Back Wages Owed for Docking Employees for Break Time

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On December 16, 2015, a publishing company in Pennsylvania was found to have violated the FLSA for docking employees for break time.   The telemarketing workers at the company were being docked for almost all time not spent making phone calls – whether it was a quick 2 minute water, bathroom or rest break or longer lunch break.   The amount of back wages has not yet officially been determined but the estimate is at least $1.75 million (back wages and liquidated damages as the court determined the violations to be willful) to compensate more than 6,000 employees who were working in the company’s 14 calls centers. The timekeeping system used by the company was deducting those short break times from the employees total hours worked.  The FLSA does not require lunch or others breaks but when employers do offer short breaks (5-to-20 minutes), the law considers the breaks compensable work hours that must be included in the total hours for the week and considered in determining entitlement to overtime.

Like most of these cases, the publishing company was also found to have failed to maintain proper records as required by the FLSA.  Companies must be vigilant in ensuring that all docking of its employees’ time is lawful pursuant to the FLSA and any applicable state laws and that proper records are kept.

For more information on the FLSA or any further employment related matters, please contact Dana Perminas, at 312-334-3474 or dperminas@messerstrickler.com for more information.

Illinois Amends The Collection Agency Act

On January 29, 2016, Illinois amended the Illinois Collection Agency Act (“ICAA”) through the enactment of Senate Bill 1369 (the “Amendment”). The Amendment, which was effective immediately, removes confusing and burdensome requirements provided by the ICAA and corrects amendments made to the ICAA last August.  Those amendments had expanded sections of the ICAA to commercial debt and required disclosures contrary to the federal Fair Debt Collection Practices Act (“FDCPA”).

To clarify that licensing requirements apply to both commercial and consumer collections the Amendment adds the following definitions:

“Collection agency” means any person who, in the ordinary course of business, regularly, on behalf of himself or herself or others, engages in the collection of a debt.

“Consumer debt” or “consumer credit” means money or property, or their equivalent, due or owing or alleged to be due or owing from a natural person by reason of a consumer credit transaction.

The Amendment changes location requirements to match those provided by the FDCPA requiring a debt collector to provide the name of their company to a third party only when it is expressly requested when trying to collect a “consumer debt.” Additionally, the Amendment changes the validation notice requirements so that only a written request will trigger the requirement that the collector provide original credit’s name and address:

(5) That upon the debtor's written request within the 30-day period, the The collection agency will provide the debtor with the name and address of the original creditor, if different from the current creditor. If the disclosures required under this subsection (a) are placed on the back of the notice, the front of the notice shall contain a statement notifying debtors of that fact.

(b) If the debtor notifies the collection agency in writing within the 30-day period set forth in paragraph (3) of subsection (a) of this Section that the debt, or any portion thereof, is disputed or that the debtor requests the name and address of the original creditor, the collection agency shall cease collection of the debt, or any disputed portion thereof, until the collection agency obtains verification of the debt or a copy of a judgment or the name and address of the original creditor and mails a copy of the verification or judgment or name and address of the original creditor to the debtor.

(c) The failure of a debtor to dispute the validity of a debt under this Section shall not be construed by any court as an admission of liability by the debtor.

(d) This Section applies to a collection agency or debt buyer only when engaged in the collection of consumer debt.

The Amendment constitutes a win for the collection industry by eliminating confusing and harsh requirements for collection agencies.  To learn more about the Amendment or the ICAA in general feel free to contact Joseph Messer at 312-334-3440 or jmesser@messerstrickler.com.

View the Amendment in Full Here

CHICAGO LIMOUSINE COMPANY ORDERED TO PAY OUT $381K+ FOR FLSA VIOLATIONS

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On December 14, 2015, Judge Virginia M. Kendall ordered Town & Country Limousine, Inc. to compensate 34 of its drivers for back wages and an additional amount in liquidated damages, bringing the total to $381,432.  Town & Country was found to have violated the overtime and recordkeeping requirements of the Fair Labor Standards Act (“FLSA”).

The problem arose from the Department of Labor’s finding that Town & Country had been incorrectly categorizing its drivers as exempt to the overtime requirements under the FLSA’s motor carrier exemption.  Although some of Town & Country’s drivers would have been subject to that exemption in some instances, the DOL found that the majority of the drivers were entitled to overtime for the time worked beyond 40 hours in a single workweek.

