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  • FTC publishes letter to CFPB on its law enforcement and public outreach

    Federal Issues

    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.

    Federal Issues FTC CFPB Congress FDCPA Small Business Debt Collection

  • Minnesota amends health care provision in extensive new law

    Privacy, Cyber Risk & Data Security

    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.

    Privacy Privacy, Cyber Risk & Data Security Minnesota Health Care Medical Debt Debt Collection

  • Healthcare providers reach $3.5 million settlement in FDCPA suit after eight years of litigation

    Courts

    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.

    Courts Class Action Debt Collection FDCPA Settlement Sixth Circuit

  • 2nd Circuit: Reverse and remand a buy-now-pay-later suit

    Courts

    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.

     

    Courts Consumer Finance Buy Now Pay Later Appellate Connecticut Debt Collection

  • Ohio AG files FDCPA suit against debt collectors

    Courts

    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.

    Courts State Attorney General Debt Collection FDCPA Ohio

  • Judge dismisses FDCPA suit for communication with CRAs

    Courts

    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.

    Courts FDCPA CRA New York Debt Collection Consumer Finance

  • Credit reporting agency, collector granted MTD in FCRA and FDCPA case

    Courts

    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.

    Courts Consumer Finance Debt Collection New Jersey Credit Reporting Agency

  • DFPI orders deceptive debt collectors to desist and refrain, pay penalties

    State Issues

    On October 23, DFPI announced enforcement actions against four debt collectors for engaging in unlicensed debt collection activity, in violation of Debt Collection Licensing Act and unfair, deceptive, or abusive acts or practices, in violation of the California Consumer Financial Protection Law. In its order against two entities, the department alleged that the entities contacted at least one California consumer and made deceptive statements in an attempt to collect a payday loan-related debt, among other things. In its third order against another two entities, DFPI alleged that a consumer was not provided the proper disclosures in a proposed settlement agreement to pay off their debts in a one-time payments. Additionally, DFPI alleged that the entity representatives made a false representation by communicating empty threats of an impending lawsuit.

    Under their orders (see here, here, and here), the entities must desist and refrain from engaging in illegal and deceptive practices, including (i) failing to identify as debt collectors; (ii) making false and misleading statements about payment requirements; (iii) threatening unlawful action, such as a lawsuit, because of nonpayment of a debt; (iv) contacting the consumer at a forbidden time of day; (iv) making false claims of pending lawsuits or legal process and the character, amount, or legal status of the debt; (v) failing to provide a “validation notice” ; and (vi) threatening to sue on time-barred debt.

    The entities are ordered to pay a combined $87,500 in penalties for each of the illegal and deceptive practices.

    State Issues DFPI Enforcement Debt Collection Deceptive UDAAP California CCFPL Consumer Finance Consumer Protection

  • CFPB releases education ombudsman’s annual report

    Federal Issues

    On October 20, the CFPB Education Loan Ombudsman published its annual report on consumer complaints submitted between September 1, 2022, and August 31, 2023. The report is based on approximately 9,284 student loan complaints received by CFPB regarding federal and private student loans.  Roughly 75 percent of complaints were related to federal student loans while the remaining 25 percent concerned private student loans. Overall, the report found underlying issues in student loan servicing that threaten borrowers’ ability to make payments, achieve loan cancellation, or receive other protections to which they are entitled under federal law.  The report indicated that challenges and risks facing federal student loan borrowers include customer service problems, errors related to basic loan administration, and problems accessing loan cancellation programs.  Similarly, private borrowers face issues accessing loan cancellation options, misleading origination tactics, and coercive debt collection practices related to private student loans.

    The Ombudsman’s report advised policymakers, law enforcement, and industry participants to consider several recommendations: (i) ensuring that federal student loan borrowers can access all protections intended for them under the law; (ii) ensuring that loan holders and servicers of private student loans do not collect debt where it may no longer be legally owed or previously discharged; and (iii) using consumer complaints to develop policies and procedures when they reveal systemic problems.

    Federal Issues CFPB Student Lending Student Loan Servicer Consumer Finance Debt Collection Covid-19

  • 3rd Circuit Limits furnishers’ labeling authority

    Courts

    On October 2, the U.S. Court of Appeals for the Third Circuit ruled that a collection agency who was acting as a furnisher of credit reporting information could not shirk its duty to investigate a dispute by labeling the dispute “frivolous” when the complaint was referred for investigation by a credit reporting agency (CRA).  The decision overturned the lower court’s ruling which had sided with the furnisher.

    According the ruling, the plaintiff in this action claimed that a fraudulent account had been opened in his name with a television service provider. Plaintiff was described as having first disputed the account directly with the television service provider, but failed to provide supporting documents which the television service provider had requested.  Following the plaintiff’s failure to provide the requested documentation, the television service provider referred the disputed account to the collection agency, who in turn reported the delinquent account to the CRA.

    The ruling states that when the disputed account appeared on the plaintiff’s consumer report, the plaintiff made an indirect dispute of the information with the CRA, who in turn forwarded the dispute to the collection agency for investigation. The ruling notes that the collection agency undertook no further investigation in response to the dispute, and instead merely confirmed the account information and updated the plaintiff’s address, which the court noted took only 13 seconds.

    The court noted that although the FCRA does allow for the recipient of disputes “to preliminarily vet the dispute for frivolousness or irrelevance before investigating,” once a CRA has referred a dispute to a furnisher, “the furnisher does not have such discretion.” Because in this case the collection agency had been referred to it by a CRA, it “had a duty to investigate [plaintiff’s] indirect dispute when it received notice thereof from [the CRA].”

    Courts Third Circuit Appeals Debt Collection CRA Credit Furnishing

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