Key Legal Decisions

//Key Legal Decisions
Key Legal Decisions 2017-09-27T11:28:30+00:00

The below legal cases have a direct correlation to our industry and how we do business.

2017


7th Cir. Divided En Banc Panel Holds Debt Collector Liable Under FDCPA Despite Changes in Underlying
Oliva v. Blatt, Hasenmiller, Leibsker & Moore, LLC, Seventh Circuit Court of Appeals, No. 15-2516 (July 24, 2017)

In a deeply divided opinion, the U.S. Court of Appeals for the Seventh Circuit, sitting en banc, held that a debt collector that relied upon circuit precedent interpreting the federal Fair Debt Collection Practices Act (FDCPA) venue provision was not protected by the FDCPA’s bona fide error defense.

In 2013, the debt collector filed suit in a venue which was supported by the 1996 decision Newsom v. Friedman, 76 F.3d 813, 819 (7th Cir. 1996). While the lawsuit was pending, the Seventh Circuit issuedSuesz v. Med-1 Solutions, LLC, 757 F.3d 636, 638 (7th Cir. 2014) (en banc), in which it held that the FDCPA’s “judicial district or similar legal entity” is “the smallest geographic area that is relevant for determining venue in the court system in which the suit is filed,” thereby overruling its prior decision in Newsom.

The debt collector here dismissed its lawsuit, but the consumer sued alleging, under Suesz, the collection lawsuit was not filed in the proper judicial district. The trial court rejected the debtor’s argument that Suesz should apply retroactively. The debtor appealed and the Seventh Circuit affirmed, concluding that the safe harbor of the bona fide error defense prevented retroactive application of Suesz.  That should have ended the dispute, but the debtor requested an en bancreview by the entire Seventh Circuit asserting that the ruling conflicted with Suesz and the Supreme Court’s ruling in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 576 (2010), which held that the bona fide error defense does not apply to mistakes of law.

The en banc panel reversed its prior decision ruling that Suesz must be applied retroactively because, while civil rulings are permitted to have a prospective-only effect “to avoid injustice or hardship to civil litigants who have justifiably relied on prior law,” it was not persuaded to give Suesz a prospective-only effect because doing so “would be impermissible unless the law had been so well settled before the overruling that it had been unquestionably prudent for the community to rely on the previous legal understanding.”


3rd Cir. Holds Single Unsolicited Automated Call Enough to Confer Standing
Susinno v. Work Out World Inc., Third Circuit Court of Appeals, No. 16-3277 (July 10, 2017)

The U.S. Court of Appeals for the Third Circuit recently held that a consumer satisfied the concreteness requirement for constitutional standing and asserted a valid cause of action under the federal Telephone Consumer Protection Act (TCPA), where she alleged she received one unsolicited, prerecorded phone call to her cell phone which she neither answered nor was charged. The Third Circuit found that the single, unanswered call was a concrete injury because “Congress squarely identified [the] injury” at issue because the “nuisance and invasion of privacy” resulting from that single prerecorded telephone call is the type of harm Congress sought to prevent in enacting the TCPA.


5th Cir. Holds Debt Collector’s Obligation to Report Debt as Disputed Not Limited By § 1692g
Sayles v. Advanced Recovery Systems, Fifth Circuit Court of Appeals, No. 16-60640 (July 6, 2017)

More than a year after receiving the initial written validation notice from the defendant debt collector, the plaintiff sent a written dispute. The debt collector admitted that after receiving this letter it did not mark the plaintiff’s account as disputed.  It (incorrectly) believed that credit reporting a debt as disputed was subject to the requirements of 15 U.S.C. § 1692g, which governs the validation of a debt but also references disputed debts.  The Court rejected the debt collector’s argument. Entirely separate from § 1692g are the prohibitions of § 1692e(8) which prohibit a debt collector from communicating or threatening to communicate false credit information, which includes the failure to communicate that a disputed debt is disputed. The Court held that the requirements of section 1692g are unique to the validation process in which the debt collector validates the debt and the debtor can obtain additional information to verify the debt.  The debt validation process does not apply to credit reporting of disputed debts, the Fifth Circuit held.  Under section 1692e(8), disputed debts, no matter how or when they are disputed, must be credit reported as disputed.


Third Circuit Serves Up a Double Fault in a Crushing FDCPA and TCPA Decision
Daubert v. NRA Group, LLC, Third Circuit Court of Appeals, Nos. 16-3613 and 16-3629 (July 3, 2017)

Under the federal Telephone Consumer Protection Act (TCPA), the trial court ruled that a collection agency’s telephone system used an automated dialing system to call the consumer to collect a medical debt without prior consent. Even though the consumer appears to have provided his cell phone number to the hospital where he incurred the medical debt, the Third Circuit said “more is required” than the simple provision of the cell phone number to an intermediary hospital who was not a creditor. Distinguishing decisions from the Sixth and Eleventh Circuits (Baisden and Mais, respectively), the Third Circuit pointed out that in those cases the hospital intake forms gave permission to release the consumer’s information for payment purposes. Here, there was no evidence that the consumer released his information to be used for payment purposes.

Additionally, under this ruling, a debt collector cannot rely on a trial court decision to escape federal Fair Debt Collection Practices Act (FDCPA) liability. In this case, the debt collector had made operational changes to its lettering to use QR (Quick Response) codes. Two trial court decisions found that the use of QR codes did not violate the FDCPA. When the debt collector was later sued for using QR codes on its letter, the trial court here found that it did violate the FDCPA, but the debt collector was exempt from liability under the FDCPA’s bona fide error exception because it relied on earlier trial court decisions. The Third Circuit disagreed finding that a bona fide error cannot be premised on a mistaken legal interpretation of the FDCPA, even when it is premised on trial court decisions.


TCPA Consent Given in Contract Cannot Be Subsequently Revoked, Says Second Circuit
Reyes v. Lincoln Automotive Financial Services, Second Circuit Court of Appeals, No. 16-2104 (June 22, 2017)

The Second Circuit Court of Appeals affirmed the decision of a trial court holding that the federal Telephone Consumer Protection Act (TCPA) does not permit a person to revoke TCPA consent that is a term of a contract. Noting that the 2015 FCC Ruling (In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 30 F.C.C. Rcd. 7961, 7993-94 (2015)) provides that a consumer can revoke prior consent under the TCPA, the court found revocation is not possible when consent to be called is given “as bargained-for consideration in a bilateral contract.”


U.S. Supreme Court Holds Debt Purchaser Collecting Its Own Debt Is Not Subject to FDCPA
Henson v. Santander Consumer USA, Inc., United States Supreme Court, No. 16-349 (June 12, 2017)

A purchaser of a defaulted debt who then seeks to collect the debt for itself is not a “debt collector” subject to the federal Fair Debt Collection Practices Act under an opinion delivered by the U.S. Supreme Court. The issue before the Court was whether a purchaser of defaulted debt meets the FDCPA’s definition of a “debt collector” as one who “regularly collects or attempts to collect . . . debts owed or due . . . another.” 15 U. S. C. §1692a(6). Here, Santander Consumer USA Inc. acquired defaulted loans from CitiFinancial Auto and then began to collect on those loans. The petitioners argued this activity made Santander a debt collector subject to the FDCPA. The Fourth Circuit Court of Appeals disagreed because the debt purchaser was not seeking to collect a debt “owed . . . another.” The Supreme Court affirmed in a unanimous decision. The opinion did not consider whether a purchaser of defaulted debt is engaged “in any business the principal purpose of which is the collection of any debts.” §1692a(6). RMA urges caution when interpreting the applicability of Henson to your operations.


211 Unanswered Collection Calls, Alone, Not Sufficient to Sustain WVCCPA Claim
Valentine & Kebartas, Inc. v. Lenahan, Supreme Court of Appeals of W.V., No. 16-0127 (June 12, 2017)

West Virginia’s highest court reversed a judgment against a debt collector under the West Virginia Consumer Credit and Protection Act, finding that although the debt collector had placed 211 collection calls to a consumer over an eight-month period, the mere making of the calls, alone, is not sufficient to demonstrate the calls were placed by the debt collector with the “intent to annoy, abuse, oppress or threaten” under West Virginia Code § 46A-2-125(d). According to the decision, a violation can only be demonstrated by evidence that the debt collector’s purpose for the calls was not to collect the debt, but to harass the recipient. The opinion found it dispositive that the consumer never answered any of the calls, the calls were otherwise made in compliance with state and federal law and the consumer never communicated with the collector, even to dispute the debt. The consumer’s silence in response to the call would not be used to impute knowledge to the debt collector that the consumer did not want to receive the calls.


