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CFPB secures $12 million after decade-old complaint against foreclosure relief scam company
On February 8, the CFPB announced the resolution of an enforcement action, begun in 2014, against a foreclosure relief operation that allegedly violated Regulation O. After a decade of court orders, opinions, and appeals, on February 5, 2024, the defendants and the CFPB jointly agreed to the dismissal of their respective appeals and on February 7, 2024, the Seventh Circuit dismissed the parties’ appeals. The final settlement required the defendants to pay $10.9 million in consumer redress and a $1.1 million penalty. The enforcement action notes that the defendants remain “subject to the bans” under the district court’s 2022 order.
The CFPB had alleged that the defendants violated Reg. O by taking payments from consumers for (i) mortgage modifications before they signed an agreement from their lender; (ii) failing to make required disclosures; (iii) directing consumers not to contact lenders; and (iv) making deceptive statements to consumers. As previously reported by InfoBytes, the CFPB and the Florida Attorney General obtained a judgment against this group in May 2015 for parallel violations.
Washington Appeals Court disagrees with appellant in a class action data breach; affirms lower court’s decision
On January 8, the Washington State Court of Appeals affirmed superior court rulings granting final approval to a class action settlement, denying a motion to consolidate six class action lawsuits, and approving a class notice plan. According to the opinion, in 2021, the U.S. Department of Health and Human Services notified the respondent company, a nonprofit organization serving low-income individuals, of a data breach that exposed the social security numbers of 163,499 individuals. In 2022, appellant filed a class action lawsuit against the respondent company, one of six such separate class action lawsuits. The appellant filed a motion to consolidate the six pending class action lawsuits, which was denied. Subsequently, plaintiffs in one of the class action lawsuits signed a settlement agreement and release that would release, discharge, and bar all claims asserted in the other class action lawsuits and provide compensation anywhere from $100 to $25,000 to impacted individuals. The appellant plaintiff then filed the instant appeal alleging that the lower court abused its discretion by denying her motion to consolidate the six actions, that the class action plan failed to provide reasonable notice, and that the settlement was not fair, reasonable, or adequate because “the settlement is the product of collusion between the settling parties.” The appellate court disagreed and ultimately upheld the lower court’s rulings.
Massachusetts State Appeals Court orders a consumer has standing to sue in state court under the FCRA without federal standing
On January 11, the Massachusetts Court of Appeals ordered that an employee has standing to sue in state court, despite lacking standing to sue in a federal court. The employee (plaintiff) sued a prospective employer for allegedly conducting a background check in a manner that violated the FCRA. The defendant successfully sought to have the case moved from state court to federal court. In federal court, the defendant was granted a motion to dismiss on the grounds that plaintiff lacked standing under Article III, which requires that the plaintiff allege a “concrete” injury. Ultimately, the case was remanded to state court, where the Superior Court dismissed the FCRA claims. The plaintiff appealed, and the appellate court ruled that the plaintiff had alleged facts sufficient to support standing to sue in state court, as the applicable standard did not require a showing of “concrete” harm.
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.
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.
Supreme Court hears oral argument in case challenging SEC ALJ use
On November 29, the Supreme Court heard oral argument in the SEC’s request to appeal the 5th Circuit’s decision in Securities and Exchange Commission v. Jarkesy. As previously covered by InfoBytes, the 5th Circuit held that the SEC’s in-house adjudication of a petitioners’ case violated their Seventh Amendment right to a jury trial and relied on unconstitutionally delegated legislative power. At oral argument, Justice Kavanaugh stated in his questioning of Principal Deputy Solicitor General Brian Fletcher (representing the SEC) that given the severity of the potential outcome of cases, the SEC’s decision-making process fully being carried out in-house could be “problematic,” and that it “doesn’t seem like a neutral process.” Meanwhile, Fletcher mentioned that the boundaries and “outer edges” of the public rights doctrine can be “fuzzy.” Justices’ questions also centered around Atlas Roofing v. Occupational Safety and Health Review Commission—a Supreme Court case that held that “Congress does not violate the Seventh Amendment when it authorizes an agency to impose civil penalties in administrative proceedings to enforce a federal statute.”
2nd Circuit affirms dismissal of whistleblower lawsuit alleging FCA violations
On October 30, the U.S. Court of Appeals for the 2nd Circuit affirmed a district court order dismissing a whistleblower lawsuit alleging violations of the False Claims Act (FCA). The three-judge panel concluded that they did not need to “address the public disclosure bar because the [second amended complaint]… fails to state a claim for a violation of the FCA.” According to the panel, the plaintiff did not allege that the defendant knowingly made a misrepresentation material to the government’s decision and that “failure to adequately plead either of these requirements is fatal to a relator's claim."
The original whistleblower complaint, filed in 2014, alleged that the defendant covered losses on loans that it acquired by taking advantage of a shared loss agreement with the FDIC. The complaint also stated that the defendant knowingly reported write-downs on loans already paid off, sold, or irrelevant to the portfolio. The FDIC declined to intervene, and the case was dismissed. The plaintiff appealed and oral arguments were heard on October 12; however, the order found that the plaintiff failed to identify a false claim or false record and did not establish scienter or motive to commit fraud.
2nd Circuit: Reverse and remand a buy-now-pay-later suit
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.
7th Circuit: Court upholds dismissal of FDCPA lawsuit over debt information sharing
On October 23, the U.S. Court of Appeals for the Seventh Circuit affirmed the dismissal of a consumer’s putative class action lawsuit alleging that a collection agency violated the FDCPA by sharing the consumer’s debt information with a third-party vendor. The court ruled that the consumer lacked standing because she did not sustain an injury from the sharing of her information.
To collect a defaulted credit-card debt, the defendant collection agency used a third-party vendor to print and mail a collection letter to the consumer. The consumer alleged that the collection agency violated the FDCPA by disclosing to the vendor the consumer’s personal information, and the disclosure was analogous to the tort of invasion of privacy. The appeals court disagreed, reasoning that the sharing of a debtor’s data with a third-party mail vendor to populate and send a form collection letter that caused no cognizable harm, legally speaking. The court also noted that the U.S. Courts of Appeal for the Tenth and Eleventh Circuits have reached similar conclusions. “The transmission of information to a single ministerial intermediary does not remotely resemble the publicity element of the only possibly relevant variant of the privacy tort.”
Utah Court of Appeals affirms ruling for debt buyer engaged in unlicensed collection efforts
The Utah Court of Appeals affirmed a lower court’s ruling against a debt buyer that acquired a portfolio of bad debts from borrowers all over the country, including residents of Utah. The debt buyer collected on the portfolio of debts by retaining third-party debt collectors or, in some instances, attorneys to recover such debts by filing lawsuits. The debt buyer was not licensed under the Utah Collection Agency Act (UCAA). As such, the plaintiffs argued that the debt buyer’s collection efforts were “deceptive” and “unconscionable” under the Utah Consumer Sales Practices Act.
The lower court ruled for the debt buyer on the grounds that failure to obtain a license, without more, did not rise to the level of “deceptive” or “unconscionable” conduct. Further, the UCAA does not have a private right of action.
Utah recently repealed the collection agency’s license, effective May 3, 2023 (covered by InfoBytes here).