FDCPA

7th Circuit Dings Plaintiff’s Attorney Mario Kasalo On Attorneys’ Fees

In Paz v. Portfolio Recovery Associates, LLC, No. 17-3259 (4/2/19) the U.S. Court of Appeals for the 7th Circuit upheld the district court’s award of $10,875 in attorney fees to the plaintiff’s attorney, Mario Kasalo, despite his petition for $187,410 in fees after prevailing at trial in a lawsuit brought under the Fair Debt Collection Practices Act and Fair Credit Reporting Act.  The 7th Circuit criticized Mr. Kasalo for not settling the case early on, stating “Sometimes settling a case is the only course that makes sense. This case provides a good example.”  At trial plaintiff was awarded only $1,000 in damages on a single FDCPA claim while defendants had prevailed in lion's share of plaintiff's other claims. Importantly, the Court noted that plaintiff had disregarded multiple offers to settle the lawsuit both at outset of action and after defendant had prevailed on summary judgment. The 7th Circuit held that when determining the reasonableness of the fee request it was appropriate for the district court to consider the fact that plaintiff had rejected the defendant’s Rule 68 Offer of Judgment and series of settlement offers, the last one of which if accepted would have settled case for $3,501 plus reasonable fees. The 7th Circuit further held that the $3,501 plus fees offer was reasonable, where it was more than three times maximum statutory damages that plaintiff could receive, and the district court could conclude that vast majority of fees requested by plaintiff's counsel was for time spent on pursuing unsuccessful and ill-advised efforts to win a much bigger payoff than what was remotely possible. 

 

Moral of the Story 

This decision illustrates the importance of making and documenting a good faith offer to settle a lawsuit where liability is likely, and to do so early in the litigation before plaintiff’s counsel racks up substantial fees.  If plaintiff’s counsel persists and ultimately wins, the offer can be extremely helpful in reducing their fee award. 

Victory in the Seventh Circuit in Bona Fide Error Case

Appellate decisions on the FDCPA’s bona fide error defense are rare. Even rarer are those upholding a grant of summary judgment on the bona fide error defense to a law firm.. Messer Strickler is pleased to report another total defense victory in the case of Abdollahzadeh v. Mandarich Law Group, 2019 U.S. App. LEXIS 12887 (7th Cir April 29, 2019).

In Abdollahzadeh, a law firm inadvertently filed a collection lawsuit against a consumer that was outside of the statute of limitations as a result of an inaccurate last payment date transmitted to it from the original creditor through its client. Specifically, the date of last payment reflected a bounced payment, as opposed to a payment that had cleared. When the consumer moved to dismiss, Mandarich Law Group defended consistent with its ethical obligations to argue in good faith that the consumer’s intent to pay extended the statute of limitations. The trial court disagreed and dismissed the matter with prejudice.

Abdollahzadeh, represented by Mario Kasalo, then sued Mandarich in federal court blaming it not only for filing suit but also for defending his motion to dismiss. Mandarich held strong and pointed to its policies and procedures for scrubbing out and closing time barred accounts. Ultimately, it prevailed at the district court level at summary judgment by invoking the bona fide error defense. The consumer appealed.

The Seventh Circuit was “not persuaded” by the consumer’s arguments for reversal. The consumer argued that in order to succeed on the defense, the law firm should have abandoned its client’s claims in response to the consumer’s motion to dismiss. The consumer also insisted that Mandarich should have engaged in independent efforts to valid the debt prior to suit and refrained to relying on its client’s data. Ultimately, the Circuit rejected all of the consumer’s arguments and affirmed the judgment of the district court.

This case is important for two reasons. First, this case affirms that a law firm cannot be faulted for a good-faith argument in a state court collection suit merely because it was ultimately unsuccessful. Second, the simplistic nature of procedures does not lead to the conclusion that the procedures utilized were insufficient. This case will likely provide a road map which can be used by other law firms developing policies and procedures for time-barred debts.

Messer Strickler thanks its client, Mandarich Law Group, LLP, for its resolve and positive contribution to Seventh Circuit precedent.. A copy of the decision can be found here: https://law.justia.com/cases/federal/appellate-courts/ca7/18-1904/18-1904-2019-04-29.html

Nicole Strickler & Lauren Burnette Honored by Collection Advisor Magazine

Collection Advisor Magazine honored two Messer Strickler, Ltd. shareholders in its September/October issue. Nicole M. Strickler was honored as one of the "20 Most Powerful Women in the Collection Industry", mean to honor those who have found success in their organizations and used that influence to create positive waves of change in the industry. You can Nicole's full interview, along with that of other honorees, at HERE.

