The RMAI Federal Legislative/Regulatory Committee met post-election to:
Evaluate the results for those races that have been called
Discuss possible actions in the lame duck session including the politics around a future stimulus package
Map out committee activities through the end of 2021
The results of the two runoff races for US Senate in Georgia will decide who controls the Senate which will dictate much of the policy and confirmations we will see.
On the regulatory front, the committee discussed the CFPB’s release of the Debt Collection Rule and what is expected to be released in December 2020. The committee is currently evaluating whether RMAI will provide comments on the CFPB Advance Notice of Proposed Rulemaking for consumer access to financial records.
RMAI is actively monitoring over 300 bills that may impact the receivables industry in both positive and negative ways. Here are a few noteworthy bills that have been enacted or are pending action:
Massachusetts SB 2874 – This bill among other things: (1) increases the garnishment exemption from 50x state minimum wage to 70x state minimum wage; (2) reduces the statute of limitations in an action for the collection of a consumer debt from six to four years; (3) prohibits the revival of a debt that is beyond the statute of limitations through the making of a payment; and (4) reduces the time allowed to take action to enforce a judgment from 20 to 10 years. [RMAI has retained a lobbyist to oppose the bill in its current form.RMAI participated in a stakeholder roundtable requested by the committee chair in January 2020. Working with a receivables industry coalition, RMAI has exchanged several redlines with proponents of the bill. While we have made progress, such as the removal of debt expungement from the bill, more work is needed.]
New York AB 6909-E/SB 4827-E – This bill which is known as the “Consumer Credit Fairness Act” would: (1) reduce the statute of limitations from six to three years on consumer credit transactions; (2) prohibit the revival of a debt that is beyond the statute of limitations through the making of a payment; (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 been actively opposing this bill since it was first introduced in 2009. After years of industry offers to negotiate the bill being rejected, the sponsors finally expressed a desire to discuss our concerns. After 13 months of negotiations, the industry was successful at: (1) removing language which would have expunged all debt at the expiration of the statute of limitations; (2) removing pre-charge-off itemization requirements on revolving lines of credit; (3) changing the point of reference on data and documents from origination to charge-off; (4) clarifying a provision of existing law, that some judges were misinterpreting, to make clear that creditors are not required to inform consumers when their accounts are sold in order for the successor parties in interest to be able to collect on those accounts; and (5) extending the effective date by six months to provide the industry time to adjust operational controls as well as accelerate any legal actions under existing law.]
Ohio HB 251 – This bill would decrease the statute of limitations from eight years to six years on a written contract and four years on an oral contract. [RMAI and a coalition of industry participants were able to prevent an amendment to the bill that would further reduce the statute of limitations to three years. The bill has been passed by the House and is now being considered in the Senate.]
If you are interested in obtaining a copy of the RMAI state tracking list, please contact David Reid at firstname.lastname@example.org.
7th Circuit Holds Accurately Stating “Interest: $0.00” Is Not Misleading
A consumer received a collection letter stating, in part: “The amount of your debt is $425.86. Please keep in mind, interest and fees are no longer being added to your account. This means every dollar you pay goes towards paying off your balance.” A subsequent letter itemized the current balance and showed “$0.00” for both interest and other charges.
The consumer alleged the second letter violated 15 U.S.C. § 1692e because it misleadingly implied that the creditor would begin to add interest and fees if the payment was not made. He also alleged the letter violated § 1692g “by failing to disclose the amount of the debt in a clear and unambiguous fashion.”
The debt collector filed a motion to dismiss which the trial court granted, finding the second letter accurately and correctly disclosed the amount of the debt and did not imply fees or interest would be added to the debt in the future.
On appeal, the Seventh Circuit acknowledged there was no dispute that the letter disclosed the correct amount owed. Rather, the question was whether the debt collector, “by providing a breakdown of [the consumer’s] debt which showed a zero balance for ‘interest’ and ‘other charges,’ violated 15 U.S.C. §§ 1692e and 1692g(a)(1) by implying that interest and other charges would accrue if the debt remained unpaid.”
The Consumer Financial Protection Bureau, siding with the debt collector’s position, argued the interpretation of the letter urged by the consumer was “’bizarre’ or ‘idiosyncratic,’” and that “the itemization of a debt is a record of what has already happened” and “cannot be construed as forward looking and therefore misleading.”
