Archives for February 2019

On February 8, a proposed class settlement received final approval for a case alleging Telephone Consumer Protection Act (TCPA) violations against Navient Solutions, LLC. The settlement awards $2.5 million to the class. The court’s approval of the class settlement awards $833,333 in attorneys’ fees and $24,379.83 in costs and expenses.

The class action lawsuit against Navient was filed in October 2017 alleging that Navient used an Automatic Telephone Dialing System (ATDS) to place calls requesting location information to third parties’ cell phones without consent. According to the complaint, the representative plaintiff’s brother had a student loan account that was placed with Navient for collection. The plaintiff was listed as a reference on her brother’s student loan application without her knowledge or consent. The plaintiff never had an agreement with nor provided consent to Navient to call her cell phone. The complaint also alleges that these third parties continued to be called even when they requested no more calls.

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The settlement agreement states that Navient “vigorously denies all claims asserted in the Action and denies all allegations of wrongdoing and liability and, in particular, that the calls at issue were made using an ATDS.”

In a new ruling released on Friday a magistrate judge in Texas has recommended allowing a fraud claim to proceed against a repeat TCPA Plaintiff who allegedly knew a third-party had provided his phone number and opted-in to a text message campaign. See Ricky Franklin v. Upland Software, Inc., Case No. 1-18-cv-00236, 2019 WL 433650 (W.D. Tx Feb. 1, 2019).  In Franklin, rather than opt out of the messages, the Plaintiff sat still and allowed the messages to continue. He then sent a demand letter to the Defendant in which he, apparently, misrepresented these facts and then filed suit.

Given that the Plaintiff was a repeat TCPA player, one could easily see how a court could conclude that he had invited the messages by failing to opt out after learning that a third-party had provided his number. (Wonder how he learned that? Hmmmm.) Indeed, the Court repeatedly noted that Plaintiff was “intimately familiar” with the statute. So this scenario seems to fit neatly within the rule of my old victory in Stoops v. Wells Fargo where it was first held that a TCPA plaintiff cannot welcome and invite their own harm and then turn around and sure for it.

But the Franklin Defendants went further than seek dismissal for lack of standing—they sued for fraud! Contending that Plaintiff’s superior knowledge of the situation coupled with his intimate familiarity with the TCPA created a duty to disclose, Defendant argued that sitting still and failing to opt out of the messages was actually a form of fraud by non-disclosure. The court agreed: “Upland alleges that it, and more importantly its third-party client, did indeed rely on the failure to disclose and continued to send text messages to the phone number at issue, as Upland took actions pursuant to its contractual obligations… Upland alleges that it was injured as a result of the nondisclosure and had to incur costs associated with what it views as a spurious and setup lawsuit.” So take note TCPAland— if a repeat Plaintiff allows messages to continue in a bid to set up a claim a fraud theory may be viable!

The Franklin magistrate judge also concluded that a direct claim for misrepresentation was possible under the facts alleged because the Plaintiff sent a demand letter to the Defendant misrepresenting that he had no knowledge of how the texter had obtained the number, a fact that was allegedly false.

The Franklin ruling is also spectacular for providers of texting technology more generally. As I reported a few months back, courts have slowly began creeping toward holding platform providers directly liable for texts sent by their users for some reason. But the Franklin ruling pushes back hard against that notion. On the Court’s review of the record: “ The process “to make” a call or send a text requires no involvement from [Defendant], but rather requires [Defendant’s] customer to log onto its platform and set up a mobile messaging campaign from a list of individuals who have opted into a messaging campaign.”  Based on these facts the Court had no problem finding that it was not the Defendant—but the user of the platform—that initiated the call. The Court also found that the Plaintiff’s claims that the Defendant was vicariously liable for the messages to be wholly unsubstantiated.