The DOL found that Town & Country was failing to include time the drivers spent preparing their vehicles, waiting on customers and commuting to and from the company’s garage.  This was compensable time that should have been included in the hourly calculation for the week.  Further, the DOL further found that Town & Country was not recording and maintaining records as required by the FLSA.

Therefore, it is of the utmost importance to ensure your employees are properly classified for FLSA purposes and that proper records are kept.

For more information on the FLSA or any further employment related matters, please contact Dana Perminas, at 312-334-3474 or dperminas@messerstrickler.com.

FTC Undertakes Enforcement Actions Under “Operation Collection Protection”

The Federal Trade Commission (“FTC”) has taken action against four debt collection firms claiming they impersonated law enforcement officials, made threatening and harassing calls, failed to provide legally required disclosures and collected debts consumers did not owe.  The FTC targeted the following firms:

  ■  AFS Legal Services

  ■  Samule Sole and Associates

  ■  Warrant Enforcement Division

  ■  Williams, Scott & Associates

Operation Collection Protection was announced by the FTC in November of 2015 as a coordinated federal-state enforcement initiative to curb deceptive and abusive debt collection practices. Some in the collection industry have criticized the FTC’s effort as not clearly differentiating between illegal operations and legitimate debt collectors struggling to comply with unclear and complex laws and regulations.

Read the FTC’s Full Press Release Here

To learn more about these actions or the FTC’s Operation Collection Protection initiative or what you should do if faced with legal action please contact Joseph Messer at 312-334-3440 or jmesser@messerstrickler.com.

New York District Court Adds Frustration for Collection Agencies Avoiding Improper Communications with Third Parties under the FDCPA

On January 18, 2016, we wrote about a recent Oregon District Court’s decision to set limits on when a message is a communication “with” a third party under the Fair Debt Collection Practices Act (“FDCPA”). The District Court in Peak v. Professional Credit Services determined there was no FDCPA violation when a debtor’s live-in boyfriend, who had permission to use the debtor’s cell phone, listened to a voicemail message from the debt collection agency which was actually intended for the debtor.

Although this decision is favorable for collection agencies, not all courts are willing to set limits on third party communications. In a recent matter in the United States District Court for the Eastern District of New York, Halberstam v. Global Credit and Collection Corp., 15-cv-5696, the court was presented with the issue of whether a debt collector, whose telephone call to a debtor is answered by a third party, may leave his name and number for the debtor to return the call -- without disclosing that he is a debt collector -- or whether the debt collector should refrain from leaving callback information and attempt the call at a later time. Judge Brian M. Cogan ruled that the message was an FDCPA violation.

In Halberstam, the collection agency called the debtor regarding his debt and reached a third party informing the collection agency representative that “Herschel [the debtor] is not yet in.” When asked if the representative wanted to leave a message for the debtor, he responded “Name is Eric Panganiban. Callback number is 1-866-277-1877 … direct extension is 6929. Regarding a personal business matter.”

Judge Cogan wrote, in part:

“There are several provisions of the Fair Debt Collection Practices Act that might bear on the question of whether this message was allowed. First, § 1692e(11) deems it a ‘false or misleading representation’ if a debt collector fails to disclose in the initial written communication with the consumer and, in addition, if the initial communication with the consumer is oral, in that initial oral communication, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector . . .

Second, the FDCPA also addresses communications between the debt collector and a third party. Section 1692c(b), subtitled ‘Communication with third parties,’ provides, in part:

Except as provided in section 1692b of this title …a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.”

Defendant’s argument was the typical “lose-lose situation” argument in which if the call to the third party is a “communication,” then the collection agency has to give the § 1692(e) disclosures. However, if it gave those disclosures to the third party, or even mentioned that it was a debt collector, then it would clearly be violating § 1692c(b).

The court concluded that “the only way to avoid violating the statute when the recipient of the call was asked if he could take a message was for the caller to make a different decision by politely demurring, and perhaps trying again at some point in the future.”

Perhaps the best option for collection agencies is to never leave a message under any situation.  However, this can lead to many other potential violations such as harassment by causing too many additional calls.

