Weltman, Weinberg & Reis Co., L.P.A., the law firm that recently defeated the CFPB’s FDCPA lawsuit against it, has filed a motion seeking attorney’s fees of approximately $1.2 million from the CFPB.

After a four-day trial, the Ohio federal district court hearing the CFPB’s lawsuit, found that the CFPB had failed to prove its FDCPA and CFPA claims by a preponderance of the evidence.  The CFPB’s complaint alleged that the debt collection letters sent by Weltman, which were printed on the law firm’s letterhead, violated the FDCPA and CFPA because they falsely implied that attorneys were “meaningfully involved” in the collection of the debts.  Having found that the letters could be interpreted to imply meaningful involvement by an attorney, the court concluded that there was “meaningful[] and substantial[] involve[ment by Weltman attorneys] in the debt collection process both before and after the issuance of the demand letters.”

In its motion, Weltman asserts that “the Bureau’s blind pursuit of its groundless case cost Weltman dearly, both in terms of substantial expense Weltman incurred in its defense and the reputational harm that cost the firm valued clients and employees.”

Weltman’s motion seeks attorney’s fees pursuant to the Equal Access to Justice Act (“EAJA”), which permits a court to award “reasonable fees and expenses of attorneys” to the prevailing party in a civil action brought by any agency of the United States “to the same extent that any other party would be liable under the common law or under the terms of any statute which specifically provides for such an award.” 28 U.S.C. § 2412(b).  Weltman asserts that “the EAJA puts the United States on equal footing with private litigants under common law and statute,” and that courts applying this provision have held the government to the same good faith standard expected of all parties to litigation.  According to Weltman, Section 2412(b) of the EAJA “permits a court to sanction the United States and its agencies for attorney’s fees under th[e] common law ‘bad faith’ exception to the American Rule that each party bears its own attorney’s fees.”

Weltman argues that, as the prevailing party, it is entitled to its reasonable attorney’s fees “because the Bureau prosecuted this action in bad faith.”  It asserts that “the Bureau knew, or should have known, that its claims lacked merit long before it even filed the Complaint.”  It claims that based on the more than two-year investigation of Weltman that the Bureau conducted, “the Bureau knew no consumer had been harmed, misled, or confused by Weltman’s practice of truthfully identifying itself as a law firm.”

Ballard Spahr attorneys have successfully pursued attorney’s fees claims against federal government agencies under the EAJA as well as attorney’s fees claims against state government agencies under other federal statutes, such as Section 1988(b) of the Civil Rights Act.  This provision entitles a “prevailing party” in a Civil Rights Act lawsuit to recover its reasonable attorney’s fees and expenses from the losing party.  Several years ago, our client brought a Civil Rights Act lawsuit against a state’s banking regulator in which it successfully argued that the regulator’s attempt to apply its laws to our client’s loans was precluded by the Commerce Clause of the U.S. Constitution.  That state subsequently paid our client $440,000 to resolve its petition seeking attorney’s fees as a “prevailing party” in a Civil Rights Act lawsuit.

The CFPB, in a decision and order signed by Acting Director Mulvaney, has denied the petition filed by Firstsource Advantage, LLC (Firstsource) to modify or set aside a civil investigative demand (CID) (Petition) that was issued under the leadership of former Director Cordray.  The CFPB did, however, grant Firstsource’s request to redact portions of the Petition that contained confidential supervisory information.  Acting Director Mulvaney’s decision demonstrates that despite the protestations of consumer advocates and some politicians, the CFPB under Mr. Mulvaney’s leadership is continuing to pursue investigations launched under former Director Cordray.

According to the Petition, there was “full compliance” by Firstsource  with the first CID issued by the Bureau to Firstsource in April 2017. A second CID was issued in September 2017 and contained a Notification of Purpose which stated that the CID had been issued “to determine whether debt collectors, depository institutions, or other persons have engaged or are engaging in unlawful acts and practices in connection with the collection of debt in violation of [the CFPA, the FDCPA] or any other Federal consumer financial law.”

In its Petition, Firstsource argued that the second CID should be set aside for reasons that included: (1) the FDCPA violations asserted by the Bureau are not actionable under the bona fide error rule, (2) the issuance of the CID was outside the Bureau’s Dodd-Frank authority because it had not identified (and cannot identify) any legally cognizable reason to believe Firstsource violated the FDCPA, (3) the Notification of Purpose was written in a vague and formulaic fashion, and (3) Firstsource had already produced data and documents to the Bureau.

