Data privacy and protection concerns permeate TCPA class actions as consumer lawyers have become increasingly bold about demanding huge sets of private financial records and data from defendants. These demands risk the privacy and financial well being of millions of customers yet–in the greatest of ironies–courts are frequently told that the data is needed to assure that consumer privacy is protected–the TCPA protects privacy, after all.

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TCPA defendants need to be extremely careful when providing customer data to anyone without a court order–a point driven home to devastating effect in the remarkable saga of Cordoba v. DirecTV, LLC.  There, DirecTV finds itself in an unshakable privacy lawsuit owing to its production of customer records to its own TCPA Defense expert.

Here’s the story:

Back in 2015 Cordoba sued DirecTV alleging, inter alia, violations of the TCPA’s DNC rules.  DirecTV decided to defend itself by arguing that many of the class members had established business relationships with it, which is an exception to the otherwise black-and-white rule that numbers on the DNC may not be called for telemarketing purposes. To advance that defense DirecTV retained an expert and transferred a bunch of account data to the expert to analyze and provide guidance to DirecTV (and eventually to the Court) as to whether and to what degree class members had EBRs.

That all seems appropriate, if not prudent. But there’s a twist.

DirecTV’s data is subject to something called the Satellite Television Extension and Localism Act of 2010. (“STELA.”) STELA imposes a commandment upon DirecTV to the effect: “thou shalt not disclose personal identifying information about your consumers to anyone…” (Paraphrasing.)

While you’ve probably never heard of STELA, DirecTV’s lawyers had and this is where things get interesting. When Plaintiff moved for certification back in 2017 DirecTV opposed certification arguing, inter alia, that individualized issues respecting the applicability of the EBR defense thwart commonality. In support of this argument they submitted their expert report relying on the customer data DirecTV had supplied.

In response the Plaintiff’s lawyers–the formidable bunch over at Lief Cabraser– demanded the data underlying the expert’s report. DirecTV refused to produce the data to LC, arguing that STELA prevents disclosure.

Hmmm.

So DirecTV asked the Court to–on the one hand–accept its expert’s report relying on the secret special data but–on the other hand–to deny the Plaintiff’s expert access to the same secret special data. You see where this is headed.

The Court ordered the production of the data over to LC’s expert and in so doing made an express finding that the data produced to DirecTV’s expert was, in fact, subject to STELA. Uh oh. (It then proceed to certify the TCPA case–more uh oh.)  You can read the opinion here: Cordoba Cert. Opinion

But Lief Cabraser was not satisfied with its data award or its certification order. Oh no, they had bigger plans.

In May, 2018 that plan was unveiled when a new class representative joined the case. This class representative did not allege that she had received calls in violation of the TCPA, however. Instead, she alleged that her data had been improperly provided by DirecTV to its defense expert in violation of STELA and sought to represent a class of at least 9,100 other individuals that had suffered the same indignity.  The class seeks to recover at least $9,100,000.00 in statutory damages for the violation! If you’re curious the Third Amended Complaint asserting the STELA claims can be found here: Cordoba Complaint

Not surprisingly, the Third Amended Complaint quotes the Court’s own earlier certification order noting that the data produced to the expert was, in fact, subject to STELA. The only liability question, therefore, was whether or not the data was produced pursuant to an enumerated exception.

DirecTV responded to the filing of the Third Amended Complaint by moving to compel arbitration. The Cordoba court ruled on that arbitration motion just last week–DENYING it– in Cordoba v. DirecTV, LLC, Case No. 15-cv-3755, 2018 WL 5919588 (N.D. GA Nov. 9, 2018). There the Court determined that the claims at issue did not arise out of the contract between Romero and DirectTV but, rather, arose out of the protections of STELA which were unrelated to the account.  The Court specifically rejected DirecTV’s argument that its privacy policy–which was built into the same contract containing the arbitration clause–provides a defense under a STELA exception and, as such, held that no part of the suit arose out of the contract containing the arbitration clause. Just that easily arbitration was denied.

Cordoba is a cautionary tale for all Defendants out there that face suit in TCPA class actions. Although it is tempting–and seemingly prudent–to get a head start on data analysis via an early production and assembly of data for review by experts be ware. Customer data is extremely important and private and its production is highly regulated. Do not assume that the data can be shared with friendly third parties. As Cordoba shows, the production of such material may be enough to get you sued in an entirely separate data privacy suit.

