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.
RMAI’s federal counsel, K&L Gates, continues to monitor activities on Capitol Hill. The latest stimulus package (which failed passage in the Senate) did not include any policy items related to the receivables management industry. While the HEROES Act, which came out of the House, did contain many harmful provisions, the Senate version did not. We will continue to monitor activities on the Hill. As we near elections, however, we do not anticipate any legislation to pass which would negatively affect the industry.
On September 2nd, RMAI filed Comments with the OCC on the True Lender proposed rule. The True Lender rule builds upon the “Valid When Made” rule which was finalized by the OCC on May 29, 2020. Under the proposed rule, the bank is the true lender if it is named as the lender in the loan agreement or funds the loan. RMAI supported the proposal as it provides uniformity and consistency in the application of law. The proposed rule keeps the cost of credit down, encourages innovation in financial service and facilitates inclusion. Despite the protests of consumer groups, the rule does not allow predatory lenders to escape regulation. We anticipate a final rule in the next 60 days.
RMAI actively monitors bills that may impact the receivables industry and takes action when merited. Here are a few noteworthy bills that are pending action:
California SB 908 – This bill passed the legislature. If signed by Governor Newsom, the new law would require collection agencies, debt buyers, and collection law firms that are either located in California or that collect from California residents to be licensed as debt collectors by the Department of Business Oversight (DBO). The bill generally contains requirements similar to other states that license debt collectors, including bonding requirements, the filing of reports, and compliance with state and federal law. Licenses would be required as of January 1, 2022. [RMAI and the California Association of Collectors (CAC) engaged in an extensive eight-month negotiation with the bill’s author and was able to obtain a number of concessions, including among other things: (1) eliminating language that would have granted consumers access to bond funds; (2) eliminating language which would have required all summons and complaints involving licensees to be served upon DBO; (3) preventing minor FDCPA violations from impacting a license; (4) allowing a family of companies to share a license and examination; (5) preempting local governments from licensing; (6) ensuring no branch license requirements; (7) eliminating a mandatory state audit every two years; (8) creating an advisory committee to review rules and fees prior to publishing them for comment; and (9) delaying the effective date until January 1, 2022. The Governor has until September 30th to sign or veto the bill.]
California AB 1864 – This bill changes the name of the Department of Business Oversight to the Department of Financial Protection and Innovation (DFPI) while giving the department new authorities that mirror the federal Consumer Financial Protection Bureau. Among the new authorities is to regulate unfair, deceptive, or abusive acts or practices (UDAAP) in connection with any transaction with a consumer for a consumer financial product or service. [Understanding this was a Governor’s budget bill and passage was virtually guaranteed, RMAI and CAC successfully focused all of our energy on obtaining a single amendment that placed parameters on the UDAAP authority by stating DFPI “shall consider the relative harm to the consumer, the frequency of the act or practice in question, and whether such act or practice is unintentional or stems from a technical, clerical, or nonmaterial error.”]
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 email@example.com.
11th Cir. Holds Obtaining Consumer Report for Verification and Eligibility is a Permissible Purpose
In a case of first impression for the U.S. Court of Appeals for the Eleventh Circuit, the Court joined the Sixth Circuit in holding that obtaining a consumer report to verify a consumer’s identity and eligibility for a service is a “legitimate business need” and therefore a “permissible purpose” under the Fair Credit Reporting Act (FCRA).
In this case, the consumer was previously the victim of identity theft when her personal information was used on several occasions to create accounts with a television provider (“provider”). Learning of the accounts after they became delinquent, the consumer brought suit against the provider for alleged violations of the FCRA. The lawsuit was settled, with the provider agreeing “to flag [the consumer’s] social security number in order to preclude any persons from attempting to obtain new [provider] services by utilizing [the consumer’s] social security number.”
The present case ensued when the consumer’s personal information was yet again fraudulently used to apply for the provider’s services online. The personal information included the last four digits of the consumer’s Social Security number, her first name and her date of birth. Other information, such as last name, address and telephone number were different from the consumer’s.
As part of an automated process, the provider sent the application information to a consumer reporting agency that returned a consumer report that included the consumer’s full Social Security number. At that point, based on the full Social Security number, the processes put in place pursuant to the settlement agreement prevented the opening of an account. In fact, at the provider’s request the consumer reporting agency deleted the inquiry from the consumer’s record.
Nevertheless, the consumer filed a lawsuit against the provider alleging the consumer report had been obtained without a “permissible purpose” and that the terms of the settlement agreement had been breached. The trial court granted summary judgment in favor of the provider, finding that it had a “legitimate business need” for obtaining the report and that it fulfilled the terms of the settlement agreement by “flagging” the consumer’s Social Security number. The consumer appealed.
