Source: https://rmaintl.org/rmai-update/rmai-update-august-2019/
Timestamp: 2019-09-20 16:47:13
Document Index: 785336132

Matched Legal Cases: ['§ 227', '§ 227', '§ 227', '§ 227', '§ 227', '§ 1692', '§ 12812', '§ 1812', '§ 1788', '§ 1788', '§ 1788', '§ 1788']

﻿ RMAI Update August 2019 | Receivables Management Association International
Home/RMAI Update August 2019
The Federal Legislative and Regulatory Committee remains laser focused on drafting the RMAI Comments to the CFPB NPRM for debt collection. Earlier this month, the CFPB extended the deadline for comments from August 19th to September 18th, giving RMAI a few more weeks to finalize the submittal. To gather additional input from members to assure RMAI’s comments reflected member’s concerns, during the Executive Summit’s Networking Breakfast, attendees engaged in in-depth table discussions on the various parts of the rule and then shared their table’s discussion.
On Capitol Hill, RMAI continues to work toward introduction of a data and documentation bill. At the same time, our Federal Council is monitoring legislation regarding E-Sign and Robocalls.
RMAI is actively monitoring over 200 bills that may impact the receivables industry in both positive and negative ways. Here are a few noteworthy bills that have been introduced:
Massachusetts HB 3949 – This bill would require passive debt buyers to be licensed as debt collectors in Massachusetts. Currently, third party collection agencies and active debt buyers are regulated and licensed by the Massachusetts Division of Banks while passive debt buyers are regulated by the Attorney General’s Office and not required to be licensed. This bill would also exempt debt buying companies from bonding requirements and allow affiliated companies to be licensed under a single license and subject to a single examination [This bill was unanimously reported out of the Joint Committee on Consumer Protection & Professional Licensure on 7/1/19. RMAI has been advocating for uniformity and consistency in state licensing laws. Maintaining the Massachusetts bifurcated regulatory scheme does not make sense and adds to industry and consumer confusion. RMAI has retained a Massachusetts lobbyist to assist us in our efforts and anticipates a successful outcome.]
New York AB 6909-B/SB 4827-B – This bill called the “Consumer Credit Fairness Act” would: (1) reduce the statute of limitations from six to three years on consumer credit transactions; (2) “extinguish” the right to collect on consumer debt past the statute of limitations; (3) require the mailing of a notice by the court clerk after filing proof of service of the summons and complaint; (4) require specific data to be included in the complaint; and (5) require the provision of form affidavits. [RMAI and a coalition of industry participants, along with our respective lobbyists, fought up to the final day of the New York Legislature to stop this legislation. RMAI is currently working on setting up a meeting with the bill sponsor to discuss amendments for the 2020 legislative session.]
California SB 616 – This bill would exempt the first $2,000 dollars in a deposit account from a bank levies as a means to satisfy court-ordered judgments. [RMA is supporting an industry coalition in opposition to this bill.]
9th Cir. Holds TCPA’s Federal Debt-Collection Exception Unconstitutional, Joins 4th Cir.
The U.S. Court of Appeals for the Ninth Circuit reversed the dismissal of a putative class action under the federal Telephone Consumer Protection Act, finding that the plaintiff adequately alleged that the defendant placed calls using an automated telephone dialing system.
In so ruling, the Ninth Circuit joined with a similar ruling by the Fourth Circuit, and held that the TCPA’s exception for calls “made solely to collect a debt owed to or guaranteed by the United States” was incompatible with the First Amendment and severed the exception as an unconstitutional restriction on speech.
The TCPA, 47 U.S.C. § 227, et seq., prohibits the use of an automatic telephone dialing system (ATDS) to place informational or collection calls or text messages to a cell phone without the user’s prior express consent. The TCPA defines an ATDS as “equipment which has the capacity . . . (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” 47 U.S.C. § 227(a)(1).
The plaintiff alleged that the defendant used an ATDS to alert its users, as a security precaution, when their account was accessed from an unrecognized device or browser. For unknown reasons, the plaintiff received messages from the defendant despite not being a user of the defendant’s products and services, and never consented to such alerts.
