Congress has returned from winter break and, between impeachment hearings and Iran, have several pending FDCPA related pieces of legislation on their agenda. RMAI is monitoring all the proposals and developing a strategy. Admittedly, several proposals have a low probability of passage due to the partisan make-up of the House and Senate. However, proposals can be pulled and put into larger packages, so we will stay vigilant.
RMAI will be submitting comments on the OCC and FDIC Proposed Rules regarding the “Valid When Made” doctrine (also known as the “Madden Fix”). When filed, the comments will be shared with members via a Member Alert.
Lastly, RMAI is anxiously awaiting the release of the CFPB’s Supplemental Rule on Time Barred Debt disclosures. We understand it will be introduced in early January. Once released, RMAI will respond with comments.
The new year is in full swing at the state level. We have had one of the quickest starts to our legislative advocacy efforts in the history of the association with active negotiations underway in California, New York, Maine, and Washington. Given that 12 state legislatures have not even begun their sessions and 13 just started this week, this should provide some indication what the upcoming year is going to look like at the state level.
Two noteworthy initiatives have been announced by the governors of California and New York. In California, Governor Newsom has announced his intention to create a new office modeled after the CFPB with similar types of powers and authority to be housed in the Department of Business Oversight (DBO). RMAI is actively monitoring this and participated in a stakeholder call last week hosted by DBO’s Commissioner. This proposal is in its infancy and more information concerning specific details are still pending.
In New York, Governor Cuomo has announced in his State of the State address, his intention to include debt collection licensing in his state budget proposal. In New York it is quite common for policy initiatives to be attached to the state budget – they are referred to as “Article 7” bills. RMAI’s lobbyist had an in-person meeting with the Governor’s Counsel last week to discuss this initiative and highlight several challenges and opportunities related to this initiative. The proposed bill language is expected next week.
In both instances, RMAI can all but guarantee adoption in 2020 given overwhelming democratic majorities in the state legislature in both states and the fact that they are being proposed by the governor. RMAI is seeking to work collaboratively with both states on these issues to make sure that industry concerns are highlighted and addressed.
RMAI is actively monitoring over 200 bills that may impact the receivables industry in both positive and negative ways. Here are a few noteworthy bills that have been introduced:
Maine HB 776 – This bill would deem any judgment or decree of any court based upon a consumer obligation “paid and satisfied” at the end of one year unless within that period the judgment creditor has commenced an enforcement action on the judgment or decree. [RMAI retained a high-quality lobbyist who was able to convince the sponsor to push the bill to the 2020 legislative session. RMAI has had two negotiating sessions with the consumer groups during the off session . . . negotiations are continuing next week.]
Massachusetts HB 3949 – This bill would require passive debt buyers to be licensed as debt collectors in Massachusetts. Currently, third party collection agencies and active debt buyers are regulated and licensed by the Massachusetts Division of Banks while passive debt buyers are regulated by the Attorney General’s Office and not required to be licensed. This bill would also exempt debt buying companies from bonding requirements and allow affiliated companies to be licensed under a single license and subject to a single examination [This bill was unanimously reported out of the Joint Committee on Consumer Protection & Professional Licensure on 7/1/19. RMAI has been advocating for uniformity and consistency in state licensing laws. Maintaining the Massachusetts bifurcated regulatory scheme does not make sense and adds to industry and consumer confusion. RMAI has retained a Massachusetts lobbyist to assist us in our efforts and anticipate a successful outcome.]
Massachusetts SB 578/HB 919 – This bill among other things would: (1) reduce the statute of limitations in an action for the collection of a consumer debt from six to four years to be measured from the earlier of the date of charge-off, placement for collection, or 180 days after the last regular payment; (2) prohibit payments made prior to the limitations period expiring from tolling the statute; (3) prohibit any attempt to collect a consumer debt once the statute of limitations has expired but would allow a debt collector to accept an unsolicited voluntary consumer payment on a debt; (4) extinguish judgments after five years unless the creditor takes action to enforce the judgment; and (5) reduce the percentage that is subject to wage garnishment. [RMAI has retained a lobbyist to oppose the bill in its current form. RMAI testified in opposition of this bill.]
