InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
CFPB fines and shuts down debt collector for alleged FDCPA, FCRA violations
On December 15, the CFPB announced a consent order against a Pennsylvania-based nonbank medical debt collection company for alleged violations of the FCRA and FDCPA. According to the order, the company failed to (i) establish and implement reasonable written policies and procedures for ensuring the accuracy and integrity of information furnished to consumer reporting agencies; (ii) conduct reasonable investigations into direct and indirect consumer disputes about furnished information; (iii) report direct dispute investigation results to consumers; and (iv) indicate disputed items when furnishing information to reporting agencies. The company also allegedly lacked a reasonable basis for debt-related representations made to consumers and engaged in collection activities after receiving a written dispute within 30 days of the consumer’s receipt of a debt validation notice but before obtaining and mailing a verification of the debt.
The consent order permanently bans the company from involvement or aid in debt collection, purchasing or selling of any debts, or any consumer reporting activities. The company must also request credit reporting agencies to delete all collection accounts previously reported by the company. Additionally, the company is obligated to pay a $95,000 civil money penalty and must display on its website information that informs consumers about the option to file a complaint with the CFPB.
District Court grants motion to dismiss in FDCPA case regarding an undated Model Validation Notice
On December 5, the U.S. District Court for the Southern District of New York granted a debt collection agency (the defendant) a motion to dismiss an individual’s (plaintiff’s) complaint. The case considers whether an undated Model Validation Notice (MVN) is a material detail that provides standing to sue under the FDCPA. An MVN is a form provided by the CFPB in Appendix B of the Debt Collection Rule to assist debt collection agencies in complying with FDCPA notice and disclosure requirements. However, the CFPB provides an undated MVN, so many debt collectors who use this template fail to provide a date when sending a debt collection letter to individuals, leading to a recipient’s confusion when the debt collector writes “today” or “now.”
In this case, the plaintiff alleges that the undated collection letter suggests the defendant “withheld a material term from [p]laintiff which made it confusing for him to understand the nature of the subject debt.” The plaintiff did not pay the debt, and instead, he alleged that he suffered damages from the defendant’s “suspicious, misleading, deceptive, unfair, and unconscionable actions.”
Before addressing the merits of the plaintiff’s claims, the court applied Article III standing to determine if the plaintiff had a basis to sue. The court considered whether the plaintiff had suffered a “concrete, particularized injury” in receiving an undated letter from the defendant and concluded that the plaintiff did not suffer harm as a result of this act under Article III because “[t]ime and money spent due to concern and confusion are not concrete harms.” The court held the plaintiff had no standing to bring this action and granted the defendant’s motion to dismiss the plaintiff’s claims. The court, however, gave the plaintiff the opportunity to file an amended complaint.
District Court dismisses FDCPA suit; clarifies debt collector communication on identity theft
On December 5, the U.S. District Court of New Jersey dismissed an FDCPA suit brought against a debt collector. According to the opinion, plaintiff originally filed suit because they received a letter from defendant regarding an outstanding cell phone bill. The letter provided instructions on what to do if the recipient suspected identity theft. Additionally, the letter contained a summary of plaintiff’s account and a QR code that linked to defendant’s website for online payment. Plaintiff contended that the dual approach of offering assistance while simultaneously pursuing collection of a debt was false and misleading. A District Court judge, however, disagreed and dismissed the case, at which point the plaintiff filed an amended complaint.
The amended complaint alleges that the debt collector breached the FDCPA by using false, deceptive or misleading representations regarding the rights of the plaintiff and the obligations of the debt collector with respect to communications concerning identity theft. Specifically, plaintiff argued defendant was in violation of § 1681m(g) of the FDCPA, which obligates a debt collector to take certain steps upon being notified of identity theft, but the court disagreed, finding that the collector’s specific steps taken were in accordance with the Act.
The court emphasized that plaintiff did not introduce any new factual claims in the amended complaint, and merely clarified how the facts already outlined in the initial complaint breached the FDCPA. The judge ruled that the letter not only allows plaintiff to inform defendant about potential identity theft, but also may serve to bring potential identity theft to plaintiff’s attention. The ruling stated that there is no obligation to extensively explain recommended procedures in the case of an identity theft occurrence, and only an “idiosyncratic reading” of the letter would lead to the conclusion that the letter misrepresents defendant’s obligations.
White House convenes on reducing medical debt
On December 8, President Biden met with over 80 federal and state officials to discuss reducing medical debts for Americans. The Biden-Harris administration desires to address medical payment products, unfair debt collection practices, surprise billing and facility fees, and charity care. This roundtable was one of several actions taken by the administration to lower Americans’ healthcare costs, in addition to (i) the CFPB’s report on how medical debt collectors pursue debts under the FDCPA, such as through misattributed billing and billing consumers without contacting them (previously covered by InfoBytes, here); and (ii) the CFPB’s proposed rule to remove medical bills from credit reports (also previously covered by InfoBytes, here). The roundtable featured speakers from the president’s council, the CFPB, the Center for Medicare and Medicaid Services, DHHS, the Treasury, and representatives from California, Colorado, and Washington.
District Court grants MSJ for debt collector in FDCPA case
On November 29, the U.S. District Court for the Eastern District of New York granted summary judgment in favor of a debt collector (defendant) under the FDCPA, holding that the defendant’s collection letter was not misleading.