The plaintiff sued on behalf of two putative classes: people who received a message from the defendant without providing their cell phone number to the defendant; and, people who notified the defendant that they did not wish to receive messages but later received at least one message.
The defendant filed a motion to dismiss and the trial court concluded that the plaintiff inadequately alleged that the defendant used an ATDS to send its messages and dismissed the complaint with prejudice.
On appeal, the Ninth Circuit began its analysis by explaining that an ATDS need not be able to use a random or sequential generator to store numbers. Instead, it merely needs to have to capacity to “store numbers to be called” and “to dial such numbers automatically,” citing Marks v. Crunch San Diego, LLC, 904 F.3d 1041, 1053 (9th Cir. 2018).
The defendant urged the Ninth Circuit to interpret Marks narrowly, as such an expansive definition of an ATDS would capture smartphones because they can store numbers and, using built-in automated response technology, dial those numbers automatically. The defendant also sought to differentiate its equipment because it stored numbers “to be called” only reflexively as a preprogrammed response to external stimuli outside of its control.
The Ninth Circuit disagreed, stating that the statutory text provides no basis to exclude equipment that stores numbers “to be called” only reflexively. Instead, the equipment need only have the “capacity” to store numbers to be called. 47 U.S.C. § 227(a)(1).
The Ninth Circuit was unpersuaded and noted that phone numbers are frequently stored for purposes other than “to be called,” and provided examples such as merchants and restaurants that stored numbers to identify customers in their loyalty program.
The defendant also argued that it was entitled to dismissal on the pleadings because the TCPA excepts calls “made for emergency purposes.” 47 U.S.C. § 227(b)(1)(A). However, because the plaintiff alleged that he did not have an account with the defendant, meaning his account could not have faced a security issue, the Ninth Circuit determined that the emergency exception cannot apply to the defendant’s text messages.
Next, the Ninth Circuit turned to the defendant’s argument that the TCPA’s “debt-collection exception” was incompatible with the First Amendment. In 2015 Congress added an exception for calls “made solely to collect a debt owed to or guaranteed by the United States.” 47 U.S.C. § 227(b)(1)(A)(iii).
The Ninth Circuit observed that the pre-amendment TCPA was content neutral and consistent with the First Amendment but noted the debt-collection exception changed the framework because the TCPA now favors speech “solely to collect a debt owed to or guaranteed by the United States.”
Because this section “target[ed] speech based on its communicative content,” the Ninth Circuit found the exception content-based and therefore subject to strict scrutiny. Reed v. Town of Gilbert, Ariz., 135 S. Ct. 2218, 2226 (2015). Under strict scrutiny the debt-collection exception may be justified only if it is narrowly tailored to serve compelling state interests. Reed, 135 S. Ct. at 2226.
As the Ninth Circuit explained, “Congress could protect the public fisc in a content neutral way by phrasing the exception in the terms of the relationship rather than content,” or “[t]he government could also obtain consent from its debtors or place the calls itself.” Because the debt-collection exception was insufficiently tailored to advance the government’s interests, the Ninth Circuit concluded that the debt-collection exception failed strict scrutiny.
Accordingly, the Ninth Circuit reversed the trial court’s ruling and remanded for further proceedings.
Bernal v. NRA Grp., LLC, No. 17-3629, 2019 U.S. App. LEXIS 21535 (7th Cir. July 19, 2019)
Distinguishing contrary rulings from the Eighth and Eleventh Circuits, the U.S. Court of Appeals for the Seventh Circuit held that a debt collector’s percentage fee was recoverable as a “cost incurred” by the creditor.
The creditor’s contract with the consumer provided that if payments were missed the consumer could be responsible for “any amounts that are due and owing plus any costs (including reasonable attorney’s fees) incurred by [the creditor] in attempting to collect amounts due.”
The consumer failed to pay, and the creditor hired a debt collector to recover the $267.31 balance. The contract with the debt collector stated the debt collector could charge the creditor “a 5% management fee plus an additional [percentage] amount based on the number of days the debt was delinquent.” The debt collector hired Defendant, a subcontractor, which sent a demand letter to the consumer that included $43.28 in “costs.”