New York AB 6909-B/SB 4827-B – This bill called the “Consumer Credit Fairness Act” would: (1) reduce the statute of limitations from six to three years on consumer credit transactions; (2) “extinguish” the right to collect on consumer debt past the statute of limitations; (3) require the mailing of a notice by the court clerk after filing proof of service of the summons and complaint; (4) require specific data to be included in the complaint; and (5) require the provision of form affidavits. [RMAI has a New York lobbyist and is working closely with a coalition of industry lobbyists to fight this bill. The coalition participated in a roundtable discussion with the Senate sponsor and consumer groups on November 26th in New York City in an attempt to find some common ground. The meeting went better than the industry anticipated. Industry submitted new redlines in January. A second roundtable is expected early in the legislative session.]
Ohio HB 251 – This bill would decrease the statute of limitations from 8 years to 6 years on a written contract and 4 years on an oral contract. [RMAI and a coalition of RMAI members were able to prevent an amendment to the bill that would further reduce the SOL to 3 years. The bill has been passed by the House and is now being considered in the Senate.]
Washington HB 2476 – This bill would require debt buyers to provide basic account-level information in or attached to a complaint. Portions of the bill text was modeled after Colorado’s 2017 debt buyer law which RMAI supported. However, there are some unusual requirements that have not been included in debt buyer legislation in the past, including attaching copies of the terms and conditions, informing the consumer that the “account may have purchased . . . for considerably less than its face value,” and requiring certain items in the complaint to be “prominently displayed.” [RMAI and other industry participants have retained lobbyists to negotiate this bill. It was through these negotiations that took place prior to bill introduction that we were able to alter the original bill draft (that was very problematic) to the language adopted in Colorado. The sponsor and consumer advocates remain open to amendments and another in-person stakeholder meeting is anticipated following the bill’s first hearing.]
If you are interested in obtaining a copy of the RMAI state tracking list, please contact David Reid at email@example.com.
Ninth Circuit Addresses SOL Partial Payment/Revival Disclosures
The U.S. Court of Appeals for the Ninth Circuit recently held that a collection letter offering payment options on a time-barred debt and listing “benefits” of paying the debt was not deceptive or misleading under the Fair Debt Collection Practices Act. Meanwhile, the CFPB is expected to take up the issue of time-barred debt disclosures early next year.
In Stimpson v. Midland Credit Mgmt., Inc., the consumer received a letter that offered three payment options, two of which involved monthly payments. The letter then listed “benefits” to paying the debt, including saving money, stopping collection communications, and obtaining “peace of mind.”
The letter contained the following statute-of-limitations (SOL) disclosure about two-thirds of the way down the first page: “The law limits how long you can be sued on a debt and how long a debt can appear on your credit report. Due to the age of this debt, we will not sue you for it or report payment or non-payment of it to a credit bureau.”
The consumer argued that the letter was deceptive or misleading under 15 U.S.C. § 1692e because (1) the SOL disclosure said that the creditor “will not sue,” instead of conveying that the collector could not sue as a matter of law; (2) the letter did not warn the recipient that a payment could revive or restart the statute of limitations; and (3) the letter touted various “benefits” to paying the debt but did not inform the consumer that the best option for dealing with a time-barred debt is to ignore it. The Ninth Circuit rejected each argument.
The Court held that the least sophisticated consumer would not be deceived or misled by the SOL disclosure because the statement that the collector “will not sue” was immediately preceded by a sentence explaining that “[t]he law limits how long you can be sued on a debt…” Therefore, the Court found that a consumer would naturally conclude that the debt was time barred. The Court also noted that nothing in the letter falsely implied that the collector could sue the consumer; and the Court specifically pointed out that the letter did not include a “settlement offer,” which other circuits found could falsely imply that the debt is enforceable in court.
The consumer resided in Idaho, where a partial payment on a time-barred debt can restart the statute of limitations. However, the card agreement between the original creditor and the consumer provided that Nevada law governed the account. Under Nevada law, a partial payment on a time-barred debt will not restart the limitation period.
