Archives for October 2018

Well yesterday was the deadline for supplemental comments on the FCC’s big TCPA Public Notice. So today I begin the process of reading and digesting these things and reporting to all of you I have just reviewed these in the order I happened to open them. No editorial discretion exercised here. Have fun. I did. More to come tomorrow.

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Louisiana Credit Union League Comment

Well we’re off to a hot start with the Louisiana Credit Union League discussing a case called “March v. Crunch San Diego, LLC” throughout its comment. Eesh.  But the LCUL comment is otherwise thoughtful and discuses the interaction between Marks and cell phones thusly: “If it is possible (as we believe it is) that a cellular phone in regular use with a stored contact list can be conceivably determined to be problematic for a business to use to make reasonable business communications as in the case of credit unions with its members, this matter cries for regulatory clarity and an application of a reasonableness standard that can cover not just this generation of technological communications – but innovations yet to come in this arena.” Comment can be found here: Louisiana Credit Union League – FCC Comment

Noble Systems Corporation

Now we’re talking. Noble comes out swinging noting that Marks “essentially adopted the plaintiff’s proposed construction verbatim…[with] the resulting holding of the court [] inconsistent with itself (as there are two differing statements of the holding in the decision), overly broad, and ambiguous as to its scope and application.”  The comment then points out that “Because random and sequential number generators unequivocally stored numbers that were to be dialed, it makes sense to read the statutory language as proposed by the defendant, consistent with its plain meaning.”  From which Noble concludes that the statutory language is not ambiguous: “Rather, the statutory language
appears deliberately and carefully crafted to cover two known modes of operation for dialing numbers using random or sequential number generators.” Nice point.

Noble further drives home the FCC’s lack of authority to edit an unambiguous statutory definition: “The Commission should be cognizant that the statutory language is not ambiguous, and is deliberately crafted to cover the known contemporaneous dialer technology at the time the TCPA was passed. The Commission does not have any basis from deviating from the plain meaning of the ATDS statutory definition in the TCPA in forming its rules.”

In the remainder of Noble’s robust comment, it makes the following points with thorough analysis and copious factual support:

• If a digital circuit produces a number, the number must be stored
  in memory in some manner. Without storing the number, the number does not exist. (Does this sound like Sarte to anyone else?)
• Congress knew about the status of technology in 1991, which plainly included numerous dialing systems that indeed randomly or sequentially created numbers to be dialed;
• The Marks definition does not define the phrase “automatic” so the formulation is essentially meaningless–“The scope of the term “automatically” is subject to interpretation, and is likely to result in extensive litigation to define its metes and bounds. The scope of how proximate human intervention is required to accomplish call origination would have to be defined in excruciating detail to provide guidance to call originators.”
• The word “dialing” needs to be defined because “modern VoIP and wireless phones typically utilize a form of “en-bloc” signaling from the phone device to the switch, where all the telephone digits are sent in one message…”The switch receiving the call request with the digits cannot differentiate between the user having manually selected all the digits versus the user pressing a speed dial (or redial) function.”  (Nice point!)
• And in a brilliant–and much needed–analysis of the FCC’s purported ability to expand the TCPA to keep up with evolving technologies, Noble points out: “There is no basis whatsoever to conclude that Congress intended, nor that the TCPA authorizes, the Commission to adapt or extend the statutory language of an ATDS in anticipation of the development of new technologies. The only authority granted to the Commission was to exempt new technologies. “

Really magnificent stuff guys. *Begins a slow clap.* I encourage all of you in TCPAland to join in the applause and also review the full comment found here: Noble Systems Corp. – FCC Comment

Ohio Credit Union League

Neat and tidy comment from the PCUL asks the FCC to clarify that the TCPA really only applies to telemarketing calls. Also raises recent First Amendment challenges as a reason to consider trimming back the scope of the statute. Urges that the statutory definition should be faithfully applies (including random or sequential number generation.) Concludes with request for “present” as opposed to “potential” capacity.

Nice stuff Paul and Miriah.  Full comment here: Ohio Credit Union League – FCC Comment

PACE 

The Professional Association for Customer Engagement has been a long-time TCPA reform advocate. Their comment is suitably and predictably well presented.

PACE starts by reminding the FCC that Congress made a policy choice when choosing to restrict dialers that use random or sequential number generation because they tend to tie up emergency lines and hospitals.

PACE then does a very nice job of mapping the history of the FCC’s 1992 and 1995 orders respecting the Commission’s earliest articulation of what random and sequential number generation means. (I presume you folks pulled that from TCPAland’s Key FCC Orders analysis?)

PACE next borrows copiously from the outstanding ruling in Pinkus to explain why Marks just flat misread the TCPA’s ATDS definition. How embarassing.

PACE also blisters the logic that Congress ratified the FCC’s 2015 Omnibus because Congress cannot, by silence, bless an interpretation contrary to the plain meaning of an Act. Citing Ashton v. Pierce, 716 F.2d 56, 63 (D.C. Cir. 1983) (Nice find!)

It concludes with a searing one liner: “A system is not an ATDS simply because it can automatically call telephone numbers from a list—a function not covered by the statute.”

Well done MM&S.  The comment can be found here:  Professional Assoc. for Customer Engagement (PACE) – FCC Comment

Wisconsin Credit Union League 

Here’s a nice little comment with a polite Midwestern feel.

The WCUL asserts: “We respect and support the rights of consumers to be free from unwanted “robocalls,” but unfortunately, the TCPA has been interpreted in ways that unduly impede credit unions’ ability to reach members for legitimate business purposes.”  It also suggests that random and sequential number generation is the hallmark of an ATDS: “That term should mean only equipment that has the present capability to generate random or sequential numbers and to dial those numbers without human intervention.” The comment is short and to the point, but well worded and–I suspect–it will be well received given the more aggressive tone of other comments.

