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11th Circuit denies revival of TCPA suit
On January 22, the U.S. Court of Appeals for the Eleventh Circuit denied an Ohio-based bank’s request for a rehearing en banc. Last August, the three-judge panel reinstated a suit accusing the bank of violating the Telephone Consumer Protection Act (TCPA) when it allegedly made “over 200 automated calls” to the consumer plaintiff who claimed to have partially revoked her consent by telling the bank to stop calling at certain times. As previously covered in InfoBytes, the appellate court’s August 2017 decision to remand the case for trial concluded that “the TCPA allows a consumer to provide limited, i.e., restricted, consent for the receipt of automated calls,” and that “unlimited consent, once given, can also be partially revoked as to future automated calls under the TCPA.” Furthermore, the decision made clear that the lower court erred in its decision to grant summary judgment in favor of the bank “because a reasonable jury could find that [the consumer plaintiff] partially revoked her consent to be called in ‘the morning’ and ‘during the workday’” during a phone call with a bank employee.
However, in its en banc rehearing petition, the bank argued that the “ruling is likely to create ambiguity amongst both consumers and callers regarding the ability of consumers to impose arbitrary limits on communications . . . despite the FCC’s consistent and unwavering proclamation that in order to revoke consent, consumers must clearly request no further communications.” The appellate court’s decision to deny the petition provides no explanation aside from noting that none of its active judges requested that the court be polled on a rehearing en banc.
10th Circuit says FDCPA does not cover non-judicial foreclosures
On January 19, the U.S. Court of Appeals for the 10th Circuit affirmed a lower court decision that the Fair Debt Collection Practices Act (FDCPA) does not cover non-judicial foreclosures in Colorado. In affirming the District Court’s dismissal of the case, the 10th Circuit reasoned that non-judicial foreclosures in Colorado do not constitute an attempt to collect money from a debtor because the state only allows the trustee to obtain payment from the sale of the foreclosed property and a deficiency judgment must be sought through a separate action. According to the opinion, in 2014, a mortgage servicer hired a law firm to initiate a non-judicial foreclosure and the law firm sent the homeowner a letter indicating that it “may be considered to be a debt collector attempting to collect a debt.” The homeowner then filed a complaint in District Court against the firm and the mortgage servicer for FDCPA violations, which was subsequently dismissed. The 10th Circuit reasoned that the mortgage servicer was not considered a debt collector under the law because servicing initiated prior to the loan’s default and the law firm’s communications with the homeowner never attempted to induce payment. The opinion acknowledges that many courts are split on this topic and emphasizes that the holding does not apply to judicial foreclosures.
Supreme Court denies cert petition in Spokeo
On January 22, the U.S. Supreme Court denied a second petition for writ of certiorari in Spokeo v. Robins, thereby declining to reconsider its position on Article III’s standing to sue requirements or to provide further clarification on what constitutes injury in fact. Citing “widespread confusion” over how to determine whether intangible injuries qualify as injury in fact, and therefore meet the standing threshold, Spokeo argued in its petition that review is “warranted to ensure that the jurisdiction asserted by the federal courts remains within constitutional limits.” The second petition was filed by Spokeo last December to request a review of the U.S. Court of Appeals for the Ninth Circuit’s August 2017 decision—on remand from the Supreme Court (see Buckley Sandler Special Alert here)—which ruled that Robins had established standing to sue for alleged violations of the Fair Credit Reporting Act (FCRA) by claiming an intangible statutory injury without any additional harm. The 9th Circuit opined that information contained in a consumer report about age, marital status, educational background, and employment history is important for employment and loan applications, home purchases, and more, and that it “does not take much imagination to understand how inaccurate reports on such a broad range of material facts about Robins’s life could be deemed a real harm.” Further, guaranteeing the accuracy of such information “seems directly and substantially related to FCRA’s goals.” The 9th Circuit reversed and remanded the case to the Central District of California after finding that Robins had adequately alleged the essential elements of standing (see previous InfoBytes coverage here).
7th Circuit says debt collectors cannot simply copy and paste safe harbor language
On January 17, the U.S. Court of Appeals for the 7th Circuit reversed a decision by the U.S. District Court for the Eastern District of Wisconsin dismissing the plaintiffs’ claims that the defendant debt collection agency violated the Fair Debt Collection Practices Act (FDCPA) by falsely stating balances owed might increase “due to interest, late charges and other charges” in its dunning letters to the plaintiffs. In 2016, the defendant sent collection letters for overdue medical bills; according to the plaintiffs, the collection letters falsely suggested that the debt would continue to increase every day due to “late charges and other charges” that the defendant could not legally impose. In granting the motion to dismiss, the District Court had agreed with the defendant that the language used in their dunning letters was nearly identical to the safe harbor language upheld by the 7th Circuit in 2000, and that the letters were not “false, deceptive, or misleading.” By reversing the District Court’s decision, the 7th Circuit determined that the defendant’s use of the safe harbor language in their letters was inaccurate, because the defendant could not lawfully impose “late charges and other charges.” In doing so, the 7th Circuit rejected the defendant’s attempt to copy and paste the safe harbor language, and instead concluded that debt collectors are required to tailor boilerplate language to avoid ambiguity and ensure their statements are accurate under the circumstances.