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

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Supreme Court: Offer of Complete Relief Does Not Moot Case

On January 20, 2016, the Supreme Court of the United States ruled in favor of a consumer on the question of whether an offer of judgment for complete relief to the named plaintiff in an uncertified class action lawsuit was enough to render the claims moot. In a 6-3 split decision the Court held in the case Campbell-Ewald Co. v. Gomez, No. 14-857, 2016 WL 228345, ---S.Ct. --- (U.S., Jan 20, 2016) that an unaccepted settlement offer or offer of judgment fulfilling the plaintiff’s requested relief does not moot the case when relief is sought on behalf of others similarly situated. The Court’s majority based their decision on the basic principles of contract law reasoning that without the plaintiff’s acceptance of the offer, the proposal bound neither party to the settlement. It is then reasoned, absent the plaintiff’s acceptance, the plaintiff had not forfeited the right to litigate the case. Chief Justice Roberts, joined by Justices Scalia and Alito, dissented from the majority criticizing their reliance on contract law to resolve the central issue in the case; whether or not there was still a controversy under Article III.

“The question, however, is not whether there is a contract; it is whether there is a case or controversy under Article III. If the defendant is willing to give the plaintiff everything he asks for, there is no case or controversy to adjudicate, and the lawsuit is moot.”

The ramifications for class action lawsuits filed under consumer protection laws such as the Fair Credit Reporting Act, the Telephone Consumer Protection Act and the Fair Debt Collection Practices Act are significant as plaintiffs typically seek damages under the specific statute, not actual damages. Due to this ruling, a plaintiff’s maximum recovery can be calculated whereas, previously, a defendant could provide a Rule 68 offer of judgment in the statutory amount, along with acquired attorneys’ fees, to moot the case as plaintiff had been afforded complete relief.

Importantly, however, as Justice Roberts commented in his dissent, Rule 68 may not have been completely eliminated as a class action defense tool:

“The majority holds than an offer of complete relief is insufficient to moot a case. The majority does not say that payment of complete relief leads to the same result… the majority’s analysis may have come out differently if Campbell had deposited the offered funds with the District Court.”

Supreme Court Opinion

For more information about Campbell-Ewald Co. v. Gomez or the defense of class action lawsuits and claim brought under the consumer protection laws please contact Joseph Messer at 312-334-3440 or jmesser@messerstrickler.com.

Consumer Protection Litigation at All Time High Since 2007

Lawsuits filed in 2015 under the Telephone Consumer Protection Act (“TCPA”) and the Fair Credit Reporting Act (“FCRA”) were at an all-time high according to the following report from Web Recon LLC:   ■ Filings under the Telephone Consumer Protection Act were up 45% and filings under the Fair Credit Reporting Act were up 53.4% compared to 2014

  ■ In 2015, 3,710 TCPA cases were filed while 2,445 were filed in 2014 and 1,904 in 2013

  ■ FCRA cases increased from 2,445 in 2014 to 3,751 in 2015

  ■ Fair Debt Collection Practices Act (“FDCPA”) case filings increased by 16.1% in 2015 compared to 2014

  ■ 16.6% of FDCPA complaints were filed as punitive class actions

  ■ 23.6% of TCPA complaints were filed as punitive class actions

  ■ 15,854 cases were filed for all consumer statutes in 2015 compared to 5,224 in 2007

  ■ 35% of consumer litigation plaintiffs have sued multiple times under consumer statutes

Given the increased pace of litigation under the consumer protection laws it is more important than ever to make sure you company is in compliance.  For more information or for insight on what do to if you company is sued contact Joe Messer at 312-334-3440 or jmesser@messerstrickler.com.

Oregon District Court Sets Limits on When a Message is a Communication “With” a Third Party under the FDCPA

In Peak v. Professional Credit Services, No. 6:2014cv01856, a consumer alleged that a collection agency violated the FDCPA when it left two voicemail messages for her on her cell phone, which was ultimately heard by third parties.  The collection agency had had prior contact with Peak on her cell phone, and the collection agency was aware that it was a cell phone and that it had permission to contact Peak at that number.  Sometime later, Peak’s live-in boyfriend cancelled his cell phone coverage and began using Peak’s phone when it was available.  The boyfriend had access to Peak’s voicemail messages.  Subsequently, the collection agency attempted to contact Peak on her cell phone and reached her voicemail.  The collection agency representative was greeted with this message:

Hi, you’ve reached Kat.  I’m not available to come to the phone right now but if

you’ll leave your name and number I’ll definitely give you a call back.  Have an

absolutely wonderful day.

The following message was left on her voicemail:

Hi, this is Katie and I have an important message from Professional Credit Service.  

This is a call from a debt collector.  Please call 866-254-2993.

The boyfriend heard the message while checking the voicemail messages.  Approximately one month later, the collection agency called Peak again and left the identical message.  Peak decided to listen to the message through the speaker function of her cell phone in the employee break room at her place of employment and the message was overhead by her employer.

