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District Court dismisses FDCPA class action for lack of standing
Recently, the U.S. District Court for the Eastern District of New York dismissed a class action lawsuit alleging that a debt collector’s (defendant) collection notice violated the FDCPA by including two different balances absent any explanation, leaving plaintiff confused and unable to pay the debt. Plaintiff also alleged she suffered emotional harm and expended time and money as a consequence of defendant’s letter.
The district court held that plaintiff’s “mere” allegations of wasted time, resources, and efforts after receiving the collection letter do not establish injury-in-fact. Furthermore, the allegations do not support standing because “the burdens of bringing a lawsuit cannot be the sole basis for standing.” Additionally, in response to claims of emotional harms, the district court found that the allegations are “virtually identical to those that have been rejected in other similar FDCPA cases.” Ultimately, the district court found that “[p]laintiff does not clearly allege facts that demonstrate standing to pursue her claims in federal court, and the Court consequently lacks jurisdiction over this action.”
CFPB files amicus brief on FDCPA case regarding scienter
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.”
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.
CFPB fines and shuts down debt collector for alleged FDCPA, FCRA violations
On December 15, the CFPB announced a consent order against a Pennsylvania-based nonbank medical debt collection company for alleged violations of the FCRA and FDCPA. According to the order, the company failed to (i) establish and implement reasonable written policies and procedures for ensuring the accuracy and integrity of information furnished to consumer reporting agencies; (ii) conduct reasonable investigations into direct and indirect consumer disputes about furnished information; (iii) report direct dispute investigation results to consumers; and (iv) indicate disputed items when furnishing information to reporting agencies. The company also allegedly lacked a reasonable basis for debt-related representations made to consumers and engaged in collection activities after receiving a written dispute within 30 days of the consumer’s receipt of a debt validation notice but before obtaining and mailing a verification of the debt.
The consent order permanently bans the company from involvement or aid in debt collection, purchasing or selling of any debts, or any consumer reporting activities. The company must also request credit reporting agencies to delete all collection accounts previously reported by the company. Additionally, the company is obligated to pay a $95,000 civil money penalty and must display on its website information that informs consumers about the option to file a complaint with the CFPB.
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.”
Illinois adopts regulatory changes as part of its Collection Agency Act
On December 1, the State of Illinois’s Department of Financial and Professional Regulation promulgated final regulations implementing provisions of the Illinois Collection Agency Act. As previously covered by InfoBytes, Illinois transferred oversight of collection agencies from the Division of Professional Regulation to the Division of Financial Institutions under Public Act 102-975 in November.
Illinois proposed the new rules to “help the Division of Financial Institutions fulfill its newly-granted statutory responsibility and align these rules with regulatory requirements” set forth by the Illinois Collection Agency Act. Adoption of the new rules will not result in any substantive changes for Illinois Collection Agency licensees but will mirror the previous rules governing collection agencies at 68 Ill. Admin. Code 1210; additionally, the new rules have been adjusted to bring collection agencies in alignment with other industries regulated by the Division of Financial Institutions. Specifically, the new rules adjust the previous collection agency rules “regarding definitions, officers, applications for or changes to licensure, communications, pseudonyms, changes in ownership, recordkeeping, fees, payments, and the granting of variances to better reflect the standards of the Division of Financial Institutions.”
Lastly, the rules add three new sections: (i) Administration and Enforcement of the Act, which grants the director administrative and enforcement power over collection agencies; (ii) Reports, which requires licensees to file written reports (upon at least 45-day notice by the Division); and, (iii) Investigations and Examinations, which generally states that licensees may be “examined from time to time” to ensure compliance. The rules went into effect on November 20, 2023.
Illinois Collection Agency Act oversight transferred to the Division of Financial Institutions
Effective November 20, 2023, the Illinois Department of Financial and Professional Regulation adopted provisions regarding the Illinois Collection Agency Act. According to the Notice of Adopted Repealer, Public Act 102-975 has transferred the oversight of collection agencies from the Division of Professional Regulation to the Division of Financial Institutions. With the Division of Financial Institutions planning to introduce new regulations to align them to the agency’s standards, the Department proposes to repeal the existing regulations from the Division of Professional Regulation.
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.