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 Denies Motion to Dismiss, Says Creditor ‘Simply Hoped’ Court Would ‘Rubber Stamp’ Its Arguments
A consumer’s Fair Credit Reporting Act lawsuit has survived a motion to dismiss sought by one of eight named defendants after a District Court judge in Georgia concluded that the defendant’s own unwillingness to carefully read the complaint did not make the complaint deficient. More details here.
WHAT THIS MEANS, FROM CRYSTAL DUPLAY OF FROST ECHOLS: World Omni filed a Motion to Dismiss asserting that the complaint was so incomprehensible that the Plaintiff’s counsel should be sanctioned. Interestingly, it was the only one of the eight defendants that took such an approach. The judge in the U.S. District Court for the Middle District of Georgia found that the plaintiff’s amended complaint provided sufficient notice of the claims asserted against the company.
World Omni argued that the complaint improperly grouped multiple defendants together and failed to clearly identify the conduct attributable to each party, rendering it an impermissible “shotgun pleading.” The court disagreed, noting that the complaint organized defendants into distinct categories. The categories included credit reporting agencies, furnishers, and debt collectors, and specified which claims applied to each group.
The court also denied World Omni’s request for sanctions.
THE COMPLIANCE DIGEST IS SPONSORED BY:
California Moves Toward Letting Trained Nonlawyers Help Consumers
The California Supreme Court has asked the State Bar to gather public comment on a proposed rule that would establish a Community Justice Worker Program. The rule would permit nonattorneys who complete specialized training to provide limited legal services while working under the supervision of approved legal aid organizations. The petition behind the proposal, submitted in December by California legal aid groups, framed the program as a response to what they called an access-to-justice crisis in the state. More details here.
WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: For the ARM industry, California’s proposed Community Justice Worker Program should be read as a warning that the consumer side of collection litigation may become more organized. The proposal is aimed directly at the gap between receiving a lawsuit and knowing how to respond. If Community Justice Workers are authorized to assist with debt validation, answers, exemption claims, and referrals, agencies, creditors, debt buyers, and collection law firms should expect more disputes to be raised earlier and more lawsuits to be answered. That does not mean collectors will lose valid cases. It means they may have to prove themselves more often.
In my opinion, this is where the industry should focus. The proposal does not authorize anyone to hang out a shingle as a consumer lawyer. The proposed rule would limit Community Justice Workers to approved legal services organizations, require training and attorney supervision, prohibit fees, require defined scopes of practice, and maintain oversight through the State Bar. That structure matters. If the Supreme Court approves a supervised exception, collectors should not dismiss it as a legal-aid experiment. They should treat it as a signal that default-based collection litigation is facing another access-to-justice pressure point.
Judge Sends FDCPA Dispute-Letter Fight to a Jury
A Magistrate Court judge in Pennsylvania has denied competing summary judgment motions in a consumer’s Fair Debt Collection Practices Act lawsuit, ruling that a jury must decide what the consumer’s dispute letter actually covered. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: This case concern’s a “gotcha” letter that is intentionally vague in an attempt to create a violation. Unfortunately, the Court took the position that the clarity or lack thereof, of the letter should be interpreted as a matter of fact (by the jury) rather than as a matter of law (by the Judge) There is circuit split on the question whether the interpretation of a letter should be a matter of law or fact.
Here, after McFarland received correspondence from LVNV Funding, LLC’s (“LVNV”) attorneys, Pressler, Felt & Warshaw (“PFW”) regarding a lawsuit filed against her, her attorneys wrote back to LVNV c/o of PFW referencing both the lawsuit and specific account advising that they represented McFarland.
The letter continued:
My representation of the above-mentioned client includes any related debt(s) and/or credit account(s) your company claims to have, sold, purchased and/orassigned from yourself, another creditor, debt buyer or other entity as of the dateof this letter (the “Debts”). Please cease and desist any further communications with my client as it relates to the collection of Debts.
According to my client, your company has been reporting the above-referenced accounts to collection and/or credit agencies.
The letter also asks for extensive information for each of those accounts. But it never identifies what are the “above referenced accounts.” The letter only identifies the one in suit.
Then on the back page:
Please be advised that at all times relative hereto, we are disputing this debt, any related debt(s) and/or credit account(s) your company claims to have sold, purchased and/or assigned from yourself, another creditor, debt buyer or otherentity as of the date of this letter (the “Debts”),
The language directly above was not an accident.
The Court now wants a jury to determine whether LVNV should have divined that this letter was a universal letter of dispute or was correct in limiting it’s dispute coding to the account actually identified.
