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Financial Services Law Insights and Observations


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  • District Court rules in favor of debt collectors in FDCPA, FCRA dispute


    On October 7, the U.S. District Court for the Eastern District of Pennsylvania granted defendants’ motion for summary judgment in an FDCPA, FCRA action. According to the opinion, the plaintiff took out a $20,000 loan but never made any payments on the loan. The charged off loan was assigned to the defendant debt purchaser, and a written notice was sent to the plaintiff who requested validation of the debt. The defendant loan servicer provided the account information to the plaintiff and later began furnishing the information to the consumer reporting agencies (CRAs). The plaintiff sued alleging the defendants violated sections 1681s-2(a) and 1681s-2(b) of the FCRA, as well as multiple sections of the FDCPA. Under section 1681s-2(b), a furnisher who has been notified by a CRA of a consumer dispute is required to conduct a reasonable investigation and follow certain procedures. The court noted, however, that these obligations are only triggered if the furnisher received such notice. In this instance, there is no record showing that any CRA reported the plaintiff’s dispute to the defendants, the court said, adding that, moreover, section 1681s-2(a) does not include a private right of action. With respect to the plaintiff’s FDCPA claims, the court determined that, among other things, (i) the plaintiff failed to provide evidence supporting the majority of his claims; (ii) section 1692g does not require the defendants to verify the plaintiff’s account by providing documentation bearing his signature or providing the contractual agreement governing the debt (in this instance, the defendant loan servicer met the minimal requirements by providing an account summary report); and (iii) that nothing in section 1692g requires a debt collector to respond to a dispute within 30 days—this timeframe only applies to when a debtor must dispute a debt, not to the debt collector’s period to provide verification, the court wrote.

    Courts Debt Collection FDCPA FCRA Consumer Finance Consumer Reporting Agency

  • District Court grants summary judgment in FCRA and FDCPA suit


    On September 30, the District Court for the Northern District of New York granted a defendant’s motion for summary judgment in an FCRA and FDCPA suit. According to the order, the plaintiff allegedly discovered that the defendant communicated incorrect information regarding a debt to credit reporting agencies (CRAs) and subsequently began disputing the debt. The defendant confirmed that the tradeline was accurate and that the account had been paid in full. The plaintiff then sent letters to the different CRAs, the original creditor, and the defendant, claiming that the information being communicated was inaccurate. The plaintiff continued to receive responses indicating that the information being reported was accurate and that the account had been paid in full. The plaintiff then received a letter from a bank rejecting his application for a credit card on the basis that they had received negative information about the plaintiff’s credit from a credit reporting agency. The plaintiff claimed that the defendant violated the FCRA by failing to conduct a reasonable investigation, failing to review information provided by the CRAs, and failing to modify or delete information it could not verify as accurate. The court disagreed, finding that the defendant’s investigations were “reasonable under the circumstances,” given that the plaintiff’s disputes contained “various misleading descriptions that indicated” the debt was not the plaintiff’s, when he had admitted in other circumstances it was. Regarding the FDCPA claim, the court noted that “even if this information was false or inaccurate, there is no evidence whatsoever that it was communicated in connection with the collection of a debt.”

    Courts Debt Cancellation FCRA FDCPA Consumer Finance Credit Reporting Agency

  • 3rd Circuit: Debt buyer not required to be licensed under Pennsylvania law


    On September 19, the U.S. Court of Appeals for the Third Circuit affirmed a district court’s ruling in an FDCPA suit, finding that a defendant debt buyer was not required to be licensed under Pennsylvania law when it attempted to collect interest that had accrued at a rate of more than 6 percent under the original credit card agreement. According to the opinion, the plaintiff opened a credit card with a bank, which had an interest rate of 22.9 percent. The plaintiff defaulted on a debt he accrued on the card, and the debt was subsequently charged-off and sold by the bank to the defendant. The plaintiff argued that the defendant violated the FDCPA since the interest rate was limited by the Pennsylvania Consumer Discount Company Act (CDCA), which states that an unlicensed firm “in the business of negotiating or making loans or advances of money on credit [less than $25,000]” may not collect interest at an annual interest rate over 6 percent. The district court granted the defendant’s motion to dismiss, ruling that the defendant was entitled to collect interest above 6 percent because it held a license under a different state law.

