Archives for June 2018

Editor’s note: While insideARM covered this development last Friday, Clark Hill did a nice job of describing the two other pending federal cases that challenge the constitutionality of the Bureau’s structure. The authors — Joann Needleman, Jane C. Luxton, and Thomas A. Brooks — have given permission to re-publish their article. 

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In an ongoing, high-profile legal debate, court opinions on the constitutionality of the structure of the Bureau of Consumer Financial Protection (“Bureau”) – previously known as the Consumer Financial Protection Bureau (“CFPB”) – continue to apply different legal analyses, positioning the issue for a possible U.S. Supreme Court resolution.  On June 21, 2018, in CFPB and The People of the State of New York v. RD Legal Funding, et al., Judge Loretta Preska of the District Court for the Southern District of New York ruled the Bureau’s creation as an independent agency with a Director removable only for cause, and not at will like other Presidential appointees, violates constitutional considerations of “history, liberty, and presidential authority.”  Rejecting a contrary January 31, 2018 en banc opinion by the D.C. Circuit in PHH Corp. v. CFPB, 881 F.3d 75, as non-binding in her Circuit, Judge Preska relied on Judge Brett Kavanaugh’s dissent in PHH in holding that the Bureau’s structure “violates Article II of the Constitution.”  Going even further, Judge Preska held this constitutional infirmity requires invalidation of Title X of the Dodd-Frank Act in its entirety, refusing to follow Judge Kavanaugh’s proposed, more limited remedy of severing the parts of the law that limited the President’s ability to supervise, direct, and remove the Bureau Director at will.   

The RD Legal case involved allegations that various corporate entities and their owner offered cash advances to consumers who had judgments entered in their favor.  Targeted included the National Football League (“NFL”) Concussion Litigation class members (“NFL Class Members”)  and individuals waiting for payouts from settlement agreements from the NFL or who qualify for compensation under the September 11th Victim Compensation Fund of 2001 (“VCF”).  The Bureau and the New York Attorney General, then Eric T. Schneiderman, claimed that the defendants misled these consumers into entering into agreements represented as valid and enforceable but, in reality, these payments functioned as usurious loans that were void under state law.  

If Judge Preska’s views hold, all actions by the Bureau since its inception could be in jeopardy.  This decision not only affects Bureau activities under Richard Cordray, but it could similarly invalidate actions taken by Mick Mulvaney, since he was appointed as Acting Director of the Bureau after Cordray’s departure in Fall 2017.

It would seem logical that the Bureau would appeal this decision to the Second Circuit Court of Appeals.  If the Circuit Court were to uphold Judge Preska’s decision, it would set up a circuit split that could be resolved only by the United States Supreme Court.  However, given the new direction of the Bureau under Mulvaney’s leadership, a Bureau appeal appears less certain.

Currently two other federal cases are pending that challenge the constitutionality of the Bureau’s structure. In CFPB v. All-American Check Cashing, the Federal District Court for the Southern District of Mississippi denied the Defendant’s Motion for Judgment on the Pleadings, relying on the D.C. Circuit’s holding in PHH.  However, in April 2018, the Fifth Circuit granted Defendants’ Certification of Questions for Interlocutory Appeal on one issue:   “Does the structure of the Consumer Financial Protection Bureau (CFPB) violate Article II of the Constitution and the Constitution’s separation of powers?”  If the Fifth Circuit disagrees with the D.C. Circuit, the issue would be primed for Supreme Court review.    

In CFPB v. Ocwen Financial Corporation et al., now before the Federal District Court for the Southern District of Florida, the Bureau recently filed a notice with the Court requesting the case be dismissed because Mulvaney, as the “Acting” Director, is removable at will under provisions of the Federal Vacancies Act and also because the Acting Director has ratified the decision to bring the Ocwen lawsuit; based on these facts, the Bureau argues, the Defendants’ constitutional challenge no longer applies.  However, Judge Preska specifically addressed the identical “ratification” argument by the Bureau in RD Legal and rejected it outright, holding:  

Here, the constitutional issues presented by the structure of the CFPB are not cured by the appointment of Mr. Mulvaney. As Defendants point out, the relevant provisions of the Dodd-Frank Act that render the CFPB’s structure unconstitutional remain intact. …Furthermore, Mr. Mulvaney cannot serve past June 22, 2018 (210 days after the vacancy arose), unless the President nominates a new Director, and then only until the new Director is appointed. Thus, there will likely be a new Director appointed in the coming months who will be subject to the for-cause removal provision. Therefore, the Ratification does not cure the constitutional deficiencies with the CFPB’s structure as the CFPB argues. Accordingly, the Court rejects the Notice of Ratification to the extent the CFPB argues that the Ratification renders Defendants’ constitutional arguments moot.