Ms. Peak filed suit alleging the collection agency violated Section 1692c(b) of the FDCPA asserting that the overheard messages were unauthorized communications with third parties.

Section 1692c(b) provides:

Except as provided in section 804, without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a post judgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency  if otherwise permitted by the law, the creditor, the attorney of the creditor, or the attorney of the debt collector.

The Oregon District Court determined that while the messages were “communications” under the FDCPA, they were not communications “with” a third party.  The District Court held that “a communication is only ‘with’ a third party under section 1692c(b) if the debt collector knows or should reasonably anticipate the communication will be heard or seen by a third party.”

Reviewing the facts of the case, the court determined it was not reasonably foreseeable that the phone messages would be overheard by Ms. Peak’s boyfriend or employer.  Key to the court’s conclusion was the fact that the calls were made to a cell phone and the cell phone’s outgoing message only identified her as the owner of the phone. “The cell phone/land line distinction is important because a caller may reasonably assume messages left on a cell phone’s voicemail system will not be accidentally overheard, as they must be accessed through the cell phone itself.  By contrast, if any person is in the vicinity of a land line answering machine, that person may overhear a message as it is being left.”

The District Court noted that Congress intended the FDCPA to cause debt collectors to be careful in the way they communicate with consumers, but it did not intend to completely shut down all avenues of communication.  Rather than a strict liability standard, the District Court concluded that a negligence standard, which it used, strikes the right balance because it holds debt collectors liable for failure to take reasonable measures to avoid disclosure to third parties, but does not require them to avoid such disclosure at all costs.

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

CFPB Doubled Caseload in 2015

The Consumer Financial Protection Bureau, “CFPB,” handled 70 cases in 2015.  Of those cases, 59 ended in settlement and 11 led to lawsuits. By scrutinizing financial sectors such as the credit, auto lending and debt collection industries, the CFPB roughly doubled its efforts in 2015 from 23 settlements and 11 lawsuits in 2014 and 21 settlements and 7 lawsuits in 2013. With these cases, the CFPB obtained $6 billion in relief for consumers as compensation for damages and returned another $1 billion in restitution for unlawfully obtained gains to consumers. A vast majority of these cases were due to alleged violations of the so called “UDAP Rules” – unfair, deceptive or abusive acts or practices.

This increase in cases is likely due to the expansion and maturation of the CFPB. In the past four years, the bureau increased the number of investigators, examiners and administrative staff allowing it to refine and perfect enforcements processes.

 For more information about the CFPB and what to do if the CFPB audits your business, contact Joseph Messer at 312-334-3440 or jmesser@messerstrickler.com.

Benign Language Does Not Violate The FDCPA

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The Fair Debt Collection Practices Act was enacted to eliminate abusive debt collection practices while ensuring collectors that refrain from abusive practices are not at a competitive disadvantage.  One such practice that Congress attempted to eliminate is addressed in § 1692f(8) of the FDCPA, which prohibits collectors from “using any language or symbol, other than the debt collector's address, on any envelope when communicating with a consumer by use of the mails.”  Last summer (2014), the Third Circuit heard an appeal from the Eastern District of Pennsylvania in Douglass v. Convergent Outsourcing and was asked to determine whether a collector that sends a letter with the consumer’s account number appearing through a glassine window on an envelope violated § 1692f(8). The Douglass court found that a visible account number was information identifying the consumer as a debtor and, therefore, prohibited by the FDCPA.  This ruling resulted in multiple claims by debtors arguing that collection letters they received violated the FDCPA because their account numbers could be seen through the glassine window.

However, since the Third Circuit’s ruling in Douglas, many courts including courts, in Illinois and New York, found that were was not FDCPA violation even if “benign language” could be seen through the glassine window.  On December 1 the Western District of Missouri joined these courts when they ruled in McShann v. Northland Group, Inc.  Just like the plaintiff in Douglass, McShann claimed that she received a letter from a collector with her account number visible through the glassine window on the envelope.  The McShann court commented that bizarre and absurd results would follow if courts were simply to following the plain language of the § 1692f(8) because that would lead to myriad possible claims if anything other than a name and address appeared on, or through, an envelope.  Recognizing that the intention of the FDCPA was to prohibit abusive practices the McShann court found that benign information appearing on an envelope, such as an account number which could mean anything or have no significance at all, does not violate the FDPCA.

