In a new district court opinion out of the E.D. District of Michigan a court found yesterday that dialers calling from a list do not qualify as automated telephone dialing systems (“ATDS”) under the TCPA unless they generate numbers randomly or sequentially. See Gary v. TrueBlue, Inc., Case No. 17-cv-10544, 2018 WL 3647046 (E.D. Mich. Aug. 1, 2018). The Court also expressly held that the 2003 and 2008 FCC Predictive Dialer rulings were set aside by ACA Int’l and that “automated” text messages do not trigger TCPA coverage unless sent randomly or sequentially. This decision dovetails nicely with last week’s big ruling in Pinkus and further undermines TCPA cases focused on dialers that call from lists, rather than from randomly or sequentially generated numbers.

In Gary the Plaintiff allegedly received a flood of employment-related text messages without his consent. Plaintiff moved for summary judgment arguing that there was no dispute that the texts were sent automatically, from a list, and without human intervention. Defendant countered that the texts were not sent using a random or sequential number generator and, thus, were not covered by the TCPA. The Court quickly recognized that the outcome of the case turned on whether or not the FCC’s previous TCPA guidance remained viable post ACA Int’l. 

Accordingly, the Gary court begins its analysis walking through the history of the TCPA and various FCC rulings including the 2003 and 2008 predictive dialer rulings dealing with human intervention. After analyzing the interplay between those rulings, the FCC’s 2015 TCPA Omnibus, and ACA Int’l the Gary court concludes that ACA Int’l did, in fact, vacate all of the FCC’s “orders regarding the definition of an ATDS.” The Gary court goes on to follow Marshall and concludes that it must independently review the statutory language as a result. And from there the fate of Plaintiff’s motion was sealed.

The court points out that the TCPA defines defines an ATDS narrowly as “equipment which has the capacity—to store or produce numbers to be called, using a random or sequential number generator.” 47 U.S.C. § 227. And, rather critically, “the statute never mentions a capacity to dial from a set list.” Gary at *7. Since Plaintiff presented no evidence that the Defendant’s dialer randomly or sequentially generated numbers, the Plaintiff’s motion for judgment was denied.

Moreover the court squarely rejected Plaintiff’s alternative argument that the texts were actionable because they were dialed without human intervention. In the court’s view the fact that the messages were worked by live agents was enough human intervention to qualify–even if the FCC’s 2003 and 2008 orders were still viable:

Even when using a fixed group, branch employees must manually edit the list of workers to fit a particular job assignment, craft an outgoing text message, and then click certain keys to send a message. This level of human judgment and intervention precludes a system from falling under the definition of an ATDS.

Finally, the court also rejected Plaintiff’s argument that texts sent “automatically” automatically violate the TCPA (so clever.) Again the rationale is straightforward: “automatic” calls for purposes of the TCPA are those of a specific sort– calls made to numbers derived via random or sequential number generation.

Accordingly, we see the TCPA landscape continuing to shift away from the continued viability of the 2003 and 2008 predictive dialer rulings and toward the requirement of random or sequential number generation. While Gary is not a predictive dialer case, it directly rejects the continued viability of the FCC’s earlier ATDS rulings and requires adherence to the statutory functionalities. Gary’s broad read of human intervention is also very helpful for defendants–many cases focus on human intervention at the time the call is launched. But Gary applies the analysis of the old Luna v. Shac, 122 F. Supp. 3d 936 (N.D. Cal. 2015) decision and treats human intervention surrounding the call campaign as sufficient to remove the calls from TCPA coverage. As always, more to come.

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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.

The Fair Debt Collection Practices Act (FDCPA) provides consumers with a tool to dispute and request validation of a debt. However, section 1692g of the FDCPA states that if a consumer does not dispute the debt within thirty days of receiving notice of these rights, then the debt collector may assume the debt is valid.

Does this mean that a consumer is barred from suing a debt collector for collecting on a previously-settled debt if the consumer failed to dispute through his or her 1692g rights? According to the Second Circuit Court of Appeals’ decision in Vangorden v. Second Round, LP, 17-cv-2186 (Jul. 27, 2018), the answer is no.

Factual and Procedural Background

At some point in 2011, Plaintiff incurred a personal credit card debt with Synchrony Bank. Plaintiff settled the account for less than the full balance directly with Synchrony. Five years later, Synchrony sold Plaintiff’s account to Second Round. Second Round then sent a collection letter to Plaintiff that included the required 1692g validation rights disclosure.  

Notably, Plaintiff never informed Second Round that this debt was previously settled nor did Plaintiff dispute the debt in any other way.