Lawyers for the Bureau have made the same ratification argument in All-American Check Cashing. Some have suggested that the Bureau’s filings in Owcen and All-American Check Cashing cases are an effort to avoid arguing the constitutionality of the agency’s structure.   The RD Legal decision may very well change that strategy, however.

In April, the Acting Director urged Congress to make the Bureau more accountable to the American people.  If the Bureau appeals the RD Legal decision, and in the interim a new Director is confirmed by the Senate, the Bureau will be forced into the political quagmire of advocating for one unaccountable director.  On the other hand, the court’s holding adds further questions to the Bureau’s authority, and enforcement targets are likely to continue challenging the Bureau’s authority outside the D.C. Circuit, based on constitutional arguments.  The continued uncertainty of the Bureau’s structure will likely reinforce calls for bringing a bi-partisan commission to this controversial agency.

WASHINGTON, D.C. – The Root Cause Coalition welcomed Credit Adjustments, Inc. (CAI) as its newest member, bringing the Coalition’s total membership to 53 organizations.

An industry leader specializing in health care and higher education accounts receivable management, CAI follows the motto: Delivering Respect. Collecting Results. One of only 11 small businesses nationally, CAI was awarded the contract with the Department of Education to assist in the recovery of student loan debt.  As a faith-based company, CAI is concerned about social issues in the communities they serve and invests in programs that help transform lives. Headquartered in Defiance, OH, CAI has more than 300 employees with additional offices in Toledo, OH, and Manchester, NH.

“The Root Cause Coalition welcomes Credit Adjustments into our membership. We have argued from the outset that we cannot achieve health equity in America without a broad commitment by the private sector to achieving our shared goals,” said Barbara Petee, Executive Director of The Root Cause Coalition. “Through its laudable efforts to lift up underserved communities in Toledo and throughout its service areas, CAI provides a model for businesses seeking to play a part in resolving social inequities.”

“We feel that it is part of our responsibility to invest in our communities, especially in programs that address the social determinants of health,” said Michael Osborne, Chairman of the Board, CAI. “We have seen first-hand the positive results of programs that improve the health and well-being of people in the community. That has led us to partner with like-minded organizations. Becoming a member of The Root Cause Coalition is one more positive step towards further collaboration and hopefully will encourage additional companies in the private-sector to join us.”

CAI becomes the tenth organization to join the Coalition in 2018, following the University of Pittsburgh Medical Center, Second Harvest Heartland, Local Initiatives Support Corporation, the Children’s Hospital of Michigan Foundation, the Alliance for Strong Families and Communities, Fairview Health Services, Aetna, the Center for Population Health at Cheshire Medical Center, and Enterprise Community Partners.

About the Root Cause Coalition

Established in 2015, The Root Cause Coalition is a non-profit, member-driven organization comprised of 53 leading health systems, hospital associations, foundations, businesses, national and community nonprofits, health insurers, academic institutions and policy centers. The Coalition works to achieve health equity through cross-sector collaboration in advocacy, education and research. For more information, visit www.rootcausecoalition.org and connect with us on Twitter, Facebook and LinkedIn.

In the last few weeks, several new lawsuits have been filed against the Department of Education (ED) by private collection agencies (PCA). This marks round 4 in the on-going quest for the unrestricted (large) debt collection contract.

Backing up slightly, last month insideARM reported that four firms had notified the Court of Federal Claims of their intention to protest ED’s request to dismiss the case of FMS v. USA as moot. On May 25, 2018, Judge Thomas C. Wheeler did infact grant the motion for dismissal and lifted the the February 26, 2018 preliminary injunction that prevented ED from recalling in-repayment accounts. — and so ended round 3 of the quest. 

