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Financial Services Law Insights and Observations


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  • 11th Circuit: Class action incentive fees are unlawful


    On September 17, the U.S. Court of Appeals for the Eleventh Circuit reversed and vacated a district court judgment awarding an “incentive payment” to a TCPA class action representative, concluding it violates a U.S. Supreme Court decision prohibiting such awards. Additionally, the 11th Circuit remanded the case so that the district court could adequately explain its findings on the fees and costs issues. According to the opinion, a consumer initiated a TCPA class action against a collection agency for allegedly calling phone numbers that had originally belonged to consenting debtors but were subsequently reassigned to non-debtors. The action quickly moved to settlement and one class member objected, challenging “the district court’s decision to set the objection deadline before the deadline for class counsel to file their attorneys’-fee petition.” Additionally, among other things, the objector argued that the proposed $6,000 incentive award to the class action representative violates the 1880s Supreme Court decisions in Trustees v. Greenough and Central Railroad & Banking Co. v. Pettus. The district court overruled the class member’s objections.

    On appeal, the 11th Circuit concluded that the district court “repeated several errors” that “have become commonplace in everyday class-action practice.” Specifically, the appellate court held that the district court “violated the plain terms of Federal Rule of Civil Procedure 23(h)” by setting the settlement objection date more than two weeks before the date class counsel had to file their attorneys’ fee petition. The appellate court also concluded that the district court violated the Supreme Court’s rule from Greenough and Pettus, which provides that “[a] plaintiff suing on behalf of a class can be reimbursed for attorneys’ fees and expenses incurred in carrying on the litigation, but he cannot be paid a salary or be reimbursed for his personal expenses.” The 11th Circuit noted that modern day incentive awards pose even more risks than the concerns from Greenough, promoting “litigation by providing a prize to be won.” Thus, according to the appellate court, although incentive awards may be “commonplace” in class action litigation, they are not lawful and therefore, the district court’s decision must be reversed.

    Courts Eleventh Circuit TCPA Class Action Settlement U.S. Supreme Court

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  • 11th Circuit sides with satellite cable provider in FCRA action


    On September 9, the U.S. Court of Appeals for the Eleventh Circuit affirmed summary judgment in favor of a cable satellite company, concluding that the company had a “legitimate business purpose” under the FCRA to obtain a consumer’s credit report. According to the opinion, in 2016, following an identity theft, the consumer entered into a settlement agreement with the cable satellite company after the consumer’s personal information was used to fraudulently open two accounts for television services. As part of the agreement, the company put the consumer’s personal information into an internal mechanism designed to flag and prevent unauthorized accounts. In 2017, an unknown individual applied for an account online using some of the consumer’s information. The company’s automated systems sent the information to a consumer reporting agency (CRA), which matched the information to the consumer and resulted in the cable satellite company blocking the account from being opened. Upon request by the company, the CRA deleted the inquiry from the consumer’s credit file. The consumer filed an action alleging that the company breached the settlement agreement and “negligently and willfully obtained the January 2017 consumer report without a ‘permissible purpose’” in violation of the FCRA. While the action was pending, two more attempts were made to use the consumer’s information to open accounts and the satellite company blocked both. The district court granted summary judgment in favor of the satellite company.

    On appeal, the 11th Circuit agreed with the district court, concluding that the satellite company had a “legitimate business purpose” to access the credit report. Specifically, the appellate court noted that the “FCRA does not explicitly require a user of consumer reports to confirm beyond doubt the identity of potential consumers before requesting a report.” Moreover, the satellite company was dependent on the credit report to access the consumer’s full social security number and “cross-check that information via its internal mechanisms.” Additionally, the appellate court rejected a claim for breach of the settlement agreement, noting that the company satisfied the terms of the agreement by flagging the social security number in its internal systems and using that system to block the fraudulent application for an account.

    Courts FCRA Credit Reporting Agency Credit Report Appellate Eleventh Circuit

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  • 11th Circuit holds forfeiture is required for money laundering even without financial harm


    On August 12, the U.S. Court of Appeals for the Eleventh Circuit reversed a district court’s denial of a government forfeiture order, concluding that a forfeiture order is still mandatory when a defendant is convicted of a money laundering scheme even when no financial harm is caused to a bank. According to the opinion, between 2000 and 2009 an international businessman engaged in “mirror-image” financial transactions, which includes using phony invoices to launder money between his corporations. The bank involved incurred no financial loss from the transactions, due to the “mirror-image nature of the scheme,” and all financial draws were repaid with interest. The opinion notes that “had the Bank known of the falsehoods that prompted these financial transactions, it would not have approved [them].” In 2017, the defendant pled guilty to conspiracy to commit money laundering and the government requested forfeiture of over $20.8 million. The district court sentenced the defendant to 27-months imprisonment and denied the government’s forfeiture motion, noting that the purpose of forfeiture would not be served since the defendant returned all the money plus interest. 

