The question concerning the constitutionality of the Consumer Financial Protection Bureau’s (CFPB) structure has found its way to the door of the United States Supreme Court yet again. This issue has been percolating for a couple of years. In January of this year, the Supreme Court denied a petition to review the matter in State National Bank of Big Spring, et al. v. Mnuchin. It appears that the Supreme Court will once again have to decide whether to hear the issue, as Seila Law LLC has filed a petition for writ of certiorari—which is fancy legalese for a request to have the Supreme Court hear the case—on June 28, 2019.

The petition stems from the CFPB’s investigation of Seila Law LLC, a debt resolution law firm. Seila Law objected to the CFPB’s civil investigation demand (CID) for information and documents about the firm, arguing that the CFPB was unconstitutionally structured. The CFPB petitioned a federal court for enforcement of the CID. The court found no issue with the CFPB’s structure. Seila Law appealed the matter to the Ninth Circuit, which affirmed the district court’s decision. Seila Law is now seeking the Supreme Court’s decision on the matter, arguing that “This case, which cleanly presents the question whether the CFPB is constitutional, is an ideal vehicle for the Court’s review.”

Similar to the arguments we’ve seen in prior cases addressing this issue, Seila Law questions “[w]hether the vesting of substantial executive authority in the Consumer Financial Protection Bureau, an independent agency led by a single director, violates the separation of powers.”

According to the case’s docket, the groups and organizations listed below filed amicus briefs supporting the Supreme Court’s review:  

• U.S. Chamber of Commerce
• The States of Texas, Arkansas, Nebraska, Oklahoma, South Carolina, Tennessee, Utah, and West Virginia
• The Cato Institute
• Separation of Powers Scholars
• Southeastern Legal Foundation and the National Federation of Independent Business Small Business Legal Center
• Pacific Legal Foundation
• Landmark Legal Foundation

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insideARM Perspective

Not too long ago with PHH and State National Bank of Big Spring, financial services industry members were arguing that the CFPB was unconstitutional. Now, we have a debt resolution law firm—arguably the “other side of the aisle”—arguing the same thing. It’s interesting how this issue gets passed around like a hot potato. However, the question of constitutionality is an interesting one—at least for us legal eagles—and is best decided by the Supreme Court in its unique position as the final authority on constitutional matters.

As the TCPAWorld reported not long ago, a Magistrate Judge in South Florida recently held that consent obtained in a class action settlement was irrevocable—even against unnamed class members—under the doctrine of “Good Reyes.” Specifically, the Magistrate Judge assigned to the case found that contractual consent is not revocable where it is a bargained-for term of a contract.

The Plaintiff challenged the Magistrate Judge’s recommendation to the district court, and it did not go well. On Wednesday of this week, the district court overruled all objections and adopted the recommendation, dismissing the case. See Lucoff v. Navient Solutions, CASE NO. 18-CIV-60743-RAR, 2019 U.S. Dist. LEXIS 133577 (S.D. Fl. Aug. 7, 2019).

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In affirming the recommended dismissal, the district court explicitly stated it was “persuaded” by the Good Reyes decision that under common law, “Plaintiff’s consent was irrevocable, and any attempt to revoke his prior consent was ineffective…” In reaching this conclusion, the district court distinguished cases where the calls at issue were not within the scope of the consent provision as inapposite.

The district court also concluded that the Plaintiff had again consented by allowing the re-submission of his phone number to the servicer.

So there you go TCPAWorld—no revocation of contractual consent permitted in the Southern District of Florida.

Pass it on.

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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. 

COLLINGSWOOD, N.J.—MyGovWatch.com, the government contract intelligence website offering users more than just leads since 2008, has been tracking government purchasing activity covering two dozen unique debt classes ever since, including utility accounts from buyers like Philadelphia Gas Works (PGW) and CPS Energy (CPS). These two large, metropolitan utility companies are actively seeking bids for collection services right now, with bids due later this month.

The website’s tracking and automation features let users access insider information showing how each utility selected vendors in the past for the same work. PGW last solicited bids in 2015, a year after CPS did the same. Documents available to users about past purchasing activities of these two utilities include:

• Detailed evaluation documents showing how and why each utility chose the selected firm(s) last time.
• Copies of winning proposals.
• Pricing of each bidder.
• Contracts signed by the vendors.

Site users also have access to the MyGovWatch.com Vendor Center, which enables nationwide searches of pricing more recently offered in response to utility contracts so bidders can anticipate current market pricing with a high degree of specificity and certainty.

