News

Video Addresses the Abuses of TCPA Litigation

A website called “facesoflawsuitabuse.org” has created a short video (linked below) addressing the ridiculous nature of many Telephone Consumer Protection Act (TCPA) lawsuits.  As most people involved in the collection industry are aware, TCPA litigation has exploded over the last few years.  TCPA attorneys have continued to take aim at the collection industry and now seem to also be focused on large creditors and other significant business entities.  The more attention provided to lawsuits like the one discussed in the video, the more likely it becomes that the TCPA is adjusted in a positive manner via regulation or legislation.  There needs to be a practical solution that allows 21st century technology to be utilized in a fair and reasonable way without being inappropriately hitched to a law from 1991 that failed to foresee the ubiquitous nature of cellular telephones in 2014.

LA Lakers ‘Showtime’ Threatened by Class Action Lawsuit

Fourth Circuit Affirms Debt Collector Violated TCPA by Using Dialer to Call VoIP Landline

Lynn v. Monarch Recovery Mgmt., Inc., CIV. WDQ-11-2824, 2013 WL 1247815 (D. Md. Mar. 25, 2013) on reconsideration in part, 953 F. Supp. 2d 612 (D. Md. 2013) and aff’d, 13-2358, 2014 WL 4922451 (4th Cir. Oct. 2, 2014)

In Lynn, the Fourth Circuit upheld the U.S. District Court for the District of Maryland’s decision that the collector violated the TCPA’s “call charged” provision.

The collector placed 37 calls to the consumer’s residential landline using an automated telephone dialing system (“ATDS”) without the consumer’s prior express consent.  Unbeknownst to the collector, the consumer had converted his residential landline service to Voice over Internet Protocal (“VoIP”).  The consumer was charged (in six-second increments) a monthly rate of $1.49 and $0.0149 per minute for each of the collector’s incoming calls.  The consumer called the collector twice to advise the collector that he received per-minute charges for phone calls.  The collector called the consumer three more times after that notice.

The consumer filed suit against the collector alleging violations of the TCPA, the Maryland Telephone Consumer Protection Act (“MDTCPA”) and the FDCPA.

In the District Court, both parties filed motions for summary judgment on all counts.  The parties stipulated the calls were made via “ATDS” as defined by the TCPA.  There was no evidence that the calls were made with the consumer’s prior express consent or for emergency purposes.  The consumer submitted evidence that his VoIP service provider charged him for each call placed to his landline.

The District Court found, “even assuming that [the collector’s] conduct was permissible under the residential telephone line provision, it was prohibited under the separate call charged provision.” 2013 WL 1247815 (D.Md. Mar. 25, 2013) at *11.  The Fourth Circuit affirmed. 2014 WL 4922451 (4th Cir. Oct. 2, 2014) at *1.

The TCPA “Call Charged” Provision

The “call charged” provision of the TCPA, § 227(b)(1)(A)(iii), prohibits persons from making any call, without the prior express consent of the called party, using any ATDS or artificial or prerecorded voice to any telephone number assigned to “any service for which the called party is charged for the call.” 2013 WL 1247815 (D.Md. Mar. 25, 2013) at *3.

The “call charged” provision appears at § 227(b)(1)(A)(iii), while the “residential telephone line” provision appears at § 227(b)(1)(B).

The “residential telephone line” provision prohibits persons from initiating calls to any residential telephone line using an artificial or prerecorded voice to deliver a message without the prior express consent of the called party, unless the call is exempted by rule or order by the FCC.  TCPA § 227(b)(2)(B)(ii) authorizes the FCC to exempt from paragraph (1)(B) “such classes or categories of calls made for commercial purposes as the Commission determines—(I) will not adversely affect the privacy rights that this section is intended to protect; and (II) do not include the transmission of any unsolicited advertisement.”  With this authority, the FCC published 47 C.F.R. § 64.1200(a)(2)(iii), creating the familiar “established business relationship exemption,” whereby collectors have correctly been able to defend themselves from TCPA liability when calling consumer landlines using a dialer without express consent – until now (if VoIP is utilized by the consumer and the consumer is charged for the call).  2013 WL 1247815 (D. Md. Mar. 25, 2013) at *3.

