Archives for April 2019

Last Tuesday the Court of Federal Claims (COFC or the Court) heard arguments in the case of FMS Investment Corp., (FMS) et al., v. United States (the Department of Education or ED). The plaintiffs are protesting ED’s re-cancellation of Solicitation No. ED-FSA-16-R-0009 for Large Business Debt Collection Services. They claim the Department of Education had no rational justification for cancelling the procurement.

The April 16^th hearing was related to a motion for preliminary injunction to prevent ED from recalling all remaining accounts from four large private collection agencies (PCAs) that still hold Award Term Extensions (ATEs) from a prior contract that ended in 2015.

The Solicitation to award new large PCA contracts has been under protest for nearly five years. For a condensed background on the case, read this article and then this article.

The recall of these accounts would, for practical purposes, be a nail in the coffin for these firms because it would mean the loss of their Authority to Operate (ATO), which can take up to a year to re-establish, even if they ultimately win their case.

The arguments articulated were essentially the same as those outlined in this article on April 8^th. In short, the plaintiffs argued:

• ED’s new “high-touch” plan to avoid loan delinquencies violates state law.
• Bundling servicing and default is illegal
• Calling under an inaccurate name is illegal under the Fair Debt Collection Practices Act.
• ED’s calculation of small business PCA capacity lacks rigor.
• ED’s calculation showing collection rate by “smalls” is as good as or better than “larges” is grossly misleading.
• Recall of the “in-repayment” accounts will cause harm to borrowers because of the confusion that will be caused by the transition.
• The Solicitation for large PCA services was cancelled in bad faith.

On behalf of ED, the Department of Justice argued:

• The PCAs want expiring contracts to not expire.
• They want to extend something that’s expiring while waiting for something else to happen.
• Nobody is protesting the terms of the (ATE) contract – so that contract should be allowed to play itself out.
• The PCAs’ complaints are predicated on getting new contracts. It’s unprecedented for the Court to order ED to give a contractor a contract.
• The Secretary of Education has said default collections are not working. The Senate has said default collections are not working. The Department is trying to do something. It’s hard. There will obviously be some bumps, but we’re trying to reconfigure how services are aligned and how people are paid to make it work better for borrowers and companies.
• It’s a 2015 procurement. We’re going in a different direction. The idea that the old way of operating is supposed to exist forever is irrational.

Both sides accused the other of manipulating numbers to suit their arguments.

Following a hearing of approximately three hours, the Court denied the motion. Although Judge Wheeler has signaled in the past that the plaintiffs may in fact succeed on the merits of their case, he felt it was outside the scope of his authority to essentially order ED to extend a contract.

So, now what?

The ATEs expired yesterday, so the Department will likely proceed with the recall immediately.

And, the case continues. Because the Court has not yet ruled on whether the Solicitation was illegally cancelled. In order to proceed, the parties have been waiting for a public version of the Administrative Record (AR) to be released by the Department. On Friday, following the denial of the preliminary injunction, the following briefing schedule was set:

By May 3, 2019 – ED to file public version of the AR

By May 20, 2019 – Plaintiffs to file Motions for Judgment on the AR (MJAR)

By June 6, 2019 – ED to file Opposition and/or Cross-MJAR

By June 20, 2019 – Plaintiffs to file Replies and/or Opposition to Cross-MJAR

By July 5, 2019 – ED to file Reply

insideARM Perspective

This is a tough blow to these large PCAs, who at one time had hundreds of employees working on the federal student loan contract. Upon completion of this recall, they will have zero. There is no doubt that the last five years have done irreparable harm to these firms.  Small PCAs will likely have to expand their use of subcontractors in order to take on additional volume, so some may be able to reconstitute a portion of their business in this way. Even if they ultimately prevail in court, it’s unclear what would happen next…another round of bids? Selection based on what criteria? More protests?

Imagine being the lead Plaintiffs in a massive piece of multi-district TCPA class litigation against a large debt collector, only to have that prestigious position ripped from you by the Court compelling arbitration of your individual claims. Well that’s what happened to two lead Plaintiffs in the case of In re Midland Credit Mgmt., Case No. 11md2286, 2019 U.S. Dist. Lexis 65827 (S.D Cal. April 17, 2019) and the result is useful for anyone trying to prove bulk assignment of arbitration rights from a creditor to a downstream collector. (That happens more often than you might think, so pay attention.)