    On appeal, the 11th Circuit disagreed, holding that the language of the U.S. money laundering statute (18 U.S.C. § 982(a)(1)), as stated by the Supreme Court, “provides that a district court ‘shall order’ forfeiture, [Congress] ‘could not have chosen stronger words to express its intent that forfeiture be mandatory.’ The appellate court noted that there is no “double counting” merely because the money was returned to the bank, and this is not a case of “double recovery” because the defendant “made no payment to the government body seeking forfeiture.” Moreover, the court agreed with the government that “substitute forfeiture” is permitted, rejecting the defendant’s claim that the bank was the owner of the funds; therefore, not a “third party” to whom the money was transferred within the meaning of e 21 U.S.C. § 853(p). Lastly, the appellate court rejected the district court’s conclusion that the $20.8 million forfeiture order was “excessively punitive,” holding that the court “failed to properly define the harm” when performing the excessiveness analysis. The appellate court noted that on remand, the district court “must consider the adverse impact on society that money laundering generally has as well as the specific conduct that [the defendant] engaged in” when determining the forfeiture amount.


    Courts Eleventh Circuit Anti-Money Laundering Financial Crimes

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  • Supreme Court to review FHFA structure, FTC restitution, and TCPA autodialing


    On July 9, the U.S. Supreme Court agreed to review the following cases:

    • FHFA Constitutionality. The Court agreed to review the U.S. Court of Appeals for the Fifth Circuit’s en banc decision in Collins. v. Mnuchin (covered by InfoBytes here), which concluded that the FHFA’s structure—which provides the director with “for cause” removal protection—violates the Constitution’s separation of powers requirements. As previously covered by a Buckley Special Alert last month, the Court held that a similar clause in the Dodd-Frank Act that requires cause to remove the director of the CFPB violates the constitutional separation of powers. The Court further held that the removal provision could—and should—be severed from the statute establishing the CFPB, rather than invalidating the entire statute.
    • FTC Restitution Authority. The Court granted review in two cases: (i) the 9th Circuit’s decision in FTC V. AMG Capital Management (covered by InfoBytes here), which upheld a $1.3 billion judgment against the petitioners for allegedly operating a deceptive payday lending scheme and concluded that a district court may grant any ancillary relief under the FTC Act, including restitution; and (ii) the 7th Circuit’s FTC v. Credit Bureau Center (covered by InfoBytes here), which held that Section 13(b) of the FTC Act does not give the FTC power to order restitution. The Court consolidated the two cases and will decide whether the FTC can demand equitable monetary relief in civil enforcement actions under Section 13(b) of the FTC Act.
    • TCPA Autodialer Definition. The Court agreed to review the U.S. Court of Appeals for the Ninth Circuit’s decision in Duguid v. Facebook, Inc. (covered by InfoBytes here), which concluded the plaintiff plausibly alleged the social media company’s text message system fell within the definition of autodialer under the TCPA. The 9th Circuit applied the definition from their 2018 decision in Marks v. Crunch San Diego, LLC (covered by InfoBytes here), which broadened the definition of an autodialer to cover all devices with the capacity to automatically dial numbers that are stored in a list. The 2nd Circuit has since agreed with the 9th Circuit’s holding in Marks. However, these two opinions conflict with holdings by the 3rd, 7th, and 11th Circuits, which have held that autodialers require the use of randomly or sequentially generated phone numbers, consistent with the D.C. Circuit’s holding that struck down the FCC’s definition of an autodialer in ACA International v. FCC (covered by a Buckley Special Alert).

    Courts FHFA Single-Director Structure TCPA Appellate FTC Restitution FTC Act Autodialer Ninth Circuit Seventh Circuit Fifth Circuit D.C. Circuit Third Circuit Eleventh Circuit

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  • 11th Circuit vacates punitive damages award against CRA for FCRA violation


