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.

Chad Echols’ Spring 2017 Conference Engagements

Chad continues to support the Collection Industry through various speaking engagements at conferences around the country.

Please contact Chad about speaking at an upcoming event in your area.  This spring he will present at the following conferences:

North Carolina Association of Community College Business Officials (ACCBO) Spring 2017 Conference in Pinehurst, NC
March 6th through March 8th

National Association of College and University Business Officers (NACUBO) 2017 Student Financial Services Conference in Las Vegas, NV

March 19th through March 21st

Colorado Association of Administrators of Student Loans and Account Receivables Conference 2017 (CAASLAR) in Blackhawk, CO

April 19th through April 21st

North Carolina Collectors Association 2017 Tri-State Collector’s Conference in Wilmington, NC

April 26th through April 28th

PacWest Student Financial Services Conference 2017 in La Jolla, CA

May 17th through May 19th

Chad Echols Selected as 2016-2017 ACA Attorney State Chair for South Carolina

Chad Echols is proud to support the credit and collection industry as ACA International’s selection for Attorney State Chair for the state of South Carolina. This role provides ACA Association Units and ACA members with a legal resource and referral attorney licensed to practice in South Carolina.

The 2016-2017 term marks Chad’s fifth consecutive year serving as ACA International’s South Carolina Attorney State Chair.

COHEAO Webinar with Chad Echols: “Bankruptcy Issues in Student Lending and Higher Education Receivables”

We are pleased to announce that Chad will present a webinar for the Coalition of Higher Education Assistance Organizations (“COHEAO”) on Thursday, October 13, 2016 at 2:00pm EST. COHEAO’s announcement notes the details of Chad’s presentation:

“COHEAO is pleased to announce its upcoming webinar, “Bankruptcy Issues in Student Lending and Higher Education Receivables” with Chad Echols of The Echols Firm, LLC. Set for Thursday, October 13 at 2 PM Eastern Time, this webinar will review the latest in the always evolving topic of bankruptcy in higher education collections. Don’t wait, sign up today!

Chad will provide an entertaining, expert update on legal matters and review some best practices to protect your institution.  Chad’s practice focuses on the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, the Telephone Consumer Protection Act, compliance for collection agencies and debt purchasers, business law, litigation, and commercial collections. He is a member of the South Carolina Bar Association.”

Should you like to attend the webinar, please register here.

Chad Echols’ Spring 2016 Conference Presentations

Chad continues to support the Collection Industry through various speaking engagements at conferences around the country.

Please contact Chad about speaking at an upcoming event in your area.  This spring he will present at the following conferences:

Coalition of Higher Education Assistance Organizations Conference 2016 in Washington, DC

January 31st through February 3rd

South Carolina State Bursar’s Meeting at the University of South Carolina

February 18th

Colorado Association of Administrators of Student Loans and Account Receivables in Golden City, CO

April 21st through April 22nd

PacWest Student Financial Services Conference 2016 in Olympic Valley, CA

May 11th through May 13th

Collection Law Firms in the Cross-hairs of Regulations

Massachusetts Attorney General Maura Healy filed a lawsuit against Lustig, Glaser & Wilson, P.C. stemming from allegations that the law firm “repeatedly sued consumers for debts they did not owe or debts that were inaccurate,” according to a news release from the attorney general.

The lawsuit was filed less than a week before the Consumer Financial Protection Bureau and Frederick J. Hanna & Associates, P.C., et al. reached a joint settlement in a similar case after nearly two-and-a-half years of investigation.  The settlement between the CFPB and the Hanna firm marked the end of an unprecedented federal lawsuit which the CFPB filed against Hanna in the U.S. District Court for the Northern District of Georgia.

In both instances, the volume of the collection lawsuits looks to have been a major factor in attracting the attention of the regulators.  The CFPB claimed the Hanna firm violated the FDCPA and the Consumer Financial Protection Act in its process of filing consumer lawsuits using affidavits of claim from the creditors in state court debt collection proceedings.  In the Massachusetts case, the Attorney General alleges the firm, “violated the state’s consumer protection laws in pursuit of debts and its use of judicial proceedings.” The complaint includes allegations that the firm filed more than 100,000 debt collection lawsuits in Massachusetts.  Notably, the Massachusetts Attorney General is seeking injunctive relief, restitution to consumers and civil penalties from the Lustig law firm.

