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Financial Services Law Insights and Observations


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  • 9th Circuit partially reverses FDCPA ruling


    On January 24, the U.S. Court of Appeals for the Ninth Circuit affirmed in part and reversed in part a district court’s summary judgment for a collection law firm (defendant) that “expressly” informed an individual in a collection letter that any dispute must be filed in writing. The plaintiff sued after receiving a collection letter from the defendant that noted, “[u]nder the federal Fair Debt Collection Practices Act, if you dispute this debt, or any portion thereof, you must notify this office in writing within thirty (30) days of receipt of this letter. After notifying this office of a dispute, all debt collection activities will cease until this office obtains verification of the debt and a copy of such verification is mailed to you. If you do not dispute the validity of this debt or any portion thereof within thirty (30) days of receipt of this letter, the debt will be assumed valid. You may request in writing, within thirty (30) days of receipt of this letter, the name and address of the original creditor, if different from the current creditor, which is the homeowners association named above, and we will provide you with the information.” The district court granted summary judgment in favor of the defendant, ruling that the passage did not violate the FDCPA because the third sentence of the disclosure did not mention that the dispute had to be filed in writing.

    On appeal, the 9th Circuit noted that “the court must view the letter ‘through the eyes of the least sophisticated debtor,’” stating that “… the least sophisticated debtor would not extract each sentence of the challenged paragraph, line them up against the disclosures the FDCPA requires, and analyze whether each sentence, in isolation, accurately conveys the required warnings.” The 9th Circuit also noted that, “[i]nstead, the least sophisticated debtor would examine the letter as a whole and would conclude based on the bold text expressly stating that he must dispute the debt in writing that he was required to dispute the debt in writing.” The 9th Circuit also upheld the ruling in favor of the defendant over its assessment of a prelien fee as a reasonable attorney’s fee and “that any implication that the fee was an ‘attorney’s fee’ was true.” The case was remanded back to the district court to address remaining arguments and the plaintiff’s summary judgment motion.

    Courts FDCPA Appellate Ninth Circuit Debt Collection

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  • 9th Circuit affirms judgment for defendant in TCPA autodialer suit


    On January 19, the U.S. Court of Appeals for the Ninth Circuit affirmed summary judgment in favor of a defendant accused of violating the TCPA after allegedly using an automatic telephone dialing system (autodialer). The plaintiff claimed that the defendant’s platform qualifies as an autodialer since it “stores telephone numbers using a sequential number generator because it uploads a customer’s list of numbers and produces them to be dialed in the same order they were provided, i.e., sequentially.” According to the 9th Circuit, the plaintiff’s interpretation would mean that “virtually any system” with the capability to store a pre-produced list of telephone numbers would qualify as an autodialer if it could also autodial the stored numbers. The court noted that this interpretation was rejected in the U.S. Supreme Court’s 2021 decision in Facebook Inc. v. Duguid, which narrowed the definition of what type of equipment qualifies as an autodialer under the TCPA and held that an autodialer “must have the capacity either to store a telephone number using a random or sequential generator or to produce a telephone number using a using a random or sequential number generator.” (Covered by a Buckley Special Alert here.)

    The plaintiff attempted to rely on a footnote in the Court’s ruling, which endeavored to explain why the terms “produce” and “store” were used in the definition of an autodialer, but the 9th Circuit concluded that the footnote discussion was not central to the Court’s analysis in Duguid and therefore did not require it to adopt the plaintiff’s interpretation. After finding that the defendant’s system does not qualify as an autodialer “merely because it stores pre-produced lists of telephone numbers in the order in which they are uploaded,” the appellate court concluded that the plaintiff’s TCPA claims failed. It further determined that even if Duguid did not foreclose the plaintiff’s argument, the district court was correct to conclude that the system at issue “does not have the capacity to automatically dial telephone numbers.”