The consumer “reasoned that it couldn’t possibly have cost [Defendant] $43.28 to mail a single collection letter” and filed a class action lawsuit alleging the fee was not “expressly authorized by the agreement creating the debt.” 15 U.S.C. § 1692f(1). The trial judge concluded the fee was expressly authorized by the creditor’s contract with the consumer.
On appeal, the Seventh Circuit analyzed first, whether the fee was a “cost” and, second, whether it was “incurred.”
The Seventh Circuit rejected the plaintiff’s argument that the contract authorized only “actual costs . . . like letterhead and postage but not collection fees,” explaining “the contract never uses the term ‘actual costs,’ nor does anything in the text suggest it should be read so restrictively . . . To the contrary, the contract explicitly allows for “any costs.”
The Court concluded “that a percentage-based collection fee is a ‘cost’ within the meaning of this language,” acknowledging that its finding was a departure from two other Circuits.
In Kojetin v. C U Recovery, Inc., 212 F.3d 1318 (8th Cir. 2000), the Eighth Circuit “held that a debt collector ‘violated the Act by adding the collection fee based on a percentage fee rather than on actual costs when [the debtor’s] agreement with the credit union provide she was liable only for actual costs.’” In Bradley v. Franklin Collection Serv., 739 F.3d 606 (11th Cir. 2014), “the Eleventh Circuit said the same of a contract that allowed for ‘costs of collection, including a reasonable attorney’s fee.’”
While the language in Kojetin and Bradley “was materially indistinguishable” from the contract at issue, the Seventh Circuit disagreed with the holdings in those cases because they relied on the assumptions that: 1) the contracts authorized only “actual costs”; and 2) “that ‘actual costs’ necessarily do not include collection fees.”
Finally, the Court rejected the plaintiff’s argument that “[r]egardless of the definition of ‘cost,’ … the collection fee wasn’t authorized because it hasn’t been ‘incurred’ yet,” reasoning that “[t]he problem with [plaintiff’s] argument is its premise: he assumes that because the contract uses the word ‘incurred,’ it applies only to obligations that already exist prior to billing. But the contract never says that.”
The Seventh Circuit then analyzed the grammar used by the contract, explaining that the word “incurred” is a past participle, which we generally use to form one of two things: perfect tenses or the passive voice.” It then noted that “[a] quick survey of judicial opinions confirms that the past participle is an uncommonly flexible device. Sometimes courts have, as [plaintiff] insists we should, found that a past participle refers to a completed event . . . In other situations, courts have said that past participles ‘describe the present state of a thing . . . In still others, courts have found that past participles can refer to future events.”
Because “nothing in the contract’s actual language says much about timing at all,” “[t]hat silence strongly supports [Defendant’s] argument: absent limiting language, ‘any’ should mean ‘any.’ It should include costs incurred at any time, including those that will necessarily be incurred at the time of payment.”
Agreeing with the trial judge “that the word ‘incurred’ lacks a specific temporal restriction[,]” and stressing that “[t]he contested $43.28 is not an estimate [but] the precise amount that would have been due had [plaintiff] paid his debt [when he received the demand letter], the Seventh Circuit concluded that “this standard collection fee falls within the contract’s broad language authorizing ‘any costs’ of collection. As a result, the [debt collector’s] letter did not violate the FDCPA.”
7th Cir. Holds Plaintiff Lacked Standing in ADA ‘Website Accessibility’ Case Against Credit Union
Carello v. Aurora Policemen Credit Union, No. 18-2887, 2019 U.S. App. LEXIS 20885 (7th Cir. July 15, 2019)
The U.S. Court of Appeals for the Seventh Circuit held that a blind plaintiff lacked standing to sue under the Americans with Disabilities Act (ADA) for alleged accessibility problems with a credit union’s website because he could not establish an injury in fact as a non-member.
The plaintiff, who was blind, sued a credit union, alleging that the credit union’s website violated his rights under the ADA because it was not accessible to blind people. Specifically, the plaintiff claimed that the credit union’s website discriminated against him on the basis of his disability and failed to make “reasonable modifications” to comply with the ADA in violation of 42 U.S.C. § 12812(a), (b). The plaintiff sought injunctive relief, court costs, and attorneys’ fees.
