Second Circuit Holds That Debt Collector’s Inquiry Regarding Nature of Consumer’s Verbal Dispute of Debt Did Not Violate the FDCPA

By: Diana M. Eng, Jonathan M. Robbin, and Andrea M. Roberts

In Levi Huebner v. Midland Credit Management, Inc., Nos. 16-2363-cv, 16-2367-cv (2d Cir. July 19, 2018), the Second Circuit affirmed the Eastern District of New York’s (“Lower Court”) order granting defendant Midland Credit Management, Inc.’s (“Midland”) summary judgment motion and dismissing the complaint on the grounds that plaintiff Levi Huebner (“Plaintiff”) failed to state a claim under Sections 1692e(5), (8), and (10) of the FDCPA. The Second Circuit held Midland’s follow-up questions about the nature of Plaintiff’s dispute cannot be interpreted as threatening, or conveying false information about the consumer’s debt. Rather, Midland’s questions were an endeavor to learn more about Plaintiff’s dispute, so Midland could properly resolve the dispute. The Second Circuit also affirmed the Lower Court’s imposition of sanctions against Plaintiff and his counsel on the grounds they intentionally misled the court and Midland as to Plaintiff’s theory of the case, breached the protective order entered into amongst the parties, acted in bad faith by “unreasonably and vexatiously” multiplying the proceedings in the action, and commencing a frivolous action and filing several frivolous motions in bad faith. As such, the Lower Court properly granted summary judgment in favor of Midland.

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California District Court Holds that a Debt Collector’s Retention of a Portion of a Transactional Fee Voluntarily Paid by the Consumer for Purposes of Convenience Was a Violation of the Rosenthal Fair Debt Collections Practices Act

By:  Nadia D. Adams

In April Lindblom v. Santander Consumer USA Inc., No. 15-cv-0990 (E.D. Cal. January 22, 2018), the United States District Court for the Eastern District of California held that the plaintiffs’ voluntary payment of a transactional fee that was not expressly authorized in the contract between the parties or by California state law was concrete injury sufficient to confer Article III standing.

The Court also held that where the underlying contract between the parties was silent on the debt collector’s retention of a transactional fee for online and telephone payments, the parties could not subsequently orally modify that contract to allow for the fee; the fee must be contemplated at the time the debt is created. Therefore, the debt collector’s portion of the fee violated the Rosenthal Fair Debt Collection Practices Act (the “Rosenthal Act”). Continue reading

Eleventh Circuit Holds that Voicemails Are “Communications” and Clarifies “Meaningful Disclosure” Under the FDCPA

By:  Diana M. Eng and Paul Messina, Jr.

In Stacey Hart v. Credit Control, LLC, No. 16-17126 (11th Cir. Sept. 22, 2017), the United States Court of Appeals for the Eleventh Circuit clarified two significant definitions under the Fair Debt Collection Practices Act (“FDCPA”), one of which was a novel issue for the Court.  First, the Eleventh Circuit ruled that the first voicemail that Credit Control LLC (“Credit Control”) left for Stacey Hart (“Hart”) qualified as a “communication” within the meaning of 15 U.S.C. § 1692a(2).  Because the voicemail was the initial communication between the parties, Credit Control had to provide the required disclosures under 15 U.S.C. § 1692e(11), commonly known as the “mini Miranda” warning.

Second, the Eleventh Circuit determined the novel issue of what constitutes a “meaningful disclosure” under the FDCPA by ruling that an individual caller is not required to disclose his/her identity as long the caller discloses that the call is being made on behalf of a debt collection company and the debtor collection company’s name.

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Eleventh Circuit Rules that Consumers Have the Right to Partially Revoke Consent to Automated Calls under the TCPA

By: Michael Esposito

The Eleventh Circuit Court of Appeals recently issued its opinion in Emily Schweitzer v. Comenity Bank, holding that the Telephone Consumer Protection Act, 47 U.S.C. sec. 227 et seq. (“TCPA”), allows consumers to partially revoke their consent to be called by an automated telephone dialing system. No. 16-10498 (Eleventh Cir. August 10, 2017).

