All posts by collectionind723

District Court Holds Letter Notifying Debtor of Change in Debt Ownership Can Fall Under FDCPA

On October 5, 2020, the U.S. District Court for the Middle District of Florida denied a debt collector’s motion for summary judgment, holding that a letter which provides notice of a change in debt ownership and requests payments be remitted to the new owner qualifies as a communication related to a debt under the Fair Debt Collection Practices Act (“FDCPA”), which restricts how debt collectors can collect from debtors.

Axiom Acquisition Ventures, LLC (“Axiom”) bought Robert Valenzuela’s consumer debt from a bank after he allegedly defaulted on his personal loan payments. Axiom sent Valenzuela a letter informing him that his debt had been reassigned and instructing him to remit future payments to Axiom.

Valenzuela brought suit, alleging that the letter violated the FDCPA because it (1) did not inform him of his right to dispute the debt; (2) misled him as to the chain of ownership of the debt; and (3) concealed Axiom’s status as a debt collector. Axiom moved for summary judgment, arguing that the letter was not a communication “in connection with the collection of a debt” subject to the FDCPA, only notice of the change in his debt’s ownership.

The District Court denied Axiom’s motion, applying precedent from the U.S. Court of Appeals for the Eleventh Circuit, that a communication from a debt collector can have dual purposes, such as giving notice and demanding payment. The Court found that true here, concluding that the letter was a communication in connection with the collection of a debt because in addition to notifying Valenzuela about the change in ownership, it “also includes specific language urging Plaintiff to immediately remit future payments” to Axiom. The Court noted that had this language not been included, the outcome may have been different.


CFPB settles lawsuit filed against debt collectors and debt buyers for alleged violations of CFPA, FDCPA, and 2015 consent order

The CFPB announced last week that it has entered into a settlement of the lawsuit it filed in September 2020 against Encore Capital Group, Inc., Midland Funding, LLC, Midland Credit Management, Inc., and Asset Acceptance Capital Corp. alleging that the defendants engaged in various unlawful practices in violation of the FDCPA, the CFPA, and a 2015 administrative consent order between the defendants and the CFPB.  The stipulated final judgment and order will require the defendants to pay $79,308.81 in consumer redress and a $15 million civil money penalty.

In its complaint filed in a California federal district court, the Bureau alleged that the defendants violated the consent order by suing consumers without possessing documentation as required by the consent order, using law firms and an internal legal department to engage in collection efforts without providing disclosures required by the consent order, and failing to provide consumers with loan documentation upon request as required by the consent order.  It also alleged that the companies violated the consent order, the CFPA, and the FDCPA by suing consumers to collect debts on which the applicable statute of limitations had run and violated the consent order by attempting to collect on debts for which the applicable statute of limitations had run without providing disclosures required by the consent order.  The Bureau further alleged that the companies violated the CFPA by failing to disclose possible international transaction fees to consumers.  The Bureau also alleged that each violation of the consent order constituted a violation of the CFPA.

In addition to payment of consumer redress and a civil money penalty, the settlement will require the defendants to make certain disclosures regarding international transaction fees and extends for five years various requirements of the consent order involving documentation the defendants must possess before initiating a collection lawsuit, disclosures the defendants must provide to consumers when engaging in collection efforts, and collection of time-barred debts.


Article by Alan S. Kaplinsky

The Trichell Offspring Saga: M.D. Fla. Dismisses FDCPA Suit for Lack of Standing

Interesting things are happening within the Eleventh Circuit and, finally, things are looking up for the industry in the litigation sphere. Back in July, the Eleventh Circuit Court of Appeals rocked the boat with its decision in Trichell v. Midland Credit Management, where it established a no-harm, no-foul approach to standing for FDCPA claims. Trichell‘s progeny are flowing in at a fast clip, and we are tracking this very closely with the iA Case Law Tracker. The latest update in this sphere comes from the  Middle District of Florida’s dismissal of an FDCPA claim for lack of standing.

Trichell established that a consumer that did not suffer the harm he or she alleges does not have standing to bring the relevant FDCPA claim. In Trichell, the claim alleged that letter language could mislead consumers, but the consumer himself was not actually misled by the letter.

The most recent court decision out of M.D. Fla. citing Trichell is Ruffin v. Dynamic Recovery Sols. (M.D. Fla. Oct. 19, 2020).

So, what happened in Ruffin?