The plaintiff used a “screen reader,” that reads text aloud to access otherwise inaccessible visual content online. However, a screen reader only works when websites support its software. The plaintiff alleged that the credit union’s website did not support screen reader software.
The Illinois has a Credit Union Act only requires that credit unions open their membership to persons that share a “common bond.” 205 ILCS 305/2(1). This common bond includes “[p]ersons belonging to a specific association, group or organization,” “[p]ersons who reside in a reasonably compact and well-defined neighborhood or community,” and “[p]ersons who have a common employer.” The credit union membership is limited to certain local city and county employees. Only members may use the credit union’s services.
The plaintiff was not a credit union member and was not eligible for membership. He was a “tester” who visited websites to determine their ADA compatibility.
The trial court granted the credit union’s motion to dismiss on the grounds that the plaintiff lacked standing to sue and the plaintiff appealed.
The Seventh Circuit observed that this appeal turned on the injury-in-fact requirement. Under Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1548 (2016), the plaintiff must allege that he suffered an injury that is “both concrete and particularized.” The plaintiff must also show that he faces a “real and immediate” threat of future injury because he seeks injunctive relief.
The plaintiff argued the trial court wrongly denied him standing on the grounds that he was a tester. The Seventh Circuit rejected this argument because although “tester status does not defeat standing, it does not automatically confer it either.” Instead, like all plaintiffs, a “tester must still satisfy the elements of standing, including the injury-in-fact requirement.”
The plaintiff also claimed he had standing to sue because the credit union caused him a dignitary harm. Although the Seventh Circuit acknowledged that a dignitary harm can be cognizable, it noted that “not all dignitary harms are sufficiently concrete to serve as injuries in fact.”
Here, the Court held, any dignitary harm did not rise to the level of a concrete injury because Illinois “erected a neutral legal barrier to the plaintiff’s use of the credit union’s services.” The fact that the credit union does not “accommodate the visually impaired” does not personally affect the plaintiff, the Court held.
Put differently, the alleged harm is not particularized as it does not affect the plaintiff individually. And because the plaintiff cannot claim that if he visited the credit union’s website again, he would be able to use the credit union’s services even though he is not a member, he is not entitled to injunctive relief.
Finally, the Seventh Circuit examined the plaintiff’s argument that the credit union’s failure to make its website accessible to his screen reader caused him an informational harm that created standing to sue. The Court had little trouble rejecting this argument because an “informational injury” is not based solely on an inability to access information. Instead, “[a]n informational injury occurs when the defendant refuses to provide the plaintiff with information that a law — typically, a sunshine law — entitles him to obtain and review for some substantive purpose.”
Here, plaintiff’s complaint was that the credit union should have made it easier to access the information on its website for blind people, not that the website lacked information. The Seventh Circuit held that was not an informational injury and affirmed the trial court order that the plaintiff lacked standing.
Calif. App. Court (1st Dist) Holds Rosenthal Act Allows Class Actions, Cure Provisions to Apply to Debtor Notices
Timlick v. Nat’l Enter. Sys., No. A154235, 2019 Cal. App. Unpub. LEXIS 3198 (May 7, 2019)
In an unreported opinion, the Court of Appeal for the First District of California held that a debt collector that violated the minimum type-size requirement for collection letters under the Rosenthal Act cured the violation, but the cure afforded the named plaintiff should not have resulted in dismissal of the entire putative class action.
The consumer received a debt collection letter from the debt collector that did not provide certain statutorily required language in the proper type-size. The consumer filed a complaint on behalf of a putative class alleging violation of Cal. Civil Code § 1812.701(b).
Nine days after it was served with the consumer’s complaint, the debt collector sent a revised collection letter corrected the type-size. The debt collector argued that this cured the alleged violation within the prescribed 15-day period and moved for summary judgment.
The cure provision in the Rosenthal Act states: “[a] debt collector shall have no civil liability under this title if, within 15 days either after discovering a violation which is able to be cured, or after the receipt of a written notice of such violation, the debt collector notifies the debtor of the violation, and makes whatever adjustments or corrections are necessary to cure the violation with respect to the debtor.” Cal. Civil Code § 1788.30(d).