    Courts Appellate Ninth Circuit U.S. Supreme Court TCPA Autodialer

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  • Agencies file amicus brief on “hybrid” loan MLA protections


    On January 6, the CFPB, DOJ, and DOD filed an amicus brief on behalf of the United States in support of a consumer servicemember plaintiff’s appeal in Jerry Davidson v. United Auto Credit Corp, arguing that the hybrid loan at issue in the case, which was used for both an MLA-exempt and non-exempt purpose, must comply with the MLA. The loan included an amount used to purchase Guaranteed Auto Protection (GAP) insurance coverage, and the plaintiff alleged that, among other things, the auto lender (defendant) violated the MLA by forcing the plaintiff to waive important legal rights as a condition of accepting the loan and by requiring him to agree to mandatory arbitration should any dispute arise related to the loan. The plaintiff also alleged that the defendant failed to accurately communicate his repayment obligations by failing to disclose the correct annual percentage rate. The case is before the U.S. Court of Appeals for the Fourth Circuit after a district court held that the plaintiff’s GAP insurance fell within the car-loan exception to the MLA as “inextricably tied to” and “directly related” to the vehicle purchase.

    Arguing that GAP coverage “is not needed to buy a car and does not advance the purchase or use of the car,” the agencies’ brief noted that GAP coverage is identified as “debt-related product that addresses a financial contingency arising from a total loss of the car” and that the coverage can be purchased as a standalone product. According to the brief, the plaintiff’s loan is a “hybrid loan—that is, a loan that finances a product bundle including both an exempt product (such as a car) and a distinct non-exempt product (such as optional GAP coverage),” and the district court erred in failing to interpret the MLA consistent with guidance issued in 2016 and 2017 by the DOD suggesting that such “hybrid loans” are consumer credit subject to the protections in the MLA. The 2017 guidance explained that “a credit transaction that includes financing for Guaranteed Auto Protection insurance … would not qualify for the exception,” and the agencies argued that although the 2017 guidance was withdrawn in 2020, the “withdrawal did not offer a substantive interpretation of the statute that would alter the conclusion” that the plaintiff’s loan was not exempt from the MLA.

    Courts CFPB Department of Defense DOJ Amicus Brief Appellate Fourth Circuit Servicemembers Military Lending Act Military Lending GAP Fees

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  • Supreme Court blocks OSHA mandate


    On January 13, a divided U.S. Supreme Court issued an order blocking a Department of Labor’s Occupational Safety and Health Administration (OSHA) rule mandating that employers with 100 or more employees require employees to be fully vaccinated or be subject to a weekly Covid-19 test at their own expense. However, in a separate order the Court allowed a separate rule issued by the Department of Health and Human Services requiring Covid-19 vaccinations for health care workers (unless exempt for medical or religious reasons) at Medicare- and Medicaid-certified providers and suppliers to take effect.

    In November, the U.S. Court of Appeals for the Fifth Circuit issued a nationwide stay on the emergency temporary standard (ETS) that included the mandate to employers, describing enforcement of the ETS illegitimate and calling the OSHA rule “unlawful” and “likely unconstitutional.” (Covered by InfoBytes here.) However, last month, the 6th Circuit lifted the stay in a 2-1 ruling, stating that “[b]ased on [OSHA’s] language, structure and Congressional approval, OSHA has long asserted its authority to protect workers against infectious diseases.” (Covered by InfoBytes here.) The applicants, seeking emergency relief from the Court to reinstate the stay, argued that the rule exceeded OSHA’s statutory authority and is otherwise unlawful.

    In agreeing that the applicants are likely to prevail, the Court majority granted the application for relief and stayed the OSHA rule pending disposition of the applicants’ petitions for review in the 6th Circuit, as well as disposition of any timely petitions for writs of certiorari. “Although Congress has indisputably given OSHA the power to regulate occupational dangers, it has not given that agency the power to regulate public health more broadly,” the majority wrote. Adding that the ETS is a “blunt instrument” that “draws no distinctions based on industry or risk of exposure to COVID-19,” the majority stated that the Occupational Safety and Health Act does not plainly authorize the rule.

    The dissenting judges argued that the majority’s decision “stymies the Federal Government’s ability to counter the unparalleled threat that COVID–19 poses to our Nation’s workers. Acting outside of its competence and without legal basis, the Court displaces the judgments of the Government officials given the responsibility to respond to workplace health emergencies.”

    With respect to the Department of Health and Human Services rule, the Government applied to stay injunctions issued by two district courts preventing the rule from taking effect. In granting the application and staying the injunctions, the majority of the Court found that one of the Department’s basic functions authorized by Congress “is to ensure that the healthcare providers who care for Medicare and Medicaid patients protect their patients’ health and safety,” concluding that “[h]ealthcare workers around the country are ordinarily required to be vaccinated for diseases” and that “addressing infection problems in Medicare and Medicaid facilities is what [the Secretary] does.” 