For good measure the Court blessed the Defendant’s software as outside the scope of the TCPA to begin with because if the high degree of human intervention associated with the text message campaign: “The process [requires a user to]… log onto its platform and set up a mobile messaging campaign from a list of individuals who have opted into a messaging campaign. After setting up the lists, the customer drafts the content of the text message and then selects the date and time the text message is to be sent, and, after reviewing the content of the message and time to be sent, sends or schedules the text to be sent. [Thus]…, the platforms require significant human intervention and sorting on almost all aspects of the text messages and the platforms do not have the capacity to act as an auto dialer.” Wow!

Great day for the Defendant in this one and a good lesson to all of us about thinking creatively and acting aggressively when defending TCPA suits against repeat players.

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Editor’s Note: This article is published on insideARM with permission from the author.

Editor’s Note: This article was written by Punit Marwah, Ethan G. Ostroff, and David N. Anthony and was originally published on the Troutman Sanders LLP Consumer Financial Services Law Monitor. It is republished here with permission. 

The United States District Court for the Western District of Texas recently granted summary judgment in favor of a debt collector, holding that letters sent with the same client account number for two different debts incurred with the same underlying creditor was not false, deceptive, or misleading or otherwise in violation of the Fair Debt Collection Practices Act.

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Consumer plaintiff Mary Reynolds incurred debts with the original creditor, Methodist Specialty & Transport Hospital, for two separate hospital visits five months apart in 2017. Medicredit, Inc. sent Reynolds two collection letters relating to the hospital visits. These letters included the same account number generated by Medicredit but pertained to debts from two separate hospital visits, with two separate balances, and different account numbers for the original creditor.

The first letter stated the balance owed as $600 for a hospital visit in March 2017, and the second letter stated a balance of $75, pertaining to a hospital visit in the following August. Reynolds alleged this caused her to believe that the amount of debt had decreased due to her insurance paying off a portion of the debt.

Reynolds filed suit, alleging Medicredit violated the FDCPA by unlawfully confusing her by including the same internal account number on both letters even though the letters pertain to separate debts. Specifically, Reynolds alleged a violation of § 1692e for using any false, deceptive, or misleading representation or means in connection with the collection of any debt, and a violation of § 1692(f) for using unfair or unconscionable means to collect or attempt to collect any debt. Medicredit filed a motion for summary judgment on the basis that no reasonable factfinder could find the correspondences at issue misleading because an unsophisticated consumer would understand that the letters were for separate financial obligations.

In its opinion, which can be found here, the Court held that the ultimate question in the case is whether the unsophisticated or least sophisticated consumer would have been led by the debt collection letter into believing something untrue that would have influenced their decision making.

In granting Medicredit’s motion for summary judgment, the Court noted that the collection letters would deceive or mislead only under a “bizarre or idiosyncratic” reading. The Court reasoned that an unsophisticated consumer, when reading the letters as a whole with some care, would note the differing client account numbers in the letters, the fact that the dates of service differed by more than four months, and the large gap between the two balances of $600 and $75. Finally, the Court held that Medicredit’s inclusion of a self-generated account number, even viewed from an unsophisticated consumer’s perspective, is not unfair or unconscionable, just as it is not false, deceptive, or misleading.

AllianceOne Management Receivables, Inc. (AllianceOne) agreed to settle a class action Fair Credit Reporting Act (FCRA) lawsuit. The lawsuit, filed against AllianceOne and Experian back in 2015, alleges that AllianceOne pulled plaintiff’s credit report in order to collect on plaintiff’s past due parking tickets, which, the complaint argues, is an impermissible purpose. The complaint also alleged that Experian failed to properly investigate plaintiff’s disputes and furnished plaintiff’s credit report to AllianceOne without a permissible purpose. According to PACER, Experian was dismissed from the case back in October 2016. In entering into the class settlement, AllianceOne denies any wrongdoing or that any violation of the FCRA occurred.

On February 7, an unopposed motion to certify the class and grant preliminary approval of the class settlement agreement was filed and is set to be heard on February 22, 2019. The settlement agreement, listed as Exhibit 2 to the unopposed motion, calls for AllianceOne to pay $5,000 to the class representative plaintiff and $2.2 million for the class settlement. The agreement also limits the class counsel’s fee request, not allowing it to exceed $733,333.33.