The trial court found that the “cure” provision under section 1788.30(d) applied to the debt collector’s violation and granted the debt collector’s motion for summary judgment and dismissed the entire putative class action. The plaintiff appealed.
On appeal, the consumer argued that the trial court erred because the cure provision was repealed when the Legislature enacted Cal. Civil Code § 1788.17 which provides, in part:
“Notwithstanding any other provision of this title, every debt collector collecting or attempting to collect a consumer debt shall comply with the provisions of Sections 1692b to 1692j, inclusive, of, and shall be subject to the remedies in Section 1692k of [the FDCPA].” Section 1692k of the FDCPA specifically provides for both individual and class action remedies but does not contain a cure provision like the Rosenthal Act.
The Appellate Court disagreed. Finding no express repeal language in the statute, nor any such intent in the legislative history, the Court explained that an implied repeal will be found “only when there is no rational basis for harmonizing the two potentially conflicting statutes.”
The consumer also argued that the type-size violation could not be cured because the statute requires compliance in the debt collector’s first written communication to the consumer.
The Appellate Court rejected this argument, citing floor analysis of the legislation.
Next, the Appellate Court turned to the consumer’s argument that the trial court erred by dismissing the entire putative class action after granting summary judgment on her individual claim.
The remedies provision of the Rosenthal Act states that “[a]ny debt collector who violates this title with respect to any debtor shall be liable to that debtor only in an individual action, and his liability therein to that debtor shall be in an amount equal to the sum of any actual damages sustained by the debtor as a result of the violation.” Cal. Civil Code § 1788.30(a) (emphasis added).
The Appellate Court began by considering whether the language “individual action” barred a class action and determined that § 1788.17, described above, can reasonably be read to incorporate the class action remedies of the FDCPA into the Rosenthal Act, “[n]otwithstanding any other provision” of the Rosenthal Act, such as the individual action provisions in section 1788.30.b
Thus, the Appellate Court determined that the consumer could bring a putative class action for her claim under section 1812.701(b).
Finally, the Appellate Court turned to the issue of the “pickoff” exception in putative class actions. “A typical pickoff situation arises when, prior to class certification, a defendant in a proposed class action gives the named plaintiff the entirety of the relief claimed by that individual. The defendant then attempts to obtain dismissal of the action, on the basis that the named plaintiff can no longer pursue a class action, as the named plaintiff is no longer a member of the class the plaintiff sought to represent.”
The debt collector argued that it did not pick off the named plaintiff but, rather, substantively prevailed on the merits of the claim based upon the cure defense.
The Court, however, determined that the debt collector did not prevail against the consumer in the sense that the allegations were disproven or shown to be meritless. Instead, the allegations were “implicitly conceded” and the debt collector “voluntarily gave special treatment to the named plaintiff only, resulting in the elimination of her standing to maintain a putative class action.”
The Court noted that involuntary receipt of relief does not necessarily preclude a plaintiff from serving as a class representative. Instead, “the trial court must consider whether the named plaintiff can continue to fairly represent the class in light of the individual relief offered by the defendant, an evaluation that in most cases may be performed in the context of a ruling on a motion for class certification.”
Thus, the Appellate Court held that the trial court erred in dismissing the entire putative class action without affording the consumer the opportunity to amend her complaint, redefine the putative class, or locate a suitable class representative.
SCOTUS Adopts ‘Objectively Reasonable’ Standard for Violations of Bankruptcy Discharge Orders
Taggart v. Lorenzen, 139 S. Ct. 1795 (2019)
Section 727 provides that a discharge relieves a debtor “from all debts that arose before the date of the order for relief,” “[e]xcept as provided in section 523.” Section 523 then lists in detail the debts that are exempt from discharge.
After the discharge order was issued, the Oregon state court proceeded to enter judgment against the debtor. The company then filed a petition in state court seeking attorney’s fees that were incurred after the debtor filed his bankruptcy petition. All parties agreed that under the Ninth Circuit’s decision in In re Ybarra, 424 F.3d 1018 (2005), a discharge order would normally discharge postpetition attorney’s fees stemming from prepetition litigation unless the discharged debtor “returned to the fray” after filing bankruptcy.