In the same issue, shareholder Lauren M. Burnette was honored as one of the "Top Attorneys in Collections". These attorneys were nominated by their peers for efforts to improve collections through legal collections, creditor defense and legal consultation. You can read Lauren's full interview HERE.

Messer Strickler, Ltd. sends its congratulations to Lauren and Nicole!

MS Obtains Unanimous Jury Verdict in Favor of Clients in FDCPA Case

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On April 8, 2015, a jury of seven sitting in the Southern District of California determined that a law firm and its asset purchaser client did not violate the Fair Debt Collection Practices Act, 15 U.S.C. 1692 et seq. (“FDCPA”) by including a request for 10% interest in the prayer for relief of a state court collection complaint.  In Hadsell v. Mandarich Law Group, LLP and CACH, LLC, a consumer filed an FDCPA claim against the two companies alleging a myriad of false claims, including that the companies had disclosed the debt to third parties and failed to abide by a request to cease and desist. After success on motions to dismiss and summary judgment, the case proceeded to a jury trial on one sole issue: whether a request for 10% statutory interest in the prayer for relief of a state court complaint violates the FDCPA where the credit card contract in question provided for an 8.9% interest rate. Like many consumer law claims against law firms, this complaint was spurred from a state court collection action on the debt. In late 2011, Mandarich Law Group, LLP filed a state court complaint on behalf of CACH, LLC to collect on a defaulted Bank of America account.  The state court complaint had two counts, breach of contract and account stated.  In the prayer for relief, the complaint requested that the court find that a 10% interest apply under the account stated theory.

Approximately 30 days after the state court suit was filed, the consumer filed suit in the U.S. District Court for the Southern District of California, claiming that the collection action, among other activity, violated the FDCPA. Plaintiff was represented by the San Diego law firms of Hyde & Swigart and Kazerouni Law Group.

The Plaintiff’s focal point during the jury trial was that the defendants intentionally violated FDCPA § 1692(f) and (f)(1) by requesting 10% interest when they were aware of the 8.9% interest rate that was set by the initial contract between the consumer and creditor.  Defendants argued, in contrast, that there was a valid factual basis to pursue the account stated claim and for the Court to assess 10% interest--- the default rate under the California Code---- based on the final charge-off statement on the account.  Further, Defendants’ argued that asking the state court to decide the question of interest was not an attempt to collect an authorized amount as the court had the legal ability to award it under the facts.  The jury unanimously agreed and found that no violation of the FDCPA occurred.

Lead trial counsel for Defendants was Nicole M. Strickler of MS&S. For more information on this case or any other FDCPA related issues, contact her at nstrickler@messerstrickler.com or at 312-334-3442.

FOURTH CIRCUIT HOLDS DEFAULT STATUS HAS NO BEARING ON DEBT COLLECTOR SHOWING

The Fourth Circuit recently held that a debt’s default status does not automatically qualify a debt purchaser as a “debt collector” subject to the Fair Debt Collection Practices Act (“FDCPA”).  In Henson v. Santander Consumer USA, Inc., four consumers alleged that a purchaser of their defaulted automobile loans violated the FDCPA by engaging in prohibited collection practices.  The district court granted the purchaser’s motion to dismiss on the ground that the complaint did not allege facts showing that the defendant qualified as a “debt collector” under the FDCPA.  The court concluded that the complaint only demonstrated that the defendant was a consumer finance company that was collecting debts on its own behalf as a creditor and that the FDCPA generally does not regulate creditors collecting debts owed themselves.  The Fourth Circuit affirmed. In arguing that the defendant constituted a debt collector, plaintiffs relied heavily on § 1692a(6)(F)(iii) of the FDCPA which excludes from the definition of debt collector “any person collecting or attempting to collect any debt . . . owed or due another to the extent such activity . . . concerns a debt which was not in default at the time it was obtained.”  Plaintiffs maintained that because the provision excludes persons collecting debts not in default, the definition of debt collector must necessarily include persons collecting defaulted debt that they did not originate.  Essentially, plaintiffs argued that the default status of a debt determines whether a purchaser of debt, such as defendant, is a debt collector or a creditor.

The Fourth Circuit disagreed, concluding that the default status of a debt has no bearing on whether a person qualifies as a debt collector under the threshold definition set forth in § 1692a(6).  Such a determination is generally based on whether a person collects debt on behalf of others or for its own account, the main exception being when the “principal purpose” of the person’s business is to collect debt.  Section 1692a(6) defines a debt collector as (1) a person whose principal purpose is to collect debts; (2) a person who regularly collects debts owed to another; or (3) a person who collects its own debts, using a name other than its own.  Because the complaint did not allege that defendant’s principal business was to collect debt, instead alleging that defendant was a consumer finance company, nor allege that defendant was using a name other than its own in collecting the debts, defendant clearly did not fall within the first or third definitions of debt collector.  Moreover, because the debts that defendant was collecting were owed to it and not another, defendant was not a person collecting a debt on behalf of another so as to qualify as a debt collector under the second definition.

