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  • Credit bureaus to eliminate 70% of medical debt tradelines

    Federal Issues

    On March 18, three major credit bureaus released a statement announcing that they are eliminating nearly 70 percent of medical collection debt tradelines from consumer credit reports. According to the statement, beginning July 1, “paid medical collection debt will no longer be included on consumer credit reports. In addition, the time period before unpaid medical collection debt would appear on a consumer’s report will be increased from 6 months to one year, giving consumers more time to work with insurance and/or healthcare providers to address their debt before it is reported on their credit file.” Finally, starting in 2023, medical collection debt under $500 will no longer be included on credit reports issued by the three credit bureaus.  The statement noted that the decision to remove medical tradelines from credit reports was taken “after months of industry research.”

    The same day Senator Sherrod Brown (D-OH), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, issued a statement supporting the credit bureaus’ announcement regarding medical debt. Brown noted the changes followed a CFPB announcement that it would hold consumer reporting agencies accountable for inaccurate reports (covered by InfoBytes here). Brown expressed his view that the CFPB is taking “real action for consumers” and noted he intends to collaborate with the CFPB to “address the growing burden of medical debt, protect working families, and hold bad actors accountable.”

    Earlier on March 16, the CFPB a released a data spotlight regarding senior adults (those age 65 and older) and medical debt. The survey used information from the 2018 “FINRA Foundation National Financial Capability Study,” which was administered online to a sample of 27,091 adults ages 18 and older. In total, there were 5,166 respondents ages 65 and older. The study found that 8.5 percent of adults over 65 carried medical debt. The Bureau suggested this outcome “is likely the result of older Americans having the highest health insurance coverage rates of all age groups due to their eligibility for coverage through Medicare,” but referenced Medicare coverage as “limited.” The data spotlight also pointed out that, “[m]edical debt is more common among older people of color, older adults with incomes near the poverty line, people who are uninsured, who are currently unmarried, and who don’t own a home,” specifically noting that “[n]on-White older adults and older adults who are not married more often report medical debt than their counterpart.” The Bureau observed that 76 percent of seniors with medical debt are retired, while 17 percent are still employed and nearly 7 percent are disabled, sick, or unable to work. The Bureau noted that a recent job loss, declining health, or the onset of a disability may explain this data. The survey also found that older adults who had medical debt were significantly more likely to report significant cost-related health care challenges and hardships than others in the same age group without medical debt. More than 33.8 percent of older adults with medical debt have skipped medical treatment or a doctor’s visit due to cost, but just 6 percent of seniors without medical debt skipped medical treatment or a doctor’s visit due to cost, according to the survey data.

    Federal Issues CFPB Medical Debt Consumer Finance Credit Report Credit Reporting Agency

  • District Court dismisses time-barred mortgage discrimination claims

    Courts

    On March 17, the U.S. District Court for the Northern District of Georgia agreed that claims against a group of mortgage lenders for conduct arising prior to November 2013 were barred under the two-year statute of limitations of the Fair Housing Act (FHA). Plaintiffs Cobb County, DeKalb County, and Fulton County, Georgia (collectively, “Counties”) alleged that the defendants “engaged in, and continue to engage in, discriminatory schemes that expose borrowers to unreasonable levels of risk; needlessly inflate interest rates, penalties, and fees; generate unauthorized and inflated charges for default related services; and lead to higher foreclosure rates among minority borrowers.” According to the Counties, these alleged practices have caused them to incur financial injury, including foreclosure-related costs, loss of property tax revenue, increased segregation, and organizational harm to County departments and authorities due to the forced reallocation of funds to address harms caused by the defendants’ actions. The Counties filed a complaint on November 20, 2015, asserting three counts related to disparate impact and disparate treatment theories under the FHA. Defendants moved for partial summary judgment on statute-of-limitations grounds, arguing that the Counties’ allegations are time-barred because they are based on allegedly discriminatory conduct occurring before November 20, 2013. Defendants further contended that the Counties could not “allege a ‘continuing violation’ that tolls the statute of limitations for each allegedly discriminatory act until the continuing violation ends because [a plaintiff’s] knowledge of a claim, or reason to have knowledge of a claim, cuts off equitable tolling of the statute of limitations for claims based on a continuing violation, and the Counties knew or should have known of their FHA claims at least as of May 2011.”