9th Cir. Amends, Reinforces Its Ruling that Foreclosure Trustees Are Not FDCPA ‘Debt Collectors’
Ho v. ReconTrust Co, Ninth Circuit Court of Appeals, No. 10-00741 (May 22, 2017)

The U.S. Court of Appeals for the Ninth Circuit recently amended its opinion in Ho v. ReconTrust Co., maintaining and affirming its prior ruling that the trustee in a California non-judicial foreclosure did not qualify as a debt collector under the federal Fair Debt Collection Practices Act (FDCPA). The amendments to the prior ruling among other things add that a California mortgage foreclosure trustee meets the FDCPA’s exclusion from the term “debt collector” for entities whose activities are “incidental to … a bona fide escrow arrangement” at 15 U.S.C. § 1692a(6)(F). Splitting from the Fourth and Sixth Circuits and ruling against the position argued by the CFPB in an amicus curiae brief, the Ninth Circuit explained that the California foreclosure trustee defendant was not attempting to collect money from the plaintiff when it sent her a notice of default and notice of sale so that its activities did not qualify as debt collection. This holding affirms the leading case of Hulse v. Owen Federal Bank, 195 F. Supp. 2d 1188 (D. Or. 2002), which has been the subject of much debate concerning whether non-judicial foreclosure constitutes debt collection.


4th Cir. Vacates $11M FCRA Class Action Judgment Citing Spokeo
Dreher v. Experian Information Solutions, Inc., Fourth Circuit Court of Appeal, No. 15-2119 (May 11, 2017)

The U.S. Court of Appeals for the Fourth Circuit recently vacated and remanded for dismissal a trial court’s summary judgment ruling in favor of the plaintiff in an $11 million, 69,000-member class action under the federal Fair Credit Reporting Act (FCRA). The defendant credit reporting agency had listed a tradeline in its consumer reports under the name of a defunct credit card issuer when in fact the information was being provided by a servicer. The consumer disputed the reporting to the defunct issuer, but never received a response. The Fourth Circuit was not convinced plaintiff suffered any injury, finding that the agency’s failure to identify the correct furnisher had no practical effect on the plaintiff. The appeals court applied the recent U.S. Supreme Court ruling, Spokeo v. Robins, explaining that, a plaintiff cannot allege a “bare procedural violation, divorced from any concrete harm” and still gain standing to sue. So while the agency’s reporting may have been inaccurate, that inaccuracy, absent a concrete harm, cannot serve as a basis for FCRA liability.


2nd Cir. Upholds Dismissal of Data Breach Action for Lack of Standing, Distinguishes 7th Cir. Rulings
Whalen v. Michaels Stores, Inc., Second Circuit Court of Appeals, Nos. 16-260 (L), 16-352 (XAP) (May 2, 2017)

The U.S. Court of Appeals for the Second Circuit recently affirmed a lower court’s ruling dismissing a complaint arising from a retailer’s data breach resulting in disclosure of credit card information. The trial court granted the retailer’s motion to dismiss finding the plaintiff’s allegations did not establish Article III standing because she did not allege any charges were made to her credit card and did not allege, with any specificity, that she had spent time or money monitoring her credit to prevent identity theft or fraudulent credit activity.


Violations of State Court Procedure Are Not Actionable under FDCPA
Lyshe v. Levy, Sixth Circuit Court of Appeals, No. 16-4026 (April 20, 2017)

Defendant lawyer and his law firm, while pursuing the plaintiff-debtor in a collection action, served requests which included a blank notary block and did not provide an electronic copy of the discovery requests. Plaintiff-debtor claimed these requests violated the federal Fair Debt Collection Practices Act (FDCPA) because Ohio Rules of Civil Procedure required that the lawyer and his firm to serve the discovery requests with a separate electronic copy and did not require the responses to be notarized. The trial court dismissed the claim finding it lacked subject matter jurisdiction, relying on last year’s Supreme Court decision in Spokeo, Inc. v. Robins.

The Sixth Circuit affirmed, holding that the harm alleged by debtor — i.e., that the discovery requests required him to visit a notary and to contact the law firm to obtain electronic copies of the discovery — is “not the type of harm the FDCPA was designed to prevent.” Therefore, the Court held that the alleged harm did not confer standing.


Post-Discharge, Monthly Mortgage Statements Did Not Violate FCCPA When Accompanied by Proper Disclosure
Helman v. Bank of America, Eleventh Circuit Court of Appeals, No. 15-13672 (April 12, 2017)

Plaintiff received a discharge under Chapter 7 of the Bankruptcy Code. Although the discharge prevented the collection of a mortgage debt she owed to the defendant mortgage lender, it did not disturb the lender’s right to enforce the mortgage upon a non-payment default. Following the plaintiff’s Chapter 7 discharge, the lender sent the plaintiff monthly mortgage statements which informed the plaintiff she had “no personal obligation to repay [the mortgage debt].” But it also informed the plaintiff that “[the mortgage] allows foreclosure if the requirements under the loan documents are not met.”

Plaintiff filed a class action complaint alleging the monthly statement violated the Florida Consumer Collection Practices Act (“FCCPA”) among other Florida laws. The trial court dismissed the claims and the Eleventh Circuit Court of Appeals affirmed, finding, among other things, the plaintiff had knowledge that while the bankruptcy discharge relieved of her personal liability, the mortgage lien remained enforceable. When coupled with the mortgage lender’s disclosure in the monthly statements, the plaintiff’s assertion that the monthly statements misled her to believe she was personally obligated to pay the mortgage loan was a “bizarre or idiosyncratic interpretation” to which the court would not provide protection.


Demanding Prejudgment Interest Under Wisconsin Law Held Not to Violate FDCPA
Aker v. Americollect, Inc., Seventh Circuit Court of Appeals, No. 15-3105 (March 29, 2017)

The U.S. Court of Appeals for the Seventh Circuit recently held that letters demanding payment of medical services debt, which also demanded prejudgment statutory interest under Wisconsin law, did not violate the FDCPA. The Appeals court rejected the debtor’s argument that prejudgment statutory interest may only be collected once the obligation is reduced to a judgment. Instead, the Appeals court agreed with the debt collector’s interpretation that under Wis. Stat. §138.04, interest runs automatically, and that a judgment just memorializes what state law requires.


Disclosing Intent Not to Sue in Letter Collecting ‘Time-Barred’ Debt Violates FDCPA If Consumer Is Not Advised of Consequences of Payment or That Collection Lawsuit Is Prohibited by Law
Pantoja v. Portfolio Recovery Associates, LLC, Seventh Circuit Court of Appeals, No. 15-1567 (March 29, 2017)

A debt buying company’s letter to collect a debt that was subject to the defense of an expired limitations period was found to violate the FDCPA because it failed to disclose that (1) a payment or promise can revive the limitations period; and, (2) the law limits or prohibits the debt collector from suing to collect the debt. The Seventh Circuit Court of Appeals reached this decision even though the letter stated: “Because of the age of your debt, we will not sue you for it and we will not report it to any credit reporting agency.” The court held that the letter was “deceptive as a matter of law” because it did not inform the consumer that a payment (or promise to pay) may restart the limitations period and thereby cause the consumer “significant risk of losing the protection of the statute of limitations.”


2nd Cir. Holds Payoff Statement Stating ‘Amount Due May Include’ Estimated Fees, Costs Violates FDCPA
Carlin v. Davidson Fink LLP, Second Circuit Court of Appeals, No. 15-3105 (March 29, 2017)

The U.S. Court of Appeals for the Second Circuit recently reinstated a complaint alleging a debt collector violated the federal Fair Debt Collection Practices Act when it sent a payoff statement containing unaccrued fees and costs without providing any information as to how those fees were calculated or any basis for those fees and costs. In so ruling, the Second Circuit was careful to note that a payoff statement may contain estimated fees and costs if the information in the statement would allow the least-sophisticated consumer to determine the minimum amount she owed at the time of the notice, what she needed to pay to resolve the debt in the future, and how the debt collector calculated the fees and costs.


MD Tenn. Holds Auto Finance Creditor’s Telephone Authorization Process Complied With EFTA
Blatt v. Capital One Auto Finance, Inc., United States District Court, M.D. Tenn., No. 2:15-cv-00015 (Feb. 17, 2017)

A federal court sitting in Tennessee recently held that a creditor complied with the federal Electronic Funds Transfer Act when it obtained verbal authorization to accept the consumer’s electronic fund transfer and request for enrollment into an autopay system. The court held that the creditor was not required to send the consumer a copy of his electronic signature (the recording). Instead, the Court held, the written confirmation of enrollment need only include the material terms of the autopay system, and sending the confirmation of enrollment within two business days of the date of enrollment was sufficient to meet the creditor’s duty under the EFTA, 15 U.S.C. § 1693, et seq. While the decision is favorable to members, other courts have reached the opposite result.


Statutory Interest Cannot Accrue on Charged-off Credit Cards Says Kentucky Supreme Court
Unifund CCR Partners v. Harrell, Supreme Court of Kentucky, No. 2015-SC-000117-DG (Feb. 16, 2017)

The Kentucky Supreme Court recently ruled that a debt buying company may not charge or collect statutory interest on an account it acquired after it was charged-off by the original creditor. The Kentucky Supreme Court held that once a credit card account is charged off and the original creditor ceases sending monthly statements, federal law prohibits further interest charges. Because the original creditor is prohibited from assessing interest, a debt buying company that purchases the account is likewise prohibited from assessing statutory interest.


