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District Court severs NJFCRA requirement that agencies must provide credit disclosures in 10 languages
On March 27, the U.S. District Court for the District of New Jersey granted in part and denied in part both the Attorney General for the State of New Jersey’s (AG) motion for summary judgment and a plaintiff international trade association’s motion for summary judgment. In particular, the court held that the New Jersey Fair Credit Reporting Act’s (NJFCRA) 2019 amendment requiring national consumer reporting agencies (NCRAs) to provide consumer reports in a language other than English (if requested) was not preempted by the federal Fair Credit Reporting Act. However, the court stopped short of requiring NCRAs to provide the disclosures in “at least ten languages” in addition to Spanish on First Amendment grounds, explaining that the requirement imposed under the NJFCRA only required a rational basis and while a rational basis existed for Spanish (due to, among other things, the high percentage of Spanish speaking constituents in New Jersey), it did not exist for the additional languages given the relatively lower prevalence of those other languages. Accordingly, the court severed the provision that mandated that credit file disclosures be provided in at least 10 languages.
District Court grants MSJ in FCRA case in favor of defendant
Recently, a plaintiff sued under the FCRA, alleging that the defendant debt collector failed to conduct a reasonable investigation into a disputed credit report item. The plaintiff claimed to be a victim of identity theft and contended that an outstanding telephone debt should not have been listed on his credit report. The defendant maintained that it had performed its duties reasonably, relying on information from the phone company for which it acted as a debt collector. The defendant moved for summary judgment on the grounds that the plaintiff had not provided any evidence to support the claim of an unreasonable investigation by defendant. The U.S. District Court for the Southern District of Florida granted the motion for summary judgment, agreeing with the defendant that the plaintiff had failed to provide any substantial evidence regarding how the defendant’s investigation was conducted or why it was unreasonable.
Indiana appellate court finds debt company violated FDCPA and Indiana’s deceptive consumer sales act
Recently, the U.S. Court of Appeals of Indiana affirmed a state trial court’s decision concluding that the defendant was a debt collector under both the Indiana Deceptive Consumer Sales Act and the FDCPA when it purchased and collected defaulted debt. The Court of Appeals rejected the defendant’s argument in its motion for partial summary judgment arguing it was not a debt collector under both statutes because the plaintiff’s debt was owned by it and due to it, and it did not collect debts owed by another. The court reviewed the evidence that the defendant purchased defaulted debt and utilized agencies to contact consumers as its primary business pursuit. The court found the defendant was a “person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts” or a “debt collector” under 15 U.S.C. § 1692a(6). It likewise concluded that the defendant was a “debt collector under” the state statute because Ind. Code § 24-5-0.5-2(a)(13) incorporated the FDCPA’s definition of debt collector and “[t]he term includes a debt buyer (as defined in IC 24-5-15.5).”
District Court grants full remedies to CFPB, State AGs
On March 31, the U.S. District Court for the Western District of Virginia entered an order granting the plaintiff state attorneys general and CFPB’s requested remedies in full against a defendant accused of violating consumer protection laws in administering “immigration bonds” for indigent consumers facing deportation. As previously covered by InfoBytes, in 2021 the CFPB, and the Massachusetts, New York, and Virginia State Attorneys General filed a 17-count complaint against the defendant, a subsidiary of a bond service for non-English speaking U.S. Immigration and Customs Enforcement (ICE) detainees. The complaint accused the defendant of misrepresenting the cost of immigration bond services and deceiving migrants into continuing to pay monthly fees by making false threats of deportation for failure to pay. Last May, the court entered default judgment against defendants (covered by InfoBytes here). In the court’s most recent order, it granted the plaintiff’s request for injunctive relief, stating that the CFPB met the standard for injunctive relief under the CFPA, and it would “undoubtedly serve the public interest.” The court also noted that the plaintiffs’ claims supported injunctive relief under state laws as well. The order also included (i) $230.9 million in restitution to the CFPB; (ii) a $111 million civil money penalty to the CFPB; (iii) a $7.1 million civil money penalty to Virginia; (iv) a $3.4 million civil money penalty to Massachusetts; and (v) a $13.89 million civil money penalty to New York.
