SOUTHGATE, Mich. – Renkim Corporation, a national mission-critical document company in the credit, collections, healthcare, and automotive industry has purchased two AcceleJet printing and finishing systems from Pitney Bowes to streamline workflow and increase color options to their clients.

Based outside Detroit, MI, Renkim specializes in highly personalized and accurate print communications.  The two new AcceleJet systems are central to the company’s redesigned floorplan and streamlined workflow that connects their print operations to their inserting and finishing area.

“When we decided to look at inkjet for digital color, we heard great things about the AcceleJets from several trusted industry colleagues,” said Henry Lenden, Director of Operations at Renkim.  “We were very impressed with the print quality and the minimal maintenance and labor the new systems require. By streamlining our print and mail workflow with the AcceleJets, we will be able to turn jobs quicker.  Our goal is to create more impactful communications for our customers.”

Renkim continues to invest in its operations to increase options, timeliness, and accuracy for their clients. The move to inkjet printers plays a large role toward the company initiatives.  

“Over the past few years we have seen our full color and custom printing volumes grow rapidly,” added Rob Augg, Vice President of Business Development. “With the addition of the AcceleJets we can continue that growth with the assurance we have industry best technology and a great partner for future expansion in Pitney Bowes.” 

About Renkim

Renkim, founded in 1982, is employee-owned and specializes in the distribution of mission-critical financial messages via paper and electronic channels. Our client base and experience are within the healthcare, ARM, insurance, financial, consumer media and automotive sectors. Renkim360 client portal provides clients with archival access for all paper and electronic messages, mail track, eNotice click tactics and reporting. Our commitment is client focused, providing Level 1 service – Accurate and On-Time, with strict adherence to compliancy consisting of Hitech/HIPAA, PCI, GLBA, FISMA and SOC Type II. www.renkim.com 

Contact: Rob Augg, VP of Business Development 248-981-4676

On September 29, 2017, in a very interesting and timely Fair Debt Collection Practices Act (FDCPA) case, a district court in Indiana shot down a debt collector’s argument that it “sent” its validation notice to a consumer via email. The case is Lavallee v. Med-1 Solutions, LLC (Case No. 1-15-cv-1922, U.S.D.C., Southern District of Indiana).

A copy of the court’s decision can be found here.

Background

The precise facts in this case are very important. Specifically, the process used by the debt collector in sending the email. As such, insideARM will provide detail. 

The court considered the following as undisputed facts:

“Defendant Med-1 Solutions, LLC (Med-1) is a debt collector within the meaning of the FDCPA. Plaintiff Beth Lavallee incurred two consumer debts for medical services provided to her by a hospital, the original creditor. Med-1 sought to collect those two debts. 

As part of its collection activity, Med-1 uses a vendor (Privacy Data Systems, its sister company) that created a software application called “SenditCertified™.” Med-1 supplies data through a data batch process to the vendor about debts it seeks to collect. The vendor’s software application extracts the data and inputs it to populate a .pdf document. The .pdf document is “sent” to the intended recipient by email as a “secure package” in the following manner: 

The recipient is sent an email; the sender on the email Info@med1solutions.com. The subject of the email is that “Med-1 Solutions has sent you a secure message.” 

If the email is opened by the recipient, the message reads: “Please find your message attached,” thus alerting the recipient that she can pick up a “secure message” by clicking a link. The email itself also includes Med-1 Solutions’ name, phone number, and address. 

If the recipient clicks the link, she is redirected over the internet via a web browser to access the vendor’s web server where there is another message “instructing the user to accept their attachment,” i.e., the .pdf “secure package.” The recipient can “accept” the attachment by checking a box to “sign for this Secure Package” and verify that she is the person whose name and email is listed. If that box is checked, the recipient finally is given access to the .pdf document if she clicks on the “Open Secure Package” button appearing on her screen. 

That .pdf “secure package” contains a letter to the recipient from Med-1 Solutions that is Med-1’s FDCPA Section 1692g(a) notification. The Section 1692g(a) notification was her “secure package.”

The above process was used to send email to Ms. Lavallee related to each debt. The first email (for the first debt) was sent on March 20, 2015, and the second email (for the second debt) was sent on April 17, 2015.

The email address used by the Med-1 vendor for Ms. Lavallee was one she had given the hospital.

Ms. Lavallee testified that she regularly checks her email inbox and her email spam folder, which automatically deletes spam emails when they age over 30 days. Although Ms. Lavallee does not remember receiving either the March 20 or April 17 emails, the Med-1 vendor did not receive any error message indicating a problem in the transmission of either email. The emails were not returned as undelivered. 

The Med-1 vendor and Med-1 know too, however, that Ms. Lavallee never viewed or accessed the .pdf “secure package” document for either debt. That is because the vendor’s system “records any attempt to view [the .pdf document, or “secure package”]” and there was no record of any attempt to view the secure packages. 

Therefore, it is undisputed that for each of the two debts at issue (1) Ms. Lavallee received an email from Info@med1solutions.com advising her she had an important message, (2) the email itself did not include the Med-1 Section 1692g(a) validation notice related to the debt or even mention the hospital, and (3) Ms. Lavallee never accessed the web server that contained the validation notice and never opened the .pdf secure package. 

The Court’s Decision and Reasoning

The court then applied these facts in light of the applicable law. The sole question presented by this case is whether under the above facts, Med-1 sent to Ms. Lavallee a debt notification letter in compliance with the FDCPA. 

The court wrote:

“The statutory provision at issue, 15 U.S.C. § 1692g(a) (emphasis added), reads as follows: 

• Notice of debt; contents. Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing— 

(1) the amount of the debt;

(2) the name of the creditor to whom the debt is owed; 

(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;

(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and

(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.” 

The court determined that Med-1 Solutions did not send a validation notice to Ms. Lavallee as required by Section 1692g(a). 

Med-1 contended that because it is undisputed that it sent emails to Ms. Lavallee that — with a few steps by Ms. Lavallee — would have provided her with the Section 1692g(a) validation letter, it therefore sent the required notice. Med-1 argued that under the statute’s plain reading and interpretive case law by some courts, it is irrelevant that Ms. Lavallee did not actually receive the notice, and she must accept the consequence of failing to open documents that were sent to her via this email attachment process. 

Med-1 also relied on one district court case, which cites a case from the Ninth Circuit, to support its argument that a Section 1692g notice must only be sent and it is irrelevant whether it is received. Med-1 argued that the case in question stands for the proposition that the sending of a notice (or other communication) by first class mail that is properly addressed is presumed to have been received by the addressee under the common law’s mailbox rule and that the Mailbox rule should also apply to email communications.

The court disagreed.

The Honorable Debra McVicker Lynch, Magistrate Judge distinguished this scenario from traditional mail notices. She determined that the Mailbox rule’s presumption of receipt that makes the sending of a notice by the debt collector sufficient without the collector proving actual receipt should not apply in this case. 

Judge McVicker Lynch wrote: 

“But if notice is not sent in a manner in which receipt should be presumed as a matter of logic and common experience, then it cannot be considered to have been “sent.” 