Unrelated, have I ever mentioned how great Womble Bond Dickinson’s IP, Technology, and Data teams are?  Just throwing it out there.

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

On November 16, 2018, the Federal Reserve Bank of New York (New York Fed) released its quarterly household debt and credit report. The report used a nationally representative sample of individuals as well as anonymized credit data from Equifax. In the third quarter of 2018 (Q3), total household debt increased by $210 billion. According to the New York Fed’s press release, this is the seventeenth consecutive quarter of increase.

For outstanding non-mortgage debt, student loans remain the behemoth. As of Q3, the student loan balance is $1.44 trillion, an increase of $37 billion since last quarter. Auto loans followed with a balance of $1.27 trillion, an increase of $27 billion since last quarter. Credit cards trailed with a balance of $844 billion, an increase of $15 billion since last quarter.

The release also includes the chart below, which shows the annualized shares of balances that transitioned into serious delinquency (90 days or more). Student loans had the highest rate of increase in serious delinquency since last quarter.

Of particular interest to the ARM industry, the report shows a continuation of the trend that the percentage of consumers with third party collections on their credit reports is decreasing, and has been since 2012. Despite this, the average amount in collections has increased in the last two years.  

insideARM Perspective

The significant drop in percentage of consumers with third party collection items on their credit reports may be attributed to the implementation of the National Consumer Assistance Plan (NCAP). In a blog post that accompanied last quarter’s report, the New York Fed believed this decrease in reported collection accounts to be temporary while collection agencies get accustomed to the new requirements. According to the most recent report, this has not yet happened.  

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Another possible explanation for the sharp decrease is the current legal climate. Since FCRA lawsuits are on the rise, third party debt collectors might be choosing to no longer credit report. The industry noticed the mass mailing of largely identical dispute letters by credit repair organizations, which appears to be a new tactic to get tradelines deleted or to drum up FCRA lawsuits against (and, thus, settlements from) debt collectors. This opens up another can of worms. Mass disputes made in such manner take away from legitimate disputes consumers may have. Finding a legitimate dispute amid the volumes of mass disputes from credit repair organziations is like finding a needle in a haystack. On a larger scale, if companies are not credit reporting delinquent items due to fear of unwarranted FCRA backlash, how accurate of a gauge is a consumer’s credit report in determining his or her creditworthiness? These are discussions for another day, but discussions that need to occur.

Edit (3:13PM): An industry source provided a third possible reason why this report shows a sharp decrease in collection accounts appearing on consumer’s credit reports. The report indicates that it pulled anonymized credit report data from Equifax. Many companies ceased reporting to Equifax after last year’s data breach, which came to light right around the time that the chart above shows a sharp decline. To paint a more accurate picture, it would be helpful to see similar data from the other two large credit bureaus.

Congress just proposed a bill to attack robocalls by leveraging the TCPA that is really dangerous but, for some reason, both parties seem to think it is a good idea. So it falls to me to save the world.

I’m up for it.

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In fairness, the TRACED Act–proposed jointly by Massachusetts Senator Ed Markey, a Democrat, and Senator John Thune, a South Dakota Republican– is a good news/extremely bad news situation. The good news is that it seeks to give the FCC the authority it has always needed–and never had–to require call identity validation and cut down on spoofed calls. That’s super critical stuff and a really big deal.

The bad news is that it modifies the existing Telephone Consumer Protection Act (“TCPA”) to encourage the FCC to bring more lawsuits against more businesses and gives the FCC an even heavier cudgel (sort of) to threaten folks with. It also requires the FCC to get together with the CFPB(!) and the DOJ to discuss why more regulators aren’t currently enforcing the TCPA and to encourage other agencies to get busy!

In other words, Congress is about to go “all in” on the TCPA and encourage the FCC and other governmental agencies to enforce the statute right alongside private actors.  This just at a time that the FCC is currently working on interpreting the reach of the TCPA in light of its recent failed power grab in expanding the statute.

All right, let’s break this down.

First, a friendly reminder. The TCPA is not the answer to the robocall problem in this country. Never has been. Never will be. And its not for a lack of teeth. The TCPA already has more teeth than a piranha family portrait and robocalls continue to run rampant.