The Bureau refused to set aside the CID, stating that “an entity’s fact-based arguments about whether it has complied with substantive provisions of the CFPA or any other enumerated consumer law, such as the FDCPA, are not valid defenses to the enforcement of a CID.”  With regard to Firstsource’s argument that the CID’s issuance was outside the Bureau’s Dodd-Frank authority, the Bureau stated that, even if Firstsource’s assertion were true, the applicable standard only requires a CID “to state the nature of the conduct constituting the alleged violation under investigation and the provision of law applicable to such violation.”  It also found that the CID’s Notification of Purpose was adequate despite its use of broad terms because it identified the conduct at issue (debt collection) and made clear that this was the conduct being investigated.

In rejecting Firstsource’s argument that it had already produced data and documents to the Bureau, the Bureau stated that Firstsource had identified “no authority that precludes a law enforcement agency from making follow-up requests for information.”

Firstsource also argued that as an alternative to setting aside the CID in its entirety, the CID should be modified for reasons that included: (1) the CID was disproportionate because it was unlikely to serve an investigatory purpose and imposed an unnecessary burden on Firstsource because the Bureau could have requested a sampling approach to the recordings of calls it requested, and (2) the requested recordings were time-barred under the FDCPA.  The CFPB rejected both of Firstsource’s arguments for why the CID was disproportionate, stating that Firstsource’s belief that it had not violated the law did not make the Bureau’s investigation improper and that Firstsource’s request for a sampling approach was untimely because it had not been made during the meet-and-confer process.

With respect to Firstsource’s argument that the requested recordings were time-barred, the Bureau stated that even assuming potential FDCPA claims were time-barred, the Notification of Purpose made clear that the Bureau was also investigating whether there had been CFPA violations which are subject to a 3-year statute of limitations that runs from discovery of the violation. Thus, the CFPA statute of limitations would not have begun to run if a CFPA violation had not yet been discovered and the Bureau was seeking the recordings to determine whether there had been a violation.

On September 11, 2018, from 12 p.m. to 1 p.m. ET, Ballard Spahr attorneys will hold a webinar, “The CFPB Under Mulvaney: What Has Really Changed?”  The webinar registration form is available here.


On August 1, 2018, Sen. Bill Nelson (D-Florida) introduced S. 3334 captioned “The Military Lending Improvement Act of 2018” in the United States Senate to “expand and improve” credit protections afforded to service members by the Military Lending Act (MLA) and the Fair Debt Collection Practices Act (FDCPA).  If this bill becomes law, it would lower the maximum rate of interest on covered transactions from 36 percent to 24 percent.  It would also expand transactions covered by the MLA to include auto and other loans secured by personal property, extend MLA protections to recently-discharged veterans, and amend the FDCPA to prohibit debt collectors from “harassing” service members by calling their commanding officers.

In a press release, Sen. Nelson, who is a senior member of the Senate Armed Services Committee, stated that “our military men and women have dedicated their lives to serving our county and we must help ensure they do not become the targets of unscrupulous lenders.”  Specifically, the bill would:

  • Reduce the interest rate cap under the MLA from 36 percent to 24 percent.  (The 36% cap is on the Military Annual Percentage Rate (MAPR), which is an “all-in” APR that includes interest and other fees such as application fees and annual fees that are not finance charges under Regulation Z.)
  • Extend coverage of the MLA to veterans for up to one year following discharge from active duty.
  • Expand coverage of the MLA to credit intended to finance the purchase of motor vehicles and other personal property.
  • Amend the FDCPA to prohibit debt collectors from “communicat[ing], in connection with the collection of any debt, with the commanding officer or officer in charge of any covered member, including for the purpose of acquiring location information about the covered member.”
  • Prohibit debt collectors from threatening that failure to cooperate with a debt collector will result in prosecution under the Uniform Code of Military Justice.
  • Prohibit creditors from requiring installation of GPS trackers or kill switches in motor vehicles as a condition of extending credit to service members.
  • Require the Department of Defense to assess whether creditors downloading bulk data from the MLA database are using adequate safeguards to prevent data breaches and other potential misuse of downloaded data.