In Ruffin, the defendant debt collector sent a letter to the consumer on a time-barred debt account. The letter included disclosures similar to what the Consumer Financial Protection Bureau (CFPB) proposed in its Supplemental Notice of Proposed Rulemaking: that, due to the age of the debt, the defendants will not sue the consumer and that a partial payment may restart the statute of limitations period.

The consumer filed an FDCPA lawsuit alleging that the letter contained a misleading representation because, in Florida, the statute of limitations does not revive with a partial payment. Revival requires a written acknowledgment by the consumer.

Notably, the consumer did not make any payments nor stated how she was damaged in any way.

Defendants filed a motion to dismiss.

The Court’s Decision

The court granted the defendants’ motion, finding that the consumer lacked standing to bring the FDCPA claim under the precedent set by the Eleventh Circuit in Trichell. The court summarizes Trichell:

In addressing the plaintiffs’ standing, the Eleventh Circuit observed that “neither plaintiff alleges that he made any payments in response to the defendants’ letters—or even that he wasted time or money in determining whether to do so,” but rather that they “asserted only intangible injuries, in the form of alleged violations of the FDCPA.” The Eleventh Circuit noted that, even in the context of a statutory violation, “Article III standing requires a concrete injury.” It concluded that the plaintiffs did not allege reliance or actual damages. Instead, the plaintiffs alleged harm only to “unsophisticated consumer[s],” which was insufficient.

[Internal citations omitted.]

In determining its result, M.D. Fla reasons:

Ruffin generally alleges the Letter “misleads the consumer regarding Florida law.” She does go a step further in claiming that she was misled. However, she fails to allege she made a payment towards the debt as a result of having received the Letter, and otherwise fails to allege any sort of reliance on the alleged misrepresentation. Also, despite claiming she was damaged, Ruffin fails to explain how she was damaged or how the alleged misrepresentations caused her damages.

At best, Ruffin alleges she is at risk of incurring damages as a result of being misled. But the complaint’s allegations reflect that this alleged risk was dissipated by the time she filed her complaint because her complaint identifies the Florida statute on reviving a time-barred debt. In other words, if the Letter was actually misleading, Ruffin knew that before she filed her complaint and any risk of harm associated with the language in the Letter had dissipated.

The court concludes:

Because the Eleventh Circuit does not recognize an “anything-hurts-so-long-as-Congress-says-it-hurts theory of Article III injury,” Ruffin’s complaint is dismissed without prejudice for lack of standing.

insideARM Perspective

As mentioned above, we are tracking Trichell and its progeny very closely in the iA Case Law Tracker. Subscribers get our weekly legal trends and analysis report, which gives them the inside scoop from someone who closely monitors industry-related court decisions: me! The Trichell saga, including its trend details, has been the subject of this report on 3 separate occasions. This means that subscribers already know this issue from all angles: where it’s held up, when it failed, what facts supported dismissal, etc. The weekly report also contains a rundown of all of the new cases added to the CLT in the prior week, so subscribers get an exclusive, detailed glimpse of what’s going on in the courts in minutes (so they don’t have to spend hours of their week getting up-to-date).


Article by Katie Grzechnik Neill

Mass. AG Moves to Dismiss ACA Lawsuit on Collection Call Ban for Mootness

It sounds like the drama in Massachusetts over the outbound collection call ban is making its way through litigation. On Friday, October 23, Massachusetts Attorney General Maura Healey (AG) moved to dismiss the ACA International lawsuit filed against her office in response to the AG’s emergency regulations that attempted to ban outbound collection calls. The AG’s argument is that ACA’s lawsuit is now moot since the controversy is over—the emergency regulations would have expired by now and, therefore, they were not an issue any longer.

When the COVID-19 pandemic began to spread in the United States, many states began enacting emergency regulations to manage the situation. This included the Massachusetts AG’s office, with the above-referenced emergency regulation. This occurred at the beginning of April. By the end of the month, ACA International filed a lawsuit against the AG’s office, arguing that the emergency regulation was unconstitutional as an unlawful restriction on free speech.