The comment can be found here:  Wisconsin Credit Union League – FCC Comment

Allstate

First, shout out to our long time followers–hi guys!

Allstate’s Comment takes a nice pro-consumer bend, reminding the FCC of the importance of immediate communications in times of natural disasters like Hurricane Florence and Michael. As the Comment puts it: “Contacting our customers through systems that have stored information and which can connect them immediately to our teams is essential to our mission of protecting them from life’s uncertainties.” Well said.

As with other Commenters, Allstate urges the FCC to: “adopt a standard that considers the actual use of the equipment and focuses on its ability to randomly generate and dial numbers and not merely call numbers from electronic databases.

The Comment also seeks clarity on “capacity” linking back to the smartphone issue: “using the Marks decision as a guideline of what constitutes an ATDS, every smartphone could qualify under the definition. Such a broad definition could continue to expose Allstate and its agents to frivolous and potentially crippling litigation aimed at not helping consumers but rather benefiting plaintiffs’ attorneys seeking to exploit large companies under the guise of consumer protection. The law should not be a “gotcha.””

Another brief comment, but very punchy and impactful. Good work Maria and team! The comment can be found here: Allstate – FCC Comment

Encore Capital Group

Here’s a nice one to end on for the day. Encore begins by noting that its never done this before but it realizes now how important this stuff is: “To date, Encore has purposely abstained from directly commenting on the definition of an automatic telephone dialing system (“ATDS”), but we feel compelled to comment at this pivotal juncture given the importance of this issue to the one out of five American consumers our company works with.”

The Encore comment is fearless in attacking Marks. It states: “The Ninth Circuit literally re-wrote the statute so as to separate from the same clause the requirements “to store numbers to be called” and “using a random or sequential number generator.””  And it draws a stark conclusion: “[Marks] subject[s] to the Act’s coverage any conventional smartphone that can store and then dial numbers. This means that, for the 77% of Americans who own smartphones, each is “a TCPA-violator-in-waiting, if not a violator-in-fact.””

Encore goes on to characterize the Marks formulation as “convoluted,” a “drastic[] alter[ation]” of the statute, an “outlier,” and “directly contradict[ing]” ACA Int’l.  And then it asserts: “Markstook the liberty of creating its own novel reading (if not blatant re-writing) of the statute and came up with the same result that the ACA ruling vacated.”

Way to jump in with both feet!

Encore then engages in an impassioned defense of predictive dialers and explains why they do not meet the statutory ATDS definition. It concludes with a reminder that TCPA litigation is out of control and industry needs some help from the FCC. The Comment concludes with a fitting call for the FCC to “end the madness”:

“For the past decade, businesses have been operating in a state of limbo, unsure how to define an ATDS and staring down the barrel of potentially door-shutting litigation. Between the pervasive confusion over the definition of an ATDS and the abusive litigation environment, it has been a veritable minefield for legitimate callers to reach their customers. Now is the time for the FCC to put an end to the madness.”

You can almost feel the angst in this comment. But for an industry that has, indeed, been oppressed and picked apart by frivolous litigation over the last decade, Encore’s aggressive Comment must feel good to read. Nice to see someone is truly fighting to stem the tide here beside just little ole me.  Here’s looking at you Sheryl and Tamar!

Encore’s Comment can be found here: Encore Capital Group – FCC Comment

That’s enough for today. More to come tomorrow.

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Editor’s note: This article is provided through a partnership between insideARM and Womble Bond Dickinson. WBD powers our TCPA case law chart and provides a steady stream of their timely, insightful and entertaining take on this ever-evolving, never-a-dull-moment topic. WBD – and all insideARM articles – are protected by copyright. All rights are reserved.

UNIVERSITY PARK, Fla. —  National Creditors Bar Association elected a new President-elect and six Board of Directors Members on October 12, 2018. They were sworn in at the NCBA 2018 Fall Conference in Nashville, Tennessee.

President-elect

Mark Groves is a Member and Managing Attorney of the Collections Department of Glasser and Glasser, P.L.C., which practices statewide in Virginia, North Carolina, Maryland and Washington, D.C. Mark has served as a member of the Virginia Supreme Court’s Advisory Committee for Electronic Filing. He has previously served as a panelist at the Federal Trade Commission’s roundtable on Legal Debt Collection in Washington, D.C. and has presented on a variety of topics related to fair, ethical and professional debt collection. Mark previously served as Treasurer and was a member of the NCBA Board of Directors prior to his election as President-elect. He has served on many NCBA committees, including Government & Regulatory Affairs, SCBA Forum, Budget & Finance, Professional Standards & Grievance, Strategic Planning, PACCA and Membership. Mark is the 2017 recipient of the NCBA President’s Award for his service to the association.

Newly Elected Board of Directors Members

Adam Cleveland is with the firm Adam L. Cleveland, P.C. in Peachtree Corners, Georgia. He has spent over ten years practicing in the area of creditors rights. In 2015 he served on the Georgia Garnishment Law Task Force, which produced what ultimately became Georgis’s new garnishment law in 2016. He also co-founded and serves as an officer of the Georgia Creditors Council. He has served on several NCBA committees including SCBA Forum, Young Professionals/Millennials (which he is co-Chair), PACCA and Government & Regulatory Affairs.

