Katherine Olson

Messer Strickler Defeats Serial FDCPA Filer in Jury Trial

The team at Messer Strickler, Ltd. is pleased to report a complete defense verdict in favor of its client, Federated Law Group, PPLC (“Federated”), in a case filed by serial FDCPA filer, Michael Savino, Jr. Mr. Savino, represented by prolific consumer attorney Donald Yarborough, filed an action against Federated, a creditors rights law firm, after receipt of a single collection letter. That letter presented Mr. Savino with various options to potentially settle a debt owed to its client.

Specifically, Plaintiff claimed that the statement in the letter stating that Federated “may resolve [Mr. Savino’s account] for $525.98 [was] false, deceptive or misleading” in violation of both §1692e and e(10) of the Fair Debt Collection Practices Act, 15 U.S.C. §1692 et seq. (the FDCPA) because Federated could indeed settle the debt for $525.98. According to Plaintiff, Federated’s letter was merely a ruse made in attempt to collect the debt or obtain information about Mr. Savino. Instead of using the word “may”, according to Savino, Federated should have disclosed that it “could” settle the account for $525.98.

In contrast, Federated argued that its letter merely stated the truth concerning a potential option to resolve the account. While Federated could, under certain circumstances, settle the account for $525.98, it was not forced to do so. Of course, while a collector may have settlement authority, nothing in the law requires it to offer or disclose the lowest amount it may take to resolve an account. The FDCPA is  designed to prevent overreaching and egregious debt collection practices, not to deny creditors the right to recover as much as it can on a valid balance.

Notably, Messer Strickler was able to enter into evidence Mr. Savino’s expansive history of suing collection agencies and law firms with the help of Mr. Yarborough. At the time of trial, Mr. Savino had been the plaintiff in no less than three (3) cases filed against debt collectors in the Southern District of Florida. Mr. Savino also admitted on the stand that he had been subject to extensive collection efforts by debt collectors, including a prior collection lawsuit.

Unsurprisingly, a jury of 6 was not fooled by Mr. Savino’s theory. On February 19, 2019, the jury rendered a complete defense verdict in favor of Federated. Messer Strickler congratulates Federated on staying the course and vindicating itself at trial!


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.


The Sixth Circuit recently joined the Federal Communications Commission (FCC) and Eleventh Circuit in holding that “prior express consent” can be obtained and conveyed via intermediaries. In Braisden v. Credit Adjustments, Inc., plaintiffs filed a putative class action contending that defendant violated the Telephone Consumer Protection Act (“TCPA”) when it placed calls to their cell phone numbers using an automatic telephone dialing system and artificial or prerecorded voice in an attempt to collect a medical debt. Defendant did not dispute that it placed the calls or that it used an autodialer. Rather, defendant maintained that by virtue of giving their cell phone numbers to the hospital where they received medical care, plaintiffs gave their “prior express consent” to receive such calls. The district court entered summary judgment for defendant on this basis and the Sixth Circuit affirmed.

Specifically, plaintiffs had received medical care from a hospital which utilized the services of a third party anesthesiologist. When the anesthesiologist did not get paid, the anesthesiologist transferred the delinquent accounts to defendant for collection. Defendant contacted plaintiffs at the numbers provided by the anesthesiologist, which had received the numbers from the hospital. Notably, the plaintiffs had signed admission forms permitting the hospital to release their “health information” to third parties for purposes of “billing and payment” or “billing and collecting monies due.” Plaintiffs argued that because they had not given their numbers to defendant or the creditor on whose behalf it was calling, plaintiffs had not provided prior express consent to be called at those numbers. The Sixth Circuit disagreed, finding that the FCC held in a 2014 Declaratory Ruling that consent can be obtained and conveyed by intermediaries. The Sixth Circuit further found that cell phone numbers fell within the definition of “health information” under a logical reading of the admission forms and rejected plaintiffs’ narrow interpretation of a 2008 FCC Declaratory Ruling which stated that a number must be “provided during the transaction that resulted in the debt owed.” Relying on its own prior ruling on the matter, the Sixth Circuit found that “during the transaction that resulted in the debt owed” was to be read as only applying to the “ ‘initial transaction’ that creates the debt.” Thus, “consumers may give ‘prior express consent’ . . . when they provide a cell phone number to one entity as part of a commercial transaction, which then provides the number to another related entity from which the consumer incurs a debt that is part and parcel of the reason they gave the number in the first place.”