In Schweitzer, Plaintiff was issued a credit card by Comenity Bank (“Comenity” or the “Bank”) in 2012 and, during the application process, provided a cellular phone number to the Bank. In 2013, Plaintiff failed to tender the required monthly credit card payments and, as a result, Comenity used an automated telephone dialing system to make hundreds of calls to Plaintiff on her cellular phone regarding the delinquency. During a call with a Comenity representative on October 13, 2014, Plaintiff informed the representative that Comenity could not call her in the morning and during the work day, because she was working and could not discuss the delinquency while at work. Subsequently, Plaintiff twice told a representative of Comenity to please stop calling her. Thereafter, Comenity did not call Plaintiff’s cellular phone using an automated telephone dialing system.

Ultimately, Plaintiff commenced a suit against Comenity for alleged violations of the TCPA. Specifically, Plaintiff claimed that during the October 13th conversation, she revoked her consent for Comenity to call her cellular phone using an automated telephone dialing system and asserted that Comenity violated the TCPA by placing over 200 calls using an automated system from October 2014 through March 2015. The district court granted summary judgment in favor of Comenity and reasoned that the bank “did not know and should not have had reason to know that [Plaintiff] wanted no further calls.” In addition, the district court stated that Plaintiff did not “define or specify the parameters of the times she did not want to be called” and, therefore, a reasonable jury could not find that Plaintiff revoked her consent to call her cellular phone. Plaintiff appealed.

On appeal, Comenity argued that the district court correctly granted summary judgment in its favor because the TCPA does not allow partial revocations of consent and, even if possible, a reasonable jury could not find that Plaintiff had expressly done so during the October 13th conversation. The Eleventh Circuit Court rejected Comenity’s arguments, finding that “[a]lthough the TCPA is silent on the issues of revocation, [its] decision in Osorio holds that a consumer may orally revoke her consent to receive automated phone calls.” See Osorio v. State Farm Bank, F.S.B., 746 F. 3d 1242, 1255 (11th Cir. 2014).

Further, the Eleventh Circuit explained that since the TCPA is silent as to partial revocations of consent, the analysis of the matter is governed by common law principles, which support its holding that the TCPA “allows a consumer to provide limited, i.e., restricted, consent for the receipt of automated calls.” Moreover, “[i]t follows that unlimited consent, once given, can also be partially revoked as to future automated calls under the TCPA.” In support of its conclusion, the Eleventh Circuit reasoned that it is “logical that a consumer’s power under the TCPA to completely withdraw consent and thereby stop all future automated calls . . . encompasses the power to partially withdraw consent and stop calls during certain times.” Although the Eleventh Circuit noted the district court’s concern that partial revocations may create challenges for both callers and parties attempting to present evidence in support of TCPA claims, it held that any such complications do not warrant limiting a consumer’s rights under the TCPA.

Second, with regard to Comenity’s argument that a reasonable jury could not find that Plaintiff’s statements made during the October 13th conversation constituted a partial revocation of consent under the TCPA, the Eleventh Circuit ruled that the “issue is close” and concluded that the matter of partial revocation was for the jury to evaluate. In reaching its conclusion, the Eleventh Circuit found that summary judgment was not warranted since reasonable minds might differ on the inferences arising from Plaintiff’s request not to be called “in the morning and during the work day.”

This decision is significant because the Eleventh Circuit has expanded the consumer’s right to revoke consent under the TCPA to include partial revocations. Based on this decision, debt collectors conducting business within the Eleventh Circuit will need to update their automated dialing systems to incorporate such partial revocations.

District Court of New Jersey Holds No Duty under FDCPA to Warn of Tax Consequences for Debt Settlement

By: Jonathan M. Robbin and Kyle E. Vellutato

In a case of first impression in the Third Circuit, Vincent Carieri v. Midland Credit Management, Inc., No. 17-0009 (D.N.J. June 26, 2017), the District Court of New Jersey held that that a debt collector does not have a duty to notify a debtor of potential tax consequences for settling a debt at a discount under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (“FDCPA”).