The consumer asserted that a revival warning was required regardless of which state’s law applied. If Idaho law applied, then he could lose the protection of the statute of limitations by making a payment on his debt. If Nevada law applied, he argued that a payment, even if it did not restart the limitation period, would leave him in a worse position because he would be forced to argue complicated choice-of-law issues in response to a lawsuit.
The Court disagreed and explained that while the FDCPA requires collectors to give certain disclosures, such as the “Mini-Miranda” and the disclosures required by 15 U.S.C. § 1692g, “nothing in the FDCPA requires debt collectors to disclose that partial payments on debts may revive the statute of limitations in certain states.”
Finally, the Court rejected the consumer’s argument that the letter was deceptive because it listed “benefits” to paying the time-barred debt and failed to convey that consumers have the option of paying nothing. The Court noted that in most states, including Idaho and Nevada, the running of the statute of limitations does not extinguish the debt, it merely forecloses a judicial remedy. Therefore, there is “nothing inherently deceptive or misleading in attempting to collect a valid, outstanding debt, even if it is unenforceable in court.”
The Court explained that because in most states a time-barred debt is still legally owed, it is not deceptive to say that the consumer will save money by paying a discounted amount. Also, collectors are not obligated to inform consumers that they do not have to pay their debt to stop communications because they can also stop communications by exercising their rights under 15 U.S.C. § 1692c(c). Finally, saying that a consumer can obtain “peace of mind” by paying the debt does not imply a threat of suit when the communication also discloses that the creditor will not sue the consumer.
The SOL disclosure at issue in this case is one that was mandated by the FTC and the CFPB in consent orders, and it is substantially similar to those required by legislation in California, Connecticut, and Texas. Furthermore, the Sixth Circuit and the Eleventh Circuit have each noted that the use of a similar SOL disclosure could remedy any false implication that a time-barred debt is enforceable in court.
On the other hand, the Seventh Circuit has held that using only the second sentence of the disclosure (informing the consumer that the creditor will not sue) is insufficient without the first sentence informing the consumer that “the law limits how long you can be sued on a debt.” The Seventh Circuit also found that “the FDCPA prohibits a debt collector from luring debtors away from the shelter of the statute of limitations without providing an unambiguous warning that an unsophisticated consumer would understand.”
Further clarity might come in the form of supplemental CFPB rulemaking. The Bureau’s Notice of Proposed Rulemaking released in May 2019 did not address time-barred debt disclosures but the NPRM noted that the Bureau planned to test disclosures and might issue a disclosure proposal at a later date. Earlier this month, Director Kraninger told a group of state attorneys general that the Bureau intends to release a Supplemental Notice of Proposed Rulemaking on this issue “very early in 2020.”
SCOTUS Holds FDCPA Claims Run from Date of Violation – Not from Date of Discovery
There is no discovery rule for federal Fair Debt Collection Practices Act claims, the U.S. Supreme Court held today. Affirming the U.S. Court of Appeals for the Third Circuit’s decision in Rotkiske v. Klemm, the Court’s opinion also overrules an earlier ruling from the U.S. Court of Appeals for the Ninth Circuit, Mangum v. Action Collection Serv., Inc., where the Ninth Circuit permitted FDCPA claims to run from when the plaintiff knows or has reason to know of the violation.
Rotkiske had sued a collection law firm alleging it violated the FDCPA by filing a lawsuit to collect a debt after the debt’s limitations period had expired. But Rotkiske did not learn of the collection lawsuit until six years after it was filed because, he alleged, the suit was served at an address where he did not reside, and someone other than himself accepted service.
The District Court dismissed the case, finding Rotkiske’s FDCPA claim was filed well after the expiration of the FDCPA’s one-year limitations period. The District Court also rejected Rotkiske’s argument that the “discovery rule” permitted his lateness because he could not have discovered the FDCPA violation earlier. It also rejected the argument that because of the law firm’s alleged conduct, his FDCPA claim was “equitably tolled.”