Since that dismissal, ED did in fact send notice to the firms operating under 2015 Award Term Extentions (ATEs) notifying them that the government will be recalling their accounts on July 3. Those firms are FMS Investment Corp. (FMS), Account Control Technology, Inc. (ACT), GC Services Ltd. Partnership (GC), Continental Service Group, Inc. (ConServe), and Windham Professionals (Windham).

Last Friday, June 22, the fourth of those same firms — FMS, ACT, GC, and ConServe — filed a new complaint, which was consolidated with the others under FMS Investment Corp. v. The United States, No. 18-862. Most of the court documents are sealed. What we do know is that there will be a scheduling conference tomorrow morning to address a Temporary Restraining Order that has been filed to prevent the recall of accounts. 

A source close to the matter tells insideARM that many assume the accounts will be recalled from the five ATE holders and transferred to Pioneer Credit Recovery and Alltran, the two firms that won their appeal of ED’s sudden termination of their contract on February 27, 2015. As a result of that win, these two firms received an ATE on April 28, 2017, but have yet to see meaningful account volume. This recall and transfer would cure that issue.

Now, back to the curent complaint.

As justification for cancelling the Solicitation for unrestricted PCA services, ED said it would be changing its strategy, and instead of using 3rd party debt collectors for defaulted accounts, it would be implementing an “enhanced servicing” strategy, using its pre-default servicers. ED says this is a part of its NextGen solution. This is the source of the round 4 dispute.

Basically, here is the argument, in bullet points to make it easier to follow:

• As currently posted, NextGen is a two-part procurement: proof of concept, and then system delivery (at least a year from now; some say this timing would be very optimistic).
• The latest diagram describing NetGen clearly shows a separate default servicing component, which has not been included in the bidding detail.
• The requirements for post-default servicing are completely different from pre-default, and cannot be handled on the same system as it is currently designed. 
• The loan servicers ED expects to perform “enhanced servicing” receive their accounts prior to default. This means that, under federal rules, they are not subject to the Fair Debt Collection Practices Act (FDCPA).
• ED is already fighting with states over who is the rightful regulator of federal student loan servicing. It seems pretty clear that if ED makes a change that removes default servicing from the protection of the FDCPA, then states will step in and ensure their individual laws require equivalent protections.
• PCAs are experts at complying with both federal and state collection laws, and their systems are built specifically for this. As a result, they can do it for far less cost. The pre-default servicers would have to invest in building this capability from scratch.
• So. ED’s arguments simply make no sense.

insideARM Perspective

Although the complaints are sealed it seems the argument has moved from “ED, your criteria for selecting unrestricted contractors was flawed” to “ED, your justification for not needing large PCAs is crazy, and your proposed strategy of using ‘enhanced servicing’ is a) non-sensical and b) at best, years away from being practical.”

What’s also worth following is that we now have the interests of collection agencies (the veritable Davids, even though they are considered “large”) in this case colliding with the interests of student loan servicers like Nelnet, Navient and Sallie Mae (the Goliaths). Meanwhile, whatever folks want to say about collection agencies, these large servicers have their own issues with regulators.

This will continue. Forever.

In spite of the recognition of the en banc decision by the Court of Appeals for the District of Columbia in the case of PHH Corp. v. CFPB, which upheld the constitutionality of the structure of the CFPB, the U.S. District Court for the Southern District of New York has declared the CFPB’s structure UNconstitutional (emphasis added).

The case in question is CFPB and NY Attorney General v. RD Legal Funding, LLC, et al. You can download the 108-page decision here.

The CFPB and NYAG have accused RD Legal Funding (RD) of scamming consumers who accept cash advances while waiting for payouts from settlement agreements or judgments in their favor. The Government alleges that RD misled consumers into accepting what were actually usurious loans not allowed under state law.

What’s interesting about the decision for the ARM industry are not the details of this particular case, but whether the now disparate rulings regarding the constitutionality of the CFPB’s (now known as BCFP or Bureau) structure will have any actual effect on the future of the Bureau.