For more information on the Sixth Circuit’s decision, “prior express consent” or the TCPA generally, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.


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.


In a recent Southern District of Texas decision, the court held that contacting a cell phone number with an area code assigned to a particular state, by itself, is insufficient to establish personal jurisdiction over an out-of-state defendant when the call gives rise to an alleged claim under the Telephone Consumer Protection Act (TCPA).  See Cantu v. Platinum Mktg. Grp., LLC, Case No. 1:14-cv-71, 2015 U.S. Dist. LEXIS 90824 (S.D. Tex. July 13, 2015).  In Cantu, plaintiff alleged that defendant placed automated calls to his cellular telephone without his permission in violation of the TCPA.  On plaintiff’s motion for default judgment, the court considered its jurisdiction over defendant, a Florida corporation.  Plaintiff argued that the court had specific personal jurisdiction over defendant because “the phone number at which it reached Plaintiff has a Texas area code of 956.”  Essentially, plaintiff analogized calling a cell phone number with a Texas area code to directing a letter to a Texas resident.  Recognizing that we live in a very mobile society such that people keep their cellphone numbers as they move state to state, the Court determine[d] that showing that a TCPA defendant called a phone number in an area code associated with the plaintiff’s alleged state of residence does not, by itself, establish minimum contacts with that state” to allow the court to exercise personal jurisdiction over the defendant. The Cantu decision is in line with case law in the Northern District of Illinois.  See e.g., Sojka v. Loyalty Media, LLC, Case. No. 14-CV-770, 2015 U.S. Dist. LEXIS 666045 at *7 (N.D. Ill. May 15, 2015) (holding that text messages directed at cell phone numbers in Illinois area code did not demonstrate purposeful availment).  Some district courts, however, have ruled to the contrary.  See e.g., Luna v. Shac, LLC, Case No. C14-00607 HRL (N.D. Cal. July 14, 2014) (holding that “where [defendant] intentionally sent text messages directly to cell phones with California based area codes, which conduct allegedly violated the TCPA and gave rise to this action, [defendant] expressly aimed its conduct at California”).  Nonetheless, the Cantu and Sojka decisions should be of use to TCPA defendants wishing to challenge jurisdiction, specifically where the plaintiff has failed to suggest any evidence, aside from the phone’s area code, that defendant knew the plaintiff was a resident of that particular state.

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



In a recent opinion, the Seventh Circuit ruled that a defendant’s offer of full compensation does not render an individual plaintiff’s claims moot.  See Chapman v. First Index, Inc., 2015 U.S. App. LEXIS 13767 (7th Cir. Aug. 6, 2015).  In Chapman, a facsimile recipient brought a lawsuit against the sender alleging two violations of the Telephone Consumer Protection Act (TCPA).  Defendant subsequently made an offer of judgment (“OOJ”) under Federal Rule of Civil Procedure 68 for $3,002.00, an injunction, and costs.  Section 227(b)(3)(B) of the TCPA authorizes awards of actual damages or $500 per fax, whichever is greater, and can be trebled if the violation was willful; while Section 227(b)(3)(A) allows for an injunction.  As Plaintiff failed to identify any actual damages, defendant’s OOJ constituted a fully compensatory offer.  Consequently, when the OOJ lapsed, the district court dismissed Plaintiff’s individual claims as moot. On appeal, the Seventh Circuit reversed and in doing so overruled Damasco, Thorogood, Rand, and similar decisions to the extent they held a defendant’s offer of full compensation moots the litigation.  The Court acknowledged that a case becomes moot only when it is impossible for a court to grant any effectual relief whatsoever to the prevailing party.  By that standard, plaintiff’s case was not moot as the district court could still award damages and enter an injunction.  “If an offer to satisfy all of the plaintiff’s demands really moots a case, then it self-destructs.”  Essentially, even if plaintiff had accepted the OOJ the district court could not have entered judgment, all it could do is dismiss the case, and in that sense as “soon as the offer was made, the case would have gone up in smoke[.]”