Because the company had a “good faith belief” that the discharge order did not apply to its claims, the Ninth Circuit held that the civil contempt sanctions were improper. The debtor then filed a petition for certiorari, which was granted.
After reviewing these provisions, the Court determined that they “authorize a court to impose civil contempt sanctions when there is no objectively reasonable basis for concluding that the creditor’s conduct might be lawful under the discharge order.” The Court further observed that in cases outside the bankruptcy context, it has said that civil contempt “should not be resorted to where there is [a] fair ground of doubt as to the wrongfulness of the defendant’s conduct.”
Moreover, this standard reflects that civil contempt is a “severe remedy,” and that principles of “basic fairness requir[e] that those enjoined receive explicit notice” of “what conduct is outlawed” before being held in civil contempt. Thus, “[t]his standard is generally an objective one.” However, subject intent is not always irrelevant, and “civil contempt sanctions may be warranted when a party acts in bad faith.”
The Court therefore held: “[A] court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor’s conduct. In other words, civil contempt may be appropriate if there is no objectively reasonable basis for concluding that the creditor’s conduct might be lawful.”
LIVE MONTHLY WEBINARS (Free to Members)
Letters – As in Dating: The First Contact is Always the Hardest – Wednesday, August 21, 2019 at 9:00am PT/12:00pm ET
CHIEF COMPLIANCE OFFICER WEBINAR SERIES (4 Webinars for $200 – for Members)
Managing Organizational Expectations – Tuesday, August 27, 2019 at 9:00am PT/12:00pm ET
What Every Compliance Professional Ought to Know About Staying Abreast of State and Local Laws, Regulations, and Rules – Wednesday, September 18, 2019
Managing A Risk Event – October 22, 2019
Best Data Privacy Practices for 2020 and Beyond – November 12, 2019
***All recorded monthly webinars are FREE to our members. Special series and select required courses for certification are paid at member rate.
DID YOU KNOW RMAI OFFERS TWO (2) TYPES OF CERTIFICATION DESIGNATIONS?
Business/Vendor Certification: complete a series of standards geared towards your business type along with an external audit every 3 years to maintain a single compliance footprint for the receivables management industry.
NOTE: An individual within your business MUST obtain Individual Certification prior to obtaining Business/Vendor Certification.
Individual Certification: complete 24 education credits within two (2) years and receive your Certified Receivables Compliance Professional (CRCP) designation.
Visit RMAI’s Certification Page for more information.
CONGRATULATIONS TO OUR NEW AND RENEWED CERTIFIED BUSINESSES AND INDIVIDUALS!
Terrill Outsourcing dba Superlative RM
Bill Sorgatz, The Bureaus, Inc.
John Touhey, The Law Offices of John P Touhey PLLC
Serhan Akca, Hayat Varlik Yonetim
Michael Lagana, Peroutka, Miller, Klima & Peters, PA
Donna Boyd, First Financial Asset Management Inc
Dan Consuegra, The Law Offices of Daniel Consuegra P.C.
Trudy Weiss Craig, Unifund
View all certified businesses
View all certified individuals
For questions about certification, contact Caitlyn Vaden at (916) 482-2462 or cvaden@rmaintl.org.
BECU Boeing Employees Credit Union Originating Creditor WA
First USA Financial, LLC Associate Debt Buyer MA
Interactions, LLC Affiliate MA
Titanium Legal Affiliate OR
Read more about these members and other members on the Member Search page.
Wrigley Rooftop Meet & Mingle — ONLY A FEW TICKETS LEFT!
Over 120 industry professionals have already registered for this event! Reserve your spot and join in the fun, food and networking! For details and to register, click here https://rmaintl.org/wrigley/
RMAI Chicago Regional Event – Wrigley Field | September 16
RMAI Annual Conference | February 4-6, 2020
Thank you to our August 2018 – August 13, 2019 legislative fund contributors!
First Financial Portfolio Service, LLC. FFAM360
C & E Aquisition Group
Conquest Receivables
Capital Solutions Bancorp, LC