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Financial Services Law Insights and Observations


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  • 10th Circuit affirms summary judgment in FDCPA action


    On August 17, the U.S. Court of Appeals for the Tenth Circuit affirmed a district court’s decision in granting a plaintiff summary judgment, finding that the debt collector (defendant) violated the FDCPA by allegedly attempting to collect a debt despite receiving written notice disputing the debt, and by allegedly calling the defendant despite receiving a “cease-and-desist letter.” According to the opinion, the plaintiff allegedly incurred a medical debt that was placed with the defendant for collection, in which the defendant sent a letter on April 25 to the plaintiff seeking payment of the debt. On April 30, the defendant called the plaintiff and left a voice message. Subsequently, the defendant received a letter from the plaintiff on May 7 disputing the debt and demanding that the defendant cease calling, and that future correspondence should be in writing. However, the letter was not documented into the defendant’s system until May 10; meanwhile, on May 8, the defendant placed another call to the plaintiff, leaving another voice message. The plaintiff filed suit, alleging the defendant violated Section 1692g(b) of the FDCPA “by attempting to collect the debt despite receiving her written notice disputing the debt” and Section 1692g(c) of the FDCPA “by continuing to call her despite receiving her cease-and-desist letter.” The district court ruled that the plaintiff violated the FDCPA and the defendant’s bona fide error defense did not excuse the FDCPA violations, emphasizing that “the bona fide-error defense is an affirmative one, requiring that [the defendant] prove the prongs of the defense, not that [the plaintiff] disprove them.”

    On appeal, the 10th Circuit agreed with the district court and cited TransUnion v. Ramirez, where the U.S. Supreme Court clarified the Spokeo standing requirements, including that the tort of intrusion upon seclusion is recognized as an intangible harm providing a basis for a lawsuit in American courts (covered by InfoBytes here). According to the opinion, in consideration of the FCRA, “the TransUnion Court noted that a company’s maintaining incorrect information in its database, absent dissemination to a third party, failed to create a harm bearing a close relationship to the common-law tort of defamation.” Further, “[w]ithout the ‘necessary’ defamation component that the tortious words were published, this harm differed in kind.” The appellate court pointed out that “this analysis doesn’t control the case at question because the plaintiff alleged the necessary components for a common-law intrusion-upon-seclusion tort.” The appellate court further affirmed that the phone call that was placed after the cease-and-desist letter was received is considered enough to confer standing for the plaintiff to sue. The 10th Circuit held, “[t]hough a single phone call may not intrude to the degree required at common law, that phone call poses the same kind of harm recognized at common law—an unwanted intrusion into a plaintiff’s peace and quiet.”

    Courts Appellate FDCPA Debt Collection Tenth Circuit Spokeo

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  • Georgia settles with debt collection company

    State Issues

    On August 12, the Georgia Attorney General announced that it entered an assurance of voluntary compliance with a debt collection company resolving allegations that the company committed multiple violations of the FDCPA and the Georgia Fair Business Practices Act. According to the AG, the company deceived consumers by, among other things: (i) threatening consumers with jailtime if a debt was not paid; (ii) failing to disclose that they were debt collectors; and (iii) failing to provide consumers, within five days after the initial communication, a written notice containing certain information required by law. Under the settlement, the company must cease collections on all Georgia consumer accounts it owns and turn those accounts over to the AG, which represents over $19.8 million in purported consumer debt. In addition, the company must pay $41,500 in penalties and fees, and fully comply with the FDCPA and the Georgia Fair Business Practices Act. Finally, if the company violates any provisions of the settlement during a three-year monitoring period, it must immediately pay an additional $41,500 payment to the state.

    State Issues State Attorney General Enforcement FDCPA Debt Collection

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  • 6th Circuit: Consumer lacks standing to bring FDCPA voice message claims


    On August 16, the U.S. Court of Appeals for the Sixth Circuit held 2-1 that a plaintiff lacked Article III standing to bring claims against a debt servicer defendant for allegedly violating the FDCPA by failing to properly identify itself in voice messages. The plaintiff filed suit in 2019 alleging violations of three FDCPA provisions, including that the defendant: (i) failed to identify itself as a debt collector in its voice messages; (ii) failed to identify the “true name” of its business, thus causing the plaintiff to send a cease-and-desist letter to the wrong entity; and (iii) placed calls without meaningfully disclosing its identity. The district court granted summary judgment in favor of the defendant, ruling that because the defendant did not qualify as a “debt collector” under the FDCPA it was not subject to the statute’s requirements.