In Lynn, the collector argued that the calls it made to the consumer were properly exempted from TCPA liability because the calls were made to a residential phone line for a commercial purpose without any solicitation – pursuant to the “established business relationship exemption.”  The Fourth Circuit affirmed the District Court’s determination that the TCPA’s “call charged” provision is wholly distinct from the TCPA’s residential phone line provision and the FCC’s exemption for calls related to an established business relationship.  “[E]ven assuming that [the consumer’s] use of VoIP service did not fundamentally change the nature of his residential telephone line, [the consumer] has established that the service charged him for the calls. [The consumer’s] TCPA claim thus fits squarely within the separate, prohibition of the call charged provision.”  2013 WL 1247815 (D. Md. Mar. 25, 2013) at *7.

The Take-Away

Obtaining and documenting the consumer’s prior express consent is the cornerstone to defending any TCPA claim.  Case law is developing towards a broader definition of consent.  Whenever an entity engages in any sort of automated dialing or prerecorded messaging, entities should continue to press clients for specific TCPA consent language in all consumer credit agreements that eventually lead to the collection account.  Also, it remains important to remember how lucrative TCPA claims have become for the consumer bar.  TCPA claims have grown at a rapid pace over the last few years.  If you have questions regarding this case or its application to your practices, please contact the firm.

New Case Impacts Use of “Benign” Language

There are various statements by the court in the case of Douglass v. Convergent Outsourcing that agencies should make sure to understand and apply to their notices. 2014 WL 4235570 (3rd Cir. 2014). Of note, the Third Circuit Court of Appeals sets precedent for the federal district courts in Delaware, New Jersey, and Pennsylvania. Despite the limited geographical scope of the opinion, the outcome will generate additional litigation on this issue. Consumer attorneys will actively advance any new theory against the collection industry. The account number at issue in this case was the account number of the collection agency rather than the account number of the original creditor, but this does not appear to be an overly important distinction because practically, there should be no reason for an agency to put the original creditor account number in an envelope window. If an agency is using the same account number as the original creditor, the agency’s use of the creditor account number falls squarely within the facts of this case.

Despite the language at issue being visible through the window rather than on the envelope, the court holds “§ 1692f(8) applies to language visible through a transparent window of an envelope.” Id. at *3. There are prior cases on this issue that held certain language on an envelope to be “benign” and therefore not in violation of the FDCPA. In the cases supporting “benign” language the information on the envelope “revealed no information about the debtor” (for example “personal & confidential”). Id. at *5. In this case the court states that the account number “is not meaningless – it is a piece of information capable of identifying Douglass as a debtor.” Id. at *6.

The court in Douglass believes the account number is a core piece of information related to the consumer’s status as a debtor and the agency’s debt collection effort. Id. at *4. If the number is disclosed to the public, it may expose the consumer’s financial situation. Id. The potential exposure is the essence of the problem and distinguishes this case from the line of cases where “benign” language was on an envelope.

In light of this case, agencies should carefully review any and all information that is on a collection notice envelope or that will appear through the envelope’s window with a qualified attorney. The review should include words, letter sequences, number sequences, symbols, bar codes, and any other printed item. Consumer attorneys will consistently argue that any debtor related information is problematic. Agencies may continue to argue that certain statements, numbers, language, or symbols are benign, but it is important to understand that agencies are left arguing the exception to the rule, and the exception is narrowed by the Douglass opinion.

Chad to speak at fall conferences

Topics to be discussed include bankruptcy, the analysis on whether or not certain debts on campus qualify as “student loans” pursuant to the United States Bankruptcy Code, and steps schools can take to better protect their debts from being discharged.  Other topics to be explored are legal hot topics, along with a discussion focusing on the current legal issues facing the collection industry and the impact those issues have on the higher education community.

Williams & Fudge, Inc.’s Student Loans & Receivables Collection Conference in Charlotte, NC

September 28th through October 1st

Texas BUC$’s 2014 Annual Conference “BUC$ by the Bayou” in Houston, TX

October 12th through October 15th

Since 1996, the Texas Association of Bursars and University Cashier$ (BUC$) has organized a professional forum for student business office administrators and staff to discuss issues relevant to student business services. This year’s 19th annual Texas BUC$ conference will continue in this endeavor, providing necessary networking opportunities and exhibitions to continually approve the student business services industry across all public, community, and private sector levels.

Minnesota Collection Network’s Mega Conference XXII in Minneapolis, MN

October 26th through October 29th

With an emphasis on Upper Midwest professionals working at the university and college level, the Minnesota Collection Network is proud to host it’s 26th annual conference on Campus Based Programs and Student Accounts Receivable. The Minnesota Collection Network prioritizes increasing communications between educational institutions and offers this conference as an affordable colloquium to the collection industry for this purpose.

