ATLANTA, Ga. – LexisNexis® Risk Solutions, a part of RELX Group, announced today the availability of LexisNexis® RiskView™ Liens & Judgments Report, which provides credit lenders and collectors with detailed, highly reliable data for making credit and collections decisions. The new, robust data report, which relies on LexisNexis Risk Solutions proprietary Advanced Linking Technology, comes in advance of the credit bureaus ceasing to offer most liens and judgment data as of July, 2017, part of the settlement between the Nationwide Credit Reporting Agencies (NCRA) and over 30 state Attorneys General. This solution serves as an addition to an existing suite of lien and judgment solutions currently offered by the company for the collections industry.

“In receivables management, with billions of dollars in consumer loans in various stages of delinquency, at any given time, identifying liens and judgments is of paramount importance,” said Sean Britt, senior director, collections and investigations at LexisNexis Risk Solutions. “In the face of the coming uncertainty, our liens and judgments solutions offer collectors complete data, saving time and money.”

July 1, the three NCRA companies will eliminate approximately 50 percent of tax liens public record data and 96 percent of civil judgments record data from their credit reports. While this is intended to make credit reporting more accurate, it has created the potential for more uncertainty for collectors when evaluating consumer indebtedness to optimize liquidation rates and profitability.

LexisNexis Risk Solutions has found that approximately 11 percent of U.S. consumers have a tax lien or civil judgment on file. A consumer who has a lien or civil judgment removed from their credit file experiences an average increase of 10 points to their credit score. These consumers are also twice as likely to default on a loan. These stats focus on credit decisioning, but it’s easy to see how the change also will affect how consumers are evaluated for willingness and ability to pay their debts and for consideration for legal recourse.

With this approaching change to credit bureau reporting, the collections industry must be prepared to adjust. Collectors, such as debt buyers and collections agencies, rely on liens and judgments information to power their collections scores and to inform their treatment of and suit-filing decisions. Having accurate data streamlines collections processes and improves profitability and rates of success for the collectors.  

The LexisNexis® RiskView™ Liens & Judgments Report and the other offered liens and judgments solutions, available now, address those issues, and the risks they pose to collectors, head on.

All LexisNexis® liens and judgments solutions deliver technology advancements that bolster the reliability and currency of lien and civil judgment content. With this information, collectors can reliably determine the count of liens and judgments on file, the type, the dollar amount of tax liens, and more, including specific details for each lien and judgment included in the report. Using the industry-leading LexID® identity linking technology, collectors and consumers can be confident that LexisNexis Risk Solutions links the right person to the right record.

The LexisNexis® RiskView™ Liens & Judgments Report expands on the success of the core LexisNexis® Risk Solutions product suite.  While liens and judgments had long been included as part of our offering, this new offering is specifically tailored to provide the data that credit bureaus will soon exclude. With over 45 billion total records, which are continually refreshed from over 13,000 different sources, LexisNexis Risk Solutions’ propriety method of linking data is 99 percent reliable.

About LexisNexis® Risk Solutions

At LexisNexis Risk Solutions, we believe in the power of data and advanced analytics for better risk management. With over 40 years of expertise, we are the trusted data analytics provider for organizations seeking actionable insights to manage risks and improve results while upholding the highest standards for security and privacy. Headquartered in metro Atlanta, LexisNexis Risk Solutions serves customers in more than 100 countries and is part of RELX Group, a global provider of information and analytics for professional and business customers across industries.  For more information, please visit www.lexisnexis.com/risk/.

A petition filed with the Federal Communications Commission (FCC) to exempt ringless voicemails from anti-robocall rules has been withdrawn after heavy opposition from many parties. 

Earlier this year, All About the Message LLC (AATM) filed a petition for a declaratory ruling before the FCC, requesting that the FCC issue a rule that would declare that delivering a voice message directly to a consumer’s voicemail box does not constitute a “call” that is subject to the Telephone Consumer Protection Act’s (TCPA) general prohibition against the use of auto-dialers or pre-recorded voice messages (absent appropriate consent).

The request to withdraw the petition was made on June 20, 2017.  A copy of the letter requesting the petition be withdrawn can be found here. 

insideARM originally wrote about the petition on April 19, 2017.  