    On appeal, the 6th Circuit raised the issue of standing “for the first time on appeal,” concluding that the plaintiff “does not automatically have standing simply because Congress authorizes a plaintiff to sue a debt collector for failing to comply with the FDCPA.” Pointing out that the appeal “centers on whether [the plaintiff] suffered a concrete injury,” the appellate court rejected the plaintiff’s arguments that the defendant’s statutory violations constituted a “concrete injury” and “that the confusion he suffered, the expense of counsel, and the phone call that he received from [the defendant] qualify as independent concrete injuries.” Among other things, the 6th Circuit noted that although the plaintiff claimed that the FDCPA “created an enforceable right to know who is calling about a debt and that [the defendant’s] failure to identify its full name concretely injured him,” the plaintiff ultimately failed to demonstrate that the defendant’s “failure to disclose its full identity in its voice messages resembles a harm traditionally regarded as providing a basis for a lawsuit.” Additionally, the appellate court determined that “confusion alone is not a concrete injury for Article III purposes,” and that the plaintiff “cannot show concrete harm simply by pointing to the cost of hiring counsel.” Moreover, because the plaintiff “did not clearly assert in his complaint that he received—let alone was harmed by—an additional phone call, [the appellate court] need not decide whether an unwanted call might qualify as a concrete injury.” The 6th Circuit vacated the district court’s order entering summary judgment and remanded the case to be dismissed for lack of jurisdiction.

    Courts Debt Collection FDCPA Appellate Sixth Circuit

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  • District Court: State law right-to-cure provisions preempted by National Bank Act


    On August 4, the U.S. District Court for the Western District of Wisconsin granted defendants’ motion for partial summary judgment in an action alleging claims under the FDCPA and the Wisconsin Consumer Act (WCA). The defendants were a debt-purchasing company and a law firm hired by the company to recover outstanding debt and purported late fees on the plaintiff’s account in a separate state-court action. After the plaintiff failed to make payments on his outstanding balance, the original creditor (a national bank) charged late fees and mailed him a “right to cure” letter advising him of the minimum payment due and the deadline to make the payment. The account was eventually sold to the debt-purchasing company after the plaintiff failed to make any minimum payments. The law firm sent the plaintiff two letters on behalf of the debt-purchasing company, one which outlined his right to dispute the debt and one which provided a “notice of right to cure default.” A small claims action was filed against the plaintiff in state court, in which the plaintiff argued for dismissal, contending in part that the notice of default failed to itemize delinquency charges as required under Wisconsin law. The plaintiff then filed this suit in federal court alleging violations of the FDCPA and the WCA, claiming that the defendants “falsely represented the status of his debt in violation of § 1692e by purporting to have properly accelerated his debt and filed suit against him despite [the plaintiff] never being provided an adequate right to cure letter pursuant to Wisconsin law.”

    First, in reviewing whether the plaintiff had standing to sue, the court determined that the “costs, time, and energy” incurred by the plaintiff to defend himself in the state-court action amounted to a “concrete injury in fact” that established his standing in the federal-court action. However, upon reviewing the WCA’s right-to-cure provisions as the basis for the plaintiff’s claims that the defendants violated federal and state laws by allegedly falsely representing that they could accelerate the plaintiff’s debt and sue him, the court examined whether the state law’s notice and right-to-cure provisions were federally preempted by the National Bank Act (NBA), as the original creditor’s rights and duties were assigned to the debt-purchasing company when the account was sold. The court determined that while the WCA right-to-cure provisions “do relate in part to debt collection,” they also “go beyond that by imposing conditions on the terms of credit within the lending relationship.” The court ultimately concluded that the WCA provisions “are inapplicable to national banks by reason of federal preemption,” and, as such, the court found “that a debt collector assigned a debt from a national bank is likewise exempt from those requirements” and was not required to send the plaintiff a right-to-cure letter “as a precondition to accelerating his debt or filing suit against him.”

