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.
State Appeals Court Revives FDCPA Class Action Filed by Parent Named in Collection Letter
The Superior Court of Pennsylvania has reinstated a Fair Debt Collection Practices Act class action that had been thrown out for lack of standing, ruling that a parent who received a collection letter about his minor son’s ambulance bill was allegedly obligated to pay the debt and therefore qualifies as a consumer. More details here.
WHAT THIS MEANS, FROM DAVID GRASSI OF FROST ECHOLS: In an unusual move, the trial judge who dismissed this FDCPA case for a lack of standing told the appellate court that the decision was wrong and they should reverse. The named plaintiff brought a putative class action under the FDCPA stemming from a letter he received from the defendant. The obligation was for an ambulance ride for plaintiff’s minor son, and the letter was directed to the “parent” of the minor seeking collection. The trial court initially dismissed based on Christy v. EOS CCA, 905 F. Supp. 2d 648 (E.D. Pa. 2012).
The plaintiff filed a motion to reconsider and appeal the same day. The trial judge would have granted the motion to reconsider but was divested of jurisdiction, so filed a supplemental opinion with the appellate court saying the decision should be reversed. Both the trial judge and the appellate court distinguished Christy because the letter there was sent to the plaintiff regarding a debt owed by the plaintiff’s adult son of the same name, so it was not an effort to collect the debt from the individual who brought suit. Here, the letter did try to collect from the plaintiff as the guardian of his minor son. Since this was a threshold standing issue, the appellate court did not delve into the substance of the letter.
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Judge Grants MTD in FDCPA Suit Over Two Letters Sent Same Day
A District Court judge in New York has dismissed a proposed class action accusing a collection agency and a debt buyer of violating the Fair Debt Collection Practices Act by sending two collection letters on the same day, ruling the plaintiff never alleged an injury concrete enough to put her in federal court. More details here.
WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: Consumer lawyers are still auditing your collection letters and reporting the results in FDCPA lawsuits. With greater frequency, they are doing this for free because their clients don’t have standing to maintain those lawsuits. Unfortunately, litigation is expensive, even when you win. Regular letter reviews, testing, and internal audits can help you avoid the technical errors that lead to lawsuits.
CFPB Complaint Doesn’t Trigger Furnisher’s Duty to Investigate, Judge Rules
A Magistrate Judge in Oregon has dismissed a Fair Credit Reporting Act lawsuit against a lender, ruling that a consumer who routed his dispute through the Consumer Financial Protection Bureau rather than a credit reporting agency never triggered the furnisher’s duty to investigate. More details here.
WHAT THIS MEANS, FROM XERXES MARTIN OF MARTIN GOLDEN LYONS WATTS MORGAN: In Hall v. JPMorgan Chase Bank, N.A., the District of Oregon dismissed an FCRA claim because the plaintiff failed to plead each required element of a furnisher claim under § 1681s-2(b). Although the plaintiff alleged inaccurate reporting and an inadequate investigation, he did not allege that he first disputed the information with a consumer reporting agency or that the CRA then notified Chase. The court emphasized that direct notice to the furnisher, or even a complaint through the CFPB, is not enough to trigger a furnisher’s § 1681s-2(b) duties. The takeaway is simple: FCRA claims must be pled element-by-element, and conclusory allegations of inaccurate reporting are not enough.
State Appeals Court Reverses $8.3K Deficiency Win For Debt Buyer
A Texas Court of Appeals of Texas has reversed a judgment that awarded a debt buyer $8,323.75 on a deficiency claim and rendered judgment that it take nothing, ruling that no evidence supported a finding that the sale of the repossessed collateral was commercially reasonable. More details here.
WHAT THIS MEANS, FROM MONICA LITTMAN OF KAUFMAN DOLOWICH: The takeaway from this case is for a creditor to make sure that all required elements to seek a deficiency balance related to a repossessed vehicle are met. If they are not and even if the debtor did not pay, the debtor can avoid liability. The debtor challenged on appeal that the sale of the repossessed vehicle was not done in a commercially reasonably way, which was a requirement under Texas law. Once the debtor did this, the creditor was required to prove reasonableness. The appellate court reviewed the trial court’s findings and found there was no evidence to support that the sale was commercially reasonable, such as where the sale occurred, if it was advertised, or whether the auction was private or public. The creditor also did not file an appellate brief here.
