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.
Labeling Yourself a ‘Debt Collector’ Doesn’t Make What You Are Collecting a Debt, Judge Rules
A District Court judge in Illinois has granted summary judgment to a defendant sued under the Fair Debt Collection Practices Act, ruling that unpaid municipal red-light fines placed for collection are not “debts” covered by the statute, even if the defendant identified itself as a “debt collector” in communications with the plaintiff. More details here.
WHAT THIS MEANS, FROM JOE DUGGAN OF FROST ECHOLS: The Webb v. Municipal Collection Services decision out of the Northern District of Illinois granted summary judgment to Municipal Collection Services (“MCS”) because red light camera fines are not “debts” under the FDCPA. Plaintiff had incurred three separate red light camera fines across the Chicagoland area, which were placed with MCS for collection.
The judge held that FDCPA coverage is limited to obligations arising from consensual consumer transactions, not penalties imposed by law. The decision relied on Seventh Circuit precedent confirming municipal fines, like traffic and parking tickets, fall outside the FDCPA’s scope. Collectors of municipal fines in the Seventh Circuit face reduced FDCPA exposure, but obligations arising from contracts remain covered despite “fine” labels.
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Judge Allows TCPA Suit Over Calls That Kept Coming After Consumer Texted ‘Stop’ to Proceed
A District Court judge in Florida has allowed most of a consumer’s Telephone Consumer Protection Act lawsuit to move forward, ruling that her texted request to stop the messages could plausibly have revoked her consent to marketing phone calls as well. More details here.
WHAT THIS MEANS, FROM JOHN HENSON OF HENSON LEGAL: Channel-specific suppression is a litigation risk. Treat a “stop” received on any channel as suppressing the number on every channel, because under 47 C.F.R. § 64.1200(a)(12) a confirmation text that does not ask the consumer to clarify scope, met with silence, will operate as a revocation of consent for all robocalls and robotexts. And do not plan around a grace period: the federal 10-business-day window is the outer limit, not a suggestion. Additionally, your systems need a way to identify revocation requests from non-standard responses (something other than “stop”). List hygiene is one of best proactive measures you can take with your messaging campaigns.
NYC Publishes Long-Awaited SHIELD Rule FAQs, Clarifying Scope Ahead of January Effective Date
New York City’s Department of Consumer and Worker Protection has released its Frequently Asked Questions for the Stopping Harassment and Intimidation and Ensuring Lawful Debt Collection Rule, giving the industry its first detailed guidance on how the agency intends to interpret the sweeping amendments taking effect January 1, 2027. More details here.
WHAT THIS MEANS, FROM LORAINE LYONS OF MARTIN GOLDEN LYONS WATTS MORGAN: 10 Things to Know About the NYC SHIELD Rule FAQs
- The FAQs provide general information and guidance. They are not a substitute for legal advice.
- The FAQs clarify when the validation and verification requirements take effect, including an example. See FAQs pages 3, 9, and 12.
- The FAQs address attorney communications related to litigation, including when the SHIELD Rule applies to such communications and when it does not. See FAQs pages 6–7.
- The FAQs confirm that the natural person designated for consumer callbacks (Rule sections 5-77(f)(1)(ii) and (iii)) may use an assumed name, provided the debt collector maintains records of the assumed name used. If the designated callback person is unavailable, another person may answer the consumer’s questions, but the reason for the unavailability must be documented. See FAQs pages 10–11.
- The FAQs clarify that consumer complaints sent to DCWP and forwarded to the debt collector licensee trigger the dispute and verification process. See FAQs page 13.
- The FAQs explain the difference between the front-end itemization requirements in the 5-day Validation Notice and the expanded itemization requirement in section 5-77(f)(11). See FAQs page 15.
- The FAQs confirm that the medical debt disclosure must appear in the 5-day Validation Notice, along with all other required information and disclosures, regardless of whether the debt being collected is medical debt. See FAQs page 16.
