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Utah appellate court upholds ruling for defendant in FDCPA case
Recently, the Utah Court of Appeals affirmed a lower court’s decision granting summary judgment in favor of a defendant debt collector in an FDCPA case. According to the court, defendant’s registration as a debt collection agency had lapsed in Utah when it sent the plaintiff a debt collection letter. Later, when still not registered as a collection agency, defendant served plaintiff with a collection complaint and filed it with the district court. Plaintiff did not contest the complaint, leading to defendant moving for a default judgment, which the district court granted in 2020. Thereafter, plaintiff filed suit against defendant for illegally pursuing the prior collection action, and summary judgment was entered against plaintiff.
On appeal, the court turned to a recent similar case that supported the lower court’s decision that a registration violation was not actionable under the Utah Consumer Sales Practices Act (UCSPA). Regarding plaintiff’s FDCPA claim, the court found that plaintiff did not argue for a different resolution under the FDCPA compared to the Utah Code. Plaintiff contended that since both statutes prohibited the same practices in debt collection, her FDCPA claim should also be valid under the UCSPA. However, as plaintiff did not preserve any argument distinguishing her FDCPA claim from her UCSPA claim, the court affirmed the dismissal of both the FDCPA and UCSPA claims.
District Court rules against CFPB on Prepaid Rule disclosure requirement
On March 28, the U.S. District Court for the District of Columbia (D.D.C.) ruled in favor of a fintech digital wallet provider by granting its motion for summary judgment, denying the CFPB’s cross-motion, and vacating the CFPB’s Prepaid Rule’s short-form disclosure requirements for digital wallets. The suit focused on the applicability of the Prepaid Rule’s short-form disclosure requirements to digital wallet products. The plaintiff sued the CFPB, arguing the CFPB’s Prepaid Rule was arbitrary and capricious because, unlike for general-purpose reloadable (GPR) products, the CFPB failed to provide a “well-founded, non-speculative reason for subjecting digital wallets” to the Prepaid Rule’s short-form disclosure regime.
The CFPB’s Prepaid Rule mandated that pre-acquisition fee disclosures, which were intended to apply to GPR cards, be required for digital wallets––i.e., digital wallet providers would be required to provide consumers with a pre-acquisition fee disclosure in a formatted “short form.” While the judge agreed that this makes sense as applied to GPR products, digital wallet products were fundamentally different from GPRs and were not primarily “used to access funds or to function as a substitute checking account.” While the CFPB’s Advanced Notice of Proposed Rulemaking, did not initially include digital wallets, in the final Prepaid Rule, the CFPB included digital wallets for three reasons: (1) the CFPB reasoned that the Prepaid Rule should apply to digital wallets since digital wallets can carry funds (just like GPRs), and the fee structure “may not hold true in the future”; (2) the CFPB argued that the Prepaid Rule filled a regulatory gap for digital wallets; and (3) the CFPB claimed it “cast a wide net” on purpose to avoid a “patchwork regime.”
In response, the plaintiff argued that the disclosure requirement was arbitrary and capricious due to the Bureau having no rational justification for including digital wallets in the Prepaid Rule. Further, it was arbitrary and capricious because the CFPB did not comply with its role under Dodd-Frank by assessing the costs and benefits of the Rule. Finally, the plaintiff argued that the short-form disclosure regime violated the First Amendment.
While declining to rule on First Amendment issues, the court held that the CFPB lacked a “rational justification” for subjecting digital wallets to the Prepaid Rule’s short-form disclosure requirement, agreeing that the CFPB’s requirement was arbitrary and capricious, and that it had no basis for including digital wallets because they were materially different products. The judge also found the CFPB’s cost-benefit analysis (as mandated by Dodd-Frank) was deficient, as the “general” cost-benefit analysis did not fit for digital wallets.
Complaint filed against the USDA alleging discriminatory loan practices
On March 29, the U.S. District Court for the District of Columbia received a complaint by two Black farmers, among others as part of a class action, alleging that the United States Department of Agriculture (USDA) disproportionately denied them federal farm loans. The plaintiffs alleged the USDA admitted to having a pattern and practice of discrimination against racial and ethnic minorities. The complaint delved into a complex story and long-standing claims from the two primary plaintiffs, with one farmer sharing that a loan manager stated, “I don’t lend to your kind” (italics omitted).
The plaintiffs asserted six causes of action. The first cause of action was under ECOA, where the plaintiffs alleged the USDA violated the ECOA by discriminating based on race. Second, the plaintiffs asserted a cause of action for discrimination under the APA. Third, the plaintiffs asserted a due process claim under the Fifth Amendment, alleging that the USDA allocated funds disproportionally in favor of White farmers. Fourth, the plaintiffs sought a writ of mandamus barring USDA Committeemen from intervening in the loan process. Fifth, the plaintiffs asserted a claim for declaratory relief seeking a declaration that the USDA violated their rights. Finally, the plaintiffs asserted a claim to compel the production of requested documents under FOIA.
