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Maryland updates prohibited items reported on consumer credit reports
On May 9, the Governor of Maryland approved SB 41 (the “Act”) which will change the requirements on prohibitions for consumer reporting agencies as to what information they may include in consumer credit reports.
The Act will prohibit consumer reporting agencies from reporting bankruptcies more than 10 years before the credit report would be issued, suits and judgments of more than seven years, paid tax liens greater than seven years, accounts placed for collection of more than seven years, arrest records or other crime reports of greater than seven years, and “any other adverse information that predates the report” by more than seven years. These reporting prohibitions do not apply to credit transactions with a principal amount of at least $150,000, as well as both the underwriting of life insurance with a face value of at least $150,000 or the employment of someone with a salary of at least $75,000. The Act will go into effect on October 1.
Arizona court upholds debt collection act from industry challenge
On May 3, the Arizona Court of Appeals affirmed the state superior court’s decision to uphold Arizona’s Predatory Debt Collection Act (the “Act”) after being challenged by judgment creditors. The Act lowered the interest rate cap on medical debt, increased the amount of the homestead exemption, increased the dollar value of personal property and assets exempt from creditor claims, and increased the amount of exempt earnings in garnishment actions. The plaintiffs alleged that the “Saving Clause” of the Act was unconstitutionally vague and unintelligible due to its failure to directly state whether the Act would apply when a judgment pre-dates the Act but a wage garnishment proceeding post-dates the Act. The appellate court found that the Saving Clause was not vague or unintelligible as the language “provides a framework and examples consistent with how Arizona courts have long ensured prospective application of the law[.]” As such, the appellate court upheld the superior court’s decision and could not rule the Act as unconstitutional.
3rd Circuit finds appellant does not have FDCPA standing where only injury was confusion
On April 26, the U.S. Court of Appeals for the Third Circuit held that an appellant who sued a debt collector for allegedly violating the FDCPA did not have standing to bring her claim because she “failed to plead a concrete injury” under Article III. The appellant received a debt collection letter that failed to explicitly state if the money was owed to the original creditor or the current creditor and then filed a putative class action alleging a violation of the FDCPA. The appellant asserted that the uncertainty caused her confusion, but failed to allege that she suffered any other harm as a result of the confusion and uncertainty. Relying on precedent, the Third Circuit found that while an intangible harm such as confusion or uncertainty could qualify as a cognizable injury, it must still “bear a ‘close relationship’ to an injury ‘traditionally recognized as providing a basis for a lawsuit in American courts[.]’” Failing to do so, the court ruled that the appellant did not reach the threshold for establishing Article III injury. Therefore, the Third Circuit vacated the judgment of the district court (a dismissal for failure to state a claim) and remanded the case with instructions to dismiss the complaint.
11th Circuit finds plaintiffs failed to show FCRA information is “objectively” available
On April 24, the U.S. Court of Appeals for the Eleventh Circuit found a defendant, a hotel timeshare company, not liable to two former clients for inaccurately reporting their unpaid debts to a consumer reporting agency (CRA) in violation of the FCRA, as alleged.
The plaintiffs stopped making monthly payments and, citing the terms of their timeshare agreements, considered their obligations to the company canceled. The hotel timeshare company disagreed and reported the plaintiffs’ debts to a CRA, prompting the plaintiffs to sue for an alleged inaccurate furnishing of data. The hotel timeshare company moved for summary judgment and the district court granted it after finding the alleged inaccuracies related to legal, not factual, disputes and therefore not actionable under Section 1692s-2 of the FCRA. The district court reasoned that “a plaintiff asserting a claim against a furnisher for failure to conduct a reasonable investigation cannot prevail… without demonstrating that had the furnisher conducted a reasonable investigation, the result would have been different.”
On appeal, the 11th Circuit held that furnishers were not required to resolve “contractual dispute[s] without a straightforward answer” when furnishing information, even if they could be required “to accurately report information derived from the readily verifiable and straightforward application of law to facts.” Because the underlying contract dispute in this case was subject to reasonable dispute, the court found that the information was not “inaccurate” and thus the plaintiffs did not have actionable claims against the defendant under the FCRA. The court pointed out that the consumers could sue for a declaratory judgment that they did not owe the debt and, if successful, use that as a “cudgel” to persuade a furnisher to stop reporting a debt. But the plaintiffs here had not done that yet. For these reasons the 11th Circuit affirmed the lower court’s judgment. As previously covered by InfoBytes, the CFPB and FTC filed an amicus brief while the case had been appealed in favor of the plaintiffs arguing that a furnisher’s duty under the FCRA would apply not only to factual disputes but also to disputes that are legal in nature.
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).”
Washington State Attorney General obtains civil penalties against debt collection agency for medical debt collection practices
On March 19, the Washington State Attorney General (AG) obtained an order from the King County Superior Court providing that a debt collection agency must pay civil penalties for allegedly failing to comply with the Washington Collection Agency Act and Consumer Protection Act when collecting medical debts, specifically by failing to provide the required disclosures in its consumer communications. The court found that the debt collection agency sent 82,729 debt collection notices to medical debtors without the necessary disclosures, which included notification of the debtor’s right to request the original or redacted account number assigned to the debt, the date of last payment, and an itemized statement. The notices also did not inform the debtor that the debtor may be eligible for charity care from the hospital or provided contact information for the hospital. According to the AG’s Office, the collection agency “unlawfully collected payments from … patients without providing critical information about their rights when faced with medical debt. By excluding the legally required disclosures about financial assistance in its collection letters, [the collection agency] created barriers that kept patients who likely qualified for financial assistance from learning about and accessing help with their hospital bills.”