CFPB, FTC submit amicus brief in FCRA case
On March 29, the CFPB and the FTC filed an amicus brief in the U.S. Court of Appeals for the Eleventh Circuit, arguing that the FCRA mandated consumer reporting agencies (CRAs) when a consumer challenged the “completeness or accuracy of any item or information” in their file, must perform a “reasonable reinvestigation.”
In the underlying case, a consumer claimed she identified multiple inaccuracies in her credit report held by the defendant CRA, including issues with her name, address, and Social Security number. She allegedly contacted the defendant three times to dispute these errors, but the defendant directed her to resolve the issues with the misinformation sources and did not conduct its own reinvestigation as the consumer believed was required by the FCRA.
The consumer then filed a lawsuit against the defendant CRA for not performing the reinvestigation. The district court acknowledged that the defendant should have completed the reinvestigation under the FCRA but nonetheless concluded that the defendant did not violate the statute because it did not reasonably interpret that the FCRA did not require a reinvestigation.
The case will now be under the appeal process and the CFPB and FTC have submitted a joint amicus brief arguing that the FCRA required a CRA to reinvestigate a consumer’s dispute about personal identifying information, and that the district court correctly determined that a reinvestigation was required. The brief also argued that the district nonetheless erred in concluding that the defendant did not negligently or willfully violate the FCRA because the defendant’s interpretation of the FCRA was not “objectively reasonable.”
State AGs sue to block Biden's SAVE Plan for student loan forgiveness
On April 1, 10 state attorneys general filed a lawsuit in the U.S. District Court for the District of Kansas against President Biden, the Secretary of Education, and the Department of Education seeking to block the enactment of the SAVE Plan. As previously covered by InfoBytes, the SAVE Plan was an income-driven repayment plan, intended to calculate payments based on a borrower’s income and family size, rather than the loan balance, and forgave balances after several years since repayment. According to the complaint, the government released a rule for the new SAVE Plan intended to eliminate at least $156 billion in student debt as the second step in a three-part loan forgiveness initiative. The first step involved an attempt to cancel $430 billion in student loans under the HEROES Act, which the U.S. Supreme Court ruled unconstitutional in Biden v. Nebraska.
The SAVE Plan assumed $430 billion in loans would be forgiven beforehand, but after the Supreme Court's decision, the defendants allegedly did not revise the cost estimate in anticipation of overturning the case. This oversight led to a significant underestimation of the SAVE Plan's true cost; plaintiffs alleged.
Plaintiffs further claimed that the SAVE Plan was written before the Supreme Court's ruling in Biden v. Nebraska and thus included outdated statements of confidence in the defendants' authority to pursue debt relief. The rule would take effect on July 1, but defendants allegedly have already started forgiving loans for some individuals before this date. The complaint alleged that on February 21, the Department of Education forgave the debt of 153,000 borrowers, which the state attorneys general claimed violated Biden v. Nebraska.
Plaintiffs brought claims under the Administrative Procedure Act, contending that the Department of Education exceeded its authority under the Higher Education Act of 1965 by issuing the rule and that the rule would be arbitrary and capricious since defendants failed to account for the full cost of the rule.
Trade groups sue Colorado Attorney General to block enforcement of law limiting out-of-state bank charges on consumer credit
On March 25, three trade groups filed a lawsuit in the U.S. District Court for the District of Colorado, against the Colorado Attorney General and the Administrator of the Colorado Uniform Consumer Credit Code to prevent enforcement of Section 3 of House Bill 23-1229, which was signed into law last year to limit out-of-state bank charges on consumer credit (the “Act”). As previously covered by InfoBytes, the Act amended the state’s Uniform Consumer Credit Code to opt out of the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) provision that allowed state-chartered banks to charge the interest allowed by the state where they are located, regardless of the location of the borrower and regardless of conflicting out-of-state law. The Act would go into effect on July 1.
