insideARM maintains a free FDCPA resources page to provide the ARM community a destination for timely and topical information on the Fair Debt Collection Practices Act (“FDCPA”). This page is generously supported by TransUnion.
The centerpiece of the page is a chart of significant FDCPA cases. Case information and analysis is provided by Joann Needleman, a Clark Hill attorney and leader of the firm’s Consumer Financial Services Regulatory & Compliance Group. Where insideARM has published a story on the case, a link is provided.
Here’s a rundown of just a few of the FDCPA cases in the spotlight in March 2018.
The issue: Convenience fees
The gist: Curt Majors brought an FDCPA action against a debt collector, alleging that he did not consent to the assessment of credit card convenience fees by a third party processor, even though defendant’s letter had explained this before plaintiff used his credit card to make a payment on a debt. Plaintiff admitted that he was not confused by the letter, and that adequate disclosures had been made. Plaintiff moved to dismiss the complaint without prejudice during summary judgment phase, but the defendant opposed dismissal, seeking sanctions against the plaintiff for filing a frivolous suit. Judge granted the plaintiff’s motion for dismissal, showing yet again that the standard applied to the plaintiff’s bar is low, and possibly dropping.
The issue: Statute of limitations language
The gist: A collection letter sent to plaintiff failed to notify him that any payment would reset the statute of limitations. Court found that failure to provide re-tolling language was both a violation of 1692e & 1692f. Significantly, many jurisdictions take the position that double recovery on the same conduct is not permitted, but this court found the opposite, ruling that the same conduct can lead to recovery on both statutes.
The issue: Verbal dispute of debt validity
The gist: The consumer alleged that the debt collector violated 1692e(2)(A) by only providing an invoice to the debt as validation. Plaintiff disputed her debt, but only verbally, in a jurisdiction that requires written validity disputes. The court found that a debt collector can reasonably rely on the representations of their client to determine that a debt is valid. Although a debt collector must abide by fair collection practices, its contractual obligation is to the client, not the consumer. Absent a written notice of a consumer’s dispute per §1692g (b), the debt collector is not obligated to provide validation of the debt to the consumer, nor is it required to cease collection activity. Note that this holding would only apply in jurisdictions that require written disputes.
Mehdi Abdollahzadeh v. Mandarich Law Group, LLP
The issue: Statute of limitations (SOL) bona fide error
The gist: A law firm sent a collection letter to the plaintiff without advising the consumer that the statute of limitations on the debt had expired. The law firm asserted, and was able to demonstrate, a bona fide error defense. The firm stated it was not aware that consumer's account was outside SOL when they mailed the letter, and that it has documented procedures in place to prevent the attempt to collect an out-of-statute debt, including: 1) a policy to cancel and return any account not in active litigation once its statute of limitations expired, 2) a policy to check dates on each account and review the certification of accurate account information from client before filing suit, and 3) reliance on the nightly scrubbing of accounts by the client’s software to identify out-of-statute debts. Court agreed and found the law firm’s procedures were reasonable.
The issue: False and misleading licensing statements
The gist: Agency sent a letter which stated it was licensed by the Wisconsin Department of Financial Institutions (DFI) as a sales finance company. Derosia, the plaintiff, alleged this was misleading because the defendant should have been licensed with the Department of Banking as a collection agency. Even if the consumer did an investigation and went to the DFI website, they would learn that the defendant was not licensed as a collection agency and upon learning that, a consumer would be more likely to assume the letter is a scam and ignore it. The court agreed that the statement in letter was false and misleading, and would be a material violation of the FDCPA.
The issue: Interest accrual disclosure
The gist: The plaintiff alleged that the collection agency failed to disclose that interest was accruing. The reason, as stated by the defendant, was that interest was no longer accruing. The court noted the Avila decision, which said a disclosure that paying a debt in full using an amount listed in a letter would be misleading only if the amount would not settle the debt due to accruing interest. In this case, the only harm suffered by plaintiff is that if they believed interest was accruing, they might pay the debt sooner rather than later. The court found that as long as the letter was accurate and no interest was being charged, then the letter is not misleading.
For additional insight on this case, see this insideARM article.
The issue: Interest accrual disclosure
The gist: A law firm’s letter used safe harbor language as set forth in Avila to disclose the accrual of interest. Nonetheless, the consumer brought suit on the issue of interest accrual. The court found that the consumer stated no valid claim under the FDCPA and ordered a rule to show cause of why the plaintiff should not be sanctioned.
The issue: 1099C disclosure
The gist: Plaintiff Konyo received a collection letter with settlement options that included the following: "When your final payment is received, we will advise our client so that it may notify any credit reporting agencies to which it reports of the updated status of the account." The court found this statement could mislead the ‘least sophisticated consumer’ into believing that updates to her credit report would only occur after the final payment on the debt was made. Letter also stated, “IRS requires certain amounts that are discharged as a result of the cancellation of debt to be reported on a Form 1099–C.” The consumer claimed the letter failed to explain the IRS exceptions to the discharge report requirement. The court agreed that the least sophisticated consumer could conclude that the collection agency would be required to report the cancellation of debt in all circumstances.