The court concludes that Med-1 Solutions did not “send” the validation notice as required by the statute. It knows (and knew, or easily could have determined at the time) that its notice was not delivered to Ms. Lavallee. She never accessed, or attempted to access, the “Secure Package” containing the validation notice, and the email itself did not contain the validation notice. 

The name of the product of Med-1 Solutions’ sister company—“SenditCertified™”—is noteworthy. The name connotes a system by which a sender receives certification that the item was received—like certified mail. But here, Med-1 Solutions asks the court to ignore the undisputed facts that its notices were not delivered to Ms. Lavallee and that Med-1 Solutions knew or could have easily determined that fact. What Med-1 Solutions requests is akin to the sender of a certified mailing claiming notice was effected without a “green card.” 

Further, Med-1 Solutions’ system of transmission is one that’s not even likely to accomplish receipt of the validation notice. Not opening an email attachment is not the same as failing to open a letter one receives through the United States Post Office mail system. It is the proven reliability of the latter system—the very high probability that a properly addressed letter reaches its destination—that led to the common law mailbox rule presumption.

The same cannot be said for documents delivered as a web-based email attachment. Med-1 Solutions has offered no evidence that its system yields a similar result as the U.S Mail and therefore merits the same presumption underlying the “mailbox rule.” Indeed, in the court’s estimation, such attachments are more likely not to be opened and delivered than to be opened. Emphasis added by insideARM.

insideARM Perspective 

As noted in the initial paragraph above, this decision is timely. The entire ARM industry is pushing for greater use of email. Consumer advocates have mixed opinions on the use of email and it is believed that the Consumer Financial Protection Bureau (CFPB) is currently considering potential debt collection rules that will address the use of email.  insideARM believes this case is important because of the discussion of the process involved. The CFPB should also take note of this case when considering how emails may be used. 

Judge McVicker Lynch noted:

“As described in the facts section, for Ms. Lavallee even to have had an opportunity to receive the validation notice, she was required to open an email and then click through over the internet to an unknown web browser inviting her to then open a “Secure Package.” Contrary to Med-1 Solutions’ argument, modern consumer practices are not conducted this way.

Although a consumer may regularly open e-mails from persons and companies she knows and to which she has given her email address for communications6 (like a recognized email from the utility company or the bank one does business with), there is no evidence that Ms. Lavallee should have recognized as safe an email from Med-1 Solutions. Today, email users are regularly warned and know to beware of email invitations to click on web-based attachments. The United States Department of Homeland Security has issued a Security Tip (ST04-010), originally released in 2009 and updated in 2017, warning the public to use caution with email attachments because they can be sources of viruses. See https://www.us-cert.gov/ncas/tips/ST04-010. The Department of Homeland Security warns that email attachments are a “common tool for attackers” and if an email attachment seems suspicious, “don’t open it.” 

A footnote to the opinion is also critical. It stated:

“Ms. Lavallee has argued that a notice sent by email should not enjoy the same presumption of receipt as a notice sent by United States mail. The court does not need to address that issue and does not do so here, because the statutory notice was not in the email sent to Ms. Lavallee. The court decides only the question presented by the undisputed facts outlined in this order.” 

Thus, it appears the that at least this court is open to the idea of email communications; it is only ruling that this process is deficient. insideARM will continue to monitor and report on this critical issue to the ARM industry.

On September 29, 2017, in an FDCPA lawsuit, a federal judge in Utah ruled that a debt collector’s actions fell within the “Bona Fide Error” defense in the FDCPA, 15 U.S.C. § 1692k(c) and granted summary judgment to the debt collector. The case is Berry v. Van Ru Credit, (Case No. 2:15-cv-150, U.S.D.C, District of Utah).

The court issued a Memorandum Decision and Order Adopting the prior Report and Recommendation of a U.S. Magistrate. A copy of that decision can be found here. The Magistrate’s original Report and Recommendation can be found here. 

Background 

In August 2014, the United States Department of Education (ED) placed plaintiff Douglas Berry’s defaulted student loans with Van Ru Credit (Van Ru) for collection. On August 19, 2014, Van Ru sent correspondence to Mr. Berry informing him that his loans had been referred to Van Ru for collection. That same day, Mr. Berry spoke with a Van Ru representative, who informed Mr. Berry that his student loans were in federal default, and that ED had the right to pursue an involuntary administrative wage garnishment or a federal tax offset against him should his student loans remain in default. The representative further notified Mr. Berry that if he pursued a voluntary rehabilitation program and made nine consecutive monthly payments, his student loan would no longer be in federal default. In that initial conversation, however, the Van Ru Representative did not advise Mr. Berry that he worked for Van Ru; he only named ED, Van Ru’s client. 

During the course of that conversation and at least one other conversation with a Van Ru representative, the plaintiff agreed to enter into a monthly payment “Rehabilitation” program. The record reflects some initial confusion regarding the amount of the monthly payment for the rehabilitation, but ultimately, once Mr. Berry submitted all the financial paperwork to Van Ru, including the Financial Information Statement (FIS) Disclosure Form, he was indeed eligible for a $5.00 per month rehabilitation agreement, and he began making monthly payments of $5.00. Mr. Berry completed the program and returned to school. 

On March 6, 2015 Mr. Berry filed suit against Van Ru alleging that the defendant had violated the FDCPA (15 U.S.C. §§ 1692 to 1692p) in its attempts to collect on Mr. Berry’s defaulted student loans. 

Mr. Berry alleged that Van Ru violated the FDCPA by: (1) consenting to a rehabilitation agreement for $5.00 per month, and then reneging on the agreement and demanding more money; (2) threatening garnishment when it did not intend to actually garnish Mr. Berry’s wages; (3) placing “telephone calls without meaningful disclosure of the caller’s identity”; (4) overshadowing the required disclosures by “threatening immediate garnishment” in the first call; (5) falsely stating in the initial call that “all [rehabilitation] agreements have to be verbal” even though Mr. Berry was eventually given and signed a written agreement; and (6) initially stating that Mr. Berry would be required to make monthly payments of $900, but then explaining that as of July 1, 2014 the policy changed even though rehabilitation agreements have always been based on the ability to pay. 

Both parties filed motions for summary judgment.

Editor’s Note:  A motion for summary judgment is based upon a claim by one party (or, in some cases, both parties) that contends that all necessary factual issues are settled or so one-sided they need not be tried. The summary judgment is appropriate when the court determines there no factual issues remaining to be tried, and therefore a cause of action or all causes of action in a complaint can be decided upon certain facts without trial.

The Magistrate’s Report and Recommendation 

As noted above, the matter was originally referred to the District Court’s Chief Magistrate Judge, Paul M. Warner. On September 11, 2017 Magistrate Judge Warner issued his Report and Recommendation. 

The Magistrate Judge discussed each of the alleged violations. Since this was a summary judgment motion and not a motion for judgment on the pleadings, the court had access to a full record that included deposition transcripts and call recordings. 

