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NY AG warns debt collectors of new state regulations
On March 29, the New York attorney general announced that letters were sent to large credit card companies and major debt collectors operating in New York, providing a warning regarding new state debt collection regulations. As previously covered by InfoBytes, the New York governor signed S.153 in November 2021, which enacted The Consumer Credit Fairness Act and expanded consumer protections against abusive debt collection by, as explained by NYDFS acting Superintendent Adrienne A. Harris, “address[ing] known predatory debt collection practices, [and] barring an abusive common tactic engaged by predatory debt collectors which is to sue on time-barred consumer debts for which they lack even the most basic of documentation.” The letter noted that its recipients are “aware of these obligations and that [they] are taking appropriate steps to comply with the new requirements.” The letter stated that beginning April 7, the statute of limitations on consumer debt collection actions in the state will be decreased to three years, a period of time that cannot be extended by partial payments made after the statute of limitations has expired, and that “debt collectors must ensure that validation notices for debts that will become time-barred on April 7, 2022 include this disclosure if the notice is likely to be received after that date.” The letter also reminded debt collectors of new disclosures that will be required when filing collection lawsuits against consumers starting May 7. Complaints are required to include an itemization of the debt and include more information about the chain of ownership, including providing a copy of the original contract on which the debt is based. Collectors must also begin utilizing a “more comprehensive” notice that is provided to the clerk of the court and subsequently passed on to consumers and must use a new form when filing for summary judgments. Lastly, the letter requested information on how the companies are complying with Regulation F and the new disclosure requirements.
North Carolina appellate court affirms district court’s decision in debt collection case
On March 15, the Court of Appeals of North Carolina affirmed a district court’s grant of summary judgment in favor of a debt buyer plaintiff and rejected the debtor defendant’s argument that the plaintiff failed to comply with a provision of North Carolina’s Consumer Economic Protection Act (CEPA). According to the order, the defendant appealed the district court’s grant of summary judgment to the plaintiff in its 2019 suit to renew a default judgment that was entered in 2010 against the defendant. The defendant argued that the default judgment “is void because it was procured by fraud and the clerk lacked jurisdiction to enter the default judgment for various reasons,” and “that Plaintiff’s interest rates on Defendant’s debt violate North Carolina law.” The appellate court noted that the CEPA “did not apply” because the statute requires that, “[p]rior to entry of a default judgment or summary judgment against a debtor in a complaint initiated by a debt buyer, the plaintiff shall file evidence with the court to establish the amount and nature of the debt.” The appellate court noted that although the plaintiff filed its original complaint against the defendant in August 2009, this CEPA provision did not take effect until October 1, 2009, and therefore only applies to “foreclosures initiated, debt collection activities undertaken, and actions filed on or after that date.” The defendant argued that the plaintiff was still required to comply with the CEPA provision because the plaintiff filed its motion for a default judgment in February 2010—after the effective date of the CEPA provision. But the appellate court determined that the plaintiff’s motion for a default judgment “was part of prosecuting its ‘action filed’ and was not a ‘debt collection activity’ within the meaning of the Act.”
District Court denies defendant's motion in FCCPA case
On March 25, the U.S. District Court for the Middle District of Florida denied a TV provider’s (defendant) motion for summary judgment while partially granting and partially denying a motion for partial summary judgment from the plaintiff in a Florida Consumer Collection Practices Act (FCCPA) suit. According to the order, the plaintiff allegedly signed up for the defendant’s service, but “pause[d]” the program, which permitted her to suspend her service for nine months for $5 per month. The plaintiff filed for bankruptcy protection, listed the defendant as an unsecured creditor, and obtained a discharge. The plaintiff’s lawyer sent two faxes to the defendant, which disclosed to the defendant that the plaintiff was represented by counsel. The defendant sent five billing notifications and made six calls to the plaintiff, attempting to collect on the $5 monthly payment. A district court granted the defendant summary judgment on claims that it violated the FCCPA and the TCPA. The plaintiff appealed the decision, which affirmed the ruling on the TCPA claim, but reversed the FCCPA ruling, finding that the defendant may have attempted to collect a debt that was discharged and that it contacted the plaintiff after being notified that she was represented by an attorney. According to the order, the court stated that the “[p]laintiff has proffered enough evidence in the record from which a jury could reasonably infer that [the defendant] knew the Pause debt was invalid and that it did not have the right to collect it,” but “[o]n the other hand, considering the evidence in a light most favorable to [the defendant], a jury could reach the opposite conclusion, as [the defendant] has provided record evidence from which a jury could infer [the defendant] did not know that the Pause debt was invalid.”
