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Idaho Department of Finance extends work from home guidance for its licensees and registrants
On May 22, the Idaho Department of Finance extended temporary work from home guidance previously issued to Idaho mortgage brokers and lenders, mortgage loan originators, regulated lenders, title lenders, payday lenders, and collection agency licensees and registrants. The original guidance, previously covered here, permits employees to work from home where the residence is not a licensed branch. The guidance is extended through September 1, 2020.
District court: Initial debt collection communication via email does not violate FDCPA
On May 19, the U.S. District Court for the Northern District of California granted a debt collector’s motion to dismiss a lawsuit with prejudice brought by a plaintiff alleging violations of the Electronic Signatures in Global Commerce (E-SIGN) Act and the FDCPA. The defendant sent an email to the plaintiff attempting to collect an unpaid debt that contained a validation notice. The plaintiff argued that the email violated the E-SIGN Act because she did not consent to receive email from the defendant, and that it also violated the FDCPA “because the email referred to ‘send[ing]’ a copy of the verification of the debt whereas § 1692g(a)(4) specifies that a copy of the verification will be ‘mailed.’” Among other arguments, the plaintiff claimed that the email’s subject line, which stated “This needs your attention,” violated the FDCPA because it did not convey that the message was seeking to collect a debt, and that she received several more emails during the validation period, which confused her and “overshadowed” the validation notice in the initial communication.
The court disagreed, stating that because there are “no express restrictions” within the FDCPA about how the initial communication must be made, allowing it to be made electronically is a “reasonable argument.” Specifically, the court noted that the CFPB has recognized that certain communication technologies such as email did not exist when the FDCPA was passed, and referred to the Bureau’s commentary on its proposed debt collection rule that stated “a validation notice as part of an initial communication can be conveyed via email.” [Emphasis in the original.] The court also determined that the plaintiff lacked standing with respect to her claim that the initial email’s subject line violated the FDCPA since she opened the email and clicked on the link. Furthermore, the court noted that using the word “send” instead of “mailed” in the initial communication would not have confused the least sophisticated debtor because the “debtor, if concerned about getting a verification of debt via email, could always ask for a copy to be sent via physical mail instead.”
CFPB further extends comment period for proposed rulemaking on time-barred debt disclosures
On May 19, the CFPB announced a further extension to the comment period on its Supplemental Notice of Proposed Rulemaking (NPRM) related to time-barred debt disclosures (covered by a Buckley Special Alert). The NPRM, issued in February, would amend Regulation F, which implements the FDCPA, to require debt collectors to make certain disclosures when collecting time-barred debts. Due to challenges created by the Covid-19 pandemic, the June 5 deadline has been extended until August 4.
Washington amends and extends proclamations regarding state of emergency, garnishments, and accrual of interest
On May 15, the Washington governor issued Proclamation 20-49.1, which amends and extends Proclamations 20-05 (declaring a state of emergency) and 20-49 (regarding garnishments and accrual of interest). Proclamation 20-49 was previously covered here. Proclamations 20-05 and 20-49 are amended to (i) recognize the extension of statutory waivers and suspensions by the Washington legislature until the sooner of the termination of the Covid-19 state of emergency or 11:59p.m. on May 21, 2020, whichever is first, and (ii) similarly extend the prohibitions contained in those proclamations until the earlier of the aforementioned dates.
FTC alleges telemarketer charged organizations for unordered subscriptions
On May 13, the FTC filed a complaint against a Pennsylvania-based telemarketing operation for allegedly misrepresenting “no obligation” trial offers to organizations and then enrolling recipients in subscriptions for several hundred dollars without their consent. The complaint also charged a New York-based debt collector with violating the FTC Act by illegally threatening the organizations if they did not pay for the unordered subscriptions. The FTC alleged that the telemarketing operation violated the FTC Act and the Unordered Merchandise Statute by calling organizations such as businesses, schools, fire and police departments, and non-profits to offer sample books or newsletters without disclosing that they were selling subscriptions and then sending publications without the recipients’ consent. The FTC alleged that, if the organizations agreed to accept what they believed to be free publications, the defendants enrolled the organizations in a negative option program without their consent, and automatically charged the organizations for annual subscriptions. The telemarketer worked with a debt collection firm that allegedly misrepresented that the debts were valid and used false threats to collect outstanding balances. According to the FTC, the debt collection firm handled collections nationwide despite not having a valid corporate registration in any state and only being licensed to collect debt in Washington State. The FTC seeks a permanent injunction against the defendants, along with monetary relief “including rescission or reformation of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies.”
District court grants debt collector’s arbitration request
On May 11, the U.S. District Court for the District of New Jersey granted a debt collector’s renewed motion to compel arbitration, concluding that the previously-ordered discovery demonstrated that the plaintiff’s FDCPA claim fell within the bounds of the arbitration clause in the underlying credit card agreement. As previously covered by InfoBytes, the plaintiffs filed a proposed class action alleging that the debt collection company’s collection letters violated the FDCPA because they did not “properly identify the name of the current creditor to whom the debt is owed.” The debt collectors filed an initial motion to compel arbitration, arguing that the debts described in the plaintiffs’ amended complaint arose pursuant to credit card agreements that include an arbitration clause. In February 2019, the court denied the motion concluding that discovery was needed in order to determine whether an arbitration clause applied to the plaintiffs’ claims regarding FDCPA violations. After the parties engaged in discovery, the plaintiff argued that only the card issuer has a right to compel arbitration under the agreement. The court rejected this argument, concluding that the collection agency was an agent of the creditor and as an agent, the collector may enforce the arbitration agreement. Moreover, the court determined that the debt collection letter relates to the consumer’s credit account as the debt is a result of the credit card use and the FDCPA claim “is statuary, as explicitly provided for in the card agreement.”