On June 5, 2017 insideARM republished (with permission) an article written by three attorneys from the Venable LLC law firm that further discussed the petition and its potential impact.

It doesn’t take any significant research skills to find the various articles written about the opposition to the petition. As an example, see this article that discusses Senate Minority Leader Chuck Schumer’s (D-N.Y.) position. 

This letter from eleven U.S. Senators to FCC Chairman Pai, objecting to the technology was located after a quick search for the term “ringless voicemail”.  

Finally, see this June 2, 2017 article in the Chicago Tribune written under the headline, “Hang up now on the idea of`Ringless voicemail’.”

insideARM Perspective 

What does this mean? The only definitive thing that can be said is that the FCC will not rule on this petition.  That may be a good thing. The issue has become very political. It is not clear how courts will rule on the issue if it is raised in TCPA litigation. Sometimes issues that are very political are often better resolved through the legal process.

insideARM maintains a free FDCPA resources page to provide the ARM community a destination for timely and topical information on the Fair Debt Collection Practices Act (“FDCPA”). This page is generously supported by TransUnion. See the page here or find it in our main navigation bar from any page on insideARM under Compliance Resources.

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

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The following are just a few of the FDCPA cases in the spotlight during the last 60 days 

Ghanta v. Immediate Credit Recovery, Inc 

The gist: Responding to a CFPB complaint disputing the debt and supplying verification through the CFPB portal is not sufficient to comply with the FDCPA. Statute requires that verification be mailed back to the consumer. See insideARM story on the case here. 

Midland Funding LLC v. Johnson 

The gist: One of the few United States Supreme Court cases involving the FDCPA. Resolving a conflict between various Circuits, the Supreme Court ruled that filing an out of stat proof of claim is not a violation of the FDCPA. See insideARM story on the case here. 

Taylor v. Fin. Recovery Servs. 

The gist: Collection letters which stated the same balance multiple times in the initial letter and in subsequent letters, where amounts remained unchanged, did not violate the FDCPA because they did not otherwise disclose whether interest was accruing. Also, a statement in the letter about potential tax consequences did not violate the Act. See insideARM story on the case here. 

Aker v. Americollect, Inc.

The gist: Debt collector was entitled to seek state statutory interest because they had sought and obtained permission from a state regulator to do so. Debt also arose under state law which allowed for demand of interest before the debt has been reduced to judgment. See insideARM story on this case here.

Barnett v. Healthcare Revenue Recovery Grp.

The gist: A debt collection letter that fully disclosed that the debt may be sold and that a subsequent owner could credit report would not mislead the least sophisticated consumer. 

insideARM Perspective 

As usual, the cases were both positive and negative for the ARM industry. Readers should be cautious about the applicability of a particular case to their jurisdiction. There are often conflicting decisions on the same or similar issue.  A slight change in facts could dramatically impact a future decision.

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 and analysis is provided by the Bedard Law Group.

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Things have been a little busy at insideARM over the past two months. We did not publish an update to the TCPA Case Law chart in May. Luckily, things were fairly quiet in the TCPA world that month, but we are ready to catch up. 

The following are some of the TCPA cases published in the last 60 days that should be interesting to members of the ARM community. 

Reyes v. Lincoln Automotive 

The gist: This is probably one of the more important TCPCA cases in the past several years. The issue was the ability of a consumer to revoke consent to be called on a cell phone. The Second Circuit held that the consumer could not unilaterally revoke consent that was part of the bargained for agreement between the parties. The court relied on Black Letter contract law in making its decision. The insideARM story on this case may be found here. 

Kern v. VIP Travel Services 

The gist: This is a positive case for the ARM community and the defense bar.  The case involved the issue of vicarious liability for activity that may violate the TCPA.  The defendants were successful in having the case dismissed for failure to state a claim because the court found that Plaintiffs did not allege facts from which to infer an agency relationship.  

