On August 30, 2017, in a Fair Debt Collection Practices Act (FDCPA) case involving almost the exact same facts as a case insideARM wrote about on July 20, 2017, a federal judge in New Jersey disagreed with the judge in the prior New York case and denied a motion for summary judgment in favor of the defendant. The case is Ridgeway v. AR Resources, Inc. (Case No 16-1188, U.S.D.C., District of New Jersey).

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

Background 

The case involves a FDCPA claim. Plaintiff Christine Ridgeway alleged that she disputed a debt with defendant AR Resources, Inc., a debt collector, but AR Resources failed to identify the debt as disputed or to delete the debt. The fact situation is familiar to those at many ARM firms – faxed dispute letters from credit repair company, Collection Shield 360. 

In October, 2015, defendant AR Resources received a one-page letter by fax, with no coversheet. At the top of the page, the letter states that it is “FROM:” Plaintiff Christine Ridgeway, and bears Ridgeway’s home address in New Jersey. No other sender is identified, although the fax header printed on the letter bears a fax number with an area code of 414, and the time stamp is in Mountain Daylight Time. The letter goes on to identify the debt at issue by name on the account (Christine Ridgeway), the last four digits of Ridgeway’s social security number, Ridgeway’s date of birth, the creditor, and the balance of the debt. The remainder of the letter appears to be a boilerplate form stating, among other things, “I dispute this debt.” The letter bears the electronic “/s/” signature of Christine Ridgeway. 

Ridgeway testified at her deposition that she did not draft the letter. A “credit repair agency,” Collection Shield 360 (CS360), wrote the letter after Ridgeway called the company. Ridgeway testified that she specifically asked CS360 to dispute the AR Resources debt.

The record contained a one-page “Collection Shield Service Agreement” electronically signed by both CS360 and Ridgeway. The agreement states in relevant part, “I, Christine Ridgeway, hereby authorize, [CS360], to make, receive, sign, endorse, execute, acknowledge, deliver, and process such applications, correspondence, contracts, or agreements to credit reporting agencies and creditors/collection agencies as necessary to improve my credit.” The agreement is undated. 

AR Resources moved for summary judgment on the one-count complaint.

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. 

On July 20, 2017 insideARM wrote about a very similar case, involving almost identical facts and the same defendant, Taylor-Burns v. AR Resources, Inc. (Case No. 16-cv-1259, U.S.D.C. Southern District of New York). In that case, New York district court judge Robert W. Sweet, forcefully determined that the CS360 Agreement failed to comply with seven different requirements of the Credit Repair Organizations Act (“CROA”), 15 U.S.C. § 1679 et seq. and therefore void and unenforceable.  Judge Sweet wrote:

“The lack of a CROA – compliant contract between CS360 and Plaintiff – and therefore the lack of a valid contract between CS360 and Plaintiff – means that CS360 had no authority to send the Letter on Plaintiff’s behalf. 

As previously noted, the Plaintiff testified that she did not prepare, sign, or send the Letter. She contacted CS360, which sent the Letter on her behalf. Therefore, no valid dispute was made, ARR cannot be liable for an alleged failure to report the debt as disputed, and the ARR motion for summary judgment dismissing the Complaint is granted.” 

In the instant case, the Honorable Noel L. Hillman considered the Taylor-Burns opinion, but disagreed with Judge Sweet’s analysis and refused to follow the same logic. Per Judge Hillman:

“In the undersigned’s view, however, even if (1) the Ridgeway-CS360 Agreement violates the CROA, and even if (2) that violation of law invalidates the Agreement (both issues the undersigned need not, and does not, decide), it does not follow that (3) CS360 had no authority to send the letter on Ridgeway’s behalf.

A reasonable factfinder could find on this record that CS360 had authority to act on Ridgeway’s behalf, and therefore Ridgeway, through her agent, CS360, disputed the debt at issue even if Ridgeway and CS360 did not have a CROA-compliant contract. Independent from the disputed written agreement, Ridgeway testified that she called CS360 and asked them to dispute the debt at issue, and in response, CS360 faxed the above-quoted correspondence.

However, we view these sections as voiding such contracts as between the parties to such agreements, i.e., the consumer and the credit agency, not provisions intended to shield third party debt collectors from conduct that may violate another consumer protection law. It truly would be ironic to deny a plaintiff the protections of the FDCPA because she had been a victim of the CROA. Here, as we have noted, Plaintiff makes no complaint of CS360 under the CROA. To the contrary, she insists they acted with her knowledge and approval. She alone – not Defendant – has standing to void any contract she may have with CS360 under the CROA.