Back in January the Court found two Plaintiffs in the big Midland Credit MDL had agreed to arbitrate their claims against the debt collector by virtue of the terms and conditions of their account agreement with the creditor.  None-to-happy about that ruling, the Plaintiffs gathered themselves and sought reconsideration arguing, inter alia, that the creditor cannot simultaneously retain its rights to compel arbitration and yet assign those rights to the debt collector to enforce the arbitration clause. In weighing the reconsideration motion the Court shrugged at the suggestion, reminding the Plaintiffs that it had never found otherwise. Rather, the Court’s ruling compelling arbitration held solely that the right to arbitrate had been assigned; the court expressed no opinion on whether the creditor could yet enforce the clause against class members simultaneously. And although the Plaintiffs cited case law to the effect that the creditor was, in fact, still enforcing clauses purportedly assigned to the collector that really didn’t matter to the Court because, in its view, it simply was not called upon to consider the issue of the creditor’s right to enforce the clause; i.e. if those other courts got it wrong as to the creditor’s rights that’s neither here nor there as to the collector’s rights in this action.

Interesting stuff, no?

Plaintiffs also launched a robust factual challenge asserting that Defendant had not proven that the right to arbitrate had been assigned to it in the first place. It challenged the Court’s reliance on affidavits and a Purchase and Sale Agreement—apparently only lobbed at the court with the Defendant’s reply—as unfairly prejudicial and insufficient to prove the assignment. The Court brushed off the unfairness argument, noting that Plaintiff had challenged the assignment in Opposition opening the door to additional evidence in reply. (If Plaintiffs didn’t like it they could have sought a surreply). And as to the foundation challenges, the court felt that the sum total of the evidence of several declarations plus the asset assignment agreements were sufficient to demonstrate that right to arbitrate was assigned. Importantly, the court suggests—but does not directly hold—that declarations alone might be sufficient to establish the assignment without consideration of the underlying purchase agreements—“Courts have found sufficient evidence of assignment without review of purchase and sale agreements in similar circumstances.”

So there you have it. Declarations asserting that rights were assigned might be enough in and of itself to prove the right of the collector to enforce the clause. But, then again, it is probably a good idea to have that asset purchase and transfer agreement handy and properly authenticated in the first instance so you don’t have to introduce it in a reply brief or otherwise draw an evidentiary challenge down the line. (Best evidence rule anyone?)

Also interesting, the Court denied Plaintiffs’ request for interlocutory appeal finding that arbitration would materially advance the conclusion of the parties case, whereas a denial of arbitration would not. By this logic—which I really enjoy and support—it seems that an order granting arbitration in a class case might never qualify for interlocutory review. Something to keep in mind TCPAWorld.

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Editor’s note: This article is provided through a partnership between insideARM and Squire Patton Boggs LLP, which provides a steady stream of timely, insightful and entertaining takes on TCPAWorld.com of the ever-evolving, never-a-dull-moment Telephone Consumer Protection Act. Squire Patton Boggs LLP — and all insideARM articles – are protected by copyright. All rights are reserved.

Editor’s Note: This article was originally appeared in the TrueAccord Blog and is republished on insideARM with permission from TrueAccord.

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Has your organization made the move to digital? It’s one of the most important transitions you can make today within any business and any industry. In the collections industry, digitizing your company means a lot of change in the way you do things, but also in the tools, you can provide. You may understand what digital collections mean for your business – it means more data and more managed control over your operations. What does it mean for your customers, then?

Your Customers Want a Digital Collection Agency

Be realistic here. How much money do you spend having people call and speak to voicemail? How many frustrating conversations happen that could be resolved with just a bit of a better method to improve communication? One of the things today’s consumers want is the ability to be reached digitally. How many of your customers appreciate threatening phone calls? Even if you consider how valuable this type of conversation can be, you know it doesn’t always lead to results.

Now, think about your consumer a bit closer. You have a large and growing base of millennials, in most cases. This group of people uses phones for anything they can handle online. Imagine, for a moment, the millennial. With money in his pocket, he is able to make a payment. Then he finds out he needs to write a check and mail it. Or, the person on the phone wants routing numbers and account numbers. Most millennials don’t have these on hand to simply offer. That person simply doesn’t make the payment because making the payment isn’t easy to do.

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What Does This Mean for Your Organization?

In short, by making a few key changes, you can learn to communicate more fully with your customer base. First, allow them to have numerous ways to connect with your company. This includes making payments online, but may also mean using chatbots as well as text messaging for communication. You also want them to be able to handle all of these transactions and needs on their mobile phone – do not rely on them to make time while they are on their phone.

Also, consider the importance of building more empathy into your collections efforts. Having an empathy-based collection outreach program ensures you are providing your customers with respect and dignity. Many customers do not respect threats. They do not respond well to them, especially millennials. However, they are more willing to have a short conversation, talk about themselves and their needs, and to produce results for you. This type of approach benefits your customer but also your business.

