The Obama Administration

Treasury's Public-Private Investment Program

Private Debt Collection Programs

Federal Trade Commission

The 111th Congress

Credit Card Reform

Mortgage Reform

GLB Annual Financial Privacy Notices

Other Federal Legislative Activity

State and City Legislation

Fair Debt Collection Practices Act (FDCPA)
Case Law

 
     
     
 

 

 
 
1st quarter 2009

The Obama Administration

President Obama’s top priority is stabilizing the financial system.  On February 25th, President Obama convened a regulatory reform meeting that included his economic team and key leaders from the Congress, including Senate Banking Committee Chairman Chris Dodd (D-CT) and House Financial Services Committee (HFS) Chairman Barney Frank (D-MA).  In late March 2009, the Treasury Department launched a new web site, FinancialStability.gov, to provide information about the Administration's efforts.


Treasury’s Public-Private Investment Program

On March 23rd, Treasury released details on its Public-Private Investment Program, which was created in hopes of boosting private demand for distressed assets that are currently held by banks and facilitate market-priced sales of troubled assets.

  • Utilizing both TARP funds ($75-$100 billion) and capital from private investors, the Program seeks to generate $500 billion in purchasing power to buy “legacy assets”.
  • Legacy assets include both real estate loans held directly on the books of banks ("legacy loans") and securities backed by mortgage loan portfolios ("legacy securities").
    • However, banks will have some discretion in identifying the assets to be sold. Assets eligible for purchase will be determined by the participating banks, their primary regulators, the FDIC and Treasury.
    • Financial institutions of all sizes will be eligible to sell assets.
    • The current scope of the program does not reach credit cards, utility, telecommunications, and other unsecuritized consumer debts, but this is an area DBA is monitoring closely.
  • One of the core principles of the Program is the incorporation of private sector participants. 
    • The Program envisions that inclusion of the private sector will help to establish the proper price point for the loans and securities purchased under the Program.
    • By identifying the market price, the Program hopes to mitigate the risk that taxpayers will overpay if government employees are tasked with setting the price for these assets.
  • Once the assets are sold, private sector participants will also serve as fund managers to control and manage the assets until final liquidation, subject to FDIC oversight.

Private Debt Collection Programs

  • On January 8th, the Department of Education announced that it had awarded student loan collection contracts to 17 collection agencies in the “unrestricted” business size class. Of the 17 collection agencies approved to bid on the contract, all were awarded contracts.
  • On February 3rd, Rep. John Lewis (R-GA) introduced a bill (H.R. 796) that would repeal the authority of the Secretary of the Treasury to enter into private debt collection contracts.
  • On March 5th, the Internal Revenue Service (IRS) announced a decision not to renew contracts with two private debt collection agencies, which will effectively eliminate the IRS’ Private Debt Collection Program. “After a thorough review of this program, I have decided not to renew the contracts,” IRS Commissioner Doug Shulman said. “I believe this work is best done by IRS employees, and I believe we have strong support from the Administration and the Congress for increased IRS enforcement resources going forward.”
  • On March 10th, Rep. Chris Lee (R-NY) and Sen. Chuck Schumer (D-NY) sent a letter to the IRS urging the IRS to reconsider its decision to eliminate the IRS’ private debt collection program. In the letter, Schumer and Lee wrote, “We believe the program should be given a sufficient caseload that would allow it to function without appropriated funds for two years. Only after that point can its success or failure be definitively determined.”

Federal Trade Commission (FTC)

Jon Leibowitz has been appointed to serve as the FTC Chairman, succeeding William Kovacic, who has indicated that he intends to continue serving as a Commissioner.  Lydia Parness, Director of the FTC Bureau of Consumer Protection, has also left the FTC after 27 years.  The FTC announced that Eileen Harrington will serve, for the time being, as Acting Director of the Bureau. 

FTC Rulemaking

On March 24th, the Energy & Commerce Subcommittee on Commerce, Trade, and Consumer Protection held a hearing on the role of the FTC in protecting consumers.  Like Commissioner Pamela Jones Harbour, Chairman Jon Leibowitz made a pitch to Congress for FTC rulemaking.  FTC efforts to obtain expanded authority, so far, have not resulted in a bill but legislative activity is expected later this year. This could emerge as one of DBA’s top issues in the 111th Congress as Leibowitz testified “that granting the agency such rulemaking authority would help the debt collection regulatory scheme keep pace with changes in technology and industry practices that create a risk of harm to consumers.”