The Court agreed, noting that the consumer’s “mere raising of an open question about future assessment of other charges with a speculative answer does not make the breakdown misleading.” Reiterating its holding in Dunbar v. Kohn Law Firm, S.C., 896 F.3d 762 (7th Cir. 2018), the Court explained that “where a dunning letter only makes explicit representations about the present that are true, a plaintiff may not establish liability on the basis that it leaves ambiguity about the future.”
Accordingly, the Seventh Circuit affirmed the judgment of the trial court.
11th Circuit: State Revival Statute Cannot Thwart FDCPA Statute of Limitations
The U.S. Court of Appeals for the Eleventh Circuit, in an unpublished opinion, affirmed a trial court order holding that Georgia’s renewal statute cannot save a claim that is otherwise time-barred under the federal Fair Debt Collection Practices Act (FDCPA).
On April 26, 2019, a consumer filed a complaint against a debt collector in Georgia state court alleging various violations of the FDCPA, 15 U.S.C. § 1692 et seq. The debt collector removed the case to the United States District Court for the Northern District of Georgia, and the consumer then voluntarily dismissed the lawsuit without prejudice.
On Nov. 27, 2019, the consumer refiled the complaint in Georgia state court and the debt collector again removed the case to federal court. The debt collector moved to dismiss, claiming that the FDCPA’s one-year statute of limitations barred the alleged claims since the alleged violations occurred on May 1, 2018, May 25, 2018, and July 23, 2018, more than one year before the consumer filed the second lawsuit.
In response, the consumer asserted that Georgia’s renewal statute, Ga. Code Ann. § 9-2-61, served to save his otherwise time-barred claims.
The trial court dismissed the case, finding that the FDCPA one-year statute of limitations controlled because “where Congress has set a specific statute of limitations, it cannot be extended by operation of state law.”
On appeal, the consumer argued that Georgia’s renewal statute should control despite the FDCPA’s clear one-year statute of limitations. Georgia’s renewal statute provides in relevant part that: “[w]hen any case has been commenced in either a state or federal court within the applicable statute of limitations and the plaintiff discontinues or dismisses the same, it may be recommenced in a court of this state or in a federal court either within the original applicable period of limitations or within six months after the discontinuance or dismissal, whichever is later.”
The Eleventh Circuit had little trouble rejecting the consumer’s argument because the “case law is clear that, where Congress has set an express statute of limitations, state law cannot otherwise extend it.” This same general principal applies to the FDCPA. In enacting the FDCPA, “Congress specifically provided for a one-year limitations period for FDCPA claims.”
The Court held that incorporating Georgia’s renewal statute into the FDCPA as the consumer seeks, “would undermine the uniform application of this federal limitation.” Thus, the Eleventh Circuit affirmed the trial court’s dismissal of the complaint.
11th Circuit Holds Incentive Awards to Class Representatives for Personal Services Are Prohibited
The U.S. Court of Appeals for the Eleventh Circuit recently reversed a trial court’s approval of a class representative’s incentive award, concluding that Supreme Court precedent prohibited the award of any incentive payment to a class representative analogous to a salary or payment for “personal services.”
A consumer (the “class representative”) filed suit on behalf of himself and a putative class of similarly situated individuals against a debt collector alleging violations of the federal Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq., for purportedly using an automatic telephone dialing system to place calls to his cell phone without his consent.
The trial court preliminarily approved a settlement and certified the class, allowing the appointed class representative to “petition the Court to receive an amount not to exceed $6,000 as acknowledgment of his role in prosecuting this case on behalf of the class members.”
One class member objected, arguing among other things that the class representative’s $6,000 incentive award contravened the Supreme Court’s rulings in Trustees v. Greenough, 105 U.S. 527 (1882), and Central Railroad & Banking Co. v. Pettus, 113 U.S. 116 (1885), and created a conflict of interest between the class representative and other class members.
At a final fairness hearing, the trial court heard arguments from the objecting class member, class representative and debt collector, and upheld the $6,000 “incentive payment” to the class representative “as acknowledgment of his role in prosecuting this case on behalf of the class members.” The objecting class member appealed.