It does not have to be difficult to make the switch to a digital collections system. Rather, simply invest the time in learning more about the ways you can improve the methods of communication you offer to your customer base. You may also want to consider the opportunities you have for creating an outreach program that helps to ensure your collections business is working for your customer.

In a speech at the Bipartisan Policy Center (full remarks in that link), Director Kathleen Kraninger provided an outline of her vision for the Consumer Financial Protection Bureau (CFPB and Bureau). The speech provides a glimpse into what the Bureau’s forthcoming debt collection rules  will look like.

Kraninger stated:

The Bureau will propose clarifying rules to better enable the use of modern communications technology in collections activity. The proposed rules also would protect consumers with clear, bright-line limits on the number of calls they may receive from debt collectors on a weekly basis. We will propose to provide clarity on how collectors may communicate via newer technology such as email or text messages. We will propose that collectors provide consumers with more and better information at the outset of collection to help them identify debts and understand their options, including their rights in disputing debts or paying them.  As the CFPB moves to modernize the legal regime for debt collection, we are keenly interested in the views of stakeholders and look forward to engagement with you.

The speech indicates that the Bureau listened to and will implement a solution for the industry’s challenges in adopting modern communication technology. Kraninger states, “As many of you know, the Act was passed in 1977. This was the same year that Steve Jobs introduced the world to the idea of a personal computer with the design of the Apple II. Phone booths were on almost every corner and cell phones were not even imaginable. And though there have been many advances in communications technologies since 1977, the FDCPA has not been updated to reflect our use of such technologies.” Given the pace of technological advancements, Kraninger gives credit to Congress for having the foresight to require the Bureau to re-evaluate its rules for effectiveness every five years.

The speech also gives a glimpse into the possible release timeline of the rules, which will be “in the coming weeks.”

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insideARM Perspective

Many stakeholders have had robust discussions with the Bureau regarding these rules, highlighting the challenges faced by both consumers and the industry. All sides have been eagerly awaiting the Notice of Proposed Rulemaking to see what the future of debt collection regulations holds. Specifically for industry, the debt collection rules are an opportunity to get clear rules of the road where there is currently little to no guidance and each minor change leads to an onslaught of lawsuits by the cottage industry of plaintiffs’ attorneys. 

While the news about call caps is not ideal for the industry, the allowances for bringing collections communications into the modern era is potentially a big win, depending on how the rules are drafted. Debt collector’s use of email has been a challenge. The complexity piled on when the Bureau issued an amicus brief implying that E-SIGN applies to validation notices. The Bureau’s Outline of Proposed Rulemaking also included the ability to email, but it contained New York-like consent requirements, which are very prohibitive. It will be interesting to see the Bureau’s solution to email. It will also be interesting to see how the Bureau addresses text messages, especially since text messages trigger the Telephone Consumer Protection Act, which is under the realm of the Federal Communciations Commission.

Full remarks: Speech at the Bipartisan Policy Center By Kathleen L. Kraninger, Director, Consumer Financial Protection Bureau

SACRAMENTO, Calif. — The RMAI Certification Council announces the adoption of version 7.0 of the Receivables Management Certification Program (RMCP) after a nine-month development and review process. The most significant enhancement to the RMCP in version 7.0 is the addition of vendor certification.

“With the launch of vendor certification, RMAI continues to secure its position of maintaining the most comprehensive receivables management certification standards in the nation,” said Marian Sangalang, President of the Receivables Management Association International (RMAI). “Offering the industry a single compliance footprint that sets high-level professional standards from the point of account origination through account conclusion is not only good for the industry but also the consumers we serve.”

“While RMAI currently certifies debt buying companies, collection agencies, collection law firms, and brokers, the Certification Council ultimately recognized the importance of extending RMAI’s rigorous standards to the vendors that provide vital services to those businesses in the support of their accounts,” said Rance Willey, Chair of the RMAI Certification Council.

Vendors interested in certification are encouraged to visit the RMAI website at rmaintl.org to learn more or call Michelle Wren at (916) 482-2720.

RMCP Continues to Advance the Most All-Encompassing Data Standards in the Marketplace

RMCP, Version 7.0, also adopted specific data and document requirements when purchasing bankruptcy and medical accounts that are effective August 1, 2019 (applies prospectively). Prior versions have adopted specific purchasing requirements for credit cards, auto, and judgments. These new standards underscore the fact that different asset classes have unique, varied data and document requirements.

For more information on RMAI certification for receivable businesses and individuals, please visit the RMAI website at www.rmaintl.org/certification.