Nevada Appeals Court Affirms Dismissal of ‘Payment in Full’ FCRA Suit Against Auto Lender
The Court of Appeals of Nevada has affirmed the dismissal of a breach of contract and credit reporting lawsuit against an auto lender that deposited three checks marked as payment in full for a $21,000 loan balance, along with a $28,979.50 attorney fee award against the plaintiff. More details here.
WHAT THIS MEANS, FROM ARTHUR SANDERS OF BARRON & NEWBURGER: As we are all aware, there has been an explosion of lawsuits brought by self-represented plaintiffs. Some of the lawsuits have merit but many do not. This case falls into the latter category.
Plaintiff financed the purchase of a motor vehicle and unilaterally decided thereafter that he would rescind the agreement and send the lender some small payments in full settlement of his payment obligations. The lender did not agree to any rescission and pursued plaintiff for the amount due.
Plaintiff then sued the lender, invoking the doctrine of Accord and Satisfaction. There is no mention of any attempt to relinquish possession of the vehicle. Unsurprisingly, the Court found no Accord and Satisfaction as there was no dispute as to the amount due.
Plaintiff also sued for negligent credit reporting by the lender but neglected to contact any Credit Reporting Agency to dispute the reporting. This claim was also dismissed for failure to follow the requirements of the FCRA.
Upon the lender’s application, plaintiff was ordered to pay $28,000 in attorney fees to the lender.
The plaintiff appealed and lost on all counts. The Appeals Court emphasized the lack of cogent arguments made by the plaintiff.
Sadly, many of us are defending these types of frivolous claims on a routine basis.
Fla. Appeals Court Affirms Dismissal of FCCPA Suit Over Attorney’s Fee Threat in Demand Letter
The Second District Court of Appeal of Florida has affirmed the dismissal of a Florida Consumer Collection Practices Act claim brought over a demand letter that warned of attorney’s fees, leaving in place a trial court’s conclusion that the letter did not assert a legal right the sender knew did not exist. More details here.
WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER BURNETTE: My first instinct after reading this opinion was to Google the defendant law firm. Sure enough, it specializes in estate planning, not collections. This attorney probably never thought of the money in dispute as a “consumer debt,” let alone of himself as a debt collector. Fortunately, this firm avoided the outcome that debt collectors and collection firms experienced several years ago, when class actions over references to attorneys’ fees in letters and pleadings were the claim du jour.
But the dissent still does all of us a great service by reminding us that the FCCPA’s reach is so much broader than the FDCPA. In Florida, any person who tries to collect a consumer debt is subject to the FCCPA. And “any person” means ANY PERSON—the statute is not just limited to creditors and debt collectors that meet some statutory definition, and there is no attorney exemption. Forget about “primary business purpose.” And what, exactly, constitutes a “consumer debt?” According to the dissenting judge and probably others, broadly construing the FCCPA means stretching the definition of a “consumer debt” to its limits, where a verbal promise to pay for half a wedding that later ceased to “align with” life will get you past “go.”
TL;DR: Florida is still Florida. Collect with caution.
Judge Dismisses FDCPA Suit Over Collection Letter Sent After Verification Request
A District Court judge in Massachusetts has dismissed a Fair Debt Collection Practices Act lawsuit accusing a collection agency of continuing to collect after receiving a verification request, ruling that such a request pauses collection only on the account the consumer actually disputed. More details here.
WHAT THIS MEANS, FROM SARAH DOERR OF COZEN O’CONNOR: In holding that the Plaintiff’s verification request only pertained to the issue it explicitly referenced, the Sullivan decision vindicates savvy debt collectors’ interpretation of section 1692g. Debt collectors should interpret verification requests narrowly and respond only to the dispute(s) raised by the debtor-consumer. Even pro se plaintiffs cannot get around what is plain on its face: only the debt disputed in the verification request is subject to cessation of collection efforts.