People not yet familiar with the site and interested in these utility contracts can try it before paying for data access in one of two ways. Anyone can create a free account and receive a promotional code to access data about either the PGW or CPS solicitation. Qualifying companies can contact MyGovWatch.com and ask for a one-month trial contract to evaluate the site, with no payment due if trial users do not continue with site access after the trial.

The website additionally offers:

• Open procurement tracking services to ensure users hear about every addendum and procurement change in real-time.
• The ability to submit questions to buyers anonymously through the site.
• Contract award announcements as they become known.
• Search tools to let users research winning proposals by buyer type, region, and other attributes.
• Advanced notice of upcoming procurements to kick start the sales cycle.

To create your free account today, visit www.mygovwatch.com.

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About MyGovWatch.com

MyGovWatch.com, the government contract intelligence website offering users more than just leads for public sector procurements since 2008, lets users access unlimited “Premium” data in industries to include Debt Collection, Call Center, and EMS Billing.  Since its 2018 relaunch, the site now enables anyone to specify their particular interests from among ten top-level industries, from professional services to construction to finance and technology and beyond.  Users can set preferences to be notified about leads in nearly sixty sub-industries, such as collections, billing, systems development, business services, and others, covering every conceivable type of government purchase. Learn more at www.mygovwatch.com.

On Thursday, the Seventh Circuit Court of Appeals (7th Cir.) published its long-awaited opinion in the matter of Lavallee v. Med-1 Solutions, LLC, 17-3244 (7th Cir. Aug. 8, 2019). Critically, the 7th Cir. found that an email containing no disclosures or information about a debt, but rather a hyperlink where such information can be securely accessed, is not a communication under the Fair Debt Collection Practices Act (FDCPA). An interesting question arises: what does this decision mean for text messaging and call frequency limits as outlined in the Consumer Financial Protection Bureau’s (CFPB) Notice of Proposed Rulemaking (NRPM) for debt collection?

Lavallee Summary

To quickly summarize, Med-1 Solutions sent emails to the consumer that did not contain disclosures or information about the debt in the subject line or body of the message (likely to prevent third-party disclosure) but instead provided a link to a secure portal that included all of the required disclosures and account information. The consumer never opened the emails and instead first learned about them after the creditor called her about another debt. Med-1 Solutions did not re-send the 1692g disclosures, figuring that the original emails satisfied 1692g as initial communications. The consumer disagreed, believing that the initial communication was the phone call. She filed an FDCPA claim alleging that Med-1 failed to provide her with her validation rights under 1692g during or within five days of the phone call. The district court found in favor of the consumer.

The 7th Circuit affirmed. The opinion revolves around the definition of communication, which requires the conveying of information about the debt. The court found that the emails were not communications since the substance of the email itself contained no disclosures or debt information. The hyperlink did not save the emails because it required the consumer to take extra steps to obtain the information.

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Clash Between Lavallee and the CFPB’s NPRM

The NPRM is hot on everyone’s mind, and the 7th Cir.’s Lavallee decision poses an interesting question about text messaging and call frequency limits.

In the NPRM’s preamble, which provides an in-depth discussion of the proposed rules, the CFPB references a debt collector’s legitimate need to communicate with consumers. The preamble implies that the rules offset the burden that call frequency limits place on this legitimate need by opening up electronic avenues of communication, such as email and text messaging.

The CFPB took a big step in bringing debt collectors into the modern world of communications. Thus far, the only “safe” methods of communication were those contemplated at the time the FDCPA went into effect: phone calls, letters, faxes, and telegrams. [Editor’s Note: “Safe” is tongue-in-cheek, as we are all well aware of the litigation dilemma faced by the industry using even these well-established communication methods.] By outlining steps for the use of electronic communications, the CFPB opened the door for debt collectors to meet consumers using the consumers’ preferred contact medium.

A significant concern regarding contact frequency limits in the NPRM is the increased amount of time it will take for debt collectors to make a right party contact—a fancy way of saying reaching the correct consumer. This poses a risk to consumers—if debt collectors are unable to reach consumers timely, it increases the likelihood that creditors will choose to pursue legal action against consumers. The ability to email and text message consumers to make that first contact might help alleviate this issue.

However, does Lavallee present a hiccup? Due to the character limits of text messages, it is unlikely that all required disclosures—especially the validation notice—will fit within the body of the text. The NPRM contemplates hyperlinks, but according to the 7th Cir., they are not enough for required disclosures. Will this impact sending validation notices via text message? Is one of the supporting legs of the CFPB’s call frequency limits kicked out from underneath itself, at least as far as the 7th Circuit is concerned? And, the biggest question of all, how will the Chevron Deference doctrine, which outlines when courts should apply administrative agency interpretations to statutes, be applied to all of this?