For more information on the Fourth Circuit decision or the FDCPA generally, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.

Second Circuit Adopts FDCPA Least Sophisticated Consumer Safe Harbor Approach Established by the Seventh Circuit

In Avila, et al. v. Riexinger & Associates, LLC, et al., Case No. 15-1584(L), the Second Circuit Court of Appeals applied the least sophisticated consumer standard of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (“FDCPA”) to conclude that a consumer cannot be expected to know that a total debt provided in a given statement continues to increase interest or other fees.  The Second Circuit held that when a debt collector issues a notice to a borrower that includes a statement of the complete amount of their debt, the debt collector must either accurately inform the consumer that the amount of the debt stated in the notice will increase over time based upon interest or other fees, or clearly state that the holder of the debt will accept payment of the amount set forth in full satisfaction of the debt if payment is made by a specified date. In Avila, a consumer brought a putative class action against a debt collector for violation of § 1692e of the FDCPA alleging that the practice of disclosing in a collection notice only the “current balance” of the amount owed amounts to “false, deceptive, or misleading” collection practices under the statute.  The consumer alleged that the notice led them to believe that the amount owed was not increasing.  The Second Circuit agreed and held that the least sophisticated consumer could believe that payment in full of the current balance provided in the notice would satisfy the entire debt owed, and that a failure to mention the ongoing accrual of interest and fees was misleading. Further, the Court held that “the FDCPA requires debt collectors, when they notify consumers of their account balance, to disclose that the balance may increase due to interest and fees.”

The Second Circuit also held that Section 1692e requires additional disclosures to ensure that consumers are not misled into thinking that simply paying the “current balance” as listed on the collection notice will always result in full satisfaction of the amount owed. Accordingly, the Second Circuit adopted the “safe harbor” approach established by the Seventh Circuit in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872 (7th Cir. 2000).  The “safe harbor” doctrine allows a debt collector to prevent liability under Section 1692e “if the collection notice either accurately informs the consumer that the amount of the debt stated in the letter will increase over time, or clearly states that the holder of the debt will accept payment of the amount set forth in full satisfaction of the debt if payment is made by a specified date.”

Although the Second Circuit declined to establish the exact language of any disclosure that a debt collector must use to sidestep a possible FDCPA violation, the Court expressed that the language proposed in Miller, 214 F.3d, at 876, would certainly qualify a debt collector for treatment under the newly-created safe-harbor.

Debt collection agencies, or those that act as debt collectors, should pay particular attention to the language of Miller that the Second Circuit suggests will satisfy the newly-recognized safe harbor provision. For information on revising statements to consumers to comply with the safe harbor language, or for other information regarding this topic, contact Stephanie Strickler at 312-334-3465 or at sstrickler@messerstrickler.com.

Debt Collector Succeeds with FDCPA Bona Fide Error Defense

The United States District Court for the Southern District of Alabama recently granted a Motion for Summary Judgment in favor of a defendant debt collection agency.  In Robert L. Arnold v. Bayview Loan Servicing, LLC, et al., the plaintiff filed suit against the collection agency for multiple FDCPA violations.  Arnold fell behind on his mortgage payments and declared bankruptcy in 2012, under which the judge granted a discharge for the mortgage.  In January 2013, Arnold received written notification that the mortgage loan servicing had been transferred to Bayview.  Bayview was well aware of the default and that the debt had been discharged in bankruptcy.  Upon receipt of the account, Bayview started the foreclosure process, and purchased the property for most of the amount of the outstanding principal on Arnold’s loan.  While the account was properly coded in Bayview’s system upon transfer, and no billing statements were produced, in December 2013, ten months after the transfer, two billing statements were sent to Arnold.  The statements reflected the outstanding balance; they did not reference the bankruptcy discharge, and they did not reference a credit for the foreclosure sale.

Bayview sought summary judgment based solely on the bona fide error defense.  To succeed on this defense, Bayview must show “a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such an error.”  This defense is not available for mistakes of law or misinterpretations of the FDCPA, but instead “to protect against liability for errors like clerical or factual mistakes.”  See Edwards v. Niagara Credit Solutions, Inc.