Yes, the TCPA makes it illegal to call cell phones using certain kinds of technology without express consent. That sounds pretty good. But the TCPA was never intended to be a comprehensive tool to prevent robocalls. Instead it was a very narrowly drawn “rifle shot” intended to stop to only the most abusive types of calls made using random-fire dialers. But that’s not much of an arsenal considering the sophisticated technology scammers are using today.

And we’ve already witnessed what happens when the FCC tries to conjure up a howitzer for itself using the vague and mushy language of the TCPA– the TCPA’s disastrous private right of action allows lawyers to sue for $500.00 a call right alongside the FCC. So the broader the FCC makes the TCPA–hoping to give itself more power to fight true bad actors– the broader it makes the TCPA for consumer lawyers and class action attorneys that use the statute against legitimate businesses to shake down millions in settlements.

TRACED wants to encourage the FCC to broaden the TCPA again. But we all already know how this movie ends. We’ve seen it before.

When the FCC began responding to consumer complaints about robocalls in the early 2000s, it dusted off the TCPA (again its only tool in the fight against robocalls) and began working to expand the statute to give itself more power to fight robocalls at that time.  In 2015 it went so far as to give itself the power to regulate all calls made by any software-enabled dialing device–including smartphones–an immense power grab that allowed everyone in the country to sue everyone else for every call to a cell phone made without consent. Talk about a bad idea.

As expected, people sued. Thousands of them. In suits big and small all across the country. But instead of suing true “robocallers”–the folks making spam and scam calls–they sued legitimate American businesses, most of whom were using live agents to handle calls and not robots. Because of the FCC’s massive expansion of the TCPA, however, calls made by “predictive dialers”– modern dialing equipment commonly used by legitimate businesses that accurately dials numbers connects calls with customer service agents– became subject to the statute. Businesses caught unaware thought they were complying with the law, but suddenly they weren’t and were facing liability for $500.00 per call! The floodgates for frivolous lawsuits were thrown open and businesses–and sometimes even individual people–were hammered with lawsuits for millions or billions of dollars in statutory authority. Terrible terrible stuff.

Those were dark times–that recently came to an end (sort of) when the D.C. Circuit Court of Appeal found the FCC’s power grab to be very illegal— but, remarkably, the scourge of true robocalls only got worse and worse despite all those frivolous lawsuits. Indeed there was a huge increase in robocalls after the FCC expanded the TCPA in 2015.

So what gives?

Simple– private lawsuits against legitimate American businesses have no impact on robocalls because scam robocalls are not made by legitimate American businesses. Instead they are made by shady fly-by-nights and overseas outfits that do not have bank accounts in the states. No bank accounts means no big money for class action lawyers, means no lawsuits against the bad guys.  So even broadening the TCPA to the furthest extent imaginable was not nearly enough to stop robocallers as the FCC’s failed recent experiment taught us.

Short answer: private lawsuits under the TCPA are not the answer to stopping robocalls. 

So why on Earth is Congress proposing to modify the TCPA to make it more important to the FCC’s enforcement efforts and encouraging other agencies to also enforce the TCPA? We’ve literally just lived through a decade of the FCC expanding the statute to devastating effect–which just ended with the D.C. Circuit Court of Appeal striking down the 2015 Omnibus ruling— and the Congressional response is to encourage the FCC to do it all over again?

Probably because they need to hear from me. So here’s my quick letter to Congress on this. I assume it will fix everything.

Dear Congress,

I know you’d like to have the FCC use the TCPA to stop robocalls–it won’t work, trust me.

But if you really want the FCC to use the TCPA to stop robocalls you must–really really MUST–get rid of the private right of action.

Happy to fly out there and explain why.

Yours truly,

Czar

Oy vey. (Did I say that right?)

So what does TRACED actually plan to do to the TCPA? While the Earl works on a redline– (Earl– I expect it on my desk Monday morning, Thanks)– here’s a quick synopsis:

It adds a forfeiture penalty for “any person that is determined by the Commission, in accordance to have violated this subsection with the intent to cause such violation shall be liable to the United States for a forfeiture penalty. A forfeiture penalty under this paragraph shall be in addition to any other penalty provided for by this Act. The amount of the forfeiture penalty determined under this paragraph shall not exceed $10,000 for each violation.”