    On the appeal, the 3rd Circuit found that the CDCA applies to companies that arrange for or negotiate loans with certain parameters, and that there is nothing in the plaintiff’s amended complaint to suggest that the defendant is in the business of negotiating loans. The appellate court noted that the plaintiff’s allegations “indicate that [the defendant] purchases debt, such as [plaintiff’s] credit card account that [the bank had] charged off. But even with that allegation as a starting point, it is not reasonable to infer that an entity that purchases charged-off debt would also be in the business of negotiating or bargaining for the initial terms of loans or advances.” The appellate court further noted that “the amended complaint cuts against such an inference: it alleges that [the bank], not [the defendant], set the annual interest rate for [plaintiff’s] use of the credit card for loans and advances at 22.90%. Thus, with the understanding that negotiate means ‘to bargain’ and not ‘to transfer,’ [the plaintiff’s] allegations do not support an inference that [defendant] is in the business of negotiating loans or advances.”

    Courts Licensing FDCPA Debt Collection Debt Buyer Appellate Third Circuit Consumer Finance Pennsylvania

  • District Court grants partial summary judgment to debt collector in credit reporting and debt collection action


    On September 21, the U.S. District Court for the District of Maryland partially granted a defendant debt collector’s motion for summary judgment in a credit reporting and debt collection action. The plaintiff disputed debt related to two electric bills for two different residences that were eventually combined into one account. After the plaintiff informed the electric company that she would not be paying the bill, the debt was eventually referred for collection to the defendant. The plaintiff disputed the debt, and the defendant conducted an investigation. The plaintiff continued to contend that the defendant was certifying the debt without proof and claimed the defendant’s agents called her a liar and incorrectly asserted that she had not made payments. The defendant argued that it was entitled to summary judgment on the plaintiff’s FCRA and FDCPA claims, contending, among other things, that FCRA 1681e(b) “expressly applies to [credit reporting agencies] and not to furnishers.”

    The court first reviewed the plaintiff’s FCRA claims as to whether the defendant conducted a reasonable investigation. The court stated that the plaintiff bore the burden to establish whether the defendant failed to conduct a reasonable investigation, and noted that because she failed to provide certain evidence to the defendant “there is no genuine dispute that the investigation conducted by [defendant] was not unreasonable” or that the defendant reported accurate information to the CRAs about the debt. With respect to some of the FDCPA claims, the court denied the defendant summary judgment on the basis that the plaintiff created a genuine dispute about whether the defendant violated § 1692d (the provision prohibiting a debt collector from engaging in harassment or abuse). According to the opinion, evidence suggests that the defendant’s agents incorrectly informed the plaintiff that she had never made a payment on one of the accounts, called her a liar when she protested this information, and used a “demeaning tone” in their communications. “[A] reasonable jury could conclude that the language would have the natural consequence of abusing a consumer relatively more susceptible to harassment, oppression, or abuse,” the court wrote.

    Additionally, the court ruled on Maryland state law claims introduced in the plaintiff’s opposition to summary judgment. The court ruled against her Maryland Consumer Debt Collection Act claim regarding the alleged use of abusive language, writing that the agents were not “grossly abusive” and that the plaintiff failed to generate a genuine dispute on this issue. Nor did the plaintiff show a genuine dispute as to whether the debt was inaccurate or that the defendant knew the debt was invalid. The court also entered summary judgment in favor of the defendant on the plaintiff’s Maryland Consumer Protection Act and Maryland Collection Agency Licensing Act claims.

