Archives for February 2016

Court Rules in Favor of Law Firm and Creditor in Four Year Old FDCPA and Bankruptcy Case

February 21, 2016 By admin Leave a Comment

Joann Needleman

After four years and two appeals, the case of Simon et v. FIA Card Services et al., stemming from communications surrounding sending a bankruptcy subpoena, has finally been resolved in favor of the attorneys as well as the creditor.

The history of Simon is as follows:

Simon I

Plaintiffs filed a Chapter 7 bankruptcy and a credit card debt owed to FIA was included in their petition. Defendant, law firm, Weinstein & Riley, on behalf of FIA sent two letters to Plaintiff’s counsel advising him that their client was contemplating a non-dischargability proceeding and offered to settle account. The letters also referred to and attached Notices of Examination pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure (FRBP), which are subject to FRPB 9016 and Federal Rule of Civil Procedure (FRCP) 45. The Notices included a certificate of service that attested that copies were also mailed to Plaintiff at their home address. However the law firm did not in fact send the notices to the Plaintiffs.

Plaintiffs brought a federal lawsuit in the District Court of New Jersey alleging Defendants violated §§ 1692e, e(5), e(11) and e(13) of the FDCPA. Plaintiffs alleged that Defendants violated §§ 1692e(5) & (13) by failing to comply with FRCP 45 in four ways:

By failing to send the Notice to the Plaintiff at their home address as required under FRCP 45;
By specifying a location in New York rather than New Jersey for the examination;
By failing to include the full subpoena text; and
By failing to include in the subpoena the method of recording

Defendants filed a motion to dismiss arguing that Plaintiffs’ claims were precluded by the Bankruptcy Code; the District Court agreed. Relying on the reasoning of the Ninth Circuit in Walls v. Wells Fargo, 276 F. 3d 503 (9^th Cir. 2002) and the line of cases thereafter including similar cases decided within the Third Circuit, the District Court found no reason to bypass the remedial scheme of the Bankruptcy Code in favor of the FDCPA and granted the Defendants’ motion. The District Court found that the alleged failures to follow FRCP 45 were either contradicted by the documents upon which the claims were based or not sufficiently pled. The Plaintiffs appealed.

The Third Circuit disagreed in part. While it affirmed the dismissal of the § 1692e(5) & (13) because Defendants fully complied with FRCP 45 as it related to the location of the examination and the method of recording, the Circuit Court reversed the District Court’s holding that the Bankruptcy Code precluded Plaintiff’s FDCPA claims, stating that the proper inquiry was whether a direct conflict existed between the Bankruptcy Code and the FDCPA or whether both can be enforced. In the case of the § 1692e(11) claim, a direct conflict did exist because to insert the mini-Miranda warning on the Notice would be in direct conflict with the Bankruptcy Code. The Circuit Court did conclude that there was no conflict between the Defendants’ ability to comply with FRBP 9016 and FRCP 45 and the FDCPA, when it failed to send the subpoena to the Plaintiffs directly and when it failed to include the full text of the subpoena. As to those claims, the Circuit Court reversed, and the remainder of the case was remanded to determine whether the FDCPA was in fact violated.

Simon II

Returning to the District Court, both the law firm and the Plaintiffs moved for summary judgment on the remaining issues. FIA moved for summary judgment that is was not a debt collector, which was granted. As to the issue of the failure to serve the Plaintiffs at their home address, the District Court found persuasive the line of case which read a materiality requirement inherent in the FDCPA’s prohibition on false, deceptive and misleading collection practices. The Court stated that the “FDCPA is ‘designed to provide information that helps consumers chose intelligently and by definition, immaterial information neither contributes to that objective (if the statement is correct) nor undermines it (if the statement is incorrect).”

Further, the Court found that, although the subpoena did not comply with FRCP 45, whether that failure amounted to a false or deceptive act must be decided by the “competent attorney standard.” Under the circumstances, since the communication only went to the attorney, the Plaintiffs were fully protected and the attorney was not otherwise deceived by the communication. Summary judgment was granted to the law firm. Plaintiffs appealed again to the Third Circuit.

By the time of the second appeal, Jensen v. Pressler & Pressler had been decided by the Third Circuit and incorporated the requirement that a false statement be material to be actionable. Adopting the logic of Jensen, the Third Circuit affirmed that the false statements in the subpoena were not material, although the court declined to adopt the “competent attorney standard.” The court found that while the subpoenas did not set forth the text verbatim, they did not contradict them in any way which would mislead the least sophisticated consumer.

There are several take-aways from Simon.