Importantly, but without ruling on same, the Seventh Circuit left open the possibility that the district court could have entered a judgment according to the offer’s terms.  Though Chapman holds a rejected OOJ, by itself, cannot render a case moot, Chapman certainly suggests that proper disposition of a case following an unaccepted offer of complete relief is for the district court to enter judgment in the plaintiff’s favor.  Consequently, defendants facing an unaccepted OOJ may choose to move for entry of judgment in accordance with the offer’s terms.  After judgment is entered, the plaintiff’s individual claims will become moot for purposes of Article III.

Notably, whether a class action is rendered moot when named plaintiffs receive an offer of complete relief is currently pending before the Supreme Court.  See Gomez v. Campbell-Ewald Co., 768 F.3d 871 (9th Cir. 2014), cert. granted sub nom. Campbell-Ewald Co. v. Gomez, 135 S. Ct. 2311 (May 18, 2015).  Recognizing same, the Seventh Circuit in Chapman admittedly felt compelled to “clean up the law of the circuit promptly[.]”

For more information on the Chapman decision, Rule 68 offers of judgment or the TCPA generally, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com



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.




The Middle District of Florida recently denied class certification in a Telephone Consumer Protection Act (TCPA) case where there was no “class-wide” proof as to whether proposed class members consented to automated calls to their cellular telephones. 


Shamblin v. Obama for Am.

, No 13-2428, 2015 U.S. Dist. LEXIS 54849 (M.D. Fla. Apr. 27, 2015).  In doing so, the court confirmed that the burden of proving critical issues are susceptible to class-wide proof falls on class-action plaintiffs regardless of whether defendants bear the ultimate burden of proving or disproving certain issues at trial (in this case consent).

The TCPA makes it illegal to call any telephone number assigned to a cellular telephone service using an automatic-telephone-dialing system or an artificial or pre-recorded voice, unless the consumer expressly consents to same.



, plaintiff filed a putative class action against Obama for America after receiving two unsolicited auto-dialed calls to her cellular telephone.  In finding that the commonality, predominance and superiority requirements for class certification were not satisfied, the court reasoned that Plaintiff was “not entitled to a presumption that all class members failed to consent” despite a lack of documentary evidence of consent and “[d]efendants have a constitutional right to a jury determination as to whether any person consented to receiving calls to their cellular telephone.”   As there was no class-wide proof available to decide consent, individualized inquiries into consent (including where, how, and when) would predominate trial, precluding class certification.

The Shamblin decision indicates that class treatment may not be the appropriate mechanism for adjudicating TCPA disputes where individual determinations with respect to consent exist.  For more information on the Shamblin decision or the TCPA generally, contact Katherine Olson at 312-334-3444 or kolson@messerstrickler.com.

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.


The Northern District of Illinois recently applied the plausibility standard articulated in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 (200) to affirmative defenses in an unsolicited fax advertisement case brought pursuant to the Telephone Consumer Protection Act (“TCPA”).  See Mussat v. Power Liens, LLC, Case No. 13-7853, 2014 U.S. Dist. LEXIS 141561 (N.D. Ill. Oct. 6, 2014).  The decision is in conflict with a recent Eastern District of Michigan TCPA decision, whereby the court held that the plausibility standard did not apply to affirmative defenses.  See Exclusively Cats Veterinary Hospital, P.C. v. Pharmaceutical Credit Corp., Case No. 13-14376, 2014 U.S. Dist. LEXIS 132440 (E.D. Mich. Sept. 22, 2014).  The majority view on the issue is that the textual differences between Federal Rule of Civil Procedure 8(a) which deals with claims and 8(b)-(c) which addresses defenses prevents the application of the plausibility standard to affirmative defenses.  The Mussat court, however, reasoned that “[a]ffirmative defenses are pleadings and, therefore, are subject to all of the pleading requirements of the Federal Rules of Civil Procedure.”  The Mussat case illustrates the inconsistent application of pleading standards to defenses among the district courts, highlighting the need to have the issue resolved. 