At the beginning of May, the judge in the case granted a temporary restraining order that restricted the AG’s office from enforcing the order until the court could reach a full decision on the merits of the case. The court reasoned that the regulation did not materially advance the substantial governmental interest in preserving domestic tranquility during the pandemic crisis, which calls into question the constitutionality of the restriction. The court also found that ACA International—specifically, its member companies—could face irreparable harm if the regulation is enforced while the lawsuit is pending.

insideARM Perspective

On its face, this sounds like good news—the emergency regulation expired and there is no more threat that this specific ban on outbound collection calls will impact the industry. In a more academic sense, it would be unfortunate if the suit got dismissed prior to a full decision on the merits of the constitutionality of such a call ban. The granting of the temporary restraining order only shows that such a call ban might violate the First Amendment. A decision on the merits would be a more definitive statement that could serve as a bedrock defense in case any other similar regulation is attempted. For now, we will wait and see how things unfold.


Article by Katie Grzechnik Neill

Debt Collection Should be on Congress’ Mind, Congressional Research Service Suggests

Debt collection seems to be a hot item this month. Not only is the Consumer Financial Protection Bureau’s (CFPB) final debt collection rule slated to be released at any time, Congress seems to have taken an interest in debt collection issues as well. (Curious timing, eh?) The Congressional Research Service released an in-depth report titled, “The Debt Collection Market and Selected Policy Issues.” The report suggests that, depending on what the CFPB final rule says, Congress may be interested in keeping an eye on things.

The report discusses where the debt collection market stands as of right now: the size of the market (“As of 2019, there are over 7,000 collection agencies in the United States, and the industry’s annual revenue is about $12.7 billion.”), and current regulatory developments. On the latter front, the report discusses the pending CFPB rule as well as complaint volumes and supervision/enforcement actions.

The report then delves into 5 separate policy issues that might be ripe for congress’ review:

  1. Communication frequency
  2. Time-barred and obsolete debt
  3. Validation issues
  4. Medical debt and credit reporting
  5. Federal, state, and local government debt exemptions

Below is a brief summary of the first four issues.

Communication frequency

The report discusses the hot button issue of whether the CFPB’s proposed rule regarding call caps is too restrictive or too permissive. There are two sides of this debate, according to the report, both of which may be moot since a CFPB survey that found consumers prefer email communications anyways. The CFPB rule would allow without limit but would grant consumers the power to stop such communication channels at their desire. This opens up another can of worms, as some consumer advocates believe that such communications should be opt-in rather than opt-out.

Time-barred and obsolete debts

The topic of time-barred debts tends to be one that is getting a lot of attention. The report discusses many sides of the debate, including the proposal by certain consumer advocates to outright ban collection on time-barred debt. There is a discussion about how consumers may not know what it means if their debt is time-barred, little less that certain actions they take could restart the statute of limitations. The report mentions that the CFPB’s proposed rule on time-barred debts would address this.

However, the CFPB proposed rule does not address another area of consumer confusion: credit reporting of time-barred debts. Specifically, there is no mention or education to consumers about when their account becomes obsolete (meaning, when a debt can no longer be included in a consumer’s credit report).

Validation issues

The report brings up an interesting issue about debt validation: that in some instances, there is no master database of account information that a debt collector can check against to ensure that the debts they are collecting are valid and correct. Instead, some debt collectors are only able to rely on the limited account information sent to them by the creditor, which often does not include account-level documentation unless and until a consumer disputes the debt.

Editor’s Note: This is not the case in all instances. Many larger financial institutions are beginning to use certain vendor resources to store all account-level information to allow debt collectors to pull validation themselves from the moment the account is placed rather than rely on the creditor to provide the information only after a dispute.

Medical debts and credit reporting

The report discusses “inconsistent billing and reporting practices” when it comes to medical debt, which often leaves consumers—who are “unlikely to know how much various medical services cost in advance”—lost. The report discusses the IRS rule from 2014, which required separating billing and collection policies of nonprofit hospitals as an attempt to alleviate this issue.

The report then discusses the credit reporting of medical debts:

Concerns about the impact of medical debts on credit reports continue. Some observers may believe it is unfair for medical debts to appear on credit reports because these debts are generally incurred for medically necessary reasons and are less likely to indicate whether someone is financially responsible.

The report’s conclusion

The report concludes that there are several areas of the debt collection market—specifically, those referenced above—that are ripe for congressional review:

As the CFPB finalizes and implements its debt collection rulemaking, stakeholders may be able to see how new regulations could impact the market. For these reasons, the debt collection market may continue to be the subject of congressional interest and legislative proposals.


Article by Katie Grzechnik Neill