In Unanimous Decision, SCOTUS Shields Debt Buyers From Reach of FDCPA But Important Questions Still Remain

Just two months after hearing argument in Henson v. Santander Consumer USA, Inc., the Supreme Court declined the opportunity to expand the Fair Debt Collection Practices Act ("FDCPA") to debt buyers. In an earlier blog post, we noted the potential impact this case may have on the regulation (and marketplace as a whole) of companies that seek to collect defaulted accounts purchased from originating lenders. In his first opinion as a member of the Supreme Court, Justice Neil Gorsuch penned an 11-page decision, affirming the Fourth Circuit's finding that Santander Consumer USA, Inc. ("Santander") did not constitute a "debt collector" under the relevant portion of the FDCPA's definition. More ›

Congress Takes a Significant Step Towards Replacing Dodd-Frank and Gutting the CFPB

On Thursday, as we anticipated in a previous blog post, the House of Representatives voted along party lines to pass the Financial CHOICE ACT ("FCA"), which would repeal Dodd-Frank and strip the CFPB of its authority.

The debate leading up to the vote also appeared to divide sharply along partisan lines, with Republicans urging their colleagues to vote for the Bill, and Democrats insisting that it was the "Wrong Choice" for Americans. Despite their differing opinions, representatives from all parties appeared to articulate the same goal: putting Main Street America ahead of Wall Street.

Supporters of the FCA contend that the purported benefits of Dodd-Frank have never materialized. They argue that due to Dodd-Frank’s excessive and expensive regulatory burdens, small banks and businesses have failed, while big banks have continued to thrive. Imposing the same regulations on every financial institution, they say, has strangled small community banks, and forced many to shut down. This problem triggered another major concern of the bill's supporters, namely an alleged lack of choice of financial products and the increased cost of these same products. More ›

Rhode Island Federal Court Refuses to Dismiss FDCPA Case against Law Firm Pursuing Mortgage Foreclosure

Should a law firm pursuing foreclosure on behalf of a mortgagee be considered a debt collector? That is a question at issue in a Rhode Island federal court case, in which borrower Lloyd Amesbury filed a class action lawsuit alleging Fair Debt Collection Practices Act (FDCPA) violations against a firm retained to initiate foreclosure on his home after he received a notice of default on the firm’s letterhead. Amesbury claimed the letter was false and misleading because of a discrepancy in the amount owed described in a letter he received from the law firm in April, 2016, and a May, 2016, bankruptcy proof of claim. The law firm moved to dismiss the case on grounds that it was not a “debt collector” under the FDCPA, because the default notice was an attempt to enforce a security interest on behalf of its mortgagee client.

Although the law firm was pursuing non-judicial foreclosure of property by providing the borrower notice of default and right to cure, the Rhode Island federal court concluded that the borrower’s complaint contained facts sufficient to demonstrate that the law firm was a debt collector under the FDCPA. Here is a description of its reasoning. More ›

Congress Seeks Dodd-Frank Overhaul and Elephant Dart for Consumer Financial Protection Bureau

On May 4, 2017, the House Financial Services Committee passed HR 10, the Financial CHOICE ACT ("FCA") by a 34-26 vote, with all proposed Democratic redlines rejected. The FCA is expected to go to a full House vote as early as this week. 

The FCA purports to keep the protections Dodd-Frank aimed to enact, while at the same time freeing regulations on the American economy. It promises to "create hope and opportunity for investors, consumers, and entrepreneurs," by, among other things, ending bailouts and "holding Washington and Wall Street accountable."

FCA, as drafted, would repeal the Dodd-Frank Act in its entirety, remove CFPB supervisory authority over financial institutions, and allow the President to appoint, and remove at will, a CFPB director.  Moreover, FCA would remove any authority the CFPB has to investigate actions it deems abusive, but would keep the agency in place, changing its name from the Consumer Financial Protection Bureau to the Consumer Law Enforcement Agency (CLEA). More ›

National Pharmacy Avoids TCPA Claim for Flu Shot Robocall under Health Care Rule Exemption

A judge in the Southern District of New York recently held that an automated, pre-recorded message sent on behalf of Rite Aid informing recipients to obtain a flu vaccine shot was exempted from the Telephone Consumer Protection Act (TCPA), by virtue of the FCC’s Health Care Rule exemption. The exemption permits health care providers to contact customers in order to convey important "health care messages" as defined and covered by HIPAA.