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



A class action lawsuit was recently filed in the Northern District of California against the world’s largest web-based professional network, LinkedIn Corp., for alleged violations of the Fair Credit Reporting Act (“FCRA”).  


Tracee Sweet et al. v. LinkedIn Corp.

, Case No. 5:14-cv-04531 (N.D. Cal. Oct. 9, 2014).  The four plaintiffs claim that LinkedIn violated the FCRA “through the use of its reference search functionality, which allows prospective employers, among others, for a subscription fee, to obtain reports containing ‘Trusted References’ for job applicants who are members of LinkedIn.”  By using the “Search for References” feature, prospective employers can access a report containing the names, locations, employment areas, current employers, and current positions of all persons in the user’s network who may have worked with the applicant.  The reference report encourages the prospective employer to contact references by allowing prospective employers to view each reference’s profile; to “connect” with each reference on LinkedIn; and to send each reference a message by “InMail,” LinkedIn’s internal electronic messaging system.  Members of LinkedIn, however, are allegedly not notified when prospective employers run the reference report on them. 

The plaintiffs claim that  LinkedIn violated the FCRA by “(1) fail[ing] to comply with the certification and disclosure requirements mandated by the FCRA for credit reporting agencies who furnish consumer reports for employment purposes, (2) fail[ing] to maintain reasonable procedures to limit the furnishing of consumer reports for the purposes enumerated in the FCRA and to assure maximum possible accuracy of consumer report information, and (3) fail[ing] to provide the users of the reference reports the notices mandated by the FCRA.”  In essence, the plaintiff claim, the reference reports allow any prospective employer to “anonymously dig into the employment history of any LinkedIn member, and make hiring and firing decisions based upon the information they gather, without the knowledge of the member, and without any safeguards in place as to the accuracy of the information.” 

The plaintiffs seek to certify a class of all persons in the U.S. who have had a reference report run on them in the last two years that was initiated through LinkedIn’s “Search for References” feature.  The plaintiffs also propose a subclass of individuals who applied for employment through a LinkedIn job posting in the last two years, whose potential employer ran a reference report initiated through LinkedIn’s “Search for References” feature. 

Importantly, the lawsuit hinges on whether the reference reports constitute consumer reports, which are defined by the FCRA as “any written, oral, or other communications of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purposes of serving as a factor in establishing the consumer’s eligibility for – [among other things] employment purposes . . . .”  In the event the reference reports are deemed not to constitute consumer reports, the claims would fall outside the purview of the FCRA and the lawsuit should be dismissed. 

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


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.  


The Eastern District of New York recently held that a plaintiff’s TCPA claims were not precluded by the Southern District of Texas’ ruling that the same claims against the same defendants were mooted by a Rule 68 offer of judgment.  See Bank v. Spark Energy Holdings, No. 13-6130, 2014 U.S. Dist. LEXIS 84493 (E.D.N.Y. June 20, 2014). 

The plaintiff alleged that he received telemarketing calls from defendants “using an artificial or prerecorded voice” without his prior express consent in violation of the Telephone Consumer Protection Act (“TCPA”).  He initially filed a class action suit in the Southern District of Texas, where after nearly two years of defending the case and prior to plaintiff moving for class certification, defendants made a Rule 68 offer of judgment offering plaintiff complete relief.  Although the plaintiff rejected the offer, the Texas court found that the offer rendered plaintiff’s claims moot because he no longer had a personal stake in the outcome of the litigation.  Accordingly, the Texas court dismissed the plaintiff’s claims for lack of subject matter jurisdiction. 