Plaintiff went on to file a lawsuit against Second Round alleging several violations of the FDCPA, including using false representations to collect the debt and attempting to collect a debt not expressly authorized by agreement or law. The district court granted Second Round’s motion to dismiss these claims because Plaintiff failed to dispute the debt despite receiving the notice of her validation rights. Plaintiff appealed this decision to the Second Circuit.

The Decision

The Second Circuit disagreed with the district court, vacated the decision, and remanded the case back to the lower court.

The Second Circuit found that Plaintiff sufficiently stated a claim upon which relief can be granted regarding the letter sent by Second Round. Applying the standard of review required for a motion to dismiss, the court took as true the facts that Plaintiff previously settled the debt and that the letter sent by Second Round was attempting to collect the previously-resolved account. Since the letter sought to collect an amount that was not owed, the court found that it was plausible that the letter violated the FDCPA.  Since this plausibility existed, it was improper for the district court to grant the motion to dismiss.

The court agreed with the Third and Fourth Circuits in finding that a consumer’s ability to bring an FDCPA claim is not in any way contingent upon the consumer exercising the 1692g validation rights. The court looked to the conditional language of 1692g and noted that it is an option for consumers, not a requirement. The court also found that other sections of the FDCPA, such as 1692g (c) (“a failure… to dispute the validity of the debt may not be construed by any court as an admission of liability by the consumer”), support the court’s decision. The court stated that the FDCPA provides an avenue for debt collectors in situations such as these in the bona fide error affirmative defense.

The court also discussed whether the claims meet the least sophisticated consumer standard. The court stated that the letter’s “only interpretation is misleading; it told [Plaintiff] that she had an outstanding debt obligation. In fact, that obligation had been settled some five years ago.” Thus, since there could only be one interpretation, the court found that even the least sophisticated consumer would view this letter as an attempt to collect a previously paid debt.

insideARM Perspective

This decision is not so bad in theory, but practically speaking it will be a thorn in the side of debt collectors.

The Second Circuit reviewed this decision using the legal standard for a motion to dismiss. A decision on a motion to dismiss is not a decision on the merits of the case. Instead, the court looks to see whether the Plaintiff alleged facts in his or her complaint sufficiently to show that it is plausible — as opposed to probable — that a violation occured. The scope of facts reviewed when deciding a motion to dismiss is generally limited to the facts alleged in or attached to the pleadings of a lawsuit.

Theoretically, the court did not find that Second Round’s letter violated the FDCPA. The court simply found that the complaint sufficiently stated facts to show that a FDCPA violation could have occured.

Practically speaking, this means that a case like this would need to be decided on a motion for summary judgment or by a trial. This typically requires months, at times years, of active litigation and significant defense costs. Unlike the plaintiff, a debt collection agnecy is not entitled to an award of its legal defense fees if they win a lawsuit. A debt collector in this situation is left with limited choices in a jurisdiction notorious for high volumes of FDCPA litigation.

JACKSONVILLE, Fla. — Effective immediately, DCI’s operation will be headed by Ms. Charlotte Zehnder, who will be performing in her previous role as Chief Executive Officer.

 

Ms. Zehnder commented that “DCI has an established presence within the ARM industry and has produced stellar results for our clients. We recognize the need to continue to grow, both for our clients and for managing all changes in an ever evolving regulatory environment.  DCI will continue to invest in its people, its technology and its clients. I am excited to again work as CEO and look forward to continue to produce world class results in a professional and compliant manner.” 

David T. Goodwin will be DCI’s Chief Operating Officer (COO) and will be responsible for the day to day operations reporting directly to Ms. Zehnder. Mr. Goodwin has been  employed within the ARM industry in many different operational, management and compliance capacities for 27 years. 

When asked about DCI, Mr. Goodwin said that “in my 27 years I have never seen, nor been prouder to be involved in such a client, employee and consumer focused culture like DCI.  The opportunity afforded to me by DCI is appreciated and I will work diligently with Charlotte Zehnder, all our shareholders, internal and external, to help ensure that DCI’s continued success is beneficial to everyone.”

Diversified Consultants Incorporated operates major call centers in Florida, Oregon and Kentucky,

Last week Judge Wheeler scheduled oral argument in the case of FMS v. The United States (ED) and Alltran Education, Inc. On August 30, 2018 at 10:00 AM EDT the Court will hear argument on both the Plaintiffs’ and Defendants’ motions for judgment on the administrative record.

Oral argument will be open to the public, but there will be no dial-ins permitted. 