These are all complicated questions that will be answered in due time. The good news is that the NPRM’s comment period is still open, leaving time for debt collectors and industry groups to comment on this specific issue. Comments are due by September 18, 2019.

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Want to keep up with other similar FDCPA cases as they come out? You can do so through iA’s Case Law Tracker, which allows you to conduct incisive and quick legal research in less time than it takes to pour your morning cup of coffee.

ROCKVILLE, Md. — insideARM and the iA Institute announced today that Mwika Kankwenda has joined its team as Digital Marketing Strategist.

Mwika is a seasoned digital marketer, having worked her way up from Marketing Coordinator to Assistant Marketing Manager at ASAE: the Center for Association Leadership. At ASAE, Mwika deftly managed multiple digital marketing campaigns across the organization with a special emphasis on education programs, special initiatives, and product launches.

At insideARM, Mwika will handle digital marketing for our full range of events, products and services, including the upcoming Women in Consumer & Commercial Finance (Dec. 11-13), and our legal and compliance tools, including the Case Law Tracker and iA Research Assistant. 

“Mwika is a creative, organized and effective digital marketer and copywriter. We’re fortunate to have her on staff,” said Aaron Steinberg, Publisher, the iA Institute. “With Mwika contributing, we’re looking forward to more visibility and more growth for iA.”

“I’m thrilled to be joining such a talented team at iA and growing with them as they continue to make great strides in the industry,” Kankwenda said.

About The iA Institute

The iA Institute is a media company that provides context, insight, and practical information to the complex debt industry. Professionals turn to us with the day-to-day challenges not covered in training. iA initiatives bring a range of stakeholders to the table in candid and intimate environments to inform, to build a culture of compliance, to address industry challenges, and to make profitable connections. The iA Institute publishes insideARM.com – including the flagship Daily Insider newsletter — as well as iA Research Assistant. The iA Institute also hosts several conferences including the First Party Summit and Women in Consumer & Commercial Finance, and the membership group, the Consumer Relations Consortium & Innovation Council. More at www.theiAinstitute.com.

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Joseph George Chromy, Jr. passed away unexpectedly on July 28, 2019, after an 18-month battle with glioblastoma. Joe’s official obituary may be accessed here.

Joe spent his professional life in the student loan industry, specifically focusing on the management of student loan portfolios. Joe worked for Unger & Associates, National Asset Management and served as VP of Sales & Executive Vice President for Education Credit Services for (ECS). Joe was instrumental in building ECS’s business from a small start-up to a successful national company with a diverse customer base. Joe’s extensive knowledge of the student loan industry led him to advocate for improvements in federal policy, regulations, and practices that have become standard industry norms.
 
Joe established a consulting firm, Momentum Business Strategies (MBS), in 2002. For 15 years, Joe successfully assisted home office markets, businesses, and government contractors to reinvent and achieve their strategic and fiscal goals by infusing a culture of managerial courage and executing innovations in strategic planning, market analysis, and corporate management.

Joe is remembered by his friends and colleagues for his caring/friendly nature. His laugh and smile were contagious, and he will be deeply missed.

A Buddhist memorial ceremony will be Friday, August 16, at 12:00 p.m. in the sanctuary at the National Funeral Home in Falls Church, VA, followed by a graveside ritual. To assist the family in planning the event, please notify Gail daMota at gaild@efc.org, if you plan on attending.

A Celebration of Life will also be held for family and friends on Saturday, August 24, in Andover, MA. https://tinyurl.com/BraveJoe

In lieu of flowers, family has asked that you please consider contributing to one of the following charities:

Glioblastoma Foundation

National Brain Tumor Society

Arlington County Fire Department
Attn: Financial Offices
2100 Clarendon Blvd. Suite 400
Arlington, VA 22201
Please include: In honor of Joseph George Chromy, Jr.

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Out of the Northern District of Texas comes Adams v. Safe Home Security, Inc., a TCPA case that holds that predictive dialers are outside of the scope of the TCPA.

As covered by Nicole Su of Womble Bond Dickinson [https://www.tcpadefenseforce.com/tcpa-law-blog/district-court-in-the-fifth-circuit-holds-that-predictive-dialers-are-outside-the-scope-of-the-tcpa], the Court took a two-pronged approach to its analysis:

1) The Court believes that ACA Int’l v. FCC invalidated the 2015 Order, as well as the 2008 and 2003 orders, too. And with those three orders out of the way, the Court “independently interpret[ed] the statute to determine the scope of the definition of an ATDS and whether it applies to predictive dialers.”