AR Resources’ Motion for Summary Judgment on the FDCPA claim will be denied.”

insideARM Perspective

It will be interesting to see what happens next. This case is not over. The judge only denied a motion for summary judgment. Hopefully AR Resources will continue to defend the case and take it to trial. Two similar cases and two disparate results… it would be nice to get some consistency from the courts.

ARM firms are constantly struggling with how to deal with high volume validation requests or disputes. It seems that it is a strategy employed by many credit repair organizations and/or consumer rights law firms. The original case (Taylor-Burns v. AR Resources, Inc) provided strong language from a New York judge that saw significant issues with the practices of CS360. The judge went even further in discussing that firm’s relationship with the RC Law Group.

In light of the Taylor-Burns case it is likely that we have not seen the last of cases like this where a defendant ARM firm vigorously defends itself in a similar case.

SACRAMENTO, Calif. -– The members of Receivables Management Association (RMA) have kept close in mind those affected by Tropical Storm Harvey.

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The storm resulted in widespread devastation and thousands of displaced families. FEMA has stated that recovery will take multiple years. While no amount of time can fully heal the physical and emotional toll of a disaster of such magnitude, RMA recommends all members temporarily suspend collection calls and communications to consumers in the affected area. Those in the Houston metroplex and Louisiana should be given space to focus on the primary needs of their families; it will take time before many regain a level of normalcy.

Several of our members have indicated a desire to reach out to RMA family experiencing duress. Many businesses are in need of office space in order for employees to continue earning a living during this time of hardship. Please contact RMA if you are able to offer support to your fellow members; RMA will put you in touch with members in need.

RMA encourages its members to consider volunteer and fundraising efforts for those affected by the storm. Share your stories with RMA, so we may inspire others to give, as well. Whether it’s your time, talents, funds, or office space, there is always a way to give back.

To help those affected by this natural disaster, please consider donations to the following humanitarian groups:

• Donations to the Red Cross can be made online at RedCross.org/donate, or text “HARVEY” to 90999. The Red Cross is currently serving about 130,000 meals per day in the affected area.
• Donations to the Salvation Army can be made online at Give.SalvationArmyUSA.org.
• All Hands is a nonprofit with staff on the ground in Texas, and is in contact with emergency management officials about assisting in the response and recovery. You can give at Hands.org.

• The Houston Humane Society is helping to care for and shelter pets in the area. You can give at HoustonHumane.org. The Society for the Prevention of Cruelty to Animals of Texas is doing the same. You can donate at SPCA.org.

• The Hurricane Harvey Relief Fund is administered by the Greater Houston Community Foundation. To make a tax-deductible donation, visit the GHCF website.

• Tax-deductible donations to the Houston Food Bank will help feed victims. Click here to donate.

• Texas Diaper Bank is working to meet the basic needs of vulnerable babies, children with disabilities, and seniors. Contributions are tax-deductible.

About Receivables Management Association International

Receivables Management Association International (RMA) is the nonprofit trade association that represents more than 550 companies that purchase or support the purchase of performing and nonperforming receivables on the secondary market. The Receivables Management Certification Program and Code of Ethics set the global standard within the receivables industry due to its rigorous uniform industry standards of best practice which focus on the protection of the consumer. RMA provides its members with extensive networking, educational, and business development opportunities in asset classes that span numerous industries. The association continually sets the standard in the receivables management industry through its highly effective grassroots advocacy, conferences, committees, task forces, publications, webinars, teleconferences, and breaking news alerts. Founded in 1997 as the Debt Buyers Association, RMA is headquartered in Sacramento, California.

This article was authored by Ari Schwartz and Jami Mills Vibbert. It was previously posted on Venable.com and is re-published here with permission.

On Monday, the first of several cybersecurity requirements for entities regulated by the New York Department of Financial Services (DFS) came into effect. As discussed at length in our prior alerts, the requirements broadly cover all entities operating under or required to operate under DFS licensure, registration, or charter, or which are otherwise DFS-regulated, as well as, by extension, unregulated third-party service providers to regulated entities.

The regulations that came into effect include some of the most onerous provisions of the law. Several of the provisions focusing on people and process controls became effective, including:

1. The maintenance of a cybersecurity program based on periodic risk assessments and designed to identify and assess risks, protect information systems and nonpublic information, detect, respond to, and recover from cyber events, and fulfill all reporting obligations. Section 500.02.
2. The maintenance of a set of written policies and procedures designed to protect information systems and nonpublic information, including a written incident response plan. These procedures must also provide for the notification of DFS within 72 hours of a determination that a cybersecurity event has occurred. Sections 500.03, 500.16, and 500.17.
3. The designation of a chief information security officer to oversee the cybersecurity program and other qualified cybersecurity personnel to manage cyber risks. Sections 500.04 and 500.10.