According to the court’s order, the plaintiff and the defendant established a payment agreement over the phone, during which the representative mentioned to the plaintiff that the interest rate on the loan would be lowered to 5.99 percent, and that failure to make any of the 11 monthly payments could render the agreement void. Shortly after, the plaintiff received a letter from the defendant that conveyed essentially the same information. The defendant also provided the plaintiff with billing statements, including a statement indicating $11.14 in accumulated interest during the initial month in the payment plan. Additionally, the defendant sent the plaintiff a collection letter that outlined the monthly payment and total balance due. The collection letter contained a warning that interest, late charges, and other charges that may vary from day to day could result in a greater balance than the amount plaintiff owed as of the date of the letter. The plaintiff argued that the warning was contradictory to the concept of “fixed” payment plan, and thus was deceptive and misleading in violation of Section 1692e.
The court noted that it had previously dismissed an FDCPA case against the same defendant using similar language in the context of a debt settlement. In that case, the defendant provided both a disclaimer and the settlement offer, and the court held that including both in the same communication “does not automatically render the letter misleading ... [d]efendant accurately and unambiguously conveyed the agreed-upon monthly payment, total balance, and APR.” The court also reasoned that holding debt collectors liable for violating the FDCPA in such instances might discourage them from proposing debt settlement plans to consumers.
District Court grants motion to approve settlement under federal and CA FDCPA
On November 16, the U.S. District Court of the Northern District of California granted the parties’ motion for preliminary approval of a proposed class action settlement and provisional class certification. The plaintiffs sued under both the federal FDCPA and California’s Rosenthal Fair Debt Collection Practices Act. The class action comprises a lead plaintiff as well as approximately 300 individuals.
The plaintiffs alleged that the defendant, a debt collector, left numerous voicemails and text messages between June and October 2021 that failed to disclose the defendant’s identity, and nature of business, and that the communication was an attempt to collect a debt. The plaintiffs also alleged that the communications instilled a “false sense of urgency… by falsely representing or implying that a civil lawsuit would be filed… to collect a defaulted consumer debt” when none was actually filed.
During mediation, the parties agreed to settle the case. Under the terms of the proposed settlement approved by the court, the defendant will pay $51,975 to the plaintiffs, and up to $123,000 in attorney’s fees and costs. The plaintiffs will each receive no less than $175, while the leading plaintiff will receive $2,000.
CFPB report on FDCPA highlights medical debt collection issues
On November 16, the CFPB released its annual Fair Debt Collection Practices Act report, which highlighted challenges specific to medical debt collection. For example, 8,500 complaints were submitted in 2022 related to medical debt collection and described problems such as collectors billing for services never received, collecting the wrong amounts, miscommunication with insurance companies or financial assistance programs, or placing bills on credit reports without prior consumer contact. The report emphasized collectors may violate federal law when they pursue inaccurate medical bills and stressed the need for medical debt collectors to comply with the Fair Debt Collection Practices Act, the No Surprises Act, and the Fair Credit Reporting Act.
The report also includes developments in state law regarding medical debt collection, including recent legislation in Colorado, New York, Maine, and Nevada. Additionally, the report contains sections related to supervision of debt collection activities, enforcement actions, education and outreach initiatives, rulemaking, and research and policy initiatives.
FTC publishes letter to CFPB on its law enforcement and public outreach
On November 16, the FTC released its letter of its annual summary of activities in 2022 to the CFPB. The CFPB used the findings in its annual report to Congress on the Fair Debt Collection Practices Act (FDCPA). In the letter, the FTC outlined several of its important procedural law enforcement activities, such as debt collection issues affecting small businesses, redressing consumers harmed by debt collection schemes, halting collection in consumer debt, and combating unauthorized charges to consumers. The second part of the letter outlines how the FTC enables public outreach and cross-agency coordination. For public outreach, the FTC proactively educates consumers about their rights under the FDCPA, and how debt collectors can comply with the law. The FTC also noted that it publishes material in both English and Spanish to broaden its outreach. In addition, the FTC added that it distributes print publications to libraries and businesses and logs more than 50 million views on its website pages. In its efforts to raise awareness about scams targeting the Latino community, the FTC highlighted its series of fotonovelas (graphic novels) in Spanish.
Ohio AG files FDCPA suit against debt collectors
On October 31, Ohio State AG Dave Yost filed a complaint against debt collectors for violations of the FDCPA and Ohio Consumer Sales Practices Act. The complaint alleged that the defendants frequently changed the names they used to engage in collection activities and purposefully used names to sound like law firms to mislead consumers. The AG’s complaint also included allegations that the debt collectors failed to honor written requests to verify debts, threatened legal action, engaged in harassing or abusive behavior, and made false, misleading, and deceptive representations.
Judge dismisses FDCPA suit for communication with CRAs
On October 26, a U.S. District Court for the Eastern District of New York granted a motion to dismiss an FDCPA suit holding that there is nothing in the FDCPA that prohibits debt collectors from reporting information about a debt to a credit reporting agency. The plaintiff filed a complaint in January 2023 alleging that the defendant violated the FDCPA by communicating with the plaintiff after the plaintiff requested that the debt collector stop all communications. The plaintiff further alleged that the defendant violated the FDCPA by reporting this debt to the major credit reporting agencies, which subsequently led to the plaintiff being denied credit. While the judge ruled that the plaintiff had standing to sue because of the denial of credit, the judge also ruled that the statute “expressly permits communications with ‘a consumer reporting agency if otherwise permitted by law,’” and that the plaintiff did not allege that negligence was the proximate cause of damages.