New York Assembly Passes New Debt Collection Bills

The New York State Assembly recently passed a package of bills targeting the debt collection industry.  The new legislation addresses increased disclosure requirements to consumers, codifying new requirements for collection lawsuits, and requiring statewide licensure for collectors. For more information, please see Patrick Lunsford’s June 12th article on insideARM.

New Case Impacts Validation Process

Collectors may be required to provide consumer additional proof of debt information than is currently customary.

Haddad v. Alexander, Zelmanski, Danner & Fioritto, PLLC, 13-2026, 2014 WL 3440174 (6th Cir. July 16, 2014).

On July 16, 2014, the United States Court of Appeals in the Sixth Circuit found, pursuant to the FDCPA, “verification of a debt requires a debt collector to provide the consumer with notice of how and when the debt was originally incurred or other sufficient notice from which the consumer could sufficiently dispute the payment obligation.”

The plaintiff, a condominium owner, brought action against the collector law firm, alleging violations of the FDCPA and Michigan Collection Practices Act.  On behalf of condominium homeowner association (“HOA”), the collector attempted to collect unpaid HOA assessments/fines from the plaintiff.  The plaintiff disputed the debt within the 30 day period pursuant to FDCPA § 1692g and the collector provided him a recent copy of his HOA account ledger (the “POD”).  The plaintiff contacted the collector again and disputed the POD and requested more information regarding at least one line-item appearing on the account ledger.  The collector responded a second time to the plaintiff and provided another account ledger evidencing the HOA debt.

The plaintiff argued the collector did not adequately verify the debt as required in § 1692g(b).

The FDCPA does not specify what the process of “verification” requires.  As a matter of first impression, the Sixth Circuit took on the question in Haddad.  The court found that the POD information provided to Haddad was inadequate for the plaintiff to “sufficiently dispute the payment obligation.”  The court explained that the FDCPA’s verification provision “must be interpreted to provide the consumer with notice of how and when the debt was originally incurred or other sufficient notice from which the consumer could sufficiently dispute the payment obligation. This information does not have to be extensive. It should provide the date and nature of the transaction that led to the debt, such as a purchase on a particular date, a missed rental payment for a specific month, a fee for a particular service provided at a specified time, or a fine for a particular offense assessed on a certain date.”

This development is especially relevant for our clients collecting medical and higher education obligations in that the POD is often presented in a way that could be confusing for the least sophisticated consumer.

The Fifth Circuit Court of Appeals oversees the federal courts in Kentucky, Michigan, Ohio, and Tennessee.

Please contact the firm if you have additional questions regarding the impact of this case.

Chad at Western Student Financial Services Conference in Portland, Oregon

Chad was invited to speak at the Western Student Financial Services Conference at Portland State University on July 28th, 2014.  The subject of his first session was bankruptcy and the analysis on whether or not certain debts on campus qualify as “student loans” pursuant to the United States Bankruptcy Code, and steps schools can take to better protect their debts from discharge.  His other session focused on legal hot topics, including a discussion focusing on the current legal issues facing the collection industry and the impact those issues have on the higher education community.

New West Virginia State Specific Text Requirements Effective June 6, 2014

Effective June, 6, 2014, debt collection entities collecting debt in West Virginia will need to update their collection letters to comply with new notice requirements when pursuing debts that are beyond the statute of limitations, including informing the consumer that the creditor or collector cannot sue to collect the debt.  This is a trend that follows Connecticut (similar requirement became effective earlier this year & case law from the 7th Circuit that impacts the collection of debts past their applicable statutes of limitations).

Debt collectors pursuing debts that are beyond the statute of limitations in West Virginia need to make modifications to collection notices to comply with recent changes to the West Virginia Code.  The bill (2014 H. B. 436) created a new text disclosure under W. Va. Code § 46A-2-128(f) that is required when debts are beyond the applicable statute of limitations.

The law requires that a debt collector seeking to collect on a debt beyond the statute of limitations for filing a legal action must inform the consumer that the creditor or collector cannot sue to collect the debt and disclose whether the debt can still be reported to a consumer reporting agency. The required disclosure reads as follows:

[When collecting on a debt that is not past the date for obsolescence provided for in Section 605(a) of the Fair Credit Reporting Act, 15 U. S. C. 1681c]

“The law limits how long you can be sued on a debt. Because of the age of your debt, (INSERT OWNER NAME) cannot sue you for it. If you do not pay the debt, (INSERT OWNER NAME) may report or continue to report it to the credit reporting agencies as unpaid.”

[When collecting on debt that is past the date for obsolescence provided for in Section 605(a) of the Fair Credit Reporting Act, 15 U. S. C. 1681c]

“The law limits how long you can be sued on a debt. Because of the age of your debt, (INSERT OWNER NAME) cannot sue you for it and (INSERT OWNER NAME) cannot report it to any credit reporting agencies.”