In addition, two difficult-to-implement technology security controls are included in those that became effective Monday:

1. Access controls (that is, the limitation of user’s access to that necessary). Section 500.07.
2. Data minimization and secure disposal. While secure disposal is relatively straightforward, limiting data retention to a period that is no longer than necessary for business operations or other legitimate business purposes can be difficult and requires an extensive and holistic data classification and information governance program. Section 500.13.

Although some of the other provisions do not become effective for another six months to a year, this first effectiveness deadline has shown that even focused and risk-based cybersecurity regulations can cause a huge shift in how companies manage and oversee cybersecurity. Enforcement by DFS will show the flexibility and focus in these regulations, but until then companies will need to be prepared to enact even the most difficult of these controls.

For questions or more information, please contact Jami Mills Vibbert at 212.370.6288 orjvibbert@Venable.com; or Ari Schwartz at 202.344.4711 or aschwartz@Venable.com.

insideARM maintains a free TCPA resources page to provide the ARM community a destination for timely and topical information on the Telephone Consumer Protection Act of 1991 (“TCPA”). This page is generously supported by Neustar. See the page here or find it in our main navigation bar from any page on insideARM under Compliance Portals.

The cornerstone of the page is a chart of significant TCPA cases. Click on the link in the chart for the complete text of the decision. Where insideARM has already published a story on the case, we provide a link. Case information is provided by the Bedard Law Group.

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It has been a busy summer for the courts, which have been weighing the many complex issues wrought by the TCPA. The following are some of the cases published in the last 60 days that should be interesting to members of the ARM community.

Schweitzer v. Comenity Bank

The gist: Plaintiff Schweitzer limited her consent to a collection agency’s calls by making clear the times that she was not able to take those calls. Comenity’s collectors continued to make automated calls, and Schweitzer brought suit. The court found that yes, the TCPA allows consumers to “provide limited, i.e., restricted, consent for the receipt of automated calls. It follows that unlimited consent, once given, can also be partially revoked as to future automated calls under the TCPA…Our conclusion is supported by the maxim that the greater power normally includes the lesser. We think it logical that a consumer’s power under the TCPA to completely withdraw consent and thereby stop all future automated calls…encompasses the power to partially withdraw consent and stop calls during certain times.”

Daubert v. NRA Group, LLC

The gist: Plaintiff Daubert sued under the TCPA for 69 calls placed by an autodialer without his express consent, and won. He also initially prevailed on his FDCPA claim based on a visible bar code on a notice for the same debt, but was denied a motion for summary judgment. Defendant NRA appealed, and the appeals court upheld the TCPA decision but reversed the FDCPA win. The key takeaway from the case?  A $25 Medical Bill Turns into $34,500 TCPA Judgment. The court found there was no express consent for the calls.

Susinno v. Work Out World Inc.

The gist:  Noreen Susinno alleged that she received an unsolicited call on her cell phone from Defendant fitness company Work Out World (WOW). She didn’t answer the call, and WOW left a prerecorded promotional offer on her voicemail. Susinno alleges that the call and message violated the TCPA’s prohibition on pre-recorded calls to cellular telephones. WOW moved to dismiss Susinno’s complaint for lack of subject matter jurisdiction, and the motion was granted. But in July, appeals court decided the TCPA provides Susinno with a cause of action, and her alleged injury is concrete. The case now has a clear runway to proceed.

Fulton Dental, LLC v. Bisco, Inc.

The gist:  Putative class representative, Fulton Dental, LLC, received an unsolicited fax from defendant Bisco, Inc., and sued for damages. Before Fulton moved for class certification, Bisco tendered an offer to Fulton under Rule 67, which allows a party to deposit a payment with the court. The district court concluded that Bisco’s maneuver was enough to moot Fulton’s individual claim and to disqualify Fulton Dental from serving as a class representative, so it dismissed the entire action. This dismissal was reversed, with the Seventh Circuit finding that an unaccepted offer to settle does not moot a plaintiff’s case, adding,”…we see no principled distinction between attempting to force a settlement on an unwilling party through Rule 68…and attempting to force a settlement on an unwilling party through Rule 67. In either case, all that exists is an unaccepted contract offer, and as the Supreme Court recognized, an unaccepted offer is not binding on the offeree.” The case is returned to the district court for further proceedings.

Borecki v. Raymours Furniture Co., Inc.