The Magistrate Judge determined: 

• That the representative never “threatened” Mr. Berry with garnishment. Rather, the representative informed Mr. Berry that if his loans stay in default, he faced the possibility of involuntary enforcement in the form “of either the administrative wage garnishment or a federal tax offset.” Thus, Van Ru’s representation with respect to garnishment was not false.
• There was also no evidence to suggest that Mr. Berry was threatened with imprisonment. As the call recordings reflect, at no time did the representative threaten Mr. Berry with imprisonment for his defaulted loans or even insinuated that was a possibility.
• That there was no “overshadowing” of Mr. Berry’s 30-day validation right to dispute the debt.
• That there was no “false, deceptive, or misleading representation or deceptive means” to collect or obtain information from Mr. Berry.
• That the failure of the representative to identify the company was a Bona Fide Error.

 On the last issue, Judge Warner discussed the Van Ru policies and procedures in detail:

“As a debt collection business, Van Ru has written policies and procedures regarding live telephone calls with consumers. When a Van Ru representative contacts a consumer over the phone they are specifically required to disclose (1) the representative’s identity, (2) that the representative is calling from Van Ru Credit Corporation, and (3) that the call is being made on behalf of Van Ru’s client. Further, when a representative contacts a consumer over the phone, the representative is prohibited from making any false or misleading statements to the consumer, including any false representation regarding the representative’s identity or where they are calling from. Representatives have online access to the written procedures, which serve as a reference throughout their employment with Van Ru, and all representatives are trained on Van Ru’s policies. 

Van Ru’s representatives are provided initial and ongoing training with respect to FDCPA and Van Ru’s procedures regarding telephone calls with consumers. Initial training includes a three-week training program, in which the first two weeks of training are performed in a classroom environment, with the third week of training set aside to help transition new hires from the classroom to the floor. During the initial two-week classroom training sessions, the emphasis is on company policy and the laws and regulations governing collection activities. At the end of this training phase, an exam of the FDCPA is administered, which new hires must pass in order to continue training activities. Each missed item is reviewed with new hires to ensure a complete understanding of the pertinent portions of the FDCPA. Once a representative is released to the floor, the representative receives consistent and individualized ongoing training for the next seven weeks, including side-by-side coaching, system navigation, and work effort reviews. During this training process, representatives are repeatedly and specifically trained to conduct collection calls in the manner described in the written procedures. Upon completion of the representatives first ten weeks of training, Van Ru conducts refresher training on a monthly and as needed basis.45 Workshops are periodically scheduled to refresh what was taught in the initial classroom training sessions in addition to new and remedial training sessions to ensure the latest techniques and information is available and communicated.46 Every January and July, mandatory retraining and testing also occurs, and if a passing score is not received, refresher training is conducted and a new examination is administered prior to resumption of correspondence activities. Representatives may take the examination three times; a third failing score results in termination.” 

However, in regard to the August 19, 2014 call, the Van Ru representative failed to follow the policies and procedures of Van Ru. While the representative had online access at all times to the written procedures and received all of the training described above, he nevertheless failed to identify that he was calling from Van Ru on behalf of the Department of Education. Still, the Magistrate granted Van Ru’s motion for summary judgment on all alleged FDCPA violations, relying on the Bona Fide Error defense for the final item. 

The District Court’s Decision 

Plaintiff objected to the Magistrate Judge’s findings and conclusions, specifically, the finding of that Van Ru was entitled to the Bona Fide Error defense. The District Court’s decision is short and concise. It is a mere four pages.  The court wrote: 

“Plaintiff objects to these findings and conclusions and contends that [T]here is a genuine dispute of fact with regard to whether the evidence on the record makes it impossible for a reasonable trier of fact to find either that: (1) Defendant’s employee intentionally withheld the identity of his employer in the telephone call in order to gain the benefit of seeming to be a direct federal employee; or (2) that Defendant failed to meet its burden of proving that it maintained reasonably adapted procedures for avoiding such violations. 

Neither of these contentions is well-founded. Plaintiff does not point to competing material allegations of fact that would appropriately preclude entering summary judgment for the Defendant. Instead, Plaintiff attempts to read differing interpretations into the provided undisputed facts. This represents a disagreement over the legal effect and consequences of the facts and not the material facts themselves. This does not create a material dispute. The objection is overruled. The analysis and conclusion of the Magistrate Judge are correct.” 

insideARM Perspective 

insideARM suggests that compliance professionals review this case for the discussion of the proof provided by Van Ru on their policies and procedures. Van Ru was able to convince the court that the violation was unintentional and a “Bona Fide Error.” 

At the end of the day the ARM industry employs ordinary people. Ordinary people make innocent mistakes, regardless of the amount of training and the safeguards in place to limit or prevent.  It is a positive story for the industry to see a court recognize the efforts to train and supervise. 

The depth of the record presented to the court, including the call recordings, contributed to the successful defense.

Last week in a Fair Debt Collection Practices Act (FDCPA) case, a judge for the federal district court New York ruled that a letter containing a fifteen-day settlement offer did not overshadow the § 1692g mandated thirty-day validation notice. The case is Santora v. Capio Partners, LLC (Case No. 16-cv-02788, U.S.D.C., Eastern District of New York).

A copy of the court’s Memorandum of Decision and Order can be found here . 

Background 

Defendant, Capio Partners, LLC (Capio), a provider of debt collection services, was engaged to collect a debt of $3,190.95 that plaintiff allegedly owed to another party. On or about February 22, 2016, defendant sent plaintiff an initial collection letter (the collection letter).

The letter contained the following: 

NOTICE OF DEBT – SETTLEMENT OFFER  

We are reasonable people to deal with and we know that times are tough. Are you expecting a tax refund this year? If so, take this opportunity to resolve your accounts with a one-time payment of $1,595.48 which is a 50% discount off of the balance. 

The offer will expire 03/07/2016. 

This settlement offer and the deadline for accepting it do not in any way affect your right to dispute this debt and request validation of this debt during the 30 days following your receipt of this letter as described on the reverse side. If you do not accept this settlement offer, you are not giving up any of your rights regarding this debt. 

SEE REVERSE SIDE FOR IMPORTANT CONSUMER INFORMATION. 

On June 1, 2016 plaintiff filed suit, alleging that although the Collection Letter contained the language required under 15 U.S.C. § 1692g, which provides a consumer with notice of her thirty-day period to exercise her validation and verification rights, these rights were overshadowed by a fifteen-day settlement offer included in the collection letter. 

Plaintiff further alleged that the collection letter is deceptive and overshadowing. Plaintiff contended that Capio’s conduct violated numerous sections of the FDCPA, including but not limited to 15 U.S.C. §§ 1692e, 1692e(2), 1692e(5), 1692e(10), 1692f, 1692f(1), and 1692g.

On October 20, 2016, Capio brought a motion for judgment on the pleadings. 