A takeaway – as companies have focused more and more on compliance and eliminated most of the potential for the claims that used to be prevalent, there are attorneys out there who’s sole focus is how can we trick collectors into making mistakes. It’s of note, the attorney here, are the same ones sanctioned by the court for sending “made-up, handwritten dispute letters to manufacture violations of the Fair Debt Collection Practices Act by a debt collector, hoping to recover statutory attorney’s fees.” Sofaly v. Portfolio Recovery Assocs., 155 F.4th 289, 292 (3d Cir. 2025) So I’ll end with a plug for Web Recon – just as valuable as checking the “litigious debtor” database, checking letters for litigious lawyers may prove useful.
State Supreme Court Vacates Card Collection Win
The Supreme Court of Rhode Island has vacated a summary judgment win for a credit card issuer in a breach-of-contract collection suit, ruling that the trial court should not have relied on an affidavit the plaintiff emailed to the clerk on the morning of the hearing. More details here.
WHAT THIS MEANS, FROM XERXES MARTIN OF MARTIN GOLDEN LYONS WATTS MORGAN: The Rhode Island Supreme Court vacated a Superior Court summary judgment entered in favor of a creditor in a credit-card collection action against Ms. Perretta. The bank moved for summary judgment without filing any supporting affidavit or exhibits. On the morning of the hearing, however, the creditor emailed a 24-page affidavit to the hearing justice’s clerk, which was relied on in granting summary judgment.
The Supreme Court held that this was improper. Under Rhode Island Superior Court Rule of Civil Procedure 6(c), when a motion is supported by an affidavit, the affidavit must be served with the motion. The creditor’s same-day submission was neither properly nor timely filed, and it deprived the defendant of a meaningful opportunity to review and respond. The Court found that the hearing should, at minimum, have been postponed, and it remanded the case for further proceedings.
Here, the rules of procedure weren’t applied by either the creditor or the Court, leading to the judgment being vacated. Skipping the step of including the evidence with the motion at the time of filing was not a shortcut or timesaver here. The creditor may ultimately obtain the same judgment on remand, but only after the delay, expense, and uncertainty of an appeal. For creditors and litigants generally, the case is a reminder to ensure that all affidavits, records, and exhibits supporting a dispositive motion are properly filed and served with the motion papers.
State Appeals Court: Accepting Wrongfully Garnished Funds Is Not Illegal Collection
The Wisconsin Court of Appeals has affirmed the dismissal of a couple’s Wisconsin Consumer Act lawsuit that accused an auto finance company of illegally continuing to collect on a debt after a court order halted collection. More details here.
WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: Lacey reinforces an important limit on consumer protection claims: not every communication about a debt is debt collection. The court held that a letter explaining the status of automatic payments and describing how consumers could voluntarily restart them was informational—not an attempt to collect a debt. That’s a helpful reminder that courts should be looking at the substance of a communication, not just the fact that it relates to an account. This decision provides additional support for dismissal when the challenged communication isn’t an attempt to collect.
State Appeals Court Won’t Open Default Judgment for Consumer
A Pennsylvania state Appeals Court has affirmed the denial of a consumer’s petition to open a default judgment entered in a debt buyer’s collection lawsuit, ruling that the defenses he offered were too generic to justify reopening the case. More details here.
WHAT THIS MEANS, FROM JOHN CULHANE OF BALLARD SPAHR: While Pennsylvania courts are somewhat forgiving when a debtor seeks to reopen a default judgment, in that the debtor need not provide a “reasonable excuse” for the failure to file and need not even attach an answer when petitioning to reopen the proceeding, fortunately for debt buyers, under Pennsylvania law the debtor must still state a “meritorious defense” when seeking to do so. That requires some effort on the part of debtor’s counsel. In a recent non-precedential opinion in Crown Asset Management, LLC v. Derrick Smith, the Superior Court held that debtor’s counsel cannot satisfy that requirement with boilerplate allegations that ignore the assertions made in and the documents filed with the original complaint. The assertions that the debt buyer lacked standing, failed to state a claim for breach of contract, failed to detail the basis for the amount demanded, and lacked a binding legal agreement were refuted by the complaint, a signed verification from the debt buyer addressing chain of title, a copy of the original promissory note, an accounting of the amount claimed, and a bill of sale.
