There have been several court decisions to come down the pipeline regarding legal-related language and disclosures in collection letters. For example, the Southern District of New York recently dismissed a complaint where the crux was letter language that stated, “[Creditor] will send your account to an attorney for possible legal action” if a payment arrangement is not made. Even the Northern District of Illinois (N.D. Ill.) granted summary judgment for a debt collector whose letter stated “If the Account goes to an attorney, our flexible options may no longer be available.” However, it sounds like early dismissal of such cases—as we saw in New York—might not be as easy in N.D. Ill. 

Editor’s Note: Want a full rundown of how the courts ruled on the issue of threats of litigation, with concise summaries of the decisions? Check out the iA Case Law Tracker. 

What happened?

In Soyinka v. Franklin Collection Serv. (N.D. Ill. Jul. 15, 2020), a collection agency sent a dunning letter to a consumer that stated, “If you are not paying this account, contact your attorney regarding our potential remedies, and your defenses, or call (###) ###-####.”

The letter doesn’t even mention litigation, and debt collectors are allowed to inform consumers of potential remedies, so any Fair Debt Collection Practices Act (FDCPA) claim alleging a false threat of litigation should be dismissed right off the bat, right? 

Wrong, according to the judge in Soyinka.

[article_ad]

The Court’s Decision

One of the main reasons the court denied the collection agency’s motion to dismiss is that in this jurisdiction, the question of whether a statement is false, deceptive, or misleading is a question of fact—meaning, a question for the jury. A motion to dismiss occurs far too early in the litigation process to warrant this treatment. (However, as mentioned above, the cases can be disposed of at summary judgment in favor of debt collectors.)

Despite that, the court delved into the facts. It found that “if only” the letter said “pay, contact your attorney, or call,” then there would be no problem. However, by including a settlement offer to “resolve” the account immediately before telling a consumer to contact their attorney about remedies and defenses, the letter may very well have crossed the line in this judge’s eyes:

The letter starts by offering a “settlement” to “resolve this matter.” Immediately after making that offer, the letter advises Soyinka, if she is not going to pay, to “contact your attorney regarding our potential remedies, and your defenses.” In combination, these sentences could communicate to an unsophisticated consumer the message that if she does not pay, then she will be sued. To begin, “settlement” is broadly understood by the public as a legal agreement used to avoid litigation. And similarly, even an unsophisticated consumer knows that “remedies,” “defenses,” and “attorney” are all terms used in litigation, and encountering them immediately after reading about a “settlement” offer could lead the consumer to believe that a lawsuit is coming—time to lawyer up. It is true that these terms could also be used to describe negotiation without resort to a lawsuit, but an unsophisticated consumer might not be able to figure that out. In cases of ambiguity—such as here—the case law says that the case must move on.

(Internal citations omitted.)

The court did note that two previous cases in the Seventh Circuit against this particular debt collector found nothing wrong with similar language, but pointed out that those letters did not use terms like “offer” and “settle.”

The court also found that a back-page disclaimer that an attorney has not yet reviewed the account does not change the fate of this motion to dismiss.

insideARM Perspective

One interesting factor that this court decision misses the mark on is the requirement that the threat be imminent for the claim to be viable under the FDCPA. Notably, the collection letter did not include a due date for the settlement offer, which means there was no hard deadline in the letter. And the legal language itself does not indicate any scintilla of imminence. The only potential time frame in the letter would be the 30-day window for the consumer to take advantage of his or her validation rights—but even the typical validation notice disclosure does not contain a reference to litigation. Even the consumer’s allegations, according to the court’s dicta, reference that legal action “is a possibility” with no reference to time frame or imminence. 

In fact, eight different judges in N.D. Ill. disposed of claims alleging threats of litigation exactly for this reason—lack of imminence—at different stages of litigation (motion to dismiss, motion for judgment on the pleads, and summary judgment). The iA Case Law Tracker shows 8 different court decisions that match these parameters, all of which side with the debt collector on the threat of litigation issue.

This decision seems to be an outlier, and that is unfortunate.

Want to get a brief rundown of all industry-related legal issues?
The iA Case Law Tracker helps you do that in less time than it takes to pour your morning cup of coffee.

ARLINGTON, Va. —  Convoke, a leader in SaaS solutions for the debt collection market, today announced the most recent software update to its debt collections compliance and management hub. Each year, Convoke develops and releases several updates to its platform to support its clients’ evolving needs.

Convoke’s platform is used by large credit issuers in the United States to monitor the activities of their third party collection partners to ensure fair treatment of consumers throughout the collection process, thereby protecting both brand and reputation.  As a result of financial hardships faced by consumers during the COVID-19 pandemic, coupled with the significant reduction of travel during the pandemic, the Convoke platform has become an even more vital tool to provide credit issuers insight into the activities of their third party collectors.  The level of oversight made possible by the Convoke platform can be achieved in an environment where travel is heavily curtailed.  In addition to protecting brand and reputation and allowing oversight of the treatment of consumers without the need to travel, the Convoke platform contributes to the maximization of recoveries.

