InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Washington Appeals Court overturns ruling for collector
On December 26, 2023, the Court of Appeals of the State of Washington overturned a ruling in favor of a collection agency. In the initial action, the collection agency sued an individual over a medical debt that was assigned to the agency. The individual filed counterclaims against the collection agency alleging violations of the Washington Consumer Protection Act (CPA), the Washington Collection Agency Act (CAA), and the FDCPA. Each counterclaim centered on the legitimacy of the debt owed since the individual had not been screened for charity care as required by law. The individual was granted charity care that assisted with paying 75 percent of the owed debt and the collection agency accepted the payment. Later, the collection agency sought to enforce a supposed settlement agreement. The trial court granted the collection agency’s motion for summary judgment and dismissed the individual’s counterclaims and denied the collection agency’s motion to enforce settlement. As a result, the dismissal of the individual’s counterclaims was reversed, the denial of the collection agency’s motion to enforce the settlement agreement was upheld, and the case was sent back to the trial court for further proceedings in line with the court's findings.
District Court affirms FDCPA case dismissal
On December 21, 2023, the U.S. District Court for the District of Oregon affirmed the dismissal of an FDCPA case after it granted a debt collector’s motion to dismiss in March 2023 because the plaintiff’s claims were filed outside of the one-year statute of limitations. The plaintiff contended that the court made a clear error by dismissing their claim as untimely without considering the potential impact of equitable tolling on the limitations period. The court held that the plaintiff's request for reconsideration based on equitable tolling was not raised in response to the defendant’s motion to dismiss and was declined. Plaintiff also referenced a new legal precedent, set earlier this year, arguing that it impacts the timing of their claims under the FDCPA. However, the court found this reference untimely and unrelated to the original motion. As previously covered in InfoBytes, the referenced case established that both serving and filing a lawsuit could be independent violations of the FDCPA, depending on certain conditions. However, in this case, where service occurred after filing, the court determined that it did not constitute a new FDCPA violation. Therefore, the court denied the plaintiff's motion for reconsideration based on this precedent.
California Appellate Court overturns ruling on FDCPA
On December 18, a California Court of Appeal overturned a lower court’s dismissal of a case involving claims under the federal FDCPA and California’s Rosenthal Fair Debt Collection Practices Act (Rosenthal Act). The appellate court found the lower court had erred in dismissing the case pursuant to California’s anti-SLAPP statute, which provides a mechanism for early dismissal of meritless lawsuits arising from protected communicative activities.
The dismissal arises from a class action filed in 2021, alleging that the defendant debt collector – who had filed an action to collect on a defaulted student loan – lacked the documents necessary to collect or enforce the loan, and thus violated the FDCPA and the Rosenthal Act. The complaint also claimed the collector violated California’s Unfair Competition Law (UCL) by engaging in “prohibited unlawful, unfair, fraudulent, deceptive, untrue, and misleading acts and practices as part of its direct and indirect collection and attempted collection of debts that have previously been adjudicated.” The complaint referenced a 2017 CFPB consent order with the defendant, previously covered by InfoBytes here, where the consent order involved allegations that the collector had filed lawsuits against consumers for private student loan debt that it could not prove was owed or that was outside the applicable statute of limitations.
In response to the complaint, the defendant debt collector filed a demurrer and an anti-SLAPP motion. While the lower court granted the anti-SLAPP motion, the appellate court reversed, concluding that the plaintiff’s claims were not barred by the litigation privilege. The appellate court found that the lower court had “only considered the litigation privilege in considering the probability that [the plaintiff] would prevail on her claims,” and did not consider the public interest exception to California’s anti-SLAPP law (which provides that the anti-SLAPP law does not apply to actions brought solely in the public interest or on behalf of the general public if certain conditions are met). The appellate court directed the trial court to determine whether the plaintiff met her burden of demonstrating a probability of prevailing on the merits of her claims and to consider the public interest exception.
District Court partially dismisses TCPA claims
On December 12, the U.S. District Court for the Northern District of Illinois partially granted a culinary school’s motion to dismiss claims concerning unwanted calls to enroll in cooking classes. According to the memorandum opinion and order, the plaintiff filed suit after the culinary school called her over 30 times, even though she had requested the school to place her on a do-not-call list. The plaintiff claimed the school violated the Telephone Consumer Protection Act (TCPA) by making unwanted calls and leaving prerecorded messages on her cell phone.