The Third Circuit affirmed the trial court’s decision concerning the discovery rule. Rotkiske did not raise the equitable tolling argument on appeal.
The background rule for interpreting statutes of limitation is that the time to file a claim begins to run “when the cause of action accrues.” This is the first moment when a litigant can file a lawsuit and ask a court for relief.
Congress sometimes uses language that permits the running of the limitations period from when a person learns they have been damaged. So the limitations period could be calculated from this later date, i.e., the “discovery” date. But when Congress chooses statutory text that does not express its intention to include such “discovery” language, the “discovery rule” cannot be applied. The Court’s opinion, delivered by Justice Clarence Thomas, found no support for a discovery rule in the text of the FDCPA.
Section 1692k(d) of the Act provides that the time to bring an FDCPA claim begins to run “within one year from the date the violation occurs.” Congress’s choice of the phrase “violation occurs” is indicative of its intent to start running the clock on FDCPA claims from the date of the violation. This point was raised by the Receivables Management Association International (RMAI) in its amicus brief.
Rotkiske raised the equitable tolling argument once again. Still, the Court would not consider it because it was not raised in his appeal to the Third Circuit or in the petition for certiorari to the Supreme Court.
Justice Sotomayor, in a concurring opinion, agreed with the majority’s opinion and simply noted, “[n]othing in today’s decision prevents parties from invoking that well-settled doctrine” of equitable tolling.
Justice Ginsburg’s dissenting opinion reasoned that there is a “fraud-based discovery rule” that differs from both the traditional discovery rule and equitable tolling. Under the fraud-based discovery rule, when a person is injured by fraud, the limitations period does not begin to run until the fraud is discovered.
This differs from equitable tolling because equitable tolling does not look at when the limitations period starts, it recognizes it has already started. Equitable tolling only acts to suspend the running of the limitations period if the litigant is diligently pursuing her rights and is prevented from filing her lawsuit by “extraordinary circumstances.”
Justice Ginsburg believed that the fraud-based discovery rule applied to Rotkiske’s circumstances and that his FDCPA claim did not begin to run until he discovered the offending collection lawsuit.
The dissent believed that Rotkiske pleaded sufficient facts to support the fraud-based rule and that it was properly before the Third Circuit. Still, the majority and concurring opinions believed the Third Circuit correctly held the issue was not raised on appeal and was therefore not before the Supreme Court.
The opinion confirmed the death of the traditional discovery rule in FDCPA cases. However, equitable tolling of FDCPA claims is not impacted by the decision as both the majority opinion and Justice Sotomayor’s concurring opinion point out.
7th Cir Holds Collection Letter Properly Identified “Original” and “Current” Creditors
The U.S. Court of Appeals for the Seventh Circuit recently affirmed judgment in favor of a debt buyer and debt collector against a consumer debtor alleging that the collector’s debt collection letter violated the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692 (“FDCPA”).
In this case, a consumer (“Debtor”) defaulted on debt owed to a bank. The debt was sold to a subsequent creditor (the “Debt Buyer”), who retained a debt collector (the “Debt Collector”) to send a form collection letter (the “Collection Letter”).
The Collection Letter advised that the Debtor’s account had been “placed with our collection agency on 9-14-17,” and that the Debt Collector’s “client” had authorized it to offer a payment plan or a settlement of the debt in full. The Collection Letter further identified the bank as the “original creditor,” and the Debt Buyer as the “current creditor,” along with the last four digits of the Debtor’s account number and principal and interest balances due on the debt.
The Debtor filed a putative class action complaint against the Debt Buyer and Debt Collector alleging that the Collection Letter violated § 1692g(a)(2) of the FDCPA by “fail[ing] to identify clearly and effectively the name of the creditor to whom the debt was owed.”
The trial court entered judgment on the pleadings in favor of the Debt Buyer and Debt Collector, holding that the Collection Letter adequately identified the current creditor. The Debtor appealed.
