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.
Ill. Appeals Court Rules Buying Defaulted Mortgage Notes Requires Collection Agency License
The Appellate Court of Illinois has reversed the dismissal of a lawsuit accusing a defendant of operating as an unlicensed collection agency under the state’s Collection Agency Act by purchasing defaulted mortgage notes and enforcing them through foreclosure actions, ruling that the plain language of the statute reaches entities that buy debt for collection purposes. More details here.
WHAT THIS MEANS, FROM JENNA WILLIAMS OF FROST ECHOLS: This Illinois Appellate Court decision is an important reminder for debt buyers: if you buy defaulted consumer debt and file lawsuits against Illinois consumers, you need an Illinois Collection Agency License. This includes judicial foreclosure of purchased defaulted mortgage debt.
Also, be careful, this is only an Illinois Appellate Court, Third District, case. It is not a federal Third Circuit case. The shorthand citations for Third District “2026 IL App (3d) 250359” and Third Circuit look very similar at first glance!
The Act expressly defines a “debt buyer” to include an entity purchasing delinquent or charged-off consumer debt for collection purposes, whether it collects the debt itself, uses a third-party collector, or hires an attorney for litigation.
Illinois has helpful licensing exemptions for original creditors and certain out-of-state collection agencies that only collect from Illinois consumers through interstate communications. However, debt buyers filing collection lawsuits in Illinois should not assume those exemptions apply to them.
The good news is that debt buyers going through the Illinois licensing process are exempt from both the trust account requirement and the bond requirement, which makes the process a little easier.
Also, as a friendly reminder, Illinois does not currently use NMLS for its Collection Agency License. You need to apply through the Illinois IDFPR online portal.
THE COMPLIANCE DIGEST IS SPONSORED BY:
Judge Tosses FCRA Case for Lack of Standing, Warns Pro Se Plaintiff About Hallucinated Cases
A District Court judge in Mississippi has granted a defendant’s motion to dismiss a Fair Credit Reporting Act lawsuit over the reporting of a charged-off credit card account, ruling the plaintiff lacked standing to sue and putting him on notice for citing case law that appears to have been invented by artificial intelligence. More details here.
WHAT THIS MEANS, FROM ERICA KRAMER OF HUDSON COOK: In Harris v. Bank of America, the court granted the Defendant’s Motion to Dismiss, finding that the Plaintiff lacked standing for his claims under the Fair Credit Reporting Act. More specifically, the court held that the Plaintiff “failed to assert an injury in fact that is fairly traceable to [the defendant’s] conduct that could be resolved by a favorable judicial decision.” Though the Plaintiff provided some evidence of his alleged damages in the form of a letter from an insurance company stating that his rates were negatively influenced by his credit report, there was no indication that the Defendant’s credit reporting was a factor in the insurance company’s decision. In addition to the standing discussion, the court also devoted a footnote to warning the Plaintiff against future use of case law hallucinated by AI. That’s a good reminder for everyone, as it’s not just pro se litigants that have fallen prey to the use of fictitious case citations generated by AI. Always check your case citations and be on guard against AI hallucinations, the use of which “severely undermines the credibility” of your allegations.
Judge Recommends MSJ for Collector in FDCPA Case Over Cease-Communication Request
A Magistrate Judge in Ohio has recommended granting a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case, ruling that a consumer who demanded a collector stop calling him never put that request in writing, and that the collector stopped calling anyway. More details here.
