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On June 8, the Washington attorney general announced a settlement with a Colorado-based collection agency for alleged unlawful debt collection practices in violation of Washington’s Consumer Protection Act and Collection Agency Act, including assessing fees and costs on consumers even when no funds were captured in the garnishment, operating without a license for over a year, and failing to provide legally required garnishment exemptions to state residents. Under the terms of the consent decree, the debt collection agency must pay back approximately $475,000 in restitution to as many as 5,000 state residents and forgive up to $250,000 in fees and costs to resolve the lawsuit. The debt collection agency must also pay $414,000 to the AG’s office for the cost of the investigation and to fund the ongoing work of the office’s Consumer Protection Division. In addition to paying the fines, the agency is also required to: (i) discontinue assessing fees on consumers from whom the company has not collected funds; (ii) provide legally required garnishment exemptions to consumers; and (iii) incorporate legally required evidence when submitting garnishment judgment applications to the court.
On May 28, the U.S. Court of Appeals for the Sixth Circuit held that a consumer’s alleged “confusion and anxiety” does not constitute a concrete and particularized injury under the FDCPA. The plaintiff alleged that the defendant’s debt collector, an attorney’s office, violated the FDCPA when it communicated with him, on behalf of a bank, by sending a letter stating the plaintiff’s mortgage loan was sent to foreclosure. The letter also informed the plaintiff that the bank “might have already sent a letter about possible alternatives,” further explaining how the plaintiff could contact the bank “to attempt to be reviewed for possible alternatives to foreclosure.” The plaintiff also alleged that the attorney’s office “sent a form of this letter to tens of thousands of homeowners and that it did so without having any attorney provide a meaningful review of the homeowners’ foreclosure files, so the communications deceptively implied they were from an attorney.” The plaintiff alleged the letter confused him because he was unsure if it was from an attorney, and that, moreover, the letter “raised [his] anxiety” by suggesting “that an attorney may have conducted an independent investigation and substantive legal review of the circumstances of his account, such that his prospects for avoiding foreclosure were diminished.”
The 6th Circuit found the plaintiff’s allegations to “come up short” in regard to proving that the statutory violations caused him individualized concrete harm. In addition, the appellate court said that “confusion doesn’t have a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit.”
On May 14, the U.S. District Court for the Middle District of Tennessee denied a request for a temporary restraining order (TRO) to block a CFPB interim final rule (IFR), which requires all landlords to disclose to tenants certain federal protections put in place as a result of the ongoing Covid-19 pandemic. As previously covered by InfoBytes, the plaintiffs sued the CFPB asserting the IFR violates their First Amendment rights because it “mandates untrue speech and encourages plainly misleading speech” by requiring disclosures about a moratorium that has been challenged or invalidated by several federal courts, including a court in Tennessee where the complaint was filed, as well as the U.S. Court of Appeals for the Sixth Circuit. The Bureau urged the court to deny the temporary injunction, arguing, among other things, that “requiring debt collectors to provide routine, factual notification of rights or legal protections that consumers ‘may’ have, in jurisdictions where the CDC [o]rder applies, does not compel false speech and plainly passes First Amendment muster” (covered by InfoBytes here).
In denying the plaintiffs’ request to block the enactment of the IFR, the court ruled that the IFR does not apply where courts have already blocked the CDC’s eviction order from being enforced. Therefore, “[b]y its very terms, the [IFR] compels nothing at all—including disclosure of false speech—in jurisdictions where the CDC [o]rder does not apply (whether due to a court order declaring the [IFR] invalid, or to something else).” Additionally, the court noted that the plaintiffs’ First Amendment arguments did not suggest that they would suffer irreparable harm without a TRO, as “[p]laintiffs cannot be harmed by a rule where it does not apply.” The court also addressed the plaintiffs’ claim that the rule is unlawful under the Administrative Procedures Act because it requires disclosures not mandated under the FDCPA that could contain false, deceptive, or misleading representations. Because debt collectors in jurisdictions where the CDC order does not apply do not have to make the required disclosures, the IFR cannot be “unlawful on the grounds that it requires false disclosures.”
The court did not opine as to the “wisdom or fairness” of the IFR or the CDC’s order, or whether the IFR is “likely unlawful for any reason other than the particular ones” put forth by the plaintiffs.
On May 13, the U.S. House passed, by a vote of 215-207, H.R. 2547, which would provide additional financial protections for consumers and place several restrictions on debt collection activities. Known as the “Comprehensive Debt Collection Improvement Act,” H.R. 2547 consolidates 10 separate proposed consumer protection bills into one comprehensive package.