The Seventh Circuit referenced prior rulings which held that “[t]o satisfy § 1692g(a), the debt collector’s notice must state the required information ‘clearly enough that the recipient is likely to understand it.’” Janetos v. Fulton Friedman & Gullace, LLP, 825 F.3d 317, 321 (7th Cir. 2016) (quoting Chuway v. Nat’l Action Fin. Servs., Inc., 362 F.3d 944, 948 (7th Cir. 2004)).
On appeal, the Debtor argued that listing two separate entities as “creditor” without explaining the difference between the two, i.e., “original” vs. “current,” and stating that the Debt Collector was authorized to make settlement offers on behalf of the Debt Buyer (an entity that was previously unlikely known to the customer) could confuse recipients as to whom the debt was actually owed.
The Seventh Circuit disagreed. It held that the Collection Letter clearly identified the Debt Buyer as the current creditor, thus meeting the requirement under 1692g(a) that the written notice contain “the name of the creditor to whom the debt is owed.” 15 U.S.C. § 1692g(a)(2).
Moreover, the Collection Letter’s identification of the original creditor (who the consumer is likely to recognize based on their past business relationship) and the current creditor (the Debt Buyer, which the consumer may not recognize and is required to be identified under the FDCPA) “provide[d] clarity for consumers” and an unsophisticated consumer would understand that his debt has been purchased by the creditor. Smith v. Simm Assocs., 926 F.3d 377, 381 (7th Cir. 2019).
Acknowledging the trial court’s suggestion that the letter could have better clarified the parties’ relationship by spelling out that the Debt Buyer purchased the debt from the original creditor, and that the Debt Buyer was the Debt Collector’s client, the Seventh Circuit held that section 1692g(a)(2) only requires clear identification of the current creditor, not a detailed explanation of transactions leading to the Debt Collector’s notice.
LIVE MONTHLY WEBINARS (Free to Members)
- Class Action Litigation: Strategies for Defending or Settling Class Claims – Thursday, January 23, 2019 at 9:00am PT/12:00pm ET
***All recorded monthly webinars are FREE to our members. Special series and select required courses for certification are paid at member rate.
CONGRATULATIONS TO OUR NEW AND RENEWAL CERTIFIED BUSINESSES, VENDORS, AND INDIVIDUALS!
CRCP – New
Chris Russell- Converging Capital
CRCP – Renewal
Andrea Rose – United Holding Group, LLC
Mark Lesinski – Landmark Strategy Group, LLC
Chris Asbrock – Debt Management Partners, LLC
Jorge Garcia – PMGI, LLC
Charles Natkins – Collins Asset Group, LLC
CRB – Renewal
Encore Capital Group, Inc.
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For questions about certification, contact Caitlyn Vaden at (916) 482-2462 or firstname.lastname@example.org.
Welcome new RMAI members!
(11-14-19 to 1-13-20)
American Recovery Service Incorporated, Associate Debt Buyer – CA
Aubrey Thrasher, LLC, Associate Law Firm – GA
Bloom & Associates, P.A., Associate Law Firm – MD
Boston Portfolio Advisors, Affiliate – FL
Commercial Credit Group Inc., Associate Debt Buyer – NC
Consumer Adjustment Company, Inc., Associate Collection Agency – MO
Credit Deployment Service (CFW), Originating Creditor – IL
First National Bank of Omaha, Originating Creditor – NE
Heritage Global Capital, LLC, Affiliate – NY
J.J. Marshall & Associates, Inc., Associate Collection Agency – MI
Kedem Financial, Inc., Associate Debt Buyer – CA
Machol & Johannes, LLC, Associate Law Firm – CO
Maxwell & Graves Solutions, LLC, Affiliate – NJ
MCS Debt Recovery, International Debt Buyer – South Africa
NLP Logix, Affiliate – FL
North American Recovery, Associate Collection Agency – UT
One Click-Data, Affiliate – NY
Orion Capital Solutions, LLC, Associate Collection Agency – NY
Paradigm Assets LLC, Associate Debt Buyer – MO
Red Target, LLC dba SCJ Financial Services, Associate Collection Agency – DE
Shermeta Law Group, PLLC, Associate Law Firm – MI
Synergetic Communication Inc, Associate Collection Agency – TX
Toyota Financial Services, Originating Creditor – AZ
W.S. Badcock Corporation, Originating Creditor – FL
Yrefy, LLC, Originating Creditor – AZ
Read more about these and other members on the Member Search page.
