In a recent decision, the Eastern District of New York (“E.D.N.Y”) answered a question left open by the Second Circuit in Taylor v. Financial Recovery Services, Inc., 886 F.3d 212 (2d Cir. 2018). In Taylor, the Second Circuit explicitly refused to answer the question of whether the safe harbor language is required if interest may accrue on the account at some point in the future.  In Medzhidzade v. Kirschenbaum & Phillips, P.C., No. 17-CV-6452, 2018 WL 2093116 (E.D.N.Y. May 3, 2018), the court gave its answer: No. 

Read the decision here. 

Factual & Procedural Background 

Kirschenbaum & Phillips, P.C. mailed a collection letter to plaintiff for a Discover account that included the balance as of the date of the letter and the safe harbor language adopted by Avila v. Riexinger & Assocs., 817 F.3d 72 (2d Cir. 2016). The account was static while placed with Kirschenbaum & Phillips, but the cardholder agreement entered into between plaintiff and Discover provided for daily accrual of interest and for Discover to recover its legal costs from plaintiff where permitted by law.

Plaintiff filed a lawsuit against Kirschenbaum & Phillips alleging the letter failed to accurately state the balance owed. Motions for summary judgment were filed where two main issues were presented to the court. First, whether the Avila safe harbor language was sufficient under the itemization requirements of Carlin v. Davidson Fink LLP, 852 F.3d 2017 (2d Cir. 2017). Second, whether it was appropriate to include the Avila safe harbor language where the account balance was static but may increase at some time in the future. 

The Decision 

On the Avila/Carlin issue, the judge decided consistently with the prior E.D.N.Y. decision on the issue.  Specifically, the court found that Carlin is applicable only in the limited circumstance where the amount listed on the letter is an estimated pay off balance. Since the letter from Kirschenbaum & Phillips contained the balance as of the date of the letter, the court found that Carlin was inapplicable. 

On the second issue, the court decided that the Avila safe harbor disclosure is not required where an account is static, even if it may increase in the future. In reaching this decision, the court looked to the cardholder agreement. The court recognized that there was a distinction between what the debt collector may do versus the rights of the creditor. The cardholder agreement that allowed for accrual of interest was between Discovery – not Kirschenbaum & Phillips – and plaintiff, since there was no evidence presented to show that Discover allowed Kirschenbaum & Phillips to collect interest. Because of this, the court decided that the Avila safe harbor language would not be appropriate in the letter. 

Analysis 

This decision is a victory for the industry and provides the much needed support for the last few hanging Avila claims in New York. The Second Circuit left open the question of whether the ability of the account balance to change at some undisclosed point in the future impacts the Avila disclosure requirement due to the issue being raised for the first time on appeal. E.D.N.Y.’s opinion in this case, coupled with the Second Circuit’s denial of en banc review of their Taylor decision, should provide plenty of ammunition for debt collectors’ summary judgment motions.

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 byTransUnion.

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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Here’s a rundown of just a few of the FDCPA cases in the spotlight in April 2018.

Pavlovich v. Account Discovery Systems, LLC

The issue: Interest language

Industry outcome: Positive

Collection letter stated that “A statement or correspondence may include post charge off interest and/or offer a settlement amount less than the legal now due balance.” The plaintiff attempted a suit stating that the language was confusing. Court found that plain meaning of disclosure was not confusing if read in its entirety.

 

Tiffany Ham v. Midland Funding LLC

The issue: Court costs

Industry outcome: Positive

 

Debt collector filed suit and obtained a default judgement. Debt collector proceeded to a wage garnishment and sought the amount of the judgment, court costs and “probable court costs of $20.00.” Kentucky law requires the judgment creditor pay a $10 fee to the clerk and a $10 fee to the garnishee for a total of $20.00. Consumer says debt collector did not have the right to collect those costs. However, under Rooker-Feldman, the consumer should have made that argument at the trial court level, and cannot make the argument now. Court found that at all times debt collector complied with state law as well as the Court’s order awarding costs.

 

Kasey Velez v. Continental Service Group, Inc.

The issue: Letter, state notification

Industry outcome: Positive

Debt collection letter to a Pennsylvania resident also included a notice under Massachusetts law. Consumer alleged that this was confusing. Court agreed that state specific notice with other state notices in a debt collection letter is not otherwise confusing.

 

Dorrian v. LVNV Funding, LLC

The issue: Passive debt buyer not a debt collector

Industry outcome: Positive

A passive debt buyer was determined not to be a debt collector under Massachusetts statute, G. L. c. 93, § 24.4. The statute contains two separate definitions of “debt collector,” neither of which applied. A “passive debt buyer” is a company that buys debt for investment purposes and then hires licensed debt collectors or attorneys to collect the debt on its behalf. Because this definition covers entities of which the “principal purpose” is the “collection of a debt,” the debt buyer in this instance had no no contact with consumers and the Legislature did not intend for these entities to be treated as debt collectors. The second definition covers entities that “regularly collect or attempt to collect, directly or indirectly, debts owed or due” to another and this definition did not apply because debt buyer deals only with its own debts and  not the debts of another.

 

Rodriguez-Ocasio v. Law Offices of Joseph Molinaro, L.L.C.