The Military Lending and Improvement Act of 2018 was originally introduced as amendments to the National Defense Reauthorization Act of 2019 (which has already been presented to the President for signature), though no action was taken on the proposed amendments.  Accordingly, Sen. Nelson reintroduced the amendments as a standalone bill, S. 3334, which has been referred to the Committee on Banking, Housing and Urban Affairs.  The bill will surely be opposed by the consumer financial services industry, which has seen MLA coverage explode from furthering the statute’s original purpose — protecting service members from aggressive pay day-type loans – to placing restrictions on forms of credit not typically considered “predatory,” such as credit cards.  We will provide updates on the bill as they become available.

After a four-day trial, the Ohio federal district court hearing the CFPB’s lawsuit against a law firm, Weltman, Weinberg & Reis Co., L.P.A., found that the CFPB had failed to prove its FDCPA and CFPA claims by a preponderance of the evidence.  By injecting some much needed logic in the approach to these types of claims, the decision should serve as helpful precedent.

The CFPB’s complaint alleged that the debt collection letters sent by Weltman, which were printed on the law firm’s letterhead, violated the FDCPA and CFPA because they falsely implied that attorneys were “meaningfully involved” in the collection of the debts.  Having found that the letters could be interpreted to imply meaningful involvement by an attorney, the court concluded that there was “meaningful[] and substantial[] involve[ment by Weltman attorneys] in the debt collection process both before and after the issuance of the demand letters.”

The court reached this conclusion despite its finding that Weltman did not require an attorney to review every individual account before a demand letter was sent and Weltman attorneys did not “form a professional judgment about the validity of a debt or the appropriateness of sending a demand letter before the letters are sent.”  It also concluded that even if the letters had misrepresented the level of attorney involvement, the CFPB still could not prevail “because there is no evidence that any consumer’s decision on when and whether to pay a debt was influenced by the inclusion of the attorney identifiers in Weltman’s demand letters.”

The findings on which the court based its legal conclusion that “Weltman attorneys were meaningfully and substantially involved” included the following:

  • Weltman’s demand letters accurately conveyed the fact that Weltman was a law firm that had been retained to collect the debt in question but did not state that an attorney had reviewed the particular circumstances of the account, mention any potential legal action, and were not signed by an attorney.
  • Before demand letters were sent, attorneys were involved in: drafting client contracts; checking clients’ reputations; discussing certain information with clients, including the available data and documentation, the history of clients’ portfolios and types of accounts, which consumers were represented by attorneys, any asset reviews that had occurred, and bankruptcy information; reviewing clients’ policies and procedures; evaluating clients’ trustworthiness and legal compliance; obtaining warranties as to the validity of the debts to be collected; sampling documentation and terms of accounts (including reviewing statutes of limitation and determining when arbitration is required); and creating data “scrubbing” procedures and criteria to identify consumers who should not receive collection letters.
  • Weltman had a formal compliance program that was developed and approved by attorneys (including attorney Board members) and conducted routine audits.
  • Attorneys drafted the demand letter templates, oversaw all departments, and were responsible for the training and oversight of non-attorney staff.
  • Weltman collected debts for the State of Ohio using demand letters that were substantially similar to the ones at issue and followed the same processes and procedures used for other clients.  Such letters were approved by the then Ohio Attorney General, Richard Cordray, who nevertheless authorized the CFPB’s lawsuit against Weltman.


The CFPB announced last Friday that it had entered into a consent order with National Credit Adjusters, LLC (NCA), a privately-held company that owns several debt collection companies, and NCA’s former CEO and part-owner (CEO).  The consent order enters a $3.0 million judgment for civil money penalties against NCA and the CEO but suspends $2.2 million of the judgment based on the financial condition of NCA and the CEO. (NCA must pay $500,000 and the CEO must pay $300,000.)

According to the consent order, the CFPB found that NCA purchased consumer debts and used a group of debt collection companies (Agencies) to collect such debts.  Some of those companies engaged in frequent unlawful debt collection practices that harmed consumers, including by representing that consumers owed more than they were legally required to pay or by threatening consumers and their family members with various legal actions that NCA did not have the intention or legal authority to take.

The consent order also finds that the CEO determined which of the Agencies NCA would place debt with, which accounts the Agencies would collect on, and the terms under which the Agencies would collect.  NCA and the CEO continued to place debt with the Agencies for collection after NCA’s compliance personnel had recommended terminating the Agencies because of their illegal debt collection practices.  NCA also sold consumer debt to one of the Agencies as a means of convincing original creditors to approve NCA’s business practices and NCA and the CEO defended the Agencies when original creditors raised concerns about their collection practices.