    The court agreed with the defendants, pointing out that, among other things, there is “copious circumstantial evidence” that the Counties knew or should have known of their claims prior to May 2011, including well publicized allegations against the same defendants for similar conduct, and their retention of outside counsel in 2010 to investigate potential discrimination claims. According to the court, while a reasonable jury could find that the Counties themselves did not know of their claims, the record left no doubt that the outside counsel “knew of the claims prior to the statutory period, or would have known of the claims if he conducted himself with reasonable prudence.” Because the outside counsel’s “knowledge is imputed to his clients, no reasonable jury could find in the Counties’ favor on the statute-of-limitations issue.”

    Courts Redlining Fair Lending Mortgages Consumer Finance Fair Housing Act Disparate Impact

  • District Court denies motions in FDCPA and TCPA suit

    Courts

    On March 18, the U.S. District Court for the District of Nevada denied motions for judgment on the pleadings filed by both the plaintiff and defendant in a lawsuit alleging violations of the FDCPA and TCPA. According to the order, the defendant allegedly offered to settle an unpaid medical debt with the plaintiff; the plaintiff accepted the offer and paid the debt. After the settlement, the defendant allegedly called the plaintiff and left voicemails seeking to collect the same debt. The plaintiff filed suit, alleging that the calls violated the TCPA because she revoked consent to be contacted after she paid the debt. The plaintiff also alleged that the defendant violated the FDCPA by attempting to collect the debt after it had been settled. In denying the parties’ cross motions for judgment on the pleadings, district court observed that, although the plaintiff had previously consented to being contacted, it could not “determine as a matter of law whether merely settling the Debt was enough to revoke Plaintiff’s consent.” With respect to the FDCPA claim, the district court “would grant Plaintiff’s motion for judgment on the pleadings under the FDCPA, if it were not for Defendant’s affirmative defense ‘bona fide error,’” for which the debt collector has the burden of proof.

    Courts TCPA FDCPA Debt Collection Consumer Finance

  • Colorado reaches agreements with credit unions over unused GAP fees violations

    State Issues

    Recently, the Colorado attorney general announced three separate settlements (see here, here, and here) with three credit unions resolving allegations that they neglected to refund unearned Guaranteed Automobile Protection (GAP) fees to Colorado consumers. The administrator of the Uniform Consumer Credit Code (UCCC), who is part of the Consumer Protection Division of the Department of Law and who led this investigation, concluded that the credit unions engaged in unfair and deceptive trade practices under the Colorado Consumer Protection Act by failing to provide GAP refunds automatically without waiting for a request from the consumer. Under the terms of the assurances of discontinuance, the credit unions have agreed to comply with all legal obligations and issue refunds to affected borrowers, and: (i) must comply with the UCCC rule’s GAP refund requirements; (ii) are subjected to an audit to verify the accuracy of their self-audits; and (iii) must send a confirmation letter pre-approved by the administrator to each consumer to whom a GAP refund was paid because of the self-audits. The AG noted that the “settlements are part of our office’s efforts to ensure lending institutions follow Colorado law and do not cheat hardworking consumers out of money they are entitled to under their lending and coverage agreements.”

    State Issues Colorado GAP Fees State Attorney General Enforcement Settlement Credit Union Consumer Finance

  • FTC, DOJ halt deceptive credit repair operation

    Federal Issues

    On March 21, the FTC and DOJ announced that the U.S. District Court for the Southern District of Texas entered a permanent injunction against a credit repair organization accused of allegedly defrauding consumers out of millions of dollars by promising to remove negative information from their credit reports, while actually filing fake identity theft reports to explain the negative items. (Press releases linked here and here.) According to the complaint, filed by the DOJ on behalf of the FTC, the defendants allegedly claimed their “two-step process” could remove negative items from consumers’ credit histories or credit reports through “advance disputing” of negative information and help boost credit scores by adding “credit building products” to consumers’ credit reports. However, according to the FTC, defendants failed to follow through on their credit repair promises, and instead filed identity theft reports even when consumers had not actually been victims of identity theft. The FTC claimed many consumers actually saw their credit scores decrease because the defendants’ “unsupported challenges rarely if ever cause[d] credit reporting agencies to delete or change any consumer’s credit information.” Company representatives also allegedly informed consumers that the process could boost consumers’ credit scores by 50-200 points within 90 days—a violation of the Credit Repair Organizations Act and the Telemarketing Sales Rule. Additionally, the FTC claimed that the defendants illegally required consumers to pay upfront fees up to $1,500, and failed to include disclosures detailing cancellation policies or provide consumers with copies of the contracts they were required to sign in order to obtain the defendants’ services. The permanent injunction imposes financial restrictions on the defendants and halts their operations.