The case, Zani v. Rite Aid Headquarters Corp., 14-cv-9701, involved an automated, pre-recorded message sent on behalf of Rite Aid informing recipients to obtain a flu vaccine shot from their local Rite Aid Pharmacy. In 2013, the putative plaintiff went to his local Rite Aid pharmacy and received a flu shot. He provided Rite Aid with his cell phone number and signed a privacy notice consenting to receiving health related communications by Rite Aid. Roughly a year after receiving his flu shot, he received a voice message reminder to get another flu shot at Rite Aid, as did all previous customers who obtained a flu shot and signed the privacy notice. More ›

Big Changes Could be coming to Class Action Practice, Courtesy of Congress

Class actions, especially those with nationwide scope and the specter of huge payouts, have long been the stuff of nightmares for in-house counsel and corporate executives. The press regularly report on settlements where plaintiffs’ counsel walked away with millions in attorney fees while the aggregate recovery by the class was much smaller.

The Class Action Fairness Act of 2005 (the 2005 CAFA) significantly changed how class actions were litigated. Advocates of the legislation said it would reduce forum shopping by expanding federal jurisdiction over certain class actions and allowing greater court scrutiny of class action settlement agreements (including settlements with so-called “coupon” components).

But the 2005 CAFA did not solve all the problems that class action critics wanted Congress to address.  In response, the U.S. House of Representatives passed H.R. 985 in March of this year, with the relevant section of the bill titled the “Fairness in Class Action Litigation Act of 2017.”. For simplicity's sake, we will call this bill the 2017 CAFA. The bill has now moved on to the Senate, and in late March was referred to the Senate Judiciary Committee. Given the current political situation in Washington, it's anyone’s guess as to when the bill will be reported out of committee (if at all) much less come to a full vote. More ›

PHH v. CFPB En Banc Oral Argument Recap: The Skinny on the Scuffle

For more than an hour and half on Wednesday, May 24, lawyers for PHH Mortgage and the Consumer Financial Protection Bureau discussed, debated, and decried the CFPB’s authority before the full D.C. Circuit Court of Appeals. There was minimal discussion of the underlying RESPA claims that formed the basis of the CFPB’s $109 million dollar judgment obtained against PHH. The major debate focused on whether the CFPB’s single director leadership and the President’s limited, for cause removal of that single director violated the Constitution’s separation of powers clause. The parties debated, among other issues, (1) the diminishment, if any, of the President's ability to faithfully execute the laws; (2) the effect and nature of the for-cause removal provisions; (3) the single director structure v. multi-member commission structure; (3) the effect and nature of the Bureau's other structural features, such as budget & appropriations; and, (4) departure, if any, from historical traditions and ideals. More ›

Forgiveness of Debt Can Prove Unforgiving, But a New Federal Court Decision Gives Cause for Optimism

A federal court in New Jersey recently dismissed a putative class action filed under the Fair Debt Collection Practices Act, which had argued that it was deceptive conduct for a debt collector to inform the debtor that forgiveness of debt, in some circumstances, may be reportable to the Internal Revenue Service. The specific language included in the debt collector's letter was as follows: "We will report forgiveness of debt as required by the IRS regulations. Reporting is not required every time a debt is canceled or settled, and might not be required in your case." More ›

Supreme Court Watch: Debt Collector Filing Bankruptcy Proof of Claim for Time-Barred Debt Avoids FDCPA Liability

What does the United States Supreme Court's decision issued earlier this week in Midland Funding, LLC v. Johnson mean for debt collectors? It means that debt collectors may file proofs of claim in a debtor's bankruptcy on time-barred debt without risk of violating the Fair Debt Collection Practices Act (FDCPA). In Johnson, a debt collector filed a proof of claim in bankruptcy court for a debt that was outside the six year statute of limitations, the bankruptcy court dismissed the claim as time-barred, and the debtor filed a separate, subsequent lawsuit arguing that the claim was misleading in violation of the FDCPA. The Eleventh Circuit agreed concluding that filing proofs of claim on time-barred debt amounted to false and misleading conduct. More ›

Attention Mortgage Loan Servicers: Highest Court in Massachusetts Attempts to Clarify When Default Notices Must Strictly Comply with Paragraph 22 of the Standard Mortgage

The Massachusetts Supreme Judicial Court (SJC) provided further guidance - up to a point - on mortgagees’ strict compliance with the notice of default provisions within paragraph 22 of the standard mortgage (or the equivalent) and when that standard takes effect. Mortgage holders have litigated this issue for years in Massachusetts, and the SJC first addressed compliance with paragraph 22 in a July 17, 2015 decision Pinti v. Emigrant Mtge. Co., 472 Mass. 226 (2015). In Pinti, the SJC ruled that "strict compliance" with paragraph 22 was required to effectuate a valid foreclosure pursuant to the statutory power of sale. Understanding that this decision would invalidate hundreds and potentially thousands of foreclosures in Massachusetts, the SJC held that its newly minted strict compliance standard would apply prospectively from its July 17, 2015 decision. However, the SJC neglected to address whether the strict compliance standard would apply to cases already filed in the trial and appellate courts. This caused conflicting decisions by the Massachusetts courts and required the SJC to review its Pinti decision in short term after several appeals were filed. More ›