9th Cir. Holds TCPA Revocation of Consent Must Be Clearly Expressed
Van Patten v. Vertical Fitness Group, Ninth Circuit Court of Appeals, No. 14-55980 (Jan. 30, 2017)

In a claim under the federal Telephone Consumer Protection Act (TCPA), the U.S. Court of Appeals for the Ninth Circuit held that although a consumer may revoke consent to receive automated text messages or calls, the revocation but must clearly express that the consumer does not want to receive the messages or calls. The Court concluded that, in this case, the consumer gave prior express consent to receive the text messages at issue and did not effectively revoke his consent, thereby dooming his TCPA claims.


9th Cir. Throws Out FDCPA Class Settlement
Koby v. ARS National Services, Inc., Ninth Circuit Court of Appeals, No. 13-56964. (Jan. 25, 2017)

The Ninth Circuit Court of Appeals rejected a class action settlement as “worthless” for absent class members in a recent federal Fair Debt Collection Practices Act case. The decision represents another addition to the growing list of FDCPA and other consumer-related class action settlements facing tough scrutiny where absent class members receive minimal or no monetary relief in proportion to their release of future claims, while class representatives and their counsel receive handsome rewards.


3rd Cir. Rules Violation of Statute Without Concrete Harm Enough for Standing, At Least in Data Breach Cases
In re Horizon Healthcare Inc. Data Breach Litigation, Third Circuit Court of Appeals, No. 15-2309 (Jan. 20, 2017)

The U.S. Court of Appeals for the Third Circuit recently reversed the dismissal of a putative class action under the federal Fair Credit Reporting Act (FCRA) based on the theft of laptops from a health insurer containing sensitive personal information, holding that the plaintiffs had standing to sue because Congress created a statutory remedy for the unauthorized transfer of personal information, the disclosure of which constituted a cognizable injury, regardless of whether the stolen information was actually used improperly.


9th Cir. Limits Scope of FDCPA ‘Enforcement of Security Interest’ Exception
Mashiri v. Epsten Grinnell & Howell, Ninth Circuit Court of Appeals, No. 14-56927 (Jan. 17, 2017)

The U.S. Court of Appeals for the Ninth Circuit recently held that a notice regarding overdue homeowners association (HOA) assessments contained language that overshadowed and conflicted with the homeowner’s federal Fair Debt Collection Practices Act (“FDCPA”) debt validation rights. The Court rejected the debt collector’s argument that in sending the notice regarding overdue HOA assessments, it merely sought to perfect a security interest and was therefore subject only to the limitations under 15 U.S.C. § 1692f(6).


SCOTUS to Decide Whether Entity is FDCPA ‘Debt Collector’ Merely Because It Purchases Defaulted Debt
Henson v. Santander Consumer USA, Inc., United States Supreme Court, No. 16-349 (Jan. 13, 2017)

The Supreme Court of the United States recently decided that it will review the decision of the U.S. Court of Appeals for the Fourth Circuit in Henson v. Santander Consumer USA, Inc. The Fourth Circuit held that the fact that a debt is in default at the time it is purchased by an entity does not necessarily make that entity a “debt collector” subject to the federal Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq.


2016

 


MD Pa. Holds Initiation of a Call is Enough for TCPA Liability
Manuel v. NRA Group, LLC, United States District Court, Middle District of Pennsylvania, No. 15-cv-274 (December 7, 2016)

The United States District Court for the Middle District of Pennsylvania recently determined that the sole issue for trial was whether the consumer should be awarded treble damages in his complaint alleging a violation of the Telephone Consumer Protection Act because “a plaintiff need not answer or hear a call to prove prohibited conduct under the TCPA, but need only prove the act of placing the call itself.” While the Third Circuit had not addressed the issue at hand, it noted that the Ninth Circuit in Satterfield v. Simon & Schuster, Inc. found that a “call” within the TCPA means “to communicate with or try to get into communication with a person by telephone.” The Court relied on the Ninth Circuit’s holding and other district courts’ decisions in finding that “a plaintiff need not answer or hear a call to prove prohibited conduct under the TCPA, but need only prove the act of placing the call itself.”


7th Cir. Holds Judgment Against Bankruptcy Debtor’s Husband Did Not Violate Co-Debtor Stay
Smith v. Capital One Bank (USA), NA, United States Court of Appeals for the Seventh Circuit, No. 16-cv-1422 and 16-cv-1423 (December 22, 2016)

The U.S. Court of Appeals for the Seventh Circuit recently held that a bank’s lawsuit against a Chapter 13 debtor’s husband did not violate the “co-debtor stay” because the husband’s credit card debts were not a consumer debt for which the debtor was personally liable.


NJ Fed. Court Holds 18 Calls Over Two Weeks – Mostly Unanswered – Did Not Violate FDCPA
Chisholm v. AFNI, Inc., United States District Court, District of New Jersey, No. 15-cv-3625 (November 22, 2016)

The U.S. District Court for the District of New Jersey recently ruled that 18 telephone calls to a consumer over a two-week period – of which 17 were unanswered, and the last where the consumer hung up – did not violate the federal Fair Debt Collection Practices Act (FDCPA). In so ruling, the Court also affirmed that under the federal Telephone Consumer Protection Act (TCPA), persons who knowingly release their phone numbers have in effect given their invitation or permission to be called at the number which they have given, absent instructions to the contrary. As to whether conduct is harassing, the Court noted that “actual harassment or annoyance turns on the volume and pattern of calls made,” and “[t]here is no consensus as to the amount and pattern of calls necessary for a Court to infer a debt collector intended to annoy, abuse, or harass a debtor.” In addition, numerous courts have found that the number of calls alone cannot violate the FDCPA; there must also be outrageous conduct in order “to have the ‘natural consequence’ of harassing a debtor.”


Timely Proof of Claim Required to Participate in Ch. 13 Bankruptcy Case, Even When Debtor Schedules Debt
Barker v. Spokane Law Enforcement F.C.U., United States Court of Appeals, Ninth Circuit, No. 14-60028 (October 27, 2016)

Even though a debtor’s Chapter 13 petition scheduled three debts owing to the defendant-creditor, the defendant-creditor was not excused from the “rigid” rule requiring it to timely filing its proofs of claim to allow it to participate in a Chapter 13 plan. Although the defendant-creditor ultimately did file proofs of claim, they were late, so the bankruptcy court did not err when it disallowed the claims.


6th Cir. Rejects Debt Collector’s Efforts to Distinguish Campbell-Ewald Following Offer of Judgment Success in Trial Court
Conway v. Portfolio Recovery Associates, LLCUnited States Court of Appeals, Sixth Circuit, No. 15‐5925 (October 27, 2016)

Applying the U.S. Supreme Court’s recent decision in Campbell-Ewald, the U.S. Court of Appeals for the Sixth Circuit revived a consumer plaintiff’s ability to proceed with a putative class action, holding that an unaccepted offer of settlement or judgment generally does not moot a case, even if the offer would fully satisfy the plaintiff’s demands for relief.


Offer of Judgment Moots TCPA Claim Rules 2nd Circuit  
Bank v. Alliance Health Networks, LLC, United States Court of Appeals, Second Circuit, No. 15-cv-4037 (Oct. 20, 2016)

Todd Bank (a repeat, pro se, litigant), filed suit alleging the defendant violated the federal Telephone Consumer Protection Act. Bank also requested class certification. Using Rule 68 of the Federal Rules of Civil Procedure, the defendant offered to allow Bank to take judgment against it for $5,004 for two unsolicited telephone calls. When Bank did not accept the offer, the defendant moved to dismiss the case. The trial court ordered the clerk to enter judgment for Bank for $5,004 and dismissed the case, finding the offer provided Bank with all the relief he could be entitled to under his lawsuit. The Second Circuit affirmed the dismissal.


9th Cir. Holds Foreclosure Trustee Not FDCPA ‘Debt Collector’
Ho v. ReconTrust Co., United States Court of Appeals, Ninth Circuit, No. 10‐56884 (October 19, 2016)

A trustee of a California deed of trust securing a real estate loan was not a “debt collector” under the federal Fair Debt Collection Practices Act the Ninth Circuit Court of Appeals held in this recent decision. According to the decision, “actions taken to facilitate a non-judicial foreclosure, such as sending the notice of default and notice of sale, are not attempts to collect ‘debt’ as that term is defined by the FDCPA.”


Supreme Court Grants Writ of Certiorari in FDCPA Case
Johnson v. Midland Funding, LLC, United States Supreme Court, No. 16-348 (October 11, 2016)

The Supreme Court of the United States will review the decision of the United States Court of Appeals for the Eleventh Circuit inJohnson v. Midland Funding LLC. Johnson was the second case decided by the Eleventh Circuit addressing time-barred proofs of claim in Chapter 13 bankruptcy. In the first case, Crawford v. LVNV Funding, LLC, the Eleventh Circuit held that a debt collector violates the Fair Debt Collection Practices Act when it files a proof of claim in a bankruptcy case on a debt that it knows to be time-barred. In Johnson, the Eleventh Circuit held that there is no irreconcilable conflict between the FDCPA and the Bankruptcy Code.