The court found Bayview sufficiently demonstrated that the December 2013 mailings were unintentional based on the following:

  1. Arnold’s loan had been coded with a foreclosure man code when Bayview assumed servicing responsibilities, effectively suppressing all billing statements;
  2. Bayview sent no billing statements to Arnold between February 2013 and November 2013;
  3. The Bayview employee who performed a pre-foreclosure review of Arnold’s loan was bound to follow a Bayview checklist that did not call for changing the man code or issuing billing statements;
  4. Nothing in the checklist or employee comments suggested that this individual intended to change the man code or reactivate Arnold’s loan;
  5. The man code was changed anyway, even though Bayview had no reason to do so in its pre-foreclosure review;
  6. Bayview ceased communications to Arnold when it discovered the error; and
  7. Bayview provides extensive, ongoing training to employees in the area of FDCPA compliance.

The Court also concluded that Bayview’s violation was in good faith in that it properly relied on the foreclosure code to suppress monthly statements to Arnold, and that it had no reason to believe that the man code would be changed during the pre-foreclosure review process.  Furthermore, Bayview had provided appropriate training and checklists to its employees concerning pre-foreclosure review.

Finally, the Court also concluded that Bayview maintained policies and procedures to avoid readily discoverable errors.  Bayview had general training procedures and specific procedures for pre-foreclosure review.  It also had ongoing FDCPA compliance training for its employees.

This case demonstrates the importance for debt collection agencies to have clear policies and procedures for FDCPA compliance, as well as ongoing training to reinforce the implementation of these policies and procedures.

For more information on this topic or questions regarding your FDCPA policies and procedures, please contact Stephanie Strickler at sstrickler@messerstrickler.com or at 312-334-3465.

When a Creditor is a “Debt Collector” Under the FDCPA

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The Federal Trade Commission (“FTC”) recently released a statement that the meaning of “debt collector” may be more expansive under the Fair Debt Collection Practices Act (“FDCPA”) than previously thought. A “debt collector” is defined under the FDCPA as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” §803(6). With this definition, it has long been assumed that creditors who collect their own debts are not covered by the FDCPA. However, Section 803(6) goes on to say “the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.”

The FTC has asserted FDCPA claims against companies using other names to collect their own debts, characterizing them as “debt collectors” under the FDCPA. The FTC has issued a warning toremind creditors that the FDCPA can in fact apply to creditors who collect on their own behalf. Creditors should regularly review their policies to ensure their practices and procedures follow all applicable laws and regulations.

View the FTC’s Original Post Here

To learn more about the FTC’s warning and how to avoid FDCPA violations please contact Joseph Messer at 312-334-3440 or jmesser@messerstrickler.com.

BIG LOTS JOINS LIST OF RETAILERS HIT WITH FCRA CLASS ACTIONS BASED ON BACKGROUND CHECK DISCLOSURE FORMS

On November 2, 2015, Big Lots Stores, Inc. became the most recent big-named retailer to be hit with a class action complaint alleging violations of the federal Fair Credit Reporting Act (FCRA).  The lawsuit, filed in the Philadelphia County Court of Common Pleas, alleges that Big Lots conducted improper background checks on employees in violation of the FCRA.  See Aaron Abel v. Big Lots Stores, Inc., Case No. 151100286.  Specifically, plaintiff claims that the consent form he signed in connection with an application for employment with Big Lots included extraneous information and failed to sufficiently disclose that a consumer report would be procured. The FCRA requires that a clear and conspicuous disclosure be made in writing to an applicant prior to the procurement of a consumer report in a document that consists solely of the disclosure that a consumer report may be obtained for employment purposes.  Notably, the disclosure must be in a separate document (i.e. it cannot be part of the employment application) and the disclosure cannot contain any additional information except for the consumer’s written authorization -- which is also required before procuring a consumer report.

This requirement for a “clear and conspicuous disclosure” has led to numerous recent FCRA class actions, including class actions against Home Depot, Chuck E. Cheese, and Whole Foods.  Markedly, the stakes in FCRA class actions can be quite high, considering the FCRA provides for statutory damages ranging from $100 to $1,000 per violation – even where the consumer suffered no actual harm.  For example, the class actions against Home Depot, Chuck E. Cheese, and Whole Foods each resulted in settlements, ranging from $802,720 to $1.8 million dollars.  This potential for high-value FCRA settlements and judgments leads to the unfortunate possibility of “professional job seekers” who seek out employment applications they know to be defective solely for the purpose of pursuing litigation.  Indeed, The National Law Review recently warned, in an article dated November 11, 2015, that a new breed of “opportunistic faux job applicants” – who have no intention of accepting employment with the targeted employers, are submitting employment applications in an attempt to position themselves as the named plaintiff in class action litigation.  To avoid such exposure, employers should re-examine their background check disclosure forms to ensure strict compliance with the FCRA.

For more information on the FCRA or to request a review of your background check disclosure forms, contact Katherine Olson at 312-334-3444 or kolson@messerstrickler.com.