“All of the changes introduced in this new software release are the direct result of feedback from Convoke’s customers about the problems they encounter with the collection and vendor oversight process,” said David Pauken, CEO of Convoke.  “We value our customers and listen attentively in order to engineer solutions that help them to do their work most completely and productively.  We are pleased to continue to partner so closely with all of our customers to provide solutions to their problems.”

About Convoke

Convoke is a leader in SaaS solutions for the debt collection market.  It enables credit issuers to manage third party debt collections, providing unsurpassed visibility into collection actions.  Convoke’s online platform is a central, validated and persistent hub that records, organizes and stores information and activities, facilitates, tracks and automates interaction with third parties, and provides powerful auditing, management and reporting tools.  Convoke is headquartered in Arlington, VA.  For more information on Convoke, please visit www.convokesystems.com.

MOUNT LAUREL, N.J. — Ceteris is pleased to welcome Chief Sales Officer Tim Smith to the company. With more than 25 years of broad-based experience in the Business Process Outsourcing space across business development, client engagement and operational strategy, Ceteris is confident that Tim’s expertise and successes will make an immediate impact. Tim’s high energy, positive attitude, and strategic vision combined with his diverse background, and record of successes in multiple markets, fits perfectly with the Ceteris vision and values. 

Jonathan Pike, CEO of Ceteris, said, “We are thrilled to welcome Tim to Ceteris as our new Chief Sales Officer and member of our Executive Team. Tim’s wealth of experience in all facets of business development and operational strategies is a key addition to assisting our team obtain aggressive revenue goals and initiatives. Ceteris remains committed to providing end-to-end industry leading account receivable management solutions and assisting our clients manage their customers in a positive, empathic manner especially during these unprecedent times; Tim’s addition demonstrates this commitment.” 

Throughout Tim’s career, he has also overseen and executed on compliance/regulatory assessments, mergers and acquisitions, joint venture/strategic partnership arrangements, and operational assessments. He holds a bachelor’s degree in SUNY College at Buffalo, Executive MBAs from Michigan State in Process Re-Engineering and University of Queensland in Organizational Leadership. 

About Ceteris Portfolio Services, LLC

Ceteris Portfolio Services (CPS) is a premiere nationwide ARM firm providing end-to-end accounts receivable management solutions to assist clients in managing their debt. CPS currently services consumer and commercial businesses engaged in heavily regulated, high-volume industries including banking, automotive finance, credit card, equipment leasing, student lending, medical services, telecommunications, utilities, retail, and publications. CPS partners with clients by creating unique solutions to significantly reduce their operating costs enabling them to focus on their core line of business while improving their revenue and profitability. By offering a variety of operational and financial solutions based on the asset class and/or industry, we can create predictable cash flows – even with unpredictable assets. 

CPS is committed to providing a positive customer experience to our clients and their customers that is unmatched in the industry. We maintain one of the lowest complaint rates in the industry through the combined implementation of industry-leading technology services and investments in compliance, world-class talent and ongoing training lead by a senior leadership team widely known as subject matter experts in the industry. For more information please visit www.ceterisholdco.com/CPS.

Editor’s Note: This article was originally published on the Maurice Wutscher blog and is republished here with permission.

Joining similar rulings by the Eighth and Tenth Circuits, the U.S. Court of Appeals for the Fourth Circuit recently held that each violation of the FDCPA gives rise to a separate claim governed by its own statute of limitations period.

A copy of the opinion in Bender v. Elmore & Throop, P.C. is available at:  Link to Opinion.

On April 16, 2016, the homeowner plaintiffs received a notice from a law firm retained by their homeowners association (HOA) stating the homeowners failed to pay $77.09 in HOA assessments and a demand for $1,000 to satisfy both the HOA assessments and the costs and attorneys’ fees.

The homeowners disputed the debt and mailed a letter to the law firm with copies of cancelled checks. The law firm acknowledged that the disputed payments had been received, but asserted that the homeowners still owed the costs and attorneys’ fees.

[article_ad]

The homeowners and law firm exchanged several letters with the homeowners denying making any late payments and the law firm insisting that late fees, costs, interest, and attorneys’ fees were owed.

On May 18, 2016, following another demand for payment, the homeowners delivered a letter to the law firm “requesting that [it] stop contacting us about this claim” and stating that the [homeowners] would consider “any further attempt to collect a debt against us or record a lien on our property [as] harassment[.]”

In January 2017, the homeowner hand-delivered a payment at the annual HOA meeting and was told to leave. The homeowner later received a notice that he had been banned from the HOA’s premises for one year.

In February 2017, the homeowners received another letter from the law firm acknowledging receipt of the January 2017 payment, but noted as outstanding the accumulated fees and costs associated with the original disputed payment from 2016.

On March 10, 2017, the homeowners responded to the February letter, writing that “in our correspondence to you on this matter, we had requested that you stop contacting us about that claim . . . As both my wife and I dispute the debt referenced in your most recent letter, I am now requesting once again that you stop all communications with my wife and myself concerning this debt.” The homeowners received additional correspondence from the law firm on March 14, 2017, including an updated ledger of the homeowners’ account showing that a fee had been added for preparation of the February letter.

In January 2018, the homeowners requested to attend the annual meeting and was told by the law firm that the homeowner would not be allowed to attend, and that “this whole thing would not have happened if you would just pay your bills.”