4th Cir. Holds Foreclosure is FDCPA ‘Debt Collection,’ Mere Servicer Need Not Provide TILA Notice of Assignment of Loan
McCray v. Federal Home Loan Mortgage Corp., United States Court of Appeals, Fourth Circuit, No. 15-1444 (October 7, 2016)

The U.S. Court of Appeals for the Fourth Circuit recently confirmed that a law firm and its employees, who pursued foreclosure on behalf of creditors, were acting as “debt collectors” under the federal Fair Debt Collection Practices Act (FDCPA) when they pursued foreclosure proceedings against a borrower.


11th Cir. Holds Third-Party Garnishments Not Subject to FDCPA Venue Provision
Ray v. McCullough Payne & Haan, LLC, United States Court of Appeals, Eleventh Circuit, No. 16-11518 (September 29, 2016)

The U.S. Court of Appeals for the Eleventh Circuit recently held that the federal Fair Debt Collection Practices Act’s venue provision did not apply to post-judgment action garnishment proceedings.


8th Cir. Rejects FDCPA Claims Regarding Follow Up Calls for Location Information, Alleged Harassment
Kuntz v. Rodenburg LLP, United States Court of Appeals, Eighth Circuit, No. 15-2777 (September 22, 2016)

The U.S. Court of Appeals for the Eighth Circuit recently held that a debt collector did not violate the federal Fair Debt Collection Practices Act by making subsequent telephone calls to a person other than the consumer regarding the location of the debtor, because the debt collector reasonably believed that the person’s initial response was incomplete. In addition, the Eighth Circuit also held, as a matter of law, that 14 calls over a period of approximately two months did not rise to the level of harassment prohibited by FDCPA § 1692d(5).


7th Cir. Rules the Use of FDCPA Language in Complaint was Deceptive
Marquez et al v. Weinstein, Pinson & Riley, P.S. et al, United States Court of Appeals, Seventh Circuit, No. 15-3273 (September 7, 2016)

The U.S. Court of Appeals for the Seventh Circuit recently held that the debt collector’s use of language similar from section § 1692g of the Fair Debt Collection Practices Act in a collection complaint was deceptive as a matter of law because it could lead an unsophisticated consumer to believe that the debt would be assumed to be valid by the court if not disputed within a time period shorter than provided by the summons. Joining other federal appellate courts on the issue, the Seventh Circuit also concluded that “pleadings or filings in court can fall within the FDCPA.”


4th Circuit Joins Majority of Other Circuits Finding No FDCPA Liability for ‘Time-Barred’ Claims
Dubois v. Atlas Acquisitions LLC, United States Court of Appeals, Fourth Circuit, Nos. 15‐1945 (August 25, 2016)

In a split decision, the U.S. Court of Appeals for the Fourth Circuit recently held that “filing a proof of claim in a Chapter 13 bankruptcy based on a debt that is time-barred does not violate the Fair Debt Collection Practices Act when the statute of limitations does not extinguish the debt.”


7th Cir. Deepens Split on FDCPA Liability for ‘Time-Barred’ Claims
Owens v. LVNV Funding, LLC, United States Court of Appeals, Seventh Circuit, Nos. 15‐2044, 15‐2082, 15‐2109 (August 10, 2016)

Filing a proof of claim with a bankruptcy court representing a debt subject to an expired state law limitations period does not violate the federal Fair Debt Collection Practices Act (FDCPA) under a recent opinion from the Seventh Circuit Court of Appeals. Under the ruling, in Owens v. LVNV, the Seventh Circuit joins the Eighth Circuit Court of Appeals in rejecting the Eleventh Circuit’s holding under Crawford v. LVNV that such proofs of claim violate the FDCPA.

Here the Seventh Circuit, like the Eighth Circuit last month inNelson v. Midland, looked to the Second Circuit Court of Appeals decision in Simmons v. Roundup Funding, decided long beforeCrawford. In Simmons, the Second Circuit held that the mere filing of a proof of claim representing an inflated debt did not violate the FDCPA. The bankruptcy process provides debtors with sufficient protections against, as the Seventh Circuit put it, an “invalid or enforceable” claim. Unlike a civil lawsuit, where the debtor may be misled to believe no defense exists to entry of a judgment and simply “give in,” in a bankruptcy case (particularly one where the debtor has counsel, as was the situation in all three of the consolidated cases here), the same concern is not present. The proof of claim must identify the age and the origin of the debt, providing sufficient information to determine whether the debt is subject to an expired limitations period.


9th Cir. Rejects FDCPA Claim for Failure to Disclose ‘Debt Collector’ Status in Follow Up Communications
Davis v. Hollins Law, United States Court of Appeals, Ninth Circuit, No. 14-16437 (August 8, 2016)

The U.S. Court of Appeals for the Ninth Circuit recently held that the federal Fair Debt Collection Practices Act (FDCPA) is not violated if a subsequent communication is sufficient to disclose to the least sophisticated debtor that the communication was from a debt collector, even without expressly stating “this communication is from a debt collector.” In reaching the conclusion, the Court gave weight to the prior, extensive communication between the debtor and debt collector.


ND Calif. Holds Alleged ‘Invasion of Privacy’ Sufficient for TCPA Standing
Cour v. Life360, Inc. United States District Court for the Northern District of California, No. 16-cv-00805-TEH  (July 28, 2016)

Article III standing to assert a claim under the federal Telephone Consumer Protection Act (TCPA) exists where a plaintiff alleges an invasion of privacy according to a federal court sitting in the Northern District of California.


DC Circuit Rejects FDCPA ‘Meaningful Involvement’ and Related State-Law Claims
Jones v. David Dufek, Sr., United States Court of Appeals, District of Columbia, No. 15‐7013 (July 26, 2016)

The U.S. Court of Appeals for the District of Columbia recently held that, under the federal Fair Debt Collection Practices Act (FDCPA), a collection letter from a law firm did not misrepresent any meaningful involvement by an attorney.

The debt buyer hired a law firm to help collect the debt. The law firm sent a one-page letter to the borrower. The letterhead had the name of the law firm. The letter informed the borrower that the debt buyer had retained the law firm to collect the outstanding debt. The letter informed the borrower of the amount owed and warned that the debt would be assumed to be valid unless the borrower disputed the debt within 30 days. Furthermore, the letter stated that the borrower could remit payment to the law firm. The signature block titled the sender of the letter as an attorney. After the signature block, the letter included the following language: “Please be advised that we are acting in our capacity as a debt collector and at this time, no attorney with our law firm has personally reviewed the particular circumstances of your account.”

The letter also stated that it was an attempt to collect a debt and any information obtained would be used for that purpose. The text of the letter, including disclaimers, were in the same readable font and size.

The D.C. Circuit rejected the borrower’s argument that using the title of attorney in the letterhead and signature block impermissibly implies that the law firm evaluated the case from a legal standpoint. In support, the Court pointed to the letter’s conspicuous disclaimer regarding the law firm’s involvement. The Court also held that the letter did not threaten any improper legal action under 15 U.S.C. § 1692e(5) because the letter did not reference any legal action and stated that the law firm had not reviewed the case at the time of transmission.

Accordingly, the D.C. Circuit affirmed the lower court’s ruling that the letter did not misrepresent the extent of the law firm’s involvement.


9th Cir. Rules Every Debt Collector – Not Just First to Communicate – Must Comply with FDCPA’s Section 1692g
Hernandez v. Williams, Zinman & Parham, United States Court of Appeals, Ninth Circuit, No. 14-15672 (July 20, 2016)

The U.S. Court of Appeals for the Ninth Circuit, in a case of first impression and the first published circuit court opinion to address the issue, recently held that each and every debt collector — not just the first one to communicate with a debtor — must send the debt validation notice required by the federal Fair Debt Collection Practices Act.


8th Cir. Holds No FDCPA Violation for Filing Proof of Claim on Debt Subject to Expired Limitations Period
Nelson v. Midland Credit Management, Inc., United States Court of Appeals, Eighth Circuit. Nos. 15-2984 (July 11, 2016)

The U.S. Court of Appeals for the Eighth Circuit recently held that the federal Fair Debt Collection Practices Act (FDCPA) does not prohibit debt collectors from filing a proof of claim merely because the debt is subject to an expired limitations period.

Previously, the Court of Appeals for the Eleventh Circuit in Crawford v. LVNV and Johnson v. Midland held that such a proof of claim does violate the FDCPA. Nelson is the first decision from a Court of Appeals outside the Eleventh Circuit on this issue.
Notably, the decision does not preclude application of the FDCPA to the bankruptcy claims process, but only holds that an FDCPA claim does not arise when the only allegation is that the debt is subject to an expired limitations period.

The issue is also before the First, Third, Fourth, Sixth and Seventh Circuit Courts of Appeals, some of whom should render decisions before the end of this year.


Mass. Call Count Cap Violated by Debt Collector Not Leaving Voicemail Message
Watkins v. Glenn Associates, Inc., Mass. Superior Court, Middlesex County, Docket No. 15-CV-3302-H (June 10, 2016)

A Massachusetts Superior Court recently held that reaching a debtor’s voicemail, but choosing to not leave a message, is a “communication” under the Massachusetts Debt Collection Regulations, 940 Code Mass. Regs. § 704(1)(f).