According to the complaint, the Act “far exceed[s]” the authority Congress granted Colorado under DIDMCA and would be deemed “invalid on its face.” Plaintiffs alleged that Colorado ignored the federal definition of where a loan was deemed to be “made,” imposing “its state interest-rate caps on any ‘consumer credit transaction[] in’ Colorado,” including “any loan to a Colorado consumer by any state-chartered bank that advertises on the internet in Colorado.” Plaintiffs further alleged that the Act’s opt out “is preempted by DIDMCA and violates the Supremacy Clause of the U.S. Constitution by attempting to expand the federally granted opt-out right to loans not actually ‘made in’ Colorado under federal law,” and “violates the Commerce Clause because it will impede the flow of interstate commerce and subject state-chartered banks to inconsistent obligations across different states.” The Plaintiffs also alleged that Colorado’s stated goal of combatting “predatory, payday-style lending” will not be accomplished through the opt out, as plaintiffs’ members are not payday lenders and offer “a wide variety of useful, familiar, everyday credit products” that “are provided at a range of rate and fee options, which sometimes—to account for credit risk—are above Colorado’s rate and fee caps, but within the rate caps allowed by DIDMCA.” Furthermore, plaintiffs warn that the Act “will prevent Plaintiffs’ members from offering these mainstream products to many Colorado consumers,” while “national banks will still offer these very same loan products to Colorado residents at interest rates in excess of Colorado’s interest-rate and fee caps.” Plaintiffs urged the court to issue a ruling stating that the Act “is void with respect to loans not ‘made in’ Colorado as defined by applicable federal law” and to enjoin Colorado from enforcing or implementing the Act with respect to those loans.
Borrower’s RESPA claim stays afloat in District Court
The U.S. District Court for the Southern District of Ohio, Eastern Division, granted in part and denied in part defendant mortgage servicer’s motion to dismiss claims for RESPA Qualified Written Requests violations. Defendant approved plaintiffs for a trial payment plan for their mortgage loan. After plaintiffs completed that plan, defendants sent an initial modification agreement with a misspelled plaintiff name. Plaintiffs notified defendant of the error but continued making payments pursuant to the initial modification agreement. Defendant then sent a corrected version which plaintiffs signed, and defendants recorded with the Delaware County Recorder’s office. However, defendants did not update the new terms in its billing system and, after realizing the agreement contained terms different from what it intended, sent a third version of the modification agreement to plaintiffs with an adjusted principal balance and interest rate. Plaintiffs refused to sign the third modified agreement, and defendants refused to honor the recorded version or accept payments, stating that plaintiffs were in default on their mortgage.
In making its judgement, the court considered how defendant handled plaintiffs’ qualified written requests (QWR). Regarding defendant’s response to plaintiffs’ notice of error, plaintiffs claimed defendant did not conduct a reasonable investigation, inadequately explained the discrepancy between the modification agreements’ interest rates and fee charges to their account, and entirely ignored the change in principal balances between the initial and the recorded modification agreements. Defendant argued that its conclusion, that no enforceable loan modification existed, would not change had it conducted the investigation. The court found that defendant could not bypass its responsibility to conduct a reasonable investigation, and that defendant did not address the difference in principal balance between the initial and recorded modification agreements.
On the issue of defendant’s response to plaintiffs’ request for information (RFI), plaintiffs claimed defendant’s response did not address their claims of missing records, nor did it mention that such records were unavailable. Plaintiffs also claimed defendant failed to produce requested documents. Refuting defendant’s argument that plaintiffs did not “even hint” that they suffered damages from the RFI portion of the QWR, the court found that plaintiffs’ damages were legally cognizable. However, the court dismissed plaintiffs’ claim as to the RFI because it did not satisfy the necessary standing requirements.