Judge’s $10 million order against payday lender falls far short of CFPB request
On January 19, a federal judge for the U.S. District Court for the Central District of California ordered an online loan servicer and its affiliates to pay a $10 million penalty for offering high-interest loans in states with usury laws barring the transactions. The judge denied the CFPB’s requested penalty of over $50 million. The judge ordered the company to pay this penalty after determining in September 2016 that the online loan servicer was the “true lender” of the loans that were issued through entities located on tribal land, previously covered by a Buckley Sandler Special Alert. The judge found that a lower statutory penalty was more appropriate than the CFPB’s requested amount because the CFPB failed to show the company “knowingly violated the CFPA.” The judge also rejected the CFPB’s requested restitution of $235 million. In rejecting the CFPB’s requested restitution amount, the judge found that the CFPB had not put forth any evidence that the company “intended to defraud consumers or that consumers did not receive the benefit of their bargain from the [program]” for restitution to be an appropriate remedy. The judge also denied the CFPB’s request for a permanent injunction, finding that the CFPB did not present any evidence to support its assertion that the servicer would violate the CFPA in the future.
Servicemember and bank settle SCRA issue, dismiss Supreme Court request
On January 5, the Supreme Court dismissed a servicemember’s petition for a writ of certiorari after receiving a Stipulation of Dismissal from both parties who agreed to settle the dispute. As previously covered by InfoBytes, the servicemember filed the petition after the U.S. Court of Appeals for the Fourth Circuit affirmed the lower court’s decision that the servicemember was not entitled to the protections against non-judicial foreclosures under the Servicemembers Civil Relief Act (SCRA). The lower court concluded that because the servicemember “incurred his mortgage obligation during his service in the Navy, the obligation was not subject to SCRA protection” even through the servicemember, after a discharge period, later re-enlisted with the Army.
Supreme Court to review whether SEC’s ALJ appointment process is constitutional
On January 12, the U.S. Supreme Court announced it had granted a writ of certiorari in Lucia v. SEC—a case which challenges the SEC’s practice of appointing administrative law judges (ALJs) and moves the Court to consider whether the ALJ appointment practice violates the Appointments Clause (Clause) of the Constitution. In Lucia, the petitioner—against whom an ALJ had issued sanctions, imposed a lifetime securities ban, and fined $300,000—appealed the decision to the D.C. Circuit Court of Appeals, and argued that ALJs are officers of the United States and therefore subject to provisions of the Clause, including the requirement that officers be appointed by the president, the head of a department, or a court of law. However, the D.C. Circuit upheld the ALJs sanctions and ruled that ALJs are not “inferior officers” subject to the Clause. In his petition for certiorari, the petitioner claimed that because he was subjected to a “trial before an unconstitutionally constituted tribunal,” the ALJ’s decision should be dismissed or a new hearing granted.
Notably, last November, the Solicitor General of the United States submitted a brief on behalf of the SEC to the Supreme Court, arguing that the SEC views in-house judges as officers of the U.S. government—not mere employees—who are subject to the Clause. Additionally, on November 30, the SEC ratified the appointment of its ALJs to resolve “any concerns that administrative proceedings presided over by its ALJs violate the Appointments Clause.”
A decision by the Court may resolve a split between the D.C. Circuit, which has ruled that ALJs are not “inferior officers” of the U.S. government, and the Tenth and Fifth Circuits, which disagreed and ruled separately that ALJs are officers.
See also previous Lucia coverage in an InfoBytes blog post and a Special Alert concerning the effect a decision in Lucia may have on the ongoing litigation in PHH v. CFPB.
