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.
California Appeals Court Says Consumers Can Sue Debt Buyers Without Showing Harm
A California Appeals Court has overturned a lower court’s ruling in favor of a debt buyer, ruling that any individual who pleads that a company violates the state’s Fair Debt Buying Practices Act has standing regardless of whether the individual suffered any harm. In the decision, the Sixth District Court of Appeal concluded that the statute itself grants consumers the right to sue for violations of its requirements, even when the violation results in no concrete injury. More details here.
WHAT THIS MEANS, FROM JOHN CULHANE OF BALLARD SPAHR: A California state appellate court has warned debt buyers to break out their gauges and digital rulers to check the type sizes in their demand letters, lest they face class actions for statutory damages for violating the California Fair Debt Buying Practices Act (the FDBPA). The FDBPA requires a debt buyer to include in its first written communication with the debtor a separate, prominent notice of the debtor’s right to request certain records about the debt. That notice must be in 12-point type. Ignoring traditional notions of standing, in Niemann v. LVNV Funding, LLC, the court ruled that under the plain language of the FDBPA, which authorizes the recovery of statutory damages for any violation, a debtor who admittedly received the notice, albeit in a smaller type size, could bring a class action for an FDBPA violation, even though the debtor failed to allege any concrete injury or actual harm.
THE COMPLIANCE DIGEST IS SPONSORED BY:
Judge Dismisses FCRA Case and Orders Show Cause Over Questionable Legal Citations
Some student loans may be discharged during bankruptcy, but not all, and one plaintiff’s attempt at asserting that a lender and credit reporting agency violated the Fair Credit Reporting Act because of how they handled his dispute was dismissed by a District Court judge in Illinois, who also ordered the plaintiff’s attorney to show cause why she should not be sanctioned for citing potentially non-existent cases in her filings. More details here.
WHAT THIS MEANS, FROM LORI QUINN OF MESSER STRICKLER BURNETTE: Plaintiff filed an FCRA claim against a CRA after asserting his student loan – believed to be discharged in his Chapter 7 bankruptcy – was inaccurately reported as open and delinquent. The CRA moved to dismiss, the Court granted the motion and emphasized the difference between legal and factual questions under the FCRA. The Court clarified that CRAs are not responsible for resolving legal issues such as whether a student loan was discharged in bankruptcy. Since Plaintiff failed to show factual inaccuracy or that his loan was discharged through an undue hardship determination, he failed to state an FCRA claim
The Court also highlighted an ongoing and prominent issue: the use of AI-generated or nonexistent case cites. Here, the Court issued an Order to Show Cause to Plaintiff’s counsel regarding potential reliance on such citations cautioning the attorney that a failure to exercise due diligence and independent verification of citations would result in a risk of sanctions.
Receiving Unsolicited Texts Still Enough for Standing, California Judge Says
When it comes to the Telephone Consumer Protection Act and text messages, the bar for standing is very low, one pro se plaintiff is learning, after a Magistrate Court judge in California recommended denying a motion to remand a TCPA and Fair Debt Collection Practices Act case back to state court. More details here.
WHAT THIS MEANS, FROM COOPER WALKER OF FROST ECHOLS: This pro se likely got quite the wake up call after filing a suit in small claims court and ending up in federal court. Attorneys cannot generally appear in small claims courts in California, so removing this case was a wise move on the agency’s part. Even wiser given this pro se clearly does not want to be in federal court. This case is a great reminder of using a change in jurisdiction to your advantage. While removing an FDCPA case is not as clear cut, the general consensus among the federal circuits is that a TCPA case gives rise to Article III standing. After reviewing the docket, this pro se has failed to object to the magistrate judge’s report and recommendation and the case will likely stay in federal court.
Expunged Does Not Mean Inaccurate, Court Says in Background Check FCRA Case
A District Court judge in Virginia has dismissed a Fair Credit Reporting Act case against a background screening company that was accused of including criminal records in a background check that had been expunged five years ago. More details here.