    Federal Issues FTC Enforcement DOJ Credit Repair Credit Report Consumer Finance Credit Repair Organizations Act Telemarketing Sales Rule

  • District Court: Failing to invoke the BFE defense does not entitle a plaintiff to judgment as a matter of law

    Courts

    On March 15, the U.S. District Court for the Eastern District of Washington denied a plaintiff’s motion for partial summary judgment, ruling that just because a defendant did not invoke the bona fide error (BFE) defense when accused of allegedly violating the FDCPA it does not mean the defendant has admitted to violating the statute. In 2018, the defendant debt collector attempted to collect unpaid debt in the amount of $786.68 from the plaintiff and began reporting the debt to the consumer reporting agencies (CRAs). In 2021, after the original creditor recalled the account from the defendant for an unspecified reason, the defendant submitted two requests to the CRAs to delete the item from the plaintiff’s credit report and took no further action on the account. Shortly thereafter, the plaintiff noticed a $787.00 debt on one of his credit reports. He contacted the original creditor and was told the company could not find an account in his name that was referred for collection. The plaintiff sued for violations of Section 1692e of the FDCPA and related violations of Washington state law, and later filed for a partial motion for summary judgment contending that the FDCPA “is a strict liability remedial statute that contains a single affirmative defense to liability—the bona fide error defense,” and that because the defendant did not plead the BFE defense “he is entitled to judgment as a matter of law as to Defendant’s liability under the statute.” While the defendant acknowledged that it did not plead the BFE defense, it countered that the plaintiff “cannot prove a prima facie case of liability.”

    The court concluded that “[w]hile the statute is strict liability, ‘a debt collector’s false or misleading representation must be ‘material’ in order for it to be actionable under the FDCPA.” Noting that the alleged violation appeared to be based on the grounds that the defendant reported an inflated account balance ($787.00 versus $786.68), the court stated it “has little trouble in concluding that inflating an account balance by 32 cents is not a materially false representation. To the contrary, it is a ‘mere technical falsehood that mislead[s] no one.’” Moreover, the court stated that because the defendant immediately ceased reporting the account and sent deletion requests to the CRAs after the account was recalled, and that there was no evidence to suggest that the debt collector knew or should have known that it was communicating information that was false, the plaintiff could not show, at this stage of the proceeding, that Section 1692e was violated.

    Courts FDCPA Debt Collection Bona Fide Error Consumer Reporting Agency Consumer Finance

  • District Court denies defendants summary judgment over FCA violations

    Courts

    On March 16, the U.S. District Court for the Eastern District of Texas denied a motion for summary judgment by a mortgage servicer relating to False Claims Act (FCA) claims alleging false certifications of compliance to obtain payment under three different government programs: Treasury’s Home Affordable Modification Program (HAMP), FHA HAMP, and VA HAMP. According to the memorandum opinion and order, the relator, a former loss-mitigation specialist at the mortgage servicer, alleged that the mortgage servicer engaged in widespread dual tracking, continuously moving homeowners’ mortgages through the foreclosure process even as the defendants were supposed to be evaluating the mortgages for loss mitigation options and HAMP. The plaintiff further alleged that “the dual tracking led many homeowners to lose their homes in foreclosure when foreclosure should have been suspended during the resolution of modification and other workout processes,” and that the defendants “knowingly lacked adequate HAMP systems, processes, staffing, and training.”

    The defendants argued that, “notwithstanding industrywide difficulties, publicly available service assessments and third-party reviews show that [the mortgage servicer was] one of the highest-rated servicers participating in HAMP []. Further, though Treasury had the power to withhold incentives for HAMP non-compliance, Treasury never did so and consistently paid HAMP incentive payments to [the mortgage servicer] until the program expired.” The mortgage servicer also argued that summary judgment was appropriate for several reasons; (i) the court lacks jurisdiction to consider any of the relator’s claims under the FCA’s first-to-file bar; (ii) the relator’s claims fail because he cannot establish one or more of the required elements as to each claim; and (iii) the relator’s VA claim fails because the he cannot cite to any evidence of a certification by the mortgage servicer to the VA, and thus cannot demonstrate a false statement or fraudulent conduct. The court held that, pursuant to Fifth Circuit precedent, the first-to-file rule is inapplicable here because this case was filed by the same relator in a New York district court. With respect to the remaining claims, the court held that summary judgment is inappropriate where, as here, there exist genuine issues of material fact.