Ok so this is kind of weird for a couple of reasons. Notice that the forfeiture only applies if a person intends to “cause such violation.” That’s weird. So does that mean if a person intends to make a scam robocall to shake down some little old lady that’s fine because they didn’t intend to violate the TRACED act? Something to think about oh ye drafters of bad statutes.

Another thing to think about– isn’t the current FCC authority in forfeiture actions $16,000.00 per call under the general Telecommunications Act rules?  Me thinks the answer is yes and so does the FCC. See e.g. this Public Notice (“failure to comply with the relevant sections of the TCPA and corresponding rules may subject[you] to enforcement action, including monetary forfeitures as high as $16,000 per violation…”) So Congress wants to fight robocalls using the TCPA by lowering the forfeiture penalty for TCPA violations from $16k to $10k? I don’t get it.

But now the really bad news. TRACED would also require the DOJ and the FCC to get serious about enforcing existing laws (again–that’s just the TCPA folks) by getting together with their friends at the CFPB (!) the Department of State, the Department of Homeland Security (and suddenly this just got dystopian), the Department of Commerce and the FTC to discuss, inter alia, “whether, and if so how, any Federal law, including regulations, policies, and practices, or budgetary or jurisdictional constraints inhibit the prosecution of [TCPA] violations.” 

Again, did I mention this is a Bi-Partison bill? Come on folks, panic with me already.

Ok, so I’ve been dwelling on the negative. There’s some upside here too.

First, TRACED would require the FCC to require: “a provider of voice service to implement an appropriate and effective call authentication framework in the internet protocol networks of voice service providers.”

I’m not sure I know what that means, but I think it means Congress wants to force the carriers to track and authenticate calls and, although that’s a little dystopian (remember how the Department of Homeland Security is supposed to get involved with enforcement here), it seems like a critical first step to stop the actual scam bad guys out there. Lots of unintended consequences are likely, however, which is why Congress is dictating the FCC implement a safeharbor “from liability for unintended or inadvertent blocking of calls or for the unintended or inadvertent misidentification of the level of trust for individual calls pursuant to the authentication framework…”

Also, TRACED requires the FCC to implement regulations protecting telephone subscribers from receiving nonauthenticated calls. Again, this sounds pretty revolutionary and important to stopping the true scammers. I like where this part of TRACED is headed, although it is (by design) pretty skeletal.

In summary, TRACED gives the FCC some badly needed tools on call spoofing but boy oh boy is it misguided with respect to encouraging TCPA expansion and enforcement proceedings.

So it looks like my quixotic TCPA adventures are far from over. Thanks for being along for the ride. We’ll keep fighting.

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

PHOENIX, Ariz. — Empereon-Constar, a leading provider of end-to-end customer engagement and customer management solutions, is proud to announce the Company was named one of the Top 50 Largest Private Companies and Top 25 Fastest Growing Private Companies by the Phoenix Business Journal at the 2018 Arizona Corporate Excellence (ACE) Awards.

Empereon-Constar ranked number 27 on this year’s list of largest privately held companies, moving up from its previous ranking as number 31, and ranked number 24 on the list of fastest growing private companies. This is the second consecutive year Empereon-Constar was recognized as one of Arizona’s largest and fastest growing private companies. Rankings were announced during the Annual Arizona Corporate Excellence (ACE) awards ceremony held November 15th at the Scottsdale Center for the Performing Arts.

“Empereon-Constar is honored to be recognized as one of the top largest and fastest growing private companies in Arizona,” said Travis Bowley, Chief Executive Officer, Empereon-Constar. “This award belongs to our entire team and affirms our ability to leverage our experience to meet client goals. We’re here today because of their hard work and dedication.”

Steve Hayes, Chief Financial Officer, Empereon-Constar stated, “We truly value this award and the recognition of the Phoenix Business Journal and the ACE award sponsors. The award reflects the hard work of our team to earn the trust of new and existing clients through exceptional performance. We are thankful to both our clients and our employees, and we are very excited with the new opportunities that are before us in coming year.”

Each year, the Phoenix Business Journal recognizes Arizona’s outstanding private companies. Companies are ranked based on overall revenue and revenue growth over a two-year period. Now in its 24th year, the ACE Award’s goal is to increase knowledge-sharing and build a sense of community among private companies in Arizona.