The issue: Improper medical disclosure

Industry outcome: Positive

A law firm sued a consumer in state court for past due medical bill. Consumer alleges that documents submitted to court contained medical information that should not have been disclosed. Court granted motion to dismiss. Doctor-patient privilege is not absolute, and to maintain a claim for breach of doctor-patient confidentiality, consumer must allege that doctor did more than send Plaintiffs’ past-due account to a debt collector for payment.

 

Bell v. Northland Group

The issue: Demand letter on settled debt

Industry outcome: Negative

Agency sent a demand letter on debt that had been settled. Agency immediately remedied the situation, but was sued anyway. Agency said it relied on information from its client, but because FDCPA is a strict liability statute, agency’s summary judgment was denied.

 

Kolbasyuk v. Capital Management Services, LP

The issue: Collection letter, amount owed

Industry outcome: Positive

Consumer alleges debt collection letter failed to provide a true and accurate statement of the amount owed. Letter contained safe harbor language found in Avila. Consumer alleges that letter failed to follow the Carlin case. In Carlin, letter spoke of unspecific costs; court found that consumer did not have an understanding of what was immediately owed. It did not result in additional requirements under the FDCPA. Motion to dismiss granted.

 

John H. Burton v. Kohn Law Firm

The issue: Whether or not a debt was a consumer debt

Industry outcome: Positive

Consumer was unable to prove that debt was a consumer debt, especially when consumer denied the existence of the debt. Summary judgment granted for debt collector. 

 

Jackson v. Barton

The issue: Untimely suit-filing by consumer

Industry outcome: Negative

Law firm alleges that consumers FDCPA action was untimely and should relate back to the filing and service of the complaint. Court found that allegation relates to specific conduct which occurred after the filing of the collection action amounts to an FDCPA violation.

 

Warner v. Ray Klein, Inc.

The issue: Failure to identify current creditor

Industry outcome: Positive

Consumer alleged that agency failed to identify the current creditor. Court disagreed. The FDCPA does not discern between “original creditor and “current creditor.”  FDCPA only requires the collector to identify the name of creditor to whom the debt is owed. Agency complied with the statute by stating this was an attempt to collect a debt and only one creditor was named. Consumer’s attempts to persuade the Court to parse out distinctions between an “original creditor” and a “current creditor” or to find confusing the inclusion of the debt collector’s account number fail in the face of the facts of this case and border on the “idiosyncratic, or peculiar misinterpretations.”

 

Hill v. Accounts Receivable Services, LLC

The issue: Assignment of healthcare debt

Industry outcome: Positive

Agency brought a state court action to collect a medical debt. At the trial agency submitted exhibits—the authenticity of which consumer challenged—purporting to document the assignment. Judge ruled in favor of the consumer saying that exhibits did not show a valid assignment. Consumer sued agency. District court granted judgment on the pleading finding that consumer claims that agency engaged in false and deceptive means by submitting the exhibits was not material. Consumer appealed. 8th Circuit affirmed stating that a debt collector’s loss of a collection action—standing alone—does not establish a violation of the Act. The fact that a lawsuit turns out ultimately to be unsuccessful” does not “make the bringing of it an ‘action that cannot legally be taken. Agency’s inadequate documentation of the assignment did not constitute a materially false representation, and the other alleged inaccuracies in the exhibits are not material.

 

Robinson v. Accelerated Receivables Solutions (A.R.S.), Inc.

The issue: Request for fees

Industry outcome: Positive

Consumer sued agency claiming that request for attorneys fee and pre-judgment interest was improper under state law because the claim was for an account stated rather than services rendered. Nebraska state law does not provide for attorney’s fees and interest on account stated claims. Court disagreed and found that services were rendered in the form of medical services and regardless of who was collecting, that forms the basis of who the claim is characterized.

 

Ruel Nieto v. MRS Associates

The issue: Overshadowing

Industry outcome: Negative*

Agency sent two collection letters to consumer. The first letter was fully compliant with the FDCPA; the second letter, sent less than 30 days after the first, provided consumer with various options for settlement which were due within 15 days of the date of the second letter. Consumer alleged that second letter made her think she no longer had the thirty days promised in the first letter in which to challenge the debt. Court concluded that even if consumer received the first letter the same day Defendant sent it, the second letter could conceivably have required her to make a payment within the 30-day period. That is, for a payment to be received in Defendant’s office “on or before February 15, 2017,” one might reasonably suppose some action was required before February 6, 2017. Under these circumstances, an unsophisticated consumer could reasonably have been confused about whether the payment options in the February 15 letter (the second letter) overshadowed her right (promised in the first letter) to dispute the debt during the full 30−day period.

* Note from Joann Needleman: This is a disturbing case which required the judge to  undergo a far reaching analysis to conclude that a violation occurred

 

McGee v. Rockford Mercantile Agency, Inc.

The issue: Reporting bankruptcy

Industry outcome: Positive

Agency who continued to report debt in bankruptcy prior to discharge does not violate FDCPA.

 

Richard Brannigan v Michael Harrison, Attorney at Law

The issue: Communication with a lawyer

Industry outcome: Negative

Consumer sued law firm over the collection of a medical debt. Consumer claims that the person he spoke with was a lawyer, and thus the law firm violated 1692e(3) because representative gave impression that she was a lawyer. Court found there was a genuine issue of material fact on that issue.