On Feb. 6, 2018, the homeowners received an updated ledger from the law firm and although this correspondence purported to provide the homeowners with “verification of your account as you requested,” the homeowners deny having made any such request for verification.

On April 5, 2018, the homeowners filed a complaint against the law firm brought under the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.  In their complaint, the homeowners alleged that the law firm violated various provisions of the FDCPA by engaging in unfair debt collection practices and by improperly communicating with the homeowners after they had disputed the debt and had made a written request that the law firm cease further communications. The law firm responded by seeking dismissal of the complaint as untimely or, in the alternative, for summary judgment.

The trial court granted the law firm’s motion to dismiss the complaint based on the statute of limitations holding that the entire complaint was time-barred because the more recent violations that the homeowners alleged were of the “same type” as other violations that occurred outside the one-year limitations period.

The homeowners appealed.

The sole question on appeal was whether the trial court erred in concluding that all the homeowners’ claims were barred by the FDCPA’s statute of limitations.

The homeowners argued that the trial court erred in dismissing all their claims as time-barred because two of the alleged violations occurred less than one year from the date they filed suit. According to the homeowners, under the language of 15 U.S.C. § 1692k(d), a new statute of limitations arose with each “violation” of the FDCPA.

In response, the law firm argued that the first alleged violation of the FDCPA occurred outside the limitations period and all later communications by the law firm arose from its attempt to collect the same debt.

The Fourth Circuit first acknowledged that under the FDCPA, claims must be brought “within one year from the date on which the violation occurs.” 15 U.S.C. § 1692k(d). Moreover, the Court noted, nothing in the FDCPA suggests that “similar” violations should be grouped together and treated as a single claim for purposes of the FDCPA’s statute of limitations. To the contrary, the Court has long held that a “separate violation” of the FDCPA occurs “every time” an improper communication, threat, or misrepresentation is made. United States v. Nat’l Fin. Servs., Inc., 98 F.3d 131, 141 (4th Cir. 1996). Accordingly, the Court concluded that Section 1692k(d) establishes a separate one-year limitations period for each violation of the FDCPA.

In coming to its ruling, the Fourth Circuit noted this interpretation avoids creating a safe harbor for unlawful debt collection activity where no matter how frequent or abusive such collection efforts became, the debtor would be left entirely without a remedy simply because the debtor did not timely pursue the first violation.

Finally, the Court observed that two other federal appellate courts have also concluded that the FDCPA’s limitations period runs anew from the date of each violation. See Demarais v. Gurstel Chargo, P.A., 869 F.3d 685, 694 (8th Cir. 2017); Llewellyn v. Allstate Home Loans, Inc., 711 F.3d 1173, 1188 (10th Cir. 2013). As these courts have recognized, it simply “does not matter that the debt collector’s violation restates earlier assertions — if the plaintiff sues within one year of the violation, [the suit] is not barred by § 1692k(d).” Demarais, 869 F.3d at 694; see also Llewellyn, 711 F.3d at 1188.

Accordingly, the Fourth Circuit vacated the trial court’s judgment and remanded the case for further proceedings.

Want short summaries of cases, packaged in an easy-to-use searchable database?
The iA Case Law Tracker helps you do that in less time than it takes to pour your morning cup of coffee.

Let’s first tally where we are. 

Last Friday afternoon, The U.S. Department of Education’s Office of Federal Student Aid (FSA) canceled a second of three solicitations that were part of its Next Generation Processing and Servicing Environment (NextGen) student loan servicing system overhaul. This cancelation is for Solicitation Number 91003119R0005, the Enhanced Processing Solution.

Back in early April, FSA canceled Solicitation Number 91003119R0007, the Optimal Processing Solution (OPS).

What’s left? Solicitation Number 91003119R0008, the Business Process Operations Solution. On June 24th FSA announced it had signed contracts with five companies through the NextGen Business Process Operations solicitation to correspond with customers and partners via phone, chat, social media, postal mail, and email and to support the back-office processing associated with those contacts. The five companies are: Edfinancial Services LLC, F.H. Cann & Associates LLC, MAXIMUS Federal Services Inc., Missouri Higher Education Loan Authority (MOHELA), and Texas Guaranteed Student Loan Corporation (Trellis Company). 

A little context, please.

This January 2019 article provides details on the latest NextGen plan, with the three solicitations (there was actually an earlier plan which was canceled – you can read about that here and here). Here’s an overview:

RFP R00005 – Enhanced Servicing Solution (EPS) – This was the immediate term solution used by ED to justify its cancellation of the unrestricted PCA Solicitation. Proposals were due by February 25, 2019.  This is the solicitation that was canceled last Friday. 

RFP R00008 – Business Process Operations Solution (BPO) – FSA said that after the Enhanced Servicing Solution has been awarded, a timeline would be set for this Solicitation – there was no initial due date, except that bidders were required to complete a Past Performance Reference Questionnaire by March 1, 2019. This is the solicitation for which the five companies mentioned above received contracts in late June.

