A summary of recent top cases from ACA. Editor’s note: This content is available for members only.
8/21/2020 9:00
Each week, ACA International’s Compliance Analysts Betsy Clarke, Laura Dadd and Andrew Pavlik compile relevant case summaries for ACA members. Here is a recap of the cases this week. Members may also submit cases for consideration to our compliance team at [email protected].
Kansas Court Weighs in on the Definition of an ATDS
A consumer took out a personal loan from a creditor and, after making a few payments, defaulted on the loan. The creditor reported the consumer’s debt to the three major credit reporting agencies (CRAs.) The consumer disputed the debt to the CRAs eight times. The consumer claimed that the creditor failed to report accurate information about his loan and failed to investigate disputed information on his credit report. The consumer also claimed that the creditor’s loan servicer contacted him via an automatic telephone dialing system (ATDS) without his consent and that they continued to call him after he told them to stop.
The court found that the creditor did not violate the Fair Credit Reporting Act. The undisputed facts of the case show that the creditor did accurately report information on the consumer’s account and the creditor conducted reasonable investigations into each of the dispute notices it received from CRAs.
The court then went on to review the consumer’s Telephone Consumer Protection Act claim. The consumer claimed that the creditor’s loan servicer contacted him via an ATDS without his consent and continued to call him after he told them to stop.
Court Rejects Claim of Cat-and-Mouse Game and Remands Case to State Court
This case focuses on strategic moves and countermoves by the parties involved based on a single unsolicited text the consumer claims she received from the creditor. After the consumer filed suit in state circuit court seeking to represent a class action regarding her claim under the Telephone Consumer Protection Act, the creditor removed the action to federal court. The consumer then made a motion seeking to have the court remand the suit back to state court on the basis that the court lacked subject matter jurisdiction due to her lack of standing because she conceded she did not suffer a sufficient injury. The creditor opposed remand and requested to conduct jurisdictional discovery on the issue of the consumer’s standing.
Standing is established by showing an injury in fact traceable to the defendant’s conduct that is likely redressable by a favorable judicial decision. (See Spokeo Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016.)) Because the creditor was the removing party, they had the burden of establishing federal jurisdiction — including the consumer’s standing. The issue before the court’s focus was whether the consumer suffered a sufficiently concrete injury for standing under Article III of the Constitution. Customarily, one would expect the consumer would argue she suffered a large injury, but that was not the consumer’s strategy in this case.
Ninth Circuit Finds “Boilerplate” Contract was Insufficient to Establish Bona Fide Error Defense
In this case, a consumer sued a debt collector regarding a miscalculation of interest on a debt the consumer owed for medical treatment. Neither party disputed that the interest error occurred, but the debt collector argued that it qualified for the bona fide error defense under § 1692k(c) of the Fair Debt Collection Practices Act. In asserting the defense, the debt collector pointed to an agreement with the creditor allowing the debt collector to add interest charges on unpaid collections at the statutorily allowed rate. The agreement required the creditor to refer outstanding debts to the debt collector “with only accurate data and that the balances reflect legitimate, enforceable obligations of the consumer.”
The district court granted summary judgment, concluding the debt collector did indeed qualify for the bona fide error defense. The consumer appealed to the 9th Circuit.
On appeal the 9th Circuit observed, to assert a bona fide error defense, the debt collector must prove that: (1) it violated the FDCPA unintentionally; (2) the violation resulted from a bona fide error; and (3) it maintained procedures reasonably adapted to avoid the violation.
Turning to the third prong of the bona fide error defense, the 9th Circuit asserted that under the FDCPA, “the debt collector has an affirmative obligation to maintain procedures designed to avoid discoverable errors, including, but not limited to, errors in calculation and itemization.” See Reichert v. Nat’l Credit Sys., Inc., 531 F.3d 1002, 1007 (9th Cir. 2008) and Clark v. Capital Credit & Collection Servs., Inc., 460 F.3d 1162, 1177 (9th Cir. 2006).
Fifth Circuit Finds Repayment of a Government Grant is a Debt Under the FDCPA
The consumer received a grant from the government Road Home program to help rebuild her home after it was damaged by hurricanes Katrina and Rita. The consumer consented to several terms to receive the funds including limitations on the transfer and sale of her property. The consumer also agreed to promptly pay the state any insurance or assistance payments that would have reduced the Road Home Grant amount if she received the payments before she received the Road Home grant.
Over a decade after the consumer had received the grant, she received a letter stating it was from a debt collector representing Louisiana and Road Home, seeking repayment for an alleged overpayment of the Road Home grant. The consumer disputed the debt and the debt collector sent her another letter which provided an itemization of the account, “including $5,300 owed in duplicated FEMA benefits, $1,269.85 owed in overpaid homeowner insurance proceeds, and a $1,970.96 credit due to a recalculated insurance penalty.” The consumer then filed a lawsuit claiming the debt collector violated the FDCPA by using false or deceptive means to collect a debt and attempting to collect a debt that cannot legally be collected.
The debt collector filed a motion to dismiss for failure to state a claim as the funds in question did not qualify as a debt under the FDCPA. The district court agreed with the debt collector and dismissed the case with prejudice. The consumer then appealed the court’s decision.
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