    In dissent, four justices argued that the efficacy or importance of Covid-19 vaccines was not at issue in assessing the injunctions, stating that the district court cases were about “whether [the Centers for Medicare and Medicaid Services] has the statutory authority to force healthcare workers, by coercing their employers, to undergo a medical procedure they do not want and cannot undo,” and arguing that “the Government has not made a strong showing that Congress gave CMS that broad authority.”

    Courts U.S. Supreme Court Appellate Sixth Circuit OSHA Covid-19 Department of Labor Department of Health and Human Services Fifth Circuit

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  • 3rd Circuit vacates TILA/RESPA judgment in favor of mortgage lender


    On January 12, the U.S. Court of Appeals for the Third Circuit vacated an order granting summary judgment in favor of a mortgage lender (defendant) for alleged violations of TILA and RESPA, among other claims. The plaintiff, a retired disabled military veteran, contracted with a home builder to purchase a home and used the defendant to obtain mortgage financing, which was later transferred to a servicing company. The plaintiff contended that the defendant allegedly (i) provided outdated TILA and RESPA disclosures; (ii) misrepresented that the plaintiff would not have to pay property taxes; (iii) failed to make a reasonable and good faith determination of the plaintiff’s ability to pay; and (iv) failed to provide notice of the transfer of servicing rights. On appeal, the 3rd Circuit determined that the defendant did not meet the initial burden to show no genuine dispute as to any material fact related to the plaintiff’s claims, and remanded the action. Without assessing the evidentiary value of the testimonies and materials submitted by each party in support of their own version of events, the appellate court reasoned that “these materials do not foreclose a reasonable jury from crediting [the plaintiff’s] testimony over [the defendant’s] account and finding [the defendant] liable.”

    Courts Appellate Third Circuit TILA RESPA Consumer Finance Mortgages State Issues Regulation Z Regulation X

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  • Supreme Court vacates $10 million judgment in light of TransUnion ruling


    On January 10, the U.S. Supreme Court issued a short summary disposition granting a petition for a writ of certiorari filed by a lender and an appraisal management company. Rather than hearing arguments in the case, the Court immediately vacated the judgment against the defendants and ordered the U.S. Court of Appeals for the Fourth Circuit to reexamine its decision in light of the Court’s ruling in TransUnion v. Ramirez (which clarified the type of concrete injury necessary to establish Article III standing, and was covered by InfoBytes here).

    As previously covered by InfoBytes, in March 2021, a divided 4th Circuit affirmed a district court’s award of over $10 million in penalties and damages based on a summary judgment that an appraisal practice common before 2009 was unconscionable under the West Virginia Consumer Credit and Protection Act. During the appeal, the defendants argued that summary judgment was wrongfully granted and that the class should not have been certified since individual issues predominated over common ones, but the appellate court majority determined, among other things, that there was not a large number of uninjured members within the plaintiffs’ class because plaintiffs paid for independent appraisals and “received appraisals that were tainted.”

    The defendants argued in their petition to the Court that the 4th Circuit’s “fundamentally unjust” holding could not stand in the wake of TransUnion, which ruled that every class member must be concretely harmed by an alleged statutory violation in order to have Article III standing. According to the defendants, the divided panel “affirmed the class certification and the class-wide statutory-damages award, because the class members all faced the same risk of harm: the appraisers had been ‘exposed’ to the supposed procedural error, and the class members paid for the appraisals, even though the court ‘cannot evaluate whether’ any harm ever materialized.”

    Courts U.S. Supreme Court Fourth Circuit Appellate Appraisal Appraisal Management Companies Settlement Mortgages State Issues Consumer Finance West Virginia

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  • District Court denies plaintiff’s motion to remand FDCPA


