Fair Debt Collection Practices Act

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.

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.

Middle District of Florida Denies Class Certification in Time Barred Debt FDCPA Case Based on Ascertainability & Predominance

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The facts of the case were simple. Plaintiff received a collection letter offering to “settle” her time-bared debt for a reduction in the balance. She filed sued alleging 15 U.S.C. §1692 et seq. (“FDCPA”) violations as the letter did not disclose the debt’s time-barred nature. Plaintiff moved for class certification seeking to represent a class of similarly situated letter recipients. However, despite the simple nature of the alleged violation, complexities nevertheless prevented class certification.

The court first discussed the class action ascertainability prong that must be satisfied as part of Federal Rule of Civil Procedure (“FRCP”) 23(a). The court noted that only letters seeking to collect “consumer” debts (i.e. those incurred for personal, family, or household purposes) could be included in a class seeking relief under the FDCPA.  As such, an initial question that must be answered is whether plaintiff could ascertain whether the debts at issue were “consumer debts.” The court explained that a plaintiff could not establish ascertainability, a necessary requirement for a class action, simply by asserting that class members could be identified using defendant’s records. Plaintiff must actually establish that the records are in fact useful for identification purposes and that identification would be administratively feasible.

The issue for plaintiff was that she relied on her bare assertion that certain records would reveal the nature of the proposed class members’ debts without actually explaining those records. In contrast, defendants provided actual evidence to controvert this conclusion in the form of declarations attesting to the fact that defendant’s records did not show the reasons for which each proposed class member’s debt was incurred. Moreover, Plaintiff introduced no evidence that demonstrated how the original creditor’s records showed the nature of the debt or even whether the original creditor still possessed transactional information for the accounts.

The second barrier to class certification was in establishing the predominance prong of FRCP 23(b)(3). The court agreed that the debts of persons meeting the proposed class definition were not necessarily time-barred and such a determination would require an individualized inquiry into the statute of limitations on each debt.  The court explained that many factors must be considered when determining the expiration of a limitations period, such as the char-off date, tolling issues, revival issues, and any actions between the debtor and creditor that may have modified their original agreement. In short, the court found these inquiries too individualized and detailed to meet the predominance prong.

Recently, time-barred debt has been a “hot topic” with not only the consumer bar but also with federal and state agencies tasked with consumer financial regulation. For more information on this topic, and other consumer financial issues, contact Nicole Strickler at nstrickler@messerstrickler.com or direct at 312-334-3442.

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.

 

 

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.

Request for Fees Not Yet Incurred In Complaint Violation of FDCPA

The Third Circuit Court of Appeals recently concluded that a demand for a specific amount of attorneys’ fees in a complaint before the fees have actually been incurred is an “actionable misrepresentation under the Fair Debt Collection Practices Act” (“FDCPA”).  In Dale Kaymark et al. v. Bank of America and Udren Law Offices PC, the plaintiff claimed that an itemized list of total debt in the foreclosure complaint improperly included $1,650 in attorneys’ fees, not all of which had been incurred. The district court dismissed the FDCPA claim on the grounds that legal pleadings were not subject to the section of the FDCPA at issue. On appeal, the Third Circuit was not persuaded that formal pleadings filed by attorneys are exempt from the FDCPA’s requirement that debt collectors must not use any "false, deceptive or misleading representation or means in connection with the collection of any debt." Instead, subject to very limited and express exceptions, "all litigation activities, including formal pleadings, are subject to the FDCPA." When drafting demand letters and complaints, creditors must be cautious when demanding fees from the debtor which the creditor has not yet incurred.  Although creditors are not barred from listing an estimate of anticipated fees in their demand letter or complaint, they must do so explicitly. Otherwise, the debtor might assume that the amounts listed as “due” are, in fact, due as of a particular date.

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

Message Left for Payroll Department Not a “Communication”

In an Order entered on January 16, 2015, Judge Victoria A. Roberts of the United States District Court for the Eastern District of Michigan issued a favorable ruling for debt collectors. In the case of William Brown III v. Van Ru Credit Corporation, the Plaintiff alleged the Defendant violated the Federal Debt Collection Practices Act (“FDCPA”) as well as two state laws by leaving a single telephone message at Brown’s place of business. The alleged violation occurred on April 14, 2014 when a representative at Van Ru called and left the following message in the general voicemail box at Brown’s business.

“Good morning, my name is Kay and I’m calling from Van Ru Credit

Corporation. If someone from the payroll department can please

return my phone call my phone number is (877) 419-**** and the

reference number is *****488; again my telephone number is

(877) 419-5627 and reference number is *****488.”

This message was heard by an employee, who was aware of Van Ru’s status as a debt collector. For this reason, Brown argued Van Ru violated 15 U.S.C. §1692c(b) declaring they communicated with an unauthorized third party about a debt owed by Brown.