Crystal Duplay is with the Law Offices of Timothy M. Sullivan in Cleveland, Ohio. She has been practicing law since 2009 and is admitted to practice in both Ohio and Wisconsin. Her core strengths include litigation, Fair Debt Collection Practices Act (FDCPA) matters, research, regulatory compliance, negotiations, analysis, diplomacy, communications and problem solving.  She is a member of the Cleveland Metropolitan Bar Association. She has served on several NCBA committees including SCBA Forum, Conferences, and Education.

David Rothman is Director of Inventory Management with the firm Rubin & Rothman, LLC, a New York, New Jersey, Connecticut and Massachusetts creditors rights law firm in Islandia, New York. David is a second-generation creditors rights attorney and has been around the industry his entire life. He is active in the NCBA Membership and Awards & Scholarships Committees, the latter for which he serves as co-Chair.

Re-Elected Board of Directors Members

June Coleman is a shareholder at Carlson & Messer LLP in Los Angeles, California. Her areas of emphasis are the FDCPA, the FCRA, the TCPA, commercial litigation, and creditor rights. She has served on or led a number of NCBA committees including the Education Committee, Education – Defense Sub-Committee, Defense Bar Steering Committee, Bylaws Committee, and Amicus Brief Sub-Committee for which she is co-Chair.

Nicole Strickler is with Messer Strickler, Ltd in Chicago, Illinois. She concentrates her practice in the defense of corporations in civil matters but particularly focuses in the defense of consumer litigation throughout the country. This includes representing clients in both individual and class actions involving state and federal consumer laws. As a member of NCBA, Nicole has taken an active role including serving on a number of committees including Education, Nominating/Elections, and Defense Bar, for which she is Chair. She is a frequent speaker at industry conferences.

Alison Walters is with Kelley Kronenberg in Tampa, Florida, where she practices in the areas of commercial litigation, creditors rights, bankruptcy, and insurance subrogation. She is a member of the Hillsborough County Bar Association, The Tampa Bay Bankruptcy Bar Association, Business Law section of the Florida Bar, National Association of Subrogation Professionals and the Hillsborough Association of Women Lawyers. Additionally she is a Past President of the Florida Creditors Bar Association. She has served on or led numerous NCBA committees, including Education, Membership, Conferences, SCBA Task Force, and Strategic Planning, for which she is Chair.

About NCBA

National Creditors Bar Association is a nationwide bar association of over 550 creditors rights law firms and in‐house counsel of creditors.  National Creditors Bar Association members are committed to being professional, responsible and ethical in their practice of creditors rights law.

ELMHURST, Ill. — At its recent Annual Conference, the Medical-Dental-Hospital Business Associates (MDHBA) elected its 2018-2019 Officers and Board of Directors and presented awards. The meeting was held October 11-12, 2018, at The Chase Park Plaza Royal Sonesta in St. Louis, Missouri.

Officers and Directors Elected

Officers who were elected include: President Kathy Shambre, president, Debt Recovery Solutions of Ohio, Mansfield, Ohio; President-Elect Matt Inscore, customer relations Manager, CSO Financial, Inc., Roseburg, Oregon; and Secretary/Treasurer Ashley Statley, client services manager, BC Services, Inc., Longmont, Colorado.

John Esa, director of strategic marketing, General Credit Services, Inc., Medford Oregon, was elected to a two-year term on the MDHBA Board of Directors. Jon Nixon, CPBE, executive vice president, CMRE Financial Services, Inc., Brea, California, continues on the Board with one year remaining in his current term.

Gina Battershaw, director of operations & outside sales, Credit Bureau Services Inc., Norfolk, Nebraska, will serve as Immediate Past President.

Awards 

The Robert T. Hellrung Award was presented twice in 2018. The recipients are Connie Matrisch, CHC, president & CEO, Pro Com Services of Illinois, Inc., Springfield, Illinois, and Ashley Statley, client services manager, BC Services, Inc., Longmont, Colorado. The Hellrung award recognizes individuals for their contributions to the medical economics profession and to MDHBA.

Jon Nixon, CPBE, executive vice president, CMRE Financial Services, Inc., Brea, California received the President’s Award. The President’s Award is presented annually by the current MDHBA president to recognize an individual or individuals who did the most to advance MDHBA’s interests during his or her tenure as president.

MDHBA’s next Annual Conference will take place Oct. 10-11, 2019, in San Diego, California.

About MDHBA

Medical-Dental-Hospital Business Associates is the healthcare ARM community for accreditation and networking. Formed in 1939, MDHBA and its members set a tone of collaboration and continuous improvement within the demanding and competitive world of healthcare financial services. MDHBA provides a nationwide forum for idea exchange, continuing education and certification. For more information, contact: MDHBA, 350 Poplar Ave., Elmhurst, IL 60126. Telephone 630.359.4723; Fax 630.359.4274; E-mail info@mdhba.org; www.mdhba.org

GENESEO, N.Y. — Coast Professional, Inc. (Coast) is pleased to announce the promotion of Ms. Michele Malczewski to Chief Human Resources Officer (CHRO). This promotion recognizes Ms. Malczewski’s successful six year career at Coast, as well as her value as a leader to the organization. Ms. Malczewski receives this promotion from her previous position of Vice President of Human Resources.

As Chief Human Resources Officer, Michele is responsible for the management of the company’s Human Resource Department, benefits, recruiting, and compensation. Michele leads a team of eight human resource professionals who provide support to more than 475 employees. Through their combined efforts, the Human Resources department has provided necessary support of the company’s significant growth periods, furthered the company’s human resource initiatives, and fostered stronger employee relations.