Judge Loretta Preska in RD notes her acknowledgement of the D.C. en banc ruling but says, “Of course, that decision is not binding on this Court.” She then went on to issue the most aggressive interpretation we’ve seen following the PHH case. 

The Court disagrees with Section V of Judge Kavanaugh’s opinion (a dissenting judge from the en banc review of the PHH case) wherein he determined the remedy to be to ‘invalidate and sever the for-cause removal provision and hold that the Director of the CFPB may be supervised, directed, and removed at will by the President.’ Instead, the Court adopts Section II of Judge Karen LeCraft Henderson’s dissent wherein she opined that ‘the presumption of severability is rebutted here. A severability clause ‘does not give the court power to amend’ a statute. Nor is it a license to cut out the ‘heart’ of a statute. Because section 5491(c)(3) is at the heart of Title X [Dodd Frank], I would strike Title X in its entirety.” (emphasis added)

That’s right – the Court says it would do away with Dodd Frank altogether – which means fully shutting down the Bureau. Supported by this argument, Judge Preska declared the CFPB ineligible to bring the current case and dismissed the agency as a party to the action.

The Court concluded, however, that the New York Attorney General may still pursue the case under the Consumer Financial Protection Act (CFPA) as well as New York law — so as a practical matter for RD, the case will move forward.

insideARM Perspective

What practical effect this decision will have is unknown. Will this court’s opinion with respect to the constitutionality of the Bureau be appealed? Under former CFPB Director Richard Cordray, it likely would have been. Under Acting (BCFP) Director Mulvaney? Perhaps there will be other priorities.

Just as Judge Preska in RD said she is not bound by the decision of the D.C. Circuit, so are other courts not bound by her ruling. Though one would certainly have to consider the effect of this decision on enforcement matters or other cases in the Second Circuit.

At a minimum, the decision could be used by those who would support those who seek to introduce a commission structure to the Bureau. When the D.C. Circuit Court of Appeals released its en banc decision in January 2018 upholding the constitutionality of the CFPB’s structure, House Financial Services Committee Chairman Jeb Hensarling (R-TX) – a long time critic of the CFPB, and also (at the time) a rumored potential Cordray replacement – released this statement:

“I am deeply disappointed with the court’s decision and hope the Supreme Court will review the ruling in short order. In the meantime, I take great solace in the fact that Mick Mulvaney can use his unchecked, unilateral powers to continue the agency’s transformation into one that will, as he said, “exercise [its] statutory authority to enforce the laws of this nation….execute the statutory mandate of the bureau to protect consumers’ and go no further.

Even though I have total confidence in Acting Director Mulvaney’s vision, the fact remains that no one person in America – especially someone who is unelected – should have the authority to unilaterally control whether working Americans can get a mortgage or a checking account. The Bureau’s consumer protection mission is important, but no government agency – no matter how well-intentioned – should be able to evade common sense checks and balances that are necessary for accountability.

Republicans stand ready to work with Democrats to reform the CFPB into a law enforcement agency that truly protects consumers and is accountable to the people’s elected representatives.”

Following yesterday’s decision in the RD case, Hensarling said this:

“The District Court for the Southern District of New York has confirmed what House Republicans have said all along, that the Bureau’s structure is unconstitutional.

By design the Bureau is arguably the most powerful and least accountable Washington bureaucracy in American history—and under then-Director Richard Cordray, it showed.  The Bureau infringed on the economic freedoms of consumers, limited their financial choices, increased their costs, and failed to hold managers accountable for widespread discrimination and abuse of its own employees. 

On June 8, 2017 the House of Representatives passed HR 10, the Financial CHOICE Act, which fixes the constitutional defects identified by the District Court by subjecting the Bureau to the control of the people’s elected representatives.”

Back on June 7, 2018, Representative Frank Pallone, Jr. and Senator Edward J. Markey proposed similar bills to their respective branches of Congress, each entitled the “Stopping Bad Robocalls Act.”  The bills are 19 and 18 pages long, respectively, and can be a bit hard to follow unless you have a complete copy of the TCPA handy and an hour or two to burn.