About Empereon-Constar

Empereon-Constar is a leading business process outsourcing company providing end-to-end customer engagement and customer management solutions for New Sales Account Generation, Customer Care, Risk / Fraud Operations, Collections Operations, QA Agent Call Monitoring, Back Office Administration Support, and Tech Support across the entire customer account lifecycle. Our customized solutions, real-time analytics, and global footprint help our clients achieve their business goals.

Empereon-Constar’s full range of consumer and commercial services includes: lead generation, inbound / outbound sales, account origination, customer care, customer service, technical support, first party collections, recovery collections, credit bureau dispute management, fraud risk management, anti-money laundering, loan servicing and loan processing. Our world-class services and unique global strategy allow us to meet the needs of our client partners across multichannel (email, chat, phone) communication platforms, provide exceptional customer experiences, and consistently deliver world-class performance results, while maintaining the highest level of data security and compliance. For more information, please visit us online at www.empereon-constar.com or www.linkedin.com/company/22345663.

The Senate will likely vote on the confirmation of Kathy Kraninger as the next Director of the Bureau of Consumer Financial Protection. On November 14, 2018, Senate Majority Leader Mitch McConnell (R-KY) filed cloture for the Kraninger confirmation, which indicates a vote will occur soon.

The Senate Banking Committee approved Kraninger’s nomination on August 23, 2018, voting squarely on party lines. The Senate Banking Committee’s vote was preceded by a confirmation hearing held in July 2018 as well as some push back from Sen. Elizabeth Warren (D-MA).

insideARM Perspective

The wildcard here is whether a leadership change (from Acting Director Mulvaney to a permanent Director Kraninger) would have any effect on the schedule to release a Debt Collection Notice of Proposed Rulemaking (NPRM). The last two scheduling updates have maintained the March 2019 target, and every indication from Bureau staff is that they are working to make that deadline.

SinglePoint Group International, Inc. is pleased to announce and welcome Jennifer McLeod as Vice President of Business Development.  Jennifer will be responsible for developing new business opportunities and creating customized solutions for customer needs.

Jennifer is a well-known figure in the BPO industry with more than twelve years of experience. The last eight years of her career was spent at Teleperformance as Vice President of Business Development where she was instrumental in the growth of the company.  Within the industry, Jennifer has also held Vice President of Business Development positions with Voxdata and CEAD fm.  She also sits on the CMA advisory and has been an active member of the CMA for over 9 years, contributing frequently on Customer Experience issues.

In addition, Jennifer has a proven record of facilitating long term business relationships with both customers and industry leaders.  Her strong winning attitude and personality are assets that will complement and enhance SinglePoint’s ability to meet the needs of our customers as we continue to provide quality and innovative services to the marketplace.

SinglePoint offers integrated customer lifecycle management and customer experience management services that will significantly improve the way you stay engaged with your customers. Please contact Jennifer McLeod  at 647 292 7871 or jennifer.mcleod@singlepointgi.com.

For more information about SinglePoint Group International Inc., please visit the website at www.singlepointgi.com.

MINNEAPOLIS, Minn. — DCM Services, Inc. (DCMS), the industry leader in estate and specialty account recovery solutions, announced today the promotion of Martha Hanson to Chief Compliance Officer/Senior Counsel.

Hanson, who most recently served as Director of Compliance/Senior Counsel, will continue to ensure the company meets compliance responsibilities and abides by applicable rules and regulations. She also will continue to serve as the lead legal advisor to the company.

Hanson joined the organization in 2006 as an attorney, providing legal guidance related to probate and collection matters. Early in her career she was charged with formalizing and overseeing the company’s complaint management program. She relies on her industry and organizational experience in offering recommendations.

“Martha is an invaluable member of the senior team at DCMS, said Tim Bauer, DCMS Chief Executive Officer. “Her involvement in our ongoing compliance initiatives has been amazing. Her legal and practical counsel in general corporate matters has been helpful to me and the company. She has also been instrumental in our company’s participation in and contributions to the Consumer Relations Consortium (CRC). Over the past year, Martha’s professional growth has been quite evident. That growth lead to this well-deserved promotion.”

Hanson holds a Bachelor of Arts degree from Marquette University and a Juris Doctor degree from Hamline University School of Law.

