I’m thrilled to announce that Frost Echols is the new sponsor for the Compliance Digest. Frost Echols reputation has been built on aggressively protecting the rights of businesses throughout our local jurisdictions. Founding partners, Mike Frost and Chad Echols, developed a deep understanding of regulatory compliance, commercial litigation and business operations through years of advising executives in the collection industry. We are committed to a strategic, economic, and aggressive approach to your legal representation.
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.
Judge Says Student Loan Servicer Not Shielded by Sovereign Immunity
A District Court judge in Florida has denied a defendant’s motion for judgment on the pleadings in a Fair Credit Reporting Act case on the grounds that the defendant is not subject to immunuty under the Eleventh Amendment of the Constitution. More details here.
WHAT THIS MEANS, FROM JENNA WILLIAMS OF FROST ECHOLS: The White v. MOHELA case is a friendly reminder that sovereign immunity is not a guarantee.
More importantly, this case shows how seriously identity theft claims must be handled in credit reporting.
When a consumer submits an eOscar dispute alleging fraud or identity theft (especially with a filed FTC Identity Theft Report), the FCRA investigation requires more than basic account data matching. The safest approach is to assume the claim is valid and work from there.
To summarize, continuing to report a tradeline that involves an FTC ID Theft Report carries significant risk with very little benefit. In most cases, it’s simply not worth it to continue reporting. Document all communications with the creditor on the claim, respond to the eOscar, and then remove the tradeline.
THE COMPLIANCE DIGEST IS SPONSORED BY:
Judge: Furnishers Not Liable for CRA Reporting Differences Without Specific Errors
A District Court judge in Wisconsin has granted a motion to dismiss filed by three furnishers in a Fair Credit Reporting Act case involving claims they failed to investigate and correct disputed information. More details here.
WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: A judge in the Eastern District of Wisconsin recently dismissed FCRA claims against 3 furnishers. The plaintiff, proceeding pro se, sued furnishers under three separate sections of the statute, each relying on the core allegation that the furnishers had provided incomplete or inaccurate information to credit reporting agencies. The plaintiff alleged that the inaccurate, incomplete, or outdated data included but was not limited to “‘Date Opened, ‘Balance,’ ‘Number of Months (Terms),’ ‘Last Reported Date,’ ‘Date Last Active,’ and ‘Date of Last Payment.'” However, there were no supporting factual allegations providing details of any alleged inaccuracies. The Court noted, “There is no allegation, for example, stating what the difference was in the actual loan balance and what [the furnisher] had reported to the CRAs” and “[t]he same is true of the other alleged inaccuracies.” Thus, the Court found the allegations identifying data categories in general to be merely conclusory and, therefore, insufficient to state a claim under the FCRA.
While the plaintiff in this action was granted leave to amend, the ruling is a good reminder to conduct an initial examination of the sufficiency of a pleading. In an industry where we frequently see nearly identical template complaints with generalized allegations being recycled by plaintiffs’ firms, it is important to assess the sufficiency of the supporting facts pled particular to each case. A motion to dismiss on fact pleading grounds likely will lead to an amended pleading and continued litigation, but it forces the plaintiff to take a firm position on the alleged wrongdoing, thus narrowing the issues for discovery (and potentially summary judgment).
Court Cautions Pro Se Plaintiff Over Fictional Cases and AI Reliance in FCRA Ruling
A District Court judge in Idaho has denied a plaintiff’s motion to dismiss counterclaims and affirmative defenses filed by a defendant in a Fair Credit Reporting Act case while also cautioning the plaintiff for citing fictional cases and relying on artificial intelligence when making his arguments. More details here.
WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: This decision serves as a cautionary note for anyone using AI. While automation can improve efficiency, unverified AI output can create significant legal and compliance risks, and courts have made clear that reliance on artificial intelligence is not a defense to submitting false authority. For lawyers, creditors, and agencies in the accounts receivable industry, the takeaway is simple: automation is a powerful tool, but only when it is audited, monitored, and independently verified for accuracy.
Washington Lawmakers Target Medical Debt Interest in New Consumer Protection Push
A medical debt collection bill has been introduced in the Washington legislature that aims to enhance consumer protections and eliminate interest charges on new and unpaid medical debt incurred in the state, a move that could significantly alter how medical balances are serviced, collected, and enforced. More details here.