Shortly thereafter, the plaintiff filed suit in the Eastern District of New York and asserted the same TCPA claims against the same defendants.  The defendants moved to dismiss the claims based on the preclusive effect of the Texas court’s ruling.  The New York court denied the motion to dismiss, reasoning that neither claim nor issue preclusion applied.  The New York court held that claim preclusion only applied if there was a final judgment on the merits in the prior action and that dismissal for lack of subject matter jurisdiction is generally not considered a final judgment on the merits.  The New York court further held that issue preclusion did not apply because an identical issue was not adjudicated in the prior action:

"I find that the identical issue is not presented here because the prior’ court’s determination of mootness relied on particular factual circumstances that are not the same as the facts presented in this suit.  In the Texas case, the court decided that plaintiff’s individual TCPA claim was moot because plaintiff had rejected a Rule 68 offer that would have provided complete relief on his claim.  In this suit, defendants have not made any Rule 68 offer, so the court is not presented with the same factual scenario.  Since the first requirement to establish issue preclusion is not satisfied, the Texas court’s prior finding of mootness does not require the dismissal of plaintiff’s claims as moot in this action."

While the New York judge did express sympathy for defendants’ position (having litigated plaintiff’s TCPA claim for almost two years in Texas, successfully moving to have the suit dismissed, and now facing the same TCPA claims in New York), she nevertheless found in favor of the plaintiff, stating: “[a] finding that a claim is moot in one case simply does not mean that claim is moot in all subsequent cases.”

While the opinion appears to undermine the goals that the mootness and preclusion doctrines were meant to serve, if this tactic gains traction, defendants should consider immediately making the same offer of judgment upon notice of the second lawsuit.  Defendants should also consider filing a motion to transfer venue to the first court rather than relitigating the mootness issue in the second court. 

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


On May 22, 2014, the Consumer Financial Protection Bureau (“CFPB”) issued its Spring 2014 Supervisory Highlights Report, which includes a review of recent rulemaking, guidance, and enforcement activity.  The CFPB uses its fourth edition since the agency’s founding to reiterate the importance of robust compliance management systems. 

The report notes that a well-developed compliance management system (“CMS”) establishes an entity’s compliance responsibilities; ensures those responsibilities are communicated to employees; ensures that responsibilities for meeting legal requirements and internal policies are incorporated into business process; requires reviews of operations to ensure responsibilities are carried out and legal requirements are met; and requires corrective action when necessary, including updates to tools, systems, training, and materials.  While the CFPB does not require a particular CMS structure, the CFPB reasons that an effective CMS commonly has four interdependent control components: (1) board of directors and management oversight; (2) a compliance program; (3) consumer complaint management program; and (4) an independent compliance audit.  “When all of these control components are strong and well-coordinated, a supervised entity is likely to be more successful at managing its compliance responsibilities and risks.”

Some interesting highlights from the Spring 2014 Report include:

-    CFPB Supervision found that board of directors and senior management at some consumer reporting agencies (“CRAs”) exercise insufficient oversight of the entity’s CMS, with at least one of the CRAs lacking a chief compliance officer or an official with comparable responsibility for company-wide compliance oversight.

-    CFPB examinations found that some CRAs fail to exercise adequate oversight of their business relationships with third-party service providers and that one or more of the CRAs failed to monitor and track consumer complaints altogether.

-    CFPB Supervision observed significant weaknesses in the CMS of several debt collectors.  For example, CFPB Supervision determined that at least one entity had inadequate written CMS policies and procedures and lacked sufficient board and management oversight of CMS.

-    For one debt collector, CFPB Supervision determined that the entity made approximately 17,000 calls to consumers outside the appropriate calling hours set forth in the FDCPA, in addition, the entity also violated the FDCPA when it repeatedly contacted more than one thousand consumers, contacting some consumers as often as 20 times within two days. 

-    CFPB Supervision has cited multiple lenders for unfair, deceptive, or abusive acts or practices, or risks of these acts or practices, for their policies of: repeatedly making unnecessary calls to third parties; improperly disclosing personal debt information; calling borrowers in violation of do-not-call requests; and making false claims during collection calls.

-    The CFPB’s nonpublic supervisory actions have “resulted in more than $70 million in remediation to over 775,000 consumers.”