The notice must be provided in the initial written communication when the debt is beyond the statute of limitations.  Debt collection entities collecting debts in West Virginia should act immediately to comply with this new requirement.

CFPB Proposes Rule on Gramm-Leach-Bliley Act Privacy Notice Requirements

On May 13, 2014, the Consumer Financial Protection Bureau (“CFPB”) released a Proposed Rule Amendment to the Annual Privacy Notice Requirement Under the Gramm-Leach-Bliley Act.  Many financial institutions currently mail printed copies of the annual GLBA privacy notices to their customers, but have expressed concern that this practice causes information overload for consumers and unnecessary expense.  In response to such concerns, the CFPB is proposing to allow financial institutions that do not engage in certain types of information-sharing activities to stop mailing an annual disclosure if they post the annual notices on their websites and meet certain other conditions.

The Proposed Rule would apply to various types of financial institutions that provide consumer financial products and services, and the CFPB is currently encouraging comments on the proposal through June 12, 2014.  At this time, there is no clear date that the Proposed Rule might go into effect.  The CFPB is expected to announce updates after the June 12, 2014 deadline for submission of comments.

Summary of the Proposed Rule

Specifically, the proposal would allow financial institutions to use the proposed alternative delivery method for annual privacy notices if the conditions below are met.  Covered financial institutions should analyze if they meet each of these criteria, and therefore may qualify to use the alternative delivery method if/when the Proposed Rule goes into effect.

  1. the financial institution does not share the customer’s nonpublic personal information with nonaffiliated third parties in a manner that triggers GLBA opt-out rights;
  2. the financial institution does not include on its annual privacy notice an opt-out notice under section 603(d)(2)(A)(iii) of the Fair Credit Reporting Act (FCRA);
  3. the financial institution’s annual privacy notice is not the only notice provided to satisfy the requirements of section 624 of the FCRA;
  4. the information included in the privacy notice has not changed since the customer received the previous notice; and
  5. the financial institution uses the model form provided in the GLBA’s implementing Regulation P. A financial institution would still be required to use the currently permitted delivery method if the institution, among other things, has changed its privacy practices or engages in information-sharing activities for which customers have a right to opt out.

Compliance Step 1: Annual Statements to Customers

To comply with the proposed rule (as currently proposed), a financial institution would need to insert a clear and conspicuous statement, at least once per year, on a notice or disclosure issued under any other provision of law, e.g. as an insert with a billing statement.  The statement must include the following information for customers:

  • the privacy notice is available on the company’s website;
  • it will be mailed to customers who request it by calling a toll-free telephone number; and
  • the privacy notice has not changed since the customer received the previous notice.

Compliance Step 2: The Alternative Delivery Method via Website Post

To comply with the proposed rule, the current model form would be continuously posted in a clear and conspicuous manner on a page of the financial institution’s website without requiring a login or similar steps to access the notice.

To assist customers with limited or no access to the internet, a company would have to mail annual notices promptly to customers who request them by phone.

To access the Proposed Rule, see the following link: https://www.federalregister.gov/articles/2014/05/13/2014-10713/amendment-to-the-annual-privacy-notice-requirement-under-the-gramm-leach-bliley-act-regulation-p#p-14

The North Carolina Dept. of Insurance (N.C. Dept. of Insurance oversees collection agencies) settles with agency for charging transaction fees:

In April 2014, the Commissioner of the North Carolina Department of Insurance (“NCDOI”) brought an action against a debt collector after receiving a complaint from a consumer about a $10.00 transaction fee.  NCDOI discovered that the company collected $20,912.50 in such fees from North Carolina consumers, between June 1, 2010 and June 5, 2013, where the individual fees ranged from $5.00 to $10.00.

Rather than face an administrative hearing to determine whether charging the fees was in violation of state law, the collector voluntarily agreed to stop collecting transaction fees from North Carolina consumers and agreed to pay a civil penalty of $21,412.50 for the fees collected.

The collector also agreed to fully reimburse any North Carolina consumer who paid the company a processing fee between June 1, 2010, and June 5, 2013 upon receipt of written request from the consumer within one year of the settlement.

The NCDOI’s position on the application of N.C. Gen. Stat. Section 58-70-115(2) should cause collection agencies doing business in North Carolina to carefully analyze the assessment of any “collection fee” including fees assessed for processing certain types of payments.

If you would like more information on this settlement or its impact on your business, please contact the firm.

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