RFP R00007 – Optimal Processing Solution (OPS) – This was to be the long-term system solution that carried a two-year implementation period. The due date for bids was March 25, 2019. This is the solicitation that was canceled in April.

When the Optimal Processing Solution was withdrawn in April 2020, ED said it was necessary to enable the Department to rescope the solicitation’s requirements in order to allow it to “bring onboard technology that will appropriately implement the provisions in the Fostering Undergraduate by Unlocking Resources for Education Act (FUTURE Act) (H.R. 5363). The FUTURE Act will have a significant impact on federal student aid business processes through new data sharing agreements, technologies, and protocols with the Internal Revenue Service.”

What does FSA say about their cancellation of the Enhanced Processing Solution?

An FSA representative contacted insideARM last weekend, just after it posted the official cancellation, to say:

“After more than 12 weeks of good faith negotiations, the Department is unable to reach an agreement with the vendor selected following the rigorous contracting process to award a contract for the EPS solicitation. The Department continues its commitment to delivering on the vision and goals of Next Gen FSA. FSA has determined that a different acquisition strategy will be more effective in obtaining the desired servicing system solution. Accordingly, late this afternoon, we canceled the existing solicitation, #91003119R005. We’ll be introducing a new solicitation to continue the Next Gen strategy in the coming months.”

What else is going on?

As it relates to solicitation R0005, the Enhanced Processing Solution (EPS), insideARM has learned that the selected vendor was PHEAA (Pennsylvania Higher Ed). They have a loan servicing subsidiary that is a legacy loan servicer.

Current legacy contracts for loan servicing are extended to December 2021 while FSA revisits the drawing board.

EPS stated that the awarded vendor had 24 months to convert all the loans from the legacy loan servicing vendors to the new EPS system. If FSA ran a new competition for loan servicing in October, administered the submission, and made an uncontested award to a new servicing vendor, would the loan conversions from the legacy vendors be done before the legacy contracts expired?

As it relates to solicitation R0008, the Business Process Operations Solution, sources tell insideARM that more than the five awards were initially made. But the way this solicitation was structured, companies only learned the pricing once they received an award. Several turned down the contract, saying that the pricing was unrealistic for the services required. 

Navient, one of the original awardees, filed a protest on June 29, 2020, over the way this process was handled. Here is a summary of their claims:

• FSA failed to amend the RFP after making material changes to the terms and conditions;
• FSA proffered a contract to Navient with terms that materially differed from the RFP terms; 
• FSA unreasonably included in the proffered contract arbitrary and unconscionable terms that unduly restrict competition, exceed FSA’s minimum needs, and failed to provide Navient with a reasonable time to respond; and
• FSA awarded contracts with the intent to make material changes after award, failed to conduct a reasonable price realism analysis for the awardees (or arbitrarily waived price realism for the awardees ), and otherwise treated offerers in a disparate manner. 

[article_ad]

What does all of this mean to borrowers?

We don’t know for sure. FSA’s goal is a good one: to provide a more efficient and effective customer experience to students, parents, and borrowers. Their stated intention is to require vendors to provide contact center operations and back-office processing activities encompassing the full student aid lifecycle, from disbursement to payoff, in a manner consistent with leading financial services providers and other industry leaders. What’s being questioned is the execution. 

Given the little we know about pricing for the BPO contract from the Navient complaint, one wonders whether borrower servicing will be impacted. In other words, will the awardees be forced to modify services in order to not lose money on the contract?

Another potential issue is the loss of institutional knowledge held by the major servicers that did not end up with a contract. There are more than 50 repayment programs out there. And they are quite complicated. Even when Congress discontinues a program, borrowers already in the program still continue with it. So, servicers must continue to honor those programs, plus learn to handle the new ones. This is not a trivial consideration. Nothing about federal student loan servicing is simple and straightforward.

So, what does all of this mean to federal student loan debt collectors?

Well, following the long saga of litigation over the large Private Collection Agency (PCA) solicitation that concluded almost exactly one year ago with FSA coming out the winner, the small PCAs were left holding the whole bag. Many wondered whether NextGen would be the death knell of PCAs altogether, as FSA implemented its “enhanced servicing” plan primarily using loan servicers (like Navient) rather than PCAs.

The small PCAs received a 5-year contract extension in September 2019, so that ends in 2024. I suspect FSA will issue a new solicitation for small PCAs in 2022 or 2023 so that they are covered going forward. 

Given the numerous restarts of NextGen, it’s unclear what the need will or won’t be by 2024. Under the best of circumstances, a systems project of this magnitude takes several years to complete. FSA had expected to be up and running in just two.

Also, if the November election brings significant change to Congress and/or the Administration, this could also bring a new approach to federal student loan servicing. For one, we know that Democrats have an interest in at least some form of student debt forgiveness. 

Another also is that a “CARES Act 2” may potentially include an extension on federal student loan payment forbearance (the current forbearance expires September 30, 2020). 

The CARES Act also prohibited Private Collection Agencies from sending collection letters or making outbound collection calls to defaulted federal student loan borrowers, which means PCAs may not reach out to borrowers to inform them of programs (like Income-Driven Repayment) and opportunities (like the ability to have $0 payments through September 30th count towards fulfilling repayment program requirements).  The only way a borrower could learn about them is if they happen to read the FAQs on the Federal Student Aid website.

