Source: http://consumerfinancialserviceslaw.blogspot.com/2015/07/
Timestamp: 2017-06-24 13:43:35
Document Index: 300083557

Matched Legal Cases: ['§1692', '§1692', '§1692', '§1692', '§1692', '§1692']

Consumer Financial Services Litigation and Compliance: July 2015
The Second Circuit recently joined other circuits in
holding that money owed as result of theft does not
constitute a debt within the meaning of the FDCPA. In Beauvoir
v. Israel, C.A. 14-3794 (2d Cir. July 21, 2015) the consumers filed a
putative class action against an attorney who was retained by a natural gas
company to collect for the consumption of unmetered gas to the consumers’
residence. The underlying obligation
arose from allegations that the consumers “diverted and consumed unmetered
natural gas…by means of unlawfully tampering with… [the] gas meter to impede,
impair, obstruct and prevent the…meter from performing its recording function.” The demand letter sent by the attorney did
not contain the debt validation language required by 15 U.S.C. §1692g. The attorney moved to dismiss the claim
because the collection action he initiated concerned the theft of natural gas
and thus, was not a debt as the term is defined by the FDCPA. In affirming the district court’s dismissal of the FDCPA
suit, the court focused on the asserted basis for the obligation to pay. Under the FDCPA, a “debt” is defined as an “obligation
or alleged obligation of a consumer to pay money arising out of a transaction in which the money,
property, insurance, or services which are the subject of the transaction are
primarily for personal, family, or household purposes, whether or not such
obligation has been reduced to judgment.” 15 U.S.C. §1692a. Because the money
owed in this case arose as a result of theft and not out of a transaction or as
a result of the rendition of a voluntary service or transaction, the court
determined that it was not a debt covered by the FDCPA. At a minimum, the court concluded that the
FDCPA contemplates that the debt arise as a result of the rendition of a
service or purchase of property or other item of value. For those keeping count, a majority of the
circuits have held that liability derived from theft or torts does
not constitute a debt under the FDCPA. See Fleming v. Pickard, 581 F.3d 922,
926 (2009); Hawthorne v. Mac Adjustment,
Inc., 140 F. 3d 1367 (11th Cir. 1998); Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 111 F.3d
1322 (7th Cir. 1997); Zimmerman
v. HBO Affiliate Grp., 834 F.2d 1163 (3d Cir. 1987). Posted by
Communications Commission (the “FCC”) recently released its Declaratory Ruling
and Order regarding the requirements of the Telephone Consumer Protection Act
of 1991 (the “TCPA”). The FCC Order provides
some good news for financial institutions, exempting certain automated calls to
cell phones and text messages from the prior express consent requirement. Here’s what you need to know:
Under the TCPA, the
general rule is that calls made with an automated telephone dialing system to
cell phones, automated messages to cell phones and text messages all require
the recipient’s prior express consent. The FCC Order exempts from the consumer consent requirements certain
pro-consumer calls which are made about time sensitive financial matters so long as they are made free to the end
user and do not count against the recipient’s plan minutes or texts. Specifically,
Calls or texts for the purpose of
notifying the customer of transactions and events that suggest a risk of fraud
that such situations require immediate attention and it may be damaging to the
customer if the financial institution is prohibited from contacting the
customer for lack of prior express consent, the FCC concluded that financial
institutions may call or text a customer’s cellular phone number to notify him
of possible fraudulent activity on his account. Call or texts for the purpose of
notifying the customer of a possible breach of the security of the customer’s
the need for expediency in the event of a data breach, the FCC held that it is
in the best interest of consumers to receive immediate notification of such an
occurrence regardless of whether the consumer provided prior express consent. Calls or texts for the purpose of
conveying measures consumers may take to prevent identity theft following a
data breach. When
a customer’s personal and financial account information is at risk following a
data breach, financial institutions seek to inform the customer of measures he
can take to prevent identity theft. Thus,
the FCC exempted such calls from the express consent requirement. The FCC, however, cautioned financial
institutions that informing a customer of an instance of identity theft or
measures to prevent identity theft does
not include marketing products a customer may use to prevent or remedy
identity theft. Calls or texts regarding actions needed
to arrange for a receipt of pending money transfers. Financial institutions want
to have the ability to notify the recipient of a money transfer of steps to be
taken in order to receive the transferred funds; however, money transfers must
often be delivered to individuals who do not have a relationship with the
transferring institution and therefore have not even had the opportunity to
consent to calls or text messages from the financial institution. Based on the fact that both the transferring
and receiving party have an interest in the details and status of the money
transfer, combined with the time-sensitive nature of money transfers, the FCC
granted the exemption to notifications regarding actions needed to arrange for
receipt of a money transfer.