Editor’s Note: A motion for judgment on the pleadings is similar to a motion for summary judgment, but is brought before Discovery occurs and a record of Discovery results is created. A party may bring a motion for judgment on the pleadings on the basis that the pleadings disclose that the are no material issues of fact to be resolved and that a party is entitled to judgment in their favor as a matter of law. It is reviewed under the same standard as a motion to dismiss under Rule 12(b)(6). 

The Court’s Decision 

The decision was rendered by the Honorable LaShann DeArcy Hall, United States District Court Judge. 

Judge Hall first discussed section 1692g of the FDCPA: 

“Section 1692g of the FDCPA provides that a consumer has thirty days to dispute the validity of a debt after receiving written notice. See 15 U.S.C. § 1692g(a)(3). Any collection activities and communication during this thirty-day period “may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.” Id. § 1692g(b).” 

She then discussed the “least sophisticated consumer” standard:

“Although courts are to analyze collection letters from the perspective of the “least sophisticated consumer,” they must also be reasonable in their application of the standard and assume that even the least sophisticated consumer can read a collection letter with some care. Such an approach protects the naïve from abusive practices while also shielding debt collectors from “bizarre or idiosyncratic interpretations of debt collection letters.” 

Judge Hall then discusses the specific language in the collection letter (citations omitted):

“Here, the Collection Letter explicitly states that “[t]his settlement offer and the deadline for accepting it do not in any way affect your right to dispute this debt and request validation of this debt during the 30 days following your receipt of the letter as described on the reverse side.” 

Defendant’s settlement offer did not demand payment, but rather “extended an incentive for [a] debtor[] to pay [her] account.” If Plaintiff chose to reject Defendant’s offer, “at worst, she . . . would be liable for the original amount of the debt.” Id. Additionally, below the settlement offer, the Collection Letter states “SEE REVERSE SIDE FOR IMPORTANT CONSUMER INFORMATION,” and Plaintiff admits that the Collection Letter contained all of the validation rights language required by § 1692g.

Even the least sophisticated consumer would not read the settlement offer and validation language so carelessly or idiosyncratically as to be misled into disregarding her validation rights. Rather, the pleadings and relevant exhibits demonstrate that Plaintiff was fully informed of her validation rights, and nothing on the face of the letter should be deemed contradictory or misleading. Accordingly, Plaintiff’s overshadowing claim is dismissed.” 

Finally, Judge Hall made short work of the other alleged FDCPA claim. 

“In addition to her § 1692g overshadowing claim, Plaintiff alleges that Defendant violated various other provisions of the FDCPA, “including but not limited to” §§ 1692e, 1692e(2), 1692e(5), 1692e(10), 1692f, and 1692f(1). Plaintiff only provides the bald allegation that Defendant violated these sections of the FDCPA without proffering any facts that would allow the Court to reasonably discern what the allegedly violative conduct was. 

Accordingly, the balance of Plaintiff’s FDCPA claims must be dismissed.” 

insideARM Perspective 

This decision is concise and to the point. It is good to see a strong judge put a quick end to a FDCPA case that seemed, at least to this writer, to have been very tenuous from the beginning. 

In her opinion Judge Hall noted that “Courts in this district have repeatedly held that a settlement offer contained in a debt collector’s initial communication with a debtor does not, by itself, overshadow or contradict a validation notice in the same communication.” 

The language in the letter was clean, simple, and easy to understand. 

insideARM contacted Capio Partners for comment on the case. Bob Hodges, President, commented:

“At Capio Partners, we really are about Complaintless Collections^TM . We do everything we can to work with the consumers we deal with, and while adhering to the myriad of state and federal laws, try offering them a way to resolve their accounts that is beneficial to them and us. In this instance, I’m glad the court acknowledged we did everything we should to help consumers understand their rights when communicating about the debt.'”

In this instance, Capiio did the right thing. Unfortunately, Capio still had to spend time and money defending the case. Such is the current state of affairs for the ARM industry.

When emergencies expose consumers to out-of-network providers, balance billing can bring a crushing burden. The recent devastation following multiple hurricanes serves as a sobering reminder that consumers are not always able to control where they go for urgent care. 

As the use of narrow provider networks has become increasingly common, the balance billing burden is growing. To mitigate the effect of situations where consumers have no control over which providers treat them, many states are working on policy solutions to protect consumers and limit financial risk. However, finding common ground between insurers and providers has been tough; they don’t agree on appropriate levels of payment for medical services. A federal solution may have the greatest potential for success. 

Whether they know it or not (and many don’t) most individuals with private insurance are participants in employer-sponsored self-insured plans. These are totally funded by the employers themselves, and regulated primarily under federal law. As Congress circles around the Affordable Care Act, and the provider community dreads the prospect of even more uninsured or under-insured consumers, now may be a good time for action on balance billing. The states, however, aren’t holding their breath. A handful of states are way ahead in developing solutions. Here’s a run-down of those that have taken this issue into their own hands… Or not, as the case may be.

30 States have no balance billing protections

In the District of Columbia and 29 states, there are no state laws or regulations that shield consumers from unexpected balance billing by out-of-network providers’ emergency departments, or even in-network hospitals. In some states, insurance regulators have stepped in to act as mediators between providers and insurers to work out acceptable payment levels, or else urge insurers to pay billed charges and help consumers avoid the burden of a massive balance bill. 

However, these approaches can’t really be relied on. Without direct authority over insurers and with almost no power over providers, informal approaches by state regulators may be inconsistently applied, and the most vulnerable patient populations (such as indigent consumers, those whose first language is not English, or those whose immigration status is an issue) may not know certain options – like arbitration – are even available. 

Even for those consumers able to advocate for themselves, there is no agency with the authority to force providers and insurers to resolve a dispute. When there’s no resolution, consumers and providers end up holding the bag. Consumers get stuck with a balance bill that can destroy their credit score and hurt their ability to get a job, obtain housing, or buy a car. Healthcare providers suffer from the growing weight of uncompensated care.

15 States have limited protections (CO, DE, IN, IA, MA, MS, NH, NJ, NM, NC, PA, RI, TX, VT, WV)

Fifteen states take a limited approach to protecting consumers who would otherwise face balance billing for care by out-of-network providers in emergency rooms, or in-network hospitals.  

What makes them limited? In some states (CO, IA, MA, NH, NJ, NM, NC, PA, RI, TX, VT, WV), the law doesn’t require consumers to pay balance bills, but doesn’t prohibit balance billing by providers. This means many consumers will pay bills they have no obligation to pay.

Some of these states limit protections to emergency department settings (CO, DE, IN, IA, MS, NH, NJ, NM, NC, PA, RI, RX, VT, WV), or only protect consumers enrolled in HMOs (IN, NH, RI, TX, WV). 

Most states with limited protections have no rules to define adequate payment to an out-of-network provider, nor a formal process to resolve payment disputes (with the exception of DE, which does have a dispute resolution process). The absence of a standard can incent providers to stay out-of-network and avoid agreeing to a contracted rate, then charging whatever they want via balance billing. This has the potential to drive up the overall cost of healthcare for everyone.  