So, many of these small agencies are hanging on by a thread. They aren’t receiving new accounts. They’ve stopped nearly all outbound contact. They likely won’t receive new accounts for a while because of the forbearance on accounts not in default. Yet they are expected to remain ready to go indefinitely. These are not simple call center jobs to fill. They are complex roles requiring extensive training (remember the 50 repayment programs?). You can’t just turn the spigot on and off and expect the water to be clean and the flow to be strong. 

WILMINGTON, Del. — Phillips & Cohen Associates, Ltd. (PCA) is excited to announce a critical enhancement to its Debt Settlement Solutions Platform with Opportunity Scrub℠.  The newly branded, no-cost feature helps creditors and debt buyers identify, evaluate and optimize debt settlement account value within their portfolios. Known globally for its award-winning decedent debt and estate servicing, Phillips & Cohen Associates has been a leader in the US debt settlement arena for over 20 years.  In line with its ongoing commitment to innovate in this growing industry segment, Phillips & Cohen Associates has created one of the nation’s largest repositories for identifying consumers engaged in a debt settlement program.  Opportunity Scrub℠ will quickly and securely enable clients to scrub up to 50 million of their accounts at no cost to identify the true impact of the debt settlement segment of their portfolios. 

Adam Cohen, Co-Chairman/CEO said, “Unlike basic scrubs or portals that simply highlight debt settlement accounts, Opportunity Scrub℠ is just the beginning of the process.  Once identified, we will provide customized options for the best path to recovery, including indicative debt sale pricing from our Invenio Financial unit as well as multiple recovery strategy options from the PCA agency team.  The analysis is comprehensive, customizable and cost-free.”     

“Utilizing Opportunity Scrub℠ is an incredible gateway to analysis from our 23-year history in this industry segment”, said Matthew Phillips, Co-Chairman/CEO.  He added “our pricing models are top of the market and our agency strategies for pre and post charge-off are the result of many years competing and leading in this space.”

To take advantage of the new Phillips & Cohen Associates Opportunity Scrub℠ please contact either: 

• Phillips & Cohen Associates: Morgan Leija | Mleija@phillips-cohen.com |302-382-5208
• Invenio Financial: Jenna Wilmes | Jwilmes@inveniofinancial.com | 218-522-0212

About Phillips & Cohen Associates, Ltd. 

Phillips & Cohen Associates, Ltd. is a specialty receivable management company providing customized services to creditors in a variety of unique market segments. Phillips & Cohen Associates, Ltd is domestically headquartered in Wilmington, DE, with additional offices in Colorado and Florida as well as international offices in the UK, Canada, Spain, Germany and Australia. For more information about Phillips & Cohen Associates visit www.phillips-cohen.com. PCA provides Equal Employment Opportunity for all individuals regardless of race, color, religion, gender, age, national origin, disability, marital status, sexual orientation, veteran status, genetic information and any other basis protected by federal, state or local laws.

About Invenio Financial, LLC

Invenio Financial, the debt buying partner of Phillips & Cohen Associates Ltd., has built an award-winning reputation in the accounts receivable management industry through its proven, compassionate recovery processes since 2004. Its headquarters located in Wilmington, Delaware with services covering the US, as well as, additional offices in Germany covering European services. Invenio Financial has been an industry leader in specialty portfolio management partnering with banks, credit card issuers, auto lenders, debt buyers and utility providers to evaluate their inventory and find underserved portfolio segments. Its proprietary analytics will find unexplored segments of specialty accounts creating new, incremental value. Invenio Financial is willing to discuss all types of partnership opportunities including specialized acquisition and master servicing. For more information about Invenio Financial visit www.inveniofinancial.com.

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. 

The Supreme Court has accepted cert. on a petition brought by Facebook to resolve an ongoing circuit split over the proper application of the Telephone Consumer Protection Act’s (TCPA’s) automated telephone dialing system (“ATDS”) definition. This decision comes on the heels of another Supreme Court ruling issued just this Monday in which the high court determined the TCPA is unconstitutional as written, but can be saved by altering First Amendment doctrine and giving the TCPA a haircut.

While the TCPA has certainly been in the Supreme Court’s gaze as of late, that is not particularly surprising. The TCPA is the single broadest restriction on constitutionally-protected speech in our nation’s history and also produces piles of the most complex (and expensive) class action litigation out there. Indeed, it is not uncommon for Defendants caught in the grips of a TCPA class action to face billions or even tens of billions in potential exposure based upon the statute’s immense statutory damages. And since no one really knows what technology the TCPA applies to, the statute raises a host of constitutional issues—from First Amendment implications, void for vagueness problems, excessive fine issues and due process concerns.

[article_ad]

Indeed, the TCPA is an absolute junker of a statute from a Constitutional perspective, and it is requiring much upkeep by the Supreme Court to keep running. While SCOTUS dodged precedent to keep the statute on the books in Barr v. AAPC, the next go at the TCPA might not be so lucky. Eventually, the Supreme Court is going to get tired of wasting its time on a statute that doesn’t even work the way it is supposed to. 

