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  • Colorado Court of Appeals holds attorney fees award is a non-dischargeable civil penalty

    Courts

    On May 17, the Colorado Court of Appeals held that an attorney fees award imposed under the Colorado Consumer Protection Act (CCPA) is a civil penalty and is not dischargeable under the Bankruptcy Code. According to the opinion, the State of Colorado sued a law firm, its owners, and affiliated companies for allegedly violating the CCPA and the Colorado Federal Debt Collection Practices Act (CFDCPA) by fraudulently billing mortgage servicers for full costs associated with title insurance premium charges even though not all the costs were incurred. The district court agreed with the State and awarded attorney fees and costs for the violations. In the appeal, one of the defendants argued, among other things, that the district court was precluded from awarding attorney fees because his debts had previously been discharged in bankruptcy. In affirming the district court’s decision, the appeals court concluded that attorney fees awards made under the CCPA and the CFDCPA are not dischargeable because the award “made under the CCPA’s mandatory provision was sufficiently penal to constitute a ‘fine, penalty or forfeiture’ under § 523(a)(7) [of the Bankruptcy Code] and was not dischargeable.”

    Courts State Issues Bankruptcy Civil Money Penalties Attorney Fees

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  • District court sanctions banker for violating consent order issued by CFPB and Maryland Attorney General

    Courts

    On May 21, the U.S. District Court for the District of Maryland granted in part and denied in part a motion for sanctions brought by the CFPB and the Consumer Protection Division of the Maryland Attorney General’s Office (plaintiffs) against a banker (defendant) previously held in civil contempt for violating a final judgment order prohibiting him from participating in the mortgage industry. As previously covered in InfoBytes, in April 2015, a joint enforcement action alleging participation in a mortgage-kickback scheme in violation of RESPA and state law was bought against the defendant, five other individuals, and a Maryland title company. According to the 2018 sanctions order, a stipulated final judgment and order between the parties was approved in November 2015, which, among other things, limited the defendant—who neither admitted nor denied the allegations—from participating in the mortgage industry for two years but did not prohibit him “from acting solely as a personnel or human-resources manager for a mortgage business operated by a FDIC insured banking institution. . . .”

    However, in August 2017, the court held the defendant in civil contempt for failing to comply with the order when it was discovered that the defendant (i) owned and operated mortgage businesses in violation of the order, while claiming to be employed as a human resources professional at one of the businesses; (ii) operated bank branches in Maryland and California; (iii) failed to upload the final judgment and order into the Nationwide Mortgage Licensing System and Registry (NMLSR); and (iv) failed to comply with stipulated reporting requirements. The plaintiffs’ proposed sanctions sought to disgorge all of the defendant’s income from 2015 until the date of compliance and impose a lifetime ban from the industry. In issuing the sanctions, the court ordered that all contemptuous income since the final judgment should be disgorged and extended the original two-year ban another two years—minus the exemption for employment as an HR professional. The defendant is further required to post the sanctions order on the NMLSR within 60 days.

    Courts CFPB State Attorney General Mortgages RESPA Enforcement

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  • Court denies plaintiff’s motion for summary judgment in TCPA action, questions accuracy of report citing number of robocalls

    Courts

    On May 21, the U.S. District Court for the Southern District of California denied a plaintiff’s motion for summary judgment against a solar company that she claimed made multiple unwanted robocalls to her cell phone, holding that questions remained about the accuracy of a report identifying the number of illegal calls the company allegedly placed. The plaintiff filed a putative class action complaint asserting that the company, in order to market products and services, violated the Telephone Consumer Protect Act (TCPA) when it used a “predictive dialer” to contact cell phone numbers the company bought from third parties. The plaintiff further claimed that none of the alleged call recipients had provided prior express consent to receive the calls, and that an expert retained by the plaintiff found that the company had made 897,534 calls to 220,007 unique cell phones. After the class was certified, the plaintiff moved for summary judgment, requesting that class members be awarded damages available under the TCPA of $1,500, or $500 per call.

    While the court determined that there is no argument as to the plaintiff’s TCPA claim concerning whether the company made telemarketing calls (and failed to receive prior express consent), a dispute remained over whether the plaintiff had “carried its burden of demonstrating” that the high number of calls cited in the report were actually made. First, the court stated that, because the company “stipulated that the [p]laintiff’s expert in fact reached a certain conclusion, it does not follow that [the company] stipulated to the accuracy of the conclusion.” Second, the court held that, since a reasonable jury could find the report’s “conclusions are flawed for any number of reasons,” a fact issue as to the report’s accuracy remained. A settlement conference has been set for June 6.