Background

FMS v. The United States is the fourth round of protests related to ED’s contract for unrestricted (large category) private debt collectors. After several years of legal wrangling, ED simply cancelled the Solicitation, saying that they changed their strategy and no longer need the services of the large collectors. Read here for more background on that.

The most recent activity had been the filing of a motion for a Temporary Restraining Order to prevent ED from recalling defaulted student loan accounts that were still being worked by five private collectors that had previously held the contract, and had received Award Term Extensions (ATEs). That motion was denied a few weeks ago, and was followed immediately by a recall of accounts.

A little about the recall

A source close to the matter tells insideARM that the recall seems to have been conducted hastily, leaving some concerned that borrowers may be harmed — or at least frustrated. Some of the questions being asked: 

• What happens to documents students have submitted as part of payment/deferral programs but have not yet been processed?
• What happens to Administrative Wage Garnishments (AWG) that were put in process but may need to be reversed?
• What happens to post-dated checks held for accounts in rehabilitation by the companies that received the recall? Who will be responsible for processing those – and will this happen in a timely fashion so the accounts don’t violate the terms of the rehab?

The source said it’s possible that ED has thought these (and many other questions) through, but the process did not appear well organized, and should borrowers attempt to contact the collectors they had been working with, those collectors do not have answers to provide.

The upcoming oral arguments

The upcoming arguments are not about the recall, but about the cancellation of the Solicitation. insideARM will report on additional developments as they occur.

For those who want additional background on this multi-year saga, this page contains a full list of insideARM coverage.

ROCKVILLE, Md. – The iA Institute and insideARM are proud to announce the addition of Katie Grzechnik Neill to their team in the role of General Counsel and Regulatory Editor.

Prior to joining insideARM, Katie served as Compliance and Litigation Counsel at ARS National Services Inc., a national collection agency that works on behalf of some of the world’s largest banks, fintech companies, and other financial institutions. Katie led ARS’s legal department on all fronts, including managing litigation and a national network of outside counsel, advising the company on the legal impact of regulatory compliance issues, and advising ARS’s executive leadership on general corporate legal matters such as contractual and employment law issues.

In addition to her role at ARS, Katie is a well-known and respected voice in the debt collection industry. No stranger to The iA Institute and its initiatives, Katie has been a regular contributor of articles to insideARM and an active member of the Consumer Relations Consortium’s Steering Committee. Katie also served on ACA International’s Judicial Committee in 2017-2018 and regularly appeared as a speaker on legal and compliance issues at industry conferences, events, and webinars.

Katie began her legal career as a litigator in the State of North Carolina. She is a member of the Bar of the Supreme Court of the United States and is a licensed attorney in California and North Carolina. Katie is originally from Poland, grew up in California, and currently resides in Texas. She is a proud spouse of an active duty United States Marine.

Stephanie Eidelman, CEO of The iA Institute, said “We are beyond excited to welcome Katie. We’ve been searching for a long time for someone knowledgeable and skilled enough to lead our news coverage. We have been lucky to get to know Katie as she has engaged with our initiatives over the past few years, and she is a terrific fit. I am confident that she will not only add excellent perspective to our news, but will also help to advance our overall strategy for serving the industry.”

About The iA Institute

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The iA institute is a media company that influences the professional debt collection community, including those responsible for managing, recovering, and regulating consumer debt. Thousands know us for our news (insideARM), which we publish four days/week and to which we add our signature perspective. But beyond the news, iA institute initiatives bring a range of stakeholders to the table in candid and intimate environments to inform, to build a culture of compliance, to actively address industry challenges, and to make profitable connections. Some of these initiatives include the ConsumerRelations Consortium (CRC), the First Party Summit, and our newest conference, Women in ConsumerFinance. The iA institute (under the name insideARM, LLC) is a certified woman-owned and woman-controlled business (WBE) by NWBOC. Read more at www.theiAinstitute.com.

insideARM previously published an article about a block of Democratic senators that submitted a letter to the Federal Communications Commission’s (FCC) Chairman Ajit Pai requesting broader protections for consumers under the Telephone Consumer Protection Act (TCPA). On July 24, 2018, a group of seven Republican senators followed suit and submitted their own letter to Chairman Pai on the topic. The Republicans’ letter can be read in its entirety here.

The letter signals that the TCPA was enacted “at a time when wireless technology was in its infancy.” It also states that “Congress did not intend for the TCPA to be a ‘barrier to the normal, expected or desired communications between businesses and their consumers.’” The letter called out the FCC’s past interpretation of the TCPA — overturned by the D.C. Circuit earlier this year — for creating barriers for businesses trying to call consumers in good faith and increasing litigation “that often does little to help consumers.”