- Notable gap: The FAQs do not address how to combine the NYC notice of time-barred debt with the New York State required notice on time-barred debt.
- The FAQs provide information and an example on Language Access Services/Limited English Proficiency requirements. See FAQs pages 18–19.
- The FAQs address records requirements and the transfer of information, including the requirement that the debt collector provide a copy of the Notice of Unverified Debt to the debt owner/creditor when returning the account. See FAQs pages 20–21.
The SHIELD Rule takes effect on January 1, 2027. The DCWP will hold a workshop on the SHIELD Rule on October 5, 2026. General compliance and operational questions can be submitted by email to debtfaqteam@dcwp.nyc.gov. The DCWP encourages submitting FAQ follow-up questions before October 5, 2026.
FTC Abandons Disparate Impact Claims
The Federal Trade Commission announced on Friday that it will no longer pursue disparate-impact claims under any statute it enforces, formally closing a chapter of enforcement theory that had loomed over auto lending, credit, and adjacent consumer finance markets for the past several years. More details here.
WHAT THIS MEANS, FROM DANIEL PRIEVE OF CLARK HILL: The FTC’s statement that it will no longer pursue disparate impact claims under ECOA puts the FTC in line with other federal agencies, including the CFPB and the DOJ. These interpretative changes mean that for the near future, federal agency fair lending actions based on disparate impact theories are unlikely. The FTC’s statement also comes after recent Supreme Court decisions curtailing federal agency independence, resulting in a more unified approach across federal agencies.
However, the FTC’s statement does not extinguish all liability for disparate impact claims under all fair lending laws. ECOA provides a private right of action for applicants against creditors who fail to comply with ECOA, and private parties could still pursue ECOA claims based on a disparate impact theory of liability. States may also take actions based on disparate impact based on state fair lending laws. For example, the New York Department of Financial Services issued an Industry Letter in April stating that credit decisions resulting in a disparate impact may be unlawful under New York law. Illinois enacted a law in July that codified a form of disparate impact liability under its fair lending laws. Fair lending risk management remains important despite interpretive changes at the federal level.
Appeals Court Affirms Ruling for Auto Lender in TILA, FDCPA, TCPA Case
The Court of Appeals for the Tenth Circuit has affirmed a summary judgment ruling in favor of a defendant that was sued under the Truth in Lending Act, the Fair Debt Collection Practices Act, and the Telephone Consumer Protection Act over how it disclosed the terms of a truck loan and then attempted to collect on it. More details here.
WHAT THIS MEANS, FROM NICK PROLA OF BASSFORD REMELE: What began as a truck loan became a six-claim pileup after a consumer stopped making payments and sued the contract assignee, Westlake Services, under the TILA, the FDCPA, the TCPA, and three state-law theories challenging the loan disclosures and collection activity. The Tenth Circuit affirmed summary judgment across the board: the TILA claim was untimely and contradicted by conspicuous disclosures, Westlake acquired the loan before default and therefore was not an FDCPA debt collector, and the contract expressly authorized calls using prerecorded voices and automatic dialing. The decision offers a practical roadmap for avoiding a similar litigation pileup. Ensure critical disclosures and communications consent in clear contractual language, preserve evidence of acquisition and default dates, and document vendor relationships because third-party collection activity can invite vicarious-liability theories even when those theories ultimately run out of gas. Did it need to be mentioned that the consumer was proceeding pro se? Even with a resounding victory in the Tenth Circuit, Defendant is left without recourse for the expense of defending litigation that should never have been filed in the first instance.
Judge Dismisses FDCPA Suit Against Servicer, CEO Over Statements Sent to Ex-Spouse
A District Court judge in Connecticut has granted a motion to dismiss filed by the defendants in a Fair Debt Collection Practices Act case, ruling that a plaintiff who accused a mortgage servicer and its chief executive of using monthly statements to collect a debt failed to plead that she was a consumer or that either defendant was a debt collector under the statute, while also denying her request to amend her complaint a second time. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: Another Pro se special. Despite getting a second bite of the apple, the Pro se Plaintiff still couldn’t get the basics right. Before we get to the problem that the alleged debt was not directed toward her to begin with, Sorrentino failed to plead any facts to establish that either of the two defendants, Fay Servicing and Ed Fay were debt collectors. Or, that she was a consumer as defined by the FDCPA.