Thus courts recognize that the FDCPA outlined practices that were harassing and abusive, and attempted to deter those types of practices.  While plaintiffs may continue to argue that certain actions that conflict with that is written in the FDCPA should be violations, courts are not going to award plaintiffs when the complaints are not in step with the purpose of the FDCPA.

For more information on the FDCPA or to request a review of your background check disclosure forms, contact Adam Hill at 312-334-3480 or ahill@messerstrickler.com.

Debt Collection Representative’s Personal Name Not Required under Meaningful Disclosure Standard of the FDCPA

The United States District Court for the District of Oregon recently decided that a debt collection agency’s representative need not provide their personal name in order to give a meaningful disclosure under the Fair Debt Collection Practices Act (“FDCPA”).  In Christina Moore v. Account Control Technology, Inc., the plaintiff filed suit against the collection agency defendant claiming that the representative did not provide their personal name.  In the phone calls the debt collection representative identified the name of the collection agency and disclosed that it was a debt collection agency attempting to collect a debt.  According to plaintiff, this was not a meaningful disclosure required by the FDCPA since they did not provide their personal name. The United States District Court for the District of Oregon disagreed with plaintiff’s “nonpersuasive and nonsensical argument” stating that the debt collection agency’s representative’s personal name is immaterial to whether there is a meaningful disclosure of the caller’s identity.  The district court determined that a representative’s name is not “meaningful” to a consumer.  “[T]he human caller is not the entity which owns or seeks the debt; the consumer would not satisfy the debt by writing a check to the representative personally; nor would the consumer sue the representative personally for violating the FDCPA.”

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

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

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

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

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

ROUND 2: SUPREME COURT ONCE AGAIN HEARS ORAL ARGUMENTS AS TO CONGRESS’S ABILITY TO CONFER ARTICLE III STANDING

Earlier this month the Supreme Court heard oral arguments in Spokeo, Inc. v. Robins, as to what limits Article III places on Congress’s power to create statutory rights enforceable through a private right of action, where plaintiff suffers no concrete harm.  In Spokeo, plaintiff claimed defendant willfully violated the Fair Credit Reporting Act (FCRA) by publishing false information about him on its website.  The district court dismissed plaintiff’s claim for failure to state an injury in fact.  The U.S. Court of Appeals for the Ninth Circuit reversed, holding that the allegation of a violation of a statutory right was sufficient injury to confer Article III standing.  On April 27, 2015, the Supreme Court granted certiorari.

Interestingly, oral arguments in Spokeo came nearly four years after the Court heard oral arguments in a similar case -- First American Financial v. Edwards.  In First American, the issue before the Court was whether a plaintiff alleging that her title insurance company violated the Real Estate Settlement Procedures Act (RESPA) had Article III standing to sue when she suffered no injury beyond the bare violation of rights established under the statute.  The Court’s decision to grant certiorari in First American was, at the time, quite surprising considering there did not appear to be a significant circuit split on the issue.   Having granted certiorari anyway, many considered that the Court would use the case to establish new Article III limitations on Congress’s power to create private rights of action.  Seven months after hearing oral arguments, however, the Court dismissed the writ of certiorari “as improvidently granted.”

The Justices’ comments during oral arguments in Spokeo suggest that the Court will be closely divided on whatever decision they eventually reach.  On the one hand, conservative Justices appeared to agree with defendant Spokeo that plaintiffs must be able to point to actual harm rather than just a violation of the statute.  For example, Justice Scalia posited that the FCRA is not drafted to allow only injured plaintiffs to sue but rather allows anyone to sue.  Similarly, Chief Justice Roberts used a hypothetical statute where a publisher has to pay every individual it publishes information about -- whether good, bad, or indifferent -- $10.00 in questioning plaintiff’s position as to the breadth of Congress’ power.  On the opposite end of the spectrum, Justice Ginsburg and Justice Sotomayor appeared to agree that plaintiffs only have to allege a violation of a right created by statute, without the need to show a concrete injury.  Indeed, Justice Ginsburg commented that it would be “very strange” to have a rule where “damages are awarded to someone who has no out-of-pocket loss, if the common law says so” but not if Congress says so; while Justice Sotomayor stated “for two centuries” the Court’s rulings have been clear “that injury in fact is the breach of a legally recognized right.”

A copy of the transcript from the November 2, 2015 oral arguments may be found HERE.

For more information on Spokeo, Inc. v. Robins and/or arguing lack of Article III standing in defense of consumer law cases, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com

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Time Barred Debt: Can We Even Collect?