    Courts TCPA Class Action Robocalls Privacy/Cyber Risk & Data Security

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  • Court enters default judgment in favor of CFPB against debt relief companies

    Courts

    On May 22, the U.S. District Court for the District of Maryland entered a default judgment, in favor of the CFPB, against two debt relief companies, their service provider, and their owners (defendants) for allegedly misleading consumers about their debt validation program. As previously covered by InfoBytes, the CFPB filed a complaint in October 2017 against the defendants for allegedly violating the Telemarketing Sales Rule and the Consumer Financial Protection Act by, among other things, purportedly claiming to be affiliated with the federal government and misrepresenting the abilities of their services. In granting the CFPB’s request for default judgment, the court held that the defendants failed to defend the action and ordered they pay almost $5 million in restitution, as well as $16 million in civil money penalties. In addition to the fines, the defendants are prohibited from engaging in telemarketing, debt relief and credit repair activities in the future.

    Courts CFPB Consumer Finance Debt Relief Enforcement CFPA Telemarketing Sales Rule UDAAP

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  • Supreme Court of Appeals for West Virginia upholds summary judgment for consumer against check cashing company

    Courts

    On May 11, the Supreme Court of Appeals of West Virginia affirmed summary judgment for a consumer who alleged a check cashing company and its debt collector violated the West Virginia Consumer Credit and Protection Act (WVCCPA) by contacting her multiple times after being notified of her Chapter 7 bankruptcy filing. According to the opinion, the consumer filed a Chapter 7 petition for bankruptcy in February 2012 and the cash checking company was notified on or about March 6, 2012 of the filing. On March 9, the company, in response to the bankruptcy notice, sent a letter to the consumer notifying her collection efforts would be stayed but the company would be pursuing a criminal complaint against her. Additionally, a debt collection agency under contract with the company contacted the consumer five additional times in attempt to collect the debt. The trial court first granted the consumer’s motion for summary judgment in part, finding that the company violated the WVCCPA by not contacting the consumer’s attorney and by threatening criminal prosecution even though the company was aware of the bankruptcy filing. The court awarded the consumer over $19,000 in statutory damages. Subsequently, the trial court granted the consumer’s second motion for summary judgment, holding, among other things, that the company instructed the debt collector to contact the consumer despite having “actual knowledge” that an attorney represented the consumer. The court granted additional statutory damages in the amount of $18,000 and awarded attorney’s fees and costs.

    Upon appeal, the Supreme Court of Appeals concluded that the check cashing company’s violations of the WVCCPA were deliberate and intentional, and therefore, the trial court did not abuse its discretion by awarding the consumer over $37,000 in damages and attorney’s fees.

    Courts State Issues Check Cashing Debt Collection Bankruptcy

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  • Court holds text message advertisements sent by internet domain provider do not violate TCPA

    Courts

    On May 14, the U.S. District Court for the District of Arizona granted an internet domain provider’s motion for summary judgment, holding that the platform used by the company to send text message advertisements did not qualify as an “autodialer” under the Telephone Consumer Protection Act (TCPA). The plaintiff filed a putative class action in 2016 asserting that the company, without his consent, sent him a single text message offering a discount on new products in violation of the TCPA. The company filed for summary judgment arguing that the platform it uses to send messages is not an “autodialer.” Citing to the recent D.C. Circuit decision in ACA International v. the FCC (covered by a Buckley Sandler Special Alert) which narrowed the FCC’s 2015 interpretation of “autodialer”, the Court agreed with the company. The Court held that the text was not sent automatically or without human intervention because the company had to “log into the system, create a message, schedule a time to send it, and perhaps most importantly, enter a code to authorize its ultimate transmission.”

    As covered by InfoBytes, the FCC’s Consumer and Governmental Affairs Bureau released a notice seeking comment on the interpretation of the Telephone Consumer Protection Act (TCPA) in light of the recent D.C. Circuit decision in ACA International.

    Courts TCPA Privacy/Cyber Risk & Data Security Autodialer

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  • 3rd Circuit reverses district court’s decision, rules TILA provisions misapplied to unauthorized-charge suit

    Courts

    On May 16, the U.S. Court of Appeals for the 3rd Circuit reversed a district court’s decision, holding that the lower court, among other things, misapplied a TILA provision under Regulation Z that requires cardholders to dispute charges within 60 days of the “first periodic statement that reflects the alleged billing error.” According to the opinion, the plaintiff-appellant filed a suit against the bank after he was allegedly rebilled for a $657 fraudulent money transfer charge that originally appeared on his statement in July 2015. The charge was originally removed from his account but reappeared in mid-September of that year after the bank claimed the charge was valid after verifying transaction details. The plaintiff-appellant challenged the decision in writing, and later filed a complaint against the bank, alleging he had “timely submitted a written notice of billing error,” and that the bank “had neither credited the charge nor conducted a reasonable investigation” and imposed liability of more than $50. The district court dismissed the complaint with prejudice for failure to state a claim, which the plaintiff appealed.