Unlike the Democrats’ letter, the Republicans’ letter requests that the FCC expeditiously clarify the TCPA. Specifically, the letter requests clarification on the definition of an Automated Telephone Dialing System (“ATDS”) — the definition to include only calls made using an actual, not a theoretical, ATDS — and clear rules for businesses to follow in order to comply with the TCPA.

insideARM Perspective

Clarity on how to comply with consumer protection laws is a common request for regulators, largely due to the many ambiguities and generalities of such laws.  As pointed out by the Republican senators, the FCC’s interpretation of the TCPA created uncertainty in how to comply with the law, an opening which plaintiffs’ attorneys pounced on to bring volumes of litigation against companies acting in good faith to comply with the myriad laws and regulations governing their businesses.  

Astutely, the Republican senators also call out the need for clear guidelines on how to comply with the TCPA due to the law’s age. Communication technologies have exponentially advanced since the inception of the TCPA, which creates the need for clarity on how to comply with the letter of the law in the context of modern, currently-available modes of communication. This is very similar to the FDCPA, which was enacted at a time when collection technology and practices were vastly different than they are today.

However, providing clarity on how the TCPA fits into current communication channels is likely insufficient. Technology changes daily, which calls for a creative regulatory regime that accommodates the latest trends and consumer preferences, and allows legitimate companies to engage in good faith business communications with consumers.

Editor’s Note:  This article originally appeared as an alert on Clark Hill and is republished here with permission from the authors, Joann Needleman, Jane C. Luxton, and Thomas A. Brooks.

On February 3, 2017, President Trump issued Executive Order 13772 (“EO”), stating that “It shall be the policy of my Administration to regulate the United States financial system in a manner consistent with the following principles of regulation, which shall be known as the Core Principles.” The EO directed the Treasury Secretary to report to the President with regard to the extent existing laws, regulations, guidance, and other government policies promote those Core Principles. As mandated in the EO, Treasury issued the fourth and final report titled, “A Financial System That Creates Economic Opportunities Nonbank Financials, Fintech, and Innovation” (“Report”) on Tuesday, July 30, 2018. This Report, and its recommendations if implemented, will markedly change the way banking will be done in the United States.

In the Report, Treasury makes four recommendations which are designed to 1) streamline the regulatory environment to foster innovation across business models; 2) modernize activity specific regulations; 3) facilitate experimentation; and 4) embrace the efficient and responsible use of consumer financial data and competitive technologies.

Regulatory Consistency and Uniformity to Foster Innovation Across Business Models

The Report rightfully notes that “Nonbank financial service providers generally operate within a largely state-based regulatory regime requiring compliance with a disparate set of standards across individual states and territories that can be cumbersome and produce conflicting guidance for entities operating on a national basis.” For a fintech entity to operate in all state jurisdictions, the costs can be prohibitive, with upfront costs ranging from $1 million to $30 million. The Report finds that “In addition to these up-front costs, nonbank firms must actively monitor regulatory requirements across all the states in which they operate, pay fees to the applicable state regulators, and deploy significant resources to accommodate multiple state examinations, which can result in as many as 30 different state regulators per year examining a firm.”

To foster consistency and uniformity, the Report recommends: 

• Advancing the harmonization of state licensing and supervision to increase efficiency, particularly for lending and payments companies. 
• Moving forward with the Office of the Comptroller of the Currency’s special purpose national bank charter to provide a federal approach to reducing regulatory fragmentation and supporting beneficial business models. 
• Harmonizing guidance related to bank partnerships with third parties to improve efficiency and further enable technological innovation in a prudent manner. 
• Improving the ability of banks to make innovation-related investments and flexibly adapt to new technologies by considering changes to applicable banking regulations.

Modernize Activity-Specific Regulations

The U.S. regulatory framework for key financial services requires meaningful modifications to improve the delivery of both digital and non-digital financial services to consumers and businesses. Such changes are aimed at improving the U.S. regulatory approach in areas such as lending, payments, and financial planning. 