Debt Collector Complies with 1692e(8) by Requesting Tradeline Deletion
Huebner v. Midland Credit Management, Inc, United States District Court for the Eastern District of New York, No. 14 Civ. 6046 (BMC) (June 6, 2016)

A U.S. District Court for the Eastern District of New York recently granted summary judgment in favor of a debt collector, holding that the debt collector did not violate the federal Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692, et seq., by reporting a debt as “deleted” rather than “disputed,” and by asking probing questions in response to a call from the consumer disputing the debt.

Following a telephone call where the debtor disputed the account for unspecified reasons, the debt collector marked the account for deletion and instructed the major credit reporting agencies (“CRAs”) to whom it furnished information (Experian, TransUnion, or Equifax) to delete the information. The consumer later received a credit report prepared by “CreditCheck Total.” The report showed the debt buyer’s account as still due and owing, but also contained a disclaimer making it clear that it was not to be relied upon as a report from the three recognized CRAs.

The Court held that the FDCPA does not make a debt collector a guarantor of the CRAs’ compliance with its furnishing requests, but rather that the debt collector only has to make the request to the CRAs to whom it furnished information, which was done here.

The plaintiff then argued that the account was marked as deleted, instead of disputed. However, the Court noted the “disputed” code allowed the debt buyer to investigate the debt, and depending on the results of the investigation, to restore the account to undisputed status, while the “deleted” code identifies a disputed account as to which no further action is going to be taken. Accordingly, a “disputed” code is a step before a “deleted” code.  The Court noted that the debt buyer merely skipped the “disputed” code as it was obvious that the $131 debt was going to be more trouble than it was worth. Thus, the debt collector did not violate § 1692e(8).


11th Circuit ­Double Downs on Crawford – Finds No Irreconcilable Conflict Between FDCPA and Bankruptcy Code
Johnson v. Midland Funding LLC and Brock v. Resurgent Capital Services, L.P., United States Court of Appeals, Eighth Circuit. Nos. 15-11240, 15-14116 (May 24, 2016)

In a much-anticipated follow-up to its 2014 decision in Crawford v. LVNV Funding, LLC, 738 F.3d 1254 (11th Cir. 2014), the U.S. Court of Appeals for the Eleventh Circuit recently held that there is no irreconcilable conflict between the federal Fair Debt Collection Practices Act (FDCPA) and the Bankruptcy Code. In so ruling, the Court reversed the dismissal of two FDCPA cases filed against debt buyers that submitted proofs of claim on debts that were subject to a statute of limitations defense.

In its 2014 decision in Crawford, the Eleventh Circuit held that a debt collector violates the FDCPA when it files a proof of claim in a bankruptcy case on a debt that it knows to be “time-barred.”  But the panel in Crawford did not consider whether the Bankruptcy Code preempts or displaces the FDCPA “when creditors misbehave in bankruptcy.”  In Johnson, a consolidated appeal involving two cases, the District Court dismissed the lawsuits based on a finding that the Eleventh Circuit’s decision in Crawford placed the FDCPA and the Bankruptcy Code in irreconcilable conflict such that there was an implied repeal of the FDCPA by the Code. The Eleventh Circuit disagreed and reversed.


7th Cir. Holds No FDCPA Violation for Filing Suit Without Intent to Proceed to Trial
St. John v. Cach, LLC, United States Court of Appeals, Eighth Circuit. Nos. 14-2760, 14-3724, 15-1101 (May 19, 2016)

The U.S. Court of Appeals for the Seventh Circuit recently held that the federal Fair Debt Collection Practices Act (FDCPA) does not prohibit debt collectors from filing a collection lawsuit without intending to proceed to trial to obtain a judgment.

In this consolidated appeal, defendant debt collectors filed suit in state court to recover on the plaintiffs’ delinquent credit card accounts. When the debtors contested the collection lawsuits, the debt collectors moved to voluntarily dismiss the actions with prejudice. Plaintiff debtors sued the debt collectors in federal court alleging the practice was deceptive and in violation of § 1692e(5) of the FDCPA because the debt collectors had no intention of going to trial to obtain judgments.

The Seventh Circuit held that the plaintiffs failed to state a viable claim under the FDCPA.  The Court held that the plaintiffs did not sufficiently allege that the defendants did not intend to proceed to trial when they initially filed their complaints in state court. The Seventh Circuit noted that the fact that the defendants voluntarily moved to dismiss their suits prior to trial did not suggest that they had no intention of ever going to trial, indicating there are many reasons why a litigant would want to dismiss its own case.

The Seventh Circuit refused to hold that a debt collector who determines it would be less cost-effective to go to trial would be liable for an FDCPA violation for simply filing a complaint. The Court noted that the FDCPA does not compel this incongruous result, and that § 1692e(5) does not punish debt collectors for engaging in a cost-benefit analysis when conducting litigation.


Even if Some of FDCPA Plaintiff’s Allegations are False, Defendant Not Entitled to Fees and Costs if Other Claims Had Support

Duranseau v. Portfolio Recovery Associates, LLC

United States Court of Appeals, Eighth Circuit. Nos. 15-1551, 15-1604 (April 4, 2016)

Section 1692k(a)(3) of the Fair Debt Collection Practices Act (FDCPA) allows a court to award a defendant its attorney’s fees and costs if it finds the action was brought “in bad faith and for the purpose of harassment.” The Eighth Circuit Court of Appeals recently affirmed a trial court’s decision denying attorney’s fees and costs because even though several of the plaintiff’s allegations proved to be false, there was evidentiary support for other FDCPA claims.


No FDCPA Standing if Person Neither Stands in Shoes of Debtor nor has “Analogous Authority”

Anarion Investments, LLC v. Carrington Mortgage Services,

U.S. District Court, M.D. Tenn. (April 4, 2016)

A third-party creditor of a debtor does not have standing to assert a claim for violation of the FDCPA where all of the alleged conduct was directed solely at the debtor. Here, the third-party creditor and FDCPA-plaintiff (Anarion Investments, LLC) was a tenant under a residential lease agreement which provided Anarion Investments with a right to purchase the property during the lease term. The property was subject to a mortgage made by Kirk Leipzig. The mortgage was foreclosed. Anarion claimed the foreclosure did not properly notice interested parties, like itself, and this failure (as well as others) violated the FDCPA.

Last summer the Sixth Circuit Court of Appeals, in a decision involving this case, held that “the term ‘person’ as used in the FDCPA includes both artificial entities and natural persons alike.” The Sixth Circuit’s decision is available here.

However, the court in the Anarion decision concluded while persons who receive threatening or harassing communications who are not debtors have standing; persons, like Anarion, neither stand in the debtor’s shoes nor have “analogous authority to ‘read his mail’” because it could not, under law, stand in the shoes of the debtor and the complained conduct was not directed at it.


Arizona Court of Appeals Holds Debt Buyer’s Incorporation of Seller-Creditor’s Records Satisfies Hearsay Business Record Exception
Portfolio Recovery Associates, LLC v. Robertson, Court of Appeals of Arizona, Division One, No. 1 CA-cv 15-0066 (March 24, 2016)
Plaintiff Portfolio purchased from Citibank, N.A. a defaulted credit account owed by Defendant Robertson. In support of its motion for judgment on the account, Portfolio attached Citibank’s records concerning Defendant’s accounts to affidavits made by its “custodian of records” and “authorized agent.” Defendant objected on the basis that Portfolio’s affiants lacked “personal knowledge” regarding the creation and reliability of Citibank’s records. The appeals court disagreed. A company whose business is the purchase of defaulted receivables can lay a proper foundation for the admission of records created by the seller-creditor if it “regularly relies on the information . . .  as part of [its] ordinary course of business.” But it must also demonstrate “other strong indicia of reliability” to permit admission of incorporated records.


Mere Purchasing of Defaulted Debt does not Make One a Debt Collector Says 4th Circuit
Ricky Henson v. Santander Consumer USA, Inc., Fourth Cir. Court of Appeals, No. 15-1187 (Mar. 23, 2016)
The U.S. Court of Appeals for the Fourth Circuit recently affirmed a district court’s dismissal of a Fair Debt Collection Practices Act (FDCPA) complaint finding that the mere purchase of defaulted debt, which an entity then undertakes to collect for itself, does not make the entity a debt collector within the meaning of the Act. The defendant here was not a debt purchasing company, but a consumer finance company that originates credit and, in addition, sometimes purchases portfolios which included defaulted debt. The Court held that the debt purchaser did not meet the FDCPA definition of “debt collector” because the plaintiffs had not (and could not) show that the debt purchaser “regularly” collected debts “owed to another” or that it was “doing so here.”