    At issue, the three-judge panel determined, were two provisions under TILA: (i) the “Fair Credit Billing Act” (FCBA), which stipulates that creditors must “comply with particular obligations when a consumer has asserted that his billing statement contains an error,” and (ii) the “unauthorized-use provision,” which requires certain conditions to be met before a credit card issuer can hold the cardholder liable, up to a limit of $50, for any unauthorized use. The panel first addressed the district court’s finding that the bank’s obligations under FCBA were “never triggered” because his written notice came 63 days after the July statement first included the charge. The panel held that, because the plaintiff-appellant’s August billing statement showed a credit to his account for the charge and that “there was no longer anything to dispute” and no reason to believe his statement contained a billing error, the 60-day time limit should have started when the bank rebilled him in September. In addressing the second issue, the district court held that plaintiff-appellant was not entitled to “reimbursement” under the unauthorized-use claim. However, the panel opined that he was not seeking reimbursement but rather “actual damages,” for which the statute does provide relief. “We conclude that a cardholder incurs ‘liability’ for an allegedly unauthorized charge when the issuer, having reason to know the charge may be unauthorized, bills or rebills the cardholder for that charge,” the panel wrote.

    Courts Third Circuit Appellate Fair Credit Billing Act TILA Regulation Z Consumer Finance

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  • 3rd Circuit holds FDCPA statute of limitations begins to run on occurrence, not discovery, of violations, splitting from 4th and 9th Circuits

    Courts

    On May 15, the U.S. Court of Appeals for the 3rd Circuit issued an en banc ruling that the statute of limitations on the ability to sue for a violation of the Fair Debt Collection Practices Act (FDCPA) is one year from the date the Act is violated. The ruling is a departure from contrary decisions issued by the 4th and 9th Circuits, which both held that the statute of limitations begins to run when a violation is discovered, not when it occurs.

    Citing the FDCPA’s provision that claims must be filed “within one year from the date on which a violation occurs,” the court found that intent of the FDCPA is that the statute of limitations should begin to run at the moment the alleged wrongdoing happens, and not when the cause of action is discovered. The Court found that the 4th and 9th Circuits’ decisions to the contrary failed to analyze the “violation occurs” language of the statute.

    However, the court noted that its holding does not serve to undermine the doctrine of equitable tolling, and “should not be read to foreclose the possibility that equitable tolling might apply to FDCPA violations that involve fraudulent, misleading, or self-concealing conduct.” This question was not addressed, the court noted, because the plaintiff-appellant failed to preserve the issue on appeal.

    Courts FDCPA Debt Collection Third Circuit Appellate

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  • 9th Circuit will not rehear interest on escrow preemption decision

    Courts

    On May 16, a panel of three judges on the U.S. Court of Appeals for the 9th Circuit denied the petition for an en banc rehearing of its March decision, which held that a California law that requires a bank to pay interest on escrow funds is not preempted by federal law. In addition to the national bank’s appeal for a rehearing, the OCC notably filed an amicus brief supporting the rehearing, arguing that the court “comprehensively misinterpreted” the Supreme Court’s 1996 decision Barnett Bank of Marion County v. Nelson. (Previously covered by InfoBytes here.) The panel noted that the full court had been advised of the bank’s petition for rehearing, and no judge had requested a vote on rehearing.

    Courts Ninth Circuit Appellate Mortgages Escrow Preemption National Bank Act Dodd-Frank OCC State Issues

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  • D.C. Circuit rejects challenge to FTC’s 2016 staff letter on soundboard technology

    Courts

    On April 27, the U.S. Court of Appeals for the D.C. Circuit dismissed a challenge to a November 2016 FTC staff letter, which announced the FTC would treat calls using soundboard technology as robocalls. According to the D.C. Circuit opinion, the FTC’s 2016 staff letter rescinded a 2009 staff letter, which reached the conclusion that soundboard technology was not subject to robocall regulation. The Soundboard Association filed suit, seeking to enjoin the rescission of the 2009 letter, arguing that the 2016 staff letter violated the Administrative Procedures Act (APA) by issuing a legislative rule without notice and comment and that it unconstitutionally restricted speech in violation of the First Amendment. The lower court granted summary judgment for the FTC holding that the 2016 letter did not violate the First Amendment and that the letter was an interpretive rule and therefore not subject to the notice and comment requirements of the APA. Upon appeal, the D.C. Circuit vacated the lower court’s decision and dismissed the action in its entirety, holding that the 2016 letter was not a “final agency action” and therefore, the plaintiffs failed to state a cause of action under the APA.

    Courts D.C. Circuit Appellate FTC Robocalls Privacy/Cyber Risk & Data Security

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