WHAT THIS MEANS, FROM MICHAEL PONCIN OF BASSFORD REMELE: In Sells v. Meade & Associates, Inc., the Magistrate Judge issued a Report and Recommendation on the debt collector’s unopposed motion for summary judgment in a suit brought under the federal Fair Debt Collection Practices Act (FDCPA) and the Ohio Consumer Sales Practices Act (OCSPA). Plaintiff alleged that the collection firm harassed him with repeated collection calls over a debt and continued calling after he demanded that the calls stop. The magistrate judge recommended granting summary judgment on the FDCPA claim, because the consumer never submitted the written cease-communication request the FDCPA requires, that his oral request was legally ineffectual, and that the record showed the collector stopped calling after a verbal request with no evidence of later contact. Because this is only a Report and Recommendation — not a final order — the parties retained a 14-day window to file objections for review by the district judge before any ruling took effect. On or about August 11, 2026, however, the parties filed a notice of settlement. Regardless of the procedural posture, the takeaway from this case is the collector’s wise decision to give full effect to the verbal cease.
Judge Tosses FCRA Suit Over Reporting of Charged-Off Balances
A District Court judge in Pennsylvania has granted judgment on the pleadings in favor of a credit reporting agency and a lender that were accused of violating the Fair Credit Reporting Act by reporting past-due balances on charged-off accounts. More details here.
WHAT THIS MEANS, FROM BOYD GENTRY OF THE LAW OFFICE OF BOYD GENTRY: In Traore, the plaintiff argued that because his accounts had been charged off, the reported balances should somehow vanish from his credit reports. The court responded with a blunt lesson in Credit Reporting 101: a charge-off is an accounting event, not a magic debt-erasing wand, and accurately reporting a balance after charge-off is not a factual inaccuracy.
For data furnishers, the takeaway is that plaintiffs still need to identify an actual factual error, not just a disagreement with how credit reporting works. The court repeatedly emphasized that FCRA claims against furnishers live or die on whether the information reported was actually incorrect, and here the plaintiff never alleged the balance itself was wrong.
The opinion also serves as a reminder that furnishers do not acquire § 1681s-2(b) duties merely because a consumer says they disputed something. The plaintiff failed to allege that a CRA actually notified the furnisher, which left a critical element of the case missing. Conclusory allegations that a furnisher “failed to investigate” are not enough; courts expect facts, not buzzwords.
The overall message is refreshingly simple: if you’re reporting accurate balances, and the alleged “inaccuracy” is really a consumer’s misunderstanding of charge-offs, you may be watching the plaintiff’s case get charged off long before your tradeline does.
Judge Denies MTD in FCRA Case Over Delinquency Reported After Lease Was Paid Off
A District Court judge in Pennsylvania has denied a defendant’s motion to dismiss a Fair Credit Reporting Act lawsuit, ruling the plaintiff plausibly alleged that the defendant failed to reasonably investigate a disputed 30-day delinquency and that the inaccurate reporting caused the denial of his home equity application. More details here.
WHAT THIS MEANS, FROM DREW CICERO OF BALCH & BINGHAM: Sometimes it isn’t better the second time around (sorry, Mr. Sinatra). In re Doney Richardson reminds us that a “win” on an initial motion to dismiss can give an opposing party just enough ammunition to restate plausible claims. Here, the Plaintiff’s Second Amended Complaint supplementing his allegations and curing “the deficiencies identified with respect to the dismissed claims,” viewed in the light most favorable to him, plausibly alleged a violation of the FCRA. Plaintiff alleged that the Defendant’s reporting caused a denial of his HELOC application. In support, he alleged that the reporting seesawed from a 30-day delinquency to no delinquency, and that inconsistent reporting, based on information provided by the Defendant, caused Plaintiff to fall short of a lender’s underwriting guidelines. Judge Gallagher points out that a plaintiff need only allege that she filed a dispute with a CRA, the CRA notified the furnisher, and the furnisher failed to investigate and modify inaccurate information, to plead a plausible case under the FCRA.
Schakowsky Revives Bill to Undo Supreme Court’s Limits on FTC Monetary Relief
A group of House Democrats is making another run at restoring the Federal Trade Commission’s ability to claw back money for defrauded consumers, reviving legislation that has languished since the Supreme Court gutted the agency’s primary redress tool in 2021. More details here.
WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS SUTHERLAND: Five years after the Supreme Court stripped the Federal Trade Commission of arguably one of its most potent consumer-protection tools, two new bills promise to give it back. But should you count on either one becoming law anytime soon?