Enforcement Actions

  • On January 21st, the FTC charged a mortgage broker with discarding consumers’ tax returns, credit reports, and other sensitive personal and financial information in an unsecured dumpster, in violation of federal law.
    (http://www.ftc.gov/opa/2009/01/navone.shtm)
  • On January 27th, the FTC obtained two court orders from a federal district court against two groups of vacation and timeshare companies that will pay a total of almost $1.2 million for violating the FTC’s Do Not Call Rule.
    (http://www.ftc.gov/opa/2009/01/westgate.shtm)
  • On February 5th, Compgeeks.com, an online seller of computer supplies and other consumer electronics has agreed to settle FTC charges that it failed to provide reasonable security to protect sensitive customer data in response to a data breach involving hackers that accessed the sensitive information of hundreds of consumers.
    (http://www.ftc.gov/opa/2009/02/compgeeks.shtm)
  • On February 18th, CVS Caremark has agreed to settle FTC charges that it failed to take reasonable and appropriate security measures to protect the sensitive financial and medical information of its customers and employees.  The FTC opened its investigation into CVS Caremark following media reports from around the country that its pharmacies were throwing trash into open dumpsters that contained pill bottles with patient names, addresses, prescribing physicians’ names, medication and dosages; medication instruction sheets with personal information; computer order information from the pharmacies, including consumers’ personal information; employment applications, including social security numbers; payroll information; and credit card and insurance card information, including, in some cases, account numbers and driver’s license numbers.
    (http://www.ftc.gov/opa/2009/02/cvs.shtm)
  • On February 23rd, the FTC announced that a federal court has ordered a halt to certain practices by seven U.S.-based companies and an individual operating as part of an international Internet payday lending operation. The defendants are charged with engaging in unfair and deceptive collection tactics in violation of the FTC Act that include falsely threatening consumers with arrest or imprisonment, falsely claiming that consumers are legally obligated to pay the debts, and repeatedly calling consumers at work and using abusive and profane language.
    (http://www.ftc.gov/opa/2009/02/cash2day.shtm)
  • On March 4th, the FTC announced that a federal district court has halted allegedly deceptive pitches made by telemarketers who targeted consumers with poor or no credit with offers of a general-use credit card for an up-front fee of as much as $250. The FTC has charged the defendants with calling consumers whose telephone numbers were on the National Do Not Call Registry and with violations of the Telemarketing Sales Rule.
    (http://www.ftc.gov/opa/2009/03/groupone.shtm)
  • On March 5th, a consumer reporting agency that failed to properly screen prospective customers and, as a result, sold at least 318 credit reports to identity thieves, agreed to settle FTC charges that it violated federal law.
    (http://www.ftc.gov/opa/2009/03/rrs.shtm)

  • On March 17th, the FTC charged seven credit repair companies with deceiving consumers throughout the U.S. by falsely promising to remove negative information from consumers’ credit reports, even information that is accurate and current, and by charging an up-front fee and failing to provide written disclosures.
    (http://www.ftc.gov/opa/2009/03/unitedcredit.shtm)
Publications, Opinions, and Reports
  • On January 7th, Mitchell Katz, of the FTC’s public affairs office, clarified for consumers that Federal Communications Commission statutes bar telemarketers from employing automated dialers to call cell phone numbers. Katz reiterated that, contrary to public rumors, it is not necessary to register cell phone numbers on the National Do Not Call Registry.
  • On February 27th, the FTC issued both a workshop report recommending reform in the debt collection legal system and an annual report to Congress on the Fair Debt Collection Practices Act, which summarizes FTC enforcement during 2008. The workshop report recommends prohibiting collectors from contacting consumers via their mobile phones, including by text messaging, without prior express consent and requiring collectors who use new payment technologies to obtain express, verifiable authorization from consumers before accessing their accounts. The annual report notes that the FTC received more than 78,000 complaints about third-party debt collectors in 2008.
    (Workshop report)
    (FDCPA report)
  • Also on February 27th, the FTC published a report analyzing consumer complaints received by the agency in 2008. For the ninth year in a row, identity theft was the top consumer complaint category, constituting 26 percent of the total 1,223,370 complaints received in 2008 (debt collections was second, with 9% of complaints and “credit bureaus, information furnishers, and report users” was sixth, representing 3% of complaints). With respect to identity theft, the report states that credit card fraud was the most common form of reported identity theft at 20 percent, followed by government documents/benefits fraud at 15 percent, employment fraud at 15 percent, phone or utilities fraud at 13 percent, bank fraud at 11 percent and loan fraud at four percent.
    (http://ftc.gov/sentinel/reports.shtml)
  • On March 18th, the Federal Communication Commission (FCC) published a notice in the Federal Register calling for public comment on a petition that questions whether, under the Telephone Consumer Protection Act, a creditor may place autodialed or prerecorded message calls to a number that was provided to the creditor initially as a telephone number associated with landline service but has been transferred to a mobile service provider. Public comments were due on or before April 2, 2009.
  • On March 24th, the FTC testified before the U.S. House Subcommittee on Commerce, Trade and Consumer Protection of the Committee on Energy and Commerce on the agency’s efforts to protect consumers of financial services, including FTC enforcement actions against deceptive debt collection practices. The FTC recommended that Congress provide the agency with more resources to pursue civil penalties for unfair or deceptive acts and practices related to financial services and authorize the agency to bring suits in federal court to obtain civil penalties.
    (http://www.ftc.gov/opa/2009/03/financialhouse.shtm)
  • On March 25th, the FTC announced that the U.S. Department of Justice has filed suit in federal district court charging Dish Network with violations of the Telemarketing Sales Rule (TSR) for its use of “robocalls” and calling numerous consumers whose numbers are on the National Do Not Call Registry. The suit seeks unspecified civil penalties in addition to a permanent injunction barring Dish Network from future TSR violations.        (http://www.ftc.gov/opa/2009/03/echostar.shtm)