Maryland Collection Agency Licensing Board issues advisory notice to collection agencies
On May 11, the Maryland State Collection Agency Licensing Board issued an advisory notice regarding voluntary cessation of collection agency activity. The board noted its expectation that collection agencies that voluntarily cease business operations in Maryland do so in compliance with their respective business continuity plans to manage any related disruptions in compliance and otherwise wind down operations in an orderly manner that protects consumers from harm. The notice sets forth certain minimum requirements that a collection agency must meet, including promptly notifying the owner of consumer claims assigned to the collection agency if collection of the consumer claims will cease and remitting any and all consumer payments held in custodial accounts. Collection agencies temporarily or permanently ceasing operations must provide the board with documentation explaining its plans to meet the expectations set forth in the guidance.
6th Circuit holds condo company and law firm did not act as debt collectors in non-judicial foreclosure
On May 4, the U.S. Court of Appeals for the Sixth Circuit held that a condominium management company, condominium association, and its law firm (collectively, “defendants”) acted as “security-interest enforcers” and not debt collectors and therefore, did not violate the FDCPA. According to the opinion, the homeowners lost their condominium to a non-judicial foreclosure after they fell behind on condominium association dues. The homeowners filed suit against the defendants alleging various violations of the FDCPA during the foreclosure process. The homeowners did not assert a violation of Section 1692f(6), which applies to security-interest enforcers. The district court dismissed the action, concluding that the homeowners failed to allege facts that the defendants did more than act as security-interest enforcers.
On appeal, the 6th Circuit agreed, citing to the U.S. Supreme Court’s opinion in Obduskey v. McCarthy & Holthus LLP, which held that parties who assist creditors with the non-judicial foreclosure of a home fall within the separate definition under Section 1692f(6) as security-interest enforcers and not the general debt collector definition (previously covered by InfoBytes here). The appellate court noted that the homeowners’ complaint did not allege the defendants’ regular business activity was debt collection. Moreover, the appellate court rejected the homeowners’ argument that the defendants recording of a lien on their condo was a step beyond enforcing a security interest. According to the court, Michigan law requires the recording of the lien in order to enforce a security-interest and therefore, the action “falls squarely within Obduskey’s central holding.”
District Court enjoins Massachusetts AG from enforcing emergency debt collection regulation
On May 6, the U.S. District Court for the District of Massachusetts entered a temporary restraining order (TRO) enjoining the Massachusetts attorney general from enforcing an emergency regulation that made numerous standard debt collection actions an unfair or deceptive act or practice during the Covid-19 pandemic. As previously covered by InfoBytes, a debt collection trade association filed a complaint last month contending that the emergency regulation is a content-based restriction on free speech and unconstitutional because it, among other things, excludes six classes of collectors from the prohibition on placing collection calls, and does not treat all “communications” equally by excluding certain types of collections communications. The trade association argued that the emergency regulation, among other things, bars debt collectors from being able to initiate phone conversations with individuals who have unpaid debts. In granting the TRO, the court wrote that the measure violates debt collection agencies’ First Amendment rights without adding meaningful consumer protections, and that, “[w]hile the [r]egulation promises some relief from unwanted telephone calls, it does not pretend to offer any relief from the debt itself or the obligation to repay it in full.” The court also noted that the emergency regulation “singles out one group debt collectors and imposes a blanket suppression order on their ability to use what they believe is their most effective means of communication, the telephone. If what the Attorney General meant to accomplish by way of the [r]egulation was a strict liability ban on all deceptive and misleading debt collection calls, the [r]egulation is redundant as that is already the law, both state and federally.”
11th Circuit affirms no unilateral revocation under TCPA
On May 1, the U.S. Court of Appeals for the Eleventh Circuit held that the TCPA does not permit a consumer (plaintiff) to later revoke her consent to be contacted by telephone when the consent was given in a bargained-for contract. The plaintiff entered into an agreement with the defendant that provided express authorization to be contacted by the defendant through the use of an automated telephone dialing system to recover unpaid obligations. The plaintiff’s attorneys later sent the defendant faxes to, among other things, revoke the plaintiff’s consent to be contacted. Notwithstanding those faxes, the defendant continued to place calls to collect debt, and the plaintiff filed suit alleging violations of the TCPA, among other allegations. The district court granted summary judgment to the defendant, ruling that the automated calls did not violate the TCPA because consent cannot be unilaterally revoked when provided as part of a bargained-for contract.
On appeal, the 11th Circuit affirmed the district court’s summary judgment order on the plaintiff’s TCPA claims because “common law contract principles do not allow unilateral revocation of consent when given as consideration in a bargained-for agreement.” Referencing a decision issued in 2017 concerning the same situation (covered by InfoBytes here), the appellate court wrote, “[w]e, like the Second Circuit, are also unpersuaded by the argument that unilateral revocation of consent given in a legally binding agreement is permissible because it comports with the consumer-protection purposes of the TCPA.”