    Courts FCA Mortgages Mortgages Servicing Loss Mitigation Consumer Finance Foreclosure HAMP Department of Treasury FHA Department of Veterans Affairs

  • HUD announces disaster relief for homeowners in several states

    Federal Issues

    On March 16, HUD announced disaster assistance for certain areas in Virginia and Tennessee (see here and here) impacted by severe winter storms. The disaster assistance follows President Biden’s major disaster declarations on March 11. According to the announcements, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals who have lost homes to finance a home purchase or to refinance a home to include repair costs through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes. 

    On March 18, HUD announced disaster assistance for certain areas in Maine impacted by a severe storm and flooding. The disaster assistance follows President Biden’s major disaster declarations on March 15. According to the announcements, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals who have lost homes to finance a home purchase or to refinance a home to include repair costs through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.

    Federal Issues Disaster Relief HUD Tennessee Virginia Consumer Finance FHA Foreclosure Mortgages

  • CFPB reminds servicers to use HAF funds to prevent foreclosure

    Federal Issues

    On March 14, the CFPB published a blog post strongly encouraging mortgage servicers to participate in the Homeowner Assistance Fund (HAF) to help borrowers avoid foreclosure and resolve delinquencies. While participation is voluntary, the Bureau reminded servicers that it remains focused on preventing avoidable foreclosures, and HAF funds can only help “if mortgage servicers work with state housing finance agencies and HUD-approved housing counselors to help borrowers” complete the process. HAF funds may allow borrowers to pay down the amount owed on a mortgage and help them enter loan modifications with lower payments. The Bureau also encouraged servicers to offer HAF program training to customer service representatives to ensure borrowers are provided accurate information about the loss mitigation process. Additionally, servicers should maintain policies and procedures that are designed to properly evaluate loss mitigation applications and should review existing policies and procedures to ensure borrowers are not improperly referred to foreclosure, especially in cases where a borrower’s HAF application is pending, or a borrower is awaiting HAF funds. The Bureau reminded servicers that it will continue to closely monitor servicer conduct and review mortgage servicing complaints to ensure compliance with all applicable federal consumer financial laws.

    Federal Issues CFPB Mortgages Consumer Finance Mortgage Servicing Foreclosure

  • District Court partially grants motion for class certification

    Courts

    On March 4, the U.S. District Court for the Eastern District of California granted in part a consumer plaintiff’s motion for class certification after denying the defendant credit reporting agency’s motion for summary judgment in an FCRA and California Consumer Credit Reporting Agencies Act (CCRAA) suit. The plaintiff, on behalf of the class, alleged that the defendant “failed to follow reasonable procedures to assure the maximum possible accuracy of the consumer information included in its OFAC Check documents” and “failed to disclose upon request all information in consumer files,” in violation of CCRAA and the FCRA. Additionally, the plaintiff alleged that the defendant “failed to reinvestigate the disputed OFAC-related information that it had prepared and sold” to its clients. In granting in part the plaintiff’s motion for class certification, the district court quoted the U.S. Supreme Court case TransUnion LLC v. Ramirez, which ruled that only a plaintiff concretely harmed by a defendant’s violation of the FCRA has Article III standing to seek damages against a private defendant in federal court (covered by InfoBytes here). In referencing TransUnion LLC v. Ramirez, the district court noted that “[the plaintiff] and the putative class members incurred the ‘same or similar injury’ in that they suffered ‘concrete reputational harm’ from the ‘same conduct’ of [the defendant].” The district court further noted that as a basis for class typicality, “[e]ven if [the plaintiff’s] injuries were slightly more severe than some class members’ injuries, [the plaintiff’s] injuries still arose ‘from the same event or practice or course of conduct that [gave] rise to the claims of other class members and [his claims were] based on the same legal theory.’” Consequently, the district court certified the class with respect to plaintiff’s FCRA allegations for statutory damages and CCRAA claims for injunctive relief. However, the district court denied class certification with respect to plaintiff’s CCRAA allegations for statutory damages, noting that “[t]he CCRAA, unlike the FCRA, requires a showing of actual harm where, as here, the plaintiff is seeking statutory punitive damages” because “individual issues will predominate.”

    Courts OFAC FCRA Class Action California State Issues Consumer Finance

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