    Courts FCRA FDCPA Consumer Finance State Issues Maryland Debt Collection Credit Report

  • 11th Circuit says wasted time, distress can confer FDCPA standing


    On September 7, the U.S. Court of Appeals for the Eleventh Circuit vacated the dismissal of an FDCPA action after determining that wasted time and emotional distress can be sufficiently concrete as to confer Article III standing. After the plaintiff fell behind on his monthly condo association payments, the association referred the matter to a law firm (collectively, “defendants”). The defendant law firm eventually filed a claim of lien against the plaintiff’s condo and threatened foreclosure if the plaintiff did not pay more than $10,000 in past-due fees, interest, late fees, attorney’s fees, and costs. The plaintiff sued for violations of the FDCPA and state law, claiming, among other things, that the debt collection letters and claim of lien overstated the amount due by including interest, late fees, and other charges not permitted under Florida law. He also alleged that the law firm violated the FDCPA by filing the claim of lien in the public record, thereby communicating with a third party about his debt without permission. These actions, the plaintiff contended, caused him emotional distress and cost him time, money, and effort when “trying to ‘determine, verify, and dispute the amounts being sought against him.’” The plaintiff eventually voluntarily dismissed the claims against the association, and the law firm moved to dismiss for lack of jurisdiction. The district court determined that the plaintiff lacked standing because the law firm’s actions did not cause him any concrete injury and dismissed the suit.

    On appeal, the 11th Circuit disagreed after finding that the time the plaintiff spent trying to determine the correct amount of debt and the emotion distress he suffered during the process were adequate to satisfy constitutional standing requirements. “[Plaintiff] presented evidence that he suffered injuries—including an inaccurate claim of lien against his property; time spent trying to determine the correct amount of his debt, resolve the lien, and avoid the threatened foreclosure; and emotional distress manifesting in a loss of sleep—which are sufficiently tangible to confer Article III standing,” the appellate court wrote. The 11th Circuit explained that while the time and money spent on the FDCPA lawsuit itself could not give rise to a concrete injury for standing purposes, the time and money spent by the plaintiff defending against a legal action taken by a debt collector was “separable” from the costs of bringing the FDCPA suit. Moreover, the appellate court determined that the defendants refusing to release the lien against the plaintiff’s home unless he paid more than what was actually owed “was a tangible harm sufficient to give [plaintiff] standing for his claims that the defendants’ conduct in filing the lien and threatening to foreclose on it violated the FDCPA.”

    Courts State Issues Appellate Eleventh Circuit Debt Collection Consumer Finance FDCPA Florida

  • 11th Circuit says plaintiff lacks standing in collection letter case


    On September 8, the U.S. Court of Appeals for the Eleventh Circuit issued an en banc decision in Hunstein v. Preferred Collection & Management Services, dismissing the case after determining the plaintiff lacked standing to sue. The majority determined that “[b]ecause Hunstein has alleged only a legal infraction—a ‘bare procedural violation’—and not a concrete harm, we lack jurisdiction to consider his claim.” In April 2021, the 11th Circuit held that transmitting a consumer’s private data to a commercial mail vendor to generate debt collection letters violates Section 1692c(b) of the FDCPA because it is considered transmitting a consumer’s private data “in connection with the collection of any debt.” The decision revived claims that the debt collector’s use of a third-party mail vendor to write, print, and send requests for medical debt repayment violated privacy rights established in the FDCPA. The 11th Circuit last November, however, voted sua sponte to rehear the case en banc and vacated its earlier opinion. (Covered by InfoBytes here.)

    The en banc decision relied heavily on the U.S. Supreme Court’s ruling in TransUnion v. Ramirez (covered by InfoBytes here), which clarified the type of concrete injury necessary to establish Article III standing and directed courts “to consider common-law torts as sources of information on whether a statutory violation had caused a concrete harm.” The majority pointed out that when making a common-law tort comparison, courts “do not look at tort elements in a vacuum” but rather “make the comparison between statutory causes of action and those arising under the common law with an eye toward evaluating commonalities between the harms.”

    “What harm did this alleged violation cause?” the majority questioned in its opinion, finding that no tangible injury or loss was identified in the complaint. Rather, the plaintiff analogized to the tort of public disclosure. The majority found that this comparison was inapposite, because “the disclosure alleged here lacks the fundamental element of publicity.” Because there was no public disclosure, there was no invasion of privacy and therefore no cognizable harm.   