Ninth Circuit: payday lenders not vicariously liable under TCPA for text messages
On January 10, the U.S. Court of Appeals for the Ninth Circuit affirmed that three payday lenders and two marketing companies (together, the defendants) did not indirectly violate the Telephone Consumer Protection Act (TCPA) by accepting marketing help from a separate lead generator company that used a program to send text-messaged advertisements. In upholding the district court’s decision, the three judge panel concluded that “it is undisputed” that the defendants did not enter into a contract with the lead generator company, and further, that the lead generator company did not act as their agent or purported agent. The plaintiff-appellant that received the text-messaged advertisement—which directed consumers who clicked on the link within the message to a loan application website controlled by one of the defendants—filed a putative class action complaint, certified by the district court, against the defendants to allege that they were vicariously liable for sending the text messages in violation of the TCPA. Specifically, the plaintiff-appellant claimed the defendants ratified the lead generator company’s actions when they accepted leads even though they knew the leads were being generated through text messages. The district court granted summary judgments for all the defendants, and ruled they were not vicariously liable for the lead generator company’s actions, and that additionally, the plaintiff-appellant failed to present evidence that defendants had actual knowledge that the texts were being sent in violation of the TCPA. The appellate panel also noted that because one of the defendants—a contracted lead provider—had “no ‘knowledge of facts that would have led a reasonable person to investigate further,’ . . . [the defendant] cannot be deemed to have ratified [the] actions and therefore is not vicariously liable.”
CFPB succession update: Judge denies English’s motion
On January 10, Judge Timothy Kelley denied CFPB Deputy Director Leandra English’s request for a preliminary injunction to prevent OMB Director Mick Mulvaney from serving as the acting director of the CFPB. In his opinion, Judge Kelley emphasized that English failed to show a likelihood of success on the merits because, among other reasons, “[t]he best reading of the two statutes [at issue] is that Dodd-Frank requires that the Deputy Director ‘shall’ serve as acting Director, but that under the [Federal Vacancies Reform Act] the President ‘may’ override that default rule.” Additionally, in finding that English failed to demonstrate irreparable harm, Judge Kelley stated that “[t]he CFPB is not and will not be shuttered; it continues to operate with Mulvaney functioning as acting director” with “the backing of the CFPB’s General Counsel and senior management.” He concluded his opinion by stating:
There is little question that there is a public interest in clarity here, but it is hard to see how granting English an injunction would bring about more of it…. The President has designated Mulvaney the CFPB’s acting Director, the CFPB has recognized him as the acting Director, and it is operating with him as the acting Director. Granting English an injunction would not bring about more clarity; it would only serve to muddy the waters.
The decision follows a hearing on December 22, 2017, where Judge Kelley heard arguments from both parties, as previously covered by InfoBytes. While English’s requests have now been denied twice, as expected, she has filed an appeal to the U.S. Court of Appeals for the D.C. Circuit, which is also currently considering the challenge to the CFPB’s constitutionality by PHH Corporation.
In addition to the English litigation, Mulvaney and President Trump face similar arguments in a complaint brought by a credit union in the U.S. District Court for the Southern District of New York, as previously covered by InfoBytes here. On December 22, 2017, the defendants responded to the complaint with a motion to dismiss, arguing that the credit union does not have standing to sue, will not succeed on the merits, and will not suffer irreparable harm from the appointment. In its reply, the credit union added an additional argument that the CFPB’s decision to slow HMDA enforcement will remove the compliance incentive and HMDA data “will cease being reliable” to show compliance with the Community Reinvestment Act (“CRA”). The credit union asserts that banks deposit at their institution to meet CRA objectives but may cease to do so without an incentive to comply with HMDA. A hearing is scheduled for January 12.
As previously covered by InfoBytes, the CFPB issued a statement that supervisory examinations of 2018 HMDA data will be “diagnostic” to help “identify compliance weaknesses, and will credit good-faith compliance efforts” and that it does not intend to impose penalties with respect to errors reported in the 2018 data.
Illinois Appellate Court rules generic card agreement cannot compel arbitration
On January 4, the Illinois Appellate Court (Fifth District) handed down an opinion affirming a circuit court’s decision to deny a debt collection company’s motion to dismiss and compel arbitration. In 2015, the company filed complaints against defendants-counterplaintiffs for failing to make payments on their accounts and entering into default. In class action counterclaims, the defendants-counterplaintiffs challenged the debt collection company’s alleged practice of suing to collect debt purchased from others without “sufficient proof of ownership of the debt,” and sought damages for purported violations of the Fair Debt Collection Practices Act, among others. The debt collection company argued that because the class action counterclaims fell within the scope of a binding card agreement—which included an arbitration clause and a class action waiver provision—the class claims should be barred and dismissed. The circuit court considered whether the agreements entered into between the company and the defendants-counterplaintiffs were subject to arbitration, and determined that the company failed to demonstrate that the card agreement containing the arbitration clause was received by, agreed to, or otherwise applied to the consumers within the agreements governing the accounts in question. The appellate court affirmed and concluded that, upon review, the company’s appeal failed to “demonstrate when or how the generic [c]ard [a]greement containing the arbitration provision pertained to [defendants-counterplaintiffs] or that it was communicated . . . prior to subsequent credit card use.”