2nd Circuit Joins Sister Circuits in Requiring Notice of Accruing Interest When Stating the “Amount Due”
Avila v. Riexinger & Associates, LLC, Second Cir. Court of Appeals, No. 15‐1597 (Mar. 22, 2016)
The U.S. Court of Appeals for the Second Circuit recently vacated the dismissal of federal Fair Debt Collection Practices Act (FDCPA) allegations that a debt collector’s notice stating the “current balance” of the debt without disclosing that the balance may increase over time due to interest and fees was “misleading” within the meaning of Section 1692e. As you may recall, 15 U.S.C. § 1692e provides that “[a] debt collector may not use any false, deceptive, or misleading representation or means in the collection of any debt.”   The Court rejected the district court’s ruling that because section 1692g requires disclosure only of “the amount of the debt”, the failure to disclose that interest would continue to accrue could not violate section 1692e. Rather, the Court held that a debt collector will not violate § 1692e if either: (1) the collection notice states that the amount of debt will increase over time, or (2) clearly states that the debt collector will accept the amount stated in the notice in full satisfaction of the debt if payment is made by a specific date.


11th Cir. Upholds Sanctions in FDCPA Lawsuit Only Against Plaintiff’s Counsel
Jocelyn Y. Diaz v. The First Marblehead Corporation,Eleventh Cir. Court of Appeals, No. 14-15797 (Feb. 25, 2016)
The U.S. Court of Appeals for the Eleventh Circuit recently affirmed a district court’s order requiring borrower’s counsel to pay a servicer’s attorney’s fees under Federal Rule of Civil Procedure 11, but reversed that part of the order that imposed sanctions jointly against both borrower and her attorney under the fee-shifting provision of the federal Fair Debt Collection Practices Act, holding only the attorney was liable.


SCOTUS Holds Unaccepted Offer of Judgment Does Not Moot Class Actions
Campbell-Ewald Co. v. Gomez, No. 14-857 (Sup. Ct. Jan. 20, 2016)
The Supreme Court of the United States held that a class action defendant cannot “pick off” the named plaintiff and thereby render the case moot by simply offering full relief by way of settlement offer or offer of judgment under Federal Rule of Civil Procedure 68. However, as the majority acknowledges, the Court also left open the question of what happens when a defendant actually tenders full relief to the named plaintiff, thus potentially leaving class action defendants an alternative weapon to cost-effectively defeat class claims.


Arizona Fed. Court Holds No FDCPA Violation for Collecting on Ex-Spouse’s Discharged Debt
Parker v. First Step Group of Minnesota LLC, No. CV-15-01217-PHX-GMS (D. Az., Jan 16, 2016)
The U.S. District Court for the District of Arizona recently held that a debt collector did not violate the federal Fair Debt Collection Practices Act (FDCPA) by attempting to collect on a debt because a debtor’s spouse’s bankruptcy proceedings did not discharge the debt to the extent that the debtor himself may be liable for it. The general rule is that, when one spouse files for bankruptcy, the other spouse is not discharged of liability.


4th Cir. Revives Homeowner’s ‘Unconscionable Inducement’ Claims Against Mortgage Lender
McFarland v. Wells Fargo Bank, N.A., No. 14-2126 (4th Cir. Jan. 15, 2016)
In a case that attracted a number of amici for both the borrower and the mortgagee, the U.S. Court of Appeals for the Fourth Circuit recently affirmed a trial court’s summary judgment ruling against a borrower holding that “the amount of a mortgage loan, by itself, cannot show substantive unconscionability under West Virginia law.” However, the Fourth Circuit allowed the borrower’s claim of “unconscionable inducement,” holding that the applicable West Virginia statute authorized such a claim “even when the substantive terms of a contract are not themselves unfair.”  The case was remanded to the district court with instructions to “consider in the first instance whether [borrower’s] mortgage agreement was induced by unconscionable conduct.”


A Dialer May be Subject to the TCPA Even if its Present Configuration Would Not Qualify as an ATDS

Cartrette v. Time Warner Cable, Inc.

U.S. District Court, E.D. N.C, No. 5:14-CV-143-FL (Jan 14, 2016)

The U.S. District Court for the Eastern District of North Carolina recently rejected the defendant’s (cable provider) arguments that its contract with the plaintiff (consumer) did not allow revocation of prior express consent under the federal Telephone Consumer Protection Act (TCPA), and that the defendant’s telephone communication system was not an “automatic telephone dialing system” under the TCPA because it dialed from a list of numbers.


Leaving Messages for Debtors with Third Parties Violates FDCPA Says New York Federal Court
Halberstam v. Global Credit and Collection Corp., No. 15-cv-5696 (BMC) (E.D. N.Y. Jan. 11, 2016)
A debt collector was found to violate the Fair Debt Collection Practices Act (FDCPA) when it telephoned its debtor but left a message with a third party who answered the call, requesting that the debtor return the call, without disclosing that he is a debt collector.


4th Cir. Holds No Violation of Maryland Usury Law Where Lender Properly Cured Interest Rate
Askew v. HRFC, LLC., No. 14-1384 (4th Cir. Jan. 11, 2016)
The U.S. Court of Appeals for the Fourth Circuit recently held that a finance company did not violate the Maryland usury interest law and was not liable under the Maryland Credit Grantor Closed End Credit Provisions (MCLEC) because it properly cured the violating contractual interest rate when it had actual knowledge of the violation.


2015


2nd Cir. Holds ID Theft Claim Under NY’s FCRA Not Preempted by Federal FCRA
Galper v. JP Morgan Chase Bank, N.A., 802 F.3d 437 (2d Cir. N.Y. 2015)
The U.S. Court of Appeals for the Second Circuit recently held that identity theft claims under New York’s Fair Credit Reporting Act based on a bank’s alleged vicarious liability for identity theft supposedly perpetrated by its employees are not preempted by the federal Fair Credit Reporting Act (FCRA).


7th Cir. Holds Defendant’s Phone System Was Not ATDS Under TCPA
Wayne Norman v. AllianceOne Receivables Management, Inc., No. 15-1780, 2015 U.S. App. LEXIS 22307 (7th Cir. Dec. 22, 2015)
In a non-precedential ruling, the U.S. Court of Appeals for the Seventh Circuit recently affirmed a district court ruling finding that telephone calls placed to a consumer’s cellphone did not violate the federal Telephone Consumer Protection Act (TCPA) because the calls were placed manually, and not using an automatic telephone dialing system (ATDS).


Missouri Federal Court Says ‘Benign’ Language on Envelope Does Not Violate FDCPA
McShann v. Northland Group, Inc., No. 15-00314-CV-W-GAF, 2015 U.S. Dist. LEXIS 165293 (W.D. Mo. Dec. 1, 2015)
The United States District Court for the Western District of Missouri recently granted a debt collector’s motion for judgment on the pleadings, holding an internal account number displayed on the envelope of a demand letter did not violate the Fair Debt Collection Practices Act (FDCPA) because it did not reveal the plaintiff was a debtor.


7th Circuit: No FDCPA Bona Fide Error for Intentional Conduct
Leeb v. Nationwide Credit Corporation, Seventh Cir. Court of Appeals, No. 14-1329 (November 20, 2015)
Debt collectors seeking to avoid liability under the bona fide error exception of the federal Fair Debt Collection Practices Act (FDCPA) will not be excused from liability if the conduct at issue was intentionally undertaken.


 

Timely Proof of Claim Required to Participate in Ch. 13 Bankruptcy Case, Even When Debtor Schedules Debt
Barker v. Spokane Law Enforcement F.C.U., United States Court of Appeals, Ninth Circuit, No. 14-60028 (October 27, 2016)

Even though a debtor’s Chapter 13 petition scheduled three debts owing to the defendant-creditor, the defendant-creditor was not excused from the “rigid” rule requiring it to timely filing its proofs of claim to allow it to participate in a Chapter 13 plan. Although the defendant-creditor ultimately did file proofs of claim, they were late, so the bankruptcy court did not err when it disallowed the claims.


3rd Cir. TCPA Ruling Restricts ATDS but Gives Nod to “Potential Capacity”
Dominguez v. Yahoo, Inc., Third Cir. Court of Appeals, No. 14-1751 (October 23, 2015)

In an Oct. 23 ruling, the Third Circuit Court of Appeals offered a mixed opinion that has the effect of both limiting and expanding the interpretation of automatic telephone dialing systems (ATDS), which can trigger a claim under the Telephone Consumer Protection Act (TCPA). While the ruling poses increased risk for businesses that use dialers, it also offers guidance on what can be done to reduce that risk.

ATDS Definition Limited
The TCPA defines an ATDS as “equipment that has the capacity . . . to store or produce telephone numbers to be called, using a random or sequential number generator; and . . . to dial such numbers.” The Third Circuit looked to the recent 2015 FCC TCPA Declaratory Rulings, finding they “hold that an autodialer must be able to store or produce numbers that themselves are randomly or sequentially generated ‘even if [the autodialer is] not presently used for that purpose.’ ” That means “the phrase [random or sequential number generator] refers to the numbers themselves rather than the manner in which they are dialed.” The FCC did not “read out” the requirement that an ATDS have capacity to be a “random or sequential number generator,” according to the opinion.