Initially, the Court of Appeals explained that the “FCRA enumerates an exhaustive list of the ‘permissible purposes’ for which a person may use or obtain a consumer report. 15 U.S.C. § 1681b(a)(3) . . . One of those permissible purposes is where a person ‘has a legitimate business need for the information . . . in connection with a business transaction that is initiated by the consumer.’ 15 U.S.C. § 1681b(a)(3)(F)(i).”
The Court noted that it had “never weighed in on what constitutes a ‘legitimate business need’ in connection to a business transaction for FCRA purposes.” However, following the lead of the Sixth Circuit Court of Appeals in Bickley v. Dish Network, LLC, 751 F.3d 724 (6th Cir. 2014), the Eleventh Circuit agreed “that requesting and obtaining a consumer report for verification and eligibility purposes is a ‘legitimate business need’ under the FCRA.”
Here, the consumer argued the provider had no “legitimate business need” because it “either knew or should have known that [she] had not initiated the business transaction because of their prior settlement agreement.” Also, she believed that the provider should have done more to verify her identity before requesting the consumer report.
These arguments did not sway the Court. First, “the FCRA does not explicitly require a user of consumer reports to confirm beyond doubt the identity of potential consumers before requesting a report.” Second, just because the provider “had the mechanisms in place to verify that the scant information provided by the applicant actually belonged to [the consumer] does not necessarily lead to the conclusion that [the provider] suspected (or was able to verify) the same.” Finally, the provider simply didn’t have enough information to act upon until it received the full Social Security number contained in the consumer report.
The breach of contract claim was rejected by the Court since “[t]he only affirmative action [the provider] agreed to take in the settlement agreement was ‘to flag [the consumer’s] social security number,’” which it did.
California Appellate Court Asserts Specific Jurisdiction Over Out-of-State Online Seller
In an action challenging the accessibility of a website to blind and visually impaired people, the Court of Appeals of the State of California, Fourth Appellate District, recently held that a California court may exercise specific jurisdiction over a Georgia company that purposefully availed itself of the privilege of conducting business in California by sending catalogs and selling over $300,000 worth of goods to California residents.
A California consumer filed a complaint in California court against a Georgia collectibles seller (“seller”) alleging a violation of the Unruh Civil Rights Act because the seller’s website allegedly was not fully accessible by the blind and the visually impaired. California’s Unruh Civil Rights Act provides that “[a] violation of the right of any individual under the federal [ADA] shall also constitute a violation of this section.” Cal. Civ. Code § 51(f).
The consumer in this case was blind and alleged the seller’s website had access barriers which prevented blind people from having “full and equal access” to the website and did not comply with the most recent Web Content Accessibility Guidelines promulgated by the World Wide Web Consortium.
The seller was the largest retail seller of diecast models via catalogs and the internet in America, with its principal place of business in Georgia and no office or employees in California. The seller’s only contact with California was through sales made via its catalogs and website, which totaled about $320,000 to $375,000 per year and comprised about eight percent of its total sales.
The seller filed a motion to quash the service of summons based on lack of personal jurisdiction. The trial court granted the motion in part because the seller “did not direct its website toward California.”
The consumer appealed.
Noting that the consumer made no claim of general jurisdiction, the Appellate Court explained that a court may exercise specific jurisdiction over a nonresident defendant only if: “(1) the defendant has purposefully availed himself or herself of forum benefits; (2) the controversy is related to or arises out of defendant’s contacts with the forum; and (3) the assertion of personal jurisdiction would comport with fair play and substantial justice.”
On the first point, and relying largely on the sliding scale developed in Snowney v. Harrah’s Entm’t, Inc., 35 Cal. 4th 1054, 29 Cal. Rptr. 3d 33, 112 P.3d 28 (2005), the court determined that under California case law, making a substantial number of sales of goods or services to California residents via one’s own website constitutes purposeful availment.
The seller made eight percent of its sales to California residents which totaled $320,000 to $375,000 per year. Additionally, the seller sent out 1.4 million catalogs a year, and while the exact number that were sent to California was unknown, the Appellate Court felt “the only reasonable inference is that [the seller] sent a substantial number of catalogs to residents of California” which was evidence that the seller “targeted” Californians.
Accordingly, the Appellate Court concluded that the seller purposefully availed itself of the benefits of the California market.
On the second point, the Court concluded that under any standard the controversy arises out of the seller’s contacts with California; the contacts consisting of maintaining a virtual store on the internet that made substantial sales to Californians.
