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  • U.S. district court holds state laws partially preempted by FCRA

    Courts

    On January 9, the U.S. District Court of Maine entered judgment, determining that Maine law is only partially preempted by the federal Fair Credit Reporting Act (FCRA). The plaintiff, a trade association that represents the major credit reporting agencies, filed the suit as a facial challenge to certain provisions of Maine law, naming the Maine Attorney General and the Superintendent of the Maine Bureau of Consumer Credit Protection as defendants.

    According to the complaint, the Maine Medical Debt Reporting Act and the Maine Economic Abuse Debt Reporting Act amended the Maine Fair Credit Reporting Act, adding state-specific restrictions on information inclusion in consumer credit reports. The plaintiff argued that the federal FCRA preempts these provisions and that enforcing these amendments threatens the accuracy, integrity, and reliability of consumer report information.

    The court held that while federal law does not “preempt all state laws relating to information contained in consumer reports,” the federal FCRA did preempt provisions of the Maine Medical Debt Reporting Act related to the timing of reporting on veterans’ medical debts by nationwide consumer reporting agencies.  The court noted, however, that sections §§ 1681c(a)(7) and (a)(8) of the federal FCRA do not preempt the Maine Medical Debt Reporting Act to the extent that they regulate non-veterans’ medical debt.

    Regarding the Maine Economic Abuse Debt Reporting Act, the court held that the provisions related to identity-theft in the federal FCRA preempt state law requirements when identify theft is the only method of economic abuse identified by the consumer.  In such cases, the court held that “the blocking of reporting activity on identity-theft-related grounds must proceed according to federal requirements and state requirements are of no effect.” The court noted that its ruling does not “support preemption of Maine’s Economic Abuse Debt Reporting Act insofar as a consumer’s debt is alleged to be the product of economic abuse carried out by means other than or in addition to identity theft.”

    Courts Maine Credit Reporting Agency Consumer Protection State Attorney General Preemption

  • Federal court grants California DFPI motion for summary judgment on commercial financing disclosure requirements

    Courts

    Recently, the California DFPI announced it was granted a summary judgment by a federal court to uphold the DFPI’s commercial financing disclosure requirements applicable to small businesses as implemented by SB 1235, including the amount of funding provided, APR, finance charges, and payment amounts. The bill was adopted in 2018 and was previously covered by InfoBytes here, as well as when the California Office of Administrative Law approved the DFPI’s commercial financial disclosure regulations here in June 2022.

    In this case, the plaintiff is an advocacy organization that sued the Commissioner of the DFPI, asserting two claims: (i) that the DFPI violated 42 U.S.C. § 1983 based on a violation of the First Amendment; and (ii) that the DFPI’s regulation is preempted by the Truth in Lending Act (TILA). The DFPI disagreed and sought summary judgment on three grounds: (i) the plaintiff lacks the standing to challenge the regulations; (ii) the regulations do not violate the First Amendment; and (iii) the regulations are not preempted by TILA.

    The court granted the DFPI’s motion for summary judgment because it found that although the plaintiff had standing to bring suit, the DFPI’s disclosure requirements were lawful under the First Amendment and were not preempted by federal law.

    Courts DFPI TILA

  • CFPB files amicus brief on FDCPA case regarding scienter

    Courts

    On January 2, the CFPB announced its filing of an amicus brief in the U.S. Court of Appeals for the First Circuit that takes the position that debt collectors can and should be held strictly liable under the FDCPA regardless of whether they knowingly or unknowingly made a false statement. As the administrator and enforcer of the FDCPA, the CFPB cites that under Section 1692e of the FDCPA, debt collectors are prohibited from “us[ing] any false, deceptive, or misleading representation or means in connection with the collection of any debt.” According to the brief, Section 1692e’s general prohibition does not include a scienter requirement and does not require that a “representation be knowingly or intentionally false, deceptive, or misleading to violate that prohibition.” The CFPB continues that since Congress selectively included an express scienter requirement, which is a level of intent or knowledge required to establish liability, in specific provisions of the FDCPA, but did not include one in Section 1692e, that indicates Congress did not implicitly intend for Section 1692e to include a scienter requirement. The CFPB also noted that “every federal court of appeals to have addressed this issue (8 in total) has held that Section 1692e does not include a scienter requirement.”

    Courts CFPB FDCPA Debt Collection

  • Large bank agrees to proposed settlement agreement; to be decided in February

    Courts

    On November 27, 2023, a large Canadian bank agreed to pay $15.9 million to accountholders in a proposed settlement agreement stemming from a class action suit in which the bank allegedly charged improper non-sufficient fund (NSF) fees. NSF fees are charges by a financial institution when they decline to make a payment from an accountholder’s account after determining the account lacks sufficient funds. Plaintiffs alleged that from February 2, 2019, to November 27, 2023, the bank charged accountholders multiple NSF fees on a single attempted transaction. In the agreement, the bank continues to deny liability. While an agreement has been reached between the two parties, the agreement has yet to be approved by the courts. A hearing has been scheduled for February 13, 2024, in the Ontario Superior Court of Justice to approve the settlement and award the payouts. Accountholders will receive their payouts, “estimated to be in the range of approximately $88 CAD,” deposited directly to their account with the bank. Under the proposed settlement agreement, the representative plaintiff will receive an honorarium of $10,000. As previously covered by InfoBytes, the FDIC warned that supervised financial institutions that charge multiple NSF fees on re-presented unpaid transactions may face increased regulatory scrutiny and litigation risk.

    Courts Banking Canada Of Interest to Non-US Persons Settlement Class Action Enforcement NSF Fees Fees

  • Washington Appeals Court overturns ruling for collector

    Courts

    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.

    Courts FDCPA Appellate Debt Collection Consumer Finance

  • District Court affirms FDCPA case dismissal

    Courts

    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.

    Courts FDCPA

  • California Appellate Court overturns ruling on FDCPA

    Courts

    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.

    Courts California Appellate FDCPA Rosenthal Fair Debt Collection Practices Act

  • District Court partially dismisses TCPA claims

    Courts

    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.

    Courts TCPA

  • District Court grants motion to dismiss in FDCPA case regarding an undated Model Validation Notice

    Courts

    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.

    Courts FDCPA Debt Collection CFPB SDNY Consumer Finance

  • District Court dismisses FDCPA suit; clarifies debt collector communication on identity theft

    Courts

    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.

    Courts Debt Collection FDCPA New Jersey Identity Theft Disclosures

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