 

Deborah Al v. Van Ru Credit Corporation

The issue: Poorly-worded settlement offer

Industry outcome: Negative

Agency sent consumer a settlement letter and stated that consumer needed to act promptly. Consumer alleges Defendant’s failure to define “promptly” is misleading, as it does not clearly define when the settlement offer expires and statement that agency was not “obligated to renew the offer” was an improper threat. Court could not dismiss claim because “there is only one path by which the [term] ‘promptly’…could be dismissed –if the Court finds that language is plainly not misleading to a significant fraction of the population.” This the Court was not willing to do.  Further, statement that not obligated to renew offer could be misleading. Because the letter had no expiration date for the settlement the language that we are not obligated to renew the offer could be confusing.

 

Michael Lait v. Medical Data Systems, Inc.

The issue: Letter and name of original creditor

Industry outcome: Positive

Consumer alleged that agency’s letter failed to identify the name of the creditor to which the debt is owed in violation of 1692g(a)(2). The matter involved a medical debt and the letter identified the collection agency and stated the “facility name.” The court found the consumer’s claim not to be plausible. The letter stated this was an attempt to collect a debt and it was hard to imagine that the least sophisticated consumer would not think he owes money if not to the facility particularly since it was the consumer himself who personally incurred the medical debt at the facility and whose name was listed on that account. District Court judge reversed the recommendation of the magistrate and dismissed the case for the failure to state a clam.

 

Spurlock v. Receivables Management Partners, LLC.

The issue: Interest disclosure

Industry outcome: Positive

Agency’s collection letter did not disclosure interest because agency had policy not to seek interest unless client approved the matter for suit. When they filed suit interest was pled. Court disagreed and found collection letter accurately stated the amount due at the time of the letter so no violation of 1692g(a)(1). Plaintiff also that because letter failed to disclose that interest would continue to accrue in the future it was a violation of 1692e. Court again disagreed, as there is not obligation to inform a consumer that he or she will be required to pay court costs, attorney’s fees, or other statutory penalties if the case proceeds to litigation and results in a judgment.

Three dates in June are of interest to collection agencies, payday lenders and debt buyers: June 1, June 15, and June 30. If you’re doing business in these states, check out the calendars below:

• Alaska
• Arkansas
• Delaware
• Guam
• Hawaii
• Idaho
• Kentucky
• Maine
• Michigan
• Minnesota
• Nevada
• New Mexico
• North Carolina
• Virgin Islands
• West Virginia
• Wisconsin

You can download PDFs of the calendar here:

June 1 and 15 (6/1: Delaware, Maine, Wisconsin; 6/15: Idaho)

June 30 (Alaska, Arkansas, Delaware, Guam, Hawaii, Kentucky, Michigan, Minnesota)

June 30 (Nevada, New Mexico, North Carolina, Virgin Islands, West Virginia)

Each PDF has clickable links, taking you to each state’s website with information about filing.

 

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On Friday May 11^ththirteen firms notified the U.S. Court of Federal Claims that they intend to oppose the Department of Education’s (ED) motion to dismiss FMS et. al. v. United States as moot (two others said they would not oppose the motion, while five more said they want to remain a party to any continuing proceedings). ED is seeking to end this litigation in light of its cancellation of the contested solicitation for unrestricted private debt collection contractors. One week later, on May 18^th, fifteen companies filed their promised responses to the Government’s motion.

FMS Investment Corp. (FMS), the lead plaintiff in the protest, said it is challenging ED’s decision to cancel the Solicitation at issue and “yank the rug out from under FMS and the other Private Collection Agencies (PCAs) despite years of effort and millions spent pursuing a new contract in response to ED’s Solicitation.”

Here is a list of who filed what response, grouped by their situation in the case (including a link to their response):

Of the 15 responding companies, those that were on the 2009 unrestricted Private Collection Agency (PCA) contract but did not receive a new award in the January 2018 do-over:

ACT – Opposes ED’s motion to dismiss.

CBE Group – Opposes ED’s to motion to dismiss.

ConServe – Opposes ED’s motion to dismiss.

FMS – Opposes ED’s motion dismiss, and requests leave to file an amended complaint.

GC Services – Opposes ED’s motion to dismiss.

Progressive – Opposes ED’s motion to dismiss.

Of the 15 responding companies, those that were on the 2009 unrestricted PCA contract, did not receive a new award, but did receive an ATE in April 2017:

Alltran – Supports ED’s motion to dismiss; asserts that new challenges to cancellation of solicitation should be filed as new protests; and argues that February 26, 2018 preliminary injunction should be lifted.

Pioneer Credit Recovery – Does not oppose ED’s motion as long as they are permitted to remain a party to protests. The company asserts its pending protest is not moot if the cancellation does not proceed.

Of the 15 responding companies, those that were on the 2009 unrestricted PCA contract and also received a new award in January 2018:

Windham – Previously on the other side of this litigation, the company opposes ED’s to motion to dismiss.

Performant Corporation, the other of the two firms that ultimately received an award in January 2018, did not file a response.

