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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 Grants Default Judgment for Plaintiff in FDCPA Case Over Text Message Sent After Cease Request
A District Court judge in Florida has granted a plaintiff’s motion for default judgment in a Fair Debt Collection Practices Act case after the defendant replied to a cease communication text message with an inquiry about the plaintiff’s ability to make a partial payment. The plaintiff is seeking almost $5,000 in damages and attorney’s fees. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW & CULBERTSON: Campos v Williams Rush & Associates is a default judgment case that highlights a number of things we all regularly see. First, the consumer texted “I decline to pay,” but the collector asked for partial payment. We don’t know for sure, but perhaps it did not realize the declination was a “cease” request. Second, the consumer’s communication was via text. This highlights that agencies have to monitor the incoming texts (and emails, faxes, letters, calls). Third, the consumer sued two days after the “offending” text. The timing smacks of a set-up.
Fourth, and as to damages, the plaintiff asked for the full statutory $1,000 but the court awarded $500. As we know, plaintiff’s claim the full amount for every violation, and this helps establish that such an amount is unlikely (though a lower award would be preferred). Fifth, the attorney sought $3869.48 in fees/costs, which is perhaps less than many of the early demands seen on flied claims. Finally, as to the fees, just an itemization was filed. The court said counsel has to file an affidavit to support the reasonableness of the fees and that the rate is reflective of the market for attorneys in the community. There thus was a lot in this short ruling.
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Judge Grants MSJ for Defense in FDCPA Case Over Dispute Request
A District Court judge in Oregon has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices act case, ruling the plaintiff’s requests when seeking validation of the debt fell outside the scope of what the defendant had to provide and that the defendant did not validate the statute by sending the same information when the plaintiff initiated multiple disputes about the same debt. More details here.
WHAT THIS MEANS, FROM LORAINE LYONS OF MARTIN GOLDEN LYONS WATTS MORGAN: Debt collectors often receive verification of debt requests asking for extensive documentation. In this case, the Plaintiff demanded either a sworn statement from the original creditor or a notarized statement from a qualified representative, to verify the debt. The debt collector responded by providing documents evidencing the underlying debt, including the name and address of the original creditor, a copy of the judgment, and records of garnishment and collections. The court ruled in favor of the Defendant stating that the provided information exceeded the requirements of the FDCPA.
This is a positive case for similar situations where debtors insist proper verification of debt must include sworn or notarized statements from the original creditor or their representatives.
Consumers, Advocates to Get Say in CFPB’s Open Banking Standard
The Consumer Financial Protection Bureau has finalized a rule that outlines the qualifications for becoming a recognized standard-setting body. These bodies will play a crucial role in helping companies comply with the upcoming Personal Financial Data Rights Rule. This move aims to accelerate the transition to open banking in the United States, ensuring a fair and competitive environment for consumers and financial institutions alike. More details here.
WHAT THIS MEANS, FROM ARI DERMAN OF CLARK HILL: Federal agencies must involve private sector leadership in development of industry standards pursuant to Circular A-119 from the Office of Management and Budget. The CFPB is likely checking some boxes here. Essentially, this is a very procedural step in the process to give the illusion of choice while looking for a standard setter to implement what they already laid out in October’s proposed rulemaking. Also, while the CFPB is looking for supposed input from the financial services industry through this Rule, it did not devote much time to considerations for small businesses, who will likely be impacted by the rule’s adoption.
NJ Appeals Court Affirms Dismissal of Hunstein Suit
The Appellate Division of the Superior Court of New Jersey has upheld the dismissal of a Fair Debt Collection Practices Act case — a Hunstein one — ruling that there was nothing associated with the defendant’s use of a third-party vendor to print and mail a collection letter that was “abusive, deceptive or unfair” under the statute. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: Most of you out there have heard the term “zombie debt.” These two cases personify “zombie causes of action.” For whatever reason, we are blessed to have extremely several persistent Plaintiff’s attorneys in New Jersey (and New York, see below) who refuse to accept defeat. They actually appear to embrace it and continue to file the same claims no matter that they have already lost 99% of the time. In this case it’s the letter vendor claim, also known as “Hunstein claims” after the infamous 11th Circuit litigation.
Plaintiffs’ attorneys Yongmoon Kim and Daniel Zemel, have filed at least 40 of these cases in New Jersey and so far they have only survived a motion to dismiss in one. Zemel also files these cases in Pennsylvania where he maintains a zero batting average.
One might think that these two Appellate Divisions would put a damper on further litigation of the claim. But like any aficionado of zombie films knows, it takes more than a shot to the head to put them down. I have been informed that there are several more appeals pending on the issuewhich had been stayed pending these decisions which will now go forward to see if Plaintiffs can get a different result. What do they say about someone that keeps doing the same thing over and over yet expects a different result? In line with this repeated behavior is attorney David Barshaywho continues to file these claims in New York State courts (I got a new one Friday), despite the fact he keeps losing there. To my knowledge he has not appealed any.
Where we hurt ourselves as an industry is every time someone pays these guys to go away because it’s cheaper than litigating. All that does is encourage these types of claims which have been found to be meritless. As a last point shout out to Aaron Easley and Sean O’Brian for their success on these appeals. However in the future they may want to consider silver ink.
Claim That Debt Not Owed Not Enough For Collection Letters to Be Harassing, Judge Rules
Courts have long been asked to put objective parameters around subjective terms. In the case of the Fair Debt Collection Practices Act, for example, what does it mean to harass, oppress, or abuse a consumer? A District Court judge in Missouri has granted a defendant’s motion to dismiss, although he did deny the defendant’s motion for sanctions in an FDCPA case over a validation letter that was sent to the plaintiffs’ attorney. More details here.