While some issues applicable to the TCPA are esoteric, one is seemingly rather mundane: what technology does this thing even apply to?  That question is trickier than it seems.

Some Background

The statute’s language appears to apply only to calls made using a random or sequential number generators. The TCPA is the only tool Congress gave to the FCC or the Courts to regulate unwanted calls to cell phones. In the face of a barrage of robocalls in recent decades, that just isn’t much of an arsenal.

Although the TCPA is a bad fit for the job—again, its language is very narrow—past administrations of the FCC and some courts have taken it upon themselves to expand the statute to apply to all mass-dialed calls and texts. Without this expansion, they would allegedly be wholly empty-handed in the fight against robocalls.

The FCC rulings were recently set aside, however, throwing TCPAWorld into complete disarray with some courts applying the statute as written (i.e. to only apply to random-fired calls) and some courts applying the statute more broadly (i.e. to all automated calls). 

This fracture has led to extremely unusual—and highly problematic—circumstances. Some speakers are being held liable for speech they made years ago that was perfectly legal at the time, only to see the law change in a way that makes their conduct potentially unlawful only in retrospect. Other speakers are being sued in far-off jurisdictions for speech that was legal both in the jurisdiction where the speech took place and in the jurisdiction where some unnamed class members reside. Some speakers have seen their speech deemed perfectly legal in some jurisdictions and the exact same speech is deemed illegal in separate jurisdictions. And all of this has been capitalized on by the Plaintiff’s bar that is happy to sue in favorable jurisdictions, even if the bulk of the conduct at issue took place in a jurisdiction with more defense-favored law. 

ATDS Heatmap

Just how fractured is the TCPA ATDS landscape? I put together this handy heat map as a visual.  Check it out:

Key:

• Dark green: jurisdictions (the 7th and 11th Circuits) that follow the statutory definition (i.e. requiring random or sequential number generation to trigger the TCPA).
• Dark red: jurisdictions (the 2nd and the 9th Circuit) that eschew the statutory language in favor of an “all automated calls” approach to the TCPA.
• Light green:  jurisdictions (3rd and 5th) that lean toward the statutory definitions
• Light red: jurisdictions (1st and 8th) that lean toward the expanded approach.
• Yellow: jurisdictions (4th, 6th and 10th) that may be the most problematic of all for speakers—whether the TCPA applies to their speech still very much depends on what courtroom they are sued in.

What ultimately matters for determining liability is not where the calls were made, or even where the calls were directed. The only thing that matters is where the resulting lawsuit is filed. Companies making calls from green jurisdictions to other green jurisdictions may still be sued in red jurisdictions by clever—or calculating—Plaintiff’s lawyers. It’s despicable stuff but so long as the split of authority endures, so will these tactics.

The TCPA landscape is fractures, and it badly needs clarity

Want to track TCPA trends and important court decisions?
The iA Case Law Tracker helps you do that in less time than it takes to pour your morning cup of coffee.

Editor’s Note: This article previously appeared on the Ontario Systems Blog and is republished here with permission.

When I was a law student, I would never have guessed the reason I needed to understand constitutional law was so I could someday explain it to nonlawyers who place collection calls.

But today, in the wake of a major legal decision, I’m here to do just that.

As readers might recall, during the waning hours of the 114th Congress—in the proverbial back room of the Senate’s Chambers—Congress passed, and President Obama signed, the Bipartisan Budget Act. Buried in this Act, between an amendment to the Federal Crop Insurance Act and a change to the Petroleum Reserve Strategy, was a quiet amendment to the Telephone Consumer Protection Act (TCPA). The amendment established an exemption from the TCPA when collecting debt owed to or guaranteed by the Federal government. 

[article_ad]

For most third-party debt collectors, the amendment was a nonevent. But for those who collected Federal government–backed student loans and other Federal government debt, it was a cash cow—until the matter of Barr, Attorney General, Et Al. V. American Association Of Political Consultants, Inc., Et Al. Certiorari To The United States Court Of Appeals For The Fourth Circuit No. 19–631 reared its ugly head. 

SCOTUS Strikes Down the Federal TCPA Exemption

The case was argued May 6, 2020. On July 6, the United States Supreme Court affirmed in favor of the U.S. Office of the Attorney General, holding that the 2015 Federal government exemption from the TCPA was unconstitutional. 

The original petitioners in the case—namely the American Association of Political Consultants and three other organizations that participate in the political system—filed a declaratory judgment action, claiming that §227(b)(1)(A)(iii) violated the First Amendment. The petitioners were basically jealous [my word] of the TCPA exemption Congress granted persons who collected debt owed to the Federal government; the petitioners wanted to make robocalls, too. 

In seeking a declaratory ruling, the petitioners were hoping the district court would: 1) agree the Federal government debt exemption from the TCPA violated the free speech clause of the U.S. constitution; and 2) declare the entire prohibition against robocalling unconstitutional. As a result, the petitioners and other callers would be free to make robocalls. 

Unfortunately for the petitioners, the district court did not rule as they had hoped. Rather, the court determined that although the robocall restriction with the government debt exemption was content- based and therefore in violation of the constitution, it would withstand constitutional scrutiny because of the overarching need to collect Federal government debt. 