The history of this litigation includes an two orders (one on a motion to dismiss, one on a motion for summary judgment) where the court disagreed with the interpretation that pulling credit reports for fully adjudicated debts is a permissible purpose.

TREVOSE, Pa. — NCB Management Services, Inc. is a proud supporter of the Employer Support of the Guard and Reserve (ESGR). There are ways to say “thanks for your military service,” and ways to say “thanks for your support.” The ESGR offers a Statement of Support program where employers can sign a pledge to support the military service of their employees. NCB shares the same hope and vision as the ESGR, which is the hope that by creating a culture in which all American employers’ value the military service of their employees.

President & CEO of NCB, Ralph Liberio stated, “on behalf of NCB, I am proud to support the ESGR and their mission. I am proud of our employees Susan Richards and Alan Nisenfeld for being recognized and awarded the ‘Patriot Award on behalf of the Department of Defense and the Secretary of Defense of the United States of America”. Liberio continued, “I am especially proud of Mr. Ollie Days, an NCB employee and active reservist in the United States Navy for his dedicated service to our country as well as his commitment and service to NCB. We wish to express our appreciation to the ESGR, Colonel David Blum (Retired US Airforce) and Mr. Ollie Days for recommending and presenting Ms. Susan Richards and Mr. Alan Nisenfeld to receive this prestigious award.” 

A video of the event can be found here.

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About NCB Management Services, Inc.

NCB Management Services, Inc., established in 1994, is headquartered in the Philadelphia area with satellite offices in Jacksonville, FL and Sioux Falls, SD. NCB is a recognized Accounts Receivable Management (ARM) industry leader as well as a nationally respected debt buyer. The company is partially owned by its employees through an Employee Stock Ownership Plan (ESOP). The NCB ESOP is a company-funded defined contribution retirement plan established in 2014 for the benefit of NCB employees.

On Monday, the Consumer Financial Protection Bureau (CFPB or Bureau) published its notice and request for comments on a survey regarding debt collection disclosures. Along with the notice, the CFPB published several other documents, including:

• Supporting Statement, Part A
• Supporting Statement, Part B
• Sample Validation Notices
• Survey Testing Plan
• Survey Screening Questions
• Survey Instrument

These documents provide some interesting information. Here are the four things you need to know.

1. Focus: Validation Notice, Consumer Rights Disclosures, and Disclosures for Time-Barred Debts

According to the Bureau’s justification of the survey in Supporting Statement, Part A, it is looking for information on three main items:

• Whether additional information is needed in the validation notice to assist consumers in recognizing their debts;
• Whether additional information should be given to consumers about their rights at the time that the validation notice is given; and
• Whether consumers should receive disclosures regarding time-barred debt in initial and subsequent communications.

The sample validation notices that will be used in the survey can be found here. These sample letters include, for the most part, identical disclosures – the only variable disclosure is the one regarding time-barred nature of the debt. Disclosures such as the mini-Miranda, the validation notice, the notice of consumer rights, and the debt itemization all appear to be uniform.

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2. One Step Closer to Electronic Disclosures

The Survey Instrument, which includes the survey questions, contains a section dedicated to electronic disclosures. As insideARM previously published, the industry is slowly moving toward modern communication channels but there are still several hurdles along the way. The good news is that the Bureau is using this survey to explore consumer preferences in receiving notices electronically. The Bureau also seems to recognize that there is a fair chance these notices will fall into their spam folder, as two questions on the survey specifically relate to how respondents treat spam emails.

3. The Bureau Still Prefers a “Tear Off” at the Bottom of Letters Containing the Validation Notice

When the Bureau issued its Outline of Proposed Rules in July 2016, it included a sample validation notice letter with a tear off section for a consumer fill out with a dispute and return. After two and a half years and after many conversations between the industry and the Bureau about the issues of such a tear off section, it seems nothing has changed.