That being said, instead of breaking down these bills in a summary, we decided to go ahead and mark up the current iteration of TCPA to easily illustrate how these bills would change it.  Note that the marked version of the TCPA linked in the PDF below is based solely on the changes proposed in Rep. Pallone’s bill only.  We took this approach because Rep. Pallone’s bill in the House includes a section entitled “Enforcement,” which includes new subsections, § 227(b)(5) and § 227(b)(6), and Senator Markey’s bill does not include those subsections.  Instead, Senator Markey’s bill re-labels the “Private right of action” section as § 227(b)(5).  Otherwise, the two bills are substantively the same.

TCPA with Rep. Pallone’s Proposed Changes

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Editor’s note: You may have noticed that Eric Troutman and other Womble Bond Dickinson attorneys have authored quite a few articles on insideARM lately. They have. We have just recently established a partnership for the firm to power our TCPA case law chart, and to provide a steady stream of their timely, insightful and entertaining take on this ever-evolving, never-a-dull-moment topic. 

This week the Federal Communications Commission (FCC) published a notice soliciting input for an upcoming staff report on robocalling. The report was requested by the FCC in November 2018, specifying that it should cover progress made by industry, government and consumers in combatting illegal robocalls, as well as the remaining challenges to continuing the efforts. The Commission requested quantitative data including calling trends and consumer complaints, as well as other relevant information.

These are some of the questions asked by the FCC’s Consumer and Governmental Affairs Bureau (Bureau), which has been directed to prepare the report:

• How have providers responded to the new permissive rules from the November 2017 Call Blocking Order?
• What kinds of blocking are providers doing as a result of this and other actions?
• How is the effort progressing to implement SHAKEN/STIR (the standardized system for caller ID authentication), and when will it result in customer benefits?
• How is the consumer complaint data released by the FCC and FTC being used, and what are the benefits of its release?
• What criteria do opt-in filtering tools use in selecting calls for consumers to block or label as illegal or unwanted? Also, how effective and popular are they, and what are service providers doing to let consumers know about them?
• How effective has call traceback been for identifying and enforcing against makers of illegal robocalls, and how might the tactic be improved?

The Bureau is also seeking trend data – using January 2018 as a baseline – that will assist in identifying which voice service providers, which types of calls, which types of scams, etc. are more/less effective. The Notice does suggest it is possible to seek confidential treatment for all or part of a submission, should it include “competitively sensitive information, or information likely to allow unlawful callers to circumvent filtering mechanisms.”

Comments are due July 20, 2018; Replies to the comments are due August 20, 2018. Electronic filers can submit comments here. Other instructions are here on the full notice.

insideARM Perspective

There has certainly been progress on the software solution side of this issue, with more than 500 apps now available, either through mobile phone carriers or app stores. Verizon recently announced screening assist for landlines. Many stakeholders are actively involved in the development of tools, rules and guidelines to stop illegal and unwanted robocalls.

As it relates to debt collection, we are still educating most of these stakeholders about the unique regulatory challenges and unintended consequences of the initiative. In fact – we are now seeing the convergence (or conflict) of FCC direction with the FDCPA rules of third party disclosure. Honestly, I think it’s leaving most people stumped. They mostly get it, but they don’t know what to do about it.

A few weeks ago I posted this 3 minute video on Linkedin describing the challenge. Here’s the gist: The FCC is responding to consumer demand to know who is calling, and why. The FDCPA says that debt collectors can’t reveal who is calling (if their name reveals that they are a collector) and why, until they have verified that they are speaking with the “right” person. So. Yeah.

The Consumer Relations Consortium has organized a roundtable of regulators, advocates, carriers, app developers, and industry to take place in early August that will address this issue specifically in the context of debt collection.

Those interested in more of the history on this can see all of our robocall topic coverage here on insideARM. Here is where it all officially started, in November 2017, with the FCC’s Commission Meeting where the Report and Order referred to above was adopted.

Consumers using scripts to bait debt collectors into FDCPA violations is certainly nothing new; insideARM has been publishing articles about this issue for years.

While the practice of consumers baiting collectors into FDCPA violations is well-established, the specific techniques and scripts used continue to change and evolve. A new trend is sweeping across the country about which all debt collectors should be aware. 