The gist: Plaintiff Scott Borecki purchased a bedroom set from defendant Raymour Furniture Co., Inc., d/b/a Raymour & Flanigan, and provided Raymour his cell phone number so that he could be reached when the furniture was ready to be claimed. That transaction also entered Borecki into an arbitration agreement with Raymour.  Nearly three years later, Raymour sent Borecki cell spam advertising without his consent. The arbitration agreement in place since the furniture purchase was invoked by Raymour in a motion to compel arbitration. The court decided that Borecki’s claim, styled as a putative class action, was not governed by the earlier arbitration agreement, which the court found to be too narrow. The case will proceed.

insideARM Perspective

For any major piece of legislation of the breadth as the TCPA (take ERISA for example), the body of case law that emerges to define its boundaries ends up being wide and deep. Eventually, litigation tapered off for ERISA after four decades, but the TCPA is not as seasoned, and is clearly in its period of trial by fire. While a challenge to the ARM community, the limits of the TCPA in the courtroom will ultimately carve a clearer path for an industry working toward more transparency and better consumer protection protocols.

This summer’s cases all had what are considered negative outcomes for the ARM space. These suits grappled with the critical issues of consent/revocation of consent, who has standing to make a claim under the TCPA, and how a claim can be shunted—all ultimately questions about the power of consumers. Understandably, the courts want and need to explore those questions in their entirety, and seem to be leaning toward interpretations that remove procedural impediments that could squash cases and prevent that exploration.

Rather than take a purely negative view, we’re inclined to see this as a period of learning for every player in the ARM space. This difficult legal landscape is also a great teacher and can be the backdrop for tremendous improvement.  

As a general rule, insideARM does not write stories that could be considered “infomercials” for a product or service. Today we are making a bit of a U-Turn on that policy. But, recent events in Houston are a good reason for the temporary shift in policy.

The written and video accounts of the impact of Hurricane Harvey have been quite dramatic. Anyone who doesn’t have some sympathetic feelings for residents of Houston and the surrounding area probably needs to be checked for a pulse.  The damage to the residents is life changing and horrific. Meanwhile, we see things like this from the Federal Trade Commission, warning people of a flood insurance scam. The IRS also issued this alert regarding fake charity scams relating to Hurricane Harvey. We can only say, scams like these are dispicable. 

This brings us to a timely discussion about a new company in the call center space. The company is called ContactRelief, LLC. The officers at ContactRelief are seasoned contact center operators, having recently retired from United Recovery Systems (URS), a highly-regarded collection agency based in Houston.

Entering the company’s website, you will immediately find their purpose: “Helping business show compassion to consumers in times of disaster.”  That sounds like an admirable goal. But what does it mean? 

insideARM connected with Doug Schultz, Chairman of ContactRelief. Doug told us a little bit about the company – How it came about and what was the product. At URS, Doug and others developed highly sophisticated software, which has been in use since Hurricane Andrew in 1992, to track and suspend calls during disasters.

The company provides real time information to call centers to allow them to tailor outbound calling strategies for areas hit by a disaster. For instance, they provide information that would allow a call center to immediately suspend outbound calling activity to impacted consumers. Per the website, “Our disaster decision engine helps you make the best decisions – for your business, for your brand – and most importantly, your customers.”

In light of Hurricane Harvey, ContactRelief has stepped to the plate and made a very generous offer to the contact center industry.  Just yesterday, the company made this announcement in an email sent to their industry contacts: 

“Below is a graphic of ContactRelief’s current contact suspension and resumption recommendations. The red color shows counties still under contact suspension. The dark green represents we had recommended suspensions but have now advised contact resumptions. The light green color represents today’s contact resumption recommendations. 

If you visit our website at www.contactrelief.com and click the “Media” tab, you will see the actual names of the counties and parishes currently under contact suspension recommendation in our recent posts.  

I encourage you to share our posts with your LinkedIn connections as well as email your friends who operate contact centers. Should they desire the actual zip codes, area codes, or area code and exchanges for our recommendations, please ask them to go to our “Contact Us” tab, and fill in their information. In the Comments section, have them list the email addresses of the people they would like to have the information sent to. The information can be sent in an Excel format or in a comma delimited file. ContactRelief will also provide you with daily updates to their recommendations throughout the duration of this disaster event. 

Due to the severity of this disaster event, we are offering this free of charge, and there is no obligation to license our ContactRelief service. 

I know that this may require some effort on your part, but you will be assisting many consumers that are currently suffering under this record setting disaster event.” 

insideARM Perspective

Regardless of whether or not you think the ContactRelief product is something that make sense for your business, you have to applaud the company’s efforts to raise awareness of this issue.

Speaking from personal experience, past efforts in this area have been ad hoc and clumsy at best. A client may send an emergency email directing suspension of calls into a particular zip code or area code, but it was often too little, too late.  Operations needed to react AFTER the fact and with little additional guidance. No two clients provided the same direction. Many offered no direction.