What may be useful here to anyone where the principals or directors of a company are sued along with the company, is the comment by the Court: “But in order for an individual to be liable under the statute, the plaintiff must “allege that the defendant was personally involved in the collection of the debt at issue.” Sorrentino, simply alleged Fay “oversaw the business practices” of the company. That lead to Plaintiff’s conclusion that he was responsible for the alleged violations. And we all know conclusionary statements are a no no in pleading.
In a footnote the Court also castigated Plaintiff for her use of AI and hallucinated citations, but went no further, although that might have played into the denial Plaintiff’s request to file a second amended complaint. Nuff said.
Indiana Appeals Court Won’t Undo Seven-Year-Old Default Judgment Over Service Dispute
The Court of Appeals of Indiana has affirmed the denial of a defendant’s motion to set aside a default judgment that a debt buyer obtained against him more than seven years ago, ruling he failed to prove the trial court never had jurisdiction over him. More details here.
WHAT THIS MEANS, FROM JASON ESTEVES OF HUDSON COOK: This decision is a useful reminder that a consumer seeking to undo a default judgment years later may face a significant evidentiary burden when the record reflects facially valid service. Here, the defendant acknowledged that the summons was left at his residence but relied only on his own statements to show that the required follow-up mailing never occurred, which the court found insufficient to establish a lack of personal jurisdiction. For debt buyers and collection counsel, the case reinforces the importance of maintaining complete service records and returns of service, which may become critical evidence if a judgment is challenged years after it is entered.
Judge Trims, But Doesn’t Fully Dismiss, FCRA Suit Over Retained Dispute Notation
A District Court judge in Michigan has allowed a consumer to proceed with a negligence claim under the Fair Credit Reporting Act after a credit reporting agency allegedly kept a dispute notation on her credit report even after the plaintiff said she no longer disputed the account, while dismissing a companion claim that the agency acted willfully. More details here.
WHAT THIS MEANS, FROM STEPHANIE STRICKLER OF MESSER STRICKLER BURNETTE: This decision holds that a consumer can plausibly allege a negligent FCRA claim when a credit reporting agency leaves a dispute notation on a tradeline after the consumer later says she “no longer disputes” the account, because the continued notation may be “misleading and/or incomplete”. The court emphasized that nothing in the FCRA requires consumers to resolve dispute‑notation issues solely through the furnisher, and Equifax’s statutory obligations do not automatically end once a furnisher initially reports a dispute. At the same time, the court dismissed the willfulness claim, finding that the statutory text is unclear and industry practice is unsettled, making Equifax’s interpretation not “objectively unreasonable.”
This opinion reinforces that dispute‑notation cases can survive dismissal on negligence theories. It also underscores the importance of documenting dispute‑handling procedures and ensuring clear communication channels with furnishers, because courts may expect CRAs and furnishers to address “dispute‑about‑a‑dispute” scenarios even when the FCRA is silent.
Judge Grants Part of CRA’s MTD FCRA Case Over Loan Mod Reporting
A District Court judge in Illinois has partially granted a defendant’s motion to dismiss a Fair Credit Reporting Act class action lawsuit over a credit report that allegedly omitted any mention of a consumer’s mortgage loan modification, ruling that the plaintiff’s reasonable reinvestigation and willfulness claims can move forward while dismissing his reasonable procedures claim. More details here.