6 States have comprehensive balance billing protections (NY, MD, IL, FL, CT, CA)

Six states have the most robust balance billing protection for consumers in that they: 

• Protect consumers receiving care both in-network and in emergency hospital settings
• Protect consumers with a wider range of health plan types (HMOs and PPOs)
• Prevent the sending of a balance bill
• Define adequate payment standards or dispute resolution processes to settle disagreements between insurers and providers—although the means of resolution varies widely from state to state 

iA Perspective

Insured consumers expect that if they pay their premiums and use in-network providers, their insurer will cover the cost of medically necessary care beyond their specified copayments, coinsurance, and deductibles. When consumers feel very ill or experience a medical emergency, they usually don’t have the time or presence of mind to determine whether a provider who treats them is out-of-network. Even if they know, they often have no opportunity to comparison shop. 

While insurers may elect to protect their enrollees from some instances of balance billing, there are no federal protections that explicitly ban the practice. To a certain extent, states can help protect enrollees from unexpected balance bills.  However, state protections are limited by federal law (ERISA), which exempts self-insured employer-sponsored plans—and these plans are prevalent, representing more than 60% of privately insured employees. 

Without a clear national standard for balance bills, consumers remain at risk and providers face significant administrative hassle. Those that offer outsourced business office or collection functions to healthcare providers should be fully educated on the laws related to balance billing, and a range of patient financing options.

The following is a profile of just one of the thousands of revenue cycle leaders at healthcare providers across the U.S. I’d like to thank Kim Roberts for generously offering her time to provide her insights. If you are a revenue cycle professional at a healthcare organization and would like to participate in a profile like this, please contact me. I would love to hear from you.

—-

What’s your name, organization & position? 

Terry Armstrong – President, State Collection Service, Inc.

How long have you worked there?  

6.5 years

How long have you worked in the revenue cycle field?  

Over 40 years

How did you land in the world of revenue cycle?  

It’s a long and interesting story, but I will try to be brief. I wanted a new opportunity and the University of Wisconsin alumni job board had a hospital management job open so I applied.  I didn’t get that job, but the administrator who selected someone else recommended me to the CFO.  The hospital CFO wanted to implement a new concept for the Business Office (what we call Revenue Cycle today) called the patient counselor concept (innovative for the 1970s) and was looking for someone to lead that program.  It sounded good to me because I had no healthcare experience.  That started my long career in healthcare revenue cycle.

If you could thank just one person in the industry, who would it be?   

I guess I would have to thank Dick Berger, the CFO who gave an inexperienced kid a chance.  I worked with him in one other setting, which ultimately led to a 20-year stint with HCA.  

What does your typical day at work look like?

I focus on our strategic goals and spend most of my time on sales, client relations and staff interaction.  Retaining good employees is critical in today’s employment environment (we have over 560 employees). Happy employees make happy clients that lead to new sales, which in turn lead to revenue and profits.  

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Can you think of something great you’ve learned about this business you’d really like to pass along?  

I don’t think there is one magic bullet to being successful but it is key that you deliver what you promise, whether it’s to employees, clients or partners.  This industry rewards people and companies they can trust and count on.  If you build strong and trustworthy relationships, they pay off for years.

Is there a TV show or movie that you can’t live without?  

I usually can’t wait for the next season of House of Cards.

If you weren’t in your current career, what else would you most love to do for work?

It’s hard for me to think of what I would do since healthcare and revenue cycle has been such a big part of my life, but I think I would have liked being a defense attorney.  While I know that most courtroom scenes are not like what we see on TV, helping people in tough situations would be rewarding.

What do you think needs to change most urgently in the revenue cycle field?  

I still believe that the administrative side of healthcare, specifically the billing and collections side including pricing, is too complicated and expensive.  We waste too many resources chasing too few dollars, with a reimbursement system that most consumers do not understand.  It is still too difficult to read and understand an EOB (explanation of benefits) and there are too many inconsistencies between what the provider bills and the insurance company says they pay.  

How can a hospital charge $30,000 but only get paid $8,000 by insurance?  How can a doctor charge $359 but only get paid $83?  We need to streamline the pricing of healthcare and provide simple bills to patients that are easy to understand and pay.  What do I really owe and why?  Many accounts end up in collections because of this confusion.  I am somewhat optimistic because of the trend towards consumerism, patient friendly billing, and payment portals that provide the amounts owed and allow an easy method  to make payments.  We still need to make it more convenient for patients to get access via cell phones, email, texts, etc.  

Last week a federal judge in Connecticut denied a debt collector’s motion for judgment on the pleadings in a Fair Debt Collection Practices Act (FDCPA) case that alleged 29 call attempts in 24 days showed defendant’s “intent to annoy, harass, and abuse him.” The case is Lundstedt v. I.C. System, Inc (Case No. 3-15-cv-00824, U.S.D.C., District of Connecticut).

A copy of the court’s order can be found here. 

Background 

In May 2015 plaintiff filed a pro se complaint against defendant in Connecticut Superior Court. Defendant filed a notice of removal to Federal Court.  

Per the court’s summary of plaintiff’s complaint:

“Plaintiff claims that defendant placed 29 telephone calls using an automatic dialing system to his home between February 16 and March 11, 2015. These calls were allegedly made to collect a debt owed by plaintiff to Verizon for about $160. 

According to plaintiff, he told defendant on the first call that he was disputing the debt, to take him off its call list, and to stop calling him because it was injurious to plaintiff. Plaintiff’s phone number had been registered as well to the national “Do Not Call” registry. Plaintiff claims that defendant’s repeated calls caused him “serious terrorizing emotional distress,” and defendant’s “terrorizing tortuous acts caused” plaintiff distress “because [he] had been called hundreds if not thousands of times by other debt collectors.” 

In addition to the alleged FDCPA claim, plaintiff’s complaint also alleged defendant 1) violated Connecticut law that regulates telephone solicitation (C.G.S.A.  § 42-288) by calling the plaintiff multiple times when the plaintiff was already registered on the “DO NOT CALL” list, and 2) that defendant violated the Telephone Consumer Protection Act (TCPA), and 3) that defendant violated the Connecticut Unfair Trade Practices Act, and 4) that defendant negligently inflicted emotional distress on the plaintiff. 

Defendant filed an answer to the complaint on June 5, 2015. On August 25, 2015 Defendant filed a motion for judgment on the pleadings.

Editor’s Note: A motion for judgment on the pleadings is similar to a motion for summary judgment, but is brought before Discovery occurs and a record of Discovery results is created. A party may bring a motion for judgment on the pleadings on the basis that the pleadings disclose that the are no material issues of fact to be resolved and that a party in entitled to judgment in their favor as a matter of law.  

The court’s order September 27, 2017 order is in response to that motion. 

The Court’s Order 

The matter was heard by the Honorable Jeffrey Alker Meyer, United States District Court Judge. 