The FCC’s exemption is
not unfettered and financial institutions seeking to take advantage of the
exemption must comply with the limitations imposed by the FCC Order:
All calls and texts must be free to the
end user and not count against the recipient’s plan minutes or texts.
Calls and texts may only be sent to the wireless
telephone number provided by the customer of the financial institution;
Calls and texts are strictly limited to
purposes specified above and must not include any telemarketing,
cross-marketing, solicitation, or advertising content; and
Calls for debt collection purposes still
require prior express consent.
The FCC ruling provides
that a single financial institution may call or message a customer, who has not
given their prior express consent, no more than three (3) times over a
three-day (3) period. These limits apply
per event warranting the exempted calls, regardless of which exemption is
triggered. Any contact beyond the
limited number of three (3) calls or messages per event, over a three-day
period, is not exempt and requires the express consent of the consumer. Opt-out
must include in their message a method for recipients to easily opt out of
future calls and messages. Voice calls
that could be answered by a live person must include an automated, interactive
voice and/or key press-activated opt-out mechanism that enables the call
recipient to make an opt-out request prior to terminating the call, voice calls
that could be answered by an answering machine or voice mail service must
include a toll-free number that the consumer can call to opt out of future
financial calls, text messages must inform recipients of the ability to opt out
by replying “STOP,” which will be the exclusive means by which consumers may
opt out of such messages
If the customer chooses
to opt out of future calls, the opt-out request should not opt the customer out
of receiving all financial calls for that account. As such, the financial institution should
customize the opt-out provision so that a customer is aware that a decision to
opt out of future calls from the financial institution is specific only to the
category of exemption referenced in that message or call. Financial
institutions are required to honor opt out requests immediately.
Voice calls and text messages must state
the name and contact information of the financial institution (for voice calls,
these disclosures must occur at the beginning of the call); and
Voice calls and text messages must be
concise, generally one minute or less in length for voice calls (unless more
time is needed to obtain customer responses or answer customer questions) and
160 characters or less in length for text messages.
FCC ruling provides much needed exemptions related to urgent financial matters, but caution should be used by financial institutions seeking to take advantage of the exemptions. First and foremost, financial institutions needs to keep in mind that this is not a blanket exemption. All calls and texts must be free to the end user and not count against the recipient's plan minutes or texts. The ability to use the exemption, therefore, will require financial institutions to work closely with wireless carriers and third party servicers to insure the messages and notices do not result in a charge to the recipient. Secondly, content and frequency of calls must likewise be closely monitored as the exemption will be tightly enforced. Failure to strictly comply, therefore could result in costly litigation. Posted by
of 1991 (the “TCPA”). The FCC Order
provides some good news for the healthcare industry, clarifying the TCPA’s
application regarding calls to patients by healthcare providers, and granting
an exemption from the TCPA’s prior express consent requirement for certain
healthcare calls that are not charged to the end recipient. Here’s what you need to know:
The General Rule. The Ruling clarifies that
when a patient provides his telephone number to a healthcare provider, such
provision constitutes prior express consent for healthcare calls subject to
HIPAA. The express consent only extends
to HIPAA covered entities and business associates acting on their behalf as
defined in the HIPAA privacy rules and only to calls made within the scope of
the consent given, and absent contrary instructions. Incapacitated Third Parties. The FCC Order
additionally addressed the issue of whether a third party may provide a
telephone number and prior express consent for incapacitated patients. In doing
so, the FCC recognized that in certain situations, it may be impossible for a
caller to provide prior express consent due to incapacity. The Order therefore allows for a third party
to provide prior express consent to make healthcare calls subject to HIPAA where
a party is unable to consent because of medical incapacity. In those situations, prior express consent to
make healthcare calls subject to HIPAA may be obtained from a third party. As such, healthcare providers may make
healthcare calls subject to HIPAA, to an incapacitated patient based on the
prior express consent of a third party. At the time the patient is considered capable to grant consent on his
own behalf, the third party consent is no longer valid. At that point, the healthcare provider must
obtain prior express consent from the patient himself. Free to End User Calls:
The Order also provides a
limited exemption from the TCPA’s prior express consent requirement for certain
non-telemarketing, healthcare calls that are not charged to the receiving party. What Calls are Exempt?