    Four judges dissented, arguing that the plaintiff had standing to sue. They opined that the court’s job is not to determine whether the plaintiff stated a viable common-law tort claim, but rather to “compare the ‘harm’ that Congress targeted in the FDCPA and ‘harm’ that the common law sought to address” and to determine whether those harms bear a sufficiently “close relationship.” The dissenting judges found that the plaintiff’s allegations that the delivery of “intensely private information” to the vendor is the “same sort of harm that common-law invasion-of-privacy torts—and in particular, public disclosure of private facts—aim to remedy.” The dissent also stressed that even if the disclosure alleged by the plaintiff is less extensive than the type of disclosure of private information typically at issue in a common law invasion of privacy claim, that is a question of the degree of harm and not a question of the kind of harm, and therefore should not be the basis for dismissal. 

    Courts Appellate Privacy, Cyber Risk & Data Security Eleventh Circuit Debt Collection Hunstein FDCPA Disclosures U.S. Supreme Court

  • CFPB reports on nursing home debt collection

    Federal Issues

    On September 8, the CFPB released an Issue Spotlight on nursing home debt collection, which focuses on the risk of financial harm that nursing homes and their debt collectors cause by attempting to collect invalid debts. The report, conducted by the Bureau’s Office of Financial Protection for Older Americans, analyzes consumer complaints, nursing home admission contracts, and debt collection lawsuits to assess risks to nursing home residents and their caregivers. In particular, the report found that many facilities include clauses in admission contracts that require caregivers to be a “responsible party” for the resident’s costs of care, or that otherwise subject the caregiver to financial liability should the admitted resident incur a debt. The report also found that nursing home residents stay for significant amounts of time, the average nursing home stay among residents being 1 year and 4 months, and that most older adults are not insured against the costs of long-term care. According to a statement by CFPB Director Rohit Chopra, he expects the "Office for Older Americans will emerge as a key pillar within the policymaking and law enforcement community on financial issues faced by older adults and their caregivers."

    The same day, the CFPB released Circular 2022-05, which asks the question: “Can debt collection and consumer reporting practices relating to nursing home debts that are invalid under the Nursing Home Reform Act [(NHRA)] violate the Fair Debt Collection Practices Act (FDCPA) and Fair Credit Reporting Act (FCRA)?” The Circular explained, though the Bureau does not enforce the NHRA, that the NHRA prohibits a nursing facility from conditioning a resident’s admission or continued stay on receiving a guarantee of payment from a third party, such as a relative or friend. The Circular also highlighted certain practices related to the collection of nursing home debts that are invalid under the NHRA and its implementing regulation that also violate the FDCPA and FCRA. The Bureau also issued a joint letter with the Centers for Medicare & Medicaid Services to nursing facilities and debt collectors reminding them of their responsibilities under the NHRA, FDCPA, and FCRA.

    Federal Issues Elder Financial Exploitation Debt Collection CFPB Consumer Finance FCRA FDCPA

  • 8th Circuit affirms decision in FDCPA case


    On September 6, the U.S. Court of Appeals for the Eighth Circuit affirmed a district court’s order to grant a defendant’s motion for judgment on the pleadings in an FDCPA suit. According to the opinion, the defendant sent the plaintiff a debt collection letter identifying the plaintiff as the attorney for a consumer named in the letter. The consumer was not the plaintiff’s client, the consumer had never identified the plaintiff as her attorney to anyone, and the plaintiff had never identified himself as the consumer’s attorney. When the plaintiff was unable to recognize the consumer’s name, he engaged in an extensive search of his files and records to determine if he had ever represented the consumer, and “found nothing to indicate that she was a past or present client.” The plaintiff filed suit, asserting that the defendant violated § 1692c(b) of the FDCPA when it contacted him regarding the debt of a consumer whom he did not represent and without the consumer’s consent. The plaintiff alleged that he suffered injury as a result of the violation, because his search for the consumer’s records cost him “valuable time and resources that he could have spent working on matters for actual clients.” The district court ruled that the defendant’s letter violated § 1692c(b) but said that the plaintiff lacked standing to sue under the statute and entered judgment on the pleadings against the plaintiff.