The first two paragraphs of the order foretold the court’s thoughts on the FDCPA claim. Judge Meyer wrote: 

“Plaintiff Peter Lundstedt’s phone would not stop ringing. It was a debt collector—defendant I.C. System, Inc.—who kept calling. Defendant called plaintiff’s home telephone some 29 times over the course of 24 days, all in hopes of collecting on a paltry sum that plaintiff owed his telephone company. 

Now it is plaintiff who hopes to collect from defendant. He has filed this lawsuit claiming that defendant’s numerous calls violated his rights under multiple statutes and the common law. Defendant moves for judgment on the pleadings.” 

Judge Meyer then made quick work summarizing his thoughts on all of plaintiff’s claims: 

“I conclude that plaintiff has alleged a valid claim for relief under the Fair Debt Collection Practices Act because he has alleged facts that plausibly show defendant’s intent to annoy, harass, and abuse him by calling him so many times. But the rest of plaintiff’s claims are lacking. The Telephone Consumer Protection Act does not prohibit the use of an automatic dialing system to call plaintiff’s home telephone. The Connecticut Unfair Trade Practices Act does not apply because plaintiff did not suffer an ascertainable loss of money or property. A Connecticut law that regulates telephone solicitation (Conn. Gen. Stat. § 42-288a) does not apply to debt collection calls. And although the many phone calls to plaintiff were bothersome, no facts plausibly suggest that plaintiff suffered a foreseeable illness or injury that would allow him to maintain a claim for negligent infliction of emotional distress. Accordingly, I will grant in part and deny in part defendant’s motion for judgment on the pleadings. 

But, it was Judge Meyer’s discussion of the FDCPA claim that is the focus of this article. Judge Meyer notes: 

“The relevant provision of the FDCPA provides that “a debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.” 15 U.S.C. § 1692d. The statute lists a specific example of conduct that violates this prohibition: “Causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.” 15 U.S.C. § 1692d(5). 

………defendant argues that the alleged pattern of calls—29 calls over a period of 24 days—is legally insufficient to show an intent to annoy, abuse, or harass plaintiff as the statute requires. This seems like a lot of calls to me, and I cannot agree that the pattern is so insubstantial that it fails as a matter of law.” Emphasis added by insideARM. 

Judge Meyer discusses the call log: 

“The call log attached to the complaint shows multiple days when more than one call was made: three calls on February 17, 2015, four calls on February 26, two calls on February 28, three calls on March 2, and then two calls each on March 3, 4, 6, 9, 10, and 11. Doc. #1-1 at 26. Even though the calls did not occur at odd hours and there are no allegations of any abusive comments made by defendant during these calls, it is far from implausible to conclude on the basis of the frequency and pattern of calls that plaintiff could prove an intent to annoy, abuse, or harass. 

There is enough here for the complaint to survive the pleading stage. Plaintiff has alleged enough facts to state plausible grounds from relief for his claim of annoyance, harassment, and abuse under 15 U.S.C. § 1692d. Accordingly, I will deny defendant’s motion for judgment on the pleadings with respect to plaintiff’s FDCPA claim.” 

insideARM Perspective 

It should be noted and highlighted that this opinion is only a denial of a motion for judgment on the pleadings. All the judge is saying is that at this stage of the proceedings plaintiff has a plausible claim. Plaintiff will still need to convince a judge or jury that there was an intent to “abuse, harass or annoy.” 

It is also interesting that the court spent little to no time discussing the alleged dispute of the debt and request to stop calling. That issue will be a significant element of the claimed intent to abuse, harass, or annoy. 

It should also be noted that the case is being pursued pro se by Mr. Lundstedt. It has been my experience that courts tend to be very liberal and generous to pro se litigants. While the complaint passed muster on a motion for judgment on the pleadings, proving the elements alleged will be a heavier lift for Mr. Lundstedt. 

On the other hand, defending a case brought by a pro se litigant often comes with a high cost. In Judge Meyer’s order, he references another case brought by Mr. Lundstedt that is also in front of Judge Meyer. That case is Lundstedt v. Deutsche Bank National Trust Company, et al (Case No 3-13-cv-1423, U.S.D.C. District of Connecticut). That case was filed in September of 2013, and is still pending. The court’s docket report shows 262 separate entries.

On Tuesday a federal judge in New Jersey dismissed a putative class action under the Fair Debt Collection Practices Act (FDCPA) alleging that the use of an abbreviation for a registered trade name in a voicemail message violated § 1692 of the FDCPA. The case is Levins v. Healthcare Revenue Recovery Group, LLC, (Case No. 1-17-cv-00928, U.S.D.C, District of New Jersey). 

Specifically, plaintiffs contended that the collection practices of defendant Healthcare Revenue Recovery Group (HRRG) violated the FDCPA, because the practices: 

(a) fail to provide meaningful disclosure of HRRG’s identity;

(b) use false representations and deceptive means to collect or attempt to collect any debt and to obtain information concerning a consumer; and

(c) use the name of any business, company, or organization other than the true name of the debt collections business, company, or organization. 

A copy of the court’s opinion can be found here. 

Background

HRRG is a Limited Liability Company existing pursuant to the laws of the State of Florida. It operates as a debt collector, with principal place of business in City of Sunrise, Florida. “ARS Account Resolution Services” is an unincorporated division of HRRG and registered as an alternative trade name for HRRG with the State of New Jersey. 

Plaintiffs allegedly owed a medical debt. That debt was placed with HRRG for collection. HRRG then contacted plaintiffs via telephone and left messages in an attempt to collect the alleged debt. HRRG’s pre-recorded message is transcribed as follows: 

ARS calling. Please return our call at 1-800-694-3048. ARS is a debt collector. This is an attempt to collect a debt. Any information obtained will be used for that purpose. Again, our number is 1-800-694-3048. Visit us at www.arspayment.com. 

Plaintiffs alleged that this message violates FDCPA. First, they maintained that it does not satisfy the “meaningful disclosure” requirement. § 1692(d)(6). Plaintiff noted that there are other debt collectors, along with numerous other types of businesses, that use the name “ARS” in New Jersey. As such, plaintiffs maintained that the only way for plaintiffs and/or a least sophisticated consumer to obtain the identity of the caller, and to ascertain the purpose underlying the messages, was to place a return call to the telephone number provided. Plaintiffs alleged that this constituted an inappropriate duty to investigate.

Plaintiffs further contended that it is deceptive and improper to abbreviate “ARS Account Resolution Services” as “ARS” for the purposes of collection because “ARS” is not the defendant corporation’s true name. Plaintiffs brought this case as a class action on behalf of all persons with addresses in the State of New Jersey for whom HRRG left such a voice message. 

HRRG brought a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief may be granted. 

The Court’s Opinion 

The court granted HRRG’s motion to dismiss.

First the court addressed the “meaningful disclosure” argument. 

Per the opinion: 

“HRRG maintains that the messages it left are within relevant parameters allowed by the FDCPA. HRRG’s position is correct—the facts pleaded do not constitute violations of the FDCPA and thus the Plaintiffs have not presented a plausible basis for relief. 