Ms. Malczewski joined Coast in 2012 and has advanced her career from Director of Human Resources to her current role of CHRO. Michele is responsible the HR functions for multiple government contracts and over 200 college and university clients. In the past year, Michele has been instrumental in the onboarding a new government client, has established a recruiting department, managed the hiring of more than 110 new staff members and the interview process of more than 5,100 applicants, and finished the transition of a new payroll processor/employee database.

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Yesterday the Bureau of Consumer Financial Protection (BCFP or Bureau) posted advice to consumers regarding how to tell the difference between a legitimate debt collector and a scammer. This is important, and I support all efforts to make this distinction. The problem is, the advice and the law don’t exactly match up.

Another insideARM article published today highlights two recent court cases that address the beginning of a interation between a debt collector and a consumer and describes the gauntlet created by the Fair Debt Collection Practices Act (FDCPA) prohibition against communicating with a third party about a person’s debt. (I suggest readers check out that one first, for background, then follow the link at the end back to this one.)

While much of the Bureau’s advice is good, it makes no mention of the collector’s responsiblity to confirm they are speaking with the “right party” before providing any information. This is misleading and, in my opinion, it causes confusion for consumers and an untenable situation for creditors and their legitimate collectors. The following are among the listed warning signs of debt collection scams:

Withholds information from you

A debt collector must tell you information such as the name of the creditor, the amount owed, and that if you dispute the debt the debt collector will have to obtain verification of the debt. If the debt collector does not provide this information during the initial contact with you, they are required to send you a written notice within five days of that initial contact.

This is the first item on the list. As a consumer, I would assume this means that the collector would start by giving me the creditor’s name, amount owed, etc. No mention is made of the fact that they can give this information only after they have confirmed they are speaking with the right person. And no mention is made about what this “confirmation” will involve.

Asks you for sensitive personal financial information

Such as your bank account, routing numbers, or Social Security numbers. You should never provide anyone with your personal financial information unless you are sure they’re legitimate. Scammers can use your information to commit identity theft.

And, here’s what that confirmation involves. While this is excellent advice in today’s world, it’s exactly what creditor clients require their collection agencies to ask for in order to confirm they are speaking with the right party (not bank account, but other sensitive information).

Ask for a callback number

If you’re uncomfortable providing any information, you can request the caller’s name, company name, street address, and a callback number. You can use this information to verify that they are not a scammer before providing any personal information. Also, if you call back and the business doesn’t answer as the name they provided to you or it’s a nonfunctioning number, it could be a scam.

Again, great advice, but until a collector can verify they are speaking to the right party, they can only provide this information if asked. This makes them seem evasive, which is exactly the kind of behavior that may cause a consumer to feel uncomfortable.

So, what often happens is that the call ends with no information being exchanged. When collectors cannot reach consumers in any meaningful way, additional adverse consequences may result. Many accounts which would otherwise be resolved are instead escalated, resulting in unnecessary credit reporting, garnishments, repossessions, and litigation against consumers.

How can this catch-22 situation be resolved?

I have a few suggestions. 

Clearly authorize and enable debt collectors to initiate communication through digital channels

A rule that clearly authorizes and enables debt collectors to initiate communication through digital channels would make it possible to employ the dozens of more advanced ways to authenticate the consumer; these very same channels are already in wide use by banks and other financial institutions – those businesses that require the very tightest security and privacy measures. Enabling use of these channels would greatly benefit the consumer from the very beginning of the collection cycle by making communication far less awkward and frightening, more immediate, more likely to be addressed and not ignored – and thus less likely that an account would escalate unnecessarily.

Contact which is initiated digitally rather than via phone call would also give the consumer the opportunity to independently check out the organization that is contacting them before they engage in a live discussion. In fact, it might even remove the interaction from the phone entirely, if that’s what the consumer chooses. 

Affirmatively provide that, for purposes of FDCPA compliance, disclosure of the debt collector’s true identity does not constitute an unauthorized disclosure of the debt.

Do this by clarifying in §1692c. Communication in connection with debt collection, section (b) Communication with third parties by that “Mere disclosure of the true identity of the collector does not constitute a communication.” This would provide a measure of transparency to the consumer, it would reduce the amount of friction at the beginning of an interaction, it would allow a consumer to check out the caller before engaging, and it would establish a modicum of trust between collector and consumer. 

Finally, I will digress for a moment. In the event that another of my suggestions — the handshake communication — catches on, this addition to the FDCPA would create a sorely needed closed loop of information between creditor, collector and consumer. The handshake communication is like the letter (regardless of the channel of delivery) sent by a mortgage lender when the loan is sold; “We’ve sold your mortgage. This is who we’ve sold it to. This is who you’ll be making your payments to.” If such a communication were sent by a creditor when placing a consumer’s account with a third party agency, the consumer would be able to recognize the name of the agency contacting them, and would be expecting the outreach. I get that there may be current limitations to the ability to send such a communication. But, isn’t it the right thing to do?

The good news is that the Bureau has the authority to act on these recommendations, and in fact remains on track to release a Notice of Proposed Rulemaking in March 2019 addressing issues such as communication practices and consumer disclosures. 

Two court cases in 2018 address the awkward dance endured at the beginning of each initial phone call between a consumer and a debt collector.

When speaking with consumers, debt collectors walk on a sword’s edge to comply with two sections of the Fair Debt Collection Practices Act (FDCPA). Section 1692c (b) prohibits a debt collector from communicating with third parties about the debt with the exception of several limited carve-out situations such as having the consumer’s prior consent. Section 1692e (11) requires a debt collector to disclose that he is attempting to collect a debt and that any information obtained will be used for that purpose while speaking with the consumer.