Washington State Attorney General obtains civil penalties against debt collection agency for medical debt collection practices
On March 19, the Washington State Attorney General (AG) obtained an order from the King County Superior Court providing that a debt collection agency must pay civil penalties for allegedly failing to comply with the Washington Collection Agency Act and Consumer Protection Act when collecting medical debts, specifically by failing to provide the required disclosures in its consumer communications. The court found that the debt collection agency sent 82,729 debt collection notices to medical debtors without the necessary disclosures, which included notification of the debtor’s right to request the original or redacted account number assigned to the debt, the date of last payment, and an itemized statement. The notices also did not inform the debtor that the debtor may be eligible for charity care from the hospital or provided contact information for the hospital. According to the AG’s Office, the collection agency “unlawfully collected payments from … patients without providing critical information about their rights when faced with medical debt. By excluding the legally required disclosures about financial assistance in its collection letters, [the collection agency] created barriers that kept patients who likely qualified for financial assistance from learning about and accessing help with their hospital bills.”
The court ordered a civil penalty of $10 per violation for the debt collection agency’s 82,729 alleged violations of the state Consumer Protection Act, totaling $827,290. Additionally, the court ordered the debt collection agency to reimburse the AG’s office for the costs of bringing the case, which is estimated to exceed $400,000 and to update its practices to comply with Washington law. In determining the civil penalty amount, the court found, among other things, that the debt collection agency acted in bad faith by “fail[ing] to take basic compliance steps,” and “fail[ing] to obtain the correct license … maintain an office in the state, and … include the mandatory disclosures on medical and hospital debt.”
As previously covered by InfoBytes, the AG successfully sued the nonprofit health system in early February, entering a consent decree pursuant to which the health system must pay $158 million in patient refunds, debt forgiveness, and AG costs.
5th Circuit reverses judgment in FDCPA case
Recently, the U.S. Court of Appeals for the Fifth Circuit ordered an FDCPA case to be reversed and remanded after the U.S. District Court for the Eastern District of Louisiana granted a motion for summary judgment. The plaintiffs filed a putative class action alleging that the defendant law firm violated the FDCPA for misrepresenting judicial enforceability of a debt in their dunning letters. The case concerned Congress’s “Road Home” grant program, which was created to provide grants to repair and rebuild homes in the aftermath of Hurricanes Katrina and Rita. All Road Home grant recipients were required to disclose repair benefits previously received. The named plaintiffs in this case applied for and received Road Home grants but failed to disclose repair benefits previously received from FEMA or a privacy insurance carrier. In March 2008, the State’s contractor, ICF, noticed the potential double payments to the two named plaintiffs and placed an internal flag on their accounts in the Road Home database. After a decade, the defendant law firm was engaged to help recover these double payments. The defendants sent a dunning letter demanding repayment in 90 days or the defendants “may proceed with further action against you, including legal action.” The dunning letter further stated that “you may be responsible for legal interest from judicial demand, court costs, and attorneys fees if it is necessary to bring legal action against you.” The plaintiffs filed suit under Section 1692e of the FDCPA and, in an amended complaint, alleged the defendants collected or attempted to collect time-barred debts, failed to itemize the alleged debts, and threatened to assess attorneys’ fees without determining if that right existed. The district court granted summary judgment to the defendants.
The 5th Circuit reversed on appeal. Concerning the first allegation of collecting or attempting to collect a time-barred debt, the court reasoned that while it does not violate the FDCPA to collect on a time-barred debt, a debt-collector “can run afoul of the FDCPA by threatening judicial action while completely failing to mention that a limitations period might affect judicial enforceability.” Further, the appellate court found the dunning letters were “untimely even under the most liberal, 10-year time window” as the plaintiffs breached their agreements when they closed on their Road Home grants or when the State of Louisiana was provided actual notice of the alleged duplicative payments, both of which occurred more than 10 years before the dunning letters were received. The court also found that the defendants mischaracterized one plaintiff’s debt as the dunning letter said the amount owed was for insurance proceeds when it included a 30 percent penalty for lack of flood insurance. Finally, the court explained that because there was no lawful basis to recover attorneys fees, the defendants violated the FDCPA.