The tear off portion in the newest sample validation notice provides consumers with the following options:

• Dispute the debt – not my debt.
• Dispute the debt – wrong amount.
• Dispute the debt – other.
• Request name and address of the original creditor.
• Enclose a payment.
• Request information in Spanish.

One situation that is not addressed is where a consumer acknowledges that the debt is owed but cannot pay at this time. This would not fall under a dispute category but it is information that would be helpful to a debt collector. Debt collectors usually have options available for consumer who cannot pay all or part of their debt due to a hardship, but a debt collector cannot avail a consumer of such options if the debt collector does not know the situation.

4. The Survey Will Likely Not Delay the Bureau’s Debt Collection Rules

The Bureau’s Fall 2018 Rulemaking Agenda listed the estimated date of the Notice of Proposed Rulemaking (NPRM) for the debt collection rules as March 2019. Since the disclosure survey comments are due on March 4, there was some speculation about whether or not the rules will be delayed.

Two items in the supporting documentation indicate that there might not be a delay after all. In the Supporting Statement, Part A, the Bureau states as follows:

The Bureau has also previously released examples of possible consumer disclosures as part of the Outline of Proposals Under Consideration for the Small Business Review Panel for Debt Collector and Debt Buyer Rulemaking. The Bureau has received and continues to receive feedback from stakeholders on these examples and related topics, and these disclosures continue to be under consideration and development. Any disclosures that become part of a rulemaking will be released at a later date and will be subject to public notice and comment.

(Emphasis added.)

The same document also states:

The Public will also have an opportunity to comment on the proposed disclosures when the Bureau publishes its notice of Proposed Rulemaking for the rule that this research will support.

This indicates that the NPRM and finalized disclosures are not co-dependent on each other, and that the NPRM’s March timeline will likely not be impacted by this survey.

Senator Ben Hueso of California’s State Senate introduced a bill on Monday that will attempt to put a stop to the practice of spoofing, specifically where the spoofed calls come from an area code local to the consumer. The bill is called the Consumer Call Protection Act of 2019.

The bill’s preamble sets the stage for the current lay of the land and what it proposes to do:

Existing federal law, with certain exceptions, makes it unlawful for any person within the United States, in connection with any telecommunications service or internet protocol enabled voice service, to cause any caller identification service to knowingly transmit misleading or inaccurate caller identification information with the intent to defraud, cause harm, or wrongfully obtain anything of value and authorizes the chief legal officer of a state, or any other state officer authorized by law to bring actions on behalf of the residents of a state, to bring a civil action on behalf of the residents of the state in an appropriate district court of the United States to enforce this prohibition.

This bill would require a telecommunications service provider, on or before July 1, 2020, to implement specified protocols or similar standards to verify and authenticate caller identification for calls carried over an internet protocol network. The bill would authorize the commission and the Attorney General to bring an action pursuant to the above-described federal law and would authorize the commission to work with the Attorney General for the purpose of enforcing that law.

The bill states that consumers have experienced a rise in deceptive robocalls and that action is needed to protect Californians “from imposters using telecommunications to defraud consumers.”

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insideARM Perspective

Yesterday, insideARM published an article about a court decision that found local number outpulsing is not a deceptive practice. The timing of this new California bill is perfect to explain a key difference: local number outpulsing and spoofing of local number are two separate practices and should not be confused.

Local number outpulsing involves making calls from a phone number with a local area code to the call’s recipient. The number used is usually owned or registered to the company using it. If the consumer were to call the number back, it would result in a call to the company.

Local number spoofing is something entirely different. Rather than using a local number owned by or registered to the company making the call, spoofers commandeer a local phone number for a brief period of time in order to place calls that are difficult to trace back to the spoofer. If the consumer calls this number back, they are not going to call the company who place the spoofed call – they are going to dial whoever owns that number.

