Category Archives: Legal News

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

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

CFPB files amicus brief in Third Circuit FDCPA case in support of debt collector

The CFPB filed an amicus brief in Hopkins v. Collecto, Inc., an appeal before the U.S. Court of Appeals for the Third Circuit, in support of the debt collector’s position that it did not violate the FDCPA by sending the plaintiff a letter that included an itemization of the plaintiff’s debt that indicated “$0.00” was owed in interest and collection fees.

The FDCPA prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt” or “unfair or unconscionable means to collect or attempt to collect any debt.”  The plaintiff filed a putative class action complaint in which he claimed that the collection letter violated these FDCPA prohibitions.  According to the plaintiff, by itemizing interest and collection fees, the letter falsely implied to the least sophisticated consumer that such interest and fees could begin to accrue and thereby increase the amount of the debt.  (While not expressly stated, it appears the plaintiff’s account was a “static debt” on which interest and fees could not be added.)  The district court dismissed the complaint because it did not state a “plausible claim for relief.”

In its amicus brief, the Bureau asserts that an itemization of a debt “discloses what has already happened, not what will happen or may happen in the future.”  According to the Bureau, “[t]he bare statement that $0.00 in interest and collection fees [is owed] says nothing one way or the other about whether such charges may be assessed in the future.”  It argues that “it would be unreasonable for an unsophisticated consumer to interpret an itemization showing that no interest and fees had been assessed on her account as raising the prospect that she would be charged fees or interest in the future.”

The Bureau references the proposed model validation notice in its proposed debt collection rule.  It states that the model notice would require debt collectors “to include a table showing the interest, fees, payments, and credits that have been applied since the itemization date, even if none of those items had been assessed or applied to the debt.  To show that no interest, fees, payments, or credits were assessed, the proposal would allow collectors to use “0” or “N/A” for that component or to state that “no interest, fees, payments, or credits have been assessed or applied to the debt.”  According to the Bureau, its proposal is based on the premise that “consumers understand such itemizations to reflect past charges (even $0.00 in past charges) rather than to suggest future charges may accrue.”

In support of its position, the Bureau cites to the Seventh Circuit’s recent decision in Degroot v. Client Services Inc., another FDCPA case in which the Bureau also filed an amicus brief in support of the debt collector.  In Degroot, the plaintiff filed a putative class action lawsuit alleging that a debt collector seeking to collect the amount owed on the plaintiff’s charged-off credit card account violated the FDCPA by including an itemization in a collection letter that indicated “$0.00” was owed for interest or other charges.  Similar to the argument made by the plaintiff in Hopkins, he argued that the inclusion of interest and other charges in the debt itemization was misleading because it implied that the card issuer would begin adding interest and possibly other charges to previously charged-off debts if consumers failed to resolve their debts with the debt collector.

In affirming the district court’s dismissal of the complaint, the Seventh Circuit indicated that it agreed with the Bureau’s argument in its amicus brief that because “the itemization of a debt is a record of what has already happened…such a breakdown cannot be construed as forward looking and therefore misleading.”  It found “unpersuasive” the plaintiff’s “insistence…that the inclusion of a zero balance for interest and fees naturally implies he could incur future interest or other charges if he did not settle the debt.”  The Seventh Circuit stated that the plaintiff’s “mere raising of an open question about future assessment of other charges with a speculative answer does not make the breakdown misleading.”  According to the Seventh Circuit, the district court had correctly concluded that the debt collector’s “use of an itemized breakdown accompanied by zero balances would not confuse or mislead the reasonable unsophisticated consumer.”

Conversation Intelligence Leader Balto Secures $10 Million Series A Funding

ST. LOUIS, Mo. — Balto, the leader in real-time guidance for contact centers powered by AI, today announced that it closed a $10 million Series A round of funding, led by Sierra Ventures and joined by Jump Capital, OCA Ventures, Cultivation Capital and others. The funding will enable Balto to fundamentally shift the way contact centers do business, extending the reach of its real-time call guidance solution through a dramatic increase in product functionality and tripling its go-to-market team.