2) In reviewing the statutory definition of an ATDS, the Court determined that “an ATDS must both store and produce numbers that are randomly and sequentially generated and not merely store any numbers.”

So the Court went all the way back to the FCC’s 1992 order, which holds that the “TCPA did not apply to speed dialing or call forwarding ‘because the numbers called are not generated in a random or sequential fashion.'”

“Notably,” Su writes, “the Court expressly rejected the Ninth Circuit’s Marks decision – which held that an ATDS covers devices that called from a list of stored numbers.”

Of additional interest in this case, the Court reviewed the TCPA’s legislative history. In doing so, it agreed that the FCC’s 1992 order allows businesses to call customers with whom they have “an established business relationship.”

Per Su: “With the Adams case, we now have at least one district court in each of the eleven circuits addressing the definition of an ATDS after ACA Int’l in some form. It remains to be seen if any other Circuit Courts besides the Ninth Circuit will address this issue.”

Acting to implement a Congressional legislative directive, the Federal Communications Commission (FCC) last week “adopted new rules banning malicious caller ID spoofing of text messages and foreign calls.” The ruling further implements amendments to the Truth in Caller ID Act of 2009, codified in 47 U.S.C. 227(e), enacted last year in the RAY BAUM’S Act.

The Truth in Caller ID Act “prohibits anyone from causing a caller ID service to knowingly transmit misleading or inaccurate caller ID information (‘spoofing’) with the intent to defraud, cause harm or obtain anything of value.” However, until last year’s Congressional action, that prohibition did not extend to text messages or international calls. The new FCC rules will effect that extension, including to “additional types of voice calls, such as one-way VoIP calls.” 

The FCC adds broad definitions of “text messaging service” and “voice service” to its TCPA definitional library in Rule Part 64. The proposed text would define the former as “a service that enables the transmission or receipt of a text message, including a service provided as part of or in connection with a voice” service. The latter would be “any service that is interconnected with the…[PSTN] and that furnishes voice communications to an end user using resources of the North American Numbering Plan [NANP] or any successor to [that Plan] adopted by the” FCC pursuant to its authority under Section 251 of the Communications Act; it would also include “transmissions from a telephone facsimile machine, computer, or other device to a telephone facsimile machine.”

Commissioner Michael O’Rielly, in supporting the decision, commented that these terms “are broader than my liking and may cause future unintended consequences,” but did not lay out what those might be. He attempted to exclude application of the new rules to Short Codes, “given the apparent lack of evidence, necessity, and notice….,” but was unsuccessful. However, the final text, which has yet to be released as this is being written, apparently restricts “regulation of the technology to the Truth in Caller ID context.”

Interestingly, the amendments to the statute, and thus the regulations implementing them, do not become effective until at least 6 months after the date on which the FCC prescribes those regulations. The proposed FCC text states six months after adoption and release of the order or 30 days after publication in the Federal Register, whichever is later.

OGDEN, Utah — Today, debt collection and ARM software technology leader DAKCS Software Systems is excited to announce a partnership with Palinode to integrate Sonnet with DAKCS’s debt collection software solution.                                    

This partnership provides DAKCS’ Beyond ARM customers full access and integration to Sonnet, which helps achieve dispute resolution quickly, increases productivity and reduces human error with the e-OSCAR (Online Solution for Complete and Accurate Reporting) and direct dispute workflow. 

Palinode, a leading provider of credit dispute resolution technology, provides DAKCS customers with an automated seamless credit dispute resolution system, supporting compliance with the Consumer Financial Protection Bureau (CFPB) regulations for “reasonable investigation.” 

“We are thrilled to be partnering with DAKCS, allowing their customers easy access to Sonnet and all of the productivity and compliance benefits of the connected platforms,” said Joe Storey, President/CEO of Palinode. 

DAKCS continues to open up integration to better serve its customer base. When integrated into the Beyond ARM system, Sonnet by Palinode will make the process seamless for our shared customers to manage disputes via e-OSCAR, the online dispute-resolution tool used by the three major credit bureaus. 

“Enhancing system integration options to improve our customer’s bottom line is a key target for DAKCS,” said Lex Patterson DAKCS President. “Addressing and managing disputes is a major pain point for our customers. This partnership will deliver compliance and efficiency in a streamlined solution. We welcome Palinode to the DAKCS family and look forward to a strong partnership.” 

About DAKCS Software Systems
DAKCS Software Systems is an industry leader in simplifying the process of collections and accounts receivable management. By creating highly configurable, innovative cloud and on-premise software solutions, DAKCS offers a way to run your business faster and more efficient.