About DCM Services

Minneapolis-based DCM Services, is the industry leader in estate and specialty account resolution services, maximizing the value of client portfolios across financial services, healthcare, retail, and telecom industries through innovation and performance. Its recovery solutions offer a full range of services from proprietary web-based solutions to full outsourcing, maintaining an unmatched spectrum of innovative solutions that increase recoveries, protect brand value, and enhance survivor relationships – with respect and sensitivity. For more information on all DCM Services’ offerings, visit www.dcmservices.com.

The U.S. Supreme Court is currently reviewing Obduskey v. McCarthy & Holthus LLP, a case that asks whether enforcing a security interest on a mortgage debt by initiating a nonjudicial foreclosure through state law-required procedures is considered debt collection under the Fair Debt Collection Practices Act (FDCPA). On Wednesday, November 14, 2018, the Bureau of Consumer Financial Protection (BCFP or Bureau) filed an amicus brief in this case stating the law firm’s actions fall outside of the FDCPA.

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Case Background

As a brief factual background, the petitioner had a mortgage with Wells Fargo. After petitioner defaulted on the mortgage, Wells Fargo placed the account with McCarthy  & Holthus LLP (McCarthy), a law firm, to collect on the debt. McCarthy sent a couple of letters to petitioner, at least one of which stated that McCarthy “may be considered a debt collector attempting to collect a debt” and contained a notice of petitioner’s 1692g validation rights. At one point, petitioner disputed the debt requesting validation, notifying McCarthy that he is represented by an attorney, and requesting a cease in communications. McCarthy did not send verification of the debt to petitioner, instead it initiated the nonjudicial foreclosure process by filing a notice with a public trustee as required by Colorado law.

Petitioner sued McCarthy alleging it violated the FDCPA by initiating the nonjudicial foreclosure. The district court ruled in favor of McCarthy, finding that initiating a nonjudicial foreclosure is not considered “debt collection” per the FDCPA. The Tenth Circuit affirmed the district court’s ruling. The U.S. Supreme Court granted the petition for writ of certiorari on this case.

BCFP’s Amicus Brief

In its amicus brief, the Bureau extensively discussed the process of enforcing a security interest. In the case of mortgage foreclosures, the security interest usually rests in the property at issue. To enforce this security interest, creditors can proceed with a judicial foreclosure or, if applicable state law allows it, a nonjudicial foreclosure.

Even though they are less formal than their judicial counterpart, nonjudicial foreclosure procedures contain protections for consumers. In Colorado, the state at issue here, even the nonjudicial foreclosure process requires some level of court intervention. The Bureau states:

Congress reasonably determined that enforcing security interests in accordance with applicable law does not present the same risks as demanding payment from debtors directly. The enforcement of security interests has long been subject to an extensive body of state law that provides substantial safeguards.

The Bureau also turned to the language of the FDCPA. When it comes to enforcing security interests, the FDCPA only applies to actions referenced in Section 1692f(6). Section 1692f(6) reads that it is an unfair or unconscionable means to collect a debt if the debt collector takes a nonjudicial action “where there is no right to possession of the property claimed as collateral through an enforceable security interest.” Since the FDCPA creates this restriction, the Bureau stated that “enforcing a security interest, by itself, is not debt collection” unless it meets the requirements of Section 1692f(6).

Based on the above, the Bureau concludes:

McCarthy did not engage in debt collection by initiating a nonjudicial-foreclosure proceeding under Colorado law. Actions that are legally required to enforce a security interest are not debt collection under the FDCPA — except for purposes of 15 U.S.C. 1692f(6), which is not at issue here. Nonjudicial foreclosure is ‘the enforcement of [a] security interest’ and filing a notice with a public trustee is undisputedly a necessary step in that process in Colorado. Deeming such activities debt collection would bring the FDCPA into conflict with state law and effectively preclude compliance with state foreclosure procedures. No sound basis exists to assume Congress intended that result.

insideARM Perspective

The Bureau’s amicus brief is consistent with what appears to be Acting Director Mick Mulvaney’s mission since taking over: keeping its positions within the limits set by Congress in the statutes. The first insight into the Bureau’s direction was when Acting Director Mulvaney changed the name of the Bureau to what the Dodd-Frank Wall Street Reform and Consumer Protection Act called for. In this case, the Bureau takes a similar, statutory-based position.

This brief also suggests that the Bureau is aware of and trying to work in sync with state consumer protection laws. Once the Bureau’s third party debt collection rules come out (currently slated for March 2019, but the release date has been pushed back several times in the past), it will be interesting to see how the Bureau’s rules interact with state laws.