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At first glance, these two sections of the FDCPA seem straight-forward. If the debt collector is talking to the consumer, he must disclose the purpose of the call. If the debt collector is talking to a third party, then he must refrain from disclosing the purpose of the call or any other information about the debt unless one of the limited carve-outs is satisfied.

A closer look at the practical implications of these two sections reveals a gray area triggered by the initiation of a telephone conversation.

Consumer Verification Process

To determine whether the debt collector needs to disclose the purpose of the call, he must first determine whether he is speaking with the right person. The FDCPA provides no guidance on how to do this, so debt collectors and their creditor clients have had to create their own policies and procedures. While these procedures may vary by company and whether the call is inbound or outbound, there is a common thread: generally debt collectors ask the consumer to verify some piece of personal information, such as the last four digits of the consumer’s social security number or the consumer’s birth date, to ensure they have the right person on the phone.

Prendergast and Ali Illustrating the Complexity

Prendergast v. First Choice Assets, LLC, No. 17-cv-316 (N.D. Ill. May 14, 2018) concerns this exact situation. This case revolves around two phone calls placed by a debt collection agency while attempting to collect a debt on behalf of its debt buyer client. In both calls, a debt collector asked the consumer to verify the last four digits of her social security number to confirm the right person was on the line; both times, the consumer refused and the conversation ended. During the second phone conversation, the consumer acknowledged she was Yenma (the plaintiff’s first name), but would not verify the last four digits of her social security number. According to the court, the called party’s acknowledgment of his or her first name is enough to trigger the requirement to disclose the call’s purpose if it is an outbound call placed to a number that the debt collector received with the account.

This same court recently came to a somewhat different conclusion in Ali v. Portfolio Recovery Associates, LLC et al., No. 15-CV-6178 (N.D. Ill. Sept. 30, 2018). In Ali, Portfolio Recovery Associates, LLC (PRA), through its counsel, served a collections lawsuit on a person who had the same first name, middle initial, and last name as the consumer liable for the account, only to later find that this was not the same person. The court would not grant summary judgment in favor of PRA for the bona fide error defense in Ali because, despite all of its policies and procedures, PRA served the wrong “Syed H. Ali.”

Ali is distinguishable from Prendergast in some ways. First, Ali did not involve a phone call. Second, the address used for service in Ali was not an address that originally came to PRA with the account. However, the skip tracing process used by PRA to obtain the address was two-pronged: it got the address both through an internal legal resource as well as through Experian.

Synthesizing these two cases highlights the complexity. Would the dual-verification of contact information in Ali be sufficient for the Prendergast court to find that verification of only the first name confirms right party contact? What if the Ali situation — same name, wrong person — occured in the Prendergast phone call? How should debt collectors proceed?

Considerations

Some questions for consideration:

• At what point can a debt collector be satisfied that they are indeed speaking to the right party, thus allowing them to disclose the purpose of the call without fear of third party disclosure?
• How many pieces of personal information, if any, other than a full name must a consumer verify to confirm their identity?
• In today’s world of identity theft and data breaches, are standard forms of information such as social security number or birth date even relevant proof of identity anymore?
• If the consumer refuses to provide any information to allow the debt collector to verify that they are speaking to the right party, is the debt collector in violation of the FDCPA if he does not disclose the purpose of the call even if refraining from doing so was with the intent to protect the consumer’s privacy?

In today’s environment, the last bullet point occurs regularly. Consumers are continually instructed by regulators, consumer advocates, and the media not to disclose their personal information if they do not know who they are speaking with. While everyone, including the ARM industry, agrees that measures to protect consumers against identity theft are important, this leaves debt collectors between a rock and a hard place due to the requirements of the FDCPA. Further, the situation makes collectors appear evasive, and often even encourages complaints to be filed, because consumers suspect fraud.

While a debt collector must disclose their agency’s name if asked by the person on the line prior to verifying the called party is the right party, that may not mean much. Consumers are familiar with the names of the entities where they took out a loan or opened a line of credit, but they are generally not familiar with the names of debt collection agencies. The issue gets more complex with purchased debt because there is an added degree of separation between the original creditor and the debt collector that is collecting on behalf of a debt buyer.

This all leads to an awkward authentication dance between the debt collector, who is trying to verify that they are speaking to the correct person, and the consumer, who is weary and suspicious of being asked for personal information from a person they don’t know. In these situations, both parties are trying to protect the consumer’s personal information. Unfortunately, these reasonable intentions often  lead to a stalemate that has the potential to harm the consumer.

If debt collectors cannot communicate and resolve accounts with consumers, it increases the likelihood that creditors, with no other means of recovering delinquent accounts, will file lawsuits against consumers. Collections lawsuits have an high default rate — meaning that consumers do not respond to complaints or appear in court — which causes judgments to be entered against consumers. Judgments impact consumers’ credit scores and follow consumers for many years to come.

There has to be a better way for all parties involved — consumers and their advocates, debt collectors, and regulators — to resolve this authentication issue.

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Editor’s note: We suggest you now read this article, also published today, for more about this topic, and some potential solutions.

STERLING, Ill. — VeriFacts Inc. (VFI) has announced the debut of Stride, a systematic verification program designed to consolidate efforts, keeping costs down while providing new information as it becomes available.  This program has streamlined the locate process, focusing efforts and labor to maximize return without breaking the bank.

Stride minimizes security and compliance risks by consolidating inventory management strategies, all in Sterling, Illinois, never offshore.  This unified waterfall process contains integrated inventory maintenance, putting the client in control of refresh and recalls.

How It Works:  The trigger process notifies the tracer of any movement, allowing for continuous monitoring of accounts.  The researcher is alerted of any new activity and follows new leads to find assets quickly and efficiently.  The Stride program maximizes speed to location with national coverage from all types and sizes of employers. This program accesses fully FCRA compliant information through VFI’s forever increasing data sources.