District Court severs NJFCRA requirement that agencies must provide credit disclosures in 10 languages
On March 27, the U.S. District Court for the District of New Jersey granted in part and denied in part both the Attorney General for the State of New Jersey’s (AG) motion for summary judgment and a plaintiff international trade association’s motion for summary judgment. In particular, the court held that the New Jersey Fair Credit Reporting Act’s (NJFCRA) 2019 amendment requiring national consumer reporting agencies (NCRAs) to provide consumer reports in a language other than English (if requested) was not preempted by the federal Fair Credit Reporting Act. However, the court stopped short of requiring NCRAs to provide the disclosures in “at least ten languages” in addition to Spanish on First Amendment grounds, explaining that the requirement imposed under the NJFCRA only required a rational basis and while a rational basis existed for Spanish (due to, among other things, the high percentage of Spanish speaking constituents in New Jersey), it did not exist for the additional languages given the relatively lower prevalence of those other languages. Accordingly, the court severed the provision that mandated that credit file disclosures be provided in at least 10 languages.
District Court grants MSJ in FCRA case in favor of defendant
Recently, a plaintiff sued under the FCRA, alleging that the defendant debt collector failed to conduct a reasonable investigation into a disputed credit report item. The plaintiff claimed to be a victim of identity theft and contended that an outstanding telephone debt should not have been listed on his credit report. The defendant maintained that it had performed its duties reasonably, relying on information from the phone company for which it acted as a debt collector. The defendant moved for summary judgment on the grounds that the plaintiff had not provided any evidence to support the claim of an unreasonable investigation by defendant. The U.S. District Court for the Southern District of Florida granted the motion for summary judgment, agreeing with the defendant that the plaintiff had failed to provide any substantial evidence regarding how the defendant’s investigation was conducted or why it was unreasonable.
Indiana appellate court finds debt company violated FDCPA and Indiana’s deceptive consumer sales act
Recently, the U.S. Court of Appeals of Indiana affirmed a state trial court’s decision concluding that the defendant was a debt collector under both the Indiana Deceptive Consumer Sales Act and the FDCPA when it purchased and collected defaulted debt. The Court of Appeals rejected the defendant’s argument in its motion for partial summary judgment arguing it was not a debt collector under both statutes because the plaintiff’s debt was owned by it and due to it, and it did not collect debts owed by another. The court reviewed the evidence that the defendant purchased defaulted debt and utilized agencies to contact consumers as its primary business pursuit. The court found the defendant was a “person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts” or a “debt collector” under 15 U.S.C. § 1692a(6). It likewise concluded that the defendant was a “debt collector under” the state statute because Ind. Code § 24-5-0.5-2(a)(13) incorporated the FDCPA’s definition of debt collector and “[t]he term includes a debt buyer (as defined in IC 24-5-15.5).”
District Court grants full remedies to CFPB, State AGs
On March 31, the U.S. District Court for the Western District of Virginia entered an order granting the plaintiff state attorneys general and CFPB’s requested remedies in full against a defendant accused of violating consumer protection laws in administering “immigration bonds” for indigent consumers facing deportation. As previously covered by InfoBytes, in 2021 the CFPB, and the Massachusetts, New York, and Virginia State Attorneys General filed a 17-count complaint against the defendant, a subsidiary of a bond service for non-English speaking U.S. Immigration and Customs Enforcement (ICE) detainees. The complaint accused the defendant of misrepresenting the cost of immigration bond services and deceiving migrants into continuing to pay monthly fees by making false threats of deportation for failure to pay. Last May, the court entered default judgment against defendants (covered by InfoBytes here). In the court’s most recent order, it granted the plaintiff’s request for injunctive relief, stating that the CFPB met the standard for injunctive relief under the CFPA, and it would “undoubtedly serve the public interest.” The court also noted that the plaintiffs’ claims supported injunctive relief under state laws as well. The order also included (i) $230.9 million in restitution to the CFPB; (ii) a $111 million civil money penalty to the CFPB; (iii) a $7.1 million civil money penalty to Virginia; (iv) a $3.4 million civil money penalty to Massachusetts; and (v) a $13.89 million civil money penalty to New York.
CFPB, FTC submit amicus brief in FCRA case
On March 29, the CFPB and the FTC filed an amicus brief in the U.S. Court of Appeals for the Eleventh Circuit, arguing that the FCRA mandated consumer reporting agencies (CRAs) when a consumer challenged the “completeness or accuracy of any item or information” in their file, must perform a “reasonable reinvestigation.”
In the underlying case, a consumer claimed she identified multiple inaccuracies in her credit report held by the defendant CRA, including issues with her name, address, and Social Security number. She allegedly contacted the defendant three times to dispute these errors, but the defendant directed her to resolve the issues with the misinformation sources and did not conduct its own reinvestigation as the consumer believed was required by the FCRA.
