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.
Fifth Circuit Sanctions Attorney Over AI Generated Errors in FCRA Appeal
A plaintiff’s attorney has been ordered to pay $2,500 in sanctions to the Court of Appeals for the Fifth Circuit for her use of artificial intelligence in drafting documents that were submitted to the court, which came after a District Court judge, since overturned, ordered another attorney from the firm representing the plaintiff to pay $33,000 in attorney’s fees to the defendants for not doing enough of an investigation into the plaintiff’s claims before filing a lawsuit alleging the defendants violated the Fair Credit Reporting Act. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER LOCKE: While AI can be a powerful tool, it’s unchecked use when practicing law poses many risks. In addition to potential hallucinations and outright invention of cases and law, even the most advanced AI systems are not capable of interpreting law in the same manner as a human can. AI is built to recognize patterns in data – that means it does not understand legal nuance, how precedent works, and the interplay of jurisdictional rules in the litigation process. When lawyers rely in AI and treat it as fact without review, time and time again, that has resulted in those lawyers introducing false and inaccurate information into legal proceedings.
Nor are these risks limited to legal research. Using AI to draft contracts, prepare deposition summaries, or generate marketing content can lead to subtle errors that, left unchecked, can misinformed clients, weaken positions, and trigger compliance violations.
In addition, AI tools generally are cloud-based or process data on external servers that may be accessible to the public. If a lawyer enters confidential client information into such platforms, there is a risk that information may be used or accessed in ways that violate ethical rules. Lawyers also have an ethical duty of competence that requires them to understand the technology being used.
In short, AI is not yet ready to be used to replace actual legal work and thought.
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N.J. Appeals Court Revives Hunstein Case Over Due Process Concerns
While this looks like a Hunstein case where a ruling in favor of the defendant was overturned, a New Jersey Appeals Court had issue with the plaintiff’s right to due process and not the merits of her argument. The ruling does not decide whether using a letter vendor violates the FDCPA. Instead, it focuses squarely on how the case was dismissed and whether the plaintiff was given a fair chance to respond before her claims were thrown out. More details here.
WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH: In the “Move along, nothing to see here” Department, this ruling by New Jersey’s Appellate Division solely pertains to the trial court’s decision to entertain the legality of the Hunstein claim immediately before trial was to begin instead of through New Jersey’s traditional summary judgment process. The Appellate Division concluded that consideration of this issue in this way was improper and the trial court had to allow the plaintiff the benefit of motion practice rules. The appellate court did not weigh in on the merits of the Hunstein claim.
If there is any takeaway from this ruling, it is that imperfect rulings (abbreviated motion process), even if in your favor, are undesirable and may lead to additional costs if an appellate court makes the trial court re-do or re-analyze an opinion.
Judge Rejects ‘Futility’ Theory in Credit Reporting Lawsuit
To have standing means to have suffered a concrete injury. But what about if you knew that any attempt at obtaining credit would be futile. Isn’t that enough? A District Court judge in New York said it isn’t enough, granting a motion to dismiss filed by two defendants in a Fair Credit Reporting Act lawsuit. More details here.
WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: This ruling gets it right and sticks closely to TransUnion LLC v. Ramirez: no concrete harm means no standing. An inaccurate credit entry that was never shared with a lender and never led to a denial just isn’t enough — and calling it “futile” to apply for credit doesn’t magically create an injury. The plaintiff made a choice not to apply, and courts shouldn’t treat speculation about what might have happened as the same thing as an actual rejection. This decision sends a clear message that FCRA claims require real-world consequences, not hypothetical what-ifs.
Judge Finds No Actionable Injury in Unlicensed Rent Collection Case
A District Court judge in Maryland has granted a motion for summary judgments filed by a pair of landlords who were sued for violating state collection laws in the state, ruling the plaintiffs lacked standing to pursue the lawsuit that accused the defendants of attempting to collect rent without having the proper license to do so. More details here.
WHAT THIS MEANS, FROM NABIL FOSTER OF BARRON & NEWBURGER: From a legal perspective, this case (Blizzard v Hunter Warfiled, Inc., no. 1:23-cv-03374-ABA, D.MD. Feb. 3, 2026) isn’t a landmark legal decision, but it is a reminder of a fundamental truth that is often overlooked in the ever-expanding horizon of consumer litigation: “No se puede tapar elsol con un dedo!” (English translation: “You cannot cover the sun with a finger.” But, what does this metaphor mean and why does it fit here?
Although much is lost in translation without context, I will attempt to do so as this Spanish idiom expresses an observation about life found in many other cultures: You can’t completely hide or obscure obvious things, you can only fool yourself that you can. Have you ever seen a small child cover his eyes with his hands in an attempt to “hide” from being seen during a game of hide-n-seek? Same basic idea.
The easily ascertainable fact of reality in this case, as aptly stated by the Court, is “the long-standing requirement under Maryland law that tenants must pay rent when they receive what they bargained for.” The Court further wrote “[t]he now-Maryland Supreme Court did not hold that tenants are entitled to live rent free when a rental property’s license expires. Put another way, denying unlicensed landlords access to the courts to collect unpaid rent does not eliminate a tenant’s rental obligations.”