    On June 19, the U.S. Court of Appeals for the Eleventh Circuit vacated a magistrate judge’s final judgment in an FCRA action, concluding that there was no competent proof of a willful violation of the Act on the part of a consumer reporting agency (CRA). According to the opinion, a consumer brought an action against the CRA and other defendants alleging, among other things, that the CRA “negligently and willfully” violated the FCRA by not reinvestigating an item on his credit report he alleged was reported in error. Approximately 75 days after a small claims debt against the consumer was dismissed with prejudice, the consumer and his attorney ran his credit report and finding the debt still reported, wrote to the CRA with the dismissal order and requested that it reinvestigate the debt listing and remove it. The CRA diverted the letter under its suspicious mail policy for unknown reasons (since the CRA did not have a system to record the reason a letter was marked as suspicious), and sent a letter to the consumer informing him that it had determined the letter was suspicious and was not sent by him, but suggesting he call if he believed his credit report was in error. Less than two months later, the CRA removed the credit line after receiving a communication from the debt holder, but the consumer had already filed the action five days prior to that time. A jury trial found that the CRA’s “negligent failure to reinvestigate” caused harm to the consumer and awarded $5,000 in compensatory damages and further concluded that the violation of the FCRA was willful, assessing $3 million in punitive damages. Subsequently, the magistrate judge remitted the punitive damages to $490,000 on due process principles.

    On appeal, the 11th Circuit vacated the magistrate judge’s final judgment on the willfulness claim, noting that the consumer “offered no evidence of a broad or systemic problem with [the CRA]’s suspicious mail policy,” and that the consumer did not establish by clear and convincing evidence that the CRA “ran an unjustifiably high risk of violating its duties under the FCRA.” Moreover, the actions of the CRA “had a foundation in the statutory text,” even if the policy’s application was negligent when applied to the consumer. Because the appellate court concluded the violation was not willful, the punitive damages judgment was eliminated.

    Courts Appellate Eleventh Circuit FCRA Consumer Reporting Agency

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  • 11th Circuit will not rehear en banc city’s Fair Housing Act suit


    On April 27, a majority panel for the U.S. Court of Appeals for the Eleventh Circuit denied the City of Miami Gardens’s petition for rehearing en banc after determining that the City “faced an uphill battle” to establish standing to bring a Fair Housing Act lawsuit against a national bank because it mainly relied on “an attenuated theory of injury.” As previously covered by InfoBytes, last July the 11th Circuit dismissed the City’s lawsuit against the bank for lack of standing after concluding, among other things, that the City’s evidence that certain loans may go into foreclosure at some point in the future “does not satisfy the requirement that a threatened injury be ‘imminent, not conjectural or hypothetical,’” and that the City failed to provide evidence that certain foreclosed loans had an effect on property-tax revenues or municipal spending or were issued on discriminatory terms. In explaining their decision to not rehear its 2019 ruling en banc, the majority stated that its decision—that the City failed to satisfy its burden of establishing standing—respects “the concerns and fairness and notice demanded by” both U.S. Supreme Court and 11th Circuit precedent. Two dissenting judges countered, however, that the rehearing should have been granted because, among other things, the 11th Circuit’s dismissal for lack of standing was done sua sponte “even though the City received neither proper notice that it failed to prove standing nor a legitimate opportunity to discover or produce the requisite evidence.”

    Courts Appellate Eleventh Circuit Fair Lending Fair Housing Fair Housing Act Foreclosure Property Tax Standing Mortgages

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  • 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.”

    Courts Appellate Eleventh Circuit TCPA Automated Telephone Dialing Debt Collection

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  • 11th Circuit: Borrowers’ state-law claims not preempted by Higher Education Act


    On April 10, the U.S. Court of Appeals for the Eleventh Circuit vacated a district court’s dismissal of borrowers’ state law claims against a student loan servicer, holding that the claims were not preempted by the federal Higher Education Act (HEA). The decision results from a lawsuit filed by two federal student loan borrowers who alleged the servicer violated the Florida Consumer Collection Practices Act (FCCPA) and other state laws by making “affirmative misrepresentations to them and to other borrowers that they were on track to have their student loans forgiven based on their public-service employment when, in fact, their loans were ineligible for the forgiveness program.” The borrowers claimed that, after making years of payments, they discovered they were not eligible for the Public Service Loan Forgiveness (PSLF) Program because most of their loans were not federal direct loans. Both borrowers contended that had they not been misinformed, they would have taken the necessary steps to ensure eligibility. The district court dismissed the borrowers’ claims on the grounds that they were expressly preempted under section 1098g of the HEA, which prohibits the application of state-law disclosure requirements to federal student loans.

    On appeal, the 11th Circuit determined that the borrowers’ claims were not expressly preempted by the HEA, concluding that the precise language in section 1098g “preempts only state law that imposes disclosure requirements; state law causes of action arising out of affirmative misrepresentations a servicer voluntarily made that did not concern the subject matter of required disclosures imposes no ‘disclosure requirements.’” Among other things, the appellate court noted that the borrowers did not allege that the servicer failed to provide information it was legally obligated to disclose, but rather that the information provided to the borrowers concerning their eligibility for the PSLF program was false. “Holding [the servicer] liable for offering false information would therefore neither impose nor equate to imposing on servicers a duty to disclose information,” the appellate court wrote. In addition to dismissing the servicer’s field preemption argument, the appellate court reasoned that its decision “does no harm to standardization of disclosures for federal student loan programs.” The court vacated the district court’s dismissal, and remanded the case for further proceedings.