First and foremost, some of the simplest arguments are the best. Granted had it not been for Jensen, Simon II may have been more difficult, but you get the sense from the Judge’s opinion that Plaintiffs’ claims of undeniable deception simply did not hold water. Practicality finally won the day in Simon. While some of the Third Circuit’s holdings regarding preclusion have been successful for subsequent cases at the District Court level, especially Torres v. Cavalry, which is currently pending on Plaintiffs’ appeal, one wonders whether Simon had to even address the preclusion issue at all. As Simon I found, even if the claims were not precluded, the complaint on its face still failed to state a claim. Kudos to the Weinstein Firm and FIA for fighting the good fight.

Court Rules in Favor of Law Firm and Creditor in Four Year Old FDCPA and Bankruptcy Case
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Accounts Receivable Management

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FTC Touts Record of Outreach, Addressing “Troubling Issues” in Debt Collection

February 21, 2016 By admin Leave a Comment

Two news items were released yesterday by the Federal Trade Commission (FTC) Office that should be reviewed by the ARM industry.

First, Chris Koegel, Assistant Director, Division of Financial Practices, at the FTC published a blog, A Year in Debt Collection. The blog is essentially a “year in review” for 2015 activities at the FTC. Koegel noted: “During 2015, the FTC made a plan to address some new and troubling issues in debt collection. Throughout the course of the year, we stuck to that plan – bringing a record number of new cases, banning bad debt collectors, talking with industry, and finding new ways to do outreach.”

During 2015, the FTC coordinated the first federal-state-local enforcement initiative (Operation Collection Protection) against debt collectors – including actions by more than 70 different partners – they also filed 12 new cases against 52 different defendants. The FTC also resolved 9 cases, obtaining nearly $94 million in judgments.

The FTC also added to their list of banned debt collectors in 2015 – and published the list.

Finally, Koegel wrote: “One of the really important things we did this year was talk with the debt collection industry. The Debt Collection Dialogues kicked off in Buffalo, and then continued in Dallas and Atlanta. At all three, to sold-out houses, we brought together the debt collection industry with the state and federal agencies that regulate them – allowing all perspectives to be heard.”

The FTC announced that it has sent a summary of its 2015 work on debt collection practices to the Consumer Financial Protection Bureau (CFPB) for inclusion in the CFPB’s annual report to Congress on the Fair Debt Collection Practices Act (FDCPA) as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. A copy of the summary can be found here. The FTC and the CFPB share enforcement responsibilities under the FDCPA.

In addition to discussion of the items mentioned in Koegel’s blog some of the other 2015 FTC activity in the summary included:

Prosecution of a sweep of cases against collectors that used unlawful text messages to collect debts;
Banning 30 companies and individuals that engaged in serious and repeated violations of law from ever working in debt collection again; and,
Filing three amicus briefs, two of them jointly with the CFPB, on key debt collection issues.

insideARM Perspective

The Koegel blog was a thoughtful and thorough review of FTC activity in 2015. insideARM applauds the FTC efforts to rid the industry of “bad actors.” Though, it could be argued that, for the most part, the “bad actors” were not truly members of the ARM industry or community. Rather, these “bad actors” are individuals that use debt collection as a “cover” or “disguise” for fraudulent and criminal activity. insideARM also supports the publication of the list of banned individuals and companies. We hope these individuals don’t reappear with a new company name in the future.

insideARM also wishes to thank the FTC for holding the Debt Dialogues in 2015. There is a significant lack of trust by consumers in the debt collection environment right now. The Debt Dialogues could lead to ideas to restore that lost trust. The debt collection industry serves an important role in the financial services ecosystem. We need to work together to make the system work better.

FTC Touts Record of Outreach, Addressing “Troubling Issues” in Debt Collection
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Debt Collectors Flooded with Mass-Produced Requests for Validation

February 21, 2016 By admin Leave a Comment

John Rossman,
Moss & Barnett

Debt collectors routinely receive requests for validation from consumers. The FDCPA provides specific guidelines and requirements for how consumers may request validation and the method in which a debt collector must respond. Recently, a small number of entities began issuing thousands of form requests for validation to collection agencies on behalf of consumers in an apparent attempt to force debt collectors to close accounts rather than provide validation. Questions have arisen as to how debt collectors should respond to the massive volume of form requests for validation and whether these form requests raise issues of consumer protection that should be reviewed by regulators.

In this episode of the Debt Collection Drill podcast, attorneys John Rossman and Mike Poncin discuss the recent challenges with volume form requests for validation and discuss strategies for responding in accordance with the FDCPA, along with the nuances of New York and Texas law that may affect how agencies respond.