HRRG’s messages unmistakably inform the consumer that HRRG is calling to collect a debt. ARS is an alternate trade name for HRRG registered with the State of New Jersey. The least sophisticated consumer understands that “[t]his is an attempt to collect a debt” unambiguously means just that. A return number and website are provided as well should the consumer have any questions as to the caller’s identity or intentions. 

Such plain identification and disclosure leaves no doubt as to the nature of the call and who Plaintiffs allegedly owe money to. As such, HRRG’s messages satisfy the meaningful disclosure requirement.” 

The court then addressed the use of the abbreviation “ARS” as an alternative trade name. The court noted that “§1692(e)(14) of the FDCPA states that no business, company, or organization may use a name other than its true name. But, “true name” has been found to include registered alternate names. See Boyko v. Am. Int’l Group., Inc., No. 08-2214, 2012 WL 2132390 (D.N.J. June 12, 2012). To use an alternate name, the business, company, or organization must register or license the alternate name where it was incorporated, where it maintained its principal place of business, or where the Plaintiff was injured.” 

The court then noted: 

“Plaintiffs maintain that abbreviating “ARS Account Resolution Services” to “ARS” for the purposes of the phone message is improper. This Court cannot agree. See Pescatrice v. Elite Recovery Serv., 2007 U.S. Dist. LEXIS 29616 (S.D. Fla. 2007). The word “name” encompasses references to a corporation by its initials. See Strand v. Diversified Collection Serv., 380 F.3d 316 (8th Cir. 2004). HRGG registered the name “ARS Account Resolution Services” as an alternate trade name with the State of New Jersey. Plaintiffs’ alleged injury occurred in the State of New Jersey. As such, HRRG’s use of “ARS” is acceptable. Such an abbreviation of HRRG’s trade name does not prejudice Plaintiffs—it is not deceptive.” 

Finally, the court addressed the issue of whether the phone calls constituted false representation or deceptive means of collecting. 

“As discussed, HRRG’s use of “ARS” constitutes a “true name” and provides meaningful disclosure of HRRG’s identity. Plaintiffs and/or least sophisticated consumers can tell who is calling and for what reason. While Plaintiffs argue that the inclusion of a phone number and internet website improperly shifts the burden to the consumer to investigate the nature of the call, this is not so. Instead, these additions constitute further means of ensuring that there are not any mistaken or false representations about either identity or purpose. Furthermore, HRRG warns consumers that any information provided in these calls will be used to collect a debt. Thus there is no violation of 15 U.S.C. § 1692(e)(10), as any attempts to collect information have been explicitly flagged and are therefore not deceptive.” 

insideARM Perspective

This a good case to study when considering using trade names or abbreviations of trade names in any communications with a consumer. 

The ARM industry is made up of a myriad of 3-initial companies. In fact, insideARM is aware of at least several other companies in the ARM space that use the “ARS” acronym. It can be confusing. 

While the court in this case did not spend a lot of time discussing it, insideARM believes that the reference to the company website in the voicemail message was a significant factor in determining that HRRG had provided meaningful disclosure. The reference to the website negates any argument about confusion as to other ARM firms with the same acronym.

Last Friday the Eleventh Circuit Court of Appeals issued an opinion addressing two specific issues under the Fair Debt Collection Practices Act (FDCPA): 

• Whether a voicemail left by a debt collector constitutes a “communication” under the FDCPA
• What information will and will not constitute a “meaningful disclosure”

The case is Hart v. Credit Control, LLC (Case No. 16-17126, U.S. Court of Appeals, Eleventh Circuit. A copy of the opinion can be found here. 

Background 

In March 2015 the plaintiff, Stacey Hart, received a call from Credit Control, LLC (Credit Control), a debt collector. When Hart did not answer the phone, Credit Control left a voicemail which, in its entirety, stated:

This is Credit Control calling with a message. This call is from a debt collector. Please call us at 866-784-1160. Thank you.

The call was Credit Control’s first communication with Hart. Although Credit Control was attempting to collect a debt from Hart, the individual caller did not disclose that information. Nor did the individual caller identify herself by name. Following that initial call and voicemail, Credit Control continued to call Hart, leaving substantially similar voicemails each time.

Hart filed a complaint in the Middle District of Florida alleging that Credit Control violated two provisions of the FDCPA—§ 1692e(11) and § 1692d(6)—governing false or misleading representations and harassment and abuse respectively.

Prior to any Discovery, Credit Control filed a motion to dismiss the complaint. The district court dismissed Hart’s claims.  In granting Credit Control’s motion to dismiss, the district court found that Credit Control did not violate § 1692e(11) because the first voicemail was not a “communication” within the meaning of the statute. The district court also found that Credit Control did not violate § 1692d(6) because its caller provided Hart with “meaningful disclosure.” The court reasoned that the voicemails provided “meaningful disclosure” because they contained enough information not to mislead the consumer as to the purpose of the call. 

After the order of dismissal Hart timely appealed the District Court decision. 

The Eleventh Circuit Opinion 

The appeal was heard by a three judge panel. 

In her complaint and on appeal Hart alleged and argued that Credit Control violated two sections of the FDCPA— § 1692e(11) and § 1692d(6). First, she argued that Credit Control violated § 1692e(11) when it failed to make the required disclosures for initial communications in its first voicemail to her. Second, she claimed that Credit Control violated § 1692d(6) when its individual callers did not identify themselves by name in any of the voicemails, thus failing to provide her with “meaningful disclosure.” 

Credit Control argued: 1) that it was not required to make such disclosures because the voicemail was not a communication, and 2) that the individual caller’s name is not necessary for such disclosure. 

Was the Voicemail a “Communication” under the FDCPA? 

In short, the court agreed with Hart and determined that the initial voicemail left by Credit Control was a communication within the meaning of the FDCPA, thereby triggering the requirements of § 1692e(11). 

Per the opinion: 

“The voicemail left by Credit Control falls squarely within the FDCPA’s definition of a communication. And because it was Credit Control’s initial communication with Hart, Credit Control’s failure to make the required disclosures was a violation of § 1692e(11). 

Credit Control’s first voicemail to Hart falls squarely within the FDCPA’s broad definition of communication. The voicemail, although short, conveyed information directly to Hart—by letting her know that a debt collector sought to speak with her and by providing her with instructions and contact information to return the call. The voicemail also indicated that a debt collector was seeking to speak to her as a part of its efforts to collect a debt. 

Whether it was the debt collector’s first communication with the consumer is significant only in determining whether the debt collector should have given the required disclosures, also known as the “mini Miranda” warning. Here, Credit Control should have provided Hart with the required disclosures. The FDCPA requires the “mini Miranda warning” to be given in the initial communication between a debt collector and consumer. Specifically, this warning requires that the debt collector disclose that he or she is “attempting to collect a debt and that any information obtained will be used for that purpose.” In this case, because the voicemail was not only a communication, but the first communication, Credit Control was required to do just that.” 

Did the Voicemail provide “Meaningful Disclosure?” 

On the second issue presented, the court agreed with Credit Control. The court ruled that Credit Control did not fail to provide meaningful disclosure in voicemails that did not leave a name of the caller. 