Supreme Court Holds an Unaccepted Rule 68 Offer of Judgment Does Not Moot the Case

On January 20, 2016, the U.S. Supreme Court ruled 6-3 in favor of a consumer in the class action TCPA case Campbell-Ewald Co. v. Gomez, No. 14-857, 2016 WL 228345, —S.Ct.—- (U.S., Jan 20, 2016).  The Court addressed the principal question of whether an offer of judgment for complete relief extended to the lead plaintiff in a purported class action (that had not yet been certified as a class) rendered the plaintiff’s class claims moot when the plaintiff rejected the offer.  This question has been the source of frequent litigation and circuit conflict in many other class actions.

The Court held that an unaccepted settlement offer or offer of judgment to satisfy the named plaintiff’s individual claims does not moot the case when the complaint seeks relief on behalf of the plaintiff and a class of persons similarly situated.  The case was remanded back to the U.S. District Court for the Central District of California to decide the case.

[The Court also considered whether the doctrine of derivative sovereign immunity applies to claims for violation of the TCPA, and held that federal contractors do not share the Government’s absolute immunity from liability and litigation.]

The facts: in 2005 the U.S. Navy entered into a contract with the defendant, Campbell-Ewald Co., where Campbell would provide recruiting and advertising services.  As part of this contract, Campbell orchestrated more than 100,000 Navy-branded text messages to cell phone subscribers.  Many of the texts were issued to individuals who had not opted-in to receive such messages.  The named plaintiff, Jose Gomez, filed a class action complaint against Campbell, alleging that the company had violated the TCPA by sending text messages to nonconsenting recipients.  Before Gomez moved for class certification, Campbell extended a Rule 68 offer of judgment and a separate settlement offer to Gomez which Gomez refused.  Campbell argued that this offer of “complete relief” to Gomez rendered his individual and class claims moot.

At trial, the U.S. District Court for the Central District of California held that Gomez’s claims were not moot, and when Campbell appealed that ruling, the U.S. Court of Appeals for the Ninth Circuit affirmed the district court decision.  Campbell petitioned the U.S. Supreme Court for review, which was granted on May 18, 2015.

Justice Ruth Bader Ginsburg issued the Court’s majority opinion affirming the Ninth Circuit’s holding.  Justice Ginsburg explained that Gomez’s complaint was not eliminated by Campbell’s unaccepted offer to satisfy his individual claim.  The Court’s majority applied basic principles of contract law, reasoning that “Campbell’s settlement bid and Rule 68 offer of judgment, once rejected, had no continuing efficacy.  Absent Gomez’s acceptance, Campbell’s settlement offer remained only a proposal, binding neither Campbell nor Gomez.  Having rejected Campbell’s settlement bid, and given Campbell’s continuing denial of liability, Gomez gained no entitlement to the relief Campbell previously offered.”

In a detailed and pointed dissenting opinion, Chief Justice John Roberts thoroughly examined and criticized the majority opinion’s reliance on contract law to resolve the central issue in the case.  Chief Justice Roberts said, “[t]he majority is correct that because Gomez did not accept Campbell’s settlement, it is a “legal nullity” as a matter of contract law. The question, however, is not whether there is a contract; it is whether there is a case or controversy under Article III. If the defendant is willing to give the plaintiff everything he asks for, there is no case or controversy to adjudicate, and the lawsuit is moot.”

Grounding his dissent on the prohibition against federal courts issuing advisory opinions, Chief Justice Roberts, joined by Justices Scalia and Alito, explained that they dissented from the majority opinion because “federal courts exist to resolve real disputes, not to rule on a plaintiff’s entitlement to relief already there for the taking.”

The Campbell-Ewald case has significant ramifications for “no-injury” statutory damage class action lawsuits filed under federal statutes such as the FCRA, the TCPA and the FDCPA. In those suits, plaintiffs often seek the specific damages provided for by statute, not actual damages. As a result, a plaintiff’s maximum recovery can be predetermined. Prior to the Supreme Court’s decision in Campbell-Ewald, if a defendant made a Rule 68 offer of judgment in the statutory amount, plus attorneys’ fees, the plaintiff’s claim could be mooted because the plaintiff would have been considered afforded complete relief. But now, under the Campbell-Ewald decision, defendants may not successfully utilize a Rule 68 offer to moot the litigation.

However, Campbell-Ewald has not completely eliminated Rule 68 as a class action defense tool. Although a mere offer of the sum owed is insufficient to eliminate a court’s jurisdiction to decide the case to which the offer related, Justice Roberts confirmed in the dissent that “[t]he good news is that this case is limited to its facts. The majority holds that an offer of complete relief is insufficient to moot a case. The majority does not say that payment of complete relief leads to the same result. . . . the majority’s analysis may have come out differently if Campbell had deposited the offered funds with the District Court. . . . This Court leaves that question for another day – assuming there are other plaintiffs out there who, like Gomez, won’t take ‘yes’ for an answer.”