Listen here:

http://traffic.libsyn.com/thedrill/TDCD__ep54.mp3

(If you cannot see the audio player above, please download the file directly at
http://traffic.libsyn.com/thedrill/TDCD__ep54.mp3)

Debt Collectors Flooded with Mass-Produced Requests for Validation
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7th Cir. Rejects FDCPA Allegations Involving Letters Sent to Debtor’s Counsel

February 21, 2016 By admin Leave a Comment

This post originally appeared on the Consumer Financial Services Blog, and is republished here with permission.

Stuart Miles

The U.S. Court of Appeals for the Seventh Circuit recently upheld the dismissal of allegations that two letters sent to the consumer’s counsel violated the federal Fair Debt Collection Practices Act (FDCPA), reiterating that its “competent attorney” standard applies regardless of whether a statement to the consumer’s counsel is false, misleading or deceptive.

A copy of the opinion in Bravo v. Midland Credit Management, Inc. is available at: Link to Opinion.

In a prior action, the debtor sued a debt collector for alleged violations of the FDCPA. The case settled with the collector settling and releasing two of the debtor’s debts. After settlement, the collector sent two letters to the debtor “care of” and addressed to the debtor’s attorney who represented the debtor in the first suit, demanding payment of the two debts released in the settlement.

The debtor filed a subsequent action alleging that the new letters violated the FDCPA. The debtor’s attorney reviewed the two letters sent by the collector, but never provided them to the debtor. The debtor claimed that the letters violated: 1) § 1692c of the FDCPA prohibiting contact with a consumer once a debt collector knows the consumer is represented by counsel, and 2) continuing to demand payment after the consumer has refused to pay. The debtor also alleged the letters made false and misleading statements that the debtor still owed debts that were previously settled.

The district court dismissed the debtor’s allegations under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. The debtor appealed and the Seventh Circuit affirmed.

The debtor argued that by sending the two letters to the debtor’s attorney, the collector violated § 1692c(a)(2) by continuing communication with a represented consumer. However, the Seventh Circuit disagreed, citing its ruling in Tinsley v. Integrity Financial Partners, Inc., 634 F.3d 416 (7th Cir. 2011), that “§ 1692c as a whole permits debt collectors to communicate freely with consumers’ lawyers.”

Because the debtor was represented by an attorney, and because the new letters were sent to the attorney, the Seventh Circuit declined to find that the debtor’s name on the envelopes was a communication with the consumer when the debt collector, knowing the consumer is represented by counsel under § 1692c(a)(2), sent the letters in “care of” to the address of the debtor’s attorney.

The debtor also argued that the two letters were an attempt to continue collection efforts after notification to cease in violation of § 1692c(c). However, the Seventh Circuit resisted the debtor’s invitation to distinguish this matter from Tinsley due to the fact that these two debts had been settled.

The Seventh Circuit based its determination on its ruling in Randolph v. IMBS, Inc. 368 F.3d 726 (7th Cir. 2004), that “[c]ourts do not impute to debt collectors other information that may be in creditors’ files – for example, that debt has been paid or was bogus to start with.” From Randolph, the Court reasoned that “it cannot limit a debt collector’s ability to communicate with a debtor’s counsel to only those incidents where a debt is owed.”

In addition, the Seventh Circuit rejected the debtor’s argument that the letters amounted to “false, misleading, or deceptive misrepresentations” in connection with the collection of a debt in violation of 15 U.S.C. §1692e.

The Court noted that it “has consistently held that with regard to ‘false, deceptive, or misleading representations’ in violation of § 1692e of the FDCPA, the standard is: (1) whether the debt collector’s communication would deceive or mislead an unsophisticated, but reasonable, consumer if the consumer is not represented by counsel or (2) whether a competent attorney would be deceived, even if he is not a specialist in consumer debt law.”

Despite the collector’s assertions in the two new letters that the debtor still owed debts that had in fact been settled, the Court reiterated that “the ‘competent attorney’ standard applies regardless of whether a statement is false, misleading or deceptive.” Evory v. RJM Acquisitions Funding L.L.C., 505 F.3d 768 (7th Cir. 2007)

Thus, the issue here was “whether a competent attorney, even if he is not a specialist in consumer debt law, would be deceived by two letters requesting payment for debts resolved in a settlement.” The Seventh Circuit held that “[o]n the facts before us, we believe a competent attorney would be able to determine whether his client continued to owe a debt after it was settled in full and would therefore not be deceived by the two letters.”