“Potential Capacity” Can Make an ATDS
Even if your equipment does not have the present capacity to store or produce numbers that are randomly or sequentially generated and dial them, if it has the “potential capacity” to do so, it can still be an ATDS. The evidence that Yahoo offered was that its text messaging system “did not have the capacity to store or produce numbers to be called, using a random or sequential number generator, and to call those numbers.” The court rejected the opinion as “conclusory,” and “begs the question of what is meant by the word ‘capacity.’ ” It remanded the case to the trial court to determine if Yahoo’s equipment had the capacity to store or produce numbers that are randomly or sequentially generated and dial them.


Offer of Judgment Moots TCPA Claim Rules 2nd Circuit  
Bank v. Alliance Health Networks, LLC, United States Court of Appeals, Second Circuit, No. 15-cv-4037 (Oct. 20, 2016)

Todd Bank (a repeat, pro se, litigant), filed suit alleging the defendant violated the federal Telephone Consumer Protection Act. Bank also requested class certification. Using Rule 68 of the Federal Rules of Civil Procedure, the defendant offered to allow Bank to take judgment against it for $5,004 for two unsolicited telephone calls. When Bank did not accept the offer, the defendant moved to dismiss the case. The trial court ordered the clerk to enter judgment for Bank for $5,004 and dismissed the case, finding the offer provided Bank with all the relief he could be entitled to under his lawsuit. The Second Circuit affirmed the dismissal.


3rd Cir. Holds TCPA ‘Called Party’ Includes Regular User and Roommate of Subscriber
Leyse v. Bank of America, Third Cir. Court of Appeals, No. 14-4073 (October 14, 2015)

The U.S. Court of Appeals for the Third Circuit recently held that a person has standing under the federal Telephone Consumer Protection Act, if they are a regular user of a phone line and occupant of the residence of the telephone line subscriber. In so ruling, the Court held that a caller may invoke the consent of the “called party” as a defense even if the plaintiff is someone other than the “called party.”

The Third Circuit noted that, although Congress did not expressly limit standing to the “called party,” its primary concern in enacting § 227(b)(1)(B) was to protect that party from unwanted robocalls, thus placing a “called party” within the protections of the TCPA. The Court held that the roommate would fall into the “called party” definition, as a regular user of the phone line who occupies a residence with the subscriber of the number being called, and has an interest in privacy, peace and quiet that Congress intended to protect.

The Third Circuit rejected the trial court’s reasoning that a bank who has the consent of the subscriber would face liability whenever any person answers the phone, noting that the caller could still raise consent as a defense to such a TCPA action. In the Court’s words, “[t]he caller may invoke the consent of the ‘called party’ as a defense even if the plaintiff is someone other than the ‘called party.’ ”


FDCPA Is Not Enforcement Mechanism for Matters Governed by Other Federal or State Laws
Bentrud v. Bowman,
794 F.3d 871 (7th Cir. 2015)

A recent decision from the Seventh Circuit Court of Appeals may make it more difficult for consumers to allege violations arising from state court collection actions. In response to a state court collection action, the plaintiff -debtor invoked arbitration under the terms of his credit card agreement. The state court stayed the case and allowed the plaintiff-debtor 30 days to commence arbitration. The plaintiff-debtor did not commence arbitration within the time provided and the collection law firm moved for summary judgment.

The Seventh Circuit disagreed that filing a motion for summary judgment after the debtor had elected arbitration violated § 1692f of the FDCPA, reasoning the “FDCPA is not an enforcement mechanism for matters governed elsewhere by state and federal law.” The Court pointed out that the debtor “seeks to transform the FDCPA into an enforcement mechanism for the arbitration provision in his credit card agreement,” and that it had previously rejected such an approach in its decision in Beler v. Blatt, Hasenmiller, Leibsker & Moore, LLC, 480 F.3d 470 (7th Circuit 2007).


Massachusetts Federal Court Imposes FCRA Preemption on State Law Claims
Lance v. PNC Bank, U.S. District Court, Mass. Civil Action No. 15-10250-FDS (Sept. 15, 2015)

A Massachusetts federal court recently held that the FCRA preempts Massachusetts state law claims for violations of the Massachusetts Credit Reporting Act, and the Massachusetts Consumer Protection Act.

PNC, which had reported derogatory information concerning debtor’s mortgage loan (discharged in a Chapter 7 case), argued that Lance’s claims were preempted by the FCRA, which provides that “[n]o requirement or prohibition may be imposed under the laws of any State …relating to the responsibilities of persons who furnish information to consumer reporting agencies….”

The Court noted that Lance’s Massachusetts Credit Reporting Act claim would appear to fall within the FCRA’s preemptive language because FCRA explicitly preempts any requirement imposed by state law that clearly relates to the responsibilities of a furnisher of credit information. However, the FCRA expressly exempts only section 54A(a) of the state law from its preemptive reach and includes no such exemption for section 54A(g), which creates a private cause of action for Lance to assert the state law violation. In the Court’s view, the absence of express language exempting § 54A(g) from the FCRA’s preemption provision was fatal to Lance’s Massachusetts Credit Reporting Act claim. PNC also successfully argued that Lance’s claim under the Massachusetts Consumer Protection Act, was preempted because it was based on its reporting of Lance’s credit information.


Excessive Fees State FDCPA Claim
Eric S. Moore JR et al v. Law Offices of Shapiro, Brown & Alt LLP et al
US District Court, E.D. Virginia, Richmond Division, August 13, 2015

Class action complaint against the Law Offices of Shapiro, Brown & Alt, LLP (“SBA”) and Professional Foreclosure Corporation of Virginia (“PFC”) (Defendants), alleging that Defendants violated both common law duties and various Fair Debt Collection Practices Act (FDCPA) provisions when foreclosing on Plaintiffs’ homes. Specifically, Plaintiffs allege Defendants violated the FDCPA by charging excessive title examination fees related to foreclosures.

The Court ruled the Plaintiffs plausibly set forth a violation for the FDCPA for charging excessive title examination fees because by charging fees in excess of actual charges the Defendants used deceptive and unfair means to collect debts.


Unaccepted Offer of Judgment Does Not Moot Individual or Putative Class Claims
Hooks v. Landmark, U.S. Court of Appeals for the Fifth Circuit, August 12, 2015

The U.S. Court of Appeals for the Fifth Circuit recently held that an unaccepted offer of judgment does not moot a lead plaintiff’s claim in a putative class action. In so ruling, the Fifth Circuit reversed the district court’s ruling that, because a motion for class certification was not filed before the offer, the putative class action was also mooted.

The plaintiff withdrew money from his checking account at an automated teller machine (ATM) and subsequently sued the ATM owner, seeking statutory damages under the Electronic Funds Transfer Act (EFTA), 15 U.S.C. § 1693 et seq., because he was charged $2.95 for the withdrawal, but there was no notice posted on or at the ATM informing customers about the fee.

The defendant made an offer of judgment under Fed. R. Civ. Pro. 68 for $1,000, the maximum recoverable statutory damages for the plaintiff’s individual claim, plus “costs accrued and reasonable and necessary attorney fees, through the date of acceptance of the offer … to be determined by the court if agreement cannot be reached.”

The plaintiff did not accept the offer and subsequently filed a motion for class certification which the district court adopted. The defendant filed a motion to dismiss, arguing that plaintiff’s individual claim and the class action were mooted by the unaccepted offer.

The Fifth Circuit held that the individual offer, which did not include attorney’s fees after the offer was made, did not moot the individual claim.


Business Entities as “Persons” Protected by the FDCPA
Anarion Investments LLC v. Carrington Mort. Servs. LLC , Sixth Circuit Court of Appeals, July 23, 2015
The FDCPA affords certain protections only to “consumers.” Not all persons who receive debt collection communications are “consumers,” rather, the consumers must be the target of the effort to collect a “debt” or an alleged debt. The Act defines consumers as “any natural person obligated or allegedly obligated to pay any debt.” 15 U.S.C. § 1692a(3).

But the FDCPA also provides certain protections to a broader category of “persons,” even if they are not consumers. Section 1692g provides only “consumers” with these rights, as opposed to other sections of the FDCPA that afford protections to “any person.” Many of the provisions of §§ 1692d, e and f are applicable to communications with “any person.”

Although § 1692a(3) defines consumers as “natural persons,” the Act does not provide a definition for “any person.” In this decision from the Sixth Circuit Court of Appeals, the court found that because the FDCPA does not likewise limit “any person” to natural persons, an “artificial entity” such as a partnership, can qualify as “any person” and receive FDCPA protections.


Representations Must be Material to be Actionable Under the FDCPA
Jensen v. Pressler & Pressler, et al., Third Circuit Court of Appeals, June 30, 2015
A false statement in a communication from a debt collector must be “material” to be actionable under the FDCPA.  In so ruling, the Court found that materiality was a part of the “least sophisticated debtor” analysis. A copy of the opinion is available here.

In that case, a debt collector had purchased credit-card debt from the original lender.  That debt collector then hired a law firm to help collect the debt. After obtaining judgment, the law firm issued a subpoena to the debtor, requesting her written responses in aid of execution. The subpoena form required the name of the court clerk to be listed, but the law firm listed an incorrect name. The debtor sued for violation of the FDCPA claiming the incorrect name was “fraudulent.” The trial court dismissed the lawsuit and the debtor appealed.