The difference here is ownership of the number. If the number is registered to the company, then such calls are not deceptive according to some courts. If the number is not registered to the company, then that’s a different story.

The Eastern District of Pennsylvania (E.D. Pa.) recently reviewed a case regarding local number outpulsing, where a company places calls from a phone number in the consumer’s area code even if the company is not located there. In Bermudez v. Diversified Consultants Inc., No. 18-cv-2004 (E.D. Pa. Feb. 1, 2019), the court found that the practice was not deceptive or misleading as alleged by the consumer.

Factual and Procedural Background

Defendant debt collector placed a call to plaintiff’s daughter using three phone numbers from the daughter’s area code in Pennsylvania. Defendant is located in Jacksonville, Florida, and does not have a place of business in Pennsylvania.

Plaintiff filed a Fair Debt Collection Practices Act (FDCPA) lawsuit against defendant, alleging that using a local area code was deceptive and misleading because the local phone number gives consumers a false impression that the call is locally originated in order to entice the consumer to answer. In response, defendant filed a motion to dismiss, which the court granted.

The Court’s Decision

Unlike the plaintiff, the court did not take issue with the practice of local number outpulsing. In determining whether the practice was deceptive or misleading, the court looked directly to section 1692e of the FDCPA. The court stated:

Section 1692e’s list of prohibited conduct generally characterizes three categories of harmful practice, to wit: misleading consumers about the debt collector’s identity, about the character of the debt itself, and about the consequences of a consumer’s decision about the debt.

Noting that the representation about the identity of the debt collector is about who the debt collector is – not merely where the debt collector is calling from – the court found that the practice was not prohibited conduct under 1692e.

Additionally, the court found that the practice is not material in how a debtor addresses debts, which what Congress sought to protect. Therefore, the court found that:

The use of a particular phone number, by a Defendant whose business location is covered by a different area code, is not materially misleading information or prohibited conduct under the FDCPA.

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insideARM Perspective

Recently, insideARM wrote about the ARM industry’s dilemma when dealing with FDCPA litigation. One reason for this dilemma is the constant stream of lawsuits even when the courts have already resolved the issue at hand. Inconsistent court decisions light a fire under this problem. This inconsistency leads to the belief that even if a claim failed in one jurisdiction, it doesn’t mean that it will fail in another — even though it relates to the same provision of the FDCPA. What is the result? Duplicative lawsuits in multiple jurisdictions addressing the same issue.

This is currently highlighted within the Third Circuit on the issue of whether validation notice language that tracks the FDCPA is or is not confusing to consumers regarding dispute procedures. In that situation, the reason for confusion is clear — district courts within the same circuit are coming out with conflicting decisions.

The situation illustrated by the decision outlined in this article shows the other face of this problem: even when courts are ruling consistently, it does not stop duplicative lawsuits on the issue. A footnote in this case references that several other district courts found no FDCPA violation in a similar set of circumstances. Yet, because courts are ruling inconsistently, suits like this continue to get filed because there could be a chance of success in other jurisdictions and the volume and cost of litigation are so high that debt collectors are almost strong-armed into settlements.

The big picture here is this: all of this relates to the same statute. The FDCPA is a federal statute, which means its requirements should be uniform throughout the country. That is not what is happening in reality, and that is a problem.

On Tuesday, the Consumer Financial Protection Bureau (CFPB or Bureau) announced that it reached a settlement with Cash Tyme, a payday retail lender. Per the consent order, Cash Tyme must pay a $100,000 fine, split into two $50,000 payments.

The allegations against Cash Tyme included, among other things, the following:

• Failing to have an adequate process to prevent unauthorized charges to borrowers. Specifically, having “no reliable means of preventing a subsequent ACH debt from the consumer’s account for the full amount of the loan, even though the full amount was no longer due.” This resulted in the collection of at least $21,800 that consumers did not owe.
• Failing to have adequate processes to monitor, identify, correct, and refund overpayments by consumers. A manual process was in place, but it often led to errors.
• Routinely making collection calls to third parties listed as references on the consumers’ applications until the consumer paid his loan, risking third party disclosure.
• Notating requests not to call in the consumers’ files rather than keeping a do-not-call list, which led to errors.
• By using references listed on consumers’ applications, which stated that these references would only be used for verification purposes, to make telemarketing leads.
• Advertising unavailable services on storefronts that were likely to lead a consumer to decide whether or not to visit a Cash Tyme store.
• Failing to adequately display the Annual Percentage Rate on its advertisements.