Appointment and exam confirmations and
reminders, Wellness checkups, Hospital pre-registration instructions, Preoperative instructions, Lab results, Post-discharge follow-up intended to
prevent readmission, Prescription notifications
Home healthcare instructions. What Calls are Not Exempt?
Calls regarding accounting, debt collections,
payment notifications, Social Security disability eligibility or other
Requirements for Exempted Calls: Voice calls and text messages must be free
to the end user and not counted against any plan limits to the recipient;
Voice calls and text messages may be sent only
to the wireless telephone number provided by the patient;
the name and contact information of the healthcare provider (for voice calls,
these disclosures must be provided at the beginning of the call);
Voice calls and text messages are strictly
limited to the purpose permitted in the FCC’s ruling;
Voice calls and text messages must not
include any telemarketing, solicitation, or advertising; All communications must comply with HIPAA
privacy rules;
minute or less in length for voice calls (unless more time is needed to obtain
customer responses or answer customer questions)
characters or less in length for text messages;
A healthcare provider may initiate only
one (1) message per day, up to a maximum of three (3) voice calls or text
messages combined per week from a specific healthcare provider;
A healthcare provider must offer
recipients within each message an easy means to opt out of future such messages;
calls that could be answered by a live person must include an automated,
interactive voice and/or key press-activated opt-out mechanism that enables the
call recipient to make an opt-out request prior to terminating the call, voice
calls that could be answered by an answering machine or voice mail service must
healthcare calls, text
messages must inform recipients of the ability to opt out by replying “STOP,”
which will be the exclusive means by which consumers may opt out of such
messages; and,
healthcare provider must honor the opt-out requests immediately.
Last week, the CFPB issued its first monthly report of
consumer complaints. The report is a
high level snapshot of trends in consumer complaints. The Report provides a summary of the volume of
complaints by product category, by company and by state. Additionally, it highlights a product type
and a geographic area. This month’s
report highlights debt collection. Here
The Report breaks down complaint volume by
product looking at a three month average and comparing the same to 2014. Surprisingly, debt collection (while still
having the largest volume of complaints) showed a decrease in complaint volume
for April-June 2015 compared to the same period of 2014;
Consumer loan and credit reporting showed the
largest increase in complaints for April-June 2015 when compared to April-June
Not surprisingly, the three products which
yielded the highest volume of complaints for April-June 2015 were debt
collection, mortgage and credit reporting.
Highlighted Product: Debt
collection Complaints This month’s report highlights debt collection
The most common debt complaints were continued
attempts to collect a debt not owed and communication tactics.
Many of the complaints concerning continued
attempt to collect suggested that the balance was not correctly calculated
Many of the complaints suggested the consumer
only found out about the debt collection through reviewing their credit report.
The Eighth Circuit has taken the middle ground in the debate
as to whether the mere filing of a proof of claim outside the statute of
limitations violates the FDCPA. Gatewood v. CP Medical, LLC, Case No.