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After the Seventh Circuit’s opinion in McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 1020 (7th Cir. 2014), many collectors rightfully wondered whether time barred debt could ever be lawfully collected. In McMahon, the Seventh Circuit slammed a debt collector for a seemingly innocuous dunning letter that sought to “settle” a time barred debt as improperly implying that the debt was legally enforceable. The Circuit’s reasoning was questionable, to say the least. The Court explained that if a consumer received an “offer of settlement” and then “searched on Google to see what is meant by ‘settlement,’ she might find the Wikipedia entry for ‘settlement offer’” and learn that the term is often used in a civil lawsuit.”

This analysis seemed to depart from long-standing unsophisticated consumer standard used to assess debt collector communications. In the past, the Circuit has described the unsophisticated consumer as “not a dimwit”, Wahl v. Midland Credit Mgmt., Inc., 556 F.3d 642, 645 (7th Cir. 2009), and as objectively “reasonable”, Turner v. J.V.D.B & Assocs., Inc., 330 F.3d 991, 995 (7th Cir. 2003). After McMahon, the unsophisticated consumer is also apparently armed with google, Wikipedia, and a bank of common legal terms at her disposal.

Putting aside questionable analysis, however, the question remains: If the Seventh Circuit can take a seemingly innocuous “settlement offer” on a time barred debt and turn it into a potentially misleading communication, can we even collect on time barred debt anymore? The short answer is: Yes, but carefully.

The language in a letter concerning a time barred debt must be carefully scrutinized by client and counsel. Using the right terminology can be key in drafting a proper dunning letter on a time barred debt. Such a letter was recently examined by the Northern District of Illinois in the case of Sorenson v. Rozlin Financial Group. In Rozlin, a consumer filed an action claiming that a letter he received on a time barred debt violated the FDCPA. The collector filed a motion to dismiss arguing that the language in the letter would not lead the unsophisticated consumer to be misled by the communication. The court agreed.

The court explained that the letter at issue did not use language of “settling” the debt but instead spoke of “clearing” and “payment” of a “financial burden”, which did not “carry the same common use in legal circles.” More importantly, the letter explicitly noted the issue of a time bar and stated that the recipient “will not be sued and the obligation will not be reported to credit agencies.” In sum, with proper phrasing and disclaimers, the letter could properly collect on a time barred debt.

For more information about time barred debts or collection letter language, contact the author, Nicole M. Strickler of Messer Strickler, Ltd., who represented the defendant in Rozlin, at (312) 334-3442 (direct) or nstrickler@messerstrickler.com

VIEW THE ORDER HERE

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Faced with a FDCPA Claim Based on a Failed State Court Collection Act? MS&S Provides a Road Map for Success Based on Its Most Recent Win

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In the U.S. District Court for the Eastern District of Missouri, collection law firms have faced a surge of litigation concerning failed state court collection actions.  Intent on finding a way to recover their attorneys’ fees from defending collection actions when they are unavailable under state law, consumer attorneys’ have turned to the fee-shifting provisions found in the FDCPA. According to the theory advanced by consumer attorneys, any time a collection plaintiff dismisses its suit prior to trial, or misses a procedural deadline, a FDCPA claim results, which entitled them to collect their defense fees from the action.

In Layton v. CACH, LLC, a consumer attorney filed just such a claim. Layton alleged that the asset purchaser filed a collection lawsuit against him without the intent or ability to prove that the debt was owed. Instead of filing a motion to dismiss, the asset purchaser filed an answer to the complaint, attaching the very documents that Layton claimed the asset purchaser could not obtain: the bill of sale and twenty-eight pages of credit card statements.  It then moved for judgment on the pleadings.

The court explained unlike with a motion to dismiss a motion for judgment on the pleadings allows the court to consider materials attached to the answer to the complaint that are “necessarily embraced by the pleadings.” Because the asset purchaser attached the very documentation that Layton alleged it could not produce, he could not state a plausible cause of action for relief.

Layton’s arguments concerning an affidavit used in the state court collection action were similarly flawed. While he argued that an affidavit from the asset purchaser in the collection action was misleading because it was intended to give the appearance to the consumer that the asset purchaser had “personal knowledge” regarding all aspects of the purchaser’s collection action, the court found otherwise. The court concluded that the language used by the asset purchaser in the affidavit was not misleading in any fashion.

While the court mentioned that cases based on improper conduct in a collection action must be evaluated on a case-by-case basis, the opinion in Layton provides a road map for consumer litigation defense attorneys to use in defeating such claims.