About Receivables Management Association International

The Receivables Management Association International (RMAI) is a nonprofit trade association that represents the Receivables Management Industry. RMAI’s Receivables Management Certification Program and Code of Ethics protect consumers and businesses by setting the gold standard through uniform industry best practices. RMAI provides networking, education, and business development opportunities through events and communications. RMAI also maintains a highly effective grassroots advocacy program at the state and federal levels. Founded in 1997, RMAI is headquartered in Sacramento, California.

A common battle in TCPA suits is discovery regarding Plaintiff’s past litigation conduct. On the one hand the Plaintiff will argue that prior suits have nothing to do with the merits of the current dispute. On the other hand Defendants argue that the case may be a sham, or manufactured, and the Plaintiff may lack standing to assert the claim based upon their past history of interaction with the statute. In extreme cases, a Defendant may even argue that the Plaintiff’s conduct of accepting messages without opting out amounts to fraud.

In class suits these concerns become even more compelling for Defendants and the Court alike. After all, a Plaintiff must be “adequate” to represent a class, meaning that there is nothing particular about that Plaintiff’s claims that may distract him from his duties of taking care of the class as a whole, as a recent discovery ruling from the Southern District of California demonstrates.

In Moser v. Health Ins. Innovations, Inc., No. 3:17-cv-1127-WQH-KSC, 2019 U.S. Dist. LEXIS 6365 (S.D. Cal. April 11, 2019), the district court approved of a Magistrate Judge’s order compelling Plaintiff—a putative TCPA class representative— to provide discovery regarding past lawsuits—including production of confidential settlement agreements, with some limited protections.  

The Plaintiff had objected to the MJ’s order, contending that it imposed an undue burden and otherwise sought information not sufficiently pertinent to the case to justify production. In overruling those objections, the district court noted that although evidence of a party’s involvement in prior litigation may not be admissible at trial to show litigiousness, evidence of a party’s prior acts in the course of prior litigation may be admissible if relevant to other disputed issues such as motive, state of mind, and credibility. In the court’s view the Plaintiff’s credibility was a “central issue” material to both his individual claims and his ability to adequately represent the class. So the MJ’s order was upheld.

Notably, however, the Court did require that the confidential settlement agreements Plaintiffs had entered into in past cases needed to be produced for an in camera inspection so the Magistrate Judge could determine what procedures, if any, were needed to protect the confidential information of third parties. (I.e. if another TCPA defendant paid this Plaintiff to go away, that Defendant may not want that fact broadcasted on TCPAWorld.com once the production is made publicly available.)

It remains to be seen what the Magistrate Judge orders by way of protection for confidential information, but the case is another remarkable reminder to TCPA Defendants to push hard for discovery from repeat-player Plaintiffs in these cases. Even if a case is not ultimately subject to dismissal due to a Plaintiff’s professional status—see this case from last week for example—the fact that Plaintiff has profited widely from TCPA violations cast doubt on his or her credibility in a way that makes discovery of past suits perfectly “in bounds” under Rule 26.

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Editor’s note: This article is provided through a partnership between insideARM and Squire Patton Boggs LLP, which provides a steady stream of timely, insightful and entertaining takes on TCPAWorld.com of the ever-evolving, never-a-dull-moment Telephone Consumer Protection Act. Squire Patton Boggs LLP — and all insideARM articles – are protected by copyright. All rights are reserved.  

Few things are more fundamental in the law than the principle that a lawyer owes a duty of loyalty to the client, a duty to be vigorous advocate within the bounds of the law, and a duty to maintain the client’s confidences and preserve the attorney-client privilege. Clients expect this of their attorneys, as they should. These core legal principles have slowly been under attack, however, by an amorphous creation called the “meaningful attorney involvement” doctrine.

For the lawyers unfamiliar with this doctrine, imagine a scenario where your client’s adversary could sue you directly, claiming you were not “meaningfully involved” when you were handling a matter for your client. How could this third party possibly have standing to sue you based on the process that you determined was appropriate for representing your client? Would any court tolerate such a claim? If the claim were allowed to proceed, how would you defend against it while still preserving the attorney-client privilege and your client’s confidences?

Although this scenario may sound far-fetched, it is an everyday occurrence for creditors’ rights attorneys, who have been targeted by “meaningful attorney involvement” lawsuits for years. Indeed, the “meaningful attorney involvement” theory has been embraced by the Consumer Financial Protection Bureau (“CFPB”) in its enforcement actions against large creditors’ rights law firms. The CFPB is expected to announce proposed debt collection rules in the near future that may incorporate the theory.

These lawsuits and regulatory actions are a threat to the core principles underlying the attorney-client relationship. All attorneys, and their clients, should be united in fighting against the continued use and expansion of the “meaningful attorney involvement” theory. If this can happen to creditors’ rights attorneys and their clients, might you and your clients be next?