15-6008 (8th Cir. Jul. 10, 2015). In Gatewood, the creditor
filed a proof of claim for medical debt. The debtors filed an adversary proceeding asserting that the debt was
time barred and that by filing a proof of claim on time barred debt, the
creditor had engaged in a “false, deceptive, misleading, unfair and unconscionable”
debt collection practice. Slip Op. at
2-3. In separating itself from the
Eleventh Circuit’s opinion in Crawford v. LVNV Funding, the court held that while the filing of a proof of claim was
debt collection, not all debt collection violates the FDCPA. Instead, the court took a more moderate
position, noting that the FDCPA “simply prohibits false, misleading, deceptive,
unfair or unconscionable debt collection practices. Filing in a bankruptcy court an accurate proof of claim containing all
the required information, including the timing of the debt, standing alone, is
not a prohibited debt collection practice.” Slip Op. at 10 (emphasis supplied).
Late Friday afternoon, the FCC issued its highly
controversial and long awaited Declaratory Ruling and Order regarding nineteen
petitions which have been filed requesting clarification of the TCPA’s
application. I spent most of my Sunday
afternoon and evening digesting the 138 page Order, looking for something
positive for the business world and found very little to get excited about. If there is any consolation to be found, and there
are few, it is that the decision was not unanimous. Two commissioners issued impassioned
dissents, rightfully noting that the Order “expands the TCPA’s reach” and “twists
the law’s words…to target useful communications between legitimate businesses
and their customers. This Order will
make abuse of the TCPA much, much easier. And the primary beneficiaries will be trial lawyers, not the American
public.” Dissenting Statement of Commissioner Ajit Pai. The second consolation was the news that ACA International,
a major trade group for the collection industry, immediately filed suit against
the FCC in the United States Court of Appeals for the D.C. Circuit seeking a judicial review of the Order.
Over the course of this week, I will break down the potential impacts of the
Ruling for key industries, but today I provide an overview of the Order’s
What is an Autodialer? The Order rejects any “present use” or current
capacity test and holds that capacity of an autodialer is not limited to its
current configuration but includes its potential functionalities even if it
currently lacks the requisite software. Thus, the FCC affirms that “dialing
equipment that has the capacity to store or produce, and dial random or sequential
numbers…[is an autodialer] even if it is not presently used for that purpose.” Id. at ¶ 10. While the FCC refused to “address the exact
contours of the “autodialer” definition”, it did clarify that its focus is on
whether the equipment can dial without human intervention and whether it can “dial
thousands of numbers in a short period of time”. Id. at
¶ 17. The FCC also concluded that callers cannot avoid
liability by dividing the ownership of pieces of dialing equipment that work in
concert among multiple entities. The
Order holds that “equipment can be deemed an autodialer if the net result of such voluntary combination
enables the equipment to have the capacity to store or produce telephone
numbers to be called, using a random or sequential number generator, and to
dial such numbers. The fact that two
separate entities have voluntarily entered into an agreement to provide such functionality
does not alter this analysis.” Id. at ¶24.
The dissent was highly critical of the majority’s
holding, particularly as it related to capacity, its statutory interpretation
of capacity and the TCPA’s potential application to smart phones which was not
ruled out by the majority. As noted by
Commissioner Pai, if a system cannot store or produce telephone numbers to be
called using a random or sequential number generator and it if cannot dial such
numbers, it should not be included. Pai
described the majority’s test as being “whether there is “more than a
theoretical potential that the equipment could be modified to satisfy the ‘autodialer’
definition. Pai Dissent.
Text Messaging/Calling Apps are
Covered. The Order confirms text messaging is covered,
but with regard to text messaging apps, it depends on who makes the calls. The Order requires some direct connection
between the person or entity and the making of the call. Order, ¶ 30. The test is a totality of the circumstances
and looks to: (a) who took the steps to physically place the call; and (b) whether
another person or entity was so involved in placing the call as to be deemed to
have initiated it. Id. The FCC also determined that equipment used to
send Internet to phone text messages may also be an autodialer because it is
the functional equivalent to phone-to-phone texting. In doing so, the FCC held that Congress
intended the word “dial” to mean “initiating a communication with consumers
through use of their telephone number.” Order, ¶ 113.
For purposes of app platforms, a contact list or
address book does not establish prior express consent.