However, this message does not constitute a communication. As defined by the FDCPA, a communication is “the conveying of information regarding a debt directly or indirectly to any person through any medium.” Since Van Ru only sought to contact the business’s payroll department and did not directly reference a debt, they did not violate the FDCPA.  This decision is a great victory for the collection industry, especially those agencies collecting federal student loan debt.

Judge Roberts granted Defendant’s Motion for Judgment on the Pleadings while denying Plaintiff’s Motion to File his First Amended Complaint. As such, Plaintiff’s FDCPA claims were dismissed with prejudice and the Court declined to retain jurisdiction over the state claims.

For more information on the decision of this case or any other consumer law related matters, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com.

View the Order Here: Order in favor of Van Ru

 

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

Federal Court Determines Voicemail Message and Return Phone Call with an Unintended Recipient Not in Violation of FDCPA

A federal court in New York recently decided that a voicemail message stating that the call was from a debt collector where the voicemail message’s intended recipient was disclosed to a third party who returned the call was not a violation of the Fair Debt Collection Practices Act (“FDCPA”).  In Abraham Zweigenhaft v. Receivables Performance Management, LLC, RPM left the following voicemail message:  “We have an important message from RPM.  This is a call from a debt collector.  Please call 1(866) 212-7408.”  Mr. Zweigenhaft’s son heard the message and returned the call.  He then had the following conversation with the RPM representative: RPM: Thank you for calling Receivables Performance Management on a recorded line. This is Michelle how can I help you?

Caller: Hi how are you? I received a message to call you, and I am just trying to figure out who you are trying to reach.

RPM: Okay and your phone number please, area code first.

Caller: (718) 258-9010

RPM: And is this Abra?

Caller: Is this who?

RPM: Abra Zweigenhaft?

Caller: Nope. It's not.

RPM: Okay let me go ahead and take your phone number off the list. The last four digits again please. 9010 or 7032?

Caller: 9010

RPM: Okay I'll take it off the list. You have a nice day.

Caller: Thank you.

RPM: Uh huh, bye bye.

Zweigenhaft filed suit against RPM alleging that the content of the voicemail message and the phone call together conveyed information regarding the consumer’s debt to a third party, Zweigenhaft’s son, in violation of FDCPA § 1692c(b).  The United States Court for the Eastern District of New York disagreed that this was a violation.  The court recognized the statute’s conflicting provisions.  Debt collectors are required by the FDCPA to meaningfully identify themselves when calling a consumer, but doing so may inevitably convey information about a consumer’s debt, which if overheard by a third party gives rise to consumer arguments that the debt collector violated the FDCPA.  In finding that the communications did not violate the FDCPA, the court stated that if it were to find that the contact was a violation of the FDCPA “would place an undue restriction on an ethical debt collector in light of our society’s common use of communication technology.”

For more information on this topic, contact Joseph Messer at 312-334-3440 or at jmesser@messerstrickler.com or Stephanie Strickler at 312-334-3465 or at sstrickler@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.

ELEVENTH CIRCUIT REVERSES CONTROVERSIAL TCPA RULING

On September 29, 2014 the Eleventh Circuit unanimously reversed the controversial lower court ruling in Mais v Gulf Coast Collection BureauSee Docket No. 13-14008 (11th Circuit Sept. 29, 2014).  In Mais, the plaintiff’s cellphone number was provided to a Florida emergency room in connection with the plaintiff’s receipt of medical services.  The plaintiff’s medical debt went unpaid and the account was forwarded to collections.  Plaintiff filed suit under the Telephone Consumer Protection Act (TCPA), against the hospital-based radiology provider and the third-party debt collector for making autodialed calls to his cellphone.  The debt collector, Gulf Coast, contended that the calls fell within the statutory exception for “prior express consent,” as interpreted in a 2008 declaratory ruling from the Federal Communications Commission (FCC).   The FCC concluded in its 2008 Ruling that “the provision of a cell phone number to a creditor, e.g., as part of a credit application, reasonably evidences prior express consent by the cell phone subscriber to be contacted at that number regarding the debt.”  The FCC further concluded in its 2008 Ruling that “calls placed by a third party collector on behalf of that creditor are treated as if the creditor itself placed the call.”

The district court granted partial summary judgment in favor of Plaintiff, finding that the FCC’s interpretation of “prior express consent” was inconsistent with the language of the TCPA, and alternatively, that the 2008 FCC Ruling did not apply to medical debts and was therefore inapplicable to the case at hand.  In reversing the ruling, the Eleventh Circuit found that “the district court lacked the power to consider in any way the validity of the 2008 FCC Ruling and also erred in concluding that the FCC’s interpretation did not control the disposition of the case.” 