The Seventh Circuit declined to address the debtor’s arguments that the two letters violated § 1692e(5) because they contained threats of action the collector was not legally able to take, noting that these arguments were not raised at the district level and were therefore waived on appeal.

7th Cir. Rejects FDCPA Allegations Involving Letters Sent to Debtor’s Counsel
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Sixth Circuit Court of Appeals Affirms “Prior Express Consent” Defeats TCPA Claim in Healthcare Collections Case

February 21, 2016 By admin Leave a Comment

On February 12, 2016 the Court of Appeals for the Sixth Circuit issued an opinion affirming that “prior express consent” will defeat a claim in the Telephone Consumer Protection Act (TCPA). 47 U.S.C. § 227(b)(1)(A)(iii). The case, Baisden, et al. v. Credit Adjustments, Inc., (U.S. Court of Appeals, Sixth Circuit, No, 15-3411) arose out of an appeal of a District Court Summary Judgment Order. A copy of the opinion can be found here.

The putative class action arose out of Credit Adjustments, Inc.’s (“CA”) attempts to collect a little over one thousand dollars of medical debt incurred by Zachary Baisden and Brenda Sissoko (“plaintiffs”). Plaintiffs contended that CA violated the TCPA when it placed debt collection calls to their cell phone numbers using an “automatic telephone dialing system” and an “artificial or prerecorded voice.” CA neither disputed that it placed calls to their cell phone numbers nor that it used the technologies as alleged. Rather, CA contends that by virtue of plaintiffs’ provision of their cell phone numbers to the hospital where they received medical care, plaintiffs gave their “prior express consent” to receive such calls and, thus, it did not violate the TCPA as interpreted by the Federal Communications Commission (“FCC”)

The underlying facts of the case distinguish this matter from a simple, direct “prior express consent” case. In this case consent was be obtained by and conveyed through an intermediary. (Editor’s Note: The prior express consent methodology described below in this case is prevalent in many healthcare accounts that originate out of a hospital visit.)

Plaintiffs received medical care from Mount Carmel Hospital in Columbus, Ohio. Consultant Anesthesiologists provided anesthesiology services to each at Mount Carmel Hospital, billing Baisden $850.00 in 2011, and Sissoko $273.42 in 2009 and $171.52 in 2011. After plaintiffs did not pay these bills, Consultant Anesthesiologists transferred these delinquent accounts to CA. CA then called plaintiffs’ cell phone numbers, despite never having received their contact information directly from them. Instead, CA received the numbers from Consultant Anesthesiologists, which had received them from Mount Carmel Hospital.

As part of their admission for services to Mount Carmel Hospital, Baisden and Sissoko signed Patient Consent and Authorization forms covering “all medical and surgical care.”

Baisden’s authorization provides, in pertinent part, as follows:

Release of information

I understand Mount Carmel may use my health information for many reasons as needed:

– billing and payment (Emphasis added)

Sissoko signed two different forms. In 2011, she agreed to the same terms set forth for Baisden. The 2009 form, however, is different and provides in pertinent part as follows:

Release of information

I understand Mount Carmel may use my health information for a range of purposes including insurance/payment eligibility verification; billing and collecting moneys due from me, private and public payors or their agents including insurance companies, managed care entities, my employer, state and federal government programs and the Bureau of Workers’ Compensation; obtaining pre-admission or continued length of stay certification; quality of care assessment and improvement activities; evaluating the performance or qualifications of physicians and health care workers; conducting medical and nursing training and education programs; conducting or arranging for medical review and audit services; ensuring compliance with legal, regulatory and accreditation requirements, performance of autopsies, and; public health activities. I authorize Mt. Carmel to receive or release my health information, whether written, verbal, electronic including secured internet web sites or by facsimile to such employees, agents or third parties as are necessary for these purposes and to companies who provide billing services for physicians or other providers involved in my medical care. (Emphasis Added)

The court reviewed the four instances of prior FCC guidance on “prior express consent.”

1) In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 7 FCC Rcd. 8752, 8769 (1992) ,(the “1992 Order”).

2) In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 23 FCC Rcd. 559, 559 (2008), (the “2008 Ruling”)

3) 2014 GroupMe Declaratory Ruling, Matter of GroupMe, Inc./Skype Commc’ns S.A.R.L Petition for Expedited Declaratory Ruling Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 29 FCC Rcd. 3442, 3444 (2014) (the “GroupMe” ruling).