Washington Bill Would Void Medical Debt That Is Credit Reported
A medical debt collection bill has been introduced in the Washington legislature that aims to enhance consumer protections and significantly reshape how medical debt can be collected, reported, and enforced across the state. House Bill 1632 would amend multiple sections of Washington law to restrict credit reporting of medical debt and impose new compliance obligations on healthcare providers, collection agencies, and debt buyers. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: People who predicted that medical debt issues would be a focus for the states in 2026 certainly hit the nail on the head. With these two recently-introduced bills, it appears that Washington is trying to catch up with other states in its attempts to limit the impact of medical debt on Washington consumers. If the state legislature passes the bills as written, Washington will join more than 10 other states that either outright prohibit or severely limit the reporting of medical debt information to consumer reporting agencies, and would have joined two other states that prohibit the imposition of interest on medical debt but the state Senate recently amended the bill to allow interest at 1%. Washington has protections in place today, including a 9% limit on the interest that can accrue on medical debt. Legislators in Washington appear to be buying into the idea that there is no value in reporting medical debts on consumer report (regardless of the amount of the debt), to the point where under H.B. 1632 if a provider or collection agency does furnish medical debt information to a consumer reporting agency, the bill imposes the severe consequence of voiding the debt. Both bills have a ways to go to become law, but companies tracking medical debt issues would do well to mark both of these for monitoring (in fact, the state Senate bill has advanced out of committee to the floor calendar).
Judge Dismisses FDCPA Claim Over Failure to Remove Dispute Notation
A District Court judge in Texas has granted a motion to dismiss filed by one of the defendants in a Fair Debt Collection Practices Act case after the defendant was accused of violating the statute by not removing a dispute flag when furnishing information to the credit reporting agencies. More details here.
WHAT THIS MEANS, FROM JASON TOMPKINS OF BALCH & BINGHAM: Consumer attorneys and courts often say that the FDCPA is a “strict liability” statute. This decision is a good reminder that there are still guardrails in place. There was a technical inaccuracy here—the debt collector reported the debt as disputed when the consumer had withdrawn his dispute. But that does not mean there was automatically a violation of the FDCPA. Many sections of the FDCPA require that the debt collector’s conduct be “in connection with collection of a debt.” Because a dispute notation is more likely to positively reflect on creditworthiness rather than induce a payment, the court held it did not fall within the prohibition. Other courts have reached similar conclusions with respect to informational letters in response to consumer disputes or communication preferences. It is always a best practice in litigation to look at the purpose of the communication in evaluating your defenses.
CFPB Complaint Does Not Equal Cease-and-Desist Under FDCPA, Court Says
A Magistrate Court judge in California has recommended granting a defendant’s motion to dismiss claims it violated the Fair Debt Collection Practices Act by continuing to attempt to collect on a debt after the plaintiff had requested that the defendant stop its collection attempts on the grounds that the request was filed in the form of a complaint with the Consumer Financial Protection Bureau and not directly with the defendant. More details here.
WHAT THIS MEANS, FROM NABIL FOSTER OF BARRON & NEWBURGER: Don’t get too excited by the attention-grabbing headline, it isn’t a completely refreshing scent from the Pacific coast. The pro-se plaintiff in this case simply didn’t state enough facts to state a claim under FDCPA. However, the court made it clear that alleging a letter of complaint was sent to the CFPB, rather than the debt collector, is insufficient to state a cause of action under § 1692c(c). Reading is fundamental and this ruling reflects the plain meaning of the statutory text “If a consumer notifies a debt collector in writing… .” The court granted the pro-se plaintiff leave to file an amended complaint, so who knows what version 2.0 will allege.
What is notable is that the history of this case (Lisa S. Bell v PRA, no. 1:25-cv-01129-JLT-EPG (E.D.CA. Jan. 15, 2026) is representative of the current type of pro-se consumer litigation, e.g., briefing battles in state court and federal court about the effect of a timely notice of removal from state court to federal court, what constitutes acceptable “verification of a debt” according to the FDCPA, and the unreasonable stretching of the concept of “notice.” If the recent economic reports about very high levels of consumer debt are accurate, you probably can guess what will follow.
