Supreme Court: Special Counsel Using State AG Letterhead Not in Violation of FDCPA

On May 16, the Supreme Court reversed the Sixth Circuit’s ruling that special counsel using Ohio AG letterhead to collect debts owed to the state is false or misleading in violation of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §1692. Sheriff v. Gillie, No. 15-338 (U.S. May 16, 2016). In a unanimous 8-0 opinion delivered by Justice Ginsburg, the Court opined that its “conclusion is bolstered by the character of the relationship between special counsel and the [AG].” Specifically, the Court determined that, because special counsel acts on behalf of the AG to provide legal services to state clients, a “debtor’s impression that a letter from special counsel is a letter from the [AG’s] Office is scarcely inaccurate.” The Court further opined that, being required by the AG’s office to send debt collection communications, special counsel “create no false impression in doing just what they have been instructed to do.” The Court rejects the Sixth Circuit’s argument that consumers may have concern regarding the letters’ authenticity: “[t]o the extent that consumers may be concerned that the letters are a ‘scam,’ the solution is for special counsel to say more, not less, about their role as agents of the [AG]. Special counsel’s use of the [AG’s] letterhead, furthermore, encourages consumers to use official channels to ensure the legitimacy of the letters, assuaging the very concern the Sixth Circuit identified.” The Court concludes by emphasizing the AG’s authority, as the top law enforcement official, to take punitive action against consumers who owe debts, commenting that §1692e of the FDCPA prohibits collectors from deceiving or misleading consumers, but “it does not protect consumers from fearing the actual consequences of their debts.” Read more…

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Fourth Circuit: Default Status of Debt Is Not Determining Factor of “Debt Collector” Under FDCPA

Recently, the U.S. Court of Appeals for the Fourth Circuit affirmed a district court’s decision that a consumer finance company collecting debts on its own behalf, which it purchased from the original creditor, is still a creditor and is not subject to the FDCPA. Henson v. Santander, No. 15-1187 (4th Cir. Mar. 23, 2016). The plaintiffs in the case each signed a retail installment sales contract with a financial services provider, and when “the plaintiffs were unable to make the payments required by the contracts and thereby defaulted, [the financial services provider] repossessed and sold their vehicles and subsequently informed each plaintiff that he or she owed a deficiency balance.” In 2011, the defendant bought the defaulted loans from the financial services provider and, thereafter, sought to collect on the debts the plaintiffs owed. In their complaint, plaintiffs argued that because the terms “debt collectors” and “creditors” as used in the FDCPA are “mutually exclusive,” any person that “receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another” (which is excluded from the definition of creditor in 15 U.S.C. § 1692a(4)) must be a debt collector. However, the court emphasized that the material distinction between a debt collector and a creditor is “whether a person’s regular collection activity is only for itself (a creditor) or whether it regularly collects for others (a debt collector).” Read more…

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CFPB Takes Action Against Co-Founders of California Online Lead Aggregator

On April 21, the CFPB filed two complaints against individual operators of an online lead aggregator for their alleged involvement in the company’s practice of reselling consumers’ sensitive personal data to lenders and debt collectors without assessing the sources of this data, a practice the CFPB claims exposed consumers to the possibility that their personal data could be used for illegal purposes. In December 2015, the CFPB filed a complaint against the California-based company for allegedly buying and selling personal information from payday and installment loan applications without “properly vetting buyers and sellers.” The CFPB’s December complaint further alleged that, among other things, the company (i) knew or should have known that the lead generators in its network used false or misleading statements to obtain consumer information; and (ii) connected consumers with lenders that offered less favorable loan terms than were otherwise available, did not comply with state usury limits or claimed they were exempt from state regulation and jurisdiction. The most recently filed complaints charge the two individual operators with, among other things, “knowingly or recklessly provid[ing] substantial assistance to [the company] in its unfair and abusive acts and practices, in violation of [the Dodd-Frank Act].” This assistance allegedly enabled the company’s lead generators “to attract consumers with misleading statements and [take] unreasonable advantage of consumers’ lack of understanding of the material risks, costs, or conditions of the loan products for which they [applied].” The CFPB’s complaints against the individual operators seek monetary and injunctive relief, as well as civil money penalties.

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CFPB Monthly Complaint Snapshot Highlights Issues Related to Debt Collection

On March 29, the CFPB released its most recent complaint report focusing on complaints related to debt collection. According to the report, as of March 1, 2016, consumers have submitted approximately 834,400 complaints across all products, with debt collection complaints accounting for approximately 219,200 of the complaints. Debt collection complaints highlighted in the report include, but are not limited to: (i) first- and third-party debt collectors attempting to collect on debts that consumers claim they do not owe; (ii) consumers repeatedly receiving calls from debt collectors, sometimes early in their delinquency or during grace periods; (iii) consumers being contacted while at work, with some alleging that collectors made in-person visits to their workplace; (iv) debt collectors not honoring consumers’ requests to cease communications; and (v) debt collectors failing to provide sufficient information to verify debts. Similar to past CFPB-issued complaint snapshots, the report identifies the top 10 most-complained-about companies in regards to all financial products, as well as the top 20 most-complained-about companies for debt collection. Finally, the report identifies Florida as its geographical spotlight, noting that (i) Florida consumers have submitted more than 80,000 complaints as of March 1, 2016; (ii) mortgage-related complaints account for 30% of complaints received from Florida, exceeding the national average by 4%; and (iii) at 24%, debt collection-related complaints submitted by Florida consumers are 2% less than the national average.

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FTC Releases 2015 Annual Highlights

On April 6, the FTC released its 2015 Annual Highlights report, which is comprised of four key sections: (i) enforcement; (ii) policy; (iii) education; and (iv) stats and data. Regarding enforcement highlights in 2015, the report covers a range of administrative and court actions related to, among other things, technological innovations that pose fraud and security risks, the security of consumers’ personal identifiable information, and alleged payday loan scams. Significant actions summarized in the enforcement section include the FTC’s (i) December settlement with a leading U.S.-based hotel and resort chain resolving charges that its data security practices were unfair and deceptive; (ii) Operation Ruse Control, a nationwide cross-border crackdown designed to protect consumers from alleged fraud within the auto industry; and (iii) Operation Collection Protection, a federal, state, and local initiative implemented to combat alleged abusive and deceptive debt collection practices. The policy and education sections of the report separately highlight the agency’s efforts to provide guidance and recommendations to government bodies and lawmakers at the state and federal levels regarding best practices for implementing competition principals into proposed laws, regulations, or policies, as well as its education outreach program, such as Start with Security, a conference designed to provide companies with tips for implementing effective data security. Notably, according to the stats and data section of the report, the FTC received more than three million consumer complaints in 2015, with debt collection, “other,” and identity theft leading the numbers at 897,655, 512,022, and 490,220 complaints, respectively.

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