For over 35 years, DAKCS continues to deliver on service, automation, and flexibility in one central collection software platform for all types of business. Contact us today to arrange a demo or call us at (800) 873-2527.

About Palinode

Palinode is a software provider serving the accounts receivable management (ARM) industry. The Palinode team has a proven history of creating revolutionary systems to synthesize large amounts of data in ways that exponentially increase speed, accuracy, compliance, and ultimately: profitability.

Sonnet, is an effective automated credit dispute resolution system. Sonnet empowers fast and accurate processing of vast numbers of disputes in a way that ensures compliance and clearly demonstrates “reasonable investigation” through comprehensive documentation and reporting that shows disputes are truly resolved. Set up your free demo today.

The Middle District of Florida just issued a sternly worded warning to TCPA plaintiffs and their counsel, stating that pre-suit investigations are a necessary pre-requisite to filing their claims – otherwise sanctions may be warranted.

In Tormenia v. Lvnv Funding, 2019 U.S. Dist. LEXIS 12662 (M.D. Fl. July 30, 2019), the court issued an order to plaintiff’s counsel demanding that they “show cause” as to why Rule 11 sanctions should not be imposed for their failure to conduct a “pre-suit ‘inquiry reasonable under the circumstances.’” Drawing the court’s ire was counsel’s repeated requests to amend the complaint’s generic allegations, in an apparent effort to avoid arbitration of the plaintiff’s TCPA claims, and counsel’s practice of “stepped” pleading (a term the court noted was coined by plaintiff’s counsel, as the court found no references to such term in its own research). For example, counsel’s “stepped” pleading alleged that a certain phone number was called 75 times, and in a later allegation the plaintiff alleged the same phone number was called 150 times, and so on, in an attempt to garner admissions as a form of pleading-stage “discovery.” Plaintiff and her counsel argued to the court that such a pleading practice “facilitates ‘obtaining useful information very early in the case.’”

However, the court was unimpressed. Based on its own research, the court found that Plaintiff’s counsel had “indiscriminat[ly] parrot[ed] . . . the same allegations from action to action and from defendant to defendant[,] [which] creates skeptism about the adequacy of the attorneys’ pre-suit investigation.” After “a careful review” of the record, the court determined that monetary sanctions were not warranted as a result of counsel’s recycled, generic allegations, but only because the court determined that counsel “possessed some factual basis for filing the complaint[]” and “were not acting in bad faith.”

But the court took Plaintiff’s counsel to task on their practice of “stepped” pleading. The court noted that such a practice, which resulted in over twenty-five alternative allegations, “strain[ed]” Rule 8’s authorization to plead in the alternative as the practice “elongates severely the complaint and obfuscates the facts that support the plaintiff’s entitlement to relief.” And, the court noted, the resulting confusion only “compounds as the case progresses.”

The court also took issue with this “stepped” pleading practice as impermissibly engaging in discovery at the pleadings stage. To the court, “[a] complaint . . . is neither an interrogatory nor a discovery tool, both of which are regulated carefully by the Federal Rules of Civil Procedure.” Rather, “[a] complaint functions to inform a defendant of the claim asserted. . . . [And] ‘[s]tepped’ pleading is unnecessary to inform a defendant of the claim.” In fact, the court reviewed answers to Plaintiff’s “stepped” pleading practice, which was “parroted” in numerous other cases, to find that “the tactic achieves rarely, if ever, the intended goal of generating ‘useful’ admissions.”

The court concluded by noting that both Rule 11 and the ethical rules of the Florida Bar require attorneys to fairly vet their client’s claims, attempt to root out and resolve complicated facts prior to filing a pleading, and to show “candor” and avoid “needless acrimony” when dealing with other parties and the court.

Thus, Tormenia indicates that courts are taking note of serial TCPA litigators who, frequently, recycle the same complaints and allegations from case to case, defendant to defendant, and court to court. Further, courts may be taking a more proactive stance in vetting the complaints and underlying pre-suit investigative steps taken by those same plaintiffs and their counsel.

Is this a one-off decision by a single court to manage and control its docket, or is this opinion indicative of a more proactive bench seeking to reign-in unorthodox practices that abuse the litigation process? Only time will tell. In the meantime, it is safe to say that “stepped” pleading will not be favorably looked upon by the federal courts, and the practice of merely recycling the allegations of prior complaints may pique the court’s curiosity regarding whether the pleading is supported by the filing attorney’s ethical obligation to investigate and tailor a case to a specific client’s claims.