CFPB Proposes New Rules to Modernize Application of the FDCPA

On May 7, 2019, the Consumer Financial Protection Bureau (CFPB) issued a notice of proposed rulemaking (NPRM) for application of the Fair Debt Collection Practices Act (FDCPA). The significance of this NPRM cannot be understated. The CFPB's proposed rules cover multiple aspects of debt collection and are one of most substantial developments in the debt collection industry since the enactment of the FDCPA in 1977. The proposed rules seek to modernize application of the FDCPA to match the sophistication of today's electronic communications (e.g., voicemails, text messages, and electronic mail) and provide safe harbors and prescribe prohibited conduct. We've highlighted some of the proposed rules that demonstrate the significant impact on both debt collectors and debtors below. More ›

Wisconsin Supreme Court Rules Creditor's Failure to Send a Right to Cure Notice is not Grounds for a Monetary Damages Claim

A debtor ("Kirsch") recently sought monetary damages from his creditor ("Security Finance"), arguing that Security Finance had failed to provide sufficient notice of right to cure before commencing a debt collection action, as required by the Wisconsin Consumer Act (WCA), §§ 425.104 and 425.105. Kirsch argued that this failure to comply with the WCA also constituted a violation of Wis. Stat. § 427.104(1)(g), which authorizes an independent private right of action for damages. In Security Finance v Kirsch, the Wisconsin Supreme Court disagreed, finding that a creditor's failure to send a notice of right to cure is a procedural error and is not a sufficient basis for a consumer to file a lawsuit seeking damages under the WCA. More ›

"Estoppel on Steroids" ‒ Does the Hobbs Act Require the District Court to Accept the FCC's Rule Interpreting an "Unsolicited Advertisement" under the TCPA?

Yesterday, the United States Supreme Court heard oral argument on appeal from the Fourth Circuit's decision issued in PDR Network, LLC v. Carlton & Harris Chiropractic, Inc. The issue is whether a district court must accept the Federal Communication Commission's (FCC) rule interpreting an "unsolicited advertisement" under the Telephone Consumer Protection Act (TCPA). The district court held that PDR Network, LLC did not violate the TCPA when it faxed an unsolicited advertisement to Carlton & Harris Chiropractic for a free Physicians' Desk Reference. In doing so, the district court declined to apply the FCC's 2006 rule that interpreted an unsolicited advertisement under the TCPA to include fax messages that promote goods or services at no cost. On appeal, however, the Fourth Circuit reversed concluding that the district court should have applied the FCC's rule because the Hobbs Act, which establishes judicial review for final orders of certain federal agencies, requires a party to first challenge an agency rule with the respective agency before challenging the rule in court. The Supreme Court is left to decide whether the district court has authority to hear PDR's challenge to the FCC's rule in its defense of this TCPA lawsuit without any prior agency challenge. More ›

SCOTUS Determines Foreclosure Firm is Not a Debt Collector Under the FDCPA's Primary Definition

Less than three months after hearing oral arguments in Obduskey v. McCarthy & Holthus LLP, Case No. 17-1307, the United States Supreme Court held, in a 9-0 decision, that a business engaged in nonjudicial foreclosure proceedings is not a "debt collector" under the Fair Debt Collection Practices Act (FDCPA, "the Act"), except for the limited prohibitions set forth in 1692(f)(6). The decision provides helpful guidance to law firms and loan servicers who pursue nonjudicial foreclosures. More ›

The Third Circuit Takes a More Expansive Approach to What Constitutes a Debt Collector under the FDCPA

On February 22, 2019, the Third Circuit in Barbato v. Greystone Alliance, LLC, issued a decision that expands the scope of the Fair Debt Collection Practices Act's (FDCPA) definition of the term "debt collector" to any entity that acquires debt for the purpose of collection, but outsources the actual debt collection activity. More ›

U.S. Supreme Court Agrees to Resolve Circuit Split on When the Limitations Period for FDCPA Claims Should Start

As we predicted last year, the United States Supreme Court earlier this week granted Plaintiff's petition for certiorari in Rotkiske v. Klemm to resolve a split in the circuits on whether the statute of limitations for a Fair Debt Collection Practices Act (FDCPA) claim begins when the alleged violation occurred (known as the "occurrence rule") or when the consumer discovers the alleged violation (known as the "discovery rule"). More ›

First Circuit Concludes that "Potentially Deceptive" Language Added to Default Notice May Void Foreclosure Sale in Massachusetts

In Thompson v. JPMorgan Chase Bank, the First Circuit Court of Appeals held a foreclosure was potentially void where terms in the lender's default notice arguably conflicted with terms in Paragraph 19 of the Mortgage. Although Chase's notice of default provided the Thompsons with the disclosures required under Paragraph 22 of the Mortgage, Chase's default notice further stated that the Thompsons "could still avoid foreclosure by paying the total past-due amount before a foreclosure sale takes place." The First Circuit interpreted this additional language as potentially misleading, because advising borrowers that they could make payment up to the time of the foreclosure sale differed from the Mortgage's Paragraph 19, which only allowed a reinstatement payment five days before the sale of the Property. More ›

A New Bright-Line Rule in New York Courts: Plead or Move, But a Borrower Can't Just Deny Standing to Challenge Foreclosure

In US Bank N.A. v. Nelson, the New York Appellate Division for the Second Department held that to raise a challenge to a foreclosing lender's standing it is not sufficient merely to deny the lender's allegations. In prior decisions, the Second Department allowed borrowers to raise a standing defense by mere denial of the allegation in the mortgagee's complaint that the plaintiff was the owner and holder of the note and mortgage being foreclosed. Under Nelson, the Second Department overturned its prior decisions and provided a bright line rule for practitioners in that Department. More ›

Illinois Supreme Court Issues Ruling On What "Aggrieved" Means Under The Biometric Information Privacy Act

The Illinois Supreme Court in Rosenbach v. Six Flags Entertainment Corporation, et al. just held that under the Illinois Biometric Information Privacy Act (BIPA) "an individual need not allege some actual injury or adverse effect, beyond violation of his or her rights under the Act, in order to qualify as an 'aggrieved' person and be entitled to seek liquidated damages and injunctive relief."

Rosenbach claimed Six Flags violated BIPA when it scanned her son's thumbprint for his season pass without written consent. The Illinois Appellate Court held that a plaintiff must demonstrate more than a technical violation of BIPA in order to state a claim. There have been conflicting decisions about whether actual harm is required since "person aggrieved" is not defined in the statute. More ›

New York Mandates New Consumer Protections for Relatives of Deceased Debtors

Effective March 28, 2019, § 601-a of New York's General Business Law ("GBL 601-a") will provide additional consumer protections to relatives of deceased borrowers. Typically, when a debtor passes away, the obligations on their uncollected debts pass to the debtor's estate. This can result in confusion about whom debt collectors should contact and what they can say regarding the decedent's unpaid debt. GBL 601-a will require, among other things, that no representations are made to relatives of deceased debtors to the effect that they are obligated to pay the decedent's unpaid debt. More ›