According to the court, any calls made to a cell phone cannot violate § 227(b)(1)(B) because the court reasoned that “a cellular phone and a residential phone are not the same thing,” and that § 227(b)(1)(B) of the TCPA expressly covers “residential telephone line[s],” but not cellular telephone services. Regarding the plaintiff’s claim under § 227(b)(1)(A) of the TCPA, although the school argued there was not enough proof that the calls were prerecorded, including because some of the calls came from different states, the court disagreed and provided examples of why the calls could have been prerecorded. The court consequently denied the school’s motion to dismiss the plaintiff’s § 227(b)(1)(A) claim.
District Court grants motion to dismiss in FDCPA case regarding an undated Model Validation Notice
On December 5, the U.S. District Court for the Southern District of New York granted a debt collection agency (the defendant) a motion to dismiss an individual’s (plaintiff’s) complaint. The case considers whether an undated Model Validation Notice (MVN) is a material detail that provides standing to sue under the FDCPA. An MVN is a form provided by the CFPB in Appendix B of the Debt Collection Rule to assist debt collection agencies in complying with FDCPA notice and disclosure requirements. However, the CFPB provides an undated MVN, so many debt collectors who use this template fail to provide a date when sending a debt collection letter to individuals, leading to a recipient’s confusion when the debt collector writes “today” or “now.”
In this case, the plaintiff alleges that the undated collection letter suggests the defendant “withheld a material term from [p]laintiff which made it confusing for him to understand the nature of the subject debt.” The plaintiff did not pay the debt, and instead, he alleged that he suffered damages from the defendant’s “suspicious, misleading, deceptive, unfair, and unconscionable actions.”
Before addressing the merits of the plaintiff’s claims, the court applied Article III standing to determine if the plaintiff had a basis to sue. The court considered whether the plaintiff had suffered a “concrete, particularized injury” in receiving an undated letter from the defendant and concluded that the plaintiff did not suffer harm as a result of this act under Article III because “[t]ime and money spent due to concern and confusion are not concrete harms.” The court held the plaintiff had no standing to bring this action and granted the defendant’s motion to dismiss the plaintiff’s claims. The court, however, gave the plaintiff the opportunity to file an amended complaint.
District Court dismisses FDCPA suit; clarifies debt collector communication on identity theft
On December 5, the U.S. District Court of New Jersey dismissed an FDCPA suit brought against a debt collector. According to the opinion, plaintiff originally filed suit because they received a letter from defendant regarding an outstanding cell phone bill. The letter provided instructions on what to do if the recipient suspected identity theft. Additionally, the letter contained a summary of plaintiff’s account and a QR code that linked to defendant’s website for online payment. Plaintiff contended that the dual approach of offering assistance while simultaneously pursuing collection of a debt was false and misleading. A District Court judge, however, disagreed and dismissed the case, at which point the plaintiff filed an amended complaint.
The amended complaint alleges that the debt collector breached the FDCPA by using false, deceptive or misleading representations regarding the rights of the plaintiff and the obligations of the debt collector with respect to communications concerning identity theft. Specifically, plaintiff argued defendant was in violation of § 1681m(g) of the FDCPA, which obligates a debt collector to take certain steps upon being notified of identity theft, but the court disagreed, finding that the collector’s specific steps taken were in accordance with the Act.
The court emphasized that plaintiff did not introduce any new factual claims in the amended complaint, and merely clarified how the facts already outlined in the initial complaint breached the FDCPA. The judge ruled that the letter not only allows plaintiff to inform defendant about potential identity theft, but also may serve to bring potential identity theft to plaintiff’s attention. The ruling stated that there is no obligation to extensively explain recommended procedures in the case of an identity theft occurrence, and only an “idiosyncratic reading” of the letter would lead to the conclusion that the letter misrepresents defendant’s obligations.
3rd Circuit affirms district court’s decision that losing a debt collection case does not necessarily violate FDCPA
On December 12, the U.S. Court of Appeals for the Third Circuit affirmed a U.S. District Court’s order denying a consumer’s motion for reconsideration of the grant of summary judgment against the consumer. After the consumer successfully defended herself in a debt collection action in municipal court, she sued the debt collection agency that had brought suit against her in federal court alleging that the agency violated the FDCPA by utilizing false or deceptive means in collecting debts that she did not owe in violation of 15 U.S.C. § 1692e and unfair or unconscionable means in the collection of any debt in violation of 15 U.S.C. § 1692f.
The district court granted judgment to the debt collection company and denied the individual’s motion for reconsideration. The appellate court found that the consumer failed to produce evidence that proved the debt collection agency made any false or deceptive representations or acted unfairly or unconscionably in bringing the debt collection action against the consumer. Although the agency failed to meet its burden of proof in the municipal action, the court noted that “losing a debt collection lawsuit does not in itself mean a defendant violated the FDCPA.”