Zean v. Fairview Health Services 

The gist: The issue in this case involved “consent”.  The plaintiff brought this putative class action, alleging that after purchasing a medical device from Fairview he received numerous telemarketing calls and voicemail messages soliciting him to buy home medical supplies from the defendant. The court ruled that the plaintiff in the case had provided “prior express consent”. The defendant produced a business record of an agreement executed by the plaintiff which read “I understand Fairview may need to contact me in regard to my services and accounts. I give permission for Fairview and its approved agents to contact me by phone (including my cell phone). This may include the use of auto-dialers or pre-recorded messages.” 

Vanover v. NCO Financial Services, Inc.  

The gist: This is a positive decision for defense attorneys regarding the esoteric legal issue of “claim splitting.” The plaintiff filed two separate suits against the defendant. The first was in Florida state court and involved a TCPA claim. Over 1 year later the, plaintiff brought another suit in Florida state court against the same defendant, this time for claims under the TCPA, the FDCPA, and Florida Consumer Protection Statute. Both complaints involved the same medical debts.  The court ruled that the complaint should be dismissed for asserting claims which could and should have been presented in an earlier-filed complaint. 

Thank you to attorney David Kleber from the Bedard Law group for his coverage, review and analysis of these cases.

First party and early-out servicing provides an enhanced customer service experience and greater responsiveness for consumers. These qualities make first party and early-out servicing beneficial for creditors as well as consumers. However, as the prevalence of this type of servicing increases, consumer attorneys and regulators seek to find ways to apply traditional debt collection laws and statutes to first party and early-out servicing. 

In the latest episode of the Debt Collection Drill, Moss & Barnett attorneys John Rossman, Mike Poncin and Dave Cherner discuss risks for first party and early-out servicing arising from the FTC DeMayo Opinion, discuss specific State licensing and disclosure requirements (24 States and jurisdictions may require early-out servicers to obtain a collection agency license) and also address possible CFPB rulemaking to modify the definition of default, as determined by meetings that Mr. Rossman and Mr. Cherner have attended with the CFPB through the Consumer Relations Consortium. 

Listen to the latest Debt Collection Drill podcast here.

Last week 23 trade associations signed a joint letter to both houses of Congress, urging them to adopt a 5-member bipartisan commission governance structure for the Consumer Financial Protection Bureau, rather than the current single-Director. The following is a copy of the letter:

June 22, 2017 

Dear Chairman Capito, Chairman Graves, Ranking Member Coons and Ranking Member Quigley: 

The undersigned trade associations representing thousands of banks, credit unions, financial institutions, and businesses of all sizes that serve America’s consumers write to express our strong support for the inclusion in the Senate and House Financial Services & General Government (FSGG) Subcommittee FY2018 bills, language that would transition the governance structure of the Consumer Financial Protection Bureau (CFPB) to a five person bipartisan commission.  

A Senate confirmed, bipartisan commission will provide a balanced and deliberative approach to supervision, regulation, and enforcement for consumers and the financial institutions the CFPB oversees by encouraging input from all stakeholders. The current single director structure leads to regulatory uncertainty and instability for consumers, industry, and the economy, leaving vital consumer financial protection subject to dramatic political shifts with each changing presidential administration. Moreover, a commission is the traditional and customary structure for the regulators of our nation’s depository institutions. 

Importantly, the American people are supportive of a bipartisan commission at the CFPB.  A recent Morning Consult poll shows that by a margin of three to one, registered voters support a bipartisan commission over a sole director, with only 14 percent of those polled stating they prefer to keep the Bureau’s current leadership structure. 

Last Congress, the House FSGG Subcommittee included CFPB commission language in the FY2017 bill text, and we strongly support similar language being included in the FY2018 Senate and House Appropriations Bills.  We look forward to working with the Committees and the 115^th Congress to pass this much needed bipartisan legislation. 