Importantly, the Hobbs Act provides that courts of appeals have exclusive jurisdiction to determine the validity of all FCC final orders.  By refusing to enforce the FCC’s interpretation, the Eleventh Circuit ruled that the district court exceeded its power.  The Eleventh Circuit further concluded that the FCC did not distinguish or exclude medical creditors from the 2008 Ruling, but rather the general language contained in the Ruling was meant to reach a wide range of creditors and collectors, including those pursuing medical debts.  Accordingly, the Eleventh Circuit reversed the partial grant of summary judgment to plaintiff and remanded the case to the district court with instructions to enter summary judgment in favor of Gulf Coast. 

The Eleventh Circuit is the first federal appellate court ruling that clarifies the scope of the 2008 FCC Ruling.  While the majority of courts have deferred to the FCC’s Ruling, the judge in Mais has twice ruled contrary to the 2008 FCC Ruling.  See also Lusskin v. Seminole Comedy, Inc., 2013 U.S. Dist. LEXIS 86192 (S.D. Fla. June 19, 2013).  The only other district court to do so is the Southern District of New York, which recently disregarded the 2008 FCC Ruling when it granted class certification in Zyburo v. NCSPlus, Inc.  Notably, the Second Circuit Court of Appeals may soon rule on the issue too, as the defendant in Zyburo has recently filed a petition for permission to appeal the class certification order with the Second Circuit Court of Appeals.  

For more information on the Mais decision and/or the TCPA generally, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.

Illinois Attorney General Files Lawsuits Against Scam Student Loan Debt Settlement Companies

In July of this year, Illinois Attorney General, Lisa Madigan, filed lawsuits against two debt settlement companies in connection with student loan scams.  The separate lawsuits, one against Illinois based First American Tax Defense and one against Texas based Broadsword Student Advantage, allege that the companies engaged in deceptive marketing practices and illegally charged student loan borrowers as much as $1,200.00 in upfront fees for bogus services or for government services that are already available at no cost.   Particularly, the lawsuits allege that the debt settlement companies advertised a wide-range of student loan relief services in Illinois, such as the ability to negotiate lower monthly payments, remove wage garnishments, get loans out of default, and secure student loan forgiveness. 

In truth, the defendants lacked any such capability and in fact do little more than complete applications to federal borrower assistance programs that are already available to consumers from the United States Department of Education at no cost.  The Complaints seek inter alia injunctive relief and civil penalties for violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, the Credit Services Organizations Act, and the Debt Settlement Consumer Protection Act, which Attorney General Madigan crafted to ban companies from charging upfront fees to consumers seeking debt relief assistance. 

Illinois is suspected to be the first state to bring legal action against debt settlement companies in connection with student loans.  In the past, debt settlement companies targeted those with large credit card debt or mortgage loans.  With more than half of recent graduates either unemployed or working low-paying jobs, however, debt settlement companies have found a new group of consumers to target. 

Student loans are the biggest source of consumer debt after mortgages.  American student loan debt currently exceeds $1 trillion dollars, with an estimated seven million Americans already in default on $100 billion in student loans and tens of thousands of additional borrowers defaulting each month.  Even before Illinois brought its lawsuits, the Federal Trade Commission was inundated with hundreds of thousands of complaints from consumers regarding debt settlement companies.  Consequently, it likely won’t be too long before we see other states following Madigan’s lead and bringing claims against debt settlement companies operating student loan scams in their respective states. 

For more information on the aforementioned complaints and/or the Illinois Consumer Fraud and Deceptive Business Practices Act, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.  

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.

Bill to Exclude Law Firms and Licensed Attorneys from the FDCPA Definition of “Debt Collector” Introduced in Senate

On May 13, 2014, S. 2328 was introduced into the Senate by Senator Pat Toomey (R-PA). The legislation seeks to amend the Fair Debt Collection Practices Act (“FDCPA”) to preclude law firms and licensed attorneys from the definition of a debt collector when taking certain actions. The bill is identical to that of House Bill HR 2892- the “Fair Debt Collection Practices Technical Clarification Act of 2013,” which was introduced last summer by Representative Ed Perlmutter (D-CO) with a co-sponsor Representative Spencer Bachus (R-AL). 

Both initiatives seek to amend the FDCPA definition of “debt collector” by excluding any licensed attorney or a law firm who is:

1)  Serving, filing, or conveying formal legal proceedings, discovery requests, or other documents pursuant to the applicable rules of civil procedure; or

2)  Communicating in, or at the direction of, a court of law or in depositions or settlement conferences, in connection with a pending legal action to collect a debt on behalf of a client.