About VeriFacts Inc.

Since 1987, VeriFacts has provided quality skip tracing services to the financial industry.  Over 50 years combined experience within the executive team alongside an innovative R&D team provide the most trusted verified solutions available on the market today.  Long lasting vendor partnerships ensure the most transparent compliance and security controls, as well as unbeatable prices. Each VeriFacts client receives individualized customer service as well as a 100% quality guarantee.

To learn more about VeriFacts and the programs available to support collection efforts, please email sales@verifactsinc.com or call 800-542-7434.

The Bad Reyes saga just keeps on getting worse for TCPA defendants.

In a decision entered today, the Court has found that the Defendant waived its one-way intervention protections by doing nothing more than failing to alert the Court of its right to be free from pre-certification substantive rulings. See  Reyes v. BCA Fin. Services, Case No. 16-24077, 2018 U.S. Dist. Lexis 176628 (S.D. Fl. Oct. 15, 2018).  In other words, the Court has found that a TCPA defendant must affirmatively assert one-way intervention protections in order to preserve them.  The ruling can be found here: Reyes One Way Intervention Ruling

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The Reyes story began back in May, 2018 when the Court issued its first critical ruling in Reyes v. Bca Fin. Servs., Case No. 16-24077-CIV-GOODMAN, 2018 U.S. Dist. LEXIS 80690 (May 14, 2018 S.D. Fl.), a case that would forever become known in TCPAland as “Bad Reyes.”  In that decision, the Court entered summary judgment on behalf of Plaintiff finding that  ACA Int’l had not overturned the 2003 and 2008 Predictive Dialer Rulings, becoming the first case in the country to so hold.

But fate had so much more in store for this case.

In June, the Court rejected the Defendant’s bid to take an interlocutory appeal of the summary judgment ruling concluding that there was not a “substantial ground for difference of opinion” on the issue of whether or not ACA Int’l set aside the FCC’s predictive dialer rulings. (Since then numerous courts have held that the rulings were set aside–including courts within the Eleventh Circuit and including the only Circuit Court of Appeal decision to consider the issue to date.)

And then things really went off the rails for Defendant when the court subsequently certified a massive wrong number class action in Bad Reyes. Reyes v. BCA Fin. Servs., No. 16-24077-CIV, 2018 U.S. Dist. LEXIS 106449 (S.D. Fla. June 26, 2018).

Interestingly, however, the entry of certification after summary judgment in favor of the Plaintiff seems to have violated the decades old rule protecting defendants from one way intervention. As I’ve written previously:

“The one-way intervention doctrine dates back to the U.S. Supreme Court holding in Am. Pipe & Constr. Co. v. Utah, 414 U.S. 538, 547, 94 S.Ct. 756, 763, 38 L.Ed.2d 713 (1974).  There the Court held, inter alia, that substantive merits issues cannot be addressed in dispositive fashion in a putative class action before certification issues are decided. Otherwise class members can benefit from awaiting the outcome of the dispositive motion–losing nothing if the class representative’s position is rejected and then leaping to join the class if the dispositive motion is decided in their favor. That would be unfair and, as the Supreme Court pointed out in Am. Pipe, the amended rules do not allow for such nonsense:

A recurrent source of abuse under the former Rule lay in the potential that members of the claimed class could in some situations await developments in the trial or even final judgment on the merits in order to determine whether participation would be favorable to their interests. If the evidence at the trial made their prospective position as actual class members appear weak, or if a judgment precluded the possibility of a favorable determination, such putative members of the class who chose not to intervene or join as parties would not be bound by the judgment. This situation—the potential for so-called ‘one-way intervention’—aroused considerable criticism upon the ground that it was unfair to allow members of a class to benefit from a favorable judgment without subjecting themselves to the binding effect of an unfavorable one. The 1966 amendments were designed, in part, specifically to mend this perceived defect in the former Rule and to assure that members of the class would be identified before trial on the merits and would be bound by all subsequent orders and judgments.

Am. Pipe & Constr. Co. v. Utah, 414 U.S. at 547.

As a result, class action practitioners know well to never file a dispositive motion pre-certification–at least not one that effects the claims of the class as a whole. Putative class counsel will not file such motions because doing so likely waives their clients’ right to subsequently seek certification. Defendant’s counsel will not do so because filing such a motion would likely be deemed a waiver of the rule against one-way intervention (i.e. an invitation to the Court to rule on the substantive issue pre-certification).”

Undeterred by the apparent violation of their one-way intervention protections, the intrepid Reyes defendant swiftly brought a motion for reconsideration asking the court to reconsider the certification ruling in light of its previous grant of summary judgment on the ATDS issue in favor of the Plaintiff. Despite its timely effort to assert the procedural abnormality, the Court has now rejected Defendant’s one-way intervention argument concluding that it had been waived.

In reaching that conclusion, the the Court first noted that parties have the responsibility to bring such arguments to a court’s attention and cannot merely expect the court to know the law. The Court argues that the failure to raise one way intervention effectuates a waiver because if “‘the law is the law and the Court knows the law,’ then the legal concept of waiver would be a nullity.” Reyes at *8.

Notably, of course, waiver is most often implied where a party takes an affirmative act contrary to a position later taken in litigation, so its not technically true that the legal doctrine of “waiver” would be rendered a “nullity” if parties were allowed to assume that courts will not act directly contrary to their rights. Nonetheless, the question of who has the responsibility to make sure the one way intervention doctrine is not violated is an interesting one.  As the Supreme Court notes, Rule 23 was amended to assure that “members of the class would be identified before trial on the merits and would be bound by all subsequent orders and judgments….” Am. Pipe & Constr. Co. v. Utah, 414 U.S. at 547. That seems to be an edict that is stern and rigid and not subject to an easy inference of waiver by a party that simply assumed the proceeding would not violate the Rules.