Nicole M. Strickler represented the defendant in the Layton case and has defended countless claims based on the same, or similar theories. Contact her at nstrickler@messerstrickler.com or (312) 334-3442 for more information.

View the Memorandum and Order Here.

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.

Third Circuit Rules “Regular Users” of Residential Telephone Lines Can Sue under the TCPA

The Third Circuit Court of Appeals recently decided that a “regular user” of a residential telephone has standing to sue under the Telephone Consumer Protection Act (“TCPA”).  In Leyse v. Bank of America National Association, the plaintiff answered a prerecorded telemarketing call from Bank of America on a residential landline shared with his roommate.  The roommate was the telephone number subscriber and the intended recipient of the call. The Third Circuit reversed the lower court’s dismissal of the case disagreeing with the lower court judge’s finding that only the “intended recipient” of a robocall is a “called party” for purposes of the law.  Judge Fuentes of the Third Circuit wrote, “If the caller intended to call one party without its consent but mistakenly called another, neither the actual recipient nor the (uninjured) intended recipient could sue, even if the calls continued indefinitely.  We doubt Congress meant to leave the actual recipient with no recourse against even the most unrelenting caller.”

The TCPA restricts telephone solicitations and the use of telephone equipment.  The TCPA makes it unlawful “to initiate any telephone call to any residential telephone line using artificial or prerecorded voice to deliver a message without the prior express consent of the called party” except in emergencies or circumstances exempted by the Federal Communications Commission.

The plaintiff in Leyse still has the burden of proof to demonstrate that he answered the telephone when the robocall was received.  This ruling could greatly expand the scope of potential liability for errant calls.

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

6th Circuit Court of Appeals Affirms Judgment in Favor of MS&S’s Client: Voicemail Message was not a “Communication”

On October 22, 2015, the 6th Circuit Court of Appeals affirmed the decision of the district court in favor of Van Ru Credit Corporation dismissing the complaint of William Brown III, with prejudice. In William Brown III v. Van Ru Credit Corporation, Brown alleged Van Ru violated the Fair Debt Collection Practices Act (“FDCPA”) by leaving a single telephone message on the general mailbox at Brown’s place of business, which stated as follows:

 “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.”

After Brown claimed an employee at his business overheard the message, he filed a claim arguing that the message violated §1692c’s prohibition against third party disclosure.   In support of his position, Brown noted that the message included a reference number, Van Ru’s name, which included the term “credit”, and was directed towards “payroll.” All of these items of information, he argued, insinuated the message was related to debt collection. He further noted that the employee that heard the message knew from his own experience that Van Ru was a debt collector, and argued that that the Court should take this subjective knowledge into consideration when determining whether a message was an actionable communication.

The Sixth Circuit disagreed. In the Court’s opinion, Judge Rogers wrote, “[a]n employee of Brown’s business who hears this message would understand it to concern Brown’s debt only in the most exceptional of circumstances.”  The Court went on to state that even though a third party “may have guessed that Van Ru’s voicemail related to Brown’s debt does not mean that the voicemail conveyed this information or that it could reasonably be construed to do so. The purposes of the FDCPA are not served by taking into account conclusions drawn by third parties where debt collectors could not reasonably expect those third parties to draw such conclusions.” Because the message did not give the objective hearer enough information to infer that the subject of the call was debt collection, the Court affirmed the district court’s dismissal.

Notably, in reaching its decision the Sixth Circuit relied upon the Tenth Circuit’s decision in Marx v. General Revenue Corp., 668 F.3d 1174 (10th Cir. 2011) to support its holding. In Marx, the debtor challenged the use of a faxed employment verification sent to the debtor’s employer. Marx was one of the first cases to employ a common-sense analysis to determine that a communication was not actionable because it did not convey to the recipient that the subject of the communication involved a debt. This was a departure from broader approaches employed by prior courts, such as the approach used in the now famous case of Foti v. NCO Financial Systems, 424 F.Supp.2d 643, 653 (S.D.N.Y. 2006). Foti employed a broad definition of “communication” to find a voicemail actionable because it “advised the debtor that the matter required immediate attention, and provided a specific number to call to discuss the matter” even though the message did not indicate that the subject of the communication was debt collection. When viewed in light of Marx, the Brown decision could be read to indicate that courts have tired of the archaic rationale employed in Foti and are moving towards a more objective, common sense approach to the definition of communication. In this writer’s opinion, if a message is overheard by a third party and would not alert the objective hearer to the subject of the communication, it is not within the purview of the FDCPA, at least in the Sixth Circuit.