4) In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 30 FCC Rcd. 7961 (2015) (the “2015 Order”)

After reviewing the prior FCC guidance the court ruled that 1) there is no one specific way to provide express prior consent, 2) the scope of the consent must be determined by the facts in each situation, 3) callers may obtain consent through an intermediary, and, 4) after applying the specific facts of this case to the law, the plaintiffs provided “prior express consent” in this case.

The court determined:

“Consumers may give “prior express consent” under the FCC’s interpretations of the TCPA when they provide a cell phone number to one entity as part of a commercial transaction, which then provides the number to another related entity from which the consumer incurs a debt that is part and parcel of the reason they gave the number in the first place. More specifically, the provision of a cell phone number to a hospital that then provides that cell phone number to an affiliated physicians’ group that provided medical services to a consumer arising out of the same occurrence can constitute “prior express consent” under the TCPA.”

insideARM Perspective

The court’s opinion is a well-reasoned, practical decision. As noted earlier, this type of consent methodology is common for healthcare accounts arising out of a hospital visit. The fact that the court discussed all prior FCC guidance on the issue, including the controversial 2015 Order, is positive for the ARM industry. It will be interesting to see how other circuits will respond to similar fact situations.

Sixth Circuit Court of Appeals Affirms “Prior Express Consent” Defeats TCPA Claim in Healthcare Collections Case
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Judge Denies Prevailing Party’s Motion For Attorney Fees in Clear Cut FDCPA Case

February 21, 2016 By admin Leave a Comment

A recent opinion from the Honorable Robert D. Mariani, United States District Judge for the District Court of the Middle District of Pennsylvania, highlights the challenges of defending Fair Debt Collection Practices Act (“FDCPA”) litigation, even when a defendant is vindicated in a trial. The opinion in Hamburger v. Northland Group, Inc. (3:13-CV-01155), filed on February 10, 2015, discusses the request for an award of attorneys’ fees and costs for the prevailing party in an FDCPA case. A copy of the opinion can be found here.

The Background

Howard and Irene Hamburger, a husband and wife, filed a Complaint against Northland Group, Inc. on April 30, 2013 alleging causes of action under the FDCPA and Pennsylvania tort law. The Complaint alleged that Defendant, Northland Group, Inc. (“Northland”) repeatedly called the Plaintiffs to collect a debt of a third party identified only as “Henry”. It further alleged that neither Plaintiff was named Henry nor did they know an individual by that name. The Complaint further claimed that Northland called the Hamburgers every day to collect Henry’s debt, including “on occasion more than once in a single day, and that these calls continued even after Northland was informed that no one named Henry lived at the hamburger residence, and that Northland should stop calling about his debt.”

During and after discovery, the allegations in the Complaint began to unravel. Plaintiffs’ claim that they did not know any person named Henry was shown to be categorically untrue: the Plaintiff’s son was named Henry. During his deposition Howard Hamburger admitted that the automated calls alleged in the complaint said, “We are looking for Henry Hamburger.” Per the Order, “This admission makes clear, from the very onset of this case there could never have been any confusion as to whom the Defendant sought; Northland already gave Howard the full name of the debtor, which happened to be the exact name of his son. Thus the Complaint contained known false allegations.”

There was a dispute about the number of calls Northland made. Northland submitted account notes showing a total of 5 calls were made. Plaintiffs, on the other hand, claimed that the Defendant called them at least 7 or 8 times. Their only evidence of this was their personal recollections and a supposed call log where Irene Hamburger claimed that she “logged or wrote down” each call that came in. However, throughout the entire course of the litigation Plaintiffs never produced the call log and claimed at trial that they somehow lost it.

During trial the Plaintiffs testified about the times they were called by Northland, purportedly relying on the lost/missing call log and their own recollections. The Northland records were listed in Central Time Zone. The Hamburgers live in the Eastern Time Zone. Unfortunately, it appeared to the Judge that Plaintiffs were merely relying on the Northland call records produced in discovery by Northland and then “passed it off to Defendant, the jury, and the Court as if it were Hamburger’s own recollection. But in so doing, they did not realize that they would need to convert Northland’s call records to Eastern Time to make their false statements believable.” Finally, no evidence was ever produced by Plaintiffs on the other alleged calls.

After a short deliberation, the jury returned a verdict in favor of Northland on all counts. Northland then filed a motion for Attorney’s Fees and Costs. It was this motion that was the subject of the opinion.

The Opinion

Judge Mariani first discussed the “American Rule” regarding assessment of attorney’s fees in litigation.

Editor’s Note: The American Rule provides that each party to litigation is responsible for paying its own attorney’s fees, unless specific authority granted by statute or contract allows the assessment of those fees against the other party. The American rule contrasts with the English Rule, under which the losing party pays the prevailing party’s attorneys’ fees.