Porting of numbers from land lines to wireless
numbers does not necessarily revoke prior express consent. Prior express consent may, under certain
circumstances, carry over from a land line to a wireless line if prior express consent was given for
the type of call in question. So, for
instance, if the consumer provided consent to receive calls from an automated
dialing system or to receive prerecorded messages at 123-456-7890 when it was a
land line and the number is then ported over to a wireless line, the Order
suggests the consent remains effective unless and until it is revoked.
Consent generally may be revoked through any reasonable
means and the caller may not dictate how revocation may be made. The FCC therefore held that “the consumer may
revoke his or her consent in any reasonable manner that clearly expresses his
or her desire not to receive further calls, and that the consumer is not
limited to using only a revocation method that the caller has established as
one that it will accept.” Id. at ¶ 70.
Consent must be given by either the current
subscriber or the non-subscriber customary user of the phone.
FCC Order’s resolution of the wrong number call
issues penalizes businesses and institutions acting in good faith to reach
their customers using modern technologies.”
Dissenting Statement of Commissioner Michael O’Rielly Dissent. Several petitions requested clarification as
to whether prior express consent must be provided by the intended recipient of
the call or the actual recipient of the call, noting that in many instances,
prior express consent is provided by the intended recipient for a particular
number which is then reassigned to a third party. The FCC Order ignores the significance of the
issue and will, as noted by the dissent, open the floodgates to more litigation
against good faith actors. Pai Dissent. The FCC majority believes that “there are
solutions in the marketplace to better inform callers of reassigned numbers,
that businesses should institute new or better safeguards to avoid calling
reassigned wireless numbers…and that the TCPA requires consent of the actual
party who receives a call.” Id. at ¶
72. The FCC refused to put any burden on
the wrong number consumer to inform the caller that it is the wrong party or
opt out of the calls. Instead, the FCC
found that “where a caller believes he has consent to make a call and does not
discover that a wireless number has been reassigned prior to making or
initiating a call to that number for the first time after reassignment, liability
should not attach for that first call, but the caller is liable for any calls
thereafter.” Id. at ¶85.
As noted by the dissent, the “marketplace
solutions” alluded to by the majority do not exist. There is “no authoritative database-certainly
not one maintained or overseen by the FCC, which has plenary authority over
phone numbers- exists to track all disconnected or reassigned telephone numbers
or link all consumer names with their telephone numbers. Pai
Certain Financial/Medical
Exceptions for Free-to-End User Calls
The Order does contain some limited good news
for the financial service and medical industries. Under certain limited circumstances,
pro-consumer messages about time sensitive financial and healthcare issues may
be provided. Call BlockingTechnology The Order affirms that carriers and VoIP
providers may implement call-blocking technology “that can help consumers who
choose to use such technology to stop unwanted robocalls.”
Continuing to flex its muscle, the CFPB has released its
nine Consumer Protection Principles for new
faster payment systems. While fintech
companies providing payment services are not governed by the CFPB, they should
pay careful attention to the CFPB principles as they may foreshadow future CFPB
action. The CFPB historically has used
its broad authority under Dodd Frank to regulate through enforcement, using the
“unfair and deceptive” language of Dodd Frank to justify its authority to
regulate and enforce practices that fall outside of its express jurisdiction
and to expand requirements of other federal statutes.
The stated purpose of the CFPB principles is to further “safe,
transparent, accessible and efficient, faster payment systems” without
compromising certain consumer protection concerns. The principles contain
concepts common to other federal statutory protections, including the Gramm
Leach Bliley, Electronic Funds Transfer and Truth in Lending Acts.
Consumer Control over Payments. New, faster systems should enable consumers
to control the time period for which an authorization is valid, the amount and
the payee. They should also include procedures
allowing consumers to easily revoke authorization.
Data and Privacy. Similar to the disclosures required by Gramm
Leach Bliley, consumers should be informed as to how data will be transferred
and used, who has access to the data, and the potential risks associated with
electronic transfers. Fraud and Error Resolution
Protections. New systems should contain robust consumer protections
against “mistaken, fraudulent, unauthorized or otherwise erroneous transactions.” The CFPB suggests that systems should contain
mechanisms for facilitating post-transaction evaluations and for reversing
erroneous and unauthorized transactions quickly. Systems should “also provide consumers with
regulatory protections, such as Regulation E and Regulation Z…”
Transparency. The CFPB principles promote
transparency with regard to real time status of transactions, as well as
disclosures as to costs, risks, funds availability and security of payments.