Sixth Circuit Expands the Definition of “Person” Under the FDCPA

The Sixth Circuit recently made a ruling which expanded the definition of “person” under the FDCPA to include artificial entities such as corporations or limited liability companies for purposes of 15 U.S.C. § 1692k.  In Anarion Investments LLC v. Carrington Mortgage Services, LLC et al., the district court dismissed the complaint on the basis that plaintiff, a limited liability company, was not a “person” under the FDCPA and could not recover under the statute’s civil liability provision.  This provision states that a debt collector who fails to comply with the FDCPA “with respect to any person is liable to such person.”  On appeal, the Sixth Circuit decided that under this provision, the term “person” includes artificial entities and natural persons.  The Sixth Circuit relied on the federal dictionary for the definition of “person” which includes artificial entities unless the context indicates otherwise.  The Sixth Circuit clearly ignored the FDCPA’s statutory purpose as the FDCPA’s legislative history and purpose to protect natural persons from abusive debt collection practices clearly “indicates otherwise” so as to not include artificial entities. Despite expanding the definition of “person” under Section 1692k, the Sixth Circuit’s opinion is unlikely to make a large impact because the FDCPA only applies to consumer debts - those incurred for personal, family, or household purposes.  Nonetheless, this type of ruling is troublesome as it demonstrates the unpredictability of court’s interpretations of even those terms that are defined within the statute.

For more information on this topic, contact Stephanie A. Strickler at 312-334-3465 or at sstrickler@messerstrickler.com.

 

 

MS&S Welcomes Adam T. Hill

Messer Strickler, Ltd. is pleased to welcome Adam T. Hill to the firm. With over 7 years of experience, Mr. Hill’s background in representing consumers gives him a unique perspective in consumer defense work. Licensed in Illinois, New York, and various district courts throughout the country, Mr. Hill’s arrival will allow us to continue to provide exceptional service to our clients in more places than ever before.

Seventh Circuit: FDCPA Not An Enforcement Mechanism for State Law

On July 27, 2015, the Seventh Circuit Court of Appeals ruled that the Southern District of Indiana was correct in granting defendant’s motion for summary judgment in a Fair Debt Collection Practices (“FDCPA”) case.  In Bentrud v. Bowman, Heintz, Boscia & Vician, P.C., the issue at hand was not that the debt itself that was disputed but rather the manner in which the firm hired by Capital One, the owner of the account, attempted to collect the debt. Bentrud took issue with the firm’s conduct after the invocation of an arbitration provision contained in the original credit agreement.  Specifically, Bentrud argued that the firm unfairly filed a second motion for summary judgment after Bertrud had elected arbitration in violation of the arbitration clause. The Seventh Circuit found nothing impermissible about the firm’s request in light of the state court’s prior orders and deadlines.

Most important, however, was the Court’s continued affirmance that not every action or inaction in a collection action implicates the FDCPA.  While limiting its discussion to the particular facts before it, the Circuit confirmed once again that that it would “not transform the FDCPA into an enforcement mechanism for matters governed by state law.” In this case, failing to comply with the terms of an arbitration provision in the underlying contract did not trigger the FDCPA’s protections. This decision should be particularly helpful to those currently litigating FDCPA actions premised on state law and procedural issues occurring in prior collection litigation.

Interestingly, the decision also discussed the sometimes conflicting ethical decisions faced by FDCPA regulated collection counsel in light of an attorney’s general ethical obligations to its own clients. While the Seventh Circuit stopped short of providing a safe haven to collection attorneys facing such an ethical debacle, it is at least refreshing to see an Appellate Court recognize it.

For more information about this case or the Fair Debt Collection Practices Act generally, contact Nicole M. Strickler at nstrickler@messerstrickler.com or (312) 334-3442.

FCC CHAIRMAN PROPOSES DECLARATORY RULINGS TO ADDRESS PENDING TCPA PETITIONS

On May 27, 2015, Federal Communications Commission (“FCC”) Chairman Tom Wheeler circulated his proposed declaratory rulings to the five FCC Commissioners for consideration.  While the details of the proposal have not been made public, the Chairman released a fact sheet and issued a blog post which provides some insight as to declaratory rulings to be voted on.  The proposal is intended to address two dozen petitions from companies – including bankers, debt collectors, app developers, retail stores, and others – that sought clarity on how the FCC enforces the Telephone Consumer Protection Act (“TCPA”). The proposal is described by the Chairman as an effort to close loopholes and strengthen consumer protections already on the books.  The Chairman’s fact sheet and blog post suggest the following declaratory rulings are being proposed:

■ Empowering consumers to say “No”: Consumers shall have to the right to revoke consent to receive robocalls and robotexts in any reasonable way at any time. People cannot be required to fill out a form and mail it in to stop unwanted calls or texts.