Judge Rules Furnisher’s ACDV Response Counts as Furnishing Information
A District Court judge in Florida has granted a plaintiff’s motion for partial summary judgment on liability in a Fair Credit Reporting Act case, ruling that a furnisher provided inaccurate information when it verified a delinquency history that a credit reporting agency had scrambled on its own. More details here.
WHAT THIS MEANS, FROM ROSHNI PATEL OF TROUTMAN PEPPER LOCKE: In a matter of first impression, a Florida district court held that an Automated Credit Dispute Verification (“ACDV”) response can constitute “information provided” to a consumer reporting agency (“CRA”) under the Fair Credit Reporting Act, § 1681s-2(b), extending furnisher liability beyond original monthly reporting submissions. In Martinez v. Green Planet Mortgage, a mortgage servicer accurately reported a borrower’s delinquency history and subsequent payoff, but a CRA later shifted the delinquency window by several years erroneously. The servicer tice confirmed the erroneous dates as accurate through the ACDV process without consulting its own records. The court granted summary judgement on liability, finding the servicer’s investigation unreasonable as a matter of law given that a straightforward review of its internal records would have revealed the discrepancy. The decision suggests that furnishers may face liability under § 1681s-2(b) where their dispute investigation process fails to account for discrepancies between CRA-reported data and their own records, even when the inaccuracy originated with the CRA.
Filing the Same Motion Twice Doesn’t Buy More Time to Appeal
The Court of Appeals for the Eleventh Circuit has dismissed an appeal in a Fair Credit Reporting Act and Fair Debt Collection Practices Act case as untimely, holding that a second, nearly identical motion for a preliminary injunction cannot restart the clock for appealing the denial of the first one. More details here.
WHAT THIS MEANS, FROM JASON TOMPKINS OF BALCH & BINGHAM: During my first couple of months of practicing law, one of my mentors told me, “We can fix anything except a late notice of appeal.” The plaintiff learned that lesson in this case. He did not appeal the order denying his initial motion for preliminary injunction. In an attempt to get a new appeal window, he later filed a second, substantively identical motion for preliminary injunction and filed a notice of appeal after it was denied. But it was too little too late. The Eleventh Circuit dismissed the appeal as untimely, noting that parties cannot reset the appeal deadline by re-filing motions previously denied. Only “changed circumstances, new evidence, or a change in the law” can re-open that door, and, in this case, escalating harm was not enough. These deadlines apply equally to all parties, so whether you’re defending against an appeal or seeking one, you should be familiar with appeal deadlines. Missing them is a mistake you cannot often fix.
Reporting an Account as ‘Discharged’ When It Was Paid on Time Is a Factual Error, Not a Legal One, Judge Rules in FCRA Case
A District Court judge in Illinois has denied an auto finance company’s motion to dismiss a Fair Credit Reporting Act claim, rejecting all four of the arguments the furnisher raised and finding that a consumer plausibly alleged her account was reported as discharged in bankruptcy when she had actually paid it on time the whole way through. More details here.
WHAT THIS MEANS, FROM BRENDAN LITTLE OF LIPPES MATHIAS: Plaintiff filed Chapter 13 bankruptcy and her plan was eventually approved. While the bankruptcy was open, Plaintiff continued to make timely payments to Ford for her vehicle outside of the bankruptcy. Plaintiff’s bankruptcy was eventually discharged and the documentation reflected that no payments were made to Ford through the bankruptcy. Thereafter, Plaintiff pulled her credit report and learned her Ford account was reported to be in “bankruptcy status”. Plaintiff disputed this tradeline because her Ford account was not included in her bankruptcy repayment plan, Ford never received payments through the bankruptcy and all of her payments to Ford were timely. Upon receiving the dispute, Ford modified its reporting to reflect “discharged through Chapter 13 bankruptcy.” Ford moved to dismiss Plaintiff’s FCRA causes of action and the district court denied the motion determining that: (1) Plaintiff had Article III standing; (2) whether Plaintiff’s account was discharged in Plaintiff’s bankruptcy was not a legal challenge because no legal analysis was needed to determine whether Ford accurately reporting that the account was discharged in bankruptcy; and (3) whether Ford conducted a reasonable investigation of Plaintiff’s dispute could not be resolved at the motion to dismiss stage.
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.