In April 2021, the Court’s unanimous decision in AMG Capital Management v. FTC held that Section 13(b) of the FTC Act does not authorize the agency to seek equitable monetary relief—no restitution, no disgorgement, no refunds—in federal court. The ruling eliminated what the FTC itself described as its “primary tool” for returning money to consumers harmed by first-time violations of the Act. The agency immediately asked Congress to pass legislation restoring the lost authority. In the meantime, the FTC has referred some matters to the Department of Justice who does have the authority in appropriate cases to seek equitable monetary relief.
Congress has tried before. A House bill passed with bipartisan support during the 117th Congress, only to die in the Senate. A companion Senate measure, S. 4145, never made it out of committee. Now, more than five years later, lawmakers seem to be trying again with two new vehicles: S. 4311, the Consumer Protection Remedies Act of 2026, introduced by Senator Maria Cantwell on April 15, 2026, and H.R. 10003, the Consumer Protection and Recovery Act, introduced in the House on July 30, 2026.
Both bills would amend the FTC Act to confirm the Commission’s authority to seek permanent injunctions, restitution, and other equitable relief in federal court—effectively overriding AMG. Both seem to face long odds of becoming law before November.
Where Things Stand
S. 4311 was referred to the Senate Committee on Commerce, Science, and Transportation. As of this writing, no hearing, markup, or committee vote has been scheduled. H.R. 10003 was referred to both the House Energy and Commerce Committee and the House Judiciary Committee. It, too, has seen no committee action beyond referral.
Neither bill has attracted a single Republican cosponsor yet.
Why Enactment Before November Is Highly Unlikely
Four factors may make passage before the midterms seem unlikely.
- History is not encouraging. The 117th Congress came closest. The House passed a substantially identical bill with bipartisan support, but Senate opposition—driven largely by business-lobby resistance to expanded FTC remedial authority—killed it. A companion Senate bill, S. 4145, died in committee without a vote. That opposition has not materially changed. The forces that blocked FTC-relief legislation in 2022 seem to have remained intact.
- Partisan sponsorship in an election year. Both S. 4311 and H.R. 10003 are sponsored exclusively by Democrats, with no Republican cosponsors. Without bipartisan buy-in, the bills face steep odds in a Congress where committee calendars are controlled by the Republican majority and leadership is focused on pre-election messaging rather than substantive legislating on enforcement policy.
- The calendar is unforgiving. With Election Day in early November, Congress will spend much of September and October in recess or on the campaign trail. Remaining floor time may be consumed by appropriations and other must-pass items. A bill that lacks even a committee markup by August may have no realistic path to clear committee in both chambers, reconcile any differences, and reach the President’s desk before the session winds down.
- Even supporters treat these as positioning measures. Commentary favorable to the legislation frames both bills as markers of potentially signalling Democratic enforcement priorities heading into the next Congress. Is this an implicit acknowledgment that they are not realistic vehicles for near-term enactment?
What This Means
The practical conclusion is straightforward: these bills may be a legislative signal, but possibly not a near-term compliance event.
A more realistic timeline may be reintroduction in the 120th Congress beginning in January 2027. Whether a restored Section 13(b) remedy finally becomes law seems to depend heavily on the midterm results—specifically, whether the elections produce a shift in committee control that gives these bills a friendlier path forward. Until then, the FTC’s enforcement posture remains constrained by the AMG framework, and the agency will continue relying on its remaining, more limited tools: administrative proceedings under Section 19 of the FTC Act, penalty actions under specific consumer-protection statutes, and referrals to the Department of Justice.
For now, perhaps the watchword is patience—let’s reassess this topic in November.
N.C. Appeals Court Won’t Let Defendant Add New Counterclaims in Collection Case
The Court of Appeals of North Carolina has affirmed a trial court’s ruling denying a defendant’s motion to amend his answer to add counterclaims under the North Carolina Debt Collection Act in a credit card collection case. More details here.