As satisfaction for a debt in the amount of $4,491.47, Midland Credit Management, Inc. (“MCMI”) sent a notice to Carieri offering various debt settlement payment options resulting in savings from continued payments under the terms of the loan (the “Notice”).  Specifically, the Notice offered to extinguish the debt if a discounted total payoff was received by a certain date, resulting in savings of 40 percent (or $1,796.58). Carieri’s complaint alleged that the Notice violated the FDCPA by failing to inform the debtor of the potential tax consequences posed by the savings from the discounted payoff of the debt.[1]

In considering MCMI’s motion for judgment on the pleadings, the Court turned to other federal courts including the Second Circuit for guidance on whether the FDCPA expands a debt collector’s duties with regard to notifying a debtor of tax consequences of debt settlement. Specifically, the Court held that as in Altman v. J.C. Christensen & Assocs., Inc., 786 F.3d 191 (2d Cir. 2015), the Notice did not violate the FDCPA, even though the letter did not warn of potential tax consequences.

The Court granted MCMI’s dispositive motion, and confirmed that a debt collector’s failure to advise a debtor of the tax consequences for a discounted payoff does not serve as a basis for a claim under the FDCPA.[2]

[1] Although Carieri attempted to raise a second FDCPA violation purportedly posed by the Notice in his opposition to the dispositive motion under review, Chief Judge Jose Linares denied Carieri’s attempt to expand his claims, offering a stern reminder to plaintiffs that untimely efforts to amend pleadings—to survive disposition or otherwise—will be barred. Nonetheless, in dicta, the Court roundly rejected Carieri’s last-ditch effort to amend finding that the Notice was misleading to the least sophisticated consumer.

[2] The Court also relied upon the following cases in reaching his decision: Smith v. Nat’l Enter. Sys., Inc., No. 15-541, 2017 WL 1194494 (W.D. Okla. Mar. 30, 2017); Rigerman v. Forster & Garbus LLP, No. 14-1805, 2015 WL 1223760 (E.D.N.Y. Mar. 16, 2015); Landes v. Cavalry Portfolio Servs., LLC, 774 F. Supp. 2d 800 (E.D. Va. 2011); Schaefer v. ARM Receivable Mgmt., Inc., No. 09-11666, 2011 WL 2847768 (D. Mass. July 19, 2011), and rejected the holding in Ellis v. Cohen & Slarnowitz, LLP, 701 F. Supp. 2d 215, 219-20 (N.D.N.Y. Mar. 26, 2010).

 

U.S. Supreme Court Excludes Banks Collecting Purchased Delinquent Debt from Definition of “Debt Collector” under the FDCPA

By: Diana M. Eng and Louise Marencik

Banks and other consumer finance firms that purchase delinquent debt and then collect on their own behalf are not “debt collectors” under the Fair Debt Collection Practices Act. However, this limitation still does not apply to those institutions that collect on behalf of another.

In a unanimous decision in Henson et al. v. Santander Consumer USA Inc., the United States Supreme Court held that the Fair Debt Collection Practices Act (“FDCPA”) does not apply to banks and other consumer finance firms that purchase and then collect on defaulted debt that they own. No. 16-349, ____ U.S. ____ (2017).

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U.S. Supreme Court Holds Debt Collectors Are Not Liable under the FDCPA for Pursuing Time-Barred Claims in Bankruptcy Court

By: Jonathan Robbin and Sholom Wohlgelernter

In a 5-3 decision in Midland Funding, LLC v. Johnson, No. 16-348, 2017 WL 2039159 (U.S. May 15, 2017), the United States Supreme Court held that a debt collector’s filing of a time-barred proof of claim in a Chapter 13 bankruptcy proceeding is not “false,” “deceptive,” “misleading,” “unfair,” or “unconscionable” within the meaning of the Fair Debt Collection Practices Act (“FDCPA”).

In overturning the Eleventh Circuit Court of Appeals, the Supreme Court held that the protections and remedies afforded to consumers under the FDCPA with respect to time-barred claims, are unavailable in Chapter 13 bankruptcy proceedings. The Supreme Court’s decision makes clear that debt collectors may pursue time-barred debts in a debtor’s bankruptcy proceeding.

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