Appeals Court Upholds Stay of Duplicative Car-Fraud Lawsuit, Flags Hallucinated Case Law
The Court of Appeals for the Tenth Circuit has upheld an order pausing a consumer’s federal lawsuit over a used-car purchase while a parallel case proceeds in state court. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: Pro se plaintiffs take some risks when they represent themselves in court, especially if their cases make it past motions and trials to the appeals level. In this case the Tenth Circuit had a fairly straightforward task in affirming the decision of the court below to stay the plaintiff’s federal case in favor of the plaintiff’s parallel state court case. The pro se plaintiff made it easy when she did not explain the basis for her “plain error” appeal, favoring a simpler approach that simply advised the court that she was requesting a plain error review. Acknowledging the accommodations all courts make for pro se litigants, the Tenth Circuit still could not make the plaintiff’s case for her and it affirmed the decision to stay the case. Lawyers have been admonished for years now not to rely on artificial intelligence in their pleadings, but that admonition does not appear to have made it to the pro se plaintiff world yet – the court had to spend some words in the opinion cautioning the plaintiff in this case not to over-rely on AI in her pleadings (where she had cited language from cases that was not in those reported cases). All-told, even if this plaintiff had retained a lawyer, the outcome would likely have been the same – this case belongs in state court to work out her claims that appear to be largely, if not entirely, based in state law.
State Appeals Court Won’t Revive FDCPA Suit Over Default Judgments
In a case that was defended by Brit Suttell of Barron & Newburger, a Washington state appeals court has upheld the dismissal of a consumer’s Fair Debt Collection Practices Act lawsuit accusing a collection law firm of acting unfairly by staying silent after she told the firm she had never been served in the cases underlying two default judgments against her. More details here.
WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER LOCKE: The Washington Court of Appeals affirmed dismissal of an FDCPA claim where a debt collector obtained default judgments based on facially valid affidavits of service and the consumer did not dispute service/ the affidavits’ descriptions of her appearance until after default. The consumer alleged unfair and unconscionable conduct for refusing to vacate the judgments after the service issue surfaced, but the court held she had not alleged that the affidavits were fraudulently procured, and therefore, had not stated a claim under the FDCPA.
The decision indicates that, in Washington, debt collectors may rely upon facially valid affidavits of service. It also underscores that a request from a consumer does not obligate a debt collector to vacate a judgment and challenges to service should be raised through appropriate procedural mechanisms rather than through an FDCPA claim.
New Vermont Privacy Law Sets a Low Coverage Bar and a First-Ever AI Disclosure Rule
Vermont has become the latest state to enact a consumer privacy law, and several of its provisions will land squarely on companies that handle large volumes of consumer data. More details here.
WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS SUTHERLAND: Vermont has joined the growing roster of states with a comprehensive consumer data privacy statute. On June 16, 2026, Governor Phil Scott signed Senate Bill 71, the Vermont Data Privacy and Online Surveillance Act (“VDPOSA” or the “Act”). Most key provisions take effect January 1, 2028. During an initial transition window — January 1, 2028 through June 30, 2029 — the Vermont Attorney General must issue a notice of violation and allow 60 days to cure before initiating enforcement where a cure is possible. After that window closes, enforcement can be immediate. There is no private right of action.
The Act closely tracks Connecticut’s privacy framework but sets coverage thresholds that are among the broadest in the country — a feature that will pull in many mid-sized collection operations and debt buyers that might have assumed they were too small to be covered.
Who Is Covered
The Act applies to any person that conducts business in Vermont, or targets Vermont residents, and during the preceding calendar year:
- Controlled or processed the personal data of at least 35,000 consumers (excluding data processed solely to complete a payment transaction);
- Controlled or processed the sensitive data of at least 3,000 consumers; or
- Offered for sale the personal data of at least 3,000 consumers.
The 35,000-consumer threshold is notable: analysts estimate it represents roughly 5.4% of Vermont’s population — the highest proportional share of any state privacy law to date. Many mid-sized collection operations routinely process data on far more than 35,000 individuals and will be covered regardless of whether they have a significant Vermont-specific presence.
Importantly, the consumer health data provisions apply to any person conducting business in Vermont with no minimum processing threshold. Medical debt collectors, in particular, should take note.
Key Consumer Rights and Controller Obligations
Vermont consumers are granted a full suite of privacy rights: the right to access and confirm processing, correct inaccuracies, delete personal data, obtain a portable copy, opt out of targeted advertising and data sales, challenge profiling decisions that produce legal or similarly significant effects, and obtain a list of third parties to whom their data has been sold. Controllers must respond to requests within 45 days (with one 45-day extension available).