Of the 15 responding companies, those that were not previously on a Department of Education contract but submitted a bid in the current contested solicitation:

Automated Collection Services (ACSI) – Notifies the court of its intent to file a new bid protest.

Central Credit – Opposes ED’s motion to dismiss.

Gatestone –  Requests leave to file an amended complaint.

Texas Guaranteed – Opposes ED’s motion to dismiss.

Value Recovery Holding – Opposes ED’s motion to dismiss.

Williams & Fudge – Opposes ED’s motion to dismiss, and requests that the court maintains the preliminary injunction.

The following are highlights representing the various responses:

The argument opposing the motion to dismiss

The general gist of the argument made by those opposing ED’s motion to dismiss the case can be summed up by this excerpt from the FMS:

Apparently as a result of [its] “analysis,” the Government concluded sometime between March 19, 2018, and May 3, 2018, that a “substantial change in the requirements to perform collection and administrative resolution activities on defaulted Federal student loan debts” had occurred, which led it to cancel the Solicitation and terminate for convenience the awards to Windham and Performant. Neither the Government nor ED provided any additional information supporting the cancellation decision.

ED has not had a substantial change in in collection requirements. ED is still directed by Congress under the Debt Collection Improvement Act of 1996 (as amended) and Office of Management and Budget (“OMB”) Circular A-129 to collect on defaulted student loan debt, and it is a public and verifiable fact that the instances of loan defaults continue to rise. The only asserted basis for the cancellation—despite years of effort and millions spent by FMS and the other PCAs—is an as yet-undeveloped master plan to have some unidentified party make some unspecified “outreach” to borrowers who are 90-days delinquent in their loan payments. This future master plan, according to ED, has “substantially” changed ED’s debt collection requirements.  

It hasn’t.  It is patently unreasonable for ED to claim that these unspecified “outreach” efforts alone can so alter the rising tide of student loan defaults as to render the current Solicitation superfluous. In 2015, ED added default and delinquency aversion efforts to the current loan servicing contracts. But given that the default rate continues to rise, these prior efforts obviously have failed; and there is no rational basis to suspect that some additional, as of-yet unplanned and unspecified “outreach” efforts will obviate the services requested by the current Solicitation.”

Alltran’s position is different than the others

Alltran’s position is not surprising. The company supports ED’s motion to dismiss, asserts that new challenges to the proposed cancellation of the Solicitation should be filed as new protests, and suggests that the preliminary injunction from Feb. 26, 2018 should be lifted. As one of the two firms that had received an Award Term Extension (ATE) in April 2017, it is in Alltran’s interests to see its potential competitors have to start over, and to be one of just a few firms left standing with the authorization to receive accounts (assuming the February 2018 preliminary injunction is lifted).

Alltran claims in its response,

“[t]he equities no longer favor an injunction.  The plaintiffs’ original theory of harm in support of the injunction was that they might potentially receive an award under the Solicitation, and that their old accounts might then potentially be transferred to those new contracts.  However, ED has cancelled the Solicitation in its entirety, further severing any connection between ED’s recall of the old accounts and the plaintiffs’ new challenges.  To establish harm now, the plaintiffs would need to demonstrate that (1) they might succeed on challenging the cancellation, (2) they might then succeed in requiring ED to reopen the procurement, (3) they might then receive a new award in that reopened procurement, and (4) ED might then choose in its discretion to transfer their old accounts to that new award.  But each step in that process is entirely speculative, and the plaintiffs cannot meet the exacting standard necessary for a preliminary injunction.”

ACSI says it will file a new bid protest

ACSI seems to be following the Alltran proposal by not opposing the Government’s motion to dismiss the current case, and moving directly to file a new protest next week. It will be interesting to see whether others join in this new case, making ACSI the third firm (following ConServe, and then FMS) to take the lead in this year’s-long ED contract debacle.

The Government has been ordered to file its reply by this Wednesday, May 23. Based on this Judge’s past actions, we can expect a quick opinion following the filings.

Background

For those who need the incredibly short recap…This all started in 2014 when the five-year 2009 contract ended, and new large-firm awards were delayed. Eventually, contracts were awarded in 2016 to seven large companies, down from 17 on the previous contract. This led to dozens of protests by firms that believed the process was flawed and unfair. So began Chapter Two of the matter, with a “re-do” of the solicitation, which resulted in awards to just two large companies. This led to more protests, and finally… nothing. No large company awards at all, as ED cancelled the whole solicitation on May 3, 2018, rescinded the contract awards from the two companies, and filed a motion to dismiss the litigation. And so began Chapter Three, with 13 parties opposing that motion.

For those who want to review all of the details, click here for the full coverage of the Department of Education collection contract on insideARM.

On Friday May 11^ththirteen firms notified the U.S. Court of Federal Claims that they intend to oppose the Department of Education’s (ED) motion to dismiss FMS et. al. v. United States as moot (two others said they would not oppose the motion, while five more said they want to remain a party to any continuing proceedings). ED is seeking to end this litigation in light of its cancellation of the contested solicitation for unrestricted private debt collection contractors. One week later, on May 18^th, fifteen companies filed their promised responses to the Government’s motion.