In its Motion Northland had asserted three exceptions to the American Rule that it believed entitled them to attorney’s fees and costs. Mariani outlined the three exceptions:

The FDCPA provides in part: “On a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment the court may award to the defendant attorney’s fees reasonable in relation to the work expended and costs.”
More generally, Congress provided that, “Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” 28 U.S.C. § 1927
Even if neither of these statutory schemes apply, “Courts of justice are universally acknowledged to be vested, by their very creation, with power to impose silence, respect, and decorum, in their presence, and submission to their lawful mandates. These powers are ‘governed not by rule or statute but by the control necessarily vested in courts to manage their own affairs so as to achieve the orderly and expeditious disposition of cases.’”

In discussing the first potential justification Mariani wrote, “…It does not appear that the Hamburgers brought this case for any reason other than satisfying a perceived grievance. Their trial testimony insisted that they did in fact receive multiple harassing phone calls from debt collectors. Their entire strategy throughout litigation had been to receive compensation for this conduct. But their case’s fatal flaw was simply that, while they may indeed have been repeatedly contacted by some debt collectors, they had no evidence supporting their attempt to blame all of that conduct on Northland. In other words, their case arose out of what appears to be a legitimate grievance, though the subsequent litigation over it was poorly prepared, sloppily executed, and devoid of evidentiary support for the sweeping claims against Northland. The FDCPA is not designed to penalize such litigants, who litigate honest grievances but utterly fail to prove them.

In discussing the second potential justification Mariani wrote, “There is no evidence that Plaintiffs’ attorneys “multiplied the proceedings” through any sort of delaying tactics. As poorly as Plaintiffs’ attorneys acted over the course of this case, they did not unduly multiply the proceedings and, as such, their misconduct falls outside the scope of section 1927.

Finally, in discussing the third potential justification Mariani wrote,

“Defendant is strongest when it argues in favor of sanctions under our inherent power. The evidence strongly suggests that the Hamburgers and their attorneys lied when they claimed the times listed in Interrogatory 8 were transcriptions from Irene Hamburger’s Caller ID. It also strongly suggests that the Plaintiffs’ attorneys knowingly submitted false evidence to the Court. The Court agrees with the Defendant that due to the complicated nature of Northland’s call records, the Plaintiffs’ attorneys would likely have had to explain to the Hamburgers what the document actually said. Then, in order to get the Hamburgers to say that Northland called them at the exact times listed in the records, their attorneys would have had to point out the times that the attorneys believed (erroneously, in some cases) that the record showed that Northland called them.

Moreover, Plaintiffs’ attorneys should have known that the times recorded in Northland’s call log were listed in Central Time and the Hamburgers’ Caller ID would reflect Eastern Time. Thus, even if the attorneys did not actually spoon feed the Hamburgers the answers that they then listed in Interrogatory 8, and even if the Hamburgers actually came up with those responses themselves, their attorneys should have known that the information they received from their clients was untrue.

So, whichever way we analyze the situation, Defendant has met its burden in proving that the Plaintiffs and their attorneys submitted evidence to this Court that they either knew or reasonably should have known was untrue.”

Still, the court decided not to award attorneys’ fees and costs to Northland under the theory that the “clearly established fraud had no actual effect on the proceedings and was very limited in scope.” The court did take one final opportunity to chide plaintiff and counsel, “The false statements were made in the course of a case that was litigated in a consistently poor manner and lacked evidentiary support from its inception. They are, if anything, simply a more extreme example of Plaintiffs’ counsel’s sloppy litigation tactics. But we remain unconvinced that counsel’s poor performance justifies the substantial sanctions that Defendant seeks.”

(Northland had sought sanctions in the form of fees, which they indicated were likely exceed $75,000.)

insideARM Perspective

As noted above, Northland incurred substantial expense defending this case. The deck is stacked against ARM companies is responding to this type of litigation. The options are to pay to make an apparent frivolous case go away or spend significant funds defending the case. Northland made their case for costs and fees. It seems to this writer that Judge Mariani did everything but pull the trigger on an award.

insideARM asked two prominent attorneys in the ARM space for their thoughts on this case.

John Bedard, Attorney at Law with the Bedard Group commented: ”If filing a knowingly false complaint, lying to a federal court, fabricating evidence and then submitting that knowingly false evidence to a federal court, and thereafter epically losing your jury trial does not warrant sanctioning the untruthful plaintiffs and their puppeteer attorney, then I don’t know what does! This decision sends a clear message to all litigants in the Middle a District of Pennsylvania that Judge Mariani has an extremely high tolerance for despicable behavior.”