Finally, on the third point, the Court concluded that the exercise of jurisdiction by California in this case would not be unreasonable, noting that the seller made no effort to show that the exercise of jurisdiction would be unreasonable and if the seller found it too burdensome to be sued in California, it can simply decline to sell to Californians.
In sum, the Appellate Court held the trial court could and should have exercised personal jurisdiction over the seller. Accordingly, the trial court’s order was reversed with directions to deny the motion to quash.
9th Cir. Holds Choice-Of-Law Analysis Not Necessarily Required for Settlement Classes
The U.S. Court of Appeals for the Ninth Circuit recently held that it is generally not legal error for a trial court to hold that a settlement class satisfies class action predominance requirements, particularly for a class asserting a unifying federal claim, without first performing a choice-of-law analysis.
A class action complaint was filed by the consumers against a bank alleging the bank pressured employees to meet unrealistic sales quotas that resulted in a systematic exploitation of the consumers for profit. The consumers sued the bank in a putative class action alleging violations of the Fair Credit Reporting Act (FCRA), the Electronic Fund Transfer Act (EFTA), California and Arizona statutory law, and common law.
The parties reached a settlement in the trial court that certified a settlement class, and the trial court approved the settlement.
In addressing the objections to the certification and the settlement, the trial court held that “[d]ifferences among state laws do not bar certification of the class here, as Plaintiffs have asserted a claim under a federal statute (the Fair Credit Reporting Act) that is equally applicable in all states.”
Some objectors appealed, arguing that the class did not satisfy Rule 23(b)(3)’s predominance requirement because the trial court did not do a choice-of-law analysis.
The Ninth Circuit began its analysis by noting Federal Rule of Civil Procedure 23(b)(3) requires “that the questions of law or fact common to class members predominate over any questions affecting only individual members.” To determine whether a class satisfies the requirement, a court pragmatically compares the quality and import of common questions to that of individual questions.
The Court noted that it is important in the analysis to determine which questions are likely “to drive the resolution of the litigation,” and if a common question will drive the resolution, even if there are important questions affecting only individual members, then the class is “sufficiently cohesive to warrant adjudication by representation.”
Also relevant is whether a trial court certifies a class for settlement or for trial since settlement may “obviate the need to litigate individualized issues that would make a trial unmanageable,” making common questions more important in the relative analysis.
Next, the Ninth Circuit examined prior rulings where it had affirmed the trial court’s certification of a settlement class asserting various consumer protection causes of action without requiring a choice-of-law analysis. The Ninth Circuit held that a “conclusion as to which state’s law applied was not necessary to the predominance determination . . . because the law of each state at issue shared common questions that were central to the resolution of the claims and capable of resolution in one fell swoop.”
Accordingly, the Ninth Circuit held the trial court did not abuse its discretion in foregoing a choice-of-law analysis and certifying the settlement class where common questions predominate, especially where the class was unified by a claim under federal law. Specifically, the FCRA claim was important enough to bind the class together and gave the best route to certification and recovery, thus driving the resolution.
2nd Cir. Confirms No Private Right of Action for FCRA ‘Direct Dispute’
The U.S. Court of Appeals for the Second Circuit recently held that two plaintiff consumers failed to state a claim under the Fair Credit Reporting Act (FCRA) because the plaintiffs did not allege that they reported the alleged errors to a consumer credit reporting agency or that any such agency notified them of the alleged errors; and there is no private right of action arising from a direct dispute of credit reporting with only the furnisher.
The plaintiffs took out a mortgage loan and later refinanced the mortgage, then defaulted. The bank sued and obtained a foreclosure judgment under Connecticut law in 2014. In 2016, one of the plaintiffs obtained his credit report, which showed that the foreclosed mortgage was still in default. He notified the bank, which “acknowledged that the loan had been erroneously reported as ‘open’” but that would be corrected and the loan reported as closed.
The plaintiffs later learned that the bank never corrected the error, and they sued. The amended complaint alleged that the bank “violated the FCRA by ‘negligently and willfully fail[ing] to perform a reasonable investigation and correction of inaccurate information,’ and … ‘by failing to correct errors in the information that it provided to credit reporting agencies’” after being notified of error.
The bank moved to dismiss the amended complaint, arguing that the duty to investigate “is only triggered after a furnisher of information receives notice of a dispute from a consumer reporting agency” and plaintiffs failed to allege that they received a notice of dispute from any consumer reporting agency.
Before the trial court ruled on the pending motion to dismiss, the plaintiffs moved to file a second amended complaint, which was allowed, and which the trial court eventually dismissed because it “failed to allege a statutory basis for [the] FCRA claim.”