The consent order makes the legal conclusions that NCA and the CEO, either through their actions or through the Agencies, directly violated the CFPA’s prohibition of unfair and deceptive acts or practices by inflating account amounts, making false threats to take legal action, and placing debts with the Agencies despite their illegal collection practices.  It also concludes that the inflation of account amounts and making of false threats by NCA, through the Agencies, constituted deceptive practices or the use of unfair or unconscionable means to collect debt in violation of the FDCPA and that such FDCPA violations also constituted violations of the CFPA.  The consent order finds further that NCA and the CEO not only directly violated the CFPA and FDCPA but also violated the CFPA by knowingly or recklessly providing substantial assistance to the unfair and deceptive collection acts and practices of the Agency to which NCA sold debts.

In addition to requiring payment of $800,000 of the judgment, the consent order prohibits NCA and the CEO from engaging in the illegal collection practices addressed by the consent order, permanently bars the CEO from working in any business that collects, buys, or sells consumer debt, and requires NCA to submit a comprehensive compliance plan to the CFPB that includes, at a minimum, certain specified elements.

It is noteworthy that, like the consent order announced last month by the CFPB that also involved alleged unlawful debt collection practices, the consent order with NCA and the CEO does not require refunds to be made to consumers.  In its Spring 2018 rulemaking agenda, the CFPB stated that it “is preparing a proposed rule focused on FDCPA collectors that may address such issues as communication practices and consumer disclosures.”  It estimated the issuance of a NPRM in March 2019.



On June 26, 2018, the Federal Trade Commission and New York Attorney General’s Office filed a lawsuit against a debt broker, debt collector and their principals to shut down a phantom debt collection scheme.  According to the complaint, debt broker Hylan Asset Management LLC and its owner, Andrew Shaevel, purchased, placed for collection, and sold phantom debts.  The complaint alleges that Hylan knew that the debts were fabricated because they were purchased from Hirsch Mohindra and Joel Tucker, two individuals who were previously sued by the FTC.  As a result of those actions, Mohindra was banned from the debt collection business and from selling debt portfolios and Tucker was banned from handling sensitive financial information about consumer debts.

The lawsuit also charges a debt collector, Worldwide Processing Group, LLC and its owner Frank Ungaro, Jr. for their role in collecting these phantom debts. The complaint alleges that Worldwide and Ungaro engaged in illegal collection practices and similarly knew that the debts were fabricated.

Hylan and Shaevel are charged with violating the FTC Act by marketing and distributing counterfeit and unauthorized debts.  Worldwide and Ungaro are charged with violating the FTC Act by making false or misleading representations that the consumers owe debts.  Worldwide and Ungaro are additionally charged with violating the Fair Debt Collection Practices Act by making false, deceptive, or misleading representations to consumers, engaging in unlawful communications with third parties, and failing to provide statutorily-required notices.

All of the defendants, including those individually named, are charged with violations of New York General Business Law § 349 by engaging in deceptive acts or practices in connection with conducting their debt sales and collection businesses, along with violations of New York State Debt Collection Law by engaging in prohibited debt collection practices under the statute, including, disclosing or threatening to disclose information affecting the debtor’s reputation for credit worthiness with knowledge or reason to know that the information is false and claiming, or attempting to enforce a right with knowledge or reason to know that the right does not exist.

This lawsuit is part of the FTC’s and State Attorneys General continuing efforts to crackdown on phantom debt schemes.

The CFPB announced that it has entered into a consent order with Security Group Inc. and its subsidiaries (Security Group) to settle an administrative enforcement action that charged the companies with having engaged in unlawful debt collection and credit reporting practices.  The consent order requires Security Group to pay a civil money penalty of $5 million.

The consent order states that Security Group owned and operated approximately 900 locations in 20 states.  According to the consent order, certain Security Group entities were primarily in the business of making consumer loans and other entities were primarily in the business of purchasing retail installment contracts from auto dealers. The consent order concludes that Security Group engaged in debt collection practices that constituted unfair acts and practices in violation of the Consumer Financial Protection Act and credit reporting practices that violated the Fair Credit Reporting Act and Regulation V.