FMS Investment Corp. (FMS), the lead plaintiff in the protest, said it is challenging ED’s decision to cancel the Solicitation at issue and “yank the rug out from under FMS and the other Private Collection Agencies (PCAs) despite years of effort and millions spent pursuing a new contract in response to ED’s Solicitation.”

Here is a list of who filed what response, grouped by their situation in the case (including a link to their response):

Of the 15 responding companies, those that were on the 2009 unrestricted Private Collection Agency (PCA) contract but did not receive a new award in the January 2018 do-over:

ACT – Opposes ED’s motion to dismiss.

CBE Group – Opposes ED’s to motion to dismiss.

ConServe – Opposes ED’s motion to dismiss.

FMS – Opposes ED’s motion dismiss, and requests leave to file an amended complaint.

GC Services – Opposes ED’s motion to dismiss.

Progressive – Opposes ED’s motion to dismiss.

Of the 15 responding companies, those that were on the 2009 unrestricted PCA contract, did not receive a new award, but did receive an ATE in April 2017:

Alltran – Supports ED’s motion to dismiss; asserts that new challenges to cancellation of solicitation should be filed as new protests; and argues that February 26, 2018 preliminary injunction should be lifted.

Pioneer Credit Recovery – Does not oppose ED’s motion as long as they are permitted to remain a party to protests. The company asserts its pending protest is not moot if the cancellation does not proceed.

Of the 15 responding companies, those that were on the 2009 unrestricted PCA contract and also received a new award in January 2018:

Windham – Previously on the other side of this litigation, the company opposes ED’s to motion to dismiss.

Performant Corporation, the other of the two firms that ultimately received an award in January 2018, did not file a response.

Of the 15 responding companies, those that were not previously on a Department of Education contract but submitted a bid in the current contested solicitation:

Automated Collection Services (ACSI) – Notifies the court of its intent to file a new bid protest.

Central Credit – Opposes ED’s motion to dismiss.

Gatestone –  Requests leave to file an amended complaint.

Texas Guaranteed – Opposes ED’s motion to dismiss.

Value Recovery Holding – Opposes ED’s motion to dismiss.

Williams & Fudge – Opposes ED’s motion to dismiss, and requests that the court maintains the preliminary injunction.

The following are highlights representing the various responses:

The argument opposing the motion to dismiss

The general gist of the argument made by those opposing ED’s motion to dismiss the case can be summed up by this excerpt from the FMS:

Apparently as a result of [its] “analysis,” the Government concluded sometime between March 19, 2018, and May 3, 2018, that a “substantial change in the requirements to perform collection and administrative resolution activities on defaulted Federal student loan debts” had occurred, which led it to cancel the Solicitation and terminate for convenience the awards to Windham and Performant. Neither the Government nor ED provided any additional information supporting the cancellation decision.

ED has not had a substantial change in in collection requirements. ED is still directed by Congress under the Debt Collection Improvement Act of 1996 (as amended) and Office of Management and Budget (“OMB”) Circular A-129 to collect on defaulted student loan debt, and it is a public and verifiable fact that the instances of loan defaults continue to rise. The only asserted basis for the cancellation—despite years of effort and millions spent by FMS and the other PCAs—is an as yet-undeveloped master plan to have some unidentified party make some unspecified “outreach” to borrowers who are 90-days delinquent in their loan payments. This future master plan, according to ED, has “substantially” changed ED’s debt collection requirements.  

It hasn’t.  It is patently unreasonable for ED to claim that these unspecified “outreach” efforts alone can so alter the rising tide of student loan defaults as to render the current Solicitation superfluous. In 2015, ED added default and delinquency aversion efforts to the current loan servicing contracts. But given that the default rate continues to rise, these prior efforts obviously have failed; and there is no rational basis to suspect that some additional, as of-yet unplanned and unspecified “outreach” efforts will obviate the services requested by the current Solicitation.”

Alltran’s position is different than the others

Alltran’s position is not surprising. The company supports ED’s motion to dismiss, asserts that new challenges to the proposed cancellation of the Solicitation should be filed as new protests, and suggests that the preliminary injunction from Feb. 26, 2018 should be lifted. As one of the two firms that had received an Award Term Extension (ATE) in April 2017, it is in Alltran’s interests to see its potential competitors have to start over, and to be one of just a few firms left standing with the authorization to receive accounts (assuming the February 2018 preliminary injunction is lifted).

Alltran claims in its response,

“[t]he equities no longer favor an injunction.  The plaintiffs’ original theory of harm in support of the injunction was that they might potentially receive an award under the Solicitation, and that their old accounts might then potentially be transferred to those new contracts.  However, ED has cancelled the Solicitation in its entirety, further severing any connection between ED’s recall of the old accounts and the plaintiffs’ new challenges.  To establish harm now, the plaintiffs would need to demonstrate that (1) they might succeed on challenging the cancellation, (2) they might then succeed in requiring ED to reopen the procurement, (3) they might then receive a new award in that reopened procurement, and (4) ED might then choose in its discretion to transfer their old accounts to that new award.  But each step in that process is entirely speculative, and the plaintiffs cannot meet the exacting standard necessary for a preliminary injunction.”

ACSI says it will file a new bid protest

ACSI seems to be following the Alltran proposal by not opposing the Government’s motion to dismiss the current case, and moving directly to file a new protest next week. It will be interesting to see whether others join in this new case, making ACSI the third firm (following ConServe, and then FMS) to take the lead in this year’s-long ED contract debacle.