Provisions under the package would cover:
- Confessions of Judgment (COJs). The bill would amend TILA and expand the ban on COJs to cover small business owners and merchant cash advance companies.
- Servicemembers. The bill would amend the FDCPA to prohibit debt collectors from threatening servicemembers, including by representing to servicemembers that failure to cooperate will result in a reduction of rank, revocation of their security clearance, or prosecution. Covered debtors would include active-duty service members, those released from duty in the past year, and certain dependents.
- Student Loans. The bill would amend TILA to require the discharge of private student loans in the case of a borrower’s death or total and permanent disability.
- Medical Debt. The bill would amend the FDCPA by making it an unfair practice to “engag[e] in activities to collect or attempt to collect a medical debt before the end of the 2-year period beginning on the date that the first payment with respect to such medical debt is due.” The bill would also amend the FCRA to, among other things, bar entities from collecting medical debt or reporting it to a consumer reporting agency without providing a consumer notice about their rights.
- Electronic Communication. The bill would amend the FDCPA to limit a debt collector from contacting a consumer by email, text message, or direct message on social media without receiving the debtor’s permission to be contacted electronically. It would also prevent debt collectors from sending unlimited electronic communications to consumers.
- Other Debt Provisions. The bill would (i) expand the definition of debt covered under the FDCPA to include money owed to a federal agency, states, or local government; certain personal, family, or household transactions; and court debts; (ii) restrict federal agencies from transferring debt to a collector until at least 90 days after the obligation becomes delinquent or defaults; (iii) require agencies to notify consumers at least three times—with notifications spaced at least 30 days apart—before transferring their debt; and (iv) limit the fees debt collectors can charge.
- Penalties. The bill would require the CFPB to update monetary penalties under the FDCPA for inflation. It would also (i) clarify that courts can award injunctive relief; (ii) cap damages in class actions; and (iii) add protections for consumers affected by national disasters.
- Non-Judicial Foreclosures. The bill would amend the FDCPA to clarify that companies engaged in non-judicial foreclosure proceedings are covered by the statute.
- Legal Actions. The bill would amend the FDCPA to outline requirements for debt collectors taking legal action to collect or attempt to collect a debt, including providing a consumer with written notice, as well as documents showing the consumer agreed to the contract creating the debt, and a sworn affidavit stating the applicable statute of limitations has not expired.
On May 7, the U.S. District Court for the Southern District of New York granted a Missouri-based accounts receivable management company’s (defendant) motion for judgment on the pleadings concerning alleged FDCPA violations. The defendant stated in a collection letter that the plaintiff’s account would be placed with an attorney “for possible legal action” if repayment could not be arranged. The letter also listed two addresses—a physical office address at the top left of the letter and a P.O. Box at the top left of a detachable payment coupon at the bottom of the letter. The plaintiff alleged the letter violated Sections 1692e and 1692g of the FDCPA, claiming that the least sophisticated consumer could read the letter and think that legal action was “imminent,” which would ultimately overshadow the 30-day period to dispute the validity of the debt. The court disagreed, however, concluding that even the least sophisticated consumer would not think the use of the words “if” and “possible” in the letter in question meant that legal action was imminent. Moreover, the court ruled that the inclusion of two different addresses in the letter would not confuse anyone about where to send a dispute notification. Specifically, the validation notice in the letter informed the plaintiff that the defendant would assume the debt to be valid unless its office was notified of a dispute and the letter provided only one office address.
On May 11, the CFPB urged the U.S. District Court for the Middle District of Tennessee to deny a request for a temporary injunction of a CFPB rule that would require all landlords to disclose to tenants federal protections put in place as a result of the ongoing Covid-19 pandemic, arguing that the rule does not require false speech and is justified by the First Amendment. As previously covered by InfoBytes, the plaintiffs, including members of the National Association of Residential Property Managers, sued the CFPB asserting the Bureau’s recently issued interim final rule (IFR) violates their First Amendment rights. The IFR amended Regulation F to require debt collectors to provide tenants clear and conspicuous written notice alerting them of their rights under the CDC’s moratorium on evictions in response to the Covid-19 pandemic (covered by InfoBytes here). The plaintiffs alleged that the IFR violates the First Amendment because it “mandates untrue speech and encourages plainly misleading speech” by requiring disclosures about a moratorium that has been challenged or invalidated by several federal courts, including the U.S. Court of Appeals for the Sixth Circuit. The CFPB asked the court not to grant the plaintiffs’ request for the temporary injunction, pointing out that the “plaintiffs fail to demonstrate that they are entitled to the extraordinary relief they seek.” The brief also notes that “requiring debt collectors to provide routine, factual notification of rights or legal protections that consumers ‘may’ have, in jurisdictions where the CDC Order applies, does not compel false speech and plainly passes First Amendment muster.”
