS MEANS, FROM XERXES MARTIN OF MARTIN GOLDEN LYONS: Kareem Marshall, as a pro se, sued Creditors Bureau Associates, Experian, and Equifax, accusing them of “willful acts of hate” (which is not exactly a recognized legal claim, but bold points for creativity). The district court told him to clean up his complaint. Instead, Marshall doubled down with motions for an injunction to stop all negative credit reporting and a request for accommodations ranging from an interpreter to a court-appointed lawyer.
The court said “not yet” (no hearings scheduled = no interpreter needed) and “not happening” (no exceptional circumstances = no free lawyer). It also reminded him that pro se litigants can file electronically only if they follow the rules—something Marshall skipped.
When he finally filed his amended complaint, it still didn’t meet the basic pleading requirements, so the court tossed it. On appeal, the Eleventh Circuit basically said (1) The trial judge wasn’t biased, just not buying Marshall’s arguments; (2)No, you don’t get a jury trial if your complaint fails at the starting line; and (3) yes, you need an actual legal claim before asking for emergency credit-reporting relief. With the rise of pro se complaints, we will probably see more decisions like this one in the future.
Judge Labels Plaintiff ‘Vexatious,’ Grants MTD in FDCPA, FCRA Case
Having read more than a few rulings over the years, I feel somewhat qualified to opine that when a complaint lodges 17 different counts, chances are it’s not going to go well for the plaintiff. A District Court judge in Massachusetts has granted motions to dismiss filed by defendants in a Fair Debt Collection Practices Act and Fair Credit Reporting Act lawsuit brought by a “vexatious” plaintiff. More details here.
WHAT THIS MEANS, FROM ISSA MOE OF MOE LAW GROUP: When you find yourself in the unfortunate position of facing off against an untrained pro se plaintiff, especially a repeat filer like the plaintiff in this case, you’re usually in for an unpleasant ride. These opponents rarely know what they’re doing, yet somehow find a way to make a nonsense case expensive for everyone. That is because many judges give pro se plaintiffs a fair amount of leeway, including by construing complaints liberally and affording plaintiffs several chances to replead deficient claims. So, even if you prevail on a motion to dismiss as the defendants did in this case, you may still be forced to incur further litigation costs should your judge grant leave to amend, an outcome I’ve seen far more times than is justified. Fortunately for the defendants in this case, in granting their motion to dismiss, the judge took notice of the plaintiff’s history of frivolous filings and failure to prosecute claims. And while the judge acknowledged that a dismissal on the grounds laid out in the motion to dismiss would typically be without prejudice, as you often see early in pro se litigation, the plaintiff’s pattern of bad-faith litigation was sufficient for the judge to dismiss the claims with prejudice.
This opinion is a good illustration of something I routinely tell folks facing litigation: narratives matter. And in this case, the defendants laid out a narrative for the judge regarding the plaintiff’s game playing that was sufficiently strong to secure an early exit from what might otherwise have been a lengthy, costly legal battle.
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.