Being proactive and sensitive to consumers suffering in these types of situations is simply the right thing to do. 

Kudos to the ContactRelief team.

Collection letters are the bane of our industry. Letters are expensive to send and – despite what a certain television pundit claims – studies prove that few consumers actually read collection letters. The CFPB, the FCC and other regulators pay little more than lip service to the urgent requests from consumer advocates to allow collectors to communicate with consumers electronically, with states such as New York enacting Byzantine and unworkable rules to “allow” collectors to communicate with consumers via email. 

It is anticipated that the CFPB, in its upcoming notice of proposed debt collection communication rules, will adopt standards for electronic communications similar to the convoluted rules found in New York. Ultimately it is consumers who are harmed by these rules that disregard modern electronic communications in favor of antiquated collection letters. Further, consumer attorneys scrutinize collection letters, measuring the font size of disclosures and injecting tortured interpretations of plain language to find possible lawsuits (and potential paydays) against collection agencies diligently seeking to comply with the law. 

In the latest episode of the Debt Collection Drill podcast, Moss & Barnett attorneys John Rossman and Mike Poncin discuss a new wave of lawsuits against debt collectors in California which focuses on the font size of certain disclosures, and in New York, which centers on a misreading of Second Circuit case law. 

Click here to listen to the podcast

On Monday a federal judge in Pennsylvania ruled that, as a matter of law, the language in a letter sent to a consumer that discussed 1099(c) tax consequences would be considered a “false representation or deceptive means to collect or attempt to collect a debt” by the least sophisticated debtor.”  The case is Balon v. Enhance Recovery Company, Inc. (Case No. 3-16-cv-0410, U.S.D.C. Middle District of Pennsylvania).

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

On July 11, 2016 insideARM published an article about this case written by Thomas Dominczyk, Attorney at Law and member of the Maurice Wutscher law firm. That article discussed the court’s June 2, 2016 denial of a motion by Enhanced Recovery Company, Inc., (ERC) to dismiss the case. In that article, Dominczyk succinctly summarized the facts of the case:

“A consumer filed a complaint against a debt collector alleging the defendant supposedly violated the federal Fair Debt Collection Practices Act (FDCPA) by sending a letter that stated that “any indebtedness of $600.00 or more, which is discharged as a result of a settlement, may be reported to the IRS as taxable income pursuant to the Internal Revenue Code 6050 (P) and related federal law. The amount of the alleged debt at the time that the letter was sent was $798.67 and the offer to settle was for $638.94. The amount of savings if the offer was accepted would be $159.73.” 

After the June 2, 2016 denial of the ERC motion there was significant activity from both parties. A sample of the activity is highlighted below. 

1. On December 28, 2016, ERC filed a motion to dismiss the complaint for lack of subject matter jurisdiction and brief in support.
2. On January 11, 2017, Plaintiff filed a motion to remand the above-captioned action to state court.
3. Plaintiff filed a motion for summary judgment, statement of undisputed material facts, and brief in support. 

The three (3) motions above were pending before the Court, each of which was fully briefed by both parties. The court’s Memorandum is 42 pages long. William J. Nealon, United State District Court Judge addressed all three motions. 

Defendant’s Motion to Dismiss for Lack of Subject Matter Jurisdiction 

ERC’s motion to dismiss for lack of subject matter jurisdiction was based upon on a Spokeo argument that the plaintiff had not suffered a concrete injury. The court’s discussion of this issue took up 23 pages. In the end, the court determined that: 

“Plaintiff’s receipt of a deceptive communication used to collect or attempt to collect a debt establishes that Plaintiff suffered a sufficiently “concrete” and “particularized” injury for purposes of Article III standing.

Based on the foregoing, Defendant’s motion to dismiss the complaint for lack of subject matter jurisdiction and Plaintiff’s motion to remand, will be denied because Plaintiff has standing to bring the instant claim.”

Plaintiff’s Motion for Summary Judgment 

Having decided that plaintiff had standing to bring the claim, the court then turned to consideration of plaintiff’s motion 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. 

ERC argued that plaintiff’s motion for summary judgment should be denied because her claim presents a question of fact that must be decided by a jury. 

Plaintiff contended in her reply that “Defendant’s argument was inconsistent with binding Third Circuit precedent.” “Specifically,” plaintiff argued, “a collection letter is analyzed through the perspective of the ‘least sophisticated debtor,’ and not through the perspective of the actual plaintiff, the question of whether a debt collection letter violates the FDCPA is a question of law.” 

Judge Nealon agreed with the plaintiff, noting:

“According to the Third Circuit a “majority of courts to have considered this question have . . . held that this determination involves a question of law.’