WHAT THIS MEANS, FROM DALE GOLDEN OF MARTIN GOLDEN LYONS WATTS MORGAN: It’s hardly unusual for cases involving pro se consumers to involve odd litigation situations. In the case, the pro se party was the defendant in a collection action. The consumer filed a counterclaim in response to the complaint, but dismissed. Later in the case, he move for leave to file an amended counterclaim after receiving his cardmember agreement from the creditor. While leave to amend is usually granted, the trial court denied the motion on the basis that the case was “over a year old” by the time the motion to amend was filed. The appellate court accepted jurisdiction to hear the consumer’s appeal since it involved what would have been a compulsory counterclaim—meaning it could not be brought in a separate lawsuit. But the court ultimately ruled that the trial didn’t abuse it’s discretion in denying the motion to amend. The court determined that since the consumer could have accessed his account documents earlier in the case, denial would proper. While this isn’t an unusual case, it highlights the importance of having competent counsel to prosecute collection claims, lest creditors find themselves needlessly facing improper counterclaims.
State Appeals Court Sends Auto Finance Collection Suit to Arbitration
The Court of Appeals for the Fifth District of Texas has reversed a trial court’s denial of a motion to compel arbitration in a breach of contract lawsuit over an unpaid auto loan, ruling a consumer did not waive his right to arbitrate by agreeing to an order letting the plaintiff — a bank — take possession of the vehicle while the case was pending. More details here.
WHAT THIS MEANS, FROM JONATHAN ROBBIN OF J. ROBBIN LAW: Recently, a Texas Appellate Court held that a dispute should have been referred to arbitration where the dispute was within the scope of a valid arbitration clause and where the party seeking arbitration had not substantially invoked the judicial process. In Romero, TD Bank filed suit in state court, alleging that the Consumer/Defendant breached a retail installment sales contract the parties entered into when Defendant purchased his vehicle. After Defendant Answered, he moved to compel arbitration under the terms of the contract. The trial court denied the Motion without including any findings of fact or conclusions of law, seemingly accepting TD Bank’s arguments that, by merely answering the complaint and approving to the form and substance of a writ of sequestration, Defendant substantially invoked the judicial process and waived his right to arbitration.
The Appellate Court limited its inquiry to whether TD Bank reached the high burden of establishing waiver as a defense to Defendant’s motion. To successfully assert waiver, TD Bank needed to show that Defendant substantially invoked the judicial process. Relying on Texas Supreme Court precedent, the Court weighed four factors to determine whether TD Bank met its burden: (1) Defendant’s knowledge of and delay in raising the arbitration clause; (2) whether Defendant’s activity related to the merits of TD Bank’s claims; (3) whether Defendant filed an claims or dispositive motions; (4) the time and expenses incurred in the litigation; and (5) whether already-litigated matters would be duplicated in arbitration. In assessing these factors, the Court rejected TD Bank’s earlier arguments, holding filing an Answer and approving of the writ of sequestration, without raising arguments or dispositive motions on the merits of the case, was insufficient to establish that Defendant substantially invoked the judicial process. The Court remanded the case to the trial court for referral to arbitration, pursuant to the terms of the contract entered into by the parties. This case demonstrates that not every action taken in litigation constitutes a waiver of the contractual arbitration provision. The mere decision to answer a Complaint or minimally participate in procedural matters is insufficient to establish substantial invocation of the judicial process needed for waiver. But defendants must still be wary of the need to assert the arbitration provision early in litigation, and not take for granted that they can attempt to litigate and hold arbitration as a backup.