WHAT THIS MEANS, FROM VIRGINA BELL FLYNN OF TROUTMAN PEPPER LOCKE: Earlier this month, in Sakowski v. TransUnion, the U.S. District Court for the Northern District of Illinois handed credit reporting agencies (CRAs) a partial win, dismissing the consumer’s claim that TransUnion failed to follow reasonable procedures under FCRA § 1681e(b) while allowing his reinvestigation and willfulness claims to proceed. Plaintiff’s mortgage servicer agreed to a loan modification that included a trial period of reduced payments for three months. The Plaintiff made the reduced payments, but the servicer began reporting him as late anyway. The court determined that TransUnion was entitled to rely on the “late” payment data it received from the mortgage servicer until the consumer disputed it. Once the consumer disputed, however, the analysis shifted to § 1681i, and the court found that TransUnion was no longer entitled to rely on the servicer’s information.
The practical takeaway for furnishers and CRAs alike: a consumer dispute can reset the compliance obligation. Reasonable procedures and reliance on furnisher data may shield you before a dispute, but once a consumer flags a potential inaccuracy, the focus shifts, and the adequacy of your reinvestigation will define your exposure.
Judge Rules Refusal to Pay Sent to One Collector Doesn’t Bind the Next One
A District Court judge in Florida has granted a defendant’s motion to dismiss a consumer’s Fair Debt Collection Practices Act lawsuit, ruling that a written refusal to pay sent to one debt collector does not prohibit a different collector from contacting the consumer about the same debt. More details here.
WHAT THIS MEANS, FROM DAVID KLEBER OF BEDARD LAW GROUP: In response to an e-mail from Resurgent, the consumer emailed that he would not make any payments. Under Section 1692c(c), this refusal to pay prohibited Resurgent from communicating further with the consumer about the debt. The account was then placed with Credit Control, who, a week later, sent its own letter to the consumer about the debt. The consumer alleged the letter from Credit Control violated Section 1692c(c) due to the refusal to pay.
The court dismissed this claim because Section 1692c(c) is creditor specific. The language of the FDCPA says “If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt … the debt collector shall not communicate further with the consumer with respect to such debt. The law only prohibits the specific debt collector to whom the notice was sent fromcommunicating further about the debt. Knowledge of the creditor is not imputed to the debt collector, even under an agency theory, so the refusal to pay does not “transfer” to a new collector.
Some sections of the FDCPA create obligations or prohibitions on communication based on the collector’s knowledge, such as:
- at a time or place known or which should be known to be inconvenient to the consumer.
- if the debt collector knows the consumer is represented by an attorney
- if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving communication
but the obligation to cease communication based on a written request or a written refusal to pay is only triggered upon receipt of such request by the particular collector.
Appeals Court Affirms $32k Fee Award Against Plaintiff in Credit Reporting Case
The Court of Appeals for the Fifth Circuit has affirmed a ruling awarding a defendant more than $32,000 in attorney’s fees under a Texas credit reporting statute, rejecting arguments from a plaintiff who filed three separate lawsuits over the same item on his credit report. More details here.
WHAT THIS MEANS, FROM JAMES K. SCHULTZ OF SESSIONS, ISRAEL & SHARTLE: Mark this up as one for the good guys. In a world where the idea of shifting attorney fees in favor of defendants sounds more like fantasy than reality, in this case, the Fifth Circuit court of appeals confirmed that, at least under the Texas Business and Commerce Code, a prevailing party (including a defendant that successfully beats back a claim) is entitled to attorneys’ fees automatically. Unlike the barrier under federal law that most often ends the chance to recover fees, Texas law allows a defendant to recover fees without a separate finding that plaintiff’s claims were frivolous or brought in bad faith. This is a lower bar than the FCRA or FDCPA, which only allows a prevailing defendant to recover fees if a defendant can prove that plaintiff acted in bad faith or for harassment. This distinction matters for any company facing consumer credit disputes in Texas: pleading state-law claims under the TBCC exposes a losing plaintiff to fee liability more easily than FCRA alone would and makes the choice to fight a case a bit tougher when there is fair chance of getting fees back at the end of a successful defense.
