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District Court grants motion to approve settlement under federal and CA FDCPA
On November 16, the U.S. District Court of the Northern District of California granted the parties’ motion for preliminary approval of a proposed class action settlement and provisional class certification. The plaintiffs sued under both the federal FDCPA and California’s Rosenthal Fair Debt Collection Practices Act. The class action comprises a lead plaintiff as well as approximately 300 individuals.
The plaintiffs alleged that the defendant, a debt collector, left numerous voicemails and text messages between June and October 2021 that failed to disclose the defendant’s identity, and nature of business, and that the communication was an attempt to collect a debt. The plaintiffs also alleged that the communications instilled a “false sense of urgency… by falsely representing or implying that a civil lawsuit would be filed… to collect a defaulted consumer debt” when none was actually filed.
During mediation, the parties agreed to settle the case. Under the terms of the proposed settlement approved by the court, the defendant will pay $51,975 to the plaintiffs, and up to $123,000 in attorney’s fees and costs. The plaintiffs will each receive no less than $175, while the leading plaintiff will receive $2,000.
District Court grants defendant’s motion to dismiss in a class action under FDCPA.
On November 27, the U.S. District Court for the District of New Jersey granted a defendant’s motion to dismiss a class action case brought under the FDCPA. The court agreed with the defendant that the plaintiffs did not suffer “concrete injury” and therefore did not have standing to sue.
The plaintiffs received debt collection letters from the defendant stating that the defendant might “take additional collection efforts” including sending “a negative credit report” if there was no response within seven days. The plaintiffs alleged the letters were “deceptive” because they violated the defendant’s own policy of credit reporting at 60 days and not seven days. The defendant moved to dismiss, arguing the plaintiffs suffered no “concrete injury” and therefore did not have standing to bring this case.
Because the plaintiffs did not incur any concrete harm—they did not allege any out-of-pocket expenses or public embarrassment as a result of the collection letters—the plaintiffs instead advanced a “novel” standing argument. Turning to the Supreme Court’s decision, the plaintiffs argued that violation of a traditional tort that Congress had elevated by statute can provide sufficient “concrete harm.” Under this theory, the plaintiffs argued that the collection letter violated the “anchor tort” of unreasonable debt collection when Congress had elevated to a statutory basis when enacting the FDCPA.
The court disagreed. In its opinion, the court noted that the plaintiffs had only provided two relevant cases indicating the existence of the unreasonable debt collection tort, both of which were from Texas, the oldest of which was nearly 70 years old. The court held that “a tort that exists in only one jurisdiction is not prevalent enough to be traditional,” and there was no precedent to determine whether a 70-year-old tort was old enough to be “traditional.” Accordingly, the court ruled in favor of the defendant and granted a motion to dismiss.
Massachusetts AG settles with household goods rental company for unfair debt collection practices
On November 28, the State AG of Massachusetts filed an assurance of discontinuance with a household goods rental company for unfair and deceptive debt collection practices. The company offers household goods under a rent-to-own payment contract as part of its business model. According to the assurance, customers would rent a good and then pay it off over several months to several years to obtain ownership; however, the assurance of discontinuance alleges that, for customers who failed to make payment or never returned the item, the company resorted to aggressive tactics: sending employees out to collect payments by making house visits, “pounding on doors, turning doorknobs to see if they were unlocked, and demanding to be let in.”
In addition to these collection tactics, the assurance of discontinuance states that the company would file criminal complaints. The AG of Massachusetts finds this to be an improper use of “the criminal process, [such as] the threat of arrest or prosecution, as a [d]ebt collection tool.” Additionally, if a customer failed to make timely payments or return the rented property, the company would file a criminal complaint alleging their customers were committing larceny. In the assurance, the company agrees to pay $8.75 million, and the company must cease filing criminal complaints against customers.
FTC publishes letter to CFPB on its law enforcement and public outreach
On November 16, the FTC released its letter of its annual summary of activities in 2022 to the CFPB. The CFPB used the findings in its annual report to Congress on the Fair Debt Collection Practices Act (FDCPA). In the letter, the FTC outlined several of its important procedural law enforcement activities, such as debt collection issues affecting small businesses, redressing consumers harmed by debt collection schemes, halting collection in consumer debt, and combating unauthorized charges to consumers. The second part of the letter outlines how the FTC enables public outreach and cross-agency coordination. For public outreach, the FTC proactively educates consumers about their rights under the FDCPA, and how debt collectors can comply with the law. The FTC also noted that it publishes material in both English and Spanish to broaden its outreach. In addition, the FTC added that it distributes print publications to libraries and businesses and logs more than 50 million views on its website pages. In its efforts to raise awareness about scams targeting the Latino community, the FTC highlighted its series of fotonovelas (graphic novels) in Spanish.
Minnesota amends health care provision in extensive new law
On November 9, the State of Minnesota enacted Chapter 70--S.F.No. 2995, a large bill to amend certain sections of its current health care provisions. The bill covers extensive changes to healthcare provisions, from prescription contraceptives, hearing aids, mental health, long COVID, and childcare, among many others.