The Government has been ordered to file its reply by this Wednesday, May 23. Based on this Judge’s past actions, we can expect a quick opinion following the filings.

Background

For those who need the incredibly short recap…This all started in 2014 when the five-year 2009 contract ended, and new large-firm awards were delayed. Eventually, contracts were awarded in 2016 to seven large companies, down from 17 on the previous contract. This led to dozens of protests by firms that believed the process was flawed and unfair. So began Chapter Two of the matter, with a “re-do” of the solicitation, which resulted in awards to just two large companies. This led to more protests, and finally… nothing. No large company awards at all, as ED cancelled the whole solicitation on May 3, 2018, rescinded the contract awards from the two companies, and filed a motion to dismiss the litigation. And so began Chapter Three, with 13 parties opposing that motion.

For those who want to review all of the details, click here for the full coverage of the Department of Education collection contract on insideARM.

ARLINGTON, Va. — Convoke, a leader in SaaS solutions for the debt collection market, today announced the most recent software update to its debt collections compliance and management hub.  Each year, Convoke develops and releases several updates to its platform to support its clients’ evolving needs.  This latest major release includes the introduction of Convoke’s consumer complaints management feature, and the expansion of its auto repossession functionality.

Complaints Management 

Convoke’s complaints management system allows credit issuers to track and manage consumer complaints with their registered vendors.  Unique features of the complaints management system include:

• The ability for credit issuers and third party collectors to create, track, and report on complaints throughout the entire lifecycle of debt collection activities, allowing collaboration among all involved parties until final resolution. 
• The new concept of teams, allowing the complaints team to work with other departments within the issuer, such as legal, vendor managers, and risk, while resolving complaints.
• A complete audit trail and robust reporting to assist in tracking the details of the complaints.

Auto Repossession 

Enhancements have been made to Convoke’s auto repossession functionality, expanding the communications channel between an issuer and its Repossession Network, along with the addition of other value-added features developed in partnership with Convoke’s customers.  With this latest release, Convoke offers a state-of-the-art recovery management system in the auto repossession market.

About Convoke 

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

This article first appeared (yesterday) on TCPAland and is republished here with permission. You will want to read it in conjunction with this other TCPA-related article by Eric Troutman, also fresh from the courts this week.

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As we reported yesterday, a court in the Southern District of Florida just held that the FCC’s 2003 and 2008 predictive dialer rulings survived their brush with the D.C. Circuit Court of Appeal and remain binding law, even if the 2015 TCPA Omnibus ruling was set aside as inconsistent with those earlier rulings. See Reyes v. Bca Fin. Servs., Case No. 16-24077-CIV-GOODMAN, 2018 U.S. Dist. LEXIS 80690 (May 14, 2018 S.D. Fl.)(“Bad Reyes“).

A couple thousand miles away in Arizona, however, another Court was issuing a diametrically opposing ruling at roughly the exact same time. In Herrick v. GoDaddy.com LLC, Case No. CV-16-00254-PHX-DJH, Doc. No. 107 (D. Az. May 14, 2018) Judge Humetewa found that ACA Int’l absolutely did away with the FCC’s earlier predictive dialer pronouncements. It went on to reject reliance on those Orders (characterizing them as “defunct”) or any subsequent district court rulings applying them:

“these courts were bound and guided by the now-defunct FCC interpretations regarding this function. As such, the Court is also not persuaded to follow these holdings, particularly because the FCC interpretations relied upon by these courts were driven by policy considerations and not the plain language of the statute”

To make matters even cleaner, the Court explained why any reading of the TCPA that included predictive dialers was just flat misguided:

Broadening the definition of an ATDS to include any equipment that merely stores or produces telephone numbers in a database would improperly render the limiting phrase “using a random or sequential number generator” superfluous.

How great is that?

In light of the well-reasoned analysis of Herrick, Bad Reyes seems to have staked out a losing position. Nonetheless, the fact that two district courts could reach completely contrary conclusions on the exact same issue within minutes of each other is, well, kind of embarrassing. Obviously the FCC needs to step in and clean this up–and just yesterday it began the process of doing so.

Hopefully the Courts will now stand down, issue primary jurisdiction stays and the let the Commission do its work. Otherwise we will be facing more conflicting district court rulings and uncertainty will continue to reign supreme in TCPAland.

This article first appeared (on Tuesday) on TCPAland and is republished here with permission. You will want to read it in conjunction with this other TCPA-related article by Eric Troutman, also fresh from the courts this week.

As soon as ACA Int’l was handed down, the debate began. Are predictive dialers still covered by the TCPA following ACA Int’l’s reversal of the FCC’s ATDS formulation or is the statute’s narrow definition now the law of the land?