Sincerely,

ACA International

American Bankers Association

American Escrow Association

American Financial Services Association

American Land Title Association

Community Mortgage Lenders of America

Consumer Bankers Association

Consumer Data Industry Association

Consumer Mortgage Coalition

Credit Union National Association

Electronic Funds Transfer Associations

Electronic Transactions Association

Financial Services Roundtable

Independent Community Bankers of America

Mortgage Bankers Association

National Association of Federally-Insured Credit Unions

National Association of Independent Housing Professionals

National Association of Realtors

National Black Chamber of Commerce

National Federation of Independent Business

Real Estate Services Providers Council, Inc. (RESPRO)

Small Business & Entrepreneurship Council

The Realty Alliance

Cc:

Senate Appropriations Chairman Thad Cochran

Senate Appropriations Ranking Member Patrick Leahy

House Appropriations Chairman Rodney Frelinghuysen

House Appropriations Ranking Member Nita Lowey

Last Thursday the Department of Education (ED) filed a Notice of Appeal  to the U.S. Court of Appeals in the litigation originating in the Court of Federal Claims regarding the May 31st Preliminary Injunction issued in the litigation over the Department of Education (ED) RFP for private collection agency services.  

insideARM last wrote about this case on June 15th. At that time we reported that Alltran Education Services (Alltran) had filed its Notice of Appeal of Judge Braden’s Preliminary Injunction. Specifically, Alltran is appealing that aspect of the injunction that prohibits ED from allowing Alltran to perform under its award-term extension (“ATE”) contract (i.e., Task Order No. ED-FSA-17-O-0007 under Contract No. GS-23F-0291K). This appeal is docketed at the Federal Circuit as Continental Service Group Inc. v. United States, docket number 17-2155, and serves as the lead case for several directly related appeals. 

On June 20, 2017, the Court of Appeals issued a short Per Curiam (unanimous) Order. The Order states: 

IT IS ORDERED THAT: 

(1) The appeals are consolidated. The revised official caption is reflected above. Alltran’s opening brief is due no later than August 14, 2017. 

(2) Any responses to Alltran’s motions are due no later than June 27, 2017. Alltran’s reply to the responses is due no later than June 30, 2017. 

insideARM Perspective 

It is likely that the Appeal filed by ED will be similar, but broader in scope than the Alltran appeal.  As of now, ED has only filed its notice of appeal. The May 31, 2017 order has effectively prohibited ED from placing any accounts with any agencies (including the small business contractors) since it was issued. It is likely that ED would like some relief to begin placing accounts, at least to the small business contractors. 

It is also likely that many of the players involved in this litigation will be joining the appeal in some fashion. There have been either Entries of Appearances or Certificates of Interest already filed in the Court of Appeals by attorneys for many of the companies involved in the original litigation.  

insideARM will continue to monitor and report on the progress of this case. See here for a link to an insideARM page that provides a history of our ED-related articles. The page is automatically updated as new stories are written.

Today in New York City a team of researchers is meeting to finalize plans for studying the economic impact of medical debt forgiveness. The Mini-Summit is being hosted by RIP Medical Debt, a not-for-profit charity that buys portfolios of medical debt and then forgives the debt.

Coming together today will be researchers from the economics departments at UCLA, the University of Chicago, Massachussetts Institute of Technology, and University of California at Berkeley. Also taking part are RIP Medical Debt, TransUnion, 1/0, and other philantropists and interested parties.

The group says that about 64 million Americans struggle with unpaid and unpayable medical debt annually, even with health insurance. About 15 million annually become insolvent because of medical debt, and about 1 million go bankrupt. So they are looking to quantify the impact of medical debt forgiveness.

The bulk of the agenda will include “Shirtsleeves work by the University team and others, including breakout sessions for special interest groups in the banking, collections, insurance, philanthropic, medical and tech industries.”

The University Team includes:

• Wes Yin, PhD, Associate Professor of Public Policy, UCLA
• Neale Mahoney, Assistant Professor of Economics, University of Chicago
• Francis Wong, PhD Candidate, Department of Economics, UC/Berkeley
• Ray Kluender, PhD Candidate, Department of Economics, MIT

Neal Mahoney of the University of Chicago said of the initiative:

“We are interested in whether medical debt relief can start a virtuous cycle: raising credit scores, lowering interest rates on non-medical debt, and thereby allowing households to more generally get their financial lives in order. And we’re hoping to identify which types of household benefit the most from medical debt relief, so that we can target medical debt forgiveness to get the highest bang-for-the-buck.”

insideARM Perspective

If this sounds familiar, you may recall a story from last summer, when Last Week Tonight with John Oliver skewered the debt-buying industry, and then dramatically closed the segment by “giving away” $15 million in medical debt. He forgave the debt by buying a portfolio of approximately 90,000 out-of-stat accounts, and giving it to RIP Medical Debt. RIP is a non-profit company established by two former collection industry executives with the mission of forgiving medical debt, with no tax consequences for the consumer.