The Eleventh Circuit acknowledged that the cases relied upon by the objecting class member, Greenough, 105 U.S. 527 (1882), and Pettus, 113 U.S. 116 (1885) are the seminal cases establishing the rule applicable in many class-action cases that attorneys’ fees can be paid from a “common fund,” and also establishing limits on the types of awards that attorneys and litigants may recover from the fund.
The Supreme Court in Greenough upheld the class representative’s award of attorneys’ fees and litigation expenses but rejected as without legal basis the award for his “personal services and private expenses,” particularly the yearly salary and reimbursement for the money he spent on railroad fares and hotel bills. Three years later, the Pettus Court confirmed that while a plaintiff suing on behalf of a class can be reimbursed for attorneys’ fees and expenses incurred in carrying on the litigation, she or he cannot be paid a salary or be reimbursed for his personal expenses.
Noting that those cases “seem to have been largely overlooked in modern class-action practice,” the Eleventh Circuit reviewed several examples where modern-day incentive awards for class representatives were roughly analogous to a salary or payment for “personal services.” The Court observed: “If anything, we think that modern-day incentive awards present even more pronounced risks than the salary and expense reimbursements disapproved in Greenough. Incentive awards are intended not only to compensate class representatives for their time (i.e., as a salary), but also to promote litigation by providing a prize to be won (i.e., as a bounty).”
In this case, the class representative claimed entitlement to the $6,000 incentive payment because he “took critical steps to protect the interests of the class, and spent considerable time pursuing their claims.” Examples included “frequently communicating with his counsel, keeping himself apprised of the matter, approving drafts before filing and responding to  discovery requests.”
Based on Greenough, the Eleventh Circuit rejected the argument: “In other words, he wants to be compensated for the time he spent litigating the case, or his ‘personal services’ – an award that the Supreme Court has deemed ‘decidedly objectionable.’. . . Whether [the class representative’s] incentive award constitutes a salary, a bounty, or both, we think it clear that Supreme Court precedent prohibits it.”
Accordingly, with respect to the $6,000 incentive award, the trial court’s order was reversed.
Calif. App. Court Finds Arbitration Clause Is Invalid Due to Prohibition on Injunctive Relief
The Court of Appeals of the State of California, Fourth Appellate District, recently held that an arbitration provision contained in a credit card agreement was unenforceable because it sought to bar a customer from pursuing his claim for a public injunction “in any forum.”
In May 2017 a consumer purchased a used motorcycle in part by using a credit card obtained through the motorcycle dealership. The credit application contained an arbitration provision providing any party acting alone could “require that the sole and exclusive forum and remedy for resolution of a Claim be final and binding arbitration.”
The arbitration agreement also contained a “poison pill” provision that provided: “If any portion of this Arbitration Provision other than section (f) is deemed invalid or unenforceable, the remaining portions of this Arbitration Provision shall nevertheless remain valid and in force. If an arbitration is brought on a class, representative, or collective basis, and the limitations on such proceedings in section (f) are finally adjudicated pursuant to the last sentence of section (f) to be unenforceable, then no arbitration shall be had.” Section (f) “barred arbitration of all class, representative, or private attorney general claims.”
Finally, the credit card agreement also contained a choice-of-law provision providing the agreement was “governed by applicable federal law and by Utah law.”
Thereafter, the consumer filed a complaint against the dealership on behalf of himself and other similarly situated consumers alleging the dealership violated the California Rees-Levering Automobile Sales Finance Act which regulates conditional sales contracts for motor vehicles, among other things. The Act also contains a “single document rule” that “requires motor vehicle dealers in transactions involving the financing of motor vehicles to state in a single document all the agreements concerning the total cost and terms of payment, including the terms of financing as required by Civil Code section 2981.9.”
The consumer’s complaint alleged the dealership was deceptively attempting to make transactions appear to be cash purchases, thus exempt from Rees-Levering, through use of the dealership credit card.
Based on the arbitration clause in the credit card agreement, the dealership moved to compel arbitration and to dismiss or stay the case pending completion of the arbitration.
The consumer opposed the motion arguing that the arbitration provision was unenforceable under McGill v. Citibank, N.A., 393 P.3d 85 (2017) because it purported to waive the consumer’s right to seek a public injunction “in any forum.”