One of the significant new laws requires a hospital to first check if a patient’s bill is eligible for charity care before sending it off to a third-party collection agency. Further, the bill places new requirements on hospitals collecting on a medical debt before it can “garnish wages or bank accounts” of an individual. The Minnesota law also outlines how a hospital wishing to use a third-party collection agency, must first complete an affidavit attesting that it has checked if the patient is eligible for charity care, confirmed proper billing, given the patient the opportunity to apply for charity care, and, under certain circumstances, if the patient is unable to pay in one lump sum, offered a reasonable payment plan instead.
Healthcare providers reach $3.5 million settlement in FDCPA suit after eight years of litigation
On November 2, two healthcare providers settled with plaintiffs after eight years of litigation between the district court and the U.S. Court of Appeals for the 6th Circuit, stemming from alleged violations of the FDCPA, breach of contract, and violations of the Ohio Consumer Sales Practices Act, among other things. According to the order, the defendants allegedly contacted plaintiffs and their legal counsel, requesting that their legal counsel sign a letter to forego any legal settlement or judgment against the defendants to prevent plaintiffs’ accounts from being sent to collections, despite having plaintiffs’ health insurance information. While the defendants deny any fault, wrongdoing, or liability in connection with the claims, the parties agreed to a settlement amount of $3.5 million, with each claimant receiving a cash payment of $25. The class is comprised of 12,000 individuals with health insurance plans accepted by the healthcare provider who were patients at an Ohio facility from 2009 to 2023, and subsequently made payments or were asked to make payments for their treatment, excluding co-pays or deductibles. Additionally, certain class members will also receive a cash payment equal to fifty percent of the amount paid to the healthcare provider.
2nd Circuit: Reverse and remand a buy-now-pay-later suit
On November 3, the U.S. Court of Appeals for the Second Circuit reversed and remanded a district court’s decision to deny a buy now pay later servicer’s (defendant) motion to compel arbitration in a class action. The plaintiffs alleged the defendant violated the Connecticut Unfair Trade Practices Act, among other things, after the defendant’s charges incurred overdraft fees on the plaintiff’s checking account. The defendant argued that the consumer agreed, on multiple occasions, to the mandatory arbitration provisions in the servicer’s terms and conditions when she used its services. The district court concluded that the plaintiff did not have “reasonably conspicuous notice of and unambiguously manifest assent to [defendant’s] terms” and therefore plaintiff was not bound by the mandatory arbitration provisions in the defendant’s terms.
The 2nd Circuit panel of three judges identified “several factors” in its finding that the plaintiff had reasonably conspicuous notice, including that defendant’s interface was “uncluttered” adding that “[a] reasonable internet user, therefore, could not avoid noticing the hyperlink to [defendant’s] terms when the user selects ‘confirm and continue’ on the [application].” Further, the court found that the plaintiff “unambiguously manifested her assent” to the defendant’s terms and conditions.
Ohio AG files FDCPA suit against debt collectors
On October 31, Ohio State AG Dave Yost filed a complaint against debt collectors for violations of the FDCPA and Ohio Consumer Sales Practices Act. The complaint alleged that the defendants frequently changed the names they used to engage in collection activities and purposefully used names to sound like law firms to mislead consumers. The AG’s complaint also included allegations that the debt collectors failed to honor written requests to verify debts, threatened legal action, engaged in harassing or abusive behavior, and made false, misleading, and deceptive representations.
Judge dismisses FDCPA suit for communication with CRAs
On October 26, a U.S. District Court for the Eastern District of New York granted a motion to dismiss an FDCPA suit holding that there is nothing in the FDCPA that prohibits debt collectors from reporting information about a debt to a credit reporting agency. The plaintiff filed a complaint in January 2023 alleging that the defendant violated the FDCPA by communicating with the plaintiff after the plaintiff requested that the debt collector stop all communications. The plaintiff further alleged that the defendant violated the FDCPA by reporting this debt to the major credit reporting agencies, which subsequently led to the plaintiff being denied credit. While the judge ruled that the plaintiff had standing to sue because of the denial of credit, the judge also ruled that the statute “expressly permits communications with ‘a consumer reporting agency if otherwise permitted by law,’” and that the plaintiff did not allege that negligence was the proximate cause of damages.
Credit reporting agency, collector granted MTD in FCRA and FDCPA case
On October 26, the U.S. District Court for the District of New Jersey dismissed without prejudice a FCRA and FDCPA lawsuit filed against a law firm and credit reporting agency. The plaintiff alleged that the defendants published inaccurate and incomplete information regarding a trade line for debt allegedly owed to a healthcare facility. The plaintiff claimed that the credit reporting agency refused to validate the debt. The judge held that the FDCPA did not apply to the credit reporting agency because it was not a debt collector, and that plaintiff did not provide any facts that the tradeline was inaccurate. The judge also found that plaintiff failed to state a claim under the FDCPA against the law firm because “merely furnish[ing] a trade line to a credit reporting agency does not violate any provision of the FDCPA.” The plaintiff is allowed to move for leave to file an amended complaint within thirty (30) days if a stronger factual basis for the claims is provided.