I hate to break it to you, but I have a rather ugly decision to report to you out of the Middle District of Florida involving class discovery.

It’s one of those class discovery rulings that just sends shivers up your spine. Where – over what were seemingly specific declarations establishing the substantial burdens of trying to extract and produce massive amounts of customer account data – a magistrate judge decided to go with the declarations of experts who claimed to know better, and said the task at hand would actually be easy, peezy, lemon squeezy…  Or something to that effect.

In Clark v. FDS Bank & Dep’t Stores Nat’l Bank, No. 6:17-cv-692, 2018 U.S. Dist. LEXIS 190518 (M.D. Fla. Nov. 7, 2018) the Plaintiff moved to compel Defendant to produce its records detailing effectively everything about each phone number it called within the past four years, including whether the recipient told the Defendant not to call the phone number again, and the account notes concerning each and every single call. The requests at issue were of astonishing breadth, and effectively sought to turn the Defendant inside out so that Plaintiff could figure out his theory of certification.

In response to the motion Defendant argued that the requests were overly burdensome and, in support of its objections, offered numerous declarations from its legal staff detailing the burden associated with extracting the account-level data (including agent notes) demanded by the Plaintiff. Plaintiff countered with the declaration of Jeff Hansen in which Hansen proclaimed “extensive experience dealing with data warehousing,” and knowledge of the specific dialing system (though not the specific account-level systems of record is seems) used by the Defendant. He stated in the declaration that, contrary to the specific declarations submitted by Defendant, it would take him “less than an hour” to export all the data Plaintiff wants from Defendant’s collection notes.  Mmm hmm…

What was really odd, however, is that Hansen attached the declaration of expert Robert Biggerstaff from another unrelated TCPA class action that Hansen claimed supported his position. Notably missing from either of these declarations – at least the portions relied upon by the Court – was any specific discussion regarding the specific systems of record used by Defendant, or anything beyond some conclusory statements about how “easy” it would be to extract the data Plaintiff had sought in discovery.

But what was truly shocking is that, in a one liner – and without really providing any explanation – the Court stated that it was persuaded by Plaintiff’s evidence that “Defendants’ business records may not be as difficult to search as they contend,” and granted the motion. So with a flick of its pen (or keyboard) the Court is now requiring the Defendant to turn over tens of millions of account notes associated with the tens of millions of calls made by the Defendant within the past four years.

Yiiiikes.

Now, this isn’t exactly the end of the story. The Court granted the motion, but directed the parties to meet and confer over how this data transfer would occur, and stated that if the parties couldn’t resolve the matters between themselves – which it seems doubtful they will – that the Court will hold an evidentiary hearing where it would hear from the experts and dictate the process and procedure to the parties.

But things shouldn’t be this way. Notably, the Czar was able to beat back very similar discovery requests in a TCPA class action that were propounded by the same class counsel. Tillman v. Ally Fin. Inc., No. 2:16-cv-313-FtM-99CM, 2017 U.S. Dist. LEXIS 1887, at *17 (M.D. Fla. Jan. 6, 2017). And earlier this year Quicken was successful in defeating a motion to compel production of every shred of documentation in any form about every do-not-call request that Quicken received. See Nece v. Quicken Loans, Inc., No. 8:16-cv-2605-T-23CPT, 2018 U.S. Dist. LEXIS 31346 (M.D. Fla. Feb. 27, 2018).

If anything, these divergent outcomes show just how high the stakes are in these class discovery disputes. Class counsel will be looking to turn Defendants inside out so they can forage for whatever they can use to stitch together a theory of certification. As the Czar has reported, this problem is compounded as courts frequently let over-broad failsafe classes slip past the pleading stage. And it’s no coincidence that this is the very type of class definition the Defendant is dealing with in the Clark case.

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

insideARM maintains a free FDCPA resources page to provide the ARM community a destination for timely and topical information on the Fair Debt Collection Practices Act (“FDCPA”). This page is generously supported by TransUnion.

The centerpiece of the page is a chart of significant FDCPA cases. Case information and analysis is provided by Joann Needleman, a Clark Hill attorney and leader of the firm’s Consumer Financial Services Regulatory & Compliance Group. Where insideARM has published a story on the case, a link is provided.