From a lending perspective, some of the recommendations in the Report include several changes to be made through regulation and legislation:

• Marketplace Lending: Congress should codify “the ‘valid when made‘ doctrine and the role of the bank as the ’true lender‘ of loans it makes to better support productive partnerships between banks and newer technology-based firms.” This would give purchasers of loans the assurance that the terms and conditions between a bank and borrower remain with the purchaser of the loan, clarifying some judicial confusion on this issue.
• Short-Term, Small-Dollar Installment Lending: Recognizing and supporting the authority of states to establish comprehensive requirements for these products and recommending that the Bureau of Consumer Financial Protection rescind its Payday Rule. Treasury also recommends that regulators take steps to encourage sustainable and responsible short-term, small-dollar installment lending by banks. The OCC already has made this decision regarding deposit advance products, but the FDIC has not proposed this activity.
• Debt Collection: Establishing minimum federal standards governing the collection of debt by third-party debt collectors.
• New Credit Models and Data: Further enabling the testing of newer credit models and data sources by both banks and nonbank financial companies to expand access to credit and improve risk assessments. 
• Credit Bureaus: Coordinating regulatory actions by the relevant agencies to best protect consumer data held by credit reporting agencies.

From a payments perspective, the Report recommends that:

• State authorities should be encouraged to further harmonize licensing requirements and supervisory examinations, particularly for money transmission activities. Some states already have started this process through interstate compacts.
• The Federal Reserve should continue to modernize payment services by continuing to work to facilitate a faster retail payments system. In particular, smaller financial institutions, like community banks and credit unions, should also have the ability to access the most innovative technologies and payment services.

From a wealth management and digital financial planning perspective, the Report recommends:

• Coordinate the current patchwork of regulatory authority over wealth management and financial planning, which makes these services more costly and potentially presents unnecessary barriers to the development of digital financial planning services.

Facilitate Experimentation

The Report declares that the “United States must preserve its leading position in financial innovation and must engage in agile and effective regulation for a 21st-century economy. If the United States does not take measures to enable innovative financial products and services, it risks losing out by failing to provide regulatory clarity and remove unnecessary barriers to innovation.” The Report recommends:

• Working with federal and state regulators to establish a system similar to a “regulatory sandbox” to invite innovations from new and existing market participants. The Bureau of Consumer Financial Protection is moving forward on its efforts in this regard, the OCC has invited applications for its new Special Purpose National Bank charter, and Arizona has passed legislation creating its own “sandbox.” 
• Reform procurement rules and encourage regulator engagement to allow financial regulators to keep up with the technological developments of the industries they regulate
• Strengthening regulator engagement efforts with industry and the establishment of clear points of contact for industry and consumer outreach.  
• Promoting the alignment of actions of international organizations with U.S. national interests and the domestic priorities of U.S. regulatory authorities.

Embrace the Efficient and Responsible use of Consumer Financial Data and Competitive Technologies

Developments in technology, cloud computing, and artificial intelligence have increased the magnitude and use of personal financial data available to consumers and businesses, raising important questions regarding data access, security, and liability. The Report recommends: 

• Modernizing rules for digital communications, such as the Telephone Consumer Protection Act and the Fair Debt Collection Practices Act. 
• Improving consumers’ access to their financial data by removing legal and regulatory uncertainties currently holding back the implementation of more secure and efficient methods of data access, providing disclosures written in plain language that enable consumers to give informed and affirmative consent regarding access to their financial account and transaction data, and giving consumers effective means to readily revoke prior authorizations. 
• Strengthening the protection of consumer financial data through enacting a federal data security and breach notification law that is technology-neutral and is scalable to the type of activity and entity, and also recognizes existing federal data security requirements for financial institutions. 
• Encouraging work on digital identity by enhancing public-private partnerships that facilitate the adoption of trustworthy digital legal identity products and services, and supporting efforts to fully implement the U.S. government federated digital identity system. 
• Modernizing regulatory requirements and guidance for technologies like cloud computing, artificial intelligence, and machine learning in the financial services sector.

The recommendations made throughout the Report are timely and bold. In recent years, the delivery of financial services to consumers and businesses has been significantly impacted by the development of technology to improve the costs of products and services. While innovations abound, regulators’ primary concerns are the protection of depository institutions, their depositors, and their customers. A “slow approach” to regulating innovation within both the banking and non-bank industries usually is the result until the regulator can understand the risks associated with a new product or service. In turn, many in the financial services industry have been slow to adopt new technologies due to the risk exposure and lack of clear guidance by some regulators who have been too focused on enforcement to define best practices. 

The United States is known for its dual banking system-a regime of federal laws and state laws. The proposals and recommendations in the Report will narrow the differences that exist between state and federal regulators’ application of these laws. Greater uniformity in the application of laws and regulations will result in a clearer understanding by the banking industry, as well as the entire financial services industry, as to its regulatory expectations, promote consistency in enforcement and ultimately provide greater consumer protections. While this has been the desire of all stakeholders, it has not always been the reality in the financial services regulatory world.  