WHAT THIS MEANS, FROM TOMIO NARITA OF WOMBLE BOND & DICKINSON: The Smith court relied on the Fourth Circuit’s recent opinion in Roberts v. Carter-Young, Inc., 131 F.4th 241 (4th Cir. 2025), which recognized that information furnishers are not “tribunals” and are not required to “make the kind of determinations about disputes that courts make.” 131 F.4th at 251 & n.6. The continued rise of the “objectively and readily verifiable” standard in the circuit courts makes sense and has been a great vehicle for defendants to get cases dismissed either on a Rule 12(b)(6) motion or a summary judgment motion.
There is some irony in the ruling because the defendant’s primary argument was that the matter should have been compelled to arbitration, and thus the district court would not have the chance to make the ruling. Although the defendant lost that battle, it won the war when the district court granted the motion to dismiss with prejudice and entered judgment.
Judge Rejects Trump Administration’s Theory Blocking CFPB Funding
A federal judge on Friday ruled that the Trump administration unlawfully refused to request funding for the Consumer Financial Protection Bureau, ordering Acting Director Russ Vought to continue seeking money from the Federal Reserve to keep the agency operating. More details here.
WHAT THIS MEANS, FROM JOANN NEEDLEMAN OF CLARK HILL: It seems that a week doesn’t go by where there isn’t yet another opinion by yet another court attempting to chart the course of the CFPB. If you are exhausted by all of it, you are not alone.
Both sides, consumer advocates and the Trump administration, are wrestling with a statute, the Dodd-Frank Act, that was poorly written and failed to account for longevity or sustainability. The only constant in this political mess is that the CFPB is statutorily mandated, yet both sides are equally guilty of disingenuity. The CFPB’s reliance on the Office of the Legal Counsel’s opinion redefining the definition of “combined earnings” of the Federal Reserve to solely that of profits, is as ridiculous as the Plaintiffs argument that the CFPB must remain open because they rely on the CFPB to support their work. A plain reading of Dodd-Frank says no such thing in either case.
Nonetheless, the ruling here changes nothing until the D. C. Circuit rules on the employees’ union case; oral argument before the en banc panel was heard on March 2, 2026. Even if a decision is rendered, it is likely that the unsuccessful party will appeal to the Supreme Court and it is likely they will agree to hear the case.
For the time being, there are rumblings that the CFPB has started to engage in some investigations and proceed with some existing enforcement actions. Given the limited staff and lack of resources it is unclear how robust this activity will be. However, what is clear is that with every ruling that involves the future of the CFPB, the states go into overdrive. No one knows what will be of the CFPB, but for now state oversight and enforcement is at a level the likes many in the industry have never seen. For the ARM Industry, complacency is not an option during this time of federal regulatory uncertainty.
Wisc. Supreme Court Reverses Class Certification in FDCPA Suit
The Wisconsin Supreme Court has reversed a state appeals court certification of a class in a Fair Debt Collection Practices Act suit, ruling that a defendant may prevent a damages class action under the Wisconsin Consumer Act by offering an appropriate remedy to the individual plaintiff who brought the case, rather than to the entire proposed class. The court concluded that the lower courts relied on an incorrect interpretation of the statute governing consumer class actions. More details here.
WHAT THIS MEANS, FROM DALE GOLDEN OF MARTIN GOLDEN LYONS WATTS MORGAN: At first blush, this appears to be ruling that could be utilized outside of Wisconsin. But a closer examination reveals that’s probably not correct. While the Wisconsin Supreme Court recognized the ability of a defendant to pick off the plaintiff in a putative class action, the ruling was based strictly on the language in the statute. The Wisconsin Consumer Act permits consumers to file class action lawsuits for damages against alleged violators. But before doing so, the consumer must give the putative defendant an opportunity to remedy the alleged violation. And according to the court, a consumer “cannot maintain [a] class action for damages …
if the ‘appropriate remedy’ is ‘given, or agreed to be given within a reasonable time.’” The statute therefore provides “a mandatory process that allows a prospective defendant to a class action for damages under this section to make a prospective party plaintiff whole and avoid the class action altogether.” The court relied on the “party” language to confirm that an individual remedy to the putative class plaintiff was all the statute required. No class remedy needed to be offered. There was one caveat noted by the court i.e., the statute applies only to class actions for damages. A similar claim seeking only injunctive relief would not be subject to the pre-suit demand requirement. To the extent there are similar statutes in other states, the ruling may have some value. But it provides no help to defendants in FDCPA litigation since the federal statute contains no similar presuit requirement.