As with previous Supervisory Highlight Reports, the 2014 spring edition provides insight into the CFPB’s supervisory and enforcement priorities.  For more information on the CFPB and its supervisory role, please contact Katherine Olson of Messer Strickler, Ltd. 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.

Illinois Eavesdropping Provisions Struck Down as Unconstitutional

In a pair of opinions recently released by the Illinois Supreme Court, People v. Clark, 2014 IL 115776 (March 20, 2014) and People v. Melongo, 2014 IL 114852 (March 20, 2014), the “recording” and “publishing” provisions of Illinois’ eavesdropping law were declared unconstitutional on First Amendment grounds.  Prior to the rulings, it was a crime for any person to record any conversation or electronic communication unless done so with the permission and consent of all parties to the communication.  See 720 ILCS 5/14-2. 

In Clark, the Kane County defendant was charged with violating the recording provision of the eavesdropping statute when he recorded judicial proceedings without the consent of the judge and opposing counsel.  The defendant argued that the eavesdropping statute violated the First Amendment under the overbreadth doctrine.  The overbreadth doctrine prevents overbroad laws which deter or chill constitutionally protected speech.  A statute may be invalidated on overbreadth grounds only if the overbreadth is substantial.  The eavesdropping statute defined “[c]onversation” as “any oral communication between 2 or more persons regardless of whether one or more of the parties intended their communication to be of a private nature under circumstances justifying that expectation.”  See 720 ILCS 5/14-1(d). 

The court held that while audio recordings of truly private conversations are within the legitimate scope of the eavesdropping statute and thus properly prohibited under the statute, the statute’s blanket ban on audio recordings sweeps so broadly that it criminalizes a great deal of wholly innocent conduct, which exceeds the statute’s purpose and its legitimate scope.  The court explained that the statute criminalized recording conversations that did not implicate privacy interests, such as: “(1) a loud argument on the street; (2) a political debate in a park; (3) the public interactions of police officers with citizens . . ., and (4) any other conversation loud enough to be overheard by others.”  Accordingly, the recording provision of the statute burdened substantially more speech than was necessary to serve a legitimate state interest in protecting conversational privacy and was thus unconstitutional.

In Melongo, the Cook County defendant was accused of recording three phone conversations with a court employee and then posting those recordings to her website.  The defendant was not only charged with violating the recording provision of the statute, but also violating the “publishing provision” of the statute which prohibited using or divulging information obtained through the use of an eavesdropping device.  See 720 ILCS 5/14-2(a)(3).  Relying on the analysis in Clark, the Illinois Supreme Court held that because it had determined that the recording provision was unconstitutional, criminalizing the publication of those conversations was likewise unconstitutional because it would amount to a “naked prohibition against disclosure” irrespective of any legitimate interest the publisher or public may have. 

The Illinois legislature will likely respond to the decisions by drafting an updated statute that addresses the overbreadth concerns raised in Clark and Melongo.  Until then, however, the recording and publishing provisions of the Illinois statute remain unenforceable.

For more information on the Illinois eavesdropping statute and/or the Clark and Melongo decisions, contact Katherine Olson of Messer Strickler, Ltd. at (312) 334-3444 or at kolson@messerstrickler.com.  

Third Circuit Holds CRAs’ Compliance with the HEA Not Furnisher’s Concern

The Third Circuit recently considered for the first time the interplay between the Fair Credit Reporting Act (“FCRA”) and the Higher Education Act of 1965 (“HEA”), with respect to the responsibilities of an institution of higher education that furnishes information on student loan indebtedness to a consumer reporting agency (“CRA”).  In Seamans v. Temple University, Case No. 12-4298, plaintiff-debtor appealed an order of the United States District Court for the Eastern District of Pennsylvania, which granted summary judgment to defendant, Temple University, on plaintiff’s claims for negligent and willful violations of the FCRA.  In Seamans, the plaintiff argued that the defendant provided incomplete and misleading information to CRAs regarding an education loan when it never provided the CRAs with the collection history and date of delinquency of the loan.  The Third Circuit reversed the lower court’s decision, holding that furnishers of consumer credit data remain obligated to report fully and accurately under the FCRA regarding the collection history and date of delinquency for even an HEA-qualifying education loan. 