On appeal, the Fourth Circuit vacated the judgment, agreeing that the robocall restriction with the government debt exception was a content-based speech restriction but holding that the law could not withstand strict scrutiny. The court invalidated the government debt exception, applying traditional severability principles to sever it from the robocall restriction.

In other words, by not striking the TCPA’s entire prohibition against robocalling as unconstitutional, the Fourth Circuit did not go as far as the petitioners would have liked.

Upon Certiorari, the United States Supreme Court affirmed the judgment of the Fourth Circuit. 

What Does This Decision Mean for You?

Now that the TCPA applies to all third-party collectors equally, here are four things you should bear in mind if you collect government debt. 

1. Stay the course and obtain consent

As required by the TCPA, you must first obtain the consumer’s consent if you:

• Place calls or texts using an automatic telephone dialing system to a mobile phone;
• Leave pre-recorded messages on a mobile phone; or
• Use an artificial voice to contact consumers on their mobile phone.

2. Federal government debt is no longer expressly exempt

If you collect on behalf of a state or local government or the Federal government, you must comply with the TCPA. This is because the TCPA applies to any Person. Person is defined as an individual, partnership, association, joint-stock company, trust, or corporation. 

3. Governments might be able to skirt the TCPA

The TCPA’s prohibition against robocalls, robo texts, pre-recorded messages, and use of an artificial voice to place calls to a mobile phone only applies to a Person as that term is defined. Federal, state, and local government bodies could possibly avoid TCPA compliance by arguing they are not a Person as defined by the Act.

4. TCPA restrictions on speech do not violate the free speech clause of the U.S. Constitution

At this point, the TCPA’s prohibition against robocalling, robo texting, leaving pre-recorded messages, and using an artificial voice to communicate with a consumer via their mobile phone does not violate the Constitution. But we’re likely to see future legal challenges on this front.

Recently, ACA International was successful in challenging the state of Massachusetts’ COVID-19 ban on debt collection communications during the state of emergency based on free speech grounds. I would not be surprised to see a challenge to the TCPA as well as to the Fair Debt Collection Practice Act’s prohibitions on consumer communications based on free speech grounds.

Want to easily track huge industry-related court decisions?
The iA Case Law Tracker helps you do that in less time than it takes to pour your morning cup of coffee.

After the U.S. Supreme Court dropped its Seila decision, it left many people and businesses on all sides of the aisle scratching their heads. All of the sudden, a million questions popped up. In an effort to provide some clarity, the Consumer Financial Protection Bureau (CFPB) issued a ratification of its prior actions. The ratification is scheduled to be published in the Federal Register tomorrow.

In last week’s decision,  found that the Consumer Financial Protection Bureau’s (CFPB) structure—specifically, the for-cause only removal of the director—was unconstitutional as it violates the Constitution’s separation of powers. The majority opinion severed that portion of the statute that created the CFPB, stated that the director should be removable at will by the president, and sent the case back to the circuit court of appeals to determine whether the civil investigation demand that prompted the Seila case was validly ratified.

With its ratification, the CFPB attempts “[t]o resolve any possible uncertainty” caused by the Seila decision. The ratification encompasses, among a list of other items:

• Documents published by the CFPB in the “Rules and Regulations” category of the Federal Register, with the exception of the CPFB’s arbitration rule, which Congress killed through the utilization of the Congressional Review Act, and the payday lending rule, which the Bureau pulled back on and, just the other day, finalized the rescision of the mandatory underwriting requirement.
• Consumer information publications issued by the CFPB.
• Notices titled “Fair Credit Reporting Act Disclosures”

The CFPB is still considering whether it should ratify other actions, such as pending enforcement actions.

The ratification notice elaborates:

Based on the Director’s evaluation of the Ratified Actions, it is the Director’s considered judgment that they should be ratified. This decision is reinforced by the fact that, based on the Bureau’s experience as a regulator of markets for consumer financial products and services, the Director is acutely aware that many of the Ratified Actions have engendered significant reliance interests. Consumers, the business community, State and local governments, and other individuals and entities have all relied upon the validity of the Ratified Actions in organizing their activities. This ratification secures those existing reliance interests by avoiding doubt as to the validity of the actions following the Court’s decision in Seila Law.

[article_ad]

insideARM Perspective

While the Bureau’s ratification certainly makes its position loud and clear, it’s still difficult to tell what, exactly, this all means. For example, Director Kraninger chose not to ratify the CFPB’s old arbitration rule, but that rule was created and passed—and subsequently killed—prior to her directorship. 

To help us understand the situation a little better, insideARM reached out to Joann Needleman, leader of Clark Hill’s Consumer Financial Services Regulatory & Compliance group, for some insight. Needleman states:

It’s still unclear whether ratification is the magic fix to the actions taken by the Director, as well as her predecessors who were unconstitutionally insulated. The Supreme Court in Seila intentionally stopped short of articulating a specific remedy. Cordray’s ratification of his prior actions taken upon his confirmation by the Senate after his recession appointment was held to be unconstitutional and was not immediately challenged. The Supreme Court has held that for ratification to be effective, the party ratifying must have been able to do the act ratified at the time the act was done. That simply is not the circumstances we have here.