Controllers must also: limit data collection to what is reasonably necessary for disclosed purposes; obtain consent before processing sensitive data; publish a clear privacy notice; conduct data protection assessments for high-risk processing activities (targeted advertising, data sales, profiling, and sensitive data processing); honor opt-out preference signals such as the Global Privacy Control; and provide a conspicuous opt-out link on their website.
A First-of-Its-Kind AI Disclosure Requirement
Vermont is the first state to require controllers to disclose in their privacy notice whether they process personal data for the purpose of training large language models (LLMs). As the ARM industry increasingly incorporates AI tools into workflows — from skip tracing and decisioning to customer communications — this disclosure requirement demands that companies develop a clear data-labeling strategy and understand exactly which data flows into AI training pipelines.
The FCRA and GLBA Exemptions — and Their Limits
For financial services businesses, the most immediately relevant provisions are the FCRA and GLBA exemptions.
FCRA Exemption
The Act exempts activities involving the collection, maintenance, disclosure, sale, communication, or use of personal data for the purpose of evaluating a consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living — but only if those activities are conducted strictly in accordance with the FCRA. This exemption covers consumer reporting agencies, information furnishers, and users of consumer reports for permissible purposes.
The critical qualifier is the word “strictly.” Any data processing that falls outside the scope of a company’s FCRA-regulated activities — or that involves noncompliance with the FCRA — will not be shielded. Collection agencies should carefully map which data flows are squarely within their FCRA obligations and which sit alongside or outside those activities. Companies considering using FCRA-related data to train AI models should be especially cautious, as that use may not qualify for the exemption.
GLBA Exemptions
Vermont’s GLBA exemptions are unusually broad compared to those in other state privacy laws. The Act provides both:
- A data-level exemption for nonpublic personal information regulated under Title V of GLBA (Regulation P and the FTC Financial Privacy Rule); and
- Entity-level exemptions for state- and federally chartered banks and credit unions; their affiliates and subsidiaries principally engaged in financial activities; registered broker-dealers, investment advisers, and investment adviser representatives; and Vermont-regulated insurance entities.
The entity-level exemption for affiliates and subsidiaries extends only to those “principally engaged in financial activities” as described in 12 U.S.C. Section 1843(k). Affiliates or subsidiaries engaged in non-financial activities may remain subject to the Act, even within a GLBA-regulated corporate family.
Special Considerations for Collection Agencies and Debt Buyers
Several features of the Act warrant particular attention for the ARM industry:
- Low coverage bar. The 35,000-consumer processing threshold will capture many mid-sized and regional collection operations, particularly those working national portfolios.
- Medical debt. The consumer health data provisions — including the prohibition on geofencing within 1,850 feet of any health care or mental health facility and the requirement for consumer consent before selling consumer health data — apply to any business serving Vermont residents with no threshold. Medical debt collectors must assess whether they are handling “consumer health data” as defined by the Act.
- Sensitive data. The Act’s definition of “sensitive data” includes financial account credentials and government-issued identification numbers. Processing sensitive data requires affirmative consumer consent.
- FCRA compliance as a prerequisite. The FCRA exemption is not self-executing. It shields only activities conducted in strict compliance with the FCRA. Agencies that are not in full FCRA compliance cannot rely on the exemption to shield non-compliant data practices.
- AI and LLM disclosure. Companies using AI tools that are trained on consumer data must disclose this in their privacy notice — a requirement that applies to controllers broadly, not just technology companies.
Enforcement
The Vermont Attorney General has exclusive enforcement authority. A violation of the Act is also a violation of the Vermont Consumer Protection Act. The Act appropriates resources for dedicated privacy enforcement and expressly states that if those resources are not provided, the legislature may revisit the decision not to include a private right of action — making future litigation exposure a live risk worth monitoring.
Recommended Next Steps
- Map data flows to confirm which activities fall within FCRA and GLBA exemptions — and which do not.
- Audit AI and LLM use to determine whether personal data is used in training and prepare the required privacy notice disclosure.
- Assess consumer health data exposure, especially for medical debt portfolios and any location-based technologies deployed near health care facilities.
- Review affiliate and subsidiary structures to confirm which entities qualify for entity-level GLBA exemptions.
- Update privacy notices, vendor contracts, and data processing agreements before January 1, 2028.
This article is for informational purposes only and does not constitute legal advice. Organizations should consult with legal counsel to assess the applicability of the Vermont Data Privacy and Online Surveillance Act to their specific operations.