Tim Collins, General Counsel and Chief Ethics & Compliance Officer for Convergent Resources added additional color: “While this is one case with one judge, the ruling only emboldens plaintiff attorneys to bring even more frivolous lawsuits and now take them all the way thru trial. They have nothing to lose. The cost to defend these cases is going to go thru the roof.”

Editor’s Note

The aforementioned Tim Collins will be conducting a Pre-Conference “Litigation Workshop” before the Fourth Annual Larger Market Participant Summit on April 21, 2016 in Washington, D.C. Information on the workshop can be found here. Defense strategies for these types of cases will be discussed.

Judge Denies Prevailing Party’s Motion For Attorney Fees in Clear Cut FDCPA Case
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Department of ED Extends Debt Collection RFP Deadline Again

February 21, 2016 By admin Leave a Comment

Last Friday, February 12 the Department of Education posted another schedule extension related to its RFP for Debt Collection Services.

According to the latest posting, the purpose of Amendment 0002 is to Change the Submission Deadline to:

Offers should be received no later than 5:00pm Eastern Standard Time on Feburary 22, 2016 for the following from Section E.1, Solicitation Responses:

(a) Section A of Proposal

(b) Section B of Proposal

(d) Section D of Proposal with the exception of the Subcontracting Plan and the Small Business Participation Plan

Offers should be received no later than 5:00pm Eastern Standard Time on Feburary 29, 2016 for the following from Section D of the Proposal:

a) Subcontract ing Plan (Attachment 2)

b) Small Business Participation Plan (Attachment 5)

insideARM posted on January 20, 2016 about a first extension, and previously posted an article on December 14, 2015 which provided a summary of the events of the last several years related to the Department of Education Debt Collection Contract.

Department of ED Extends Debt Collection RFP Deadline Again
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Delta Outsource Group, Inc. Strengthens Senior Leadership Team

February 21, 2016 By admin Leave a Comment

ST. LOUIS, Mo. — Delta Outsource Group, Inc. has hired industry veteran Melvin Powell to serve as Senior Vice President of Operations.

Melvin Powell

Powell brings more than three decades of debt collection and management experience to the organization which includes serving in senior level roles of in both national and international debt collection agencies overseeing the day to day collection operations. Powell brings a diverse background of expertise including expertise of both consumer and commercial debt.

“I am very excited about this opportunity with Delta Outsource Group. Fifteen years ago I hired Nick Jarman with no experience and now here we are today in reverse roles. Things have certainly come full circle. I have obviously followed Delta Outsource Group closely since they started and to see what Delta has accomplished, where Delta is going, and what is ahead; this opportunity was too good to pass up,” said Powell regarding his hiring.

Nick Jarman, President and COO of Delta Outsource Group commented, “There are two people I respect more than anyone in this industry, one is my business partner Jim Peacock and the other is Melvin Powell. Melvin gave me my start in collections and served as my mentor. In our previous time together we accomplished great things and facilitated significant and sustainable growth. I look forward to picking up where we left off and excited about the value he brings to our team.”

About Delta Outsource Group, Inc.

Delta Outsource Group, Inc. provides innovative, quality and cost effective receivables management solutions built on a foundation of integrity, transparency, and accountability. We offer a diverse selection of call center solutions from first party and customer care programs, to post charge off recovery and legal programs. Delta Outsource Group, Inc. employs a highly experienced and motivated workforce empowered to deliver superior results by incorporating innovative technology with intelligent analytics.

Delta Outsource Group, Inc. can be found on the internet by visiting: www.deltaoutsourcegroup.com

Contact

Delta Outsource Group, Inc.
Jackie Mucha-Chief Marketing Officer
Jackie.mucha@deltaoutsourcegroup.com
636-590-3649

Delta Outsource Group, Inc. Strengthens Senior Leadership Team
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Ontario Systems Announces Compliance Professionals Forum Sponsorship for Texas Regional Peer Meeting

February 14, 2016 By admin Leave a Comment

MUNCIE, Ind. – Ontario Systems, a leading technology and services provider to the healthcare and accounts receivable management industries, announced its sponsorship of the Compliance Professionals Forum’s Texas Regional Peer Meeting today, to be held February 19 at the Addison Conference & Theatre Centre in Addison, Texas. Representatives from the company will be in attendance at the event, which provides compliance professionals in the ARM industry with a safe space to share perspectives, accomplishments and challenges with one another.

