May 16, 2017

Memorandum of Decision and Order Regarding Contact Limits in Massachusetts

Watkins v. Glenn Associates, Inc., No. 15-cv-3302 (Mass. Sup. Ct. June 10, 2016).

In this case, the plaintiff sought relief from the defendant’s alleged violations of the Massachusetts Debt Collection Regulations, 940 Code Mass. Regs. § 7.04 and the Massachusetts Consumer Protection Act, G.L. c. 93A, §2. The Code states in part that it is an “unfair and deceptive act or practice for a creditor to…initiat[e] a communication with any debtor via telephone…in excess of two such communications in each seven-day period…” 940 Code Mass. Regs. § 7.04(1)(f). The defendant called the plaintiff’s cell phone on December 17th, twice on December 22nd, and twice on December 23rd. The defendant spoke with the consumer on December 17th, but reached his voicemail on December 22nd and December 23rd. The defendant did not leave any voicemails for the plaintiff. Watkins v. Glenn Associates, Inc., No. 15-cv-3302 (Mass. Sup. Ct. June 10, 2016).

The question for the Court in this case was “whether the telephone calls in question constituted ‘initiating a communication’ under the state debt collection regulations.” The Court determined that, based upon the language of the statute and the Attorney General’s guidance, because the defendant was able to leave a message for the debtor, such contact constituted a communication.

The Court placed much of its focus on the Attorney General’s Guidance that “unsuccessful attempts by a creditor…may not constitute initiation of communication if the creditor is truly unable…to leave a message for the debtor.” Despite the fact that the defendant did not leave a voicemail for the plaintiff, the Court reasoned that because the defendant had a choice not to leave a voicemail, this action was a communication.

Second Circuit Holds Failure to Disclose Fees and Interest Accrual on Debt Violates the FDCPA

Avila v. Riexinger & Associates, LLC, 817 F.3d 72 (2nd Cir. 2016).

According to a recent Second Circuit opinion (in line with a past Seventh Circuit opinion), the FDCPA requires debt collectors to disclose to consumers if account balances will increase due to interest or other fees.

In Avila v. Riexinger & Associates, LLC, 817 F.3d 72 (2nd Cir. 2016), the Court found collection notices sent to consumers, without expressly stating the balances were subject to increase, violate the FDCPA. In Avila, consumers were sent collection notices with the amount due identified as “Current Balance.” Relying on the FDCPA’s purpose of protecting consumers, the Court held this was a deceptive practice because, “[a] reasonable consumer could read the notice and be misled into believing that she could pay her debt in full by paying the amount listed on the notice.  In fact, however, if interest is accruing daily, or if there are undisclosed late fees, a consumer who pays the ‘current balance’ stated on the notice will not know if the debt is paid in full.” Id. at 76.

The holding is in accord with the Seventh Circuit’s opinion in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols & Clark, LLC, 214 F.3d 872 (7th Cir. 2000). Although there is not consensus across all Federal Circuits on this issue, we recommend collectors use language similar to the safe-harbor provision outlined in Miller in any collection notice sent for an account where the balance is subject to increase. Contact us if you need additional information on the safe harbor language outlined in Miller and buttressed by Avila.

U.S. Supreme Court Issues Important Opinion on Article III Standing

Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016).

The issue in this case revolves around whether the respondent (Robins) had standing to maintain an action in federal court against the petitioner (Spokeo) for alleged violations of the FCRA (Fair Credit Reporting Act).

The procedural history of this case consists of the District Court dismissing Robins’ complaint for lack of standing with a panel of the Ninth Circuit reversing the District Court’s ruling. Ultimately, the Supreme Court determined the Ninth Circuit’s analysis was incomplete as review of the injury-in-fact requirement requires a plaintiff to allege an injury that is both concrete and particularized. The Ninth Circuit did not address whether the injury was concrete.

In reaching its conclusion, the Supreme Court discussed Article III of the United States Constitution and indicated Article III standing serves to prevent the judicial process from being used to usurp the powers of the political branches. In order to have standing to sue, the plaintiff must meet three elements: (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision. The plaintiff has the burden of proof of establishing these elements and, at the pleading stage, must clearly allege facts demonstrating each element.

This case hinges on whether Robins suffered an injury in fact, one of the required elements to establish standing. In order to establish an injury in fact, a plaintiff must show he/she suffered an invasion of a legally protected interest that is concrete and particularized, as well as, actual or imminent. An injury is particularized if it affects the plaintiff in a personal and individual way. A concrete injury must actually exist.

It is important to note the Court states that even for statutory violations, the plaintiff must have suffered a concrete injury. A plaintiff cannot allege a bare procedural violation and meet the Article III standing requirements. The Court provides the example of an incorrect zip code and indicates that it is difficult to imagine how the dissemination of the incorrect zip code, without more, could cause any concrete harm.

This case has the ability to heavily impact the debt collection industry. Consumer attorneys are already pleading their cases differently to account for the Court’s decision. Defense counsel are trying to see how this opinion can apply in other circumstances such as FDCPA and TCPA cases. We will continue to update clients as to how courts are interpreting Spokeo. Of note, many cases brought against the industry are purely technical. Despite being technical, this opinion will not provide clients the ability to dismiss many of the types of cases you regularly encounter. Spokeo is helpful, but the case is not a panacea.

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