District Court denies defendant’s MSJ in TCPA claim regarding plaintiff’s consent
On March 21, the U.S. District Court for the Northern District of Illinois denied a defendant’s motion for summary judgment regarding alleged TCPA violations and dismissed a plaintiff’s FDCPA claim against a debt collector. According to the memorandum, after the plaintiff was hospitalized, she was billed for the balance of her debt once insurance payments were credited to her account. The hospital called the plaintiff to collect the balance and later placed the account with the defendant, who then called the plaintiff eight times, leaving a pre-recorded message, and sent one text message. The plaintiff filed suit, claiming that the defendant violated the FDCPA by failing to send a validation notice and violated the TCPA because she revoked consent to be contacted when the hospital originally called her. As a “unique posture,” according to the district court, the plaintiff claimed to not have standing to pursue the FDCPA claim while the defendant insisted that she did. The plaintiff contended that while she felt “anxiety” when “having to relive the car accident,” “[t]hese are not damages that create injuries-in-fact for purposes of standing under the FDCPA.” The district court agreed and dismissed the FDCPA claim. As for the TCPA claim, the defendant argued both that the plaintiff could not revoke consent to be contacted because she signed a consent form at the hospital and that there was no evidence consent was revoked when she was contacted by the hospital. The plaintiff testified that she spoke with an agent of the hospital, disclosed to the agent that she was not responsible for the balance, and requested to be placed on the do-not-call list. Determining that a genuine issue of material fact existed regarding the plaintiff’s consent, the district court denied the defendant’s motion for summary judgment as to the TCPA claim
District Court denies motions in FDCPA and TCPA suit
On March 18, the U.S. District Court for the District of Nevada denied motions for judgment on the pleadings filed by both the plaintiff and defendant in a lawsuit alleging violations of the FDCPA and TCPA. According to the order, the defendant allegedly offered to settle an unpaid medical debt with the plaintiff; the plaintiff accepted the offer and paid the debt. After the settlement, the defendant allegedly called the plaintiff and left voicemails seeking to collect the same debt. The plaintiff filed suit, alleging that the calls violated the TCPA because she revoked consent to be contacted after she paid the debt. The plaintiff also alleged that the defendant violated the FDCPA by attempting to collect the debt after it had been settled. In denying the parties’ cross motions for judgment on the pleadings, district court observed that, although the plaintiff had previously consented to being contacted, it could not “determine as a matter of law whether merely settling the Debt was enough to revoke Plaintiff’s consent.” With respect to the FDCPA claim, the district court “would grant Plaintiff’s motion for judgment on the pleadings under the FDCPA, if it were not for Defendant’s affirmative defense ‘bona fide error,’” for which the debt collector has the burden of proof.
District Court: Failing to invoke the BFE defense does not entitle a plaintiff to judgment as a matter of law
On March 15, the U.S. District Court for the Eastern District of Washington denied a plaintiff’s motion for partial summary judgment, ruling that just because a defendant did not invoke the bona fide error (BFE) defense when accused of allegedly violating the FDCPA it does not mean the defendant has admitted to violating the statute. In 2018, the defendant debt collector attempted to collect unpaid debt in the amount of $786.68 from the plaintiff and began reporting the debt to the consumer reporting agencies (CRAs). In 2021, after the original creditor recalled the account from the defendant for an unspecified reason, the defendant submitted two requests to the CRAs to delete the item from the plaintiff’s credit report and took no further action on the account. Shortly thereafter, the plaintiff noticed a $787.00 debt on one of his credit reports. He contacted the original creditor and was told the company could not find an account in his name that was referred for collection. The plaintiff sued for violations of Section 1692e of the FDCPA and related violations of Washington state law, and later filed for a partial motion for summary judgment contending that the FDCPA “is a strict liability remedial statute that contains a single affirmative defense to liability—the bona fide error defense,” and that because the defendant did not plead the BFE defense “he is entitled to judgment as a matter of law as to Defendant’s liability under the statute.” While the defendant acknowledged that it did not plead the BFE defense, it countered that the plaintiff “cannot prove a prima facie case of liability.”
The court concluded that “[w]hile the statute is strict liability, ‘a debt collector’s false or misleading representation must be ‘material’ in order for it to be actionable under the FDCPA.” Noting that the alleged violation appeared to be based on the grounds that the defendant reported an inflated account balance ($787.00 versus $786.68), the court stated it “has little trouble in concluding that inflating an account balance by 32 cents is not a materially false representation. To the contrary, it is a ‘mere technical falsehood that mislead[s] no one.’” Moreover, the court stated that because the defendant immediately ceased reporting the account and sent deletion requests to the CRAs after the account was recalled, and that there was no evidence to suggest that the debt collector knew or should have known that it was communicating information that was false, the plaintiff could not show, at this stage of the proceeding, that Section 1692e was violated.
CFPB updates debt collection examination procedures to include Regulation F provisions
Recently, the CFPB updated its debt collection examination procedures to incorporate provisions of Regulation F (the FDCPA’s implementing regulation). As previously covered by InfoBytes, in October 2020, the Bureau issued its final rule (effective November 30, 2021) amending Regulation F to address debt collection communications and prohibitions on harassment or abuse, false or misleading representations, and unfair practices. Following the publication of the final rule, the Bureau also released debt collection compliance guidance and frequently asked questions that address validation information generally and validation information related to residential mortgage debt (covered by InfoBytes here). The Bureau noted that depending on the scope of an examination, “and in conjunction with the compliance management system and consumer complaint response review procedures,” an examination will cover at least one of the following modules: (i) entity business model; (ii) communications in connection with debt collection; (iii) information sharing, privacy, and interactions with consumer reporting agencies; (iv) validation notice, consumer FDCPA disputes and complaints, and ceasing communication; (v) payment processing and account maintenance; (vi) ECOA; and (vii) litigation practices, administrative wage garnishment and repossession, and time-barred debt.