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Stewart v. Selip & Stylianou, LLP, No. 17-CV-2745 (E.D.N.Y. Oct 4, 2018)

Main Issue: Does a law firm’s collection letter require mentioning court costs when the collection lawsuit is not yet filed or still pending?

Conclusion: No

A law firm sent a collection letter to the consumer stating that it intended to file a collection lawsuit in state court. The letter did not include a disclosure that the firm would collect court costs or fees, which were ultimately requested when the suit was filed. The consumer sued saying that the letter was false and misleading due to this omission. The court found that the letter was not deceptive or misleading because court costs would only become due if the debt collector prevailed in the lawsuit. This means that the balance would remain static even while the suit was pending and no disclosure was needed per the Second Circuit’s Taylor v. Financial Recovery Services decision.

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Wise v. Credit Control Services, Inc., No. 16-CV-8128 (N.D. Ill. Oct. 19, 2018)

Main Issue: Is a debt collector sufficiently on notice of a consumer’s refusal to pay from (1) a fax received by an affiliated company or (2) a fax sent to the debt collector containing incorrect account information?

Conclusion: No

The consumer, with guidance from her attorney, sent two faxes to two separate numbers. One fax was sent to a company affiliated with and working under the same umbrella company as the debt collector, but the affiliated company did not engage in collecting debts. The consumer’s attorney found the affiliated company’s fax number in a job advertisement for the debt collector. The second fax was sent to defendant, but it contained incorrect account information. Specifically, the fax contained the consumer’s correct name and last four digits of her social security number, but it referenced a creditor and account number that was not associated with that particular debt collector. After the debt collector sent another collection letter to the consumer, this FDCPA lawsuit was filed.

The court found that neither letter put the debt collector sufficiently on notice of the refusal to pay. The court noted consumerdid not cite relevant case law and provided no reason sufficient for the court to extend liability to the debt collector for a fax received by the affiliated company, so the court considered the argument waived. The court also found that the second fax was insufficient to support the consumer’s claims. The FDCPA only requires a debt collector to honor a refusal to pay for the particular debt listed in the refusal. Since the subsequent collection letter did not relate to the incorrect debt listed in the second fax, there was no violation.

Williams v. Harris, Klein Associates, Inc., No. 17-CV-03473 (E.D.N.Y. Oct. 23, 2018)

Issue: Does a debt collector’s refusal to discuss a debt with a debt settlement company violate the FDCPA?

Conclusion: No

Consumer retained a debt settlement company to assist with her debt. The debt settlement company sent a power of attorney to the debt collector for a “Bria Williams” whereas the debt collector’s records showed the consumer’s name as “Monet Williams.” After sending the power of attorney, an agent of the debt settlement company called the debt collector with the consumer on the line to provide verbal authorization to speak to the debt settlement company. The debt collector refused to discuss the debt with the debt settlement company because the name and address in the power of attorney did not match the name and address on the collection letter. The court ruled that established case law shows that FDCPA protections do not apply to conversations with third parties such as the agent for the debt settlement company. Since the FDCPA did not apply to the conversation in question, the court granted summary judgment in favor of the debt collector. The court also admonished plaintiff’s counsel for not mentioning relevant caselaw that precluded his client’s claim even though he was counsel of record on both of those prior cases.

Guzman v. HOVG, LLC, No. 18-CV-3013 (E.D. Pa. Oct. 31, 2018)

Issue: Does including a validation notice that follows the statutory language listed in section 1692g (a)(3)-(5) violate the FDCPA?

Conclusion: Yes

In its letter, the debt collector included a notice of validation rights that followed the language in section 1692g of the FDCPA. The court found that this language is subject to two interpretations — that a dispute per 1692g (a)(3) can be oral or written — when only one of those interpretations is true, as least in the Third Circuit (the Third Circuit requires 1692g (a)(3) disputes to be in writing). The court noted that there is a circuit split on this issue, and that this circuit split is evidence that the FDCPA language is subject to more than one interpretation. According to the court, “[i]f the federal appellate courts have divided on the best reading, then surely the least sophisticated debtor would be similarly confused.” The court also took some issue with the notice being on the back of the letter. The court found that stating “see reverse side for important consumer information” did not adequately inform the consumer of the nature of the notice on the back page since the front side of the letter instructed the consumer multiple times to call with any questions.