Wisconsin Appeals Court Affirms Judgment for CU
The Court of Appeals of Wisconsin has affirmed a judgment allowing a credit union to repossess a vehicle in a lawsuit filed under the Wisconsin Consumer Act, rejecting the defendant’s argument that the underlying auto loan had been securitized and that she was entitled to use the loan’s proceeds to make her own payments. More details here.
WHAT THIS MEANS, FROM LAURIE NELSON OF AUTOSCRIBE: For creditors and companies serving the accounts receivable management industry, the practical lesson is straightforward: documentation must be complete, accurate, and readily retrievable. Before collection or recovery activity advances to litigation, the organization should be able to produce the operative agreement, evidence of assignment or ownership, account history and balance support, and any required default or right-to-cure notices.
The court also cautioned the borrower about false and irrelevant legal citations in her appellate briefs. The court did not determine that generative AI had been used, but warned that, if AI was the source, it can produce nonexistent cases or inaccurately describe real decisions.
The same control principle applies to both aspects of this case: verify the source. Creditors should preserve the source documents proving the obligation and their right to enforce it, while anyone using AI-assisted legal research must verify every citation and legal proposition against the original authority. Technology can make compliance work faster, but it is most valuable when paired with strong records and disciplined human review.
Case Over Collection of DMV Fee Survives Dismissal Motion, Then Settles
A District Court judge in Washington has denied a defendant’s motion for judgment on the pleadings in a Fair Debt Collection Practices Act and Fair Credit Reporting Act case, ruling that an unpaid fee for a Nevada Department of Motor Vehicles driver history printout may qualify as a “debt” under the FDCPA because the plaintiff voluntarily requested the service at a stated price. More details here.
WHAT THIS MEANS, FROM LORI QUINN OF MESSER STRICKLER BURNETTE: Plaintiff alleged that Transworld violated the FDCPA and FCRA by attempting to collect and report a debt arising from an unpaid Nevada DMV driver history printout transaction and related fees. The court denied the defendants’ motion to dismiss, finding that the obligation may qualify as a consumer debt under the FDCPA because it originated from a voluntary, consumer transaction, and further factual development is needed before deciding the issue.
What we learn from this decision: A debt associated with a government agency can still fall under the FDCPA when it arises from a voluntary consumer transaction rather than a mandatory fine, tax, or statutory obligation. It is important to follow Court procedure whereas here; the Plaintiff requested an expedited schedule.
Ind. Appeals Court Rejects Same Defendant’s Second Bid to Undo a Default Judgment
The Court of Appeals of Indiana has affirmed the denial of a defendant’s motion to set aside a default judgment obtained by a debt buyer, marking the second time in two months the court has ruled against the same defendant in a dispute with the same plaintiff. More details here.
WHAT THIS MEANS, FROM STACY RODRIGUEZ OF MUCH SHELIST: A recent Indiana appellate decision shines a spotlight on a recent trend – an increase in filings by pro se litigants. More than seven years after a default judgment was obtained against him and following a 2025 order of wage garnishment, a judgment debtor decided to fight back. He filed a motion to stay the order of garnishment and to set aside the judgment due to allegedly insufficient service. After the trial court denied those requests, he filed an appeal without the assistance of counsel.
The appellate court noted that the appellant’s brief included citations to court opinions that were factually distinguishable and procedurally dissimilar, and the record on appeal was missing trial court filings upon which the appellant purported to rely. Although the judgment creditor did not file an opposing brief – and one could guess that may have been an intentional decision considering the small judgment amount at issue – the pro se appellant still did not make a showing of error sufficient to set aside the judgment.
Although the consumer ultimately did not prevail, he managed to prepare and file multiple trial court motions and to navigate the appellate court system. With the rising use of AI-assistance to help pro-se litigants develop a legal plan of action and prepare court filings, this scenario is becoming more common, as many of us are witnessing firsthand. Although AI-generated court filings are typically easy to spot and often include flaws and errors rendering them susceptible to attack, they are still increasing litigation costs as more consumers elect to eliminate their own legal fees and instead generate their own AI-assisted court documents.
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.