The consent order finds that:

  • The unlawful debt collection practices in which Security Group engaged included the following:
    • Visiting consumers’ homes and places of employment, as well as the homes of their neighbors, and visiting consumers in other public places, thereby disclosing or risking disclosure of consumers’ delinquencies to third parties, disrupting consumers’ workplaces and jeopardizing their employment, and humiliating and harassing consumers
    • Routinely calling consumers at work, sometimes calling consumers on shared phone lines and in the process speaking with co-workers or employers and thereby disclosing or risking disclosure of consumers’ delinquencies to third parties, and also calling after being told that consumers were not allowed to receive calls at work and that future calls could endanger their employment
    • Failing to heed and properly record consumers’ and third parties’ requests to cease contact or to give personnel access to cease-contact requests logged by employees in other stores, thereby resulting in repeated unlawful calls to consumers and third parties
  • The unlawful credit reporting practices in which Security Group engaged included the following:
    • Failing to establish and implement any reasonable policies and procedures regarding the accuracy and integrity of information furnished to consumer reporting agencies (CRAs)
    • Failing to address in policies and procedures how to properly code customer account information or responses to consumer disputes using the Metro 2 Guide and not ensuring that its monthly furnishing system was coordinated with its consumer dispute furnishing practices
    • Regularly furnishing information to CRAs that it had determined was inaccurate based on information maintained in its data base or other information, such as information provided by consumers as part of a credit reporting dispute or information provided to CRAs

The consent order appears to indicate that first-party collectors that engage in conduct that the FDCPA would prohibit as unfair conduct by third-party collectors continue to be at risk for violating the CFPA’s UDAAP prohibition.  It also appears to indicate that the CFPB continues to disfavor in-person debt collection activities and that companies that do so remain in great peril.  In December 2015, the CFPB issued a bulletin to provide guidance to creditors, debt buyers and third-party debt collectors about compliance with the CFPA UDAAP prohibition and the FDCPA when conducting in-person debt collection visits, such as visits to a consumer’s workplace or home.

In addition to imposing the $5 million civil money penalty, the consent order prohibits Security Group from engaging in the debt collection practices found to be unlawful, and requires it to:

  • implement and maintain reasonable written policies and procedures regarding the accuracy and integrity of the information furnished to CRAs
  • correct or update any inaccurate or incomplete information furnished to CRAs
  • provide a prescribed notice to customers affected by inaccurate information furnished to CRAs
  • update its policies and procedures to include a specific process for identifying when information furnished to CRAs is inaccurate or requires updating (which must include at a minimum the monthly examination of sample accounts and monitoring and evaluation of disputes received from CRAs and customers)
  • submit a compliance plan to the CFPB to ensure that Security Group’s credit reporting and collections comply with applicable federal consumer financial laws and the terms of the consent order (which includes a list of items that, at a minimum, must be part of the compliance plan

It is noteworthy that while the consent order imposes a $5 million civil penalty on Security Group, unlike a 2015 CFPB consent order that required the respondents to refund amounts collected through in-person visits found to be unlawful, the consent order does not require Security Group to make refunds to consumers.

In its Spring 2018 rulemaking agenda, the CFPB stated that it “is preparing a proposed rule focused on FDCPA collectors that may address such issues as communication practices and consumer disclosures.”  It estimated the issuance of a NPRM in March 2019.

The CFPB has issued a new report, “Complaint snapshot: Debt collection,” which provides complaint data as of April 1, 2018.  The report represents the CFPB’s first complaint report since Mick Mulvaney was appointed Acting Director.  The CFPB’s last regular monthly complaint report was issued in May 2017 and provided complaint data as of April 1, 2017.   (Subsequent complaint reports issued prior to former Director Cordray’s departure were “special edition” reports.)

The new report is different from prior monthly complaint reports in several significant respects:

  • While the new report includes overall complaint volume information by product and state that was previously part of the CFPB’s monthly complaint reports, it does not include complaint volume information by company (i.e. the “top 10 most-complained about companies.”)
  • It does not highlight complaints received in a particular state as did prior monthly reports.
  • It provides context for certain complaint data.  More specifically, as described below, the new report provides context for the complaint categories showing the greatest percentage changes over the three month periods compared in the report and for the debt collection data highlighted in the report.  (In the RFI seeking comment on potential changes to the CFPB’s practices for the public reporting of consumer complaint information, the CFPB has asked for comment on whether it should change the amount of context it provides for complaint information, particularly with regard to product or service market share and company size.)