Because of this uncertain, parties who are subject to pending enforcement actions will be challenging the Director’s current statements on ratification. Similarly, consumer advocates who oppose the Bureau’s rulemaking activities for payday and debt collection will make the same arguments. For payday, advocates will argue that Kraninger had no constitutional authority to pull back the ability to repay provision in the payday rule during its implementation period. For debt collection, the challenge could be that she had no authority to approve the various provision of the NPR, especially in the areas of call caps and electronic communications.

Sounds like only time will tell how all of this shakes out.

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. 

Better bust out the popcorn—the Navient Solutions, LLC v. Law Offices of Jeffrey Lohman, P.C. case is still as crazy as ever. We’ve been chronicling this drama for several months now, and the court continues to absolutely skewer these TCPA plaintiff-lawyers, who are sitting the other side of the V for a change.

[article_ad]

Navient is alleging the law firm conducted to manufacture TCPA claims and defraud Navient: Here’s the CliffsNotes version of the alleged scheme: After “luring” student borrowers in under the guise of debt relief, Navient alleges the law firm would convince students to stop paying their loans (and start paying other entities instead), give them a script to read that instructed Navient to stop calling them, and tell them not to answer any other calls (which inevitably would come when they defaulted). The firm would then sit back, wait, then tally up the TCPA fines and eventually sue Navient.

Navient eventually caught on and went on the offensive, to say the least. They came out guns blazing, suing Lohman and his employees (among a plethora of other defendants) in the Eastern District of Virginia. The defendants filed a bunch of counterclaims, but the court seems to be knocking them out one at time.

As we’ve been reporting, the EDVA has been pretty ruthless for Lohman so far, and there’s been a flurry of activity in recent months despite the ongoing pandemic. Back in November, the court threw out Lohman counterclaims and denied its motion to strike under California’s anti-SLAPP law back, and then tossed another defendant’s counterclaims in April. Then, the court entered default against an absent debt-relief company alleged to have been involved in the scheme, entering a $6.15 million judgment.

But that’s far from the worst of it for the plaintiffs’ lawyers. As we detailed in March, the magistrate judge held that Lohman’s otherwise privileged communications with his clients were discoverable under the crime-fraud exception, and the district judge agreed. OUCH—there’s no decision on the merits yet, but this certainly spells trouble for Lohman.

Lohman tried to fight back against some of this in May by filing a motion to compel Navient to produce privileged communications. Lohman argued that Navient waived attorney-client privilege by putting its attorneys’ advice regarding causation and damages at issue in the lawsuit, but the magistrate judge found no basis for that argument. Lohman just filed a motion for reconsideration of this decision, but it seems unlikely that he’s going to be able to even the playing field here.

The magistrate judge issued another decision last week in Navient Solutions, LLC v. Law Offices of Jeffrey Lohman, P.C., No. 1:19-cv-461, 2020 U.S. Dist. LEXIS 117260 (E.D. Va. July 1, 2020), and Navient continues its winning streak. This court here denied a motion to compel Navient to supplement several discovery responses, finding it “meritless for several reasons.”

Two former Lohman associates named as defendants in the original suit filed the motion in June. The court first held that they lacked standing to compel responses to discovery that Lohman (not the associates) had propounded. It didn’t matter to the court that the associates—who obtained new counsel in March—had been represented by the same attorneys as Lohman when the discovery was sent.

The associates couldn’t compel responses to their own discovery requests either. They were too late. They had Navient’s responses for over seven months by the time they filed the motion to compel in June, and according to the court, they should have done so during the meet-and-confer process in late 2019, or at least “in the earlier months of 2020 by the latest.” The court reiterated that it had granted prior discovery extensions (a rarity in this court) to accommodate newly added defendants as well as the difficulties associated with conducting discovery during the COVID-19 pandemic. These extensions had nothing to do with the defendants’ various “long-winded complaints,” and the court didn’t extend so that the associates “could procrastinate resolution of discovery disputes.” Pretty brutal introduction to the Rocket Docket.

The fact that the associates “slept on their discovery remedies” was, in and of itself, enough for the court to deny the motion in its entirety, but it still explained why it would deny the motion to compel on the merits anyway: Simply put, Navient’s objections to the “incredibly broad” requests were “valid and [had to] be sustained.”

Notably, the court said that requests regarding Navient’s debt-collection policies had “no bearing on the claims and defenses” in the case, given that the “matter is not an ‘underlying’ TCPA case” and instead involves claims “for racketeering against a group of businesses, law firms, and individuals that allegedly worked together to recruit clients and produce fraudulent lawsuits.” This aspect of the decision in particular is yet another big win for Navient (if it stands after reconsideration/objections, which seems likely), as it could signal that the court’s sole focus will be on the RICO-related conduct, not on any conduct of Navient.

For now, Navient continues its forward attack, and it’s not taking any prisoners. This continues to be the most successful RICO case we’ve seen, and companies and lawyers should closely monitor developments. More to come.

Want to quickly find other cases that call out plaintiffs’ counsel?
The iA Case Law Tracker helps you do that in less time than it takes to pour your morning cup of coffee.