WHAT THIS MEANS, FROM CAREN ENLOE OF SMITH DEBNAM: Much of the FDCPA is couched in aspirational and general terms. For instance, section 1692d prohibits a debt collector from engaging in conduct which harasses, abuses or oppresses a person in connection the collection of a debt. The section then provides six non-exclusive examples of conduct which would meet that standard.
In Ross, the parties were engaged in an underlying real estate dispute. The attorney for the prior homeowner (also a lawyer at that firm) sent a demand letter to the Rosses’ attorney. Because the Rosses contend the amount demanded (attorney’s fees) is not owed, they filed an FDCPA action alleging that the letters sent to their attorney violated 15 USC §1692d. Explaining the basis for their claim, the plaintiffs asserted that because they did not owe the defendant any money, the letters were inherently an attempt to harass. The Court quickly dispensed with the claim, noting certain deficiencies with the Complaint – for instance, the lack of any allegation or argument which explained how letters the Court termed as “mundane” could rise to the level of harassing, oppressing or abusive, particularly when sent to the attorney and not the plaintiffs directly. The Court also noted that to the extent the plaintiffs contended the amount was not owed, they could have proceeded under section 1692e, but did not do so.
The bottom line? Plaintiffs must allege sufficient allegations to connect the dots between the asserted statutory violation and the underlying factual allegations in order to survive a motion to dismiss.
CFPB Creates Corporate Offender Registry for Non-Banks
The Consumer Financial Protection Bureau yesterday announced the publication of a final rule that will create a registry aimed at detecting and deterring corporate offenders who have violated consumer protection laws. This registry will track companies subject to federal, state, or local government or court orders, helping to identify repeat offenders and trends in recidivism. This initiative is part of the CFPB’s broader effort to hold lawbreaking companies accountable and curb corporate recidivism. More details here.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF TROUTMAN PEPPER: The CFPB’s final rule represents a significant regulatory development for nonbank entities. It is crucial for these entities to understand the requirements of the rule and ensure compliance. The CFPB may publish certain information about registered covered nonbanks and covered orders on its website, and noncompliance could lead to significant reputational and regulatory risks. It also would not be surprising to see an entity that suffers an adverse consequence as a result of being labeled a repeat offender considering ways to challenge the rule, perhaps on the basis of the earnings argument making the rounds lately.
CFPB Issues Warning About Contractual Fine Print
The Consumer Financial Protection Bureau yesterday issued a new circular warning companies in the financial services industry against including unlawful or unenforceable terms in contracts for consumer financial products and services. This move is part of the CFPB’s ongoing efforts to protect consumer rights and ensure fair practices in the financial industry. More details here.
WHAT THIS MEANS, FROM MARISSA COYLE OF FROST ECHOLS: The CFPB issued a Circular (a document issued to all parties who have authority to enforce federal consumer financial law – such as state attorney generals and regulators – to assist in promoting a consistent approach across the various enforcement agencies) outlining “ ‘covered persons’ and ‘service providers’ must comply with the prohibition on deceptive acts or practices in the Consumer Financial Protection Act (“CFPA”).” This Circular focuses on the inclusion of unenforceable contractual terms with consumers. Ultimately, if you are a “covered person” or “service provider” and you include unlawful or unenforceable terms in a contract with a consumer for a consumer financial product or service, you may be violating the CFPA. The CFPB states that the deception is not usually remedied by including broad language such as “subject to applicable law” or “except where unenforceable.” The Circular includes examples of problematic contractual provisions. For example, the inclusion of language that suggests a consumer is waiving his/her right to file for bankruptcy or waiving his/her right to retain counsel is deceptive and misleading, thus violating the CFPA.
If you’re subject to this Circular, take the time to evaluate your contracts with consumers to ensure they do not include terms that would be misleading or deceptive to consumers.
Judge Dismisses FCRA, FDCPA Claims For Failure to State Claim
A District Court judge in North Carolina has granted a defendant’s motion to dismiss after it was sued for allegedly violating the Fair Credit Reporting Act and the Fair Debt Collection Practices Act, ruling that the plaintiff’s amended complaint did not contain enough information to allege that a violation of either statute had taken place. More details here.
WHAT THIS MEANS, FROM JONATHAN ROBBIN OF J. ROBBIN LAW: This case presents the classic situation of a plaintiff attempting to fit a square peg into a round hole. The Court rightfully held that not only did the Complaint fail to have jurisdiction over the non-resident creditor, because the complaint alleges no actions took place within the state, but also, the pleading was completely deficient to state a claim. At best, the claim alleged was for furnishing incorrect information, but there is simply no private right of action under the FCRA for this claim. Again, trying to stretch the factual allegations to create a claim plaintiff also argued a violation of the FDCPA. But the Court correctly determined that not only was there no specific allegation that defendant was a debt collector, but also no allegation to suggest that even if it was a debt collector there was any conduct violative of the FDCPA. Thus, it is essential to move to dismiss cases, such as this, where a plaintiff seeks to manufacture a claim where none exists.
I’m thrilled to announce that Bedard Law Group is the new sponsor for the Compliance Digest. Bedard Law Group, P.C. – Compliance Support – Defense Litigation – Nationwide Complaint Management – Turnkey Speech Analytics. And Our New BLG360 Program – Your Low Monthly Retainer Compliance Solution. Visit www.bedardlawgroup.com, email John H. Bedard, Jr., or call (678) 253-1871.
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