What Is It Like To Be Named In A “Meaningful Attorney Involvement” Suit?

For those lawyers who are unfamiliar with “meaningful attorney involvement” lawsuits, consider for a moment what it would be like to be named as a defendant in one. Imagine a week in the office that starts off on a positive  note. You land a big new client, who owns a valuable trademark and tells you a competitor has been infringing it. The client provides you with information about the claim. Applying your expertise and years of training, you quickly conclude the client has good faith basis for alleging trademark infringement. You draft a letter to the competitor, stating the facts as you understand them, demanding that the infringement cease and desist, and inviting the competitor to call you to discuss a resolution. All is well.

At the end of that week, however, things go sour. A process server knocks on your office door, and hands you a copy of a summons and a federal court complaint. You are personally named as a defendant. Your law firm is also named a defendant. Your client’s competitor never responded to your demand letter, but the competitor has now sued you and your firm. What is the claim?

The complaint alleges that your demand letter was false and misleading, because you were not “meaningfully involved” in reviewing your client’s files before you sent the letter on your client’s behalf. The competitor does not deny that it infringed your client’s trademark. Rather, the competitor is suing you and your firm because you allegedly determined too quickly that the infringement had occurred. The complaint seeks damages and attorney’s fees. It is served along with discovery requests, asking you to turn over all of your client’s files. A notice of your deposition is served, where your client’s adversary plans to ask you questions about what you did before you sent the letter.

This scenario sounds completely outrageous, right? We can assume this case will get bounced out of federal court immediately, right? No judge would ever seriously entertain such an obvious shakedown, right?

To the contrary, this is a real description of the “meaningful attorney involvement” lawsuits that are currently being litigated in courts across the country.  Welcome to everyday life as a creditors’ rights attorney.

Where Does The “Meaningful Attorney Involvement” Doctrine Come From?

How could the “meaningful attorney involvement” doctrine have ever gotten off the ground? It makes no sense. The communications between the lawyer and the client concerning the basis for the client’s claim are plainly privileged. The nature of review conducted by an attorney before a demand letter is sent is also privileged. The attorney gets to decide, in consultation with the client, and based on the attorney’s professional judgment, what to review and how long to review it before sending a demand letter. There is no viable way for a  third party to file a lawsuit against an attorney based on this process.

How, then, can the adversary of the attorney’s client file an independent federal court action against the attorney, and claim the attorney was not “meaningfully involved” in sending the demand letter? How did everything go wrong for creditors’ rights attorneys?

The “meaningful attorney involvement” doctrine evolved out of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (the “FDCPA”). You can read the entire FDCPA from front to back, however, and you will not find the term “meaningful attorney involvement” defined or even mentioned anywhere in the statute. Instead, you will come across section 1692e(3) of the FDCPA, which contains a simple rule: a debt collector may not make a “false representation or implication that any individual is an attorney or that any communication is from an attorney.” 15 U.S.C. § 1692e(3). In other words, if you are not a lawyer, the FDCPA prohibits you from falsely stating or implying that you are a lawyer. This is a sensible and uncontroversial prohibition.

The early “meaningful attorney involvement” cases did not even involve letters mailed by attorneys. Instead, the letters had been mailed by collection agencies that had used an attorney’s letterhead in a misleading fashion. In Clomon v. Jackson, 988 F.2d 1314 (2d Cir. 1993), a collection agency sent letters to “approximately one million debtors each year” using a computerized mass-mailing system, on letterhead listing “P.D. Jackson, Attorney at Law, General Counsel, NCB Collection Services,” and containing a mechanically-reproduced “signature” of an attorney. Clomon, 988 F.2d at 1316-17. But the attorney “played virtually no day-to-day role in the collection process” – he never reviewed the letters, and never decided whether or when the collection agency should mail them. See id. The Court concluded the letters were not “from” the attorney “in any meaningful sense of the word.” Id. at 1320.

Similarly, in Avila v. Rubin, 84 F.3d 222 (7th Cir. 1996), a collection agency owned by an attorney generated and mailed letters on attorney letterhead “‘signed’ with a mechanically reproduced facsimile” of the attorney’s signature. Avila, 84 F.3d at 225. Nearly 270,000 letters were mailed each year, and the attorney had  not personally prepared, signed, or reviewed any of them. See id. The Court observed that “Rubin has no real involvement in the mailing of dunning letters to debtors,” id. at 228, and that the “true source of the ‘attorney’ letters was a collection agent who pushed a button on the agency’s computer.” Id. at 230.