Then again, the Court has a very valid point vis “it is not the Court’s job to advance arguments on behalf of the parties.” So perhaps the issue is whether the protections against one way intervention are mere “arguments”–which are commonly waived when not asserted by parties in litigation– or are they affirmative rights that cannot be lightly waived absent knowing and voluntary conduct?  The Reyes court certainly views matters through the former lens–  “when a party waits until reconsideration to raise a new argument, the argument is considered waived” Reyes at *7–but one could certainly adopt the later position and still be of reasonable mind in my view.

But there is more to this story anyway.

The Reyes court also holds that it has the discretion to rule on a summary judgment motion pre-certification, one-way intervention be darned. See Reyes at *10, citing Kehoe v. Fid. Fed.Bank & Tr., 421 F.3d 1209, 1211 (11th Cir. 2005).  This is a pretty aggressive position considering–as the Reyes Court readily admits–Kehoe dealt with a defendant’s summary judgment motion. So while a defendant may choose to risk waiving the protections of one-way intervention by seeking its own ruling on a class-wide substantive issue pre-certification, that doesn’t seem to make it ok for a plaintiff to run roughshod over those protections unilaterally–which is what happened in Reyes. But Reyes reads Kehoe very broadly and apparently for the proposition that a court always has the discretion to rule on any summary judgment motion pre-certification, a determination that seems to grant district courts the discretion to will away one-way intervention altogether. Reyes buttresses this finding by noting that the Eleventh Circuit has previously reversed denial of certification in at least one case where a Plaintiff’s motion for summary judgment had already been granted. See Reyes at *11, citing Dickens v. GC Services Limited Partnership. 706 F.App’x 529 (11th CVir. 2017). While it naturally follows that such a ruling would necessarily violate the one-way intervention protections afforded to the Defendant, it doesn’t seem to follow that the Eleventh Circuit intentionally disregarded the rule since Dickens does not mention one-way intervention at all.  And Dickens certainly does not hold that district courts are free to disregard Am. Pipe & Constr. Co. v. Utah, even if it (the Eleventh Circuit panel) did so.

There is one final and interesting wrinkle to the latest Reyes ruling.  The Court finds that, as a threshold matter, the grant of summary judgment in favor of the Plaintiff on the issue of whether or not Defendant’s dialer is an ATDS is not necessarily a substantive ruling applicable to the entire class. But the class definition includes calls made by Defendant “using computer assisted dialing technology manufactured or designed by Noble” and the MSJ found “that the Noble predictive dialer, as used by BCA Financial, was an ATDS as a matter of law.” See Reyes, 2018 U.S. Dist. Lexis 80690 at *37. So maybe there’s some daylight between the class definition and the reach of the summary judgment ruling but its tough to say that the ruling won’t be dispositive as to some large portion of the class, which seems sufficient to trigger one-way intervention concerns.

This last piece of Reyes is also curious considering footnote one of the original Reyes ruling, which reads: “Moreover, it [the MSJ] concerns threshold issues that may impact the class, if it is certified. Therefore, the Court deems it prudent to rule on the summary judgment motion first.” Reyes , 2018 U.S. Dist. Lexis 80690 at *6, fn 1. So the driving impetus behind the Court granting summary judgment before certification in the first place was the Court’s belief that the ruling would have classwide impact. But the Court now finds that the ruling did not violate one way intervention because the ruling may not have such impact after all.

At bottom, the Reyes court stands as a stern reminder to defendants to be ever-vigilant in asserting one-way intervention protections. Assuming Reyes is correct that one-way intervention protections are discretionary to some degree, defendants will be much better served by asserting their rights early in a proceeding. As you might expect, a court is unlikely to reverse itself after it has put in the hard work of considering a beefy certification motion and ruling on it. So asserting the issue as soon as it becomes apparent will save the court time and might just prevent a wayward certification ruling after the class members have already had a peek at the merits of their claim.

—

Editor’s note: This article is provided through a partnership between insideARM and Womble Bond Dickinson. WBD powers our TCPA case law chart and provides a steady stream of their timely, insightful and entertaining take on this ever-evolving, never-a-dull-moment topic. WBD – and all insideARM articles – are protected by copyright. All rights are reserved.

In a September 30, 2018 decision, the Eastern District of Wisconsin found that there is no specific labelling requirement in the Fair Debt Collection Practices Act (FDCPA) for identifying the creditor and found nothing wrong with listing both PayPal Credit and Comenity Capital Bank in a collection letter in Smith v. Simm Associates, Inc., No. 17-cv-769 (E.D. Wisc. Sept. 30, 2018).

Factual and Procedural Background

Simm Associates, Inc. (Simm) sent a debt collection letter to plaintiff notifying her of an outstanding debt. The letter identifies PayPal Credit as Simm’s client and Comenity Capital Bank (Comenity) as the “Original Creditor.” As stated in the decision, “Comenity Capital Bank is the actual creditor, [but] the bank holds itself out as PayPal Credit in its transactions with consumers and thus would be more familiar with the PayPal name.”

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Plaintiff filed a two-pronged FDCPA lawsuit against Simm alleging that: (1) Simm failed to list the current creditor since it identified Comenity as the “original creditor” and (2) that the letter was false, deceptive, or misleading.

After the court granted class certification, the parties filed cross motions for summary judgment.