    Courts Appellate Eleventh Circuit Debt Collection State Issues Student Lending

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  • 11th Circuit interprets FDCPA statute of limitations


    On March 31, the U.S. Court of Appeals for the Eleventh Circuit partially affirmed a district court’s dismissal of federal and state law claims against a loan servicer, concluding that while a 1099-A form sent to the plaintiff was not an attempt to collect a debt under the FDCPA, the district court erred in determining that the claim was time-barred. The plaintiff filed suit alleging violations of the FDCPA, the Florida Consumer Collection Practices Act, the Florida Deceptive and Unfair Trade Practices Act, and the Florida Mortgage Brokerage and Lending Laws (MBBL). After the district court dismissed her initial and amended complaints, the plaintiff appealed, arguing, among other things, that the district court erred when it (i) determined that the defendant’s mailing of IRS form 1099-A was not an attempt to collect a debt under the FDCPA; (ii) dismissed her FDCPA claim as time-barred because the statute of limitations had expired; (iii) found that the defendant was not involved in the original loan transaction and therefore could not be liable for damages under the MBLL; and (iv) declined “to exercise supplemental jurisdiction” over the other state law claims after dismissing the FDCPA claims with prejudice.

    On appeal, the 11th Circuit agreed that the form 1099-A “was not a communication in connection with debt collection” because it did “not demand payment, state that it was an attempt to collect a debt, or state to whom or how to make a payment of the debt.” The appellate court also agreed that the district court properly dismissed the plaintiff’s MBLL claim because she failed to plead that the defendant made her mortgage loan as required under the MBLL. The district court’s decision to dismiss the remainder of the state-law claims was also affirmed. However, the 11th Circuit disagreed with whether the plaintiff’s FDCPA claim was time-barred, concluding that while the one-year statute of limitations under the FDCPA begins to run on the date the communication is mailed, the appellate court has “never held that, when the date of mailing is in dispute and a plaintiff alleges receipt of a letter on a certain date, a court could presume a mailing date based on the date of receipt and the parties’ addresses.” (Emphasis in the original.) According to the 11th Circuit, “the district court erred in dismissing [the plaintiff’s] FDCPA claims as untimely when her complaint did not allege a date of mailing of the February mortgage statement, and it was not apparent from the face of her complaint whether her claim was time-barred.”

    Courts Appellate Eleventh Circuit Debt Collection Mortgages FDCPA State Issues Mortgage Servicing Time-Barred Debt

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  • 11th Circuit reverses dismissal of “shotgun” FDCPA, FCRA, TCPA pleadings


    On March 16, the U.S. Court of Appeals for the Eleventh Circuit partially reversed a district court’s dismissal of a lawsuit against several defendants for alleged violations of the FDCPA, the FCRA, and the TCPA, holding that the plaintiff’s third amended complaint was not filled with “shotgun pleadings.” The matter revolves around several statutory and common-law claims arising from the defendants’ allegedly-unlawful debt collection attempts, which were dismissed multiple times by the district court as “shotgun pleadings.” In her third amended complaint—which alleged 10 causes of action—the plaintiff contended, among other things, that the defendants failed to respond to letters she sent to dispute the alleged debt and failed to notify credit reporting agencies (CRA) of the dispute. The plaintiff also alleged that certain defendants called her cell phone multiple times using an automatic telephone dialing system. The district court entered final judgment in favor of all the defendants, minus the CRA defendant, stating, among other things, that the plaintiff continued to “‘lump the defendants together. . .and provide generic and general factual allegations as if they applied to all defendants.’”

    On appeal, the 11th Circuit concluded that the district court erred in dismissing six of the 10 counts as shotgun pleadings. “While not at all times a model of clarity, [the third amended complaint] is reasonably concise, alleges concrete actions and omissions undertaken by specific defendants, and clarifies which defendants are responsible for those alleged acts or omissions,” the appellate court wrote. However, the appellate court agreed that the district court correctly dismissed two counts for failing to state a claim related to claims concerning one of the defendant’s alleged attempts to collect delinquent tax payments owed to the IRS. According to the appellate court, since “tax obligations do not arise from business dealings or other consumer transactions they are not ‘debts’ under the FDCPA.’”

    Courts Appellate Eleventh Circuit FDCPA FCRA TCPA Autodialer

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