Clomon and Avila thus did not involve letters “from” an attorney. The letters were mass-produced by collection agencies and designed to appear as if  they came from attorneys. Over time, however, consumer advocates convinced some courts to use the Clomon and Avila decisions to support “meaningful attorney involvement” claims regarding letters that were, in fact, mailed by attorneys.     See, e.g., Nielsen v. Dickerson, 307 F.3d 623, 635 (7th Cir. 2002) (attorney’s   letter violated section 1692e(3) where attorney had not “meaningfully involved himself in the decision” to send letter); Lesher v. Law Offices Of Mitchell N. Kay, 650 F.3d 993, 1003 (3d Cir. 2011) (letter from law firm violated section 1692e where it “falsely impl[ied] that an attorney, acting as an attorney, is involved in collecting Lesher’s debt.”).

As this disturbing trend in the case law continued, some courts allowed litigants to take invasive discovery regarding the process used by an attorney when evaluating and preparing a demand letter for the client. See, e.g., Miller v. Wolpoff & Abramson, L.L.P., 321 F.3d 292, 307 (reversing summary judgment in favor of attorneys on “meaningful involvement” claim to allow plaintiff to take discovery on “precisely what information the [attorneys] reviewed, how much time was  spent reviewing plaintiff’s file, and whether any legal judgment was involved with the decision to send the letters and ultimately to initiate litigation . . .”).

The “meaningful attorney involvement” doctrine subsequently expanded beyond demand letters, and has been applied in cases that challenge the process used to prepare pleadings that were, in fact, filed by attorneys. See, e.g., Bock v. Pressler & Pressler, LLP, 30 F. Supp. 3d 283 (D.N.J. 2014).

Can The Federal Government Target Me And My Clients Using The “Meaningful Attorney Involvement” Doctrine?

Fighting off “meaningful attorney involvement” cases filed by consumer attorneys is incredibly expensive and disruptive. But what would it be like if the federal government targeted you and your clients using this theory? Well you can creditors’ rights attorneys, who are already painfully aware of the answer to this question.

The Consumer Financial Protection Bureau (“CFPB”) has targeted large creditors’ rights law firms using the “meaningful attorney involvement” theory, and beginning in 2016, the CFPB announced a series of consent orders with the firms that imposed specific requirements on the information and documentation those attorneys must review before sending collection letters or filing collection lawsuits on behalf of their clients. See, e.g., Consumer Fin. Prot. Bur. v. Frederick J. Hanna & Assocs, et al., United States District Court, Northern District Of Georgia, Case No., 1:14-cv-02211-AT, Docket 61-1, Stipulated Final Judgment and Order; In the Matter of: Pressler & Pressler, LLP, et al., Administrative Proceeding File No. 2016-CFPB-0009; In the Matter of: Works & Lentz, Inc., et al., Administrative Proceeding File No. 2017-CFPB-0003.

In a rare victory for creditors’ rights attorneys, a law firm recently defeated a “meaningful attorney involvement” action filed by the CFPB following a four-   day trial. See Consumer Fin. Pro. Bur. v. Weltman, Weinberg & Reis Co., L.P.A., 2018 WL 3575882 (N.D. Ohio July 25, 2018). The government had not alleged  that the letters sent by the law firm included false statements about the amount that the consumers owed. Instead, the CFPB claimed the letters “falsely imply that an attorney was meaningfully involved in the collection of the debts to which the letters relate.” Id. at *2.

After days of detailed testimony from members of the law firm regarding the procedures they employed for their clients prior to generating and mailing demand letters, the court held the firm had proven that “attorneys were meaningfully and substantially involved in the debt collection process both before and after the issuance of the demand letters.” Id. at *11. When the Weltman firm subsequently sought to recover the attorneys’ fees it had spent defending the case, however, the court denied the motion. See Consumer Fin. Prot. Bur. v. Weltman, Weinberg & Reis Co., L.P.A., 2018 WL 5257602 (N.D. Ohio Oct. 22, 2018).

Why Every Lawyer And Client Should Fight Against The Spread Of The “Attorney Meaningful Involvement” Doctrine

All attorneys, and their clients, should be disturbed by the evolution of the “meaningful attorney involvement” and its implications for the legal profession. Lawyers who do not have a creditors’ rights practice may be tempted to dismiss the theory as an anomaly, a unique risk that was knowingly assumed by a limited group of practitioners who are subject to the FDCPA. But it is important to remember that the phrase “meaningful attorney involvement” is not contained anywhere in the plain language of the FDCPA. Indeed, the “meaningful attorney involvement” doctrine arose from cases that did not even involve letters sent by attorneys.