In addition to paying the fine, Cash Tyme must implement adequate processes related to unauthorized charges, ACH payments, and monitor for overcharges. Cash Tyme must also amend their advertisements to correctly state the Annual Percentage Rate, make its privacy notice clear and conspicuous, and refund all un-refunded customers.

SEATTLE, Wash. — Attunely Inc. announced today that it has raised $3.7 million and is making its machine learning (ML) platform commercially available to over 4,000 third-party collection agencies, debt buyers, and collection law firms in the Accounts Receivable Management (ARM) industry. Attunely uses machine learning to help its customers fine-tune their outreach process by using real-time optimization and account scoring to improve the consumer experience, reduce ineffective outreach, and drive increased recovery rates and operating margins.

“Attunely’s team brings together ARM industry veterans with enterprise-grade machine learning software innovators,” said Scott Ferris, Attunely’s Founder and Chief Executive Officer. “We couldn’t be more excited to be playing the long game by partnering and tailoring our software to the specific set of challenges facing the ARM industry.”

Over the last year, Attunely has partnered with several third-party agencies and debt buyers to design its supervised learning algorithms and real-time account valuation model driven by data from over 100M historical consumer interactions. The company also offers a suite of reporting and analytics tools that empower customers to monitor and continuously optimize performance in real time.

“Machine learning is a game changer for the industry – the new edge in leveraging the data we already have. Attunely has been able to streamline and optimize the priorities of consumer contact, while still complying with strict regulatory issues. We have been able to take our business to new levels of efficiency and revenue opportunity. We at Account Management Services (AMS) intend to change, grow, and thrive, thanks to our friends at Attunely,” said Rick Moss, CEO of AMS.    

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As a result of close collaboration with industry leaders and experienced operations managers, Attunely’s product is designed to integrate seamlessly with a customer’s existing IT infrastructure and workflows. To that end, the company is beginning to engage in cooperative channel partnerships with embedded technology vendors to seamlessly integrate and distribute its machine learning platform and tools.

“We have spent significant time with the Attunely team and continue to be impressed with how they are listening and adapting their software to meet our exacting specifications,” said Mike Frost, Chief Compliance, Sales Officer and General Counsel of CBE Companies. “As we evolve our optimization patterns, we expect to see increased propensity to pay results, reduced compliance infractions, and in the end deliver improved results to our clients.”

Steven Fuernstahl, President of Stoneleigh Recovery Associates, says “Attunely’s machine learning insights have significantly improved our collections operations and allowed us to recover more revenue for our clients through a more personalized consumer engagement.”

The company has also managed to engage an impressive list of long-standing industry experts who have helped to shape the product offering, including the appointment of Steven Wilansky as Attunely’s Chief Legal & Compliance Officer and Jack Lavin, Chairman Emeritus of Arrow Financial Services and Chairman of Javlin Capital, as a Board Director of Attunely Inc.

“Attunely and its clients are well positioned to improve the ecosystem and cycle even more credit back into the U.S. economy each year by mitigating risks associated with extending credit to subprime borrowers,” said Lavin. Attunely is announcing today the commercial availability of its platform at the annual Receivables Management Association (RMA) conference in Las Vegas.

About Attunely

Attunely is a cloud-based, optimization platform for the Accounts Receivable Management industry that uses machine learning to increase efficiency in the collection process, thus improving outcomes for creditors, lowering risk in the credit ecosystem, and expanding access for subprime borrowers.

For more information, visit http://www.attunely.com.