In the latest episode of the Debt Collection Drill podcast, Moss & Barnett attorneys John Rossman and Mike Poncin discuss this latest call baiting strategy and provide specific steps debt collectors can take to avoid an FDCPA violation when faced with a consumer using this script. Attorneys Rossman and Poncin also discuss the “new frontier” of debt collectors using text messages and how to potentially overcome the regulatory and legal hurdles with use of this technology. 

Listen to the episode here:

http://traffic.libsyn.com/thedrill/TDCD_ep70.mp3

ST. CHARLES, Mo. – Client Services, Incorporated (CSI) announced today that Mr. Jamie Campise has joined the company as Vice President of Business Development to further expand their national client base. Jamie Campise comes to CSI with over 30 years of industry experience. He spent the past seventeen years at one of the nation’s largest agencies, where he was instrumental in acquiring numerous business relationships with many of the nation’s largest consumer and commercial credit grantors. 

Jamie joins Client Services as Vice President of Business Development to expand on an already impressive footprint by introducing new and existing services to national creditors across multiple verticals within the marketplace. With Jamie’s experience and ability to create and deliver client-specific solutions, he will play a key-role in acquiring and strengthening client relationships to complement CSI’s continued success. 

Jamie commented, “I am excited to join a national firm that has a proven infrastructure, an award-winning management team, and a company-wide culture that clearly places a focus on compliance and customer experience. I am fortunate and excited for this opportunity to work with a team that prides itself on being the best in the business.”

About Client Services, Inc.

Established in 1987, Client Services, Inc. (CSI) is a Better Business Bureau A+ accredited organization. CSI offers a full suite of Accounts Receivable Management (ARM), Business Processing Outsourcing (BPO) and Healthcare Revenue Cycle Management solutions, which include collections and recovery programs involving 1st Party Pre Charge-Off, 3rd Party Pre Charge-Off and 3rd Party Post Charge-Off.

CSI provides its clients a standard of performance that emphasizes superior compliance/quality control, consistently high collection results and outstanding back-office processes. For over 30 years CSI has worked as a top-tier service provider in financial services, one of the most highly competitive and complex segments of the ARM industry. CSI operates branches in St. Charles, Mo, Lenexa KS and Barreal de Heredia, Costa Rica. For more information on Client Services, Inc., visit us at www.clientservices.com.

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Since the California Fair Debt Buying Practices Act of 2013 (CFBDPA) went into effect, there has been little guidance on how the requirements of the CFBDPA apply to a third party collection agency collecting on behalf of a debt buyer.  One such requirement is the disclosure a debt buyer must provide a consumer in its initial communication.  This disclosure tells the consumer that they can request certain records, with an instruction in the statute for the debt buyer to “insert debt buyer’s active mailing address and email address, if applicable” for such records. 

At issue in Robinson v. ARS National Services Inc., 3:17-cv-52820, was whether including the debt buyer’s address in the California disclosure, as instructed by the CFBDPA, overshadows the consumer’s FDCPA 1692g validation rights by confusing the consumer in regards to where he or she should send a dispute: to the debt collector or to the debt buyer.

In a short two-paragraph order released on June 19, 2018, the Northern District of California answered unequivocally “no.”

Read the decision here. 

Factual and Procedural Background 

Plaintiff Andrea Robinson, a California resident, incurred a debt on a J.C.Penney account, on which she eventually went delinquent. The debt was sold to Crown Asset Management, LLC. (“CAM”).  CAM placed the account with ARS National Services Inc. (“ARS”) for collection.  Since ARS was collecting on this account on behalf of a debt buyer, ARS included both the FDCPA 1692g validation disclosure as well as the CFBDPA disclosure on the initial letter it sent to Plaintiff.  The FDCPA disclosure was on the front of the letter, instructing the consumer to send any disputes “to this office.”  The CFBDPA disclosure was on the back side of the letter and included CAM’s address as the place to send requests for certain records.