The FDCPA does not give consumers, federal courts, or federal regulators the power to regulate the private interactions between a creditors’ rights attorney and the client. The judiciary, not Congress, establishes professional standards for the bar and oversees the conduct of attorneys. See Paul E. Iacono Structural Eng’r, Inc. v. Humphrey, 772 F.2d 435, 439 (9th Cir. 1983) (“[T]he regulation of lawyer conduct is the province of the courts, not Congress.”). This is a point that has been emphatically demonstrated by litigation initiated by the American Bar Association against the Federal Trade Commission. See ABA v. FTC, 430 F.3d 457, 472 (D.C. Cir. 2005) (rejecting argument that Congress gave FTC the power to regulate attorneys under Gramm-Leach Bliley Act: “Congress has not made an intention to regulate the practice of law ‘unmistakably clear’ in the language of the GLBA”) (citations omitted).

All attorneys and their clients should reject the “meaningful attorney involvement” doctrine. It has morphed into an undefined standard of care that gives consumers and federal regulators a license to challenge all aspects of a creditors’ rights attorney’s representation of the client. The FDCPA was not passed by Congress as a means to regulate the practice of law or to dictate the relationship and workflow between a client and an attorney. Clients and lawyers have the right to decide what level of attorney review or “involvement” is appropriate for collection matters. No federal statute, including the FDCPA, should be misinterpreted in a way that so fundamentally interferes with the attorney-client relationship.

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

SHAWNEE, Kan. — Guru DNA is excited to announce it is the first Latitude by Genesys authorized partner. Guru DNA will extend its personalized support services, providing customization of the Latitude platform to more customers in the receivables management industry. In addition, Guru DNA will be an industry first to become a Latitude by Genesys Authorized Reseller.

Guru DNA specializes in helping companies use Latitude and other receivables systems to get the most from their platform. They add value by streamlining workflows and building process automation through its customizable dashboards, Agency Interface Manager, full reporting, exchange ETL tool, and a configurable agent desktop. As an authorized Latitude support team, Guru DNA will continue to provide implementation, conversion, upgrades, service, and support with regards to all aspects of the Latitude platform. Guru DNA’s deep knowledge of SQL, the database that sits in the background of Latitude, makes them the perfect partner for Genesys clients desiring to upgrade to or integrate other technology with the Latitude platform.

“We are very proud to be the first Latitude by Genesys authorized partner,” says John Everman, CEO and Founder of Guru DNA. “This partnership is another avenue that allows Guru DNA to provide our customers with superior technology systems that improve efficiency and revenue generation. Latitude’s newly developed authorization program is very robust and focused on setting industry best practices. The new authorization stratification will provide our clients with consistency, standardization, and an exceptional customer journey.”

“Genesys has a rich history of collaborating with industry leaders to extend the value of our solutions” said Ian Winder, business owner of Latitude by Genesys. “We are pleased to work with Guru DNA, an industry leading services provider, and are excited about the opportunity to provide customers with greater choice and flexibility to purchase, service, and manage their Latitude environment.”

“The new partnership of Guru DNA and Latitude by Genesys is a perfect fit,” says Marian Sangalang, Vice President of The Bureaus, Inc. “Guru DNA strives for excellence with each client and partner, leveraging their deep knowledge of technology systems to improve efficiency and drive revenue. Their expertise will serve to enhance the functionality and flexibility of the Latitude software for each end user. Guru DNA has been an excellent partner to The Bureaus, Inc. with regards to project implementation and this partnership between Guru DNA and Latitude by Genesys is complimentary for continued growth in both businesses.”

About Guru DNA

Headquartered in Shawnee, Kansas, Guru DNA is a technology company that specializes in customizing popular technology in the receivables management industry. Guru DNA designs, develops, and integrates various tools for creditors, debt buyers, collection agencies, and law firms. Their understanding of technology systems improves efficiency by simplifying business processes and enhancing the user experience.

On March 27, 2019, California Assemblywoman Monique Limón (D-Santa Barbara) stated that she plans to introduce legislation that would create a state-level version of the Consumer Financial Protection Bureau (CFPB). In a press conference, Limón argues that the goal of strengthening consumer protection can be achieved by creating a new state agency—which is being dubbed the “mini CFPB”—or by increasing the budget for California’s Department of Business Oversight.

Limón stated, “We are working to really rethink what a state CFPB would do… We see the presence of predatory lending products in auto loans, payday loans, cash advance and small business loans.”

The federal CFPB’s former Director, Richard Cordray, was also in attendance. Cordray commented:

If, at the federal level, they are pulling back, a large and important state like California can make an important difference here. If the system is not preventing massive problems and exploitation, even the people that are most careful can be hurt.

Limón chairs the state assembly’s Banking and Finance Committee.