■ Giving the green light for robocall-blocking technology: Carriers can and should offer robocall-blocking technology to consumers to stop unwanted robocalls.

■ Closing the “reassigned number” loophole: If a phone number has been reassigned, callers must stop calling the number after one phone call.

■ Clarifying the definition of “autodialers:” Autodialers shall include any technology with the potential to dial random or sequential numbers.

■ Very limited and specific exceptions for urgent circumstances: Exceptions shall not include practices like debt collection and marketing and consumers will have the right to opt-out of such calls.  Free calls or texts to consumers to alert them of possible fraud on their bank accounts or to remind them of important medication refills shall be allowed.

The proposed declaratory rulings are scheduled to be voted on as a single omnibus item by the full Commission on June 18, 2015 during the FCC’s June Open Commission Meeting.  As adjudications of the pending petitions before the FCC, if adopted, the declaratory rulings would be effective immediately upon release.  Unfortunately, however, the specifics of the declaratory rulings will not be known until the adoption and release of same.

For more information with respect to the TCPA, please contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.

 

Account Number on Envelope Not a FDCPA Violation

On March 17, Judge Milton I. Shadur, a Senior U.S. District Judge for the Northern District of Illinois, dismissed a Fair Debt Collection Practices Act (“FDCPA”) case, which alleged an account number on an envelope violated the statute, just one day after the complaint was filed. In Sampson v. MRS BPO, LLC, No. 15-C-2258, 2015 WL, the court held that revealing an indecipherable sequence of numbers and symbols on the outside of an envelope was not abusive and, therefore, could not violate the FDCPA. In his Opinion, Judge Shadur wrote, “It takes only a quick look at those two exhibits to see that the Complaint is a bad joke -- a joke because the claims are so patently absurd, and a bad one because $400 has been wasted on a filing fee.” The Court reasoned the public would need supernatural powers to determine the letter held inside the envelope was sent in an effort to collect a debt.

The attorney who represented Plaintiff is now facing sanctions for his conduct.

For more information regarding this case and what abusive behaviors the FDCPA covers, contact Joseph Messer at jmesser@messerstrickler.com or (312) 334-3440.

New York Department of Financial Services Clarifies Debt Collection Regulations

On February 19, 2015, the New York State Department of Financial Services (the “Department”) issued answers to frequently asked questions to assist debt collectors and debt buyers in understanding and complying with the recently enacted rules regulating debt collection practices in the state of New York.  For a quick overview of the newly enacted New York regulations see December 8, 2014 Blog Post titled “New York Issues New Rules on Debt Collection.”  The FAQs are available on the Department’s website: http://www.dfs.ny.gov/legal/regulations/adoptions/faq-debt-collect.htm. Note that the Department is likely to update its website with additional information as it continues to receive questions regarding the new regulations.  Accordingly, debt collectors and debt buyers are encouraged to visit the website as the effective date for the regulations approaches. As a reminder, the new regulations will take effect on March 3, 2015, with the exception of Sections 1.2(b) (disclosure requirements) and 1.4 (substantiation requirements), which take effect on August 30, 2015.  Debt collectors who collect in the state of New York should examine the regulations and newly issued FAQs and prepare compliance plans to meet the new requirements.

For more information on the new regulations and/or compliance recommendations, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.

NEW YORK ISSUES NEW RULES ON DEBT COLLECTION

On December 3, 2014, New York financial regulators announced the adoption of final rules regulating debt collection practices in the state of New York.  The new regulations are intended to curb abuse by debt collectors, requiring them to, among other things, advise consumers when the statute of limitations has expired on debts and confirm settlements agreements in writing.  Interestingly, both such rules have long been in place in New York City pursuant to City Rules and Regulations.  See New York City, N.Y., Rules, Tit. 6, §§ 2-191, 2-192. The regulations are the result of more than a year of meetings and public comments stemming from two earlier published versions of the regulations.  The new statewide regulations are far from surprising, considering that more than 20,000 complaints about debt collection practices were filed by New Yorkers in 2014 alone.  In announcing the new regulations, New York Governor Andrew M. Cuomo stated that New York “will not tolerate debt collectors who wrongfully take advantage of consumers.”

To address the perceived abuses in the debt collection industry, the new regulations of third-party debt collectors and debt buyers include the following key reforms:

  •    Improved Disclosures and Debt Information: Enhanced initial disclosures will be required when a debt collector first contacts an alleged debtor. These disclosures go beyond current federal requirements, by requiring that collectors disclose key information about the charged-off debts they collect, including: the amount owed at charge-off, and the total post-charge-off interest, charges, and fees.