Plaintiff filed a putative class action against ARS in N.D. California with only an FDCPA cause of action. The suit alleged that the CFBDPA disclosure with the debt buyer’s address overshadows the consumer’s FDCPA validation rights by confusing the consumer as to where he or she can send disputes: to ARS’s address on the front of the letter or to the CAM address listed on the back. 

The parties filed cross motions for summary judgment. The court granted ARS’s motion for summary judgment and denied Plaintiff’s motion for summary judgment. 

The Decision 

In its motion for summary judgment, ARS argued that the consumer rights provided in the two statues are separate and there is no confusion based on the letter sent by ARS that a dispute needs to be sent to ARS. The court agreed. 

Simply put, the court found that the letter distinguished well between the two statutory rights. The FDCPA 1692g notice was on the front of the page. All around this paragraph were references that “make clear that this paragraph is referring to ARS and that the customer should contact ARS at the mailing address at the top of the page to verify their debt.” The court found that the footer of the letter, which stated that the consumer should see the reverse side for “important information” does not make the consumer’s 1692g rights unclear. 

Very pointedly, the court states that “[e]ven an ‘uninformed or naïve’ recipient of the letter would understand that the notice on the back of the letter relates to a different kind of request, which would be addressed to Crown Asset Management, LLC.” 

Ultimately the court found that the “least sophisticated debtor would not be misled by the collection letter that ARS sent Robinson.” 

Analysis 

Anytime a new statute comes out, there often is uncertainty on how such statute is practically applied until there are a few court decisions on the issue to provide guidance. This decision is one of those guides to debt collectors collecting on behalf of debt buyers in California.

Additionally, this decision shows the benefit of agencies defending suits on issues of first impression that appear to be far-fetched claims so they do not turn into the “next big thing” for plaintiffs’ attorneys. This issue is now closed, and instead of focusing on endless litigation on the matter we can all move forward with more productive issues.

TCPA defendants have enough to deal with without having to worry about secret limitations on their ability to call phone numbers supplied by customers. But, oh well!

In Benedetti v. Charter Communications, No.1:16-CV-2083 RLM-DLP, 2018 WL 2970998 (S.D. Ind. June 13, 2018) a customer supplied his nanny’s phone number to the Defendant in connection with his account. After the account went delinquent the Defendant began calling the phone number in an effort to collect. The nanny sued under the TCPA contending that the calls had been made to her without her express consent.

Charter sought summary judgment in the case arguing that it had permission to call the number supplied by its customer. Importantly, the nanny had admitted in deposition that she had given permission to the customer to provide the phone number to Charter. Thus, Charter argued, under the FCC’s presumed consent rule it had permission to make the informational calls at issue.

The Court disagreed. The nanny had testified that she only gave the customer permission to supply the phone number to Charter for a limited purpose–specifically for setting up the cable service and for troubleshooting if it was on the fritz. Because the record was barren respecting what the customer had actually told Charter in providing the phone number, the Court concluded that a jury might find that the customer told Charter that it could only call the number for those limited purposes. If that was the case, then the scope of consent would not have be broad enough to encompass debt collection calls. So summary judgment was denied.

Although the issue of what the customer did or did not say to Charter is obviously speculative given the poorly-developed record, the Court found that it was Charter’s job to prove the negative–i.e. that the customer didn’t tell it to call the number for a limited purpose. That’s always fun.

The take away here is that a caller receiving a third-party’s phone number from a customer must always be cautious for secret limitations imposed by the third-party. Absent documentation that the customer did not provide additional instruction related to the scope of consent, the third-party may sue the caller on the theory that the customer had exceeded the scope of his or her consent in providing the number to the caller. While a counterclaim would likely exist against the overreaching customer, that is of little comfort.

Of course if the customer never even reveals that the number belongs to a third-party in the first place things get even trickier. All the more reason to see the FCC adopt the “expected recipient” approach in defining the phrase “called party.” Keep your fingers crossed.

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Editor’s note: You may have noticed that Eric Troutman and other Womble Bond Dickinson attorneys have authored quite a few articles on insideARM lately. They have. We have just recently established a partnership for the firm to power our TCPA case law chart, and to provide a steady stream of their timely, insightful and entertaining take on this ever-evolving, never-a-dull-moment topic. Welcome to the WBD team!