    On December 22, the U.S. District Court for the Northern District of California denied a plaintiff’s motion to remand, ruling that a default judgment allegedly obtained fraudulently in an underlying collection lawsuit qualifies as a concrete injury in fact to the plaintiff in an FDCPA suit. According to the order, the plaintiff sued the defendants, a process server and its employee, for fraudulently certifying that service of process had been made to the plaintiff in a state debt collection action and obtaining a default judgment against the plaintiff as a result, which the plaintiff described as engaging in the practice of “sewer service.” The plaintiff sued the defendants in state court and the action was removed to federal court by the defendants. The plaintiff filed a motion to remand for lack of standing, claiming that his complaint “does not sufficiently allege a concrete harm to confer [Article III] standing to Plaintiff” because the complaint “solely asserts a bare procedural violation of the [FDCPA].” While “Article III requires plaintiff to show ‘(i) that he suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by the defendant; and (iii) that the injury would likely be redressed by judicial relief,’” the court noted that the plaintiff’s argument “focuses only on the ‘concreteness’ of the ‘injury in fact.’” Applying the U.S. Court of Appeals for the Ninth Circuit’s two-step framework for determining whether a statutory violation is a “concrete” harm, and considering the U.S. Supreme Court’s decision in TransUnion LLC v. Ramirez decision (covered by InfoBytes here), the court found that the plaintiff’s complaint sufficiently alleged a “concrete” injury in fact for alleged violations of the FDCPA arising from alleged sewer service.

    Specifically, the court indicated that the 9th Circuit’s first step requires the court “‘[t]o identify the interests protected by the FDCPA’ by examining the ‘[h]istorical practice’ and the ‘legislative judgment’ underlying the provisions at issue’” and determine whether “the FDCPA ‘provisions at issue were established to protect the plaintiff’s concrete interests.’” Although the defendants failed to identify any historical or common-law practices, the court found that legislative history of the FDCPA indicates that Congress enacted the statute to protect consumers from abusive collection practices, which include engaging in sewer service. The court further cited to district courts’ decisions concluding that “the ‘FDCPA codifies Plaintiff's concrete interest in being free from abusive debt collection practices.’” Turning to step two of the 9th Circuit’s framework, the court considered whether the sewer service allegations present a material risk of harm that had materialized and “actually harm[ed] Plaintiff’s interests under the FDCPA.” The court found that the “Complaint sufficiently allege[d] that the risk of harm to Plaintiff’s concrete interests materialized” because the “Complaint plead[ed] that the fraudulent proof of service specifically targeted Plaintiff, advanced the state debt collection action against Plaintiff to a stage where default judgment was pending, and caused Plaintiff to obtain legal representation to defend Plaintiff in the state debt collection action [which] do more than present a ‘risk of harm’ to Plaintiff’s interests under step two.” On this basis, the court denied the plaintiff’s motion to remand the action.

    Courts FDCPA California Debt Collection Ninth Circuit Appellate U.S. Supreme Court

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  • 2nd Circuit addresses TCPA’s definition of “unsolicited advertisement”


    On January 6, the U.S. Court of Appeals for the Second Circuit held that an unsolicited fax asking recipients to participate in a market research survey in exchange for money does not constitute as an “unsolicited advertisement” under the TCPA. According to the opinion, the plaintiff medical services company claimed the defendant sent two unsolicited faxes seeking participants for its market research surveys in exchange for an “honorarium of $150,” and filed a putative class action alleging violations of the TCPA, as amended by the Junk Fax Prevention Act of 2005 (JFPA). The district court agreed with the defendant that an unsolicited faxed invitation to participate in a market research survey is not an “unsolicited advertisement” under the TCPA and dismissed the case.

    The TCPA, as amended by the JFPA, defines an “unsolicited advertisement” as “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person’s prior express invitation or permission.” On appeal, the 2nd Circuit found that the defendant’s faxes asking participants to take part in a market survey “plainly do not advertise the availability of any of those three things, and therefore cannot be ‘advertisements’ under the TCPA.” The 2nd Circuit added that “[t]his is not to say that any communication that offers to pay the recipient money is thereby not an advertisement. One could imagine many examples of communications, including faxed surveys, offering the recipient both money and services, that might incur liability under the TCPA.” The 2nd Circuit recognized that its decision disagrees with the 3rd Circuit’s ruling in Fischbein v. Olson Research Group, which held that faxes such as the ones at issue are advertisements because “an offer of payment in exchange for participation in a market survey is a commercial transaction, so a fax highlighting the availability of that transaction is an advertisement under the TCPA.” The 2nd Circuit held that in Fischbein the 3rd Circuit mistakenly relied “on an encyclopedia definition of what constitutes a ‘commercial transaction’. . . rather than focusing on the definition of ‘advertisement’ that the TCPA and FCC regulations provide.”