As a result, Defendant’s argument that Plaintiff’s motion for summary judgment should be denied because the present summary judgment record, specifically whether the letter at issue constitutes a false or misleading communication from the perspective of the “least sophisticated consumer,” presents a question of fact for the jury is without merit. 

Therefore, the Court will address whether Defendant violated the FDCPA as a question of law and, thus, determine whether Plaintiff is entitled to summary judgment based upon the undisputed factual record.” 

Judge Nealon then held: 

“As established by the summary judgment record, it is undisputed that Plaintiff received a letter which stated, in relevant part, that “any indebtedness of $600.00 or more, which is discharged as a result of a settlement, may be reported to the IRS as taxable income pursuant to the Internal Revenue Code 6050 (P) and related federal law.” The letter also stated that the “Amount of Debt” was “$798.67” and the “Settlement Amount” was for “$638.94.” As a result, the amount of savings had the offer been accepted would have been $159.73.

It is determined that the challenged language addressed above, which serves as the basis for Plaintiff’s section1692e(10) claim, would be considered a “false representation or deceptive means to collect or attempt to collect any debt” by the “least sophisticated debtor.” 

As a result, Plaintiff has established that no genuine issues of material fact remain as to any of the elements of the FDCPA claim she advances under section 1692e(10). Additionally, based on these undisputed facts, Plaintiff has established that she is entitled to summary judgment on her claim. As a result, Plaintiff’s motion for summary judgment will be granted. Therefore, judgment will be entered in Plaintiff’s favor.” 

insideARM Perspective 

This case is yet another in the long line of 1099(c) disclosure cases. Results have not been consistent. insideARM has an FDCPA Resources page. Within that page is the insideARM FDCPA case law chart. A quick review of that chart will show multiple 1099(c) cases. 

What should compliance professional take away from this case? Many things.

1. First, 1099(c) letters are an invitation to be sued. Most of the time these letters are sent because a client mandates they be sent. To the extent a collector can convince their client not to require they send such letters, the better off a business will be. If clients still require these letters, a serious discussion with that client on indemnification is in order. 
2. Second, the precise language is important. A review of the 1099(c) cases in the insideARM FDCPA caselaw chart that show a positive result will shed great light on the type of language that courts have found to be acceptable. 
3. Third, while precise language of any disclosure is critical, this specific fact scenario (where the settlement offered was less than $600) should also be considered. One best practice solution is to never send a 1099(c) letter, regardless of the specific language, when the settlement offered is less than $600.

CARROLLTON, Texas -– As an expression of continued support, SWC Group has performed a collection drive for supplies for the Boys & Girls Club of Greater Dallas. Employees were assigned into teams and given a wish list with point values assigned to each item. Needed items included school supplies, games, shoes and socks, cleaning and hygiene supplies. The goal of the contest was to see which team could collect the most points by the end of the month by donating items into their respective team’s box. The winning team received bragging rights for this year as well as a very nice catered lunch. The collection drive was SWC Group’s most successful yet, collecting over $3,500 in supplies.

“The response from our employees has been incredible,” says Jeff Hurt, CEO. “By continuing to support local charities throughout each year, our employees exemplify our company culture of respect and making a positive difference in the lives of others.”

The Boys and Girls Club seeks to enable all young people to reach their full potential as productive, caring, responsible citizens. Their vision is to provide a world-class club experience that assures success is within reach of every young person who enters their doors, with all members on track to graduate from high school with a plan for the future, demonstrating good character and citizenship, and living a healthy lifestyle.

“We continue to support Boys & Girls Clubs of Greater Dallas because of their active commitment to cultivating and supporting area youth,” says Hurt. “We believe that through The Boys and Girls Club, these youth are being given key foundational elements of success through their access to proper education, guidance and support.” Thank you to the Boys and Girls Club for allowing us the opportunity to make such a big impact in the lives of those families and children. 

About SWC Group

SWC Group is one of the nation’s leading providers of accounts receivable management and consumer service solutions.  They bring over 40 years of proven experience in the government, tolling, utility, telecommunications, cable, property management, and education industries. SWC Group annually manages billions of dollars in receivable accounts, proudly serving organizations of all sizes—from Fortune 500 private firms to small public agencies.

Last Wednesday a federal judge in Illinois ruled that a consumer who had two accounts assigned to a debt collector did not effectively revoke consent to be called on a second account when he revoked consent to be called on the first one. The case is Michel v. Credit Protection Association L.P. (Case No. 14-cv-8452, U.S.D.C., Northern District of Illinois, Eastern Division).