Judge Rejects TCPA Claims Based on Call Volume Alone
A District Court judge in California has granted a defendant’s motion for summary judgment in a Telephone Consumer Protection Act case after the plaintiff received “hundreds” of calls from a debt collector, ruling there was not enough evidence to prove the defendant’s calls used artificial or prerecorded voices. More details here.
WHAT THIS MEANS, FROM MONICA LITTMAN OF KAUFMAN DOLOWICH: This is a positive decision for the industry where the court dismissed a pro se plaintiff’s TCPA claims that the agency used an automatic telephone dialing system or an artificial or prerecorded voice. The court recognized that the plaintiff’s evidence of her own memory was unsupported and merely self-serving. The court also rejected the plaintiff’s attempt to support her claims with information found on LiveVox’s website. However, to ultimately defeat these claims, the agency had to engage in discovery and provide a declaration from LiveVox so that the court had the necessary evidence to issue a favorable decision on summary judgment. If you have a TCPA case like this, be prepared to invest the time in discovery and work with your vendor who can provide testimony or a declaration to explain how the system works to defend against the claims.
Why Chatbots Can Be a Compliance and Fraud Risk
AI chatbots are quickly becoming a frontline channel for consumer-facing financial services, but new research suggests the technology may be far riskier than many institutions realize. An applied AI researcher who tested 24 leading AI models configured as banking customer-service chatbots found that every single one was exploitable, sometimes with alarming success rates. The findings raise serious implications for banks, fintechs, healthcare providers, and collection operations that rely on chatbots to handle disputes, eligibility questions, and account-related conversations — areas where a single incorrect or misleading response can trigger regulatory exposure or enable fraud. More details here.
WHAT THIS MEANS, FROM ROSHNI PATEL OF TROUTMAN PEPPER LOCKE: A recent study examining enterprise-grade Generative AI (“GenAI”) chatbots used in customer service found that all tested systems demonstrated exploitable security vulnerabilities, with risk levels varying widely and often appearing only after repeated conversations. For financial institutions, this is especially concerning as these chatbots are increasingly being relied upon to provide customer service and support servicing flows, and errors or misuse can directly impact customer trust and regulatory compliance and create financial risk to both consumers and institutions. The findings show that traditional one-time testing is not sufficient for probabilistic AI systems that evolve across interactions. To deploy GenAI systems safely at scale, financial institutions need continuous, automated red-teaming and layered safeguards beyond prompts and basic filters. The study also highlights that model selection is a security decision: smaller, less expensive models are meaningfully less safe, increasing the likelihood of compliance failures and reputational damage.
FCRA Claims Over Post CARES Act Credit Reporting Allowed to Proceed
A District Court judge in Delaware has denied a plaintiff’s motion for summary judgment and partially granted a defendant’s motion in a Fair Credit Reporting Act case involving how information should have been furnished to the credit reporting agencies related to payments during the COVID-19 pandemic. The case centers on whether a mortgage servicer properly investigated and corrected credit reporting after receiving consumer disputes tied to a trial payment plan and a permanent loan modification that occurred during the CARES Act accommodation period. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: I thought Covid would have generated more litigation but that did not seem to be the case. This lawsuit, however, has its roots in Covid and the 2020 FCRA amendment in the CARES Act. Plaintiff disputed to Transunion how defendant reported her mortgage loan during and after a trial payment plan and subsequent permanent loan modification. The court denied defendant’s summary judgment on whether it accurately reported that plaintiff had become current on her payments. Thus, per § 1681s-2(b) of the FCRA, it found a question of fact on whether defendant acted negligently or willfully in not investigating and modifying the improper information in response to TransUnion’s notice of dispute.
As I was reading the opinion, I thought that damages are probably weak. Sure enough, the last argument the court addressed was defendant’s summary judgment on damages. The court found the evidence submitted was not sufficient to prove the lack of damages. So, after almost five years of litigation, It looks like this one may be going to trial.
Frost Echols reputation has been built on aggressively protecting the rights of businesses throughout our local jurisdictions. Founding partners, Mike Frost and Chad Echols, developed a deep understanding of regulatory compliance, commercial litigation and business operations through years of advising executives in the collection industry. We are committed to a strategic, economic, and aggressive approach to your legal representation.