Meanwhile, you may have noticed a recent story in the news, where the Minnesota Nurses Association has worked to help approximately 1,800 patients by buying and forgivinig their medical debt.

An admirable initiative, this organization seems to have established some legs… and has recruited some very well-respected names in the process. We will keep watching.

Yesterday the Second Circuit Court of Appeals issued a groundbreaking opinion in a Telephone Consumer Protection Act (TCPA) case regarding revocation of consent. The case is Reyes, Jr. v. Lincoln Automotive Financial Services, (Case No 16-2104, Second Circuit Court of Appeals).

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

insideARM originally wrote about this case on July 5, 2016. In that article, we commented that that the issue of “revocation of consent” was going to be a major battleground in TCPA cases. This decision from the Second Circuit is going to be a boost to defense of TCPA cases going forward.

Background 

On June 29, 2012, Plaintiff, Alberto Reyes, Jr. (Reyes), leased a new 2012 Lincoln MKZ luxury sedan from a Ford Dealership, through Defendant Ford Motor Credit Company LLC (Ford Credit) Note: Lincoln Automotive Financial Services” is a registered trade name of Ford Motor Credit Company LLC, and not an independent company. Ford Credit was named in the complaint as Lincoln Automotive Financial Services (Lincoln). In connection with this transaction, Plaintiff executed a written New York Lease Contract dated June 29, 2012.

As part of the Lease Contract, Plaintiff expressly consented to receive telephone calls from Ford Credit, “including but not limited to, contact by manual calling methods, prerecorded or artificial voice messages, text messages, emails, and/or automatic telephone dialing systems.”  Plaintiff further consented to Ford Credit using “any telephone number” provided by Plaintiff in order to contact him, “including a number for a cellular phone or other wireless device, regardless of whether [Plaintiff] incurs charges as a result.”

Plaintiff failed to make several payments under the Lease Contract when due, thereby defaulting on his obligation. Ford Credit then began telephoning Plaintiff at the phone number provided by Plaintiff in the Lease Contract. Plaintiff failed to cure his default and Ford Credit repossessed the vehicle.

Reyes claimed that on June 14, 2013, he mailed a letter to Lincoln in which he wrote: “I would also like to request in writing that no telephone contact be made by your office to my cell phone.” Lincoln contends that it never received Reyes’s letter, or any other request to cease its calls. At his deposition, Reyes testified to mailing the letter to the P.O. box listed on Lincoln’s invoices and produced a copy of the letter that did not bear an address or postmark and referenced an incorrect account number. 

Despite his alleged revocation of consent, Lincoln continued to call Reyes. Following the close of discovery, Lincoln’s attorney confirmed that Lincoln had called him 141 times with a customer representative on the line, and had called him with prerecorded messages an additional 389 times.

Plaintiff filed this lawsuit on February 6, 2015, alleging violations of both the TCPA and the Fair Debt Collection Practices Act (FDCPA). Plaintiff requested damages in the amount of $720,000. After Discovery, Ford Credit filed a 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.]

The district court granted the defendant’s motion for summary judgment on the basis that (1) the evidence of consent revocation was insufficient, and (2) in any event the TCPA does not permit revocation when consent is provided as consideration in a binding contract. 

The plaintiff appealed that order. Two issues were raised by Reyes in the appeal: 

1. That he introduced sufficient evidence to create a triable issue of fact as to whether he placed Lincoln on notice of his revocation of consent; and 
2. That the TCPA, construed in light of its broad remedial purpose to protect consumers from unwanted phone calls, does permit a party to revoke consent to be called, even if that consent was given as part of a contractual agreement.

This opinion is the result of that appeal. 