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

Background 

Between January 5, 2013 and January 3, 2014, Credit Protection Association (CPA), a debt collection agency, placed multiple calls to plaintiff’s cell phone seeking to collect debts for two separate creditors—Comcast and Commonwealth Edison (ComEd)—both of which had accounts with CPA. 

In early January 2013, after receiving a call that turned out to be related to his Comcast debt, plaintiff allegedly called CPA and orally advised CPA to stop calling him. When CPA called plaintiff, it frequently left pre-recorded voicemails stating that the call was from a debt collector and that plaintiff should return the call. The pre-recorded messages identified the debt through an eleven-digit reference number but did not state the name of the creditor (i.e., whether the call was related to plaintiff’s debt with Comcast or ComEd). 

CPA used a system operated by Dial Connection. The parties dispute whether Dial Connection is an automated telephone dialing system (“ATDS”), as required for TCPA liability. 

In his complaint, plaintiff alleges that he continued to receive calls from CPA in January and February 2013. CPA closed its Comcast account in February 2013, and contends that it stopped calling plaintiff on behalf of Comcast at that time. It is undisputed that plaintiff did not receive any calls from CPA in March 2013. 

In April 2013, CPA received a second, different account for plaintiff, this time from ComEd. Also in April 2013, plaintiff began receiving calls from CPA again, which continued until January 2014. CPA contends that the calls to plaintiff between April 2013 and January 2014 were on behalf of ComEd. 

Plaintiff alleged that CPA did not advise him that it was seeking to collect debts for two separate creditors. CPA, for its part, contended that it sent letters to plaintiff on each account and thus plaintiff was put on notice of its attempts to collect for both Comcast and ComEd. CPA also contended that plaintiff could have determined which creditor a call referred to by calling CPA back or by cross-referencing the eleven-digit account reference number stated in the voicemail with the letters CPA allegedly sent to plaintiff. 

Plaintiff filed suit in October of 2014 alleging that CPA’s calls to plaintiff violated the Telephone Consumer Protection Act, 47 U.S.C. § 227 (TCPA), and the Fair Debt Collection Practice Act, 15 U.S.C. §§ 1692 et seq. (FDCPA). 

On June 30, 2016, the parties filed a joint status report with the court explaining that a summary determination on one issue would help streamline the disposition of this case. Both parties filed motion for partial summary judgment. The single issue in both motions was whether plaintiff’s alleged revocation of consent in early January 2013 means that CPA violated the TCPA for the calls made on behalf of ComEd. 

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 Court’s Decision 

The court summarized the parties’ respective positions as follows: 

“Plaintiff argues that he should be able to recover for all calls made by CPA after he allegedly instructed CPA to stop calling his cell phone. In Plaintiff’s view, his call to CPA revoked any prior express consent CPA had to call him, whether on behalf of Comcast or ComEd. Defendants argue that even if Plaintiff revoked consent to receive calls on the Comcast account, that revocation does not apply to the later placed ComEd account, and thus Defendants did not violate the TCPA by calling Plaintiff on behalf of ComEd. 

Plaintiff argues that when he alleged instructed CPA to stop calling him, this instruction revoked any prior express consent CPA might have had, and this revocation applied to all matters for which CPA was attempting to contact him. Plaintiff contends that since the voicemails left by CPA only state an account reference number and not the name of the creditor, he “could not have deciphered that he was being pursued by CPA on” two separate creditor accounts, Comcast and ComEd. 

Plaintiff focuses on the fact that CPA has the ability to perform searches to determine whether a debtor is already in its database and whether a debtor has multiple accounts with CPA, as well as the capacity to mark a number in a “do not call list.” Plaintiff argues that when he allegedly revoked consent, CPA should have placed his cell phone number on a “do not call list” to prevent him from being called on all present and future creditor accounts placed with CPA.

Defendants, for their part, argue that when Plaintiff called CPA in early January 2013, he was calling solely about his Comcast account, as Defendants had not yet placed the ComEd account. Defendants contend that even if Plaintiff revoked his prior express consent for Comcast, the revocation does not apply to the later placed ComEd account.”

The Honorable Robert M. Dow, United States District Court Judge, agreed with CPA. He wrote: 

“The Court agrees with Defendants that revocation of consent for one creditor is not revocation of consent for all creditors, and thus even if Plaintiff can prove that he revoked his consent for CPA to call on behalf of Comcast when he called CPA in January 2013, he did not revoke his consent for calls from ComEd or from CPA on behalf of ComEd.

When Plaintiff called CPA in January 2013 and allegedly asked CPA to stop calling his cell phone, he was returning a call that CPA made regarding the Comcast account, and therefore revoked his consent only for calls made on behalf of Comcast. That is, Plaintiff’s revocation was creditor-specific, just as the consent was creditor-specific. Plaintiff could not anticipatorily revoke consent for all calls to be placed by CPA on behalf of potential future creditors, such as ComEd.