  •    Protection Against “Zombie Debts”: If a collector attempts to collect on a debt for which the statute of limitations has expired, prior to accepting payment, the collector must provide notice that the statute of limitations may be expired and that, if the consumer is sued on such debt, the consumer may be able to prevent a judgment by informing the court that the statute of limitations has expired.

  •    Substantiation of the Debt Allegedly Owed: These regulations establish groundbreaking protections that require a collector to “substantiate” a debt upon a consumer’s request for same, which may be made at any time during the collection process.  This will assist consumers who fail to exercise their right to verification under the 30-day window established by the federal Fair Debt Collection Practices Act.

  •    Written Confirmation of Settlement Agreements: Collectors must provide consumers with written confirmation of any debt settlement agreement, and must also provide written confirmation upon satisfaction of the debt.

  •    Email Communications: Consumers may opt to communicate with collectors via their personal email.  This is intended to reduce harassing phone calls and allow consumers to maintain better records of their communications with the collector.

The new regulations will take effect on March 3, 2015, with the exception of Sections 1.2(b) (disclosure requirements) and 1.4 (substantiation requirements), which take effect on August 30, 2015.  The final regulations are available at: http://www.dfs.ny.gov/legal/regulations/adoptions/dfsf23t.pdf.  Debt collectors who collect in the state of New York should examine the new regulations and prepare compliance plans to meet the new requirements.

For more information on the new regulations and/or compliance recommendations, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com

Hang Up That Telephone: The Importance of Training Collectors to Properly Receive Attorney Information

Recently, United States Magistrate Judge David D. Noce created an important teaching moment for collectors in Istre v. Miramed Revenue Group, LLC et al, a case pending in the U.S. District Court for the Eastern District of Missouri. In Istre, after collection attempts, the plaintiff allegedly placed a call to the collection agency to inform it that he had retained counsel regarding his debts. At the beginning of the call, plaintiff told the agency that he had retained counsel. Instead of ending the call, however, the agency allegedly asked, “Why are you having a lawyer involved in this?” and, “So how are you going to go about this?” Only after plaintiff again stated that he had retained counsel regarding his debt did the agency request the attorneys’ contact information, which plaintiff immediately provided.

Upon these alleged facts, plaintiff alleged various violations of the Fair Debt Collection Practices Act, 15 U.S.C. 1692c(a)(2), d, e and f. Defendants filed a motion to dismiss, arguing that by initiating the call, plaintiff consented to the ensuing discussion about his debt. The court, however, agreed with plaintiff that the mere fact that plaintiff initiated the phone call was not conclusive that he thereby consent to the debt collector to the collection attempt. The court further held that without that consent, once notified of legal representation, defendants may only ask for the attorney’s contact information before ending the call. As a result, the court found that plaintiff properly stated a cause of action under 1692c(a)(2), d, and f. However, it granted the motion with respect to 1692e, finding that no misleading statement had been alleged in the complaint.

The decision shows the importance of dissuading collectors from continuing a telephone call after receipt of attorney information. For a full copy of the opinion, see http://scholar.google.com/scholar _case?case=14559722534209738563&q=istre+v.+miramed+revenue+group&hl=en&as_sdt=400006&as_vis=1.

For more information on this subject, and other consumer litigation compliance information, contact Nicole Stricler, 312-334-3442, nstrickler@messerstrickler.com.

Federal Judge Rules One Voicemail Message Is Not Enough to Sustain FDCPA Violation

In Hagler v. Credit World Services, Inc., a federal judge in Kansas decided that a debt collection agency was not in violation of the FDCPA by failing to identify itself as a debt collector in one voicemail message.  The judge explained that multiple calls must be made in order for “harassment” to occur.

Plaintiff was initially contacted by a Credit World Services employee to discuss the outstanding debt.  Plaintiff informed the employee that he would need to call him back.  After waiting about a month with no contact with Plaintiff, Defendant called Plaintiff and left the following voicemail:

“Hi, this message is for Charles.  Please call Bill Jackson at 913-362-3950 when you get a chance. 

 My extension is like 281.  Thank you.”

Plaintiff sued, arguing that Defendant’s voicemail violated several provisions of the FDCPA.  Specifically, Plaintiff alleges Defendant:

•Failed to disclose meaningfully the caller’s identity, in violation of 15 U.S.C. § 1692d(6);

•Failed to disclose that a debt collector had left the voicemail, in violation of 15 U.S.C. § 1692e(11); and

•Used misleading and deceptive language, in violation of 15 U.S.C. § 1692e.

Plaintiff also claimed that the voicemail message was otherwise deceptive and failed to comply with the provisions of the FDCPA.  Plaintiff and Defendant filed cross-motions for summary judgment on all four claims.