The debate was sparked by the D.C. Circuit Court of Appeal’s express refusal to limit its review of the FCC’s ATDS craftsmanship to the 2015 TCPA Omnibus Ruling. Although the FCC had urged that Judge Srinivasan and co. lacked jurisdiction to evaluate the Commission’s earlier rulings regarding predictive dialers the D.C. Circuit disagreed, holding that “[w]hile the Commission’s latest ruling purports to reaffirm the prior orders, that does not shield the agency’s pertinent pronouncements from review.”  While that sounds pretty clear, after teeing up the issue the Court stopped short of expressly invalidating the earlier FCC orders while simultaneously stressing the inconsistency between the prior predictive dialer rulings and the FCC’s 2015 TCPA Omnibus ruling with respect to the functionalities of an ATDS. As you can tell, this ruling was more fun to unpackage than a new iPhone.

That inconsistency exists between the predictive dialer rulings and the Omnibus suggests that the FCC itself may have invalidated the 2003 and 2008 predictive dialer rulings long before ACA Int’l came along. But the Omnibus also expressly affirmed the FCC’s earlier predictive dialer rulings, creating an impossible universe-ending paradox that the D.C. Circuit Court of Appeal saved us from by invalidating the Omnibus just in time, while leaving just enough confusion regarding the 2003 and 2008 predictive dialer rulings in order to assure a sequel.

As if there weren’t already enough angels dancing on the head of that pin, we now have two district court rulings addressing the issue and coming out in opposing directions. First came Marshall v. CBE Grp., Inc., No. 216CV02406GMNNJK, 2018 WL 1567852, at *4-8 (D. Nev. Mar. 30, 2018), a neatly worded opinion that found ACA Int’l set aside the FCC’s earlier predictive dialer rulings. Marshall’s reasoning seemed straight forward and dead on. You can’t apply FCC rulings that are contradicted by other FCC rulings leading to the reversal of those FCC rulings by the D.C. Circuit Court of Appeal.

But in TCPAland, the Empire always strikes back. Within weeks of the Marshall decision House Democrats quickly brought a discussion draft bill to expressly change the definition of ATDS to include dialers that call from a list of numbers. Long before that bill could work its way through Congress, however, the other shoe had to drop in the judiciary–and now it has.

Just today – a day that will already live in TCPA infamy — a court in the Southern District of Florida has held that the FCC’s 2003 and 2008 predictive dialer rulings do, in fact, survive ACA Int’l, and remain good law. See Reyes v. Bca Fin. Servs., Case No. 16-24077-CIV-GOODMAN, 2018 U.S. Dist. LEXIS 80690 (May 14, 2018 S.D. Fl.)(“Bad Reyes“). Bad Reyes –for verily we already have a “good Reyes” in TCPAland – holds that the 2003 and 2008 FCC rulings survive ACA Int’l because the D.C. Circuit Court of Appeal never expressly said that they didn’t. But while that point is “fair enough,” one wonders whether the D.C. Circuit Court of Appeals was really to be excepted to spell out something so seemingly obvious as earlier FCC orders contradicted by later FCC orders are not to be applied as binding authority.

Who’s to say? In TCPAland there is never an easy answer. For every Marshall there must be a Bad Reyes to oppose it. And so now there is.

This article was originally published on the Maurice Wutscher blog and is republished here with permission.

A decision out of a district court in California continues the trend of holding appropriate interest rate disclosures to be within the bounds of the FDCPA and other consumer protection acts.  In Pavlovich vs. Account Discovery Systems, LLC, the U.S. District Court for the Southern District of California found no violation of the FDCPA, the California Rosenthal Act or the California FDBPA for an interest charge disclosure attached within the agency’s initial correspondence.

A copy of the opinion is available at:  Link to Opinion.

The plaintiff brought a putative class action suit alleging violations of the FDCPA and the Rosenthal Act against both a debt purchaser and the agency hired to attempt debt collection and asserted a third claim against the debt purchaser only for the alleged violation of the California FDBPA.  The alleged offending language included the following disclosure:

“If applicable” INTEREST CHARGES & SETTLEMENTS — At our discretion, a statement or correspondence may include post charge off interest and/or offer a settlement amount less than the legal now due balance.

The plaintiff alleged the interest/settlement disclosure violated the law because it was unclear and false, misleading, deceptive and confusing, could be reasonably read to have two or more different meanings, and thus violated 15 U.S.C. Sections g(a), e, e(2)(A) and 1692 e(10).

The debt collector moved for summary judgment arguing that the validation notice clearly provided the plaintiff with the amount of the debt as of the date of the validation notice and did not contain any language to lead the least sophisticated consumer otherwise.

The Court agreed with the plaintiff that the amount contained in the validation notice must not confuse the least sophisticated consumer. Clark vs. Capital Credit & Collection Serv., Inc, 460 F.3d 1162, 1171 (9^th Cir. 2006).  In focusing on the phrase “may include post charge off interest,” the Court considered the plain meaning of the words but also looked at the context surrounding those words.  In overruling the plaintiff’s interpretation of the alleged offending disclosure, the Court found that to accept the plaintiff’s interpretation would mean reading other parts of the disclosure as unintelligible.

In reaching its decision, the Court reasoned that the plaintiff who owes a consumer debt and receives a validation notice with an exact amount owed is faced with three options: (1) this could be the exact amount owed since the notice so states; (2) the actual balance could be higher due to post charge off interest; (3) the balance could be lower due to a potential settlement.