Although it may have been tedious for Plaintiff to discern that CPA was calling on behalf of two different creditors, this does not change the fact that CPA obtained Plaintiff’s prior express consent separately through each creditor. Plaintiff still must revoke his consent separately for each creditor. 

For these reasons, the Court concludes that Plaintiff’s alleged revocation of consent in January 2013 revoked consent only for CPA’s calls on behalf of Comcast and did not revoke any alleged consent stemming from Plaintiff’s debt with ComEd. Therefore, CPA cannot be held liable for calls to Plaintiff on behalf of ComEd.”

insideARM Perspective 

This case should be closely examined by all members of the ARM industry. It is not at all unusual for a debt collector to have multiple accounts for the same consumer. insideARM would suggest that this decision, while positive for this particular fact scenario, should not be read too broadly. In this case, the fact that the second account was not yet placed with CPA when the consumer revoked consent is a significant distinction.

While the court discusses creditor-specific consent and revocation of consent, would the result be different if the facts were tweaked slightly? For instance, if CPA had both accounts in house at the time the revocation of consent was given, would the court have ruled differently. Would the court then agree with plaintiff’s argument that CPA should have marked the number in some sort of internal “do not call” list? 

Industry best practices to avoid TCPA litigation might suggest that any revocation of consent be construed as broadly as possible and that any revocation of consent apply to all accounts currently handled and also those accounts with the same consumer and same phone number that might be placed in the future. 

insideARM polled members of the Compliance Professionals Forum on this issue.  Most responders indicated that, to the extent their clients will allow them to systematically link accounts for the same consumer, they will look at any revocation of consent as a revocation of consent on all accounts. However, most agreed that when a second (or multiple other accounts) are subsequently placed for the same consumer, the issue becomes murkier. All agree that account documentation is critical when a consumer might revoke consent to be called on one account and specifically allow calls on a second account.

Last Thursday the Department of Education (ED) filed a status report in the United States Court of Claims that provided an update on the ongoing ED RFP “do-over.” A copy of the status report can be found here. 

On August 4, 2017 ED filed an initial status report to the court. That report was required per the August 2, 2017 Sua Sponte Order issued by Judge Susan G. Braden. insideARM wrote about that order on August 3, 2017, and the initial status report on August 8, 2017.

In the latest status report ED states: 

“In a status report filed on August 4, 2017, we informed the Court that ED has been working diligently on the corrective action, and had completed a review of more than half of the 37 proposals it has received under the corrective action. ECF No. 183 (Defendant’s Status Report dated August 4, 2017, accompanied by Dr. Bradfield Declaration.) We explained in that status report that ED may need additional time, past August 25, 2017, to complete its evaluation and finalize the corrective action.

As of the date of this notice, ED’s evaluation teams have completed their review of all proposals. Evaluation reports are now being prepared and should be finalized within the next few weeks. After the evaluation is complete, ED’s Source Selection Authority will conduct a new source selection determination and announce any new award or awards, and/or the termination of previously-awarded contracts, as appropriate.

As we stated in our August 4, 2017 status report, this corrective action is a top priority of Federal Student Aid, and ED is working diligently to complete the corrective action. Defendant respectfully requests that it be allowed to file a status report on September 14, 2017 informing the Court of the status of the corrective action.” (Emphasis added by insideARM) 

insideARM Perspective 

The fact that ED did not meet the initial deadline of August 24 to complete the corrective action and make awards is a surprise to no one. As we mentioned in our August 8^th article, ED received 37 proposals/responses to the RFP. To complete a thorough review of that many proposals in the originally proposed 8-week time frame was going to be a very heavy lift for the department. In light of the volume of protests and litigation surrounding the initial selections, insideARM is convinced that ED is taking its time to properly analyze the proposals, document its rationale for decisions, and make new selections. 

However, it may not make any difference in the end. It is likely that unless the outcome is that every single firm that submitted a response is selected, there may still be additional protests and litigation. This show may never close.

Finally, the language in the report is interesting. ED does not say that selections will be made on September 14, 2017. ED wrote: “Defendant respectfully requests that it be allowed to file a status report on September 14, 2017 informing the Court of the status of the corrective action.” It may be that September 14^th will only bring another status report requesting yet additional time to complete the evaluations. 

Editor’s Note: insideARM has written extensively about the ED RFP and the litigation surrounding the RFP. We have often been asked for a summary of all our articles on the subject. See here for a link to an insideARM.com page that provides a history of our ED related articles. The page is automatically updated as new stories are written.