“Real improvement within an ARM business starts with truthful dialogue,” says Casey Stanley, Ontario Systems Vice President, Product Management & Marketing. “Collection agencies, healthcare organizations, law firms, creditors and debt buyers need the opportunity to learn from one another to solve the complex problems that face their organizations.”

Compliance Professionals Forum meetings typically include 20-30 attendees, making them larger gatherings than the Forum’s usual monthly phone-based peer groups. Those attending will set the agenda for the Texas Regional Peer Meeting, which will run from 10:00 a.m. – 3:00 p.m. The $25 reservation fee is waived for Compliance Professionals Forum members.

To register and learn more, visit compliancepf.com, or contact Liz Slovenkay at liz@compliancepf.com, or by phone at 240-499-3828.

About Ontario Systems

Ontario Systems, LLC is a leading provider of solutions to the accounts receivables management (ARM) and healthcare revenue cycle management (RCM) industries. Offering a full portfolio of software, services and business process expertise, Ontario Systems customers include nine of the 10 largest ARM companies, and three of the top six best health systems in the U.S., with 55,000 representatives in more than 500 locations.

Ontario Systems Announces Compliance Professionals Forum Sponsorship for Texas Regional Peer Meeting
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Rhode Island ‘Expired Debt Act’ More Than Name Implies

February 14, 2016 By admin Leave a Comment

This post originally appeared on the Consumer Financial Services Blog, and is republished here with permission.

Eric Rosenkoetter

On Jan. 7, the Expired Debt Act (EDA) was introduced in the Rhode Island House of Representatives and referred to the House Committee on Judiciary. The bill was introduced by State Representatives Shekarchi, Solomon, Regunberg, McEntee, and Craven.

Since 2007, Rhode Island has had its own Fair Debt Collection Practices Act (RIFDCPA) that is, for the most part, identical to its federal counterpart. The EDA, however, introduces new definitions and restrictions related to debt collection.

The EDA defines a “collector” as “a person collecting or attempting to collect an alleged debt arising out of a consumer transaction.” The definition is not restricted by any exclusions other than the definition of a “consumer transaction,” which is “any transaction involving a person seeking or acquiring real or personal property, services, money, or credit for personal, family, or household purposes.” The EDA does not define “debt” and does not explicitly adopt any definitions from the RIFDCPA.

Thus, compared to the RIFDCPA, the EDA applies to:

Creditors, and creditors’ employees, collecting their own debts;
Attorneys at law;
Federal and state employees collecting debt in their official capacity;
Persons serving legal process in connection with the judicial enforcement of a debt;
Nonprofit organizations that perform consumer credit counseling and assist consumers in the liquidation of debts by receiving payments from the consumer and distributing the amounts to creditors;
Persons collecting or attempting to collect a debt owed or due or asserted to be owed or due another to the extent the activity:
- is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement, or;
- concerns a debt that was originated by the person;
- concerns a debt that was not in default at the time it was obtained by the person or in connection with a debt secured by a mortgage, when first serviced by the person;
- concerns a debt obtained by the person as a secured party in a commercial credit transaction involving the creditor.

As the name implies, the legislation provides that if a debt is beyond the statute of limitations, a “collector” must advise the debtor in every communication that: 1) the statute of limitations has expired; 2) the debtor may assert the expiration as a defense in a collection action; and 3) entering into a payment agreement or making a payment may revive the debt and prevent assertion of the statute of limitations defense.

The EDA contains “prohibited practices” that are similar, but not identical, to various requirements and restrictions in the RIFDCPA. Because of the differences and the fact that some persons would be subject to both acts, the EDA creates an exceptional opportunity for conflict, confusion and resulting litigation.

Notably, the EDA prohibits a collector from initiating any contact with a debtor unless the collector possesses “verifiable” documentation of ownership of the debt, including a copy of the signed contract of the original debt, the final account statement of the debt, and written documentation that the collector has the right to collect on the debt.

Yesterday, the bill was considered before the Rhode Island House Judiciary Committee. Testimony was taken including that from DBA International, the trade organization of debt buying companies. Industry stakeholders ACA International, Encore Capital Group, PRA Group and DBA International also submitted written testimony outlining their concerns with the bill.

“DBA International acknowledges the importance of the issue and appreciates the spirit behind the Expired Debt Act (HB 7028),” said Jan Stieger, executive director of DBA International. “However, this bill needs revisions to lessen unnecessary harm to the industry without lessening what will be a powerful consumer protection bill when amended. We have communicated our willingness to work with the sponsor.”

Rhode Island ‘Expired Debt Act’ More Than Name Implies
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