    On appeal, the 8th Circuit agreed with the district court that the defendant violated the FDCPA when it sent the letter to the attorney, but also agreed with other circuit courts that non-consumers cannot bring § 1692c(b) claims. The appellate court noted that “[b]ecause the purpose of § 1692c(b) is to protect consumers alone, we conclude that [the plaintiff] falls outside § 1692c(b)’s ‘zone of interests’ and thus cannot invoke the protection afforded by it.” The 8th Circuit rejected the plaintiff’s argument that the proper course of action was to remand the case back to state court, where it was originally filed, and affirmed that the decision “was a ruling on the merits of [the plaintiff’s] claim, not on the district court’s jurisdiction.”

    Courts Appellate Eighth Circuit FDCPA Debt Collection Consumer Finance

  • District Court rules non-judicial foreclosure claims fail


    On August 30, the U.S. District Court for the District of Oregon granted defendants’ motion for summary judgment in an action concerning an allegedly unlawful non-judicial foreclosure. Plaintiffs obtained a cash-out loan in 2005 and modified their mortgage terms. The plaintiffs stopped making payments after one of the defendant loan servicer’s agents allegedly informed them that “help was only available if they were in default,” and the defendant loan servicer threatened foreclosure. Following several years of bankruptcy proceedings and foreclosure mediation, plaintiffs sued to stop the foreclosure proceedings, claiming “that the deed of trust was void and that defendants committed fraud in attempting to foreclos[e] on the debt.” The initial non-judicial foreclosure proceedings were rescinded after the suit was dismissed with prejudice, and the defendant loan servicer was eventually allowed to proceed with a second non-judicial foreclosure under Oregon law. Plaintiffs sent a dispute letter demanding that the foreclosure be rescinded because the order in which several notices of default showing the amounts due and the amounts necessary to reinstate were sent did not comply with state law. After the notice was rescinded and a new notice of default was issued and recorded, plaintiffs sued again, seeking to enjoin the defendant trustee’s sale and filing several claims, including breach of contract and violations of the Oregon Unfair Trade Practices Act (OUTPA), RESPA, and FDCPA.

    In granting summary judgment to the defendants on each of the claims, the court determined that the breach of contract claim fails because plaintiffs acknowledged that because “they have not substantially performed under the relevant contract,” they are precluded from seeking damages. The FDCPA claim against the defendant trustee also fails “because it is based on a perceived lack of authority under the relevant contract, but as explained in the breach of contract claim, that authority was not lacking.” Finally, the OUTPA and RESPA claims both fail “because there is no evidence that they incurred damages arising out of either claim”—a required element under both statutes, the court said. According to the court, plaintiffs failed “to support their drastic allegations with relevant evidence” and failed to “point to specific evidence supporting valid legal claims.”

    Courts Consumer Finance Mortgages Foreclosure State Issues Oregon RESPA FDCPA Debt Collection

  • District Court grants summary judgment for defendant in FDCPA suit


    On August 25, the U.S. District Court for the Southern District of Indiana granted a defendant’s motion for summary judgment in an FDCPA case, finding that the plaintiff did not suffer a concrete injury after receiving two collection letters from the defendant’s attorneys on the same day. According to the order, the plaintiff had a medical debt that was placed with the defendant for collection. The defendant sent a bill to the plaintiff, but because the plaintiff was unemployed when she received it, she did not make a payment, and “planned on setting up a payment plan once she obtained a ‘steady income.’” A month after sending the bill, the defendant called the plaintiff, and during the call, the plaintiff noted that she was considering filing for bankruptcy. The plaintiff subsequently retained an attorney to assist with a bankruptcy filing. Later that year, the plaintiff received two letters on the same day from the defendant, from two separate attorneys, both requesting that she pay the bill. The plaintiff sued the defendant, alleging that the collection letters violated the FDCPA because they falsely implied that the defendant’s attorneys were personally involved in the collection of her debt. The plaintiff claimed that she experienced concrete harm after receiving the letters in the form of emotional stress and confusion, which affected her decision whether to repay the debt or file for bankruptcy protection. The court granted the defendant summary judgment, deciding that the plaintiff lacked standing because she did not provide “evidence of specific facts showing that the collection letters caused her to take any action to her detriment, including making a payment on the debt or filing bankruptcy.” The court also found that “’[p]sychological states induced by a debt collector’s letter’—including emotional distress and confusion—are not concrete injuries.”

    Courts Consumer Finance FDCPA Debt Collection


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