Auto Lender Can’t Escape FCRA Claim Over Totaled Car
A District Court judge in Oregon has allowed a consumer’s Fair Credit Reporting Act claim against an auto lender to move forward while dismissing all of the claims against the company that administered her vehicle’s GAP and service contracts. More details here.
WHAT THIS MEANS, FROM STEPHANIE STRICKLER OF MESSER STRICKLER BURNETTE: The court held that a furnisher’s liability under the FCRA depends on whether the challenged credit reporting is actually inaccurate. However, the court concluded that the alleged inaccuracy turned on a dispute over the meaning of the parties’ contract. Although the creditor maintained that it accurately reported the account as delinquent, the court found that resolving the accuracy issue would require interpretation of the contract and therefore declined to resolve the dispute at the pleading stage. The court further held that the FCRA preempts Oregon UTPA claims based on allegedly inaccurate credit reporting. At the same time, the opinion recognized that independent contractual claims, including claims for breach of the implied covenant of good faith and fair dealing, are not necessarily preempted by the FCRA and may proceed.
Brief Reporting Error Wasn’t Enough to Confer Standing, Judge Rules
A consumer’s Fair Credit Reporting Act lawsuit has been dismissed for lack of standing after a District Court judge in New York found she could not show a concrete injury when a lender briefly reported her business credit card debt to her personal credit file. More details here.
WHAT THIS MEANS, FROM DAVID KLEBER OF BEDARD LAW GROUP: Here, the system worked as intended, and the court recognized the lack of real injury. Chase incorrectly reported a commercial account to the individual cardholder’s personal credit file. When the cardholder disputed the tradeline, the credit bureau notified the creditor who, upon confirming the mistake, removed the information from the individual’s report.
When the cardholder sued, the court found she had no standing because during the time of the mistaken reporting, there was no injury. Plaintiff didn’t apply for credit, and she did not allege that anyone saw the inaccurate report. Although the Plaintiff made some of the typical arguments – she didn’t apply for credit because he knew it would be rejected, she incurred costs in getting the report fixed, she suffered emotional distress over the worry her credit would be ruined – the court rejected them because they all rested on the speculation of some potential future harm. The lesson here is that not all inaccuracies are actionable. There must be some actual impact on the consumer before any cause of action can lie.
Judge Denies Consolidation Bid, Transfers Debt Collection Lawsuit
A consumer’s Fair Debt Collection Practices Act lawsuit has been transferred from Idaho to Utah after a Magistrate Court judge determined that all of the conduct giving rise to the claims took place in Utah. More details here.
WHAT THIS MEANS, FROM COLIN WINKLER: Jurisdictional rules and rules of civil procedure aim to balance efficiency and simplicity with fairness and completeness, all while maintaining some measure of procedural predictability. In this case, that balance meant a federal judge in Idaho could not drag a collections lawsuit out of Idaho state court and into a consumer’s federal FDCPA suit absent the consumer’s timely request for removal. At the same time — and over the consumer’s objection — the court found that transferring the federal FDCPA case to federal court in Utah would be more convenient for all involved and would better serve the public interest. Although the consumer resided in Idaho, allegedly “suffered harm” there, and filed his FDCPA case in Idaho, the events giving rise to the FDCPA claims all occurred in Utah, and the evidence and witnesses related to his FDCPA claims were all located there. As a result, the court found Utah to be the proper venue for the FDCPA claims. When dealing with messy procedural disputes like this one, litigation managers should consult carefully with outside counsel to craft a cost-effective litigation strategy that minimizes ultimate litigation costs and gains or maintains whatever advantage the balance of jurisdictional and procedural rules will allow.
Judge Dismisses FDCPA Suit Against Collection Law Firm Over Unchallenged Default Judgment
A District Court judge in New Jersey has dismissed a lawsuit accusing a collection law firm of violating the Fair Debt Collection Practices Act by suing to collect on a debt the plaintiff claimed was void, ruling that a default judgment entered in the underlying collection case meant the claims could not be litigated. More details here.
WHAT THIS MEANS, FROM MONICA LITTMAN OF KAUFMAN DOLOWICH: This case is a good reminder to check if there is an argument that an FDCPA claim should be dismissed because the consumer was required to assert it in a prior lawsuit. A default judgment had been obtained against the consumer in a state court collection case. The federal court ruled that the court did not have jurisdiction because the FDCPA claim in this separate lawsuit was barred by res judicata and New Jersey’s entire controversy doctrine. This means generally that the consumer could not file this lawsuit when the consumer should have raised all defenses to the debt, including an FDCPA claim, in the underlying state court collection action. The federal court made the right decision in this case.
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.