    Courts Debt Collection FDCPA State Issues Consumer Finance National Bank Act

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  • CFPB takes action against Maryland debt collectors

    Federal Issues

    On August 16, the CFPB entered into a preliminary settlement with a debt collection entity, its subsidiaries, and their owner (collectively, “defendants”) for allegedly violating the FCRA, FDCPA, and the CFPA, resolving a case filed in the U.S. District Court for the District of Maryland. As previously covered by InfoBytes, the complaint alleges that the defendants violated the FCRA and its implementing Regulation V by, among other things, failing to (i) establish or implement reasonable written policies and procedures to ensure accurate reporting to consumer-reporting agencies; (ii) incorporate appropriate guidelines for the handling of indirect disputes in its policies and procedures; (iii) conduct reasonable investigations and review relevant information when handling indirect disputes; and (iv) furnish information about accounts after receiving identity theft reports about such accounts without conducting an investigation into the accuracy of the information. The Bureau separately alleges that the violations of the FCRA and Regulation V constitute violations of the CFPA. Additionally, the Bureau alleges that the defendants violated the FDCPA by attempting to collect on debts without a reasonable basis to believe that consumers owed those debts. Under the terms of the proposed stipulated final judgment and order, the defendants are required to, among other things: (i) establish, modify, update, and implement policies and procedures on the accuracy of information furnished to consumer reporting agencies; (ii) establish internal controls to identify activities that may compromise the accuracy or integrity of information; (iii) establish an identity theft report review program; and (iv) retain an independent consultant to review the defendant’s furnishing of consumer information and debt collection activities in addition to provide recommendations. The proposed order also imposes a civil money penalty of $850,000.

    Federal Issues FDCPA Enforcement CFPB Act CFPB Credit Reporting Agency Debt Collection FCRA Credit Furnishing Consumer Reporting Agency

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  • District Court grants summary judgment for defendant in FDCPA vicarious liability case


    On July 30, the U.S. District Court for the Northern District of Alabama granted a motion for summary judgment in favor of a debt collector (defendant) with respect to a plaintiff’s FDCPA allegations. The plaintiff alleged that the defendant, among other things, violated the FDCPA by engaging in abusive, deceptive, and unfair debt collection practices when the defendant allegedly filed a false proof of service in a collection action, which allowed the defendant to obtain a default judgment and garnish the plaintiff’s wages. The defendant, through a law firm, allegedly purchased a debt that the plaintiff had maintained. Subsequently, a collection lawsuit against the plaintiff was filed and a process server delivered the summons and complaint to the plaintiff. The plaintiff filed suit against the defendant, alleging the defendant violated the FDCPA by falsely claiming that it served the summons and complaint. After finding that the defendant itself did not falsify the service return form or have knowledge that a falsified service return form was filed, the court examined if the defendant is vicariously liable for the alleged violations undertaken by the collection law firm or the process server. According to the opinion, “a plaintiff may press an FDCPA claim pursuant to a theory of vicarious liability only if the pertinent parties both constitute “debt collectors” and they enjoy an agency relationship,” however, “the evidence fails to permit a reasonable determination that either may expose [the defendant] to vicarious liability.”

    As previously covered by InfoBytes, in June, the U.S. District Court for the District of Oregon partially granted a plaintiff’s motion for summary judgment, finding that a debt buyer who puts accounts with a debt collector can be held vicariously liable for the actions of the debt collector, since the debt buyer “bear[s] the responsibility of monitoring the activities of those it hires to collect debts on its behalf.” However, in the U.S. District Court for the Northern District of Alabama case, the court found that that any alleged issues regarding summons and complaints in an underlying collection case do not qualify as the responsibility of the defendant.

    Courts FDCPA Debt Collection Vicarious Liability

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  • CFPB confirms final debt collection rules still set to take effect November 30

    Federal Issues

    On July 30, the CFPB officially announced that the agency’s two final debt collection rules, which implement the FDCPA, will take effect as scheduled on November 30. Earlier in April, the Bureau proposed delaying the effective date by 60 days to provide affected parties additional time to comply due to the ongoing Covid-19 pandemic (covered by InfoBytes here). However, the Bureau determined that an extension is unnecessary and will publish a formal notice in the Federal Register withdrawing the April notice of proposed rulemaking. According to the Bureau, “public comments generally did not support an extension. Most industry commenters stated that they would be prepared to comply with the final rules by November 30, 2021.” The Bureau pointed out that while “consumer advocate commenters generally supported extending the effective date, they did not focus on whether additional time is needed to implement the rules.” Rather, the “alternative basis for an extension that many commenters urged, a reconsideration of the rules, was beyond the scope of the NPRM and could raise concerns under the Administrative Procedure Act,” the Bureau stated, adding that the decision does not preclude the Bureau from reconsidering the debt collection rules at a later date.