Cost. Fee structures need to be
affordable and disclosed in a meaningful manner to allow consumers to compare
the costs of different payment options.
Access. Newer systems need to be broadly
accessible and accepted including through non-depositories, including mobile
wallet providers and payment processors.
Funds Availability. Faster payments need to bring
faster, guaranteed access to funds.
Security and Payment Credential
Value. Systems need to
include built-in protections to detect and limit errors, unauthorized
transactions and fraud and to safeguard and respond to data breaches.
Strong Accountability Mechanisms
that Effectively Curtail System Misuse. Commercial participants must be held
accountable for “risks, harm, and costs they introduce to payment systems and
are incentivized to prevent and correct fraudulent, unauthorized or otherwise
erroneous transactions for consumers.”
In the accompanying release, the CFPB indicates its intent
to continue working with other regulators, entities developing new payment systems,
and other stakeholders to ensure these new systems address consumer needs and
In an orchestrated fashion, the OCC, CFPB, 47 states and the District of Columbia have entered into consent orders with JP Morgan Chase and related entities. The OCC Consent Order: Today’s OCC Consent Order resolved an enforcement action that was taken against J.P. Morgan Chase Bank and two of its affiliates in 2013. At that time, a Consent Order was entered into which required corrective action to address deficiencies with Chase’s debt collection practices, as well as its compliance with the Servicemembers Civil Relief Act (the "SCRA"). The Consent Order entered today requires an additional $30 million civil money penalty which comes on top of the $50 million already paid out in restitution pursuant to the 2013 Consent Order. According to the Statement released by the OCC, today’s consent order comes after the OCC has had a "time to assess the full extent of the deficiencies." Like the prior consent order, the OCC Consent Order includes the following findings:
Requires withdrawal, dismissal or termination of all prejudgment collections litigation pending at any time between January 1, 2009 and June 30, 2014; and Requires Chase to cease all post judgment enforcement actions and request that the consumer reporting agencies delete/amend/suppress any reporting of the judgments.
The Third Circuit joined other circuits last week by
requiring that false statements must be material in order to be actionable
under 15 U.S.C. §1692e. In doing so, the
Third Circuit joins the Fourth, Sixth, Seventh and Ninth Circuits in so
ruling. In Jensen v. Pressler & Pressler, 2015 U.S. App. LEXIS 11188, No.
14-2808 (3rd Cir. June 30, 2015), the law firm issued an information
subpoena post judgment in an effort to obtain personal and financial information
to aid in collection. The information
subpoena, which under state law could be issued by the law firm as the agent of
the clerk of court, erroneously listed “Terrence D. Lee” as the clerk of
Superior Court. Mr. Lee, however, was
not the clerk of Superior Court and the plaintiff knew it. The plaintiff filed a putative class action
based on 15 U.S.C. §1692e which prohibits making false, misleading, or deceptive
statements in the collection of consumer debts. The plaintiff also asserted claims under 15 U.S.C. §§1692e(9) and
(10). The court of appeals in affirming
the lower court decision determined that a technically false representation is
not actionable unless it is material. “[A]
statement in a communication is material if it is capable of influencing the
decision of the least sophisticated debtor.” [Slip Op. at 12]. The court also gave little credence to plaintiff’s
argument that the subpoena violated 15 U.S.C. §1692e(9) which prohibits the use
or distribution of any communication which falsely represents itself to be a document
authorized, issued or approved by any court, official or agency of any
State. The court “was not persuaded that
the information subpoena bearing Lee’s name is actually invalid under New
Jersey law” noting that New Jersey courts have repeatedly declined to
invalidate similar documents based on “hypertechnical errors.” [Slip Op. at 14]. Finally, the court declined to consider the
issue as one of mixed fact and law requiring a remand, holding that “[n]o reasonable
juror could find that the mistake in this case was material.” [Slip Op. at 16].