Also noteworthy is that the new report was not accompanied by a press release or blog containing editorial spin about the report information.  Rather, the blog post accompanying the new report provides an objective overview of the report information.

General findings include the following:

  • As of April 1, 2018, the CFPB handled approximately 1,492,600 complaints nationally, including approximately 30,300 complaints in March 2018.
  • Credit reporting complaints and debt collection complaints represented, respectively, approximately 37 and 27 percent of complaints submitted in March 2018.
  • Credit reporting, debt collection, and mortgage complaints collectively represented about 74 percent of the complaints submitted in March 2018.
  • Money transfer or service and virtual currency complaints showed the greatest percentage increase from January-March 2017 (352 complaints) to January-March 2018 (1,000 complaints), representing an increase of approximately 184 percent.  The CFPB comments that the increase was “driven by a spike related to virtual currency” and that in the complaints submitted from January-March 2018 “consumers described issues with the availability of funds held at virtual currency exchanges during periods of price volatility for the most active virtual currencies.”
  • Credit reporting complaints showed the second greatest percentage increase from January-March 2017 (4,848 complaints) to January-March 2018 (11,107 complaints), representing an increase of approximately 129 percent.  The CFPB comments that improvements to its complaint submission process in April 2017 allowed consumers “to submit consumer reporting complaints about concerns they are having with data furnishers that supply consumer information to consumer reporting agencies, contributing to this increase in [credit reporting] complaints.”
  • Student loan complaints showed the greatest percentage decrease from January-March 2017 (monthly average of 3,273 complaints) to January-March 2018 (monthly average of 974 complaints), representing a decline of approximately 70 percent.  The CFPB comments that the decline “is likely because student loan complaint data was elevated in 2017 following the Bureau’s enforcement action against a student loan servicer.”

Findings regarding debt collection complaints include the following:

  • The CFPB has received approximately 400,500 debt collection complaints since July 21, 2011, representing 27 percent of all complaints.
  • The CFPB has referred approximately 40 percent of the debt collection complaints it has received to other regulators.  The CFPB states that it typically makes such referrals when a complaint is about a first-party collector, where the debt did not arise from a financial product or service, or when the company complained about does not appear to be a third-party collector of a financial product or service-related debt.
  • The CFPB comments that “debt collection complaints submitted by consumers can be more meaningful when considered in context with other data, such as the number of consumers who have an account in collection.”  The CFPB observes that according to its most recent annual FDCPA report, “millions of Americans” are affected by the debt collection industry, according to its Consumer Credit Panel, “about 26 percent of consumers with a credit file have a third-party collection tradeline listed.”
  • The most common concerns identified by consumers were attempts to collect a debt not owed (39 percent), written notification about debt (17 percent), and communication tactics (17 percent).
  • Based on its review of the narrative descriptions in complaints, the CFPB observed that:
    • Consumers complained about debts appearing on their credit reports without prior written notice of the existence of the debt and not receiving additional information requested about such debts from companies.
    • Consumers complained about communication tactics, such as frequent and repeated calls and calls before 8 am and after 9 pm and calls after having requested no further telephone contact about the debt.

The CFPB has indicated that it intends to move forward on debt collection rulemaking.  Its Spring 2018 rulemaking agenda states that the Bureau “is preparing a proposed rule focused on FDCPA collectors that may address such issues as communication practices and consumer disclosures” and estimates the issuance of a NPRM in March 2019.


The CFPB (referring to itself as the Bureau of Consumer Financial Protection) has filed what appears to be its first amicus brief since former Director Cordray’s departure.

The amicus brief was filed in Lavallee v. Med-1 Solutions, LLC, an appeal to the U.S. Court of Appeals for the Seventh Circuit in which the issue before the court is whether the defendant sent the plaintiff a written validation notice containing the disclosures required by the FDCPA in 15 U.S.C. Section 1692g(a).  The defendant claimed that it satisfied the FDCPA requirement when it sent the plaintiff two emails relating to two medical debts that each included a link to a webpage on which the plaintiff could open a “secure package” that would then take the plaintiff to another webpage on which she could open (or save to her computer) the validation notice which was in electronic Portable Document Format (PDF).  There was undisputed evidence that the plaintiff never viewed or accessed either of the two secure packages containing the validation notices for her two medical debts.