Per the opinion: 

“Generally, § 1692d aims to protect consumers from harassment and abuse by unscrupulous debt collectors and subsection (6) prohibits debt collectors from placing calls without “meaningful disclosure of the caller’s identity.” In pertinent part, the FDCPA prohibits debt collectors from: engag[ing] in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. Without limiting the general application of the foregoing, [it] is a violation of this section . . . [to place] telephone calls without meaningful disclosure of the caller’s identity. 

The FDCPA is silent on what constitutes “meaningful disclosure.” We hold that meaningful disclosure does not require the individual caller to reveal her name, and this holding comports with text of the FDCPA. The individual caller here is working on behalf of the debt collection company, which is the actual entity collecting the debt. An individual caller’s name is ancillary to the debt collection company’s name and adds little value to a consumer who seeks to complain about the debt collection company’s behavior. The company is collecting the debt; the caller is merely an arm of the company. Equipped with the knowledge that the call is being placed on behalf of a debt collection company and the company’s name, a consumer has enough information to protect herself under the FDCPA. 

Because the individual callers here disclosed that they were calling on behalf of Credit Control, a debt collection company, Hart was provided with meaningful disclosure, and thus no violation of § 1629d(6) occurred.” 

The Court of Appeals remanded the case back to the district court for further proceedings consistent with their opinion. 

insideARM Perspective 

This is a very interesting case. Litigation over voice messages has been a hotbed of consumer litigation for years. We can now add this case to the long list of voice message cases. 

The message left in the case is what is generally referred to as a “limited content” message. 

In the CFPB’s July 2016 “Outline of Proposed Debt Collection Rules” the bureau specifically discussed “limited content” messages. The CFPB indicated that they were considering a proposal that would provide that no information regarding a debt is conveyed — and no FDCPA “communication” occurs — when collectors convey only: (1) the individual debt collector’s name, (2) the consumer’s name, and (3) a toll-free method that the consumer can use to reply to the collector. See the insideARM discussion of this proposal here.

The Credit Control message, while limited, did not contain all of the elements suggested by the CFPB. Additionally, and most important for this court, the Credit Control voicemail message was also the FIRST communication with the consumer. That was an important distinction for the court. 

On the other hand, in light of the Eleventh Circuit discussion on whether the message provided “meaningful disclosure,” this court may come to a different conclusion in the case had Credit Control previously sent an initial letter with the full disclosures required under § 1692e(11).

One final note, the original motion to dismiss was filed before any discovery was completed. Thus,both  the original decision by the district court to dismiss the case and the Court of Appeal’s de novo review were made without benefit of a record from Discovery.

Can a bank be sued for acting as a “debt collector” under the California Rosenthal Act?  You are probably tempted to answer “yes” it can, because you know the Act defines a “debt collector” to include an entity that is collecting on behalf of itself or on behalf of third parties.  But a closer look at the activities performed by employees of the bank in question may reveal that it is not, in fact, collecting on its own behalf. Instead, all collection activities may be handled through separate, though related, servicing companies, or by third parties. A consumer may have no basis for suing the bank under the Rosenthal Act, and elimination of the bank from the action could significantly reduce the available damages and decrease business interruption for bank officers. 

First, a quick review of some key provisions of the Rosenthal Act.  Unlike the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692, et. seq., (“FDCPA”), which, generally speaking, only applies to third party debt collectors, the Rosenthal Act broadly defines a “debt collector” to include persons or entities that collect on behalf of themselves or others.  See Cal. Civ. Code § 1788.2(c) (“The term ‘debt collector’ means any person who, in the ordinary course of business, regularly, on behalf of himself or herself or others, engages in debt collection. . . .”) (emphasis added). The Act defines “debt collection” as “any act or practice in connection with the collection of consumer debts.”  Id. § 1788.2(b). The Rosenthal Act also incorporates by reference certain sections of the FDCPA, and makes any violation of those FDCPA provisions into a violation of California state law.  Id. § 1788.17.  Courts have held that consumers may pursue class actions under the Rosenthal Act, and the statutory damages in such cases are capped at the lesser of $500,000 or one percent of the net worth of the defendant.  See, e.g., Gonzales v. Arrow Financial Services, LLC, 660 F.3d 1055, 1065 (9th Cir. 2011). 

Thus, if the employees of a bank actually handle collection activity on behalf of the bank, it may be a “debt collector” subject to the Rosenthal Act. But if the bank relies on employees of a related servicing company or other third parties to collect, then is the bank actually engaged in “debt collection” as defined by the Act? Probably not. 

If the bank does not have employees who engage in collection efforts, such as making collection phone calls or sending collection letters, there is a strong argument the bank is not a “debt collector” under the Rosenthal Act. In an analogous context, courts have regularly held that a debt buyer who simply purchases and owns unpaid accounts, and then utilizes other entities to actually collect them, is not a “debt collector” under the FDCPA.  See, e.g., Gold v. Midland Credit Mgmt., Inc., 82 F. Supp. 3d 1064, 1072-73 (N.D. Cal. 2015) (summary judgment granted on FDCPA and Rosenthal Act claims for debt buyer that retained affiliate company to collect debts); Kasalo v. Trident Asset Mgmt., LLC, 53 F. Supp. 3d 1072, 1077 (N.D. Ill. 2014) (“[a]n entity that acquires a consumer’s debt hoping to collect it but that does not have any interaction with the consumer itself does not necessarily undertake activities that fall within this purview.”); Scally v. Hilco Receivables, LLC, 392 F. Supp. 2d 1036, 1037 (N.D. Ill. 2005) (“Hilco did not act directly to collect Scally’s debt: Hilco never contacted Scally to collect the debt nor did Hilco mail the allegedly offending collection letter. Rather, Hilco outsourced the activity of debt collection to co-defendant MRS, which mailed the letter that is the basis of Scally’s complaint.”). 

Why does any of this matter, you may ask?  Well, it may matter a lot, depending on the claims asserted in the litigation, the identity of the parties, and the procedural posture of the case. If the only claim asserted against the bank arises under the Rosenthal Act, it may be subject to a dispositive motion, thereby sparing the bank and its officers of the cost and distraction associated with litigation. Employees of the servicing companies who actually do the collection work will likely make better witnesses to support other defenses to a Rosenthal Act claim. Eliminating the bank as a defendant could also impact the damage exposure in the case. For example, in a Rosenthal Act class action, statutory damages are capped at the lesser of $500,000 or one percent of the net worth of the debt collector. The dismissal of a bank from the case could significantly reduce the exposure to statutory damages.  Depending on the procedural posture of your case, there may be other strategic considerations bearing on when and how this defense is best raised. 

What’s the bottom line? Do not assume that a bank or other financial institution is a “debt collector” under the Rosenthal Act until you closely analyze the functions performed by employees of the bank, as opposed to activities performed by employees of related servicing entities or third parties. If you determine the bank is not a “debt collector” under the Act, think strategically about when and how to break the news to your adversary.