To protect consumersfrom having their credit forever impaired by aging debts, CRAs are precluded from reporting accounts which have been “placed for collection” or “charged to profit and loss” more than seven years prior to the report. See 15 U.S.C. § 1681c(a)(4).  When a furnisher provides information to a CRA regarding an account placed for collection or charged to profit or loss, the furnisher then has 90 days in which to notify the CRA of the account’s “date of delinquency,” which is defined as “the month and year of the commencement of the delinquency on the account that immediately preceded the action.”  See § 1681s-2(a)(5)(A).  The date of delinquency enables the CRA to calculate the seven-year window for “aging-off” purposes—without it, the CRA would be unable todetermine when the account had been placed for collection, rendering the “aging-off” date impossible to calculate.  The HEA, however, contains a provision that instructs CRAs to disregard the FCRA’s “aging-off” provisions when reporting data on certain federally backed education loans.  See 20 U.S.C. § 1087cc(c)(3). 

Defendant argued that by simply omitting from its report all facts that could trigger the “aging-off” provisions, it was helping the CRAs comply with the HEA and, in practice, furthering the congressional intent to prevent unpaid student loans from “aging off” credit reports.  The Third Circuit disagreed, finding that the question of whether a particular loan should or should not “age off” a credit report was the CRAs’ statutory concern, not an excuse for furnishers to report loan information in an incomplete or inaccurate manner. 

Although furnishers, such as the defendant in Seamans, are obligated to provide complete and accurate information to CRAs, the FCRA explicitly precludes private suits for failure to comply with that statutory duty and instead provides for enforcement of that provision by federal and state officials.  See 15 U.S.C. § 1681s-2(a), (c), (d).  Accordingly, the plaintiff’s claims in Seamans were limited to those which occurred after defendant was informed of plaintiff’s dispute of the information.

For more information on the Third Circuit decision or furnishers’ duties under the FCRA, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.



In a recent Fair Credit Reporting Act (“FCRA”) case, Mohammad Babar v. Screening Reports, Inc., the U.S. District Court for the District of New Jersey granted defendant, Screening Reports, Inc.’s, motion for judgment on the pleadings, dismissing plaintiff’s complaint with prejudice.   Joseph Messer & Katherine Olson of Messer Strickler, Ltd. represented Screening Reports, Inc., with the assistance of local counsel. 

In the lawsuit, plaintiff sought to recover from Screening Reports, Inc., for a willful violation of Section 1681e(b) of the FCRA, which provides that “[w]henever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.”  To prove a willful violation of Section 1681e(b), a plaintiff must establish, among other things, that the defendant prepared a report which was inaccurate.  Plaintiff alleged that defendant inaccurately reported an “eviction record match” on his credit report.  Plaintiff admitted that he was involved in the eviction action but alleged that he was never evicted because the action was dismissed without prejudice. 

Screening Reports, Inc. moved pursuant to Federal Rule of Civil Procedure 12(c) for judgment on the pleadings arguing that it could not be found liable under Section 1681e(b) because it provided an accurate report.  The Court reviewed the report, which defendant had attached to its Answer to the Complaint, and found that judgment on the pleadings was warranted.  Specifically, the Court relied on the report’s decision detail, which required any and all eviction actions filed against the plaintiff in the past 84 months be reported.  Accordingly, the plaintiff need not have been actually evicted for an eviction action to appear on his report.  Importantly, the Court also found that the eviction action was captioned in the report as “DSM W/O PR 1-5-12.”   The Court held that with this caption, the report clarified that while an eviction proceeding was filed against plaintiff, it was dismissed without prejudice.   As the plaintiff admitted that the eviction action was filed against him and dismissed without prejudice, the report was accurate.  Because the report was accurate, Plaintiff could not establish a violation of § 1681e(b), and the Court dismissed the complaint with prejudice.

For more information on this case or assistance in defending an FCRA claim, contact Joseph Messer at (312) 334-3440 or Katherine Olson at (312) 334-3444.  

$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.