District Court partially grants bank’s motion in TCPA case
On March 3, the U.S. District Court for the Western District of Kentucky partially granted and partially denied a defendant bank’s motion for summary judgment in a TCPA case. According to the opinion, the plaintiff allegedly did not meet his minimum monthly credit card payments, so the defendant began conducting debt collection calls. The defendant allegedly attempted 574 communications via phone call, prerecorded messages, or text messages, including 111 prerecorded messages, during a 7-month period.
The plaintiff filed suit, alleging the defendant violated the TCPA by contacting him using an automatic telephone dialing system (ATDS) before and after he allegedly revoked consent to be contacted. The district court held that the telephone system used by the defendant to contact the plaintiff did not qualify as an ATDS under the Supreme Court’s ruling in Facebook v. Duguid (Covered by a Buckley Special Alert here), which narrowed the definition of an ATDS under the TCPA. The court was “not persuaded by [the plaintiff’s] argument that [the telephone system] is an ATDS simply because it has the ‘capacity to store telephone numbers using a random or sequential number generator, and then to dial those numbers without human intervention.’”
The plaintiff also argued that the defendant violated the TCPA by sending the 111 prerecorded messages. The court determined that while the plaintiff had initially consented to being contacted by the defendant when he provided his telephone number to create his account, there was a genuine dispute of material fact as to whether the plaintiff subsequently revoked his consent. Even though the defendant submitted seven call recordings between itself and the plaintiff in support of its argument that the plaintiff did not specifically revoke consent, the court explained that “the evidence could lead reasonable minds to differ,” including the plaintiff’s deposition testimony, his request to have information sent to him via mail, his refusal to talk to a collector and hanging up the phone on a subsequent call, and his failure to answer the phone when the defendant called.
New York college to cancel $20 million in unpaid loans
On March 2, the New York City mayor announced an agreement with a for-profit college resolving allegations that it violated various provisions of New York consumer protection laws. According to the press release, the New York City Department of Consumer and Worker Protection filed the lawsuit against the defendant in 2018, claiming that it, among other things: (i) collected debts that were not owed; (ii) concealed its identity from former students when collecting debts; and (iii) falsely misrepresented when debts were accrued on official documents. Under the terms of the settlement agreement, the defendant is required to cease collecting outstanding student loans incurred prior to January 2019, which are estimated to be valued at approximately $20 million. The defendant must also pay $350,000 in restitution, establish polices related to communicating with students about debt owed to the college, and ensure that the statutes of limitation on debt collection are observed.
CFPB looks at removing medical debt from credit reports
On March 1, the CFPB announced plans to review whether data on unpaid medical bills should be included in consumer credit reports. The Bureau stated in its report, Medical Debt Burden in the United States, that research found $88 billion in medical debt on consumer credit reports, accounting for 58 percent of all uncollected debt tradelines reported to credit reporting agencies (CRAs). “Our credit reporting system is too often used as a tool to coerce and extort patients into paying medical bills they may not even owe,” CFPB Director Rohit Chopra said in a statement.
The Bureau noted that medical debt is often less transparent than other types of debt, due to opaque pricing, complicated insurance, charity care coverage, and pricing rules, reporting that in many instances, consumers may not even sign a billing agreement until after receiving treatment. Medical debts often end up in collections, the Bureau added, which can cause far-ranging repercussions even if the bill itself is inaccurate or erroneous. The report noted additional challenges for uninsured consumers, as well as for Black and Latino families, consumers with low incomes, veterans, older adults, and young adults of all races and ethnicities. The report further stated that the Covid-19 pandemic has exacerbated the situation, with costs and medical debt expected to increase post-pandemic, and found that medical debt weakens underwriting accuracy, as it is less predictive of future repayment than reporting on traditional credit obligations. The Bureau pointed out that it has seen dramatic effects when newer credit scoring models weigh medical collections tradelines less heavily, but noted that there has been very little adoption of this approach so far.
The Bureau stated it intends to examine CRAs to ensure they are collecting accurate information from medical debt collectors and expects CRAs to take action against furnishers who routinely report inaccurate information, including cutting off their access to the system. The Bureau also plans to work with the Department of Health and Human Services to make sure consumers are not forced to pay more than the amount due for medical debt. A January compliance bulletin reminded debt collectors and CRAs of their legal obligations under the FDCPA and the FCRA when collecting, furnishing information about, and reporting medical debts covered by the No Surprises Act. The Bureau also recently supported changes by the Department of Veterans Affairs to amend its regulations related to the conditions by which VA benefit debts or medical debts are reported to CRAs. (Covered by InfoBytes here and here.)