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insideARM Perspective

Discussions of states beefing up consumer financial protection enforcement after President Donald Trump named Mick Mulvaney the Acting Director of the CFPB back in 2017 were widespread. This was intended as a solution to fill the gaps allegedly caused by the CFPB’s lack of oversight under its new leadership. As with most things, this solution is not so simple. It has the potential to turn into what we are currently seeing in the judicial system: inconsistent, and sometimes contradictory, requirements depending on where the consumer resides and where the financial services company does business. This places hurdles in consumers’ ability to resolve past due accounts through their preferred communication channels. Regulations that provide clarity to the industry about the rules of the road are beneficial, but uniformity is important too — both for companies and consumers.

Not long ago it looked like the TCPA was headed for the dustbin of history. Courts were lining up behind a statutory approach to the TCPA—finding that the FCC’s earlier rulings expanding the statute were defunct—which meant that the TCPA would not apply unless numbers were randomly or sequentially dialed. RIP TCPA, and good riddance.

This statutory approach seemed all but assured among the district courts in the Third Circuit Court of Appeal’s footprint. After all, the case of Dominguez v. Yahoo, Inc., 2018 U.S. App. LEXIS 17350  (3rd Cir. June 26, 2018) seemed to hold rather squarely that random or sequential number generation was the hallmark of ATDS usage.

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But the district courts did not receive the message uniformly. While some courts have followed Dominguez faithfully and required random and sequential number generation—see e.g.  Fleming v. Associated Credit Servs., No. 16-3382 (KM) (MAH), 2018 U.S. Dist. LEXIS 163120 (D.N.J. Sep. 21, 2018)—others have, rather oddly, concluded that Dominguez requires fidelity to the FCC’s old predictive dialer rulings that actually contradict the holding in Dominguez. Go figure.

Recently, a district court within the Third Circuit footprint went a different direction entirely—applying an ATDS formulation that is purportedly derived from earlier FCC rulings but that looks suspiciously like the definition accepted in Marks. In Ruby v. Dish Network, CIVIL ACTION No. 18-0400, 2019 U.S. Dist. LEXIS 62472 (E.D. Pa. March 25, 2019) the court denied summary judgment on the issue of whether or not the Defendant used an automated telephone dialing system because the system had the capacity to dial automatically from a list of numbers. Hmmm.

Although the formulation the court applied sounds a lot like the statutory reading adopted by the Ninth Circuit in Marks, the Rubycourt never mentions the decision. Instead, it focuses entirely on the 2003 FCC Predictive Dialer ruling, which it reads in a rather unusual way. Whereas most courts look at the 2003 Ruling as focused on timing and use of predictive algorithms to place calls—the Ruby court reads the case in a much simpler fashion: in its view the FCC’s ruling covers any system “that can dial without human intervention from a pre-programed list of telephone numbers….”   Wow, does that sound like Marks and not look anything like what the FCC actually said in 2008.

Nonetheless, the Court applies this formulation and determines that the evidence supports a finding that Defendant’s dialer can make a number of calls with a designated wait period and the system allows businesses to program the dialer to independently make calls at a set frequency to a list of numbers without requiring a human to prompt each call. Thus, in the court’s view, the dialer might be an ATDS and the jury will have to determine Defendant’s fate.

Ruby is an interesting case for a few reasons. In the first place the court assumes, without any discussion, that the 2003 FCC predictive dialer ruling is still binding although a number of courts—including Marks itself, has found that the D.C. Circuit Court of Appeals overturned those rulings in ACA Int’l. Most courts struggle with the issue before coming out one way or other other, but the Ruby court just applies the FCC’s ruling. Simple as that.

Only it is not so simple. As alluded to above, the Court does not show fidelity to the FCC’s actual findings or conclusions in its 2003 Order. The FCC never, for instance, ruled that dialing automatically from a list constitutes usage of an ATDS.  That’s just not part of the order. It is, of course, the preferred interpretation of ATDS in the Ninth Circuit, but such a broad reading of the statute is fundamentally at odds with the Third Circuit’s take in Dominguez. So the Ruby court skips over Dominguez, misreads the FCC’s ruling and in so doing (inadvertently?) directly applies the Ninth Circuit’s formulation without ever mentioning Marks. What an odd ruling.

On the heels of Marks being adopted in the First Circuit earlier this week, seeing its creeping influence within the Third Circuit—where Dominguez should dominate—is really a bit disconcerting for TCPA defendants. Hang in there TCPAWorld.

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Editor’s note: This article is provided through a partnership between insideARM and Squire Patton Boggs LLP, which provides a steady stream of timely, insightful and entertaining takes on TCPAWorld.com of the ever-evolving, never-a-dull-moment Telephone Consumer Protection Act. Squire Patton Boggs LLP — and all insideARM articles – are protected by copyright. All rights are reserved.