This Spanish idiom is good poetry, as the meaning is so much deeper than the words on the page. Trying to express the same idea in the context of this case would create something far less elegant: You cannot escape your obligation to pay rent with a claim of regulatory wrongdoing.(…Ya extraño las palabras en español!)
There are many other idioms that come to mind after reading sections of this opinion, e.g., “How do you like them apples?”; however, this case isn’t really a “smackdown” but rather a prosaic reprieve from a rising tide of claims from individuals who want to have a better part of their bargain after their deal is done.
Appeals Court Backs Creditor in Prescreened Offer FCRA Dispute
The Court of Appeals for the Tenth Circuit has affirmed a ruling in favor of a creditor that was sued for violating the Fair Credit Reporting Act after it denied the plaintiff an application for credit it had previously prescreened him for. What makes the case extra interesting is that the plaintiff apparently cited fictional cases in his arguments, perhaps relying on artificial intelligence tools that led him astray. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: We all know about the proliferation of pro se litigation and their regular use of AI. This is the second case in a month where a Circuit Court of Appeals took no action against a pro se who used AI and false case citations. The 10th Circuit commented: “[n]either status as a pro se litigant nor the use of generative artificial intelligence excuses violations of [28(a)(8)(A)].” In January, the 7th Circuit faced the same situation and the pro se denied the claims. Jones v Kankakee County Sheriff’s Dept. (No. 25-1251). However, the Court took no further action than affirming dismissal, even noting that plaintiff made false statements to it: “we doubt Jones’s representation and continue to believe he used a generative AI application to prepare his brief.”
In contrast, a couple weeks ago a Magistrate Judge in Indiana sanctioned plaintiff’s counsel $10,000 for similar conduct. Virgil v Experian (S.D. IN 25-cv-1641). These cases highlight the misuse of AI, and the different standards for lawyers and pro se parties. It would be helpful if the courts took a stronger stance with the pro se in this situation.
Post-Judgment Collections Can Still Trigger FDCPA Liability, Appeals Court Rules
The Court of Appeals for the Seventh Circuit has vacated a lower court’s dismissal of a Fair Debt Collection Practices Act case, ruling the lower court judge misapplied the Rooker-Feldman doctrine related to the defendant’s conduct in attempting to collect on a garnishment order. More details here.
WHAT THIS MEANS, FROM XERXES MARTIN OF MARTIN GOLDEN LYONS WATTS MORGAN: This is an interesting opinion. The plaintiff filed his suit in federal court making FDCPA allegations based on post-judgment collection activity. The defendants moved to dismiss based on the Rooker-Feldman doctrine, which argues the federal court lacks jurisdiction over the matter because the claims challenge the validity of the state court judgment, which only the state court has jurisdiction. While the district court granted the motion, the United States Court of Appeals for the Seventh Circuit reversed the decision finding Rooker-Feldman does not bar jurisdiction unless the plaintiff is effectively asking the federal court to overturn the state-court judgment itself. Here, he was not asking the court to overturn the judgment, but find violations from the post-judgment collection activity. Keep in mind this reversal does not give validity to the claims, but merely says the federal court does have jurisdiction over the matter. We will need to stay tuned to see how this plays out further when evidence is presented.
Maryland Lawmakers Introduce ID Theft/Coerced Debt Bill
A coerced debt collection bill has been introduced in the Maryland legislature that would create a new legal framework for how creditors and collectors must respond when a consumer claims a debt was incurred through identity theft or coercion. The proposal would give consumers a formal process to dispute alleged identity theft debt, require creditors to pause collection activity while an investigation is conducted, and expose creditors to damages and attorney’s fees if they fail to follow the required procedures. More details here.
WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS SUTHERLAND: Maryland lawmakers have introduced House Bill 1471, a proposed consumer protection measure that would establish a new statutory framework governing “identity theft debt.” Introduced on February 13, 2026, by well-respected Baltimore City politician Elizabeth Embry, and referred to the House Judiciary Committee, the bill would authorize consumers to submit formal written notice to creditors asserting that a debt was incurred through identity theft. Upon receipt, creditors would be required to conduct an investigation and take specified actions, including providing written notice of the investigation’s outcome. The proposal would also restrict collection activity on the disputed debt while the investigation is pending.
If enacted, HB 1471 would significantly expand consumer remedies and litigation risk. The bill would permit consumers to bring civil actions under certain circumstances, expressly allow jury trials, create a rebuttable presumption in favor of the consumer when specified evidence is provided (such as police reports or FTC identity theft reports), and establish an affirmative defense related to identity theft debt. The proposal would also prohibit the collection of identity theft debt in defined circumstances, increasing exposure for creditors and collectors that fail to follow the bill’s procedural requirements.
HB 1471 reflects a broader state-level trend toward heightened scrutiny of coerced or fraudulent debt, particularly in contexts involving identity theft, domestic abuse, or financial exploitation. If adopted, the bill would require creditors, debt buyers, and collection agencies operating in Maryland to reassess intake procedures, investigation protocols, documentation standards, and litigation strategies for disputed accounts. The bill remains in the early stages of the legislative process, but it signals Maryland’s continued willingness to use consumer protection law to reshape debt collection and servicing practices.
Other states with proposed coerced debt legislation thus far in 2026 include Kansas (HB 2754), Vermont (H.385), New York (S.8830), Illinois (HB 3352).
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.