    Courts TCPA Privacy/Cyber Risk & Data Security Second Circuit Third Circuit Appellate Faxes

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  • 11th Circuit affirms FCRA suit dismissal


    On December 23, the U.S. Court of Appeals for the Eleventh Circuit affirmed a lower court’s dismissal of an FCRA case where a furnisher (defendant) allegedly failed to conduct a reasonable investigation in response to materials that the plaintiff had sent to two credit reporting agencies (CRAs), which was then forwarded to the furnisher. According to the opinion, the plaintiff had submitted a letter to each CRA requesting they remove a dispute notation on her credit report with respect to her account with the furnisher because the account in question was no longer being disputed. The CRAs forwarded the plaintiff’s request to the furnisher, who then investigated and notified the CRAs that the account was still being disputed. The plaintiff did not otherwise directly tell the furnisher that she no longer disputed the tradeline. After discovering that the account was still reported as disputed, the plaintiff filed suit under the FCRA against the furnisher for failing to investigate the dispute and failing to direct the CRAs to remove the notation of account in dispute. The district court granted the defendant’s motion to dismiss for the plaintiff’s failure to state a claim.

    On appeal, the 11th Circuit found that the letter sent by the plaintiff to the CRAs failed “to make anything clear” to the furnisher. The appellate court explained that the plaintiff “could have written a better letter: one that made clear that she was attempting to revoke her dispute for the first time or, better yet, one addressed to the bank itself. But that is not the letter on which she premised her lawsuit.” The appellate court also noted that, although the furnisher could have contacted the plaintiff directly, the FCRA does not require the furnisher to do so. In effect, “[w]hat [the plaintiff] wants [the bank] to do — either (1) to intuit that she no longer disputed the tradeline from her report to the CRAs or (2) to reach out to her directly to clarify and confirm that she no longer wished to dispute the tradeline — goes beyond what FCRA reasonableness requires,” the appellate court explained in its ruling. The appellate court therefore found that it was reasonable for the furnisher to review its official records, which indicated that the tradeline was still in dispute, and retain the dispute notation on the plaintiff’s credit report.

    Courts Appellate Eleventh Circuit FCRA Credit Reporting Agency Consumer Finance

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  • 7th Circuit: Collector did not violate FCRA by obtaining a “propensity-to-pay score”


    On December 22, the U.S. Court of Appeals for the Seventh Circuit affirmed summary judgment in favor of a defendant debt collector in an FCRA action alleging a plaintiff’s credit information was acquired without a permissible purpose. The plaintiff and her husband jointly filed for bankruptcy protection. The bankruptcy court ordered a discharge of their debts, which included a debt incurred by the plaintiff’s husband that was being serviced by the defendant. The defendant was notified of the discharge (which included each of the four former last names used by the plaintiff) and scanned its system for affected accounts; however, by the time it received notice of the bankruptcy, it had already closed the account it had been servicing. Later, another account bearing one of the plaintiff’s former names was placed with the defendant. The defendant sent the account to a third-party vendor to see if the individual had filed for bankruptcy protection and did not received any bankruptcy results. It then ordered a “propensity-to-pay-score” from a credit reporting agency. The plaintiff’s records were eventually updated by the third-party vendor with information about the bankruptcy, and the defendant closed the account. However, the plaintiff noted the soft inquiry on her credit report and sued, alleging the defendant did not have a permissible purpose to make such an inquiry. The district court granted summary judgment to the defendant.

    On appeal, the 7th Circuit determined that the plaintiff had suffered a concrete injury, concluding that an “unauthorized inquiry into a consumer’s propensity‐to‐pay score is analogous to the unlawful inspection of one’s mail, wallet, or bank account.” However, after reviewing the merits of the case, the appellate court held that an alleged invasion of privacy was not enough for it to overturn the district court’s ruling. There was no negligent violation of the FCRA “because no reasonable juror could conclude that the inquiry into [the plaintiff’s] propensity‐to‐pay score resulted in actual damages,” the appellate court wrote. Additionally, while the 7th Circuit acknowledged that the plaintiff’s debt was discharged by the time the defendant obtained her propensity-to-pay score, there was no willful violation of the FCRA because the defendant “lacked actual knowledge of the bankruptcy” and “did not recklessly disregard the possibility that debt had been discharged.” The appellate court added that the evidence showed that the defendant “had a reasonable basis for relying on its procedures.”

    Courts Bankruptcy FCRA Appellate Seventh Circuit Consumer Finance Debt Collection

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