The Appellate Court Decision 

The Second Circuit affirmed the district court judgment in favor of the defendant. The court held that (1) Reyes did introduce sufficient evidence from which a jury could conclude that he revoked his consent, but that (2) the TCPA does not permit a consumer to revoke its consent to be called when that consent forms part of a bargained‐for exchange. (Emphasis added by insideARM) 

The court began its analysis with a review of the documentation: 

“In his lease application, Reyes provided several personal details, including his cellular phone number. The lease itself contained a number of provisions to which Reyes assented when finalizing the agreement. One provision permitted Lincoln to contact Reyes, and read as follows: 

You [Reyes] also expressly consent and agree to Lessor [Ford], Finance Company, Holder and their affiliates, agents and service providers may use written, electronic or verbal means to contact you. This consent includes, but is not limited to, contact by manual calling methods, prerecorded or artificial voice messages, text messages, emails and/or automatic telephone dialing systems. You agree that Lessor, Finance Company, Holder and their affiliates, agents and service providers may use any email address or any telephone number you provide, now or in the 1 future, including a number for a cellular phone or other wireless device, regardless of whether you incur charges as a result. 

As noted above, the court agreed with Reyes on the first issue. The court found that he did introduce sufficient evidence to create a triable issue of fact as to whether he had placed Lincoln on notice that he had revoked his consent. The court wrote: 

“We agree with Reyes that the district court’s finding that he did not revoke his consent to be contacted by telephone was improper on summary judgment. This material issue of fact was in dispute and raised a jury question. The district court’s conclusion that Reyes did not revoke his consent rested on an impermissible assessment by the court of Reyes’s credibility. The district judge erred in concluding 1 that no reasonable jury could find that Reyes revoked his consent, when Reyes introduced sworn testimony to the contrary. Whether that testimony was reliable was a question of fact for the jury.” 

The court then turned to the issue of whether Reyes was able to revoke his consent under the facts presented. The court noted that “two of our sister circuit courts have ruled that a party can revoke prior consent under the terms of the act.” (Citing cases from the Third and Eleventh Circuits.)  The court also noted that the Federal Communications Commission (FCC), in their 2015 Rulemaking, had relied on those two cases to rule that that “prior express consent” is revocable under the TCPA. 

However, the court distinguished those cases and the 2015 FCC Rule from this case. The court wrote: 

“Reyes’s appeal presents a different question, which has not been addressed by the FCC or, to our knowledge, by any federal circuit court of appeal: whether the TCPA also permits a consumer to unilaterally revoke his or her consent to be contacted by telephone when that consent is given, not gratuitously, but as bargained‐for consideration in a bilateral contract. 

Reyes contends that the same principles that the FCC and the Third and Eleventh Circuits relied on in their previous rulings apply to this situation as well. He argues that (1) under the common law definition of the term, which Congress is presumed to have adopted when it drafted the TCPA, any form of “consent” (whether contractual or not) is revocable by the consenting party at any time; and (2) permitting parties to revoke their consent to be called is consistent with the remedial purpose of the TCPA, which was designed by Congress to afford consumers broad protection from harassing phone calls. 

We agree with the district court that the TCPA does not permit a party who agrees to be contacted as part of a bargained‐for exchange to unilaterally revoke that consent, and we decline to read such a provision into the act.

 (Emphasis added by insideARM) 

Reyes also argues that his consent to be contacted is revocable because that consent was not an “essential term” of his lease agreement with Lincoln. This argument is meritless. In contract law “essential terms” are those terms that are necessary in order to lend an agreement sufficient detail to be enforceable by a court. Brookhaven Hous. Coal. v. Solomon, 583 F.2d 584, 593 (2d Cir. 1978) (“If essential terms of an agreement are omitted or are phrased in too indefinite a manner, no legally enforceable contract will result.”). For example, a contract for the sale of goods must contain terms such as the quantity of goods to be sold and the price at which they will be purchased. But a contractual term does not need to be “essential” in order to be enforced as part of a binding agreement. It is a fundamental rule of contracts that parties may bind themselves to any terms, so long as the basic conditions of contract formation (e.g., consideration and mutual assent) are met.” 

insideARM Perspective

This case is a very big “win” for defense of TCPA claims where consent has been provided in a contract.  The court’s labeling the Reyes argument on whether the consent was an “essential term” to the agreement will be referenced over and over in the coming weeks and months.  