“Balto is bringing the most aggressive real-time call guidance solution to market at a time when sales and customer experience agents and managers are working remote and need even greater support,” said Marc Bernstein, Balto’s CEO and founder. “Unlike other conversation intelligence solutions available today that provide only post-call analytics, Balto uses AI to guide customer conversations on-the-fly, helping agents say the right thing, at the right time. As a result, call centers see a substantial increase in conversion rates, more quickly ramp new agents, and improve customer experiences.”

Real-time Guidance Helps Agents Lead Better Conversations

The post-call speech analytics tools used by many contact centers fail to address agents’ biggest pain point: simply forgetting the right thing to say to a customer in the moment. Because post-call analytics are not equipped to deliver real-time insights and prompt action until after the call has ended, post-call solutions are unable to help the agent redirect the conversation during the call when they can be more effective.

Balto bridges the gap between post-call data analytics and action with its real-time guidance solution that offers both scalable, in-the-moment coaching for agents and a holistic view that helps managers understand which tactics work and which do not. Balto’s Real-Time Coaching for agents listens to both sides of a conversation and visually prompts them to say the right thing at the right time, enabling agents to execute on best practices at scale. And with Balto’s Real-Time Management functionality, contact center managers can get instant insights into agent performance, win rates and trends, which enables them to update messaging and highlight important points immediately, so all agents can easily adapt to changes.

“Fueled by demand for enterprise applications like CRM, ERP and business intelligence, and the skyrocketing growth of recordings as businesses have gone virtual, conversational intelligence is poised to become a multibillion market in the next few years. Balto is well positioned in this burgeoning market, offering something that other solutions don’t have: the ability to deliver the insights representatives need to execute key actions in real time,” said Tim Guleri, managing partner at Sierra Ventures, who also will join the Balto Board of Directors.

Companies, such as eHealth, Empire Today and National General Insurance, using Balto are already seeing real results, including:

  • Up to a 35% increase in conversion rates
  • Improving average handle time by 90 seconds
  • Speeding ramp time by getting agents up to full production 75% faster
  • Understanding what’s happening on 100% of calls

About Balto

Balto is the leader in real-time guidance for contact centers. Powered by AI, Balto’s software solution evaluates both sides of a phone call and instantly delivers critical information that enables agents to perform at the highest level humanly possible. With Balto, contact centers deliver world-class customer experiences, increase conversions and decrease agent ramp time. Current customers include contact centers in sectors such as insurance, telecommunications, retail, financial services and healthcare. For more information, visit

CFPB, FTC, and Others Partner to Target Phantom and Abusive Debt Collection

On September 29, the CFPB, in partnership with the FTC and numerous federal and state law enforcement agencies, announced a nationwide effort addressing “phantom debt collection” and abusive and threatening debt collection practices. The initiative has been titled “Operation Corrupt Collector.”

Phantom debt collection (also known as fake debt collection) covers a range of practices, including attempts to collect on obligations that consumers never took out or received, as well as efforts to recover loans without authorization from the creditor. The FTC has been active in this space for some time, as evidenced by the CFPB’s most recent annual Fair Debt Collection Practices Act (FDCPA) report (which incorporates information from the FTC’s annual letter to the CFPB describing its FDCPA activities), but this latest initiative is something of a new area of focus for the CFPB. Both the FTC and CFPB, along with other agencies, share enforcement responsibilities under the FDCPA.

To date, this joint operation includes five cases filed by the FTC, two filed by the CFPB, as well as three cases brought by the U.S. Department of Justice and U.S. Postal Inspection Service. Additionally, the operation includes actions by authorities in the following states: Arizona, California, Colorado, Connecticut, Florida, Idaho, Illinois, Indiana, Massachusetts, New Mexico, North Carolina, North Dakota, New York, Ohio, South Carolina, and Washington.

In its press release, the CFPB highlighted its partnership with the New York Attorney General in actions against several companies. The FTC has similarly partnered with the New York Attorney General’s Office to crack down on phantom debt collection in the past.


Article by Jeremy Sairsingh