Although the Campbell-Ewald decision “does not prevent a defendant who actually pays complete relief – either directly to the plaintiff or to a trusted intermediary – from seeking dismissal on mootness grounds,” the Court, unfortunately, did not consider the practical aspects of how a defendant might actually pay for complete relief, rather than merely offer complete relief, when a plaintiff in a variety of contexts may be entitled to not only fixed statutory damages, but also attorneys’ fees, which are in an undetermined amount.

New Colorado AG Website Prompts Mandatory Revisions to Collection Notices

Colorado Updated the Website Address Required on all Debt Collection Notices

The Colorado Attorney General’s Office announced in a recent e-mail sent to Colorado licensees that the website address required to be listed on all initial debt collection communications has been updated.

Collection agencies should immediately update initial notices sent to Colorado consumers so that the state-specific disclosure on the letters lists the correct website address.   Initial notices must be updated to the following text:


Strikingly, the text of the Colorado statute requiring the disclosure has not been amended and still currently lists the old website address for the Attorney General’s office. However, be advised that the statute specifically stipulates, “if the web site address is changed, the notification shall be corrected to contain the correct address.”

Along with the new website address, the Attorney General’s Office also announced that all Office email addresses now coincide with the new website and end in, to include the  main licensing and registration email address, which is now listed as: (note the change from “cab” to “car”).  The old email addresses will only reroute to the new system for a limited time, so it highly recommended that you update your records now to ensure proper delivery of any emails sent to the Colorado Attorney General’s Office in the future.

Recent Court Decisions Impacting the Industry

Favorable Decision Regarding Voicemails

An Oregon federal court issued a favorable opinion for the industry in December of 2015 in Peak v. Professional Credit Service. The voicemail at issue in the case was very similar to the voicemail from the well known Zortman opinion. The court held the voicemail was a communication, but not a communication “with” a third party. According to the court, it would be unfair to hold debt collectors liable for third party communications in these situations, unless it was reasonably foreseeable that a third party could overhear the message. Some of the factors the court found worked in the collector’s favor were; (1) it was not reasonably foreseeable that a third party could hear the message (2) it was a cell phone; (3) the voicemail greeting identified only the plaintiff; and (4) plaintiff indicated it was the “best” number to reach her. The court noted that if only one of those three factors had been present, there would have been an issue of fact as to whether the disclosure was reasonably foreseeable, but because all three factors were favorable to the collector, the court granted summary judgment in favor of the collector.

Adverse Decision When Leaving a Message with a Third Party

Halberstam v. Global Credit and Collection Corp., No 15-5696, 2016 WL ——- (E.D.N.Y. Jan 12, 2016).

The collector called the consumer’s number, a third party answered, stated the consumer was not home yet and asked to take a message. The collector then gave his name and number. When the collector was specifically asked what the call was regarding, the collector said it was about a “personal business matter.”

The issue before the court was whether the collector, whose telephone call to a consumer is answered by a third party, may leave his name and number for the consumer to return the call, without disclosing that he is a debt collector, or whether the debt collector must refrain from leaving callback information and attempt the call at a later time.

The federal district court in New York ruled that the collector must not answer those questions, end the call, and try again later. The court’s reasoning was that the collector withheld information about his identity as a collector, and this may induce the consumer to contact the debt collector – because the consumer does not know whose call he is returning. The court explained that the consumer may not wish to speak to the collector, and it was the undisclosed nature of the message with the third party that induced the consumer to call the collector. The court found that this is an undesirable result and so the debt collector must refrain from leaving callback information and attempt the call at a later time.

The key points/facts from this case are that if a third party asks, the collector is to state the name of their employer. Prior to that, they are required to give their name only. So the only information that was given that is not covered by the FDCPA are the call back number and personal business matter. This is a single district court decision that we understand is likely to be appealed to the 2nd Circuit Court of Appeals. The firm suggests you understand the theory of liability, review your procedure for interacting with third parties, and watch this case as it develops on appeal.

From the MAPlist:

There has been a significant amount of recent activity on this issue arising from the consumer bar – to include matters involving several members of the Halberstram family. We have gathered from our colleagues and friends who also defend the industry that there are several consumer plaintiff attorneys who are likely training their plaintiffs to have family members answer the phone and solicit a message from the collector.

Be aware of this issue if you regularly come in contact with NY and/or NJ firms such as: Harvey Rephen, Natasha Santiago, David Palace, Barshay Sanders, Fishbein and Maximov.

The path of least liability suggest that in this region collectors should respond: “No. Thank you. Have a nice day” if a third party asks to take a message.

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Rock Hill, SC 29730

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