New York Gov. Signs Coerced Debt Bill Into Law
A coerced debt collection bill has been signed into law by the New York governor, finalizing a framework that will significantly impact how creditors, debt buyers, and collection agencies handle claims that a debt was incurred under coercion. The law builds on prior legislation and introduces detailed procedures, timelines, and liability standards that industry participants will need to operationalize in the coming months . More details here.
WHAT THIS MEANS, FROM NABIL FOSTER OF BARRON & NEWBURGER: Compliance Kaleidoscope. Full Stop.
When you first look through a kaleidoscope, one’s field of view is filled with a chaotic chromatic compilation of contours. If you look long enough, your brain will process all the visual information, and you will start to recognize patterns and parts of shapes. The colors and patterns viewed inside a kaleidoscope tube are made by the reflection and/or refraction of light using mirrors and a combination of colored beads or small pieces of colored glass. Add a new piece of glass or a new colored bead to the mix, and the resulting patterns inside the kaleidoscope become more complex. Some may find it interesting others may find it induces a headache. You should all see where I am going with this…
The new NY coerced debt law, standing alone, is a complicated piece of legislation. As it is a new law, there are ambiguities and areas that need clarification. The good news is that the statute provides some guidelines where other consumer statutes are silent and it includes a 15-day cure period for alleged violations of the statute AFTER receiving notice from a “debtor injured by a violation” of the statute. See § 604-bb, § 7a. There is a large swath of current consumer litigation that could have been avoided if other statutes provided creditors and collectors with a reasonable period to cure any alleged statutory violations. While the cure period and a few other parts of this new statute constitute a proverbial spoonful of sugar to help make the medicine go down (see Julie Andrews in Mary Poppins, 1964), there is such a thing as being overly medicated and having ocular migraines (aka “kaleidoscope vision”). Either one is bad for you, and recognizing the onset of symptoms is a very important part of reducing any discomfort or pain.
If you work in the Empire State, pursuant to § 604-gg, § 2, the statute currently becomes effective 180 days after March 18, 2026 (when the NY Governor signed the bill into law – for a quick refresher on civics, see the 1976 Schoolhouse Rock! animation “I’m Just a Bill”). So, you have until that effective date to integrate new procedures, new required written notices and training for your people to recognize how they must navigate through your growing compliance kaleidoscope. Oh, and by the way, this new statue applies only to “coerced debts” (a defined statutory term) incurred on or after the date when this statute becomes effective. (…where is my ibuprofen or acetaminophen?)
Judge Tosses FCRA and FDCPA Claims Over Credit Reporting Dispute
A District Court judge in Oklahoma has granted a defendant’s motion to dismiss clams it violated the Fair Credit Reporting Act and the Fair Debt Collection Practices Act as well as Oklahoma state law over how a creditor handled his dispute. More details here.
WHAT THIS MEANS, FROM PREANDRA LANDRUM OF BASSFORD REMELE: This decision is a straightforward application of threshold defenses in consumer credit litigation, particularly the distinction between a creditor and a “debt collector” under the FDCPA. The Court emphasized that Capital One, as a creditor collecting its own debt, does not fall within the statutory definition of a debt collector, foreclosing plaintiff’s FDCPA claim as a matter of law. On the FCRA side, the court made clear that simply alleging inaccurate reporting is not enough – plaintiffs must plead specific facts, including what information was inaccurate and facts supporting a failure to conduct a reasonable investigation after CRA notice. The opinion also reinforces the breadth of FCRA preemption over related state-law claims. Overall, this is a strong defense decision in both FDCPA matters involving misidentified creditors and FCRA cases where the allegations are conclusory. In my view, the opinion reflects a continued willingness by courts to enforce statutory boundaries and pleading standards at the outset, rather than allowing these cases to proceed on generalized allegations.