However, before everyone gets too excited about this, note the very clear language in the lease agreement. Not every consumer contract is written in this manner. The consent terms are clearly part of the lease agreement. Would the result have been the same if this were a credit card account and these terms were sent out later as part of an update to an account terms and conditions?

insideARM contacted frequent contributor, attorney John Rossman from the Minneapolis law firm of Moss & Barnett, for his thoughts on this decision. Rossman commented:

“The decision in Reyes is a game-changer for companies defending against the seemingly endless onslaught of “no actual damages” TCPA cases.  Further, this case is yet another recent example of a Court injecting a much-needed common sense element into the assessment of the often ethereal claims asserted under consumer protection laws.  The Court recognized that it makes no sense to allow a consumer, after receiving the benefit of a contract, to pick and choose contractual elements that he or she later decides are unfavorable.  Our office intends to cite this case in motions to dismiss both under the TCPA and under certain State protection laws in a number of cases pending across the country.” 

Another frequent insideARM contributor, Rozanne Andersen, Vice President and Chief Compliance Officer at Ontario Systems, also commented:

 “This Court’s ruling creates a tremendous opportunity for creditors and their first and third party collection agencies. By updating their contracts with consumers to include mutually bargained for consent, calls placed to consumer’s cells using an ATDS or a prerecorded message will be subject to legally binding contract provisions – to wit the consumer cannot back out of without penalty. To date our industry has waffled between the need to include TCPA style written consent in the underlying creditor contract and relying on the FCC’s ruling that so long as the consumer voluntarily provides their cell number to the creditor consent is obtained. The latter is not protected by contract while the former will at least give the creditor and its first and third party debt collector their day in court.”

On Monday the Minnesota Court of Appeals reversed a lower court decision granting summary judgment in favor of a debt collector attorney on whether the Fair Debt Collection Practices Act (FDCPA) applied to an attorney who, in the course of complying with the Minnesota Mechanic’s Lien statute, served two mechanic’s lien statements on a consumer and his spouse. The case is Randall v. Pall, (Case No. A16-1745, MN Court of Appeals).

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

Background

Bruce and Kathy Randall hired Northstar Design and Build, Inc. (Northstar) to complete a home improvement project during the summer of 2014. On September 26, 2014, respondent William Paul, counsel for Northstar, served the Randalls via certified mail with a copy of a mechanic’s lien statement and a letter, which said, “please find [enclosed] a copy of the Mechanic’s Lien Statement which is going to be recorded in the immediate future.” Among other things, the lien statement provided that Northstar intended “to claim and hold a lien upon” the Randalls’ land for the home improvement work in the amount of $9,901.75, which was “due and owing.” On October 2, 2014, Paul recorded the lien statement.

On October 6, 2014, Paul served the Randalls via certified mail with a second copy of the mechanic’s lien statement. For purposes of summary judgment, the parties appear to agree that the second copy of the lien statement was the same as the first copy, except it included an attachment providing a legal description of the Randalls’ property. Paul explained in an accompanying letter to the Randalls that he realized after serving the first copy that he had failed to include the attachment, he was serving “a conformed copy” of the lien statement, and he had recorded the lien statement. 

Over one year later, on October 15, 2015, the Randalls sued Paul for damages under the FDCPA, claiming that Paul failed to provide what the parties call a “mini-Miranda” warning advising them that he was a debt collector and that anything they said could be used in a debt collection action. The complaint also alleged that Paul failed to send the Randalls a validation notice verifying the amount owed and providing the procedures they could follow if they disputed the debt.

Paul moved for summary judgment, arguing that the letters and service of the mechanic’s lien statements were not subject to the FDCPA because they were not “communications” regarding a debt collection action, and he was complying with the requirements under Minn. Stat. § 514.08 to perfect the lien.

The district court granted Paul’s summary judgment motion and dismissed the complaint, concluding that the Randalls were not entitled to relief as a matter of law because Paul’s communications with them did “not trigger the protections afforded by the FDCPA.” 

The Randalls appealed the district court decision. 

Issue Presented 

The appellate court determined that the case presented the following issue:  Did the district court err in granting Paul summary judgment based on its determination that Paul’s service of two mechanic’s lien statements was not, as a matter of law, a “communication” under the FDCPA? 