The district court granted summary judgment to the plaintiff, finding that the defendant had violated Section 1692g(a) because it had not “sent” validation notices to the plaintiff.  The court stated that if a notice “is not sent in a manner in which receipt should be presumed as a matter of logic and common experience, then it cannot be considered to have been ‘sent.'”  The district court also questioned whether in light of the frequent warnings consumers receive that email attachments can contain viruses, the use of a click-through attachment was a method likely to accomplish a consumer’s receipt of a validation notice.  In addition, it found no evidence that that plaintiff had given her email address to the defendant or anticipated it would have her address.

In its amicus brief, which was filed in support of the plaintiff/appellee, the Bureau argues that if the Seventh Circuit reaches the question of whether the validation notices purportedly sent to the plaintiff complied with the “written notice” requirement of Section 1692g(a), the court’s analysis should address the applicability of the E-SIGN Act.  The E-SIGN Act applies to any statute that “requires that information relating to a transaction or transactions in or affecting interstate or foreign commerce be provided or made available to a consumer in writing.”  It allows “the use of an electronic record” to satisfy a written notice requirement if the consumer has given prior, informed consent to receiving electronic notices in lieu of paper, and if the Act’s other conditions are satisfied.

The Bureau argues that, for purposes of the E-SIGN Act, a debt collector’s actions in collecting consumer debt involves a “transaction” and the FDCPA’s validation notice requirement is a requirement for information to be provided “in writing.”  Thus, according to the Bureau, because the E-SIGN Act’s requirements serve “as an overlay on other laws,” the Seventh Circuit cannot assess the defendant’s argument that it provided a written notice under Section 1692g(a) without determining whether such requirements were satisfied.  The Bureau observes that the summary judgment record before the district court contained no evidence that the E-SIGN Act’s requirements were satisfied and suggested that the defendant had not complied with the Act.

In its amicus brief, the Bureau notes that the topics addressed in the advance notice of proposed rulemaking regarding debt collection that it published in November 2013 included the electronic delivery of validation notices and requested information about collectors’ current practices and experience with the “consent regime under the E-Sign Act…for electronic delivery of validation notices.”  The Bureau states that “the next step in the rulemaking-issuance of a  proposed rulemaking—is currently being considered by the Bureau.”  It also notes the authority that the E-SIGN Act grants to federal regulatory agencies to “exempt without condition a specified category or type of record from the requirements relating to consent” and comments that “any policy concerns related to the application of the E-SIGN Act to validation notices are more appropriately addressed through the exercise of that statutory authority.”

ACA International submitted an amicus brief in support of the defendant/appellant in which it urges the Seventh Circuit to reverse the district court and thereby provide guidance “which would establish that email can be ‘written notice” within [Section 1692g(a)’s] meaning, and that the [FDCPA] applies to email in the same way that it applies to postal mail.”  ACA also observes in its brief that if the Seventh Circuit affirms the district court, the district court’s approach “raises several questions about which guidance from this Court would be very helpful to the credit and collection industry” and lists such questions.



On April 4, Georgia Attorney General Chris Carr (“AG Carr”) announced an $8.5 million settlement with a national debt collection company, resolving alleged Fair Debt Collection Practices Act (FDCPA) and the Georgia Fair Business Practices Act violations.

Specifically, AG Carr alleged that the company harassed and deceived consumers by falsely representing to consumers that they were attorneys or otherwise affiliated with government entities, that the consumers had committed a crime and could be imprisoned because of nonpayment, failed to disclose they were debt collectors, attempted to collect illegal payday loans, and divulged information to third-parties without authorization.  The settlement required the company to stop collecting on nearly 12,000 accounts, totaling over $8.5 million in consumer debt, pay a $20,000 civil penalty, and agree to comply with the FDCPA and Georgia Fair Business Practices Act.  Any subsequent failure to do so will cause the company to owe an additional $240,000 civil penalty.

While it may not surprise the collections industry to see a state Attorney General take issue with the alleged actions above, seeing this sort of settlement come out of a Republican attorney general in a solidly Republican state is slightly more interesting.  It is yet another example of significant state-level enforcement but this time, out of a state that is generally not thought of as being particularly active within the collections arena.  Coming after confirmation from the CFPB that it plans to move forward with a third-party collections rulemaking, this recent settlement demonstrates that regardless of party, federal and state regulators continue to be interested in collections and addressing perceived violations arising under both federal and state law.