This Report suggests that moving forward, the philosophy will be different with banks and non-banks now operating on the same level playing field. Implementation of the recommendations in the Report will result in significant change. While some legislation might be needed, most of the change will occur at the regulatory level. It is critical that financial entities, whether they are traditional lenders or fintech innovators, have input in how the Report’s recommendations are implemented. Outreach to regulators will be critical and necessary in order to ensure that the goals of the report are met. 

If you would like more information about the Report or how you might be impacted by its proposals, please contact Tommy Brooks, Joann Needleman or Jane Luxton.

 

NEW YORK, N.Y. — It may be unorthodox for a nonprofit to encourage people to enjoy a draft or two by teaming up with an award-winning brewery, but RIP Medical Debt (RIP) and Melvin Brewing aren’t your run of the mill organizations.

The duo has been working on this project for almost a year and have joined forces to create a new beer, “Your IPA,” with 100% of proceeds from kegs sold from a special donated batch in August & Sept of 2018 going directly to RIP to relieve people of unpaid and unpayable medical debt.

Medical debt relief will be centered in Melvin’s 10 markets: Colorado, Wyoming, Utah, Idaho, Oregon, Washington, Pennsylvania, New York, California and Massachusetts. The amount of debt forgiven will be determined by how much beer is sold by bars in each state – setting the stage for an epic philanthropic competition.

Melvin has already committed to donating 2% of proceeds from sales of “Your IPA” (which launched in can-form in mid-April) to RIP. Even before this donated batch, Melvin is already set to abolish nearly $5 million of medical debt.

It’s Amazing What a Penny Can Do

RIP, started by two former collection agency executives, is positioned in the debt selling and buying industry to purchase bundled medical debt for pennies on the dollar. One dollar = $100 of medial debt relieved, $100 = $1,000, etc. Melvin’s aim is to raise $300,000 throughout the year, to relieve $30 million in debt for 27,000 families across 10 states!

“We at Melvin have always shot high with our goals. When we sat down nearly a year and a half ago to discuss what we could do that might have a huge impact on people’s lives, we didn’t imagine that we’d be so lucky to team up with RIP Medical Debt and get such an amazing impact for our philanthropic dollar,” says Melvin’s Sales Director Ted Whitney. “With help from our amazing accounts, our incredible distributors and beer-loving fans, we’re positively affecting the lives of thousands of individuals and families. Who knew you could get so much done by sitting down to have a few beers!”

“To re-fashion that famous line,” EVP and RIP Co-Founder Jerry Ashton says, “Yes, Dorothy, you can drink away someone else’s medical debt problem.” He adds, “You can think of it as having your charity and drinking it, too.”

Media: Here’s a link to a creative advertisement explaining the Melvin/RIP collaboration.

And here’s a video chronicling RIP’s founders’ trip to Melvin’s headquarters in Alpine Wyoming to help brew the latest “Your IPA” donated batch.

Every case purchased of “Your IPA” also relieves $17 of medical debt. Cumulatively, there’s $300 million debt across Melvin’s markets. So, the campaign has its work cut out for it, and certainly needs your support to succeed. Find which bars are carrying the donated batch (scroll down) & donate here. Find a local bar that carries Your IPA with the beerfinder app: https://melvinbrewing.com/about/beerfinder/

About RIP Medical Debt

RIP Medical Debt is a nonprofit that buys and forgives medical debt across America — the only civilized country that puts its citizens at risk of financial ruin due to an illness or accident. RIP works with individual donors, philanthropists and organizations to purchase medical debt for pennies on the dollar to provide financial relief for those burdened by impossible medical bills. Founded in 2014 by two former collections industry executives, Craig Antico & Jerry Ashton, RIP has eliminated over $120M in medical debt thus far. RIP rose to national prominence on an episode of HBO’s “Last Week Tonight” with John Oliver in which RIP facilitated the abolishment of $15M in medical debt. That segment on YouTube has clocked more than 11,000,000 views. To learn more visit www.ripmedicaldebt.org

About Melvin Brewing

Melvin Brewing was born in the back of a Thai restaurant in 2009, when owner Jeremy Tofte decided to bring beers from the future to Jackson, Wyo. What began as a 30-gallon brew system grew into a 3-barrel system, which produced multiple award-winning beers Melvin IPA, 2×4 Double IPA, and Ch-Ch-Ch-Cherry Bomb, served alongside Asian street food, kung fu movies and old school hip hop.  After winning Small Brewpub of the Year at GABF 2015, Melvin Brewing opened a 30-barrel production facility in Alpine, WY, and went on to win Brewing Group of the Year at GABF 2017. Embracing the chaos and riding the wave, Melvin Brewing is now ready to take its world class beers on a worldwide tour, because if your beer is not madness, it’s not beer. For more information about Melvin: https://www.beeradvocate.com/beer/profile/24056/