The court ordered a civil penalty of $10 per violation for the debt collection agency’s 82,729 alleged violations of the state Consumer Protection Act, totaling $827,290. Additionally, the court ordered the debt collection agency to reimburse the AG’s office for the costs of bringing the case, which is estimated to exceed $400,000 and to update its practices to comply with Washington law. In determining the civil penalty amount, the court found, among other things, that the debt collection agency acted in bad faith by “fail[ing] to take basic compliance steps,” and “fail[ing] to obtain the correct license … maintain an office in the state, and … include the mandatory disclosures on medical and hospital debt.”
As previously covered by InfoBytes, the AG successfully sued the nonprofit health system in early February, entering a consent decree pursuant to which the health system must pay $158 million in patient refunds, debt forgiveness, and AG costs.
Trusts are covered persons subject to the CFPA, 3rd Circuit upholds CFPB FDCPA case
On March 19, the U.S. Court of Appeals for the Third Circuit filed an opinion remanding a case between the CFPB and defendant statutory trusts to the District Court. After issuing a civil investigative demand in 2014, the CFPB initiated an enforcement action in September 2017 against a collection of 15 Delaware statutory trusts that furnished over 800,000 private loans and their debt collector for, among other things, allegedly filing lawsuits against consumers for private student loan debt that they could not prove was owed or was outside the applicable statute of limitations (covered by InfoBytes here). Then, early last year, the parties settled and asked the court to enter a consent judgment, which was denied (covered by InfoBytes here).
The 3rd Circuit addressed two questions: (i) whether the trusts are covered persons subject to the CFPA; and (ii) whether the CFPB was required to ratify the underlying action that questioned a constitutional deficiency within the Bureau. On the statutory issue, the court found that the trusts fell within the purview of the CFPA because trusts “engage” in offering or providing a consumer financial product or service, specifically student loan servicing and debt collection, as explicitly stated in the trust agreements each trust entered. Regarding the constitutional question, the defendants argued that the Bureau needed to ratify the underlying suit because it was initiated while the agency head was improperly insulated, and since the Bureau ratified it after the statute of limitations had run, the suit was untimely. The court disagreed and found that the defendants’ analysis of the here-and-now injury “doesn’t go far enough,” therefore the CFPB did not need to ratify this action before the statute of limitations had run because the impermissible insulation provision does not, on its own, cause harm.
7th Circuit says plaintiffs should have produced evidence to prove concrete injury
On February 29, the U.S. Court of Appeals for the Seventh Circuit decided that while an interruption of self-employment can cause a concrete loss for a plaintiff to sue, that loss must be established by evidence at summary judgment. The loss in question involved a consumer debt in arrears sold by a bank to a debt collection agency. Two individual plaintiffs owing the underlying debt sued the debt collection agency under 15 U.S.C. §1692e of the FDCPA when the debt collection agency attempted to collect on the debt owed without relaying that the bank had not verified the balance of the debt. The judge opined that rather than claiming they had incurred any concrete loss (e.g., a loss of income, payment of funds, etc.), plaintiffs instead filed an affidavit to state that the debt had “interrupted my self-employment” because they were focused on thinking about the debt and spent time working through records to confirm the debt owed. The judge agreed with the plaintiffs’ claim that debt collection efforts can very well cause a delay in receiving self-employment income, which is a “form of loss”; however, the judge also held that plaintiffs must show evidence of injury at the summary judgment stage, as this is the “put up or shut up” stage in litigation. Ultimately, the plaintiffs failed to show any evidence that debt collection efforts caused them concrete harm, other than interrupting a productive day of work.
District Court finds “negative emotions” alone do not establish standing under the FDCPA
Recently, the U.S. District Court for the Eastern District of Missouri granted a debt collector’s motion to dismiss, finding that the plaintiff’s allegations of injury after receiving one letter that violated the FDCPA did not establish standing. The plaintiff sued the debt collector under Sections 1692e and 1692g of the FDCPA, alleging that the defendant (i) made false and misleading representations, and (ii) continued to collect the debt without proper validation by sending the plaintiff a collection letter with the wrong account number and purporting the plaintiff is personally liable for her deceased husband’s medical debt. The plaintiff asserted her injuries because of receiving the letter included expending time and money to mitigate the risk of future financial harm and fear, anxiety, and stress, which “manifested physically in the form of increased heartrate.”
The court found that the plaintiff did not allege sufficient facts to establish, or for the court to infer, a tangible injury because the plaintiff only stated she lost money without providing additional detail on what that entailed. Additionally, the court relied on the holdings of Courts of Appeals and found that the plaintiff’s alleged emotions of fear, anxiety, and stress alone do not state a cognizable or “particularized, concrete” injury.