View the Opinion Here

Van Ru was represented by Nicole M. Strickler and Dana Perminas of Messer Strickler, Ltd.  For more information regarding this case or the FDCPA generally, contact Nicole Strickler at nstrickler@messerstrickler.com or 312-334-3442 or Dana Perminas at dperminas@messerstrickler.com or 312-334-3474.

PAID SICK LEAVE POLICIES SPREADING AROUND THE U.S.

As a follow up to prior blogs, I wanted to provide a list of those states and cities that have enacted legislation compelling employers to provide their employees with paid sick leave.   We had previously discussed the new laws in California and Philadelphia.  Now Pittsburgh is following suit, and so have other states and cities. Under the new Pittsburgh law, effective January 11, 2016, all full-time and part-time employees working in the city of Pittsburgh, excluding independent contractors, state and federal employees, any members of construction unions subject to collective bargaining agreements, and seasonal employees notified in writing when hired that they will not work more more than 16 weeks during the year, will accrue one hour of paid sick leave for every 35 hours worked (including overtime hours).

Pittsburgh employers with 15 or more employees must permit employees to accrue 40 hours of paid sick leave per year while employers with less than 15 must permit employees to accrue 24 hours of paid sick leave per year.  Those employees must be allowed to carry over accrued sick leave from year to year but employers need not allow them to use more than 40 hours (or 24 for smaller employers) of that paid sick leave in a given year.  In lieu of the carryover, employers can choose to provide all of the required sick leave at the beginning of the year, to avoid that carryover of unused leave.   For those smaller employers, they are only required to provide unpaid sick leave (accrued at the same rate state above) for the first year after the law is enacted.  The Pittsburgh law also has stated terms and regulationsfor permitted use and increments of using the leave, notice, documentation and posting requirements, recordkeeping and prohibited conduct, to name a few.

As far as the rest of the country, California, Connecticut, and Massachusetts are the only states that have enacted legislation to allow statewide paid sick leave.  It is expected that other states and cities will attempt to follow the trend– specifically Oregon, who recently adopted a paid sick leave and safe[1] leave law that will be effective next year.  Tacoma, WA and Montgomery County, MD (the first county to do so) also passed sick and safe leave laws also to be effective in 2016.  In some jurisdictions, such as San Diego, proposed laws such as these have been met with opposition.

As far as cities go, Eugene, OR, Newark, Jersey City, Irvington, Passaic, East Orange, Paterson, Trenton, Montclair, Bloomfield, New York City, Oakland, Philadelphia, Pittsburgh (discussed above, effective 1/1/16), Portland, OR, San Francisco, Seattle, and Washington, D.C., already have laws on the books that allow workers to earn paid sick leave, or in a few of those cities, also allows workers to earn paid safe days as well.

For more detailed information on the new Pittsburgh law, or any employer vacation/sick/PTO policies around the country, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com for more information.

[1] Safe Day laws involve allowing an employee paid days off in the event care or treatment is needed for domestic violence, sexual assault or stalking.

 

Related Articles:

EFFECTIVE MAY 13, 2015: UPDATE TO PHILADELPHIA SICK LEAVE REQUIREMENTS

EFFECTIVE JULY 1, 2015: UPDATE TO CALIFORNIA SICK LEAVE REQUIREMENTS

“Ban the Box” Introduced to Congress

On September 10, 2015, a bill was introduced by Senator Cory Booker (D-NJ) and Representative Elijah Cummings (D-MD) marking the first time “ban the box” has been proposed at the federal level.  If passed, The Fair Chance Act would prevent federal agencies and contractors from inquiring about prospective employees’ criminal records before extending a formal job offer.  Once a job offer is presented, the employer may ask about an applicant’s criminal background and revoke the job offer based on the result of a criminal background check.  Law enforcement, national security agencies, and positions with access to classified information will be exempt from this proposed law. For more information about the proposed Fair Chance Act, contact Joseph Messer at jmesser@messerstrickler.com or (312) 334-3440.

 

Read More on “Ban the Box”

                Illinois Enacts “Ban the Box” Law Impacting Private Employers

                Private Employers May be Impacted by the “Ban the Box” Approach in 2014

                The “Ban the Box” Movement Continues                

               “Ban the Box” and Local Ordinances – What Employers Should Know