    As previously covered by InfoBytes, the first debt collection rule, issued in October 2020, addressed debt collection communications and prohibitions on harassment or abuse, false or misleading representations, and unfair practices. The second debt collection rule, issued in December 2020, clarified the information debt collectors must provide to consumers at the outset of collection communications and provided a model validation notice containing such information (covered by InfoBytes here).

    Federal Issues CFPB Debt Collection Agency Rule-Making & Guidance FDCPA

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  • Massachusetts Division of Banks issues guidance to debt collectors and student loan servicers

    Recently, the Massachusetts Division of Banks published guidance related to the conduct of debt collectors, student loan servicers, and third-party loan servicers. 209 CMR 18.00 defines unfair or deceptive acts or practices for entities servicing loans or collecting debts within the commonwealth, and provides licensing, registration, and supervision procedures. Those provisions of the regulation that govern fair debt collection and third party loan servicing practices apply both to licensed entities, and entities exempt from licensure. Additionally, the regulation specifies that licensed debt collectors are not required to register as third party loan servicers but must still comply with all relevant state and federal laws and regulations that govern third party loan servicers when acting in that capacity. Student loan servicers engaged in third party loan servicing activities or debt collection activities within the scope of student loan servicing activities described within Massachusetts’ law are also required to comply with all applicable state and federal laws and regulations governing third party loan servicers and debt collectors when acting in such capacity. Additionally, 209 CMR 18.00 outlines, among other things, (i) licensing application requirements; (ii) licensing standards; (iii) registration procedures and standards; (iv) notice, reporting, and recordkeeping requirements; (v) collection practices and consumer communication restrictions; (vi) prohibitions related to harassment or abuse, false or misleading representations, and unfair, deceptive, or unconscionable practices; (vii) debt validation requirements; (viii) mortgage loan servicing practices; (ix) student loan servicing practices; and (x) confidentiality provisions. The regulation took effect July 1.

    Licensing State Issues State Regulators Massachusetts Debt Collection Student Lending Student Loan Servicer Third-Party Compliance

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  • DFPI to start accepting debt collector licensing applications on September 1

    On July 12, the Nationwide Multistate Licensing System & Registry (NMLS) published an announcement reminding debt collectors that all persons must apply for a license through the California Department of Financial Protection and Innovation (DFPI) by December 31, 2021. As previously covered by InfoBytes, last September, California enacted the “Debt Collection Licensing Act” (the Act), which requires a person engaging in the business of debt collecting in the state, as defined by the Act, to be licensed and provides for the regulation and oversight of debt collectors by DFPI. Under the Act, debt collection licenses will be required starting January 1, 2022; however, debt collectors who submit applications before January 1, 2022 will be allowed to operate while their applications are pending. However, a debt collector that submits an application after December 31 must wait for DFPI to issue a license before it can operate in the state. All required application materials must be submitted through NMLS, and NMLS reminded applicants that fingerprints must also be submitted to the California Department of Justice. The application will be available on NMLS beginning September 1.

    Find continuing InfoBytes coverage on DFPI’s debt collector licensing requirements here.

    Licensing State Issues State Regulators DFPI Debt Collection NMLS

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  • 3rd Circuit overturns FDCPA ruling in plaintiff’s favor


    On July 6, the U.S. Court of Appeals for the Third Circuit overturned a district court’s decision, holding that a debt collector that sent an envelope with a quick reference (QR) code that when scanned, revealed an Internal Reference Number (IRN) with the first 10 characters of the plaintiff’s street address violated the FDCPA’s prohibition in 15 U.S.C. § 1692f(8) on “[u]sing any language or symbol, other than the debt collector’s address, on any envelope.” The district court, relying on the 3rd Circuit’s 2019 decision in DiNaples v. MRS BPO, dismissed the case, holding the plaintiff lacked standing under the FDCPA because the barcode on the envelope did not reveal enough protected information to rise to the level of a concrete injury, since numerous individuals could have an identical IRN.

    The 3rd Circuit reversed and remanded, explaining that the plaintiff had standing to bring a claim because the envelope’s QR code made protected information available to the public. The court rejected the defendant’s arguments that the envelope did not violate the FDCPA because it did not reveal the account number, the plaintiff did not know how to use the bar code to unlock the private information, and that there was no material risk of harm. The appellate court explained that “[a]ccount numbers are but one type of protected information” and that the plaintiff “did not need to know how to use IRNs to access accounts” nor “did he need to show an increased risk of harm.”

    Courts Appellate Third Circuit FDCPA Debt Collection

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