Does consent to receive calls on a cell phone given by a patient to a medical provider pass to a debt collector hired by the medical provider to collect the delinquent account? The 6th Circuit already answered this question in the affirmative. The Eastern District of Michigan recently reaffirmed and extended this flow of TCPA consent in Mayang v. The PAR Group, Inc., 17-CV-12447 (Jul. 17, 2018). In this case, the court found that TCPA consent provided to a doctor’s office flows all the way to a debt collector retained by the laboratory running a blood test on behalf of the doctor’s office.

Read the decision here. 

Factual and Procedural Background

In this case, Plaintiff incurred a medical debt for a blood test performed at a laboratory as requested by the Plaintiff’s doctor. When registering at the doctor’s office, Plaintiff provided his cell phone number as a way to be contacted. The registration form also stated “I understand that as a part of my treatment, payment, or healthcare operation, it may become necessary to disclose my protected health information to another entity, and I consent to such disclosure.” The Plaintiff did not limit this consent on the registration form.

When Plaintiff failed to pay the invoice for the blood test, the laboratory sent the account to The PAR Group, Inc. (“PAR Group”) to collect on the debt. After receiving a call for PAR Group, Plaintiff contacted his insurance company to inquire about the claims and whether they were paid, but failed to inform PAR Group of this.

Plaintiff filed a lawsuit against PAR Group alleging that it violated the TCPA by calling him on his cell phone using an Automated Telephone Dialing System (“ATDS”) without his consent and violated the FDCPA for attempting to collect a debt not owed by him.  Plaintiff filed a motion for summary judgment on all claims, which the court denied.

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The Decision

Regarding the TCPA claim, the court found that by providing his cell phone number on the doctor’s registration form, Plaintiff consented to receive calls on his cell phone from the doctor and subsequent debt collector that collects on a debt related to the services provided.  The court also noted Plaintiff’s failure to limit the consent when he had the chance to do so. 

Plaintiff attempts to argue that he revoked his consent during one of the phone calls. However, the only person at PAR Group who spoke with Plaintiff alleges that the revocation did not occur. Since this fact is in dispute, the court could not take it into consideration when deciding this motion.

Regarding Plaintiff’s FDCPA claim, the court found insufficient undisputed evidence to grant summary judgment for Plaintiff. Plaintiff alleged that his insurance company paid the claim, thus he did not owe the debt PAR Group was attempting to collect. However, PAR Group disputes that it knew this, and Plaintiff did not inform PAR Group of his insurance’s payment of this debt. Two vital issues also remain to be answered in order for a decision to be reached on the issue. First, the court stated that it is reasonable for a debt collector to rely on the medical provider’s representation that Plaintiff owed the debt. Second, there is a question of whether the bona fide error defense applies to this claim. With these items unaddressed, the court decided it could not grant summary judgment on this issue.

insideARM Perspective

A court grants summary judgment if the undisputed facts, when viewed in the light most favorable to the non-moving party, show that the moving party is entitled to judgment as a matter of law, foregoing the need for a trial on the issue. By denying Plaintiff’s motion for summary judgment, the court decided that there were issues left unanswered that would need to be decided before a final decision on the merits can be reached.

While this decision is not dispositive of the case, the court took a step to explain the reach of TCPA consent. While the 6th Circuit already found that consent provided to a medical provider flows to a debt collector, the doctor to whom consent was provided was not the entity that retained the debt collector in this case.  It was the laboratory that ran the blood test at the request of the doctor. It appears that the court is trying to show that consent flows with the account.

This article previously appeared on the Ontario Systems Blog and is republished here with permission (and with additional information from insideARM at the bottom).

Believe it or not, many creditors will not collect interest on a charged-off debt even if they have the right to do so – The compliance mandates are simply that muddy. Where do we go for guidance to decide whether interest may be charged in a situation where the creditor stopped collecting interest after charging off the debt? There’s no real single source of the truth – Certain judges have held that only a jury can decide on the issue. Predictions are difficult, to put it mildly.

Consumer lawyers scrutinize the Fair Debt Collection Practices Act (FDCPA) with great intensity. They write books about the FDCPA, they share pleadings, they mine the statute for ambiguity and they do so for one reason: They want to sue you. As Debra Ciskey, Chief Compliance Officer of Wakefield and Associates observes in her excellent article on interest disclosure cases, “While 2016 was the year of the bar code cases on collection letters, 2017 can be characterized as the year of interest accrual disclosure cases.” The trend has not abated.