On April 26, the U.S. District Court for the Northern District of Alabama partially granted a defendant debt collector’s motion for summary judgment concerning alleged FCRA and FDCPA violations. According to the opinion, the defendant sent a dunning letter to the plaintiff’s son seeking to recover unpaid debt. The plaintiff disputed the amount of debt owed and asked that the debt not be reported to the CRAs. However, two years later the son noticed the debt was included on his credit report and wrote to a CRA to dispute the debt. The defendant conducted an investigation to verify the debt and asserted that it told the CRAs that the son continued to dispute the debt. The credit reports the son obtained after the investigation, however, did not include a notation on his credit report showing the debt as disputed. The plaintiff brought suit on behalf of his son alleging the defendant violated the FCRA by failing to investigate the disputed debt, and the FDCPA by failing to communicate with the CRAs and misrepresenting the amount of the debt. The court granted summary judgment on the FCRA claim, finding that the dispute as to the debt owed was based on a legal defense not a factual inaccuracy, and that “the FCRA makes a furnisher liable for failing to report a dispute only if the dispute is meritorious.” The court, however, permitted the FDCPA claim predicated on the alleged failure to communicate with the CRA to proceed to trial because there is no analogous requirement that the dispute be meritorious to state a claim. The court dismissed the FDCPA claim predicated on the dunning letter for lack of standing.
On May 3, plaintiffs, including members of the National Association of Residential Property Managers, sued the CFPB asserting the Bureau’s recently issued interim final rule (IFR) violates their First Amendment rights. As previously covered by InfoBytes, the IFR amended Regulation F to require debt collectors to provide tenants clear and conspicuous written notice alerting them of their rights under the CDC’s moratorium on evictions in response to the Covid-19 pandemic. Under the IFR, failure to provide notice is considered a violation of the FDCPA. The plaintiffs argue that the moratorium, however, has been challenged and invalidated by several federal courts, including the U.S. Court of Appeals for the Sixth Circuit. As such, the plaintiffs contend that the IFR compels “false speech” and “requir[es p]laintiffs to lie about the lawfulness and availability” of consumers’ rights under the moratorium. The complaint asks the court to “enjoin this CFPB policy, declare it unlawful, and set it aside.”
On April 26, the U.S. District Court for the Northern District of Illinois granted a defendant debt collector’s request for summary judgment and vacated a class certification order following recent decisions issued by the U.S. Court of Appeals for the Seventh Circuit, in which the appellate court held that “the state of confusion is not itself an injury.” The court’s order reversed an earlier ruling that granted class certification and partial summary judgment in favor of a class of Illinois consumers who alleged that the defendant sent misleading or confusing dunning letters that violated the FDCPA by incorrectly identifying the name of the creditor. However, after reconsidering several 7th Circuit holdings (see InfoBytes coverage of Pennell v. Global Trust Management, LLC here), the court concluded that in the absence of any evidence showing that the plaintiff suffered a concrete injury, the plaintiff lacked standing to bring his FDCPA claims. Specifically, the court held that the plaintiff failed to claim that his confusion led him to take any actions to his detriment. Being merely confused is not a concrete injury, the court ruled, emphasizing that the plaintiff “needed to do more than demonstrate a threat that he would fail to exercise his rights because he deemed the letter a scam—he must have actually failed to exercise those rights and suffered some tangible adverse consequence as a result.”
On April 27, the CFPB announced a consent order against a nationwide, New Jersey-based mortgage broker and direct lender for allegedly sending deceptive loan advertisements to hundreds of thousands of older borrowers. According to the CFPB, the respondent’s advertisements and letters violated the Mortgage Acts and Practices Advertising Rule (MAP Rule), TILA, and the CFPA, by, among other things; (i) misrepresenting the costs of reverse mortgages, including fees, associated taxes, and insurance; (ii) failing to inform borrowers that if they did not continue to pay taxes or insurance they were at risk of losing their homes; (iii) creating the impression that consumers had a preexisting relationship with the lender; and (iv) informing consumers that they were preapproved for specific loan amounts and likely to obtain particular terms or refinancing. Under the terms of the consent order, the respondent is required to pay a $140,000 civil money penalty. Additionally, an advertising compliance official must review the respondent’s mortgage advertisement template before it is put into use in an advertisement “to ensure that it is compliant with the MAP Rule, Regulation Z, TILA, the CFPA,” as well as the consent order. The respondent must also develop and provide the CFPB a “comprehensive compliance plan designed to ensure that Respondent’s mortgage advertising complies with all applicable Federal consumer financial laws and the terms of this Order.”