The judge agreed with the collection agency on all four counts.  The judge decided that the voicemail message did not provide a “meaningful” disclosure of the employee’s identity as a debt collector under § 1692d(6) as the employee only provided his name, which has no real meaning to the debtor.  The judge explained further that the employee must provide more about himself than his name to be a “meaningful” disclosure.  However, the judge ruled that a violation requires more than just one call.

Because the clear language of § 1692d(6) prohibits the placement of telephone “calls” without meaningful disclosure, the judge did not agree that this single voicemail message violated the FDCPA.  He supported this finding by citing other district courts who also focused on the plural usage of “calls” in the statute.  See Thorne v. Accounts Receivables Mgmt, Inc., 2012 U.S. Dist. LEXIS 109165 (S.D. Fla. July 23, 2012); Jordan v. ER Solutions, Inc., 900 F. Supp. 2d 1323 (S.D. Fla. 2012); Sanford v. Portfolio Recovery Assocs., LLC, 2013 U.S. Dist. LEXIS 103214 (E.D. Mich. May 30, 2013).

The judge also determined that the debt collector was not in violation of the FDCPA for failing to provide the “mini-Miranda” disclosure.  The judge noted that “in order to ‘convey information regarding a debt,’ a message must ‘expressly reference debt’ or the recipient must be able to infer that the message involved a debt.”  Since the employee did not mention the debt in the voicemail message, the judge did not consider it a debt collection communication under the FDCPA.

Finally, the judge disagreed that the message was misleading.  The employee merely left his name, phone number, and requested Plaintiff call him back.  The judge decided that nothing in the message was intended to mislead the Plaintiff.

For more information on this topic, contact Stephanie Strickler at 312-334-3465 or sstrickler@messerstrickler.com.

Protecting Your Financial Privacy: The Rights Afforded to You by the Gramm Leach Bliley Act

The Gramm LeachBliley Act (GLBA) also referred to as the Financial Services Modernization Act of 1999, was established to protect certain financial information of consumers in connection with the business practices offinancial institutions such as banks, credit unions, insurance companies. The GLBA creates three basic privacy rights for consumers: the right to a privacy notice, the right to stop financialinstitutions from sharing certain financial information by “opting-out”, and the right to be informed how the institution will protect the confidentiality and security of their information.

Consumers’ rights under the GLBA are limited. For example, The Act does not require financial institutions to specify exactly with whom and why they are sharing a consumer’s financial information with an affiliated company.  Rather, financial institutions are only required to provide consumers with a brief description of the categories of information that may be shared. Also, consumers may not have ability to “opt-out” to avoid information being shared within a company’s own “corporate family” or if the company needs the information to conduct normal business (i.e. attempting to prevent fraud, complying with a court order, etc.).

For more information regarding the GLBA contact Joseph Messer at jmesser@messerstrickler.com or (312) 334-3440.

FTC Puts Texas-Based Debt Collector Out of Business

Accordingly to a recent Federal Trade Commission press release (“FTC”), a Houston-based debt collection company, Goldman Schwartz, Inc., used insults, lies, and false threats of imprisonment to collect on payday loans, which in some cases it owned and in others, it acted as a third-party debt collector.  Under the FTC settlement announced last week, the company’s owner will surrender his assets, approximately $550,000, to pay restitution to consumers who were charged unauthorized fees, often in the hundreds of dollars.  Also under the settlement, all defendants, including the company owner, two company managers, and several corporate entities, will be permanently banned from debt collection and prohibited from misrepresenting the characteristics of any financial product or service.  

The FTC had charged Goldman Schwartz, Inc. with multiple violations of both the FTC Act and the Fair Debt Collection Practices Act (“FDCPA”).  According to the Complaint, the FTC charged Goldman Schwartz, Inc. with, among other things: making false threats that consumers would be arrested, falsely claiming to be attorneys and/or working with the local sheriff’s office, disclosing debts to consumers’ employers, collecting bogus late fees and attorneys’ fees, using obscene language and calling at odd hours of the day, failing to inform consumers of their right to dispute the debts or have the debts verified, and failing to obtain the names of the original creditors.  In 2013, at the request of the FTC, a U.S. district court shut down Goldman Schwartz, Inc. and froze its assets pending the outcome of the litigation. 

The remainder of the $1.4 million judgment entered against the owner of Goldman Schwartz, Inc. by agreement is suspended based on the owner’s inability to pay, as is the judgment against the company’s managers.  However, if it is later determined that the financial information provided to the FTC by the defendants is false, the full amount of the judgment will become due. 

The recent settlement demonstrates the FTC’s continued efforts to crackdown on scams that target consumers in financial distress.  For more information on the settlement or fair debt collection statutes generally, contact Katherine Olson of Messer Strickler, Ltd. at 312-334-3444 or kolson@messerstrickler.com.