The consumer then filed a lawsuit against the defendant CRA for not performing the reinvestigation. The district court acknowledged that the defendant should have completed the reinvestigation under the FCRA but nonetheless concluded that the defendant did not violate the statute because it did not reasonably interpret that the FCRA did not require a reinvestigation.
The case will now be under the appeal process and the CFPB and FTC have submitted a joint amicus brief arguing that the FCRA required a CRA to reinvestigate a consumer’s dispute about personal identifying information, and that the district court correctly determined that a reinvestigation was required. The brief also argued that the district nonetheless erred in concluding that the defendant did not negligently or willfully violate the FCRA because the defendant’s interpretation of the FCRA was not “objectively reasonable.”
State AGs sue to block Biden's SAVE Plan for student loan forgiveness
On April 1, 10 state attorneys general filed a lawsuit in the U.S. District Court for the District of Kansas against President Biden, the Secretary of Education, and the Department of Education seeking to block the enactment of the SAVE Plan. As previously covered by InfoBytes, the SAVE Plan was an income-driven repayment plan, intended to calculate payments based on a borrower’s income and family size, rather than the loan balance, and forgave balances after several years since repayment. According to the complaint, the government released a rule for the new SAVE Plan intended to eliminate at least $156 billion in student debt as the second step in a three-part loan forgiveness initiative. The first step involved an attempt to cancel $430 billion in student loans under the HEROES Act, which the U.S. Supreme Court ruled unconstitutional in Biden v. Nebraska.
The SAVE Plan assumed $430 billion in loans would be forgiven beforehand, but after the Supreme Court's decision, the defendants allegedly did not revise the cost estimate in anticipation of overturning the case. This oversight led to a significant underestimation of the SAVE Plan's true cost; plaintiffs alleged.
Plaintiffs further claimed that the SAVE Plan was written before the Supreme Court's ruling in Biden v. Nebraska and thus included outdated statements of confidence in the defendants' authority to pursue debt relief. The rule would take effect on July 1, but defendants allegedly have already started forgiving loans for some individuals before this date. The complaint alleged that on February 21, the Department of Education forgave the debt of 153,000 borrowers, which the state attorneys general claimed violated Biden v. Nebraska.
Plaintiffs brought claims under the Administrative Procedure Act, contending that the Department of Education exceeded its authority under the Higher Education Act of 1965 by issuing the rule and that the rule would be arbitrary and capricious since defendants failed to account for the full cost of the rule.
Trade groups sue Colorado Attorney General to block enforcement of law limiting out-of-state bank charges on consumer credit
On March 25, three trade groups filed a lawsuit in the U.S. District Court for the District of Colorado, against the Colorado Attorney General and the Administrator of the Colorado Uniform Consumer Credit Code to prevent enforcement of Section 3 of House Bill 23-1229, which was signed into law last year to limit out-of-state bank charges on consumer credit (the “Act”). As previously covered by InfoBytes, the Act amended the state’s Uniform Consumer Credit Code to opt out of the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) provision that allowed state-chartered banks to charge the interest allowed by the state where they are located, regardless of the location of the borrower and regardless of conflicting out-of-state law. The Act would go into effect on July 1.
According to the complaint, the Act “far exceed[s]” the authority Congress granted Colorado under DIDMCA and would be deemed “invalid on its face.” Plaintiffs alleged that Colorado ignored the federal definition of where a loan was deemed to be “made,” imposing “its state interest-rate caps on any ‘consumer credit transaction[] in’ Colorado,” including “any loan to a Colorado consumer by any state-chartered bank that advertises on the internet in Colorado.” Plaintiffs further alleged that the Act’s opt out “is preempted by DIDMCA and violates the Supremacy Clause of the U.S. Constitution by attempting to expand the federally granted opt-out right to loans not actually ‘made in’ Colorado under federal law,” and “violates the Commerce Clause because it will impede the flow of interstate commerce and subject state-chartered banks to inconsistent obligations across different states.” The Plaintiffs also alleged that Colorado’s stated goal of combatting “predatory, payday-style lending” will not be accomplished through the opt out, as plaintiffs’ members are not payday lenders and offer “a wide variety of useful, familiar, everyday credit products” that “are provided at a range of rate and fee options, which sometimes—to account for credit risk—are above Colorado’s rate and fee caps, but within the rate caps allowed by DIDMCA.” Furthermore, plaintiffs warn that the Act “will prevent Plaintiffs’ members from offering these mainstream products to many Colorado consumers,” while “national banks will still offer these very same loan products to Colorado residents at interest rates in excess of Colorado’s interest-rate and fee caps.” Plaintiffs urged the court to issue a ruling stating that the Act “is void with respect to loans not ‘made in’ Colorado as defined by applicable federal law” and to enjoin Colorado from enforcing or implementing the Act with respect to those loans.