Several consumer groups, including the National Consumer Law Center, sent correspondence to Members of the Banking Committee urging them to oppose S. 2328 alleging it would open “the floodgates” of abusive debt collection practices by attorneys. The bill has gained significant support in the collection industry, however, including support from the National Association of Retail Collection Attorneys (“NARCA”), which has encouraged attorneys and law firms involved in debt collection to support the S.2328 bill by sending letters to their respective Senators.

For more information on the legislation, FDCPA and debt collection related matters you may contact Nicole Strickler of Messer Strickler, Ltd. at (312) 334-3442 or at nstrickler@messerstrickler.com

Alert! Debt Buyers and Debt Collectors May Need a License to Buy and Collect Debt in New Jersey

The United States District Court for the District of New Jersey recently denied a motion to dismiss a Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., claim against a debt buyer and a debt collector because the debt buyer failed to obtain a “consumer lender” license pursuant to the New Jersey Consumer Finance Licensing Act (“NJCFLA”).

In Veras v. LVNV Funding, LLC and MRS BPO, LLC, a New Jersey consumer filed a class-action FDCPA complaint against a debt buyer and debt collector alleging a violation of Section 1692e(10) of the FDCPA, which prohibits using a false representation of deceptive means to collect or attempt to collect consumer debt.  The debt collector sent a collection notice on behalf of the debt buyer in an attempt to collect a debt owed by the consumer.  The consumer alleged that the debt buyer and debt collector engaged in deceptive conduct because they attempted to collect consumer debt without obtaining a license under the NJCFLA.

The court determined that the debt buyer was considered a “consumer lender” under the NJCFLA because it “directly or indirectly engages…in the business of buying, discounting or endorsing notes…for compensation in amounts of $50,000 or less…”.  Therefore, the debt buyer was required to obtain a license under the NJCFLA.  Thus, even though the collection letter did not make any representation that the debt collector or debt buyer was licensed under the NJCFLA, the court still found that the allegations supported the FDCPA claim.

This case is interesting because New Jersey does not have a law expressly requiring debt collectors to obtain a license.  Instead, there are only bonding and registration requirements.  Thus, this court determined that the NJCFLA indirectly applies to debt collectors collecting in New Jersey because debt buyers are considered “consumer lenders” and are required to obtain a license in order to engage in collection activity.  

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

$23 Million Judgment Against Owners of Debt Collection Agency

On March 26, 2014, the United States District Court for the Central District of California entered a Final Order for Permanent Injunction and Monetary Judgment in Federal Trade Commission v. Rincon Management Services, LLC et al. pursuant to a stipulation between the Federal Trade Commission (“FTC”) and the two principal owners of Rincon Management Services, LLC (“Rincon”), a California-based collection agency.  The Final Order entered judgment in the amount of $23,084,885 against the two principal owners as equitable monetary relief.   Furthermore, the Final Order permanently enjoined the two principal owners from engaging in debt collection activities; assisting others engaged in debt collection activities; misrepresenting or assisting others in misrepresenting any material fact concerning financial-related products and services; and advertising, marketing, promoting, offering for sale, selling, or assisting others engaged in the advertising, marketing, promoting, offering for sale, or selling, of any portfolio of consumer or commercial debt and any program that gathers, organizes, or stores consumer information relating to a debt or debt collection activities.  All money paid to the FTC pursuant to the Judgment is required to be used for equitable relief, including consumer redress. 

In October 2011, the FTC filed a complaint for permanent injunction and other equitable relief against Rincon and other companies associated with Rincon.  The complaint alleged that defendants violated the Federal Trade Commission Act (“FTCA”) and the Fair Debt Collection Practices Act (“FDCPA”) by making bogus threats that consumers had been sued or could be arrested.  The Complaint also alleged that the defendants violated the FTCA and FDCPA by calling consumers and their employers, family, friends, and neighbors, posing as process servers seeking to deliver legal papers purportedly related to a lawsuit.  In most of the instances, the consumers did not even owe the debt the defendants were attempting to collect.  As Jessica Rich, the director of the FTC’s Bureau of Consumer Protection, commented: “These debt collectors focused on Spanish-speaking consumers and other people who were strapped for cash, and preyed on them by using abusive collection tactics in violation of federal law.”

As maintained in a recent FTC Press Release, the $23 million judgment will be suspended due to the defendants’ inability to pay.  However, certain personal assets defendants agreed to surrender and the $3 million in frozen funds held by the receiver as part of the FTC’s 2011 temporary restraining order will be exempt from the suspension.

The recent Judgment demonstrates the FTC’s commitment to suppressing illegal debt collection practices.  Notably, litigation still continues against several companies that were involved in Rincon’s illegal debt collection actions.

For more information on this lawsuit or on debt collection and fair debt collection statutes contact Joseph Messer at jmesser@messerstrickler.com or Katherine Olson at kolson@messerstrickler.com.