The Third Circuit recognized that using the incorrect name on the subpoena was technically “false.”  Noting that other circuit courts have required a false statement to be material to be actionable under the FDCPA, it reasoned that materiality was a “corollary” of the “least sophisticated debtor” standard by which communications are judged. That is, the question is not whether the borrower was misled, but whether the “least sophisticated debtor” would be.  The Court observed that appellate courts “almost universally employ[]” this standard, even though it is not in the text of the FDCPA.

In affirming the trial court’s dismissal, the Third Circuit held that it was “obvious” that including the incorrect name was not material.  The Court found there was no way this would affect the least sophisticated debtor’s decision-making.


Attorney Litigation Conduct
Miljkovic v. Shafritz & Dinkin, P.A., et al.,
Eleventh Circuit Court of Appeals, June 30, 2015
Statements made by a creditor’s counsel in a pleading are actionable under the Fair Debt Collection Practices Act (FDCPA), subject to the limited exemption allowed for disclosures required by § 1692e(11). The Eleventh Circuit concluded that the “FDCPA’s statutory text does not provide nor does it imply immunity for debt collection practices otherwise forbidden by the Act simply because those debt collection practices are directed at a consumer’s attorney or any other non-consumer.”

The decision adversely impacts debt buying companies because several decisions have interpreted the FDCPA to permit a party that hires an agent to be liable under the FDCPA for the agent’s acts if both the principal and the agent are “debt collectors” within the meaning of the FDCPA. This recent decision expands the scope of FDCPA liability for statements made in pleadings by ignoring the exemption provided under § 1692g(d) to a “formal pleading,” and the “implied exceptions” doctrine, which the Supreme Court formulated in Heintz v. Jenkin, 514 U.S. 291, 294, 115 S. Ct. 1489 (1995).


Cease and Desist Letter – Credit Report Pulls and Adverse Action Notices
Scheffler v. Messerli & Kramer, P.A.,
Eighth Circuit Court of Appeals, June 29, 2015
A debt collector does not violate the FDCPA or the Fair Credit Reporting Act when it “pulls” a credit report for collection purposes and is not required to notify the debtor of the “pull” beforehand. Further, a “cease and desist” letter made under § 1692c(c) of the FDCPA is not violated by a debt collector’s subsequent pull of the consumer’s credit report.

Although the Eighth Circuit found there was no evidence the debtor made a cease and desist request, even if one were made a debt collector may communicate with the debtor “to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor,” under 15 U.S.C. § 1692c(c)(2).

Second, the Eighth Circuit held that the debt collector could request the debtor’s credit report for use “in connection with a credit transaction involving the consumer on whom the information is to be furnishing and involving…review or collection of an account of, the consumer” pursuant to 15 U.S.C. § 1681b(a)(3)(A), and that the debt collector did not need to notify the debtor before reviewing such information.


On June 30, 2015, the U.S. Court of Appeals for the Third Circuit issued an opinion in Jenson v. Pressler & Pressler and Midland Funding, LLC that follows the Fourth, Sixth, Seventh and Ninth Courts of Appeals in adopting the materiality requirement as a prerequisite for establishing liability under the portions of the statute concerning “false, deceptive, or misleading representations.” The court opined that any misstatement must be material to be a violation of section 1692(e) and that incorrectly stating the name of the Clerk of Court for the Superior Court in a subpoena was not a material misstatement.


No Violation for Not Providing Tax Consequences of Debt Settlement
Altman v J.C. Christensen & Associates, Inc.
, Second Circuit Court of Appeals, May 24, 2015
A debt collector did not violate the FDCPA by not disclosing to a debtor the potential tax consequences arising from settlement of a debt. The debt collector’s letter offered two options to settle the debt at a discount and third option allowing the debt to be paid in full over time. The debtor alleged that by making the discount offers without disclosing to him the potential tax consequences, the letter was a false, deceptive or misleading representation or means to collect a debt. In affirming the trial court’s judgment dismissing the claim, the appellate court noted that the letter only stated the amount the debtor would save on the unpaid account balance and that undisclosed, potential tax consequences are not within the context of an “outstanding account balance.”


Collecting Interest – Usury
Madden v. Midland Funding, LLC, et al
, Second Circuit Court of Appeals, May 22, 2015
The National Bank Act (NBA) permits credit card accounts originated by national banks to charge interest rates that exceed state usury rates. A recent opinion from the Second Court of Appeals held that when the same account is purchased by a debt buying company, it loses the NBA exemption and the account becomes subject to state usury law. Because, under this ruling, the debt buying company’s attempt to collect the original rate of interest violated New York’s usury law, the decision permits Madden to proceed with his claim that the practice violates the Fair Debt Collection Practices Act (FDCPA) and to seek class certification.

The decision poses significant risk to debt buying companies that continue to charge, post-purchase, the same rate of interest charged by originating national banks. Debt buying companies who collect debt within the Second Circuit (New York, Connecticut, Vermont and Puerto Rico) should evaluate their policies concerning collection of interest and make appropriate adjustments. The decision remains limited to the Second Circuit and is in conflict with two decisions from the Eighth Circuit Court of Appeals and trial courts throughout the country.


2013

On January 21, 2013, the U.S. Court of Appeals for the Sixth Circuit handed down an opinion that defined mortgage foreclosure actions as “debt collection” under the Fair Debt Collection Practices Act (FDCPA), reversing a lower court decision. In Glazer v. Chase Home Finance, LLC, et. al., the appellate panel said that third parties initiating foreclosure actions must comply with the provisions of the FDCPA. The case will now go back to the lower court for further consideration.


2012

On November 14, 2012, The Fourth Circuit Court of Appeals held that a debt collector did not violate the federal Fair Debt Collection Practices Act (FDCPA) when it made multiple calls to a third party in an effort to locate a debtor. In Worsham v. Accounts Receivable Management, a debt collector, who was unable to locate a debtor, instead placed 10 telephone calls to the debtor’s brother-in-law, Worsham. Worsham sued the debt collector alleging it violated section 1692b of the FDCPA. Section 1692b(3) permits a debt collector to obtain “location information” from a third party.

The process of obtaining location information is an important tool to debt collectors. The court recognized that “third parties may understandably find debt-collection calls bothersome or inconvenient,” but multiple calls placed to obtain “location information” are permitted by the FDCPA in certain instances. This ruling is binding only within the Fourth Circuit.


On May 2, 2012, a federal district court in Minnesota ruled that a voicemail left by a debt collector that was heard by the debtor’s children was not a communication as defined by the Fair Debt Collection Practices Act (FDCPA), because the information contained in the message was minimal. The court concluded that the collection agency’s name, the fact that the call was from a debt collector, and a phone number at which the collector could be contacted were all types of information that could be determined by performing a simple web search using the phone number shown on the telephone’s call log. The court reasoned that, “short of requiring debt collectors to block their numbers—it is virtually impossible to use a telephone without revealing directly or indirectly that a debt collector is calling.”
(Zortman v. J.C. Christensen & Associates, D. Minn., No. 10-cv-3086, 5/2/2012)


On October 12, 2012, a federal appeals court in California ruled that debt buyer Portfolio Recovery Associates must stop using an automatic dialing system to call cell phones without prior consent. The 9th Circuit Court in Pasadena, CA supported a preliminary injunction barring Portfolio Recovery from using its “Avaya Proactive Contact Dialer” to dial cell phone numbers that the company obtained through skiptracing. (Meyer v. Portfolio Recovery Associates)

The three-judge panel also approved provisional class certification in an action alleging Portfolio Recovery used the dialer in violation of the Telephone Consumer Protection Act (TCPA). Last year, in San Diego, U.S. District Judge Anthony Battaglia granted an injunction and certification after finding a likelihood of success for lead plaintiff Jesse Meyer. The panel agreed late last week, pointing out that the company had admitted in securities filings that it used “predictive dialers”, which is “sufficient to determine that Portfolio Recovery used an automatic telephone dialing system.”


On January 18, 2012, the United States Supreme Court ruled that cases brought for alleged violations of the Telephone Consumer Protection Practices Act (TCPA) may be filed in Federal Court as a claim asserting original question jurisdiction. In the case of Mims v. Arrow Financial Services, LLC, Case No. 10-1195, the Supreme Court, in a decision drafted by Justice Ginsburg, held that suits brought under the TCPA may be filed in Federal Court giving Federal Courts original jurisdiction and held that State Courts are not the only Courts with jurisdiction over TCPA claims. Previously, Courts had been split on whether TCPA claims were only to be filed in State Court.

Download the decision


2011

On October 27, 2011, DBA (presently known as RMA) filed an Amicus Curiae brief with the U.S. Supreme Court in the case of Mims v. Arrow Financial Services, LLP. DBA urged the Court to clarify that private TCPA actions can be brought in state courts only. Congress directed private TCPA actions to state courts to provide an easy and affordable path to recovery. Allowing claims to be filed in federal courts would turn U.S. District Courts into small claims courts and needlessly increase the costs of all involved.

Click here for additional information about Amicus briefs filed by RMA.

 

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