The trial court concluded that “[t]o the extent [the plaintiffs] sought relief for a violation of 15 U.S.C. § 1681s-2(a) . . . they failed to state a claim because there is no private right of action under that subsection of the FCRA.” The trial court further concluded that to the extent the plaintiffs’ claim was “premised on violation of Section 1681s-2(b) . . . they again failed to state a claim because they (1) did not plead that they notified a CRA of the disputed accuracy of [the borrower’s] reports, and (2) did not allege that a CRA notified [the borrower] of the dispute.”
Concluding that any additional amendment would be futile, the trial court entered judgment for the bank and the plaintiffs appealed.
On appeal, the Court first affirmed the trial court’s conclusion that “the FCRA does not provide a private cause of action for violations of Section 1681s-2(a),” which only “federal and state authorities” have standing to enforce, and which “details a furnisher’s responsibility to provide accurate information, including a duty to refrain from knowingly reporting inaccurate information . . . and to correct information discovered to be inaccurate.”
Turning to subsection 1681s-2(b), the Court explained that it “outlines a furnisher’s duties following a dispute regarding the completeness or accuracy of a consumer’s credit report.”
Once a furnisher receives a notice of dispute, it must conduct an investigation, review information provided by the consumer reporting agency, report the results to the consumer reporting agency, report any incomplete inaccurate information to other consumer reporting agencies to which the information was furnished, and, if the disputed information is “inaccurate or incomplete or cannot be verified after any reinvestigation,” the item or information must be modified, deleted or blocked from being reported further.
The Court reasoned that “[t]he statute is clear that the notice triggering these duties must come from a CRA, not the consumer” because subsection 1681i(a)(2) provides “that once a ‘consumer reporting agency receives notice of a dispute from any consume. . . the agency shall provide notification of the dispute to any who provided any item of information in dispute[.]’”
In other words, the statute’s obligations are triggered only when the consumer disputes the information to a consumer reporting agency, which then gives notice to the “furnisher” that the consumer disputes the information.
Thus, the Court concluded: “Section 1681s-2(b) is not implicated simply because a consumer contacts a furnisher such as [the bank] regarding inaccuracies in her credit report.”
Because the plaintiffs did not allege that a consumer reporting agency notified them of their dispute or that they notified a consumer reporting agency of their dispute, the Court affirmed the trial court’s holding that they failed to state a claim under subsection 1681s-2(b).
Finally, the Court held that the trial court did not err when it denied the plaintiffs’ leave to amend their complaint a third time because they “presented no basis for the court to ‘believe [they] could allege facts that could withstand a 12(b)(6) motion.’”
The trial court’s judgment was affirmed.
Donate with your 2021 RMAI Member Renewal
With RMAI membership renewal starting 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.
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!
Buddy Beaman – Hilco Receivables
Autumn Bloom – Unifund CCR LLC
Elizabeth Haug – Poser Investments, Inc.
Christy Maier – Red Target, LLC dba SCJ Commercial Financial
Robert Obringer – Invenio Financial, Phillips & Cohen Associates, Ltd.
Stacy Rodriguez – Actuate Law, LLC
Brian Valentin – Lockhart, Morris & Montgomery, Inc.
Mitch Williamson – Barron & Newburger, P.C.
CRCP – Renew
Mikel Burroughs – RIP Medical Debt
Monica Johnson – Absolute Resolutions Corp.
Joseph Kimsal – NCB Management Services, Inc.
Adam Wertman – National Recovery Solutions LLC
Carole Wiegel – The Bureaus, Inc.
For questions about certification, contact Caitlyn Vaden at (916) 482-2462 or firstname.lastname@example.org.
Welcome New RMAI Members
ATKB Porfolio Management – Associate Debt Buyer, NY
BFS Capital – Originating Creditor, FL
Capital Currency Resolutions, LLC – Associate Collection Agency, NY
Malen & Associates P.C. – Associate Law Firm, NY
Nelson & Frankenberger, LLC – Associate Law Firm, IN
Premium Asset Recovery Corp (PARC) – Associate Debt Buyer, FL
Revenue Assistance Corporation dba Revenue Group – Associate Collection Agency, OH
Read more about these and other members on the Member Search page
Membership Renewal … Moved? New Phone Number?
Your 2021 RMAI membership renewal statement will soon arrive in your office mailbox in just a few weeks. We want to make sure we have all your correct information. If you are the Primary Contact for your RMAI membership, you can make updates to your membership from the comfort of your computer.
If you already have your log in credentials set up, click here.
If you have not created your username and password, click here.
RMAI’s leadership cultivates relationships within the receivables management industry to expand business opportunities for members.