In McGill, the California Supreme Court concluded that “the waiver in a predispute arbitration agreement of the right to seek public injunctive relief under these statutes would seriously compromise the public purposes the statutes were intended to serve. Thus, insofar as the arbitration provision here purports to waive McGill’s right to request in any forum such public injunctive relief, it is invalid and unenforceable under California law.” Accordingly, the California Supreme Court ruled that an arbitration provision was “invalid and unenforceable under California law” because “it purports to waive McGill’s statutory right to seek [public injunctive] relief.”
The trial court agreed with the consumer that the arbitration provision was unenforceable under McGill and the dealership appealed.
On appeal, the dealership first argued that McGill did not apply due to the choice-of-law provision in the contract which provided that Utah law, rather than California law, governs the dispute.
The Court of Appeals acknowledged that if a party seeking to enforce choice-of-law meets the burden of proving a substantial relationship, “the parties’ choice generally will be enforced unless the other side can establish both that the chosen law is contrary to a fundamental policy of California and that California has a materially greater interest in the determination of the particular issue.”
The Court of Appeals found that while a substantial relationship was established through the business’s headquarters in Utah, it also noted that Utah law was contrary to a fundamental policy of California because “Utah does not permit courts to invalidate arbitration clauses that waive public injunctive relief in any forum.” Consequently, applying Utah law would conflict with California’s materially greater interest in protecting the consumer’s right to seek public injunctive relief from the dealership’s allegedly illegal practices.
Thus, the Court of Appeals held that the trial court properly applied McGill.
Next, the dealership argued that if California law is applied, the arbitration provision “does not run afoul of McGill” because the consumer does not seek a public injunction, but rather an injunction to benefit only a narrow group of the dealership’s customers.
The Court of Appeals rejected this argument, finding that the consumer sought an injunction forcing the dealership to cease “selling motor vehicles in the state of California without first providing the consumer with all disclosures mandated by [the Civil Code] in a single document.” The Court held this fit the definition of “public injunctive relief” in McGill, which was defined as “injunctive relief that has the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public.” Accordingly, the Court of Appeals found no merit in the dealership’s argument.
Accordingly, the Court of Appeals of the State of California affirmed the trial court order denying the petition to compel arbitration.
Donate with your 2021 RMAI Member Renewal
Now that RMAI membership renewal started on October 1, 2020, please consider donating to the Legislative Fund. Now more than ever, we can certainly use the help of our membership in what is sure to be an eventful 2021 on the legislative front.
CHIEF COMPLIANCE OFFICER WEBINAR SERIES (Dates TBD)
RMAI is currently planning a Chief Compliance Officer webinar series that will take a deep dive into the recently released CFPB rule, especially in regards to implementation for compliance officers. Please look out for more information on pricing and webinar topics.
Did you know that if your Certified Business has one or more affiliated business entities (debt buying company, law firm, collection agency, creditor), you can certify them as a Family of Companies for ONLY $100 each?
Your affiliated business entities must meet the following criteria to qualify for a Family of Companies under the same Certification:
Have the same Chief Compliance Officer
Have the same executive management team that exerts control over business operations
Maintain a uniform network of compliance on all accounts serviced between the business entities
Be governed by the same corporate policies and procedures
Agree to be audited in a single unified audit
Agree deficiency and remediation against one business entity will apply to all of the business entities
Add a Family of Companies easily by clicking here.
CONGRATULATIONS TO OUR NEW AND RENEWAL CERTIFIED BUSINESSES, VENDORS, AND INDIVIDUALS!
As the COVID-19 pandemic continues and enters new phases, RMAI is committed to keeping you informed. We distribute weekly Member Alerts when warranted with guidance for our members. RMAI continues to maintain our COVID-19 resource page on the RMAI website, conveniently accessible without a member password. Included on this webpage are COVID-19-related member alerts, webinars, regulatory and legislative resources, Executive Orders, and emergency court rules. We update the site with new content as it becomes available.
We also provide live and recorded webinars focused on the impact of COVID-19. To date we have hosted eight webinars on COVID-19 related topics. You can find and register for recorded webinars here.
In compliance with California’s guidelines re: minimizing non-essential employees in offices, the RMAI staff is working remotely. We continue to be available to serve you by phone and email.
Thank you to our November 2019 – November 16, 2020 Legislative Fund Contributors!