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In this update:
Thank you to our January 2019 – January 13, 2020 Legislative Fund Contributors!
Cavalry Investments, LLC
Financial Recovery Associates, Inc.
Portfolio Recovery Associates, LLC
Resurgent Holdings, LLC
Crown Asset Management, LLC
Encore Capital Group, Inc.
Unifund CCR, LLC
Velocity Portfolio Group, Inc.
Second Round, LP
Digital Recognition Network
Diverse Funding Associates, LLC
First Financial Portfolio Service, LLC
Garnet Capital Advisors, LLC
Plaza Services, LLC
Absolute Resolutions Corp
- Reynolds Sims & Associates, P.C.
Glass Mountain Capital, LLC
International Debt Buying Consultants, LLC
Jefferson Capital Systems, LLC
National Loan Exchange, Inc.
RAzOR Capital, LLC
Security Credit Services, LLC
The Bureaus, Inc.
Andreu, Palma, Lavin & Solis, PLLC
Balbec Capital, LP
C & E Aquisition Group
Central Portfolio Control, Inc.
Geist Holdings, Inc.
Indiana Receivables, Inc.
Investment Retrievers, Inc.
Kino Financial Co., LLC
Ontario Systems, LLC
Peroutka, Miller, Klima & Peters, P.A.
Stenger & Stenger P.C.
The Cadle Company
The Law Offices of Ronald S. Canter, LLC
Tobin & Marohn
U.S. Equities Corp.
United Holding Group
Vertican Technologies, Inc
Accelerated Data Systems
Acctcorp International, Inc.
Actuate Law, LLC
AGORA Data, Inc.
Aldridge Pite Haan, LLP
Alliance Credit Services, Inc.
Arko Consulting LLC
Ballard Spahr LLP
Butler & Associates, P.A.
Capital Solutions Bancorp, LC
CBE Group, Inc.
Clear Payment Solutions
Comtronic Systems, LLC
Convergence Acquisitions, LLC
Converging Capital, LLC
Credit Control, LLC
Credit Management Corporation
D & A Services, LLC
Delev & Associates, LLC
Delta Outsource Group, Inc.
Diverse Funding Associates, LLC
DNF Associates LLC
Dynamic Recovery Solutions
Federal Pacific Credit Company
FLOCK Specialty Finance
Fort Crook Financial Co.
Full Circle Financial Services, LLC
Genesis Recovery Services
Halsted Financial Services, LLC
Harvest Strategy Group, Inc.
Hinshaw & Culbertson
Hudson Cook, LLP
Hunt & Henriques
Kirschenbaum & Phillips, P.C.
Law Office of James R. Vaughan, P.C.
Law Offices of Daniel C. Consuegra, P.L.
Law Offices of Steven Cohen, LLC
Lockhart, Morris & Montgomery, Inc.
London & London
Maurice Wutscher LLP
Metronome Financial LLC
Midwest Fidelity Services, LLC
Monarch Recovery Management, Inc.
MRS BPO, LLC
Mullooly, Jeffrey, Rooney & Flynn, LP
National Check Resolution, Inc.
National Recovery Associates
National Recovery Solutions, LLC
NCB Management Services, Inc.
PCI Group, Inc.
Pharus Funding, LLC
POM Recoveries, Inc.
Portfolio Group Investors, LLC
Poser Investments, Inc.
Premier Forty Financial, LLC
RAS LaVrar LLC
Resource Management Services, Inc
RIP Medical Debt
Rocky Mountain Capital Management, LLC
Sandia Resolution Company, LLC
Simmonds & Narita LLP
Solutions by Text
Sonnek & Goldblatt, Ltd.
Tag Process Service, Inc.
Troutman Sanders LLP
Troy Capital, LLC
Universal Fidelity LP
Vargo & Janson, P.C.
Viking Client Services, Inc.