FDIC agrees to settle with CEO and board members after District Court dismissal
On December 7, the U.S. District Court for the Eastern District of Louisiana dismissed a lawsuit brought by the FDIC against the chairman, president and CEO and board members of a state-chartered Louisiana bank after the parties reached a confidential settlement. In 2017, the State of Louisiana closed the bank and appointed the FDIC as the bank’s receiver. According to the DOJ’s press release, the bank’s former chairman, president and CEO was found guilty of 46 counts of bank fraud, conspiracy and other charges related to the bank’s collapse and has been sentenced to 14 years in prison and required to pay $214 million in restitution in August 2023. The FDIC also brought a civil action alleging that the bank’s chairman, president and CEO abused his incremental lending authority and the bank’s board loan committee approved improper credit extensions. The FDIC claimed it was entitled to recover $165 million from the bank in its capacity as its receiver: the loans consisted of $114 million for the bank’s chairman’s alleged commission of “gross negligence and breaches of fiduciary duty” and $51 million for the bank’s “gross negligence in approving other credit extensions.” More specifically, the bank’s chairman, president and CEO “recklessly” approved improper credit extensions, while the bank’s board loan committee violated “prudent business practices” by approving director loans.
EU court clarifies conditions for imposing GDPR fines
On December 5, the Court of Justice of the European Union (CJEU) issued a judgment clarifying the conditions under which a General Data Protection Regulation (GDPR) fine can be imposed on data controllers. The judgment is in response to two cases involving GDPR fines: (i) a German case in which a real estate company was fined for allegedly storing personal data for tenants for longer than necessary, and (ii) a Lithuanian case in which a government health center was fined in connection to the creation of an app that registered and tracked people exposed to Covid-19.
In the judgment, the CJEU clarified that a data controller can only face an administrative fine under the GDPR for intentional or negligent violations—that is, violations for which a data controller was aware or should have been aware of “the infringing nature of its conduct,” regardless of their knowledge of the specific violation. The judgment also held that for a legal person, it is not necessary for the violation to be committed by its “management body,” nor does that body need to have knowledge of the specific violation. Instead, the legal person is accountable for violations committed by its representatives, directors, or managers, and those acting on their behalf within the business scope. Additionally, imposing an administrative fine on a legal entity as a data controller does not require prior identification of a specific person responsible for the violation.
The judgment also addressed administrative fines for operations involving multiple entities. The CJEU noted that a controller may have a fine imposed upon it for actions undertaken by its processor. The court also clarified that a joint controller relationship arises from the two or more entities participating in determining the purpose and means for processing, and “does not require that there be a formal arrangement between the entities in question.”
To calculate the amount of an administrative fine under the GDPR, the supervisory authority must consider the notion of an “undertaking” under competition law. The maximum fine must be based on the percentage of the total worldwide annual turnover of the particular undertaking in the preceding business year.
District Court grants MSJ for debt collector in FDCPA case
On November 29, the U.S. District Court for the Eastern District of New York granted summary judgment in favor of a debt collector (defendant) under the FDCPA, holding that the defendant’s collection letter was not misleading.
According to the court’s order, the plaintiff and the defendant established a payment agreement over the phone, during which the representative mentioned to the plaintiff that the interest rate on the loan would be lowered to 5.99 percent, and that failure to make any of the 11 monthly payments could render the agreement void. Shortly after, the plaintiff received a letter from the defendant that conveyed essentially the same information. The defendant also provided the plaintiff with billing statements, including a statement indicating $11.14 in accumulated interest during the initial month in the payment plan. Additionally, the defendant sent the plaintiff a collection letter that outlined the monthly payment and total balance due. The collection letter contained a warning that interest, late charges, and other charges that may vary from day to day could result in a greater balance than the amount plaintiff owed as of the date of the letter. The plaintiff argued that the warning was contradictory to the concept of “fixed” payment plan, and thus was deceptive and misleading in violation of Section 1692e.
The court noted that it had previously dismissed an FDCPA case against the same defendant using similar language in the context of a debt settlement. In that case, the defendant provided both a disclaimer and the settlement offer, and the court held that including both in the same communication “does not automatically render the letter misleading ... [d]efendant accurately and unambiguously conveyed the agreed-upon monthly payment, total balance, and APR.” The court also reasoned that holding debt collectors liable for violating the FDCPA in such instances might discourage them from proposing debt settlement plans to consumers.