Good-Faith Reliance Wins the Day: Indiana Court Backs Law Firm in FDCPA Dispute
An Indiana Appeals Court has affirmed a summary judgment ruling in favor of a law firm that was sued for allegedly violating the Fair Debt Collection Practices Act because it believed what a landlord/client told it about his interactions with the plaintiff. More details here.
WHAT THIS MEANS, FROM JAMES K. SCHULTZ OF SESSIONS, ISRAEL & SHARTLE: Oshinubi is a refreshing case that resurrects what was once a well-accepted concept under the FDCPA – debt collectors should be able to rely on the accuracy of information provided by creditor clients. Here, the debt collector was given specific information that a state required notice was sent to the debtors, but the client later reversed that claim when under oath in a deposition and said, whoops, our bad, we did not actually send it. But the court fairly found that a debt collector does not violate the FDCPA when there is a good faith basis that the debt was due and owing. In an era where many cases are brought alleging nothing more that the debt collector violates the FDCPA by attempting to collect a debt not owed, this case gives refuge to the debt collector that reasonably relies on its clients that a debt is valid.
FCRA Suit Over Fraud Alert Ends in Dismissal After Plaintiff Floods Court With Filings
What started as a Fair Credit Reporting Act case against a bank for allegedly placing an erroneous fraud-alert restriction on the plaintiff’s account turned into a lot more, leading a District Court judge in Missouri to dismiss the suit. The court ultimately ruled that the plaintiff repeatedly violated court orders throughout the litigation, filing dozens of motions and communicating with court staff in ways that directly violated restrictions imposed by the judge. More details here.
WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: A Missouri federal court dismissed an FCRA lawsuit after the plaintiff repeatedly violated court orders, including filing excessive unauthorized motions and improperly contacting court staff despite clear restrictions. The court emphasized that dismissal was warranted as a sanction for noncompliance and abusive litigation conduct, rather than based on the underlying merits of the fraud-alert dispute.
The decision is a useful reminder for financial institutions and furnishers that procedural defenses and litigation conduct can be as critical as substantive FCRA compliance. It also highlights courts’ growing willingness to curb vexatious litigants and protect judicial resources, particularly when a party disregards explicit limitations on filings or communications.(See Fed. R. Civ. P. 41(b) (authorizing dismissal for failure to comply with court orders); see also Chambers v. NASCO, Inc., 501 U.S. 32 (1991) (recognizing courts’ inherent authority to impose sanctions for abusive litigation conduct).)
Virginia Advances New Pleading Requirements for Consumer Debt Lawsuits
Virginia lawmakers have advanced legislation that could change how collection lawsuits are filed in the state, sending a bill to the governor that would require additional attorney information to be included in consumer debt collection pleadings. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: The Virginia legislature struck a balance with this bill that seemed to work for most legislators, passing almost unanimously. The Bill is still waiting for signature as of this writing, but it is hard to imagine the Governor not signing it. The biggest change in procedure from today’s requirements to the requirements that will be in place when 2027 begins is that attorneys will have to sign and provide contact information on all pleadings in a consumer debt collection or enforcement action, not just the initial pleading. The bill addresses a concern that some consumer defendants in collection lawsuits cannot discern from pleadings (after the Complaint) who is suing them. With this amendment to the procedure statute, consumers will have collection attorneys’ contact information on virtually all lawsuit documentation. It is not a big change, but an important one – because, as is the case in general for deficient signatures on initial pleadings in Virginia, consumer debt collection lawsuits are voidable if collection attorneys do not comply with the signature and contact information requirements. They can cure the deficiency and are entitled to notice, but attorneys are very likely to address this procedurally on the front end. There is plenty of time to prepare, if the Governor signs the bill, given the Jan. 1, 2027 effective date.
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.