The Decision

The court found that Simm’s letter stated the creditor information “clearly enough that the recipient is likely to understand it.” (Internal citation omitted.)

The court agreed with Simm that the FDCPA does not require that the letter explicitly include the label “current creditor.” According to the court, it was clear from the letter that Comenity is the entity to whom the debt was owed.

The court also found no issue with the letter listing both Comenity and PayPal Credit. The court cited and agreed with the reasoning of another case against Simm containing similar allegations: Maximiliano v. Simm Associates, Inc., No. 17-CV-80341 (S.D. Fla. Feb 8, 2018).

The court summarized the Maximiliano decision as follows:

The Maximiliano court found that Simm’s demand letter left “no room for confusion in the eyes of the least sophisticated consumer.” It reasoned that by disclosing PayPal Credit as Simm’s client, Comenity as the original creditor, the amount of the debt, and the PayPal Credit account number, Simm’s letter allowed a consumer to easily identify the nature of the debt. The court therefore held that the letter, read in whole, properly identified the current creditor because the “least sophisticated consumer” is unlikely to know that Comenity is actually providing the credit line. The court concluded that “from the perspective of the least sophisticated consumer receiving the demand letter at issue, Simm identified the name under which Comenity transacted business with PayPal Credit account holders, such as Plaintiff.”

(Internal citations omitted.)

Persuaded by the Maximiliano ruling, the court granted summary judgment in favor of Simm.

insideARM Perspective

Debt collectors that collect on accounts that are owed to an entity that may not be as familiar to the consumer as another entity that the consumer regularly transacted with (for example, branded credit card accounts) might now have a little more guidance on how to proceed with identifying the creditor in collection letters. We now have two district courts from different parts of the country that found the value of helping the consumer recognize the debt by identifying the entity with which the consumer is familiar.

On a procedural note, this decision came after the court already certified the class in this suit. While class certification may be discouraging to an FDCPA defendant, this case illustrates that it is still worth fighting the case if the merits are strong.

Last week, four separate entities filed amicus briefs in the State National Bank of Big Spring v. Mnuchin, Case No. 18-5062, case before the U.S. Supreme Court this term. As previously reported by insideARM, this case questions the constitutionality of the Bureau of Consumer Financial Protection’s (BCFP or Bureau) structure due to the “for-cause” removal requirement of the Bureau’s director, the Bureau’s exemption from Congress’s power of the purse, and lack of internal checks and balances due to the Bureau’s single director structure.

All four petitions are filed in support of State National Bank of Big Spring, arguing that the Court should find the Bureau’s structure unconstitutional.

Buckeye Institute Brief

The Ohio-based think tank makes two main arguments. First, that the Bureau is almost completely insulated from oversight by the Executive and Legislative branches of government due to the “for-cause ” requirement for removing the director. Due to the 5 year term of the director, the brief points out that “a President could serve a full term without ever having any say in who runs this powerful agency.” The brief also calls out the Bureau’s bypass Congress’s power of the purse because it does not rely on the Legislative branch for funding.

One interesting argument in this brief is that it advocates for a state, rather than a national, solution. The Buckeye Institute states that the nation is large, diverse, and polarized and asks “[w]hy, then, do we try to resolve so many issues on a national level?”

Southeast Legal Foundation, National Federation of Independent Business Small Business Legal Center, and Cato Institute Brief

This brief argues that “Congress violated the separation of powers principle when it created the [BCFP] and gave the [BCFP]’s Director unilateral and unchecked power to legislate, execute, and adjudicate nineteen federal consumer protection statutes.” This brief points to an issue that the D.C. Circuit Court of Appeals summarily denied in its en banc rehearing of PHH v. Consumer Financial Protection Bureau: considerations of individual liberties. The brief argues that the separation of powers protects individual liberties and that the current structure of the Bureau does the opposite.

Landmark Legal Foundation Brief

This brief likewise finds that Congress violated the separation of powers with the creation of the BCFP. It discusses how executive power in the Bureau is not diffused with a multi-member commission. Instead, it rests solely in the hands of a single director who can be removed only for cause by the President. This brief, similar to the Southeast Legal Foundation’s brief, speaks to the Bureau’s exemption from Congress’s power of the purse by being allowed to set its own budget and draw funds directly from the Federal Reserve.

Pacific Legal Foundation Brief

What sets this brief apart from the others is that it references how the Bureau steps on the toes of the Judicial branch. This brief discusses all of the different hurdles a company must clear within the BCFP before it has a chance at judicial review of the matter. Even when a company finally gets its case before a court, the decision can only be reviewed under the “abuse of discretion” standard and the BCFP’s findings of fact are “all but unreviewable.”

This brief also calls out the Bureau’s ability to create regulations by enforcement. By using enforcement actions to establish new policies, the Bureau could “challenge conduct that was, prior to the enforcement action, perfectly legal.”

insideARM Perspective

While all four of these briefs show support a finding that the Bureau’s structure is unconstitutional, we will likely see briefs supporting the other side of the argument in the weeks to come. With Justice Kavanaugh now officially on the bench, who authored the dissenting opinion in the en banc review of PHH v. CFPB, we already know how at least one vote will go.

As it relates to the comments made in the Pacific Legal Foundation’s brief, Acting Director Mick Mulvaney stated that his hope was to provide clear regulatory rules and reduce regulation by enforcement. However, what the current director (or acting director) does is not indicative of what a future director could do. Bringing this issue to the Supreme Court’s attention is important as the court can clarify whether this type of action by the Bureau is constitutional.

The due date for the Bureau’s response in the Supreme Court case was moved from October 10, 2018 to November 9, 2018.