If you assess interest, collect add-on fees or charge convenience fees on payments, be afraid. Be very afraid. Interest rate disclosure cases and convenience fee cases remain two of the leading causes of action for our consumer lawyer friends and the reason the BCFP – formerly CFPB – published its Guidance Bulletin on phone pay fees.

If you do collect interest in states that expressly permit the assessment of interest on outstanding balances, you may need to include one of the following disclosures in your collection notices:

1. The amount of the debt stated in the letter will increase over time; or
2. The holder of the debt will accept payment of the amount set forth in full satisfaction of the debt if payment is made by a specific date; See, Avila v. Riexinger & Associates, LLC, 2nd Circuit, (2016); Miller v. McCalla, 7th Circuit, (2000).

If you do not collect interest in states that expressly permit the assessment of interest, it may not be enough to simply state the amount of the interest accruing is zero or to remove any reference to interest in the collection notice. Rather, many courts have held in the states which permit the assessment of interest, you have an affirmative duty to inform the consumer that interest is not accruing on the debt.

But wait, there’s more: Still a number courts have held no disclosure is required if interest is not assessed on the outstanding balance. Included among those cases are, Krause v. Professional Bureau of Collections of Maryland, U.S.D.C., EDNY, (2017); Ozier v. Rev-1 Solutions, LLC, U.S.D.C, EDWI, (2017); Powers v. Capital Management Services, L.P., U.S.D.C, OR, (2017).

Obviously if you collect interest or assess convenience fees, you need to navigate this litigation minefield with the advice of legal counsel, or risk costly class action lawsuits based on law that is quite literally all over the map. Scrutinize state law. Review your own compliance management system. And perhaps most importantly, work to optimize your own collection tactics.

insideARM editor’s note:

insideARM has published quite a few articles on this topic. You may want to augment Rozanne’s article with the following:

• Court Denies Request for Re-Hearing in Taylor Interest Disclosure Case – May 2018
• BREAKING: 2nd Circuit Upholds Taylor, Big Industry Win on Interest Disclosure Issue – March 2018
• E.D.N.Y. Decides “Settlement May Have Tax Consequences” is an Acceptable 1099C Disclosure – January 2018
• Another 1099(c) Disclosure Case Moves Forward in New Jersey – October 2017
• 3 Lessons You Should Take From the Latest 1099(c) Letter Case – August 2017
• Collection Letter That Failed to State Interest or Fees No Longer Accruing Does Not Violate FDCPA – June 2017
• Another “Tax Consequence” Case, Another Decision – This One Positive for Collectors – May 2017
• Another Court Rules No FDCPA Violation For: “This settlement may have tax consequences. Please consult your tax advisor.” – March 2017
• PODCAST: Debt Collectors Sued for Not Assessing Interest . . . Seriously?!? – March 2017
• U.S. District Court in Indiana Rules 1099(c) Disclosure by Collection Agency is Not Misleading – January 2017

What would be easiest of all is to not charge any interest on debts. Interest disclosures may lead to a lawsuit of some kind. insideARM leads monthly peer calls where compliance folks have a chance to ask questions, either live on the call or through email. Interest disclosures are a regular topic, because, as Rozanne mentions, the laws around these disclosures are muddy. (Learn more here about access to these peer calls, and to our research concierge service.)

Where does this leave us as letter writers?

We have what’s known as the Miller safe harbor language, which comes from Miller v. McCalla:

As of the date of this letter, you owe $[a stated amount]. Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check. For further information, write to the above address or call [phone number].

This language had long been thought to work for any agency collecting interest. And it did work right up until it didn’t.

The Miller language covers three possibilities: interest, late charges, and other charges. So, the Miller language works well when all those possibilities are in play. In those cases, it is a safe harbor.

However, some states won’t allow late charges (or the nebulous “other charges”) to be added to a consumer’s debt. And that’s when the Miller Safe Harbor language stops being safe. For instance, in Boucher v. Fin. Sys. Of Green Bay, the collection agency used the full Miller Safe Harbor language in a letter to a Wisconsin consumer despite Wisconsin prohibiting the addition of such charges. The Miller disclosure, according to the court, is misleading in this situation because Finance System of Green Bay could not and was not attempting to collect late or other charges.

So what to do? There is no easy answer. There isn’t a one-sized solution. Miller language can be useful, but it also needs to be deployed thoughtfully, with understanding of the laws and regulations in place where the debt/consumer resides.