In any event, the Court found the disclosure language appropriate as the debt collector never alluded to the potential of additional interest being charged.  The Court also found persuasive the fact that the letter never stated that the balance might change in the future or that the consumer should call to get the actual balance due.  Finally, in finding no ambiguity in the letter, the Court focused on the phrase “if applicable” and stated that the obvious intent was to make the disclosure note qualified.

There have been a few developments worth noting in the robocall regulatory and enforcement arena recently. First, the Federal Communications Commission (FCC) announced last week a massive $120M fine against Adrian Abramovich, a so-called “kingpin” of illegal calls. Second, two states have advanced or proposed their own robocall bills, which affect legal as well as illegal calls.

FCC Fines Kingpin $120M

In March the FCC and the Federal Trade Commission (FTC) held a joint Policy Forum, which is where the FTC said they’ve learned there are kingpins who seem to lord over the bulk of the illegal robocall schemes, and they tend to be located in the United States. Denise Beamer, Senior Assistant Attorney General for the Florida Office of the Attorney General, said “[The kingpins] are known, they are sophisticated, and they are connectors…Going after them really is a deterrent.” She was evidently referring to the building action against Abramovich.

FCC Chairman Ajit Pai released a scathing statement about Abramovich. He said Abramovich did not dispute any of the key facts in the case, but asserted that he had no intent to defraud or cause harm to consumers. Pai commented,

“[I]f [he had no intent to defraud], why did he include fraudulent caller ID information with each and every one of his 96 million robocalls? Friendly visitors don’t wear disguises to mask who they are. And why did the recorded messages indicate that the calls came from well-known travel or hospitality companies such as Marriott, Expedia, Hilton, and TripAdvisor, even though they were attempting to sell vacation packages at destinations unrelated to those named companies?

…Mr. Abramovich also claims that the consumers who received these robocalls were only harmed if the calls lasted for at least five minutes. So he says he should only be penalized for calls that long or longer. With all due respect, this is a ridiculous argument. I haven’t met a single American who likes getting these kinds of robocalls, regardless of length. And in any case, our rules against caller-ID spoofing certainly don’t permit spoofed robocalls so long as they string you along for 4:59 or less.”

Also of note is the statement of FCC Commissioner Michael O’Rielly, who approved in part and dissented in part to the Abramovich Order. He agreed that there was intent to defraud, but said:

“Where I part ways is the claim that he also intended to cause harm to various individuals or businesses. From what I can tell, his intent was to make a buck. More succinctly, he wanted to make as many bucks as possible. I don’t see in the item or have any evidence that he spent time thinking about what might happen to consumers or companies so long as enough calls went through to make his fraudulent venture profitable. I’m even more skeptical that he intended to harm consumers whose numbers were spoofed. He used local numbers to increase answer rates, not to damage the reputation of people associated with those numbers or the underlying businesses subject to fraud. And, I do not subscribe to the notion that “[h]arm has been done whether or not the consumer listens to the robocall message.”

This whole theory is off the mark and completely unnecessary for our purposes, as the Commission can and should proceed on the intent to defraud basis alone to impose the full monetary penalty on Mr. Abramovich. In short, I believe the Commission should impose the penalty on Mr. Abramovich, but we do not need to rely on a circumstantial intent to harm theory to get to that result.” (emphasis added)

States take action

In Massachusetts, the House has given initial approval to a bill filed by a state representative that would ban all robocalls to mobile phones or other electronic devices. The bill defines a robocall as any “automated phone call that uses both a computerized auto-dialer and a computer-delivered pre-recorded message.” Exceptions are made for school and government alerts, and certain calls from healthcare providers. Proposed penalties are steep, at a minimum of $10,000 for each knowing violation and $1,500 for violations involving consumers who are 65 or older. (emphasis added)

In New York, a state senator says he has drafted a bill that would require all callers to get consumer consent before making any non-emergency autodialed call, whether to a cell phone or a landline. The bill would also require that consumers have the right to revoke their consent by “any reasonable means.“ (emphasis added)

insideARM Perspective

If you’ve been following the discussion about efforts to curb illegal and unwanted automated calls to mobile phones, you will not be surprised to read the many unfolding initiatives in this arena. The problem is exasperatingly difficult. Illegal callers – by definition – will not follow any laws, existing or new. This has led to technology-based attempts to fix the problem, which ultimately will require cooperation among hundreds of companies and stakeholders.

Managing other calls, which are legal but may be unwanted, is also a challenge, because stopping these calls can bring unintended consequences. When referring to these unwanted consequences, most point to school or healthcare examples, because, well, who wouldn’t agree with those? But there are other valid examples, such as legitimate debt collection calls. If consumers don’t receive a telemarketing call, the consequence is that they don’t buy whatever was being sold. In the case of debt collection, if they don’t receive or answer a call, the consumer may end up with a negative mark on their credit report, a lawsuit from a creditor, garnished wages, or other negative result. Debts can’t be resolved without communication.

The Massachusetts and New York bills don’t say a debt collector can’t call a consumer; they do propose that companies wouldn’t be able to use an automated dialer to do so. In addition to providing speed and efficiency, autodialers automate compliance. With so many differing (and some conflicting) state and federal regulations surrounding debt collection, it would be impossible for thousands of debt collectors to reliably adhere to all rules on a manual basis.

These are definitely activities to watch.