CFPB Examiner Chief Warned Staff of ‘Most Unpleasant’ Fallout for Aggressive Oversight
A senior official at the Consumer Financial Protection Bureau warned the agency’s own examination staff that being too aggressive with the financial firms they oversee would bring “most unpleasant” consequences, according to an internal email obtained by Reuters and reported for the first time this week. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER LOCKE: The CFPB’s internal memo warning examiners against overly aggressive oversight, combined with its announcement to stop publishing unverified consumer complaint narratives, points to its continued and deliberate pivot in how the agency balances its mission. By pulling back on public narratives to prevent misleading data and asking field staff to adopt a less adversarial posture, the CFPB is actively moving away from the high-friction, public-shaming tactics that defined its recent history. When viewed as part of a two-year trajectory marked by a streamlined workforce and rescinded guidance documents, these choices reflect a broader structural shift toward institutional pragmatism. Rather than acting primarily as an aggressive enforcement disruptor, the CFPB appears focused on stabilizing its statutory operations, managing a massive influx of automated complaints, and fostering compliance through predictable, industry-aligned frameworks. Hopefully this enhanced consistency and continuing is not completely reversed in the future because it is additive to the CFPB’s important role as a responsible regulator for consumers and industry alike
Servicemember FDCPA Bill Is Back, This Time With a Republican Co-Sponsor
A familiar piece of debt collection legislation is back on Capitol Hill. Rep. Madeleine Dean [D-Penn.], joined by Rep. Warren Davidson [R-Ohio], on Monday introduced H.R. 10018, the Fair Debt Collection Practices for Servicemembers Act, a bill that would amend the FDCPA to prohibit collectors from making certain threats when collecting from members of the military and their families. More details here.
WHAT THIS MEANS, FROM BILL MAROHN OF TOBIN & MAROHN: Any time a bill is raised seeking to amend the Fair Debt Collection Practices Act, compliance teams should take note — especially when it arrives with bi-partisan support. When that bi-partisan bill involves enhanced protections for servicemembers, it is time to review your internal policies, procedures, and talk-offs related to servicemember accounts.
No creditor, agency, or law firm wants to be the cautionary tale for mistreatment of a servicemember. While I can not imagine any frequent reader of the Compliance Digest would allow a talk-off that even remotely implies failure to work with a debt collector could result in a servicemember having their rank reduced, security clearance revoked, or being prosecuted under the Uniform Code for Military Justice, this is still an excellent time to review, train, and potentially further refine your policies and procedures. An ounce of prevention is worth a pound of cure.
State Appeals Court Affirms Denial of CU’s Motion to Compel Arbitration in Repossession Class Action
The Superior Court of Pennsylvania has affirmed a lower court’s ruling denying a defendant’s motion to compel arbitration in a class action over vehicle repossession notices, holding that the defendant never proved the plaintiffs actually received the document containing the arbitration provision. More details here.
WHAT THIS MEANS, FROM SKIP KOHLMYER OF ZIMMERMAN, KISER & SUTCLIFFE: The interaction between class action litigation and arbitration clauses that limit this process is at the forefront of any litigation decision in consumer law cases. For example. In Burnett v. Blue Federal Credit Union, Superior Court of Pennsylvania, the court affirmed the trial court opinion that denied BFCU’s motion to dismiss the class in light of an arbitration provision. This case emphasized the importance of educating and advising consumers on the terms and conditions of the financing agreements and providing adequate notice of the arbitration provisions contained therein. In order to comply with arbitration, the party seeking such relief bears the burden of demonstrating factual evidence that (1) a valid agreement to arbitrate exists, and (2) the dispute is within the scope of the agreement. The Burnett court held that the BFCU failed to overcome the “abuse of discretion” standard because BFCU failed to demonstrate that “Burnett received the revised Part 2” containing the arbitration clause. BFCU also failed to demonstrate that the “mailbox” rule applied in mailing the notice to the consumer since there was no evidentiary proof that the letter was signed in the usual course of business and placed in the regular place of mailing.
Overall, parties relying on an arbitration clause should establish a process in which the consumer verifies and agrees to important sections of the agreement or that evidence is obtained that the consumer received the documentation rather than rely on the “mailbox rule.”
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.