The Court’s Opinion 

For purposes of the summary judgment motion, it was undisputed that the mechanic’s lien involved a disputed debt between the Randalls and Northstar, and Paul did not include mini-Miranda warnings in the service letters or lien statements or send the Randalls a validation notice. 

Also, Paul did not contest that, when he served the mechanic’s lien statements, he was acting as a “debt collector,” as that term is defined under the FDCPA.

Thus, the sole issue on appeal was whether there are genuine issues of material fact that Paul’s service of two mechanic’s lien statements in September and October 2014 were “communications” “made in connection with the collection” of a debt under the FDCPA.

The court wrote: 

“The Randalls contend that Paul’s two communications triggered FDCPA protections because they were “associated with the collection of a debt,” and fact questions exist that preclude summary judgment. Paul responds that his service of the lien statements was not an attempt to collect the debt, but rather was a necessary step under Minnesota law to perfect the lien. 

In granting Paul’s summary judgment motion, the district court determined that Paul’s communications with the Randalls were not subject to the FDCPA as a matter of law because Paul merely notified the Randalls “of the legal status of the case,” the service letters “included no demand for payment or a threat if payment was not received, and were not an attempt to get immediate payment,” and Paul was “not actively seeking to collect a debt on behalf of his client.” 

All that is required to trigger FDCPA initial notice requirements is a debt collector’s oral or written communication with a debtor made in connection with a debt collection. 15 U.S.C. §§ 1692e(11), 1692g(a). The fact that such a communication is also mandated by state law does not affect the FDCPA’s applicability. In other words, the FDCPA and the Minnesota mechanic’s lien statute are not mutually exclusive, and a debt collector may be required to comply with both laws. 

Keeping in mind the FDCPA’s broad remedial purpose, we conclude that a debt collector is not immune from FDCPA liability by virtue of complying with a state statute. Therefore, Paul was not immune from the FDCPA solely by reason of complying with Minn. Stat. § 514.08.” 

Once the court found that the FDCPA did apply to the defendant, the court moved to a discussion of whether a genuine issue of material fact exists regarding whether Paul’s service of the mechanic’s lien statements was a communication made in connection with a debt collection. 

The opinion states:

“We begin our analysis with the FDCPA’s definition of a “communication,” “the conveying of information regarding a debt directly or indirectly to any person through any medium,” and conclude that Paul’s service of the mechanic’s lien statements meets this “broad” definition because the lien statements and accompanying service letters conveyed information “regarding” the debt that the Randalls allegedly owed Northstar. 

But a debt collector’s communication to a debtor triggers FDCPA initial notice requirements only if it is made “in connection with the collection” of a debt. 

Whether a communication has the requisite connection with a debt collection activity is an objective, “commonsense inquiry” and is generally a fact question reserved for a fact finder. 

In granting Paul’s summary judgment motion, the district court noted that Paul did not explicitly demand payment or threaten consequences for non-payment in either his service letters or the mechanic’s lien statements. We also note that Paul did not provide a deadline for payment in his communications. But the district court erred by failing to view the evidence in the light most favorable to the Randalls. 

For instance, a reasonable fact-finder could conclude that Paul’s animating purpose in sending the lien statements was to induce payment because the statements expressly provided that “[t]he amount for the lien claimed is $9,901.75, and is due and owing to the lien claimant for labor performed and material furnished to the land.” (Emphasis added.) The statements also identified Northstar as the lienholder and provided Northstar’s mailing address. 

Viewing the evidence in the light most favorable to the Randalls, we conclude that there is a genuine issue of material fact on whether the “animating purpose” of Paul’s communications was to induce payment. Accordingly, the district court erred in granting summary judgment to Paul.” 

insideARM Perspective 

This case highlights the argument for attorneys to consider the absolute most conservative position in regard to FDCPA applicability in any instance.  The lesson: When in doubt, the FDCPA applies. 

However, one wonders if the result in this case would have been different if the attorney had argued that he was not a “debt collector” as that term is defined under the FDCPA.  Under the FDCPA , the term “debt collector” means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another (emphasis added by insideARM). If the attorney does not “regularly collect” or his “principal practice” is not “the collection of debts” would the same result have occurred?