Upcoming Events

  • The FTC has announced that it will sponsor a free, full-day identity theft workshop in New York City on Wednesday, April 29, 2009 in partnership with the Center on Law and Information Policy of Fordham Law School, the New York State Consumer Protection Board, and the New York City Department of Consumer Affairs. The workshop is free, open to the public and provides a comprehensive approach to help businesses prevent identity theft.
    (http://ftc.gov/opa/2009/03/datasec.shtm)

The 111th Congress

The 111th Congress convened its first session on January 3rd with expanded Democratic majorities in both the House and the Senate.


Credit Card Reform

Before the Congress adjourned for the April recess, both the full Senate Banking Committee and the House Financial Services (HFS) Subcommittee on Financial Institutions and Consumer Credit held markups on credit card reform bills: S. 414 (Dodd) and H.R. 627 (Maloney).  The House Judiciary Committee also held a recent hearing on so-called credit card abuses.

HFS Chairman Barney Frank (D-MA) has committed to addressing this issue before the full committee when the House reconvenes on April 21st.  Frank stated that H.R. 627 could reach the House floor by the end of April.


Mortgage Reform

Frank also plans to move the House mortgage reform bill (H.R. 1728) to markup as soon as the Congress returns.  The bill could reach debt buyers of residential mortgage loans as civil actions against a creditor may, in certain circumstances, be maintained against assignees. 

The bill also contains notice requirements that would apply to any DBA members engaged in the purchase of residential mortgage loans.  A notice would need to be sent to the consumer whenever there is a change in ownership of a residential mortgage loan as well as an annual notice containing contact information for the creditor or any assignee.  Under the bill, consumers would also receive periodic statements with a breakdown of principal, current interest rate, amount of any prepayment fee, description of any late payment fees, and any other information as dictated by regulations to be issued at a later time by the federal banking agencies. 


GLB Annual Financial Privacy Notices

In June 2008, the House passed a financial services regulatory relief bill (H.R. 6312).  The bill included language to eliminate debt buyers’ obligation to send annual consumer privacy notices under GLB.  DBA has entered into discussions with various Senate and House offices on a way to move this bill forward in the current Congress.


Other Federal Legislative Activity

Social Security Numbers (SSNs)

  • On January 6th, Rep. Mark Steven Kirk (R-IL) introduced a bill that would provide for the issuance of a “secure” Social Security card.
  • On January 6th, Rep. Rodney Freylinghuysen (R-NJ) introduced a bill (H.R. 122) that would limit the misuse of SSNs and establish criminal penalties for such misuse.
  • On January 6th, Rep. Elton Gallegly (D-CA) introduced a bill (H.R. 133) that would provide that individuals and appropriate authorities are to be notified by the Commissioner of Social Security where there is evidence of misuse of the SSNs of such individuals.
  • On January 6th, Rep. Ron Paul (R-TX) introduced a bill (H.R. 220) that would protect the integrity and confidentiality of SSNs, prohibit the establishment in the Federal Government of any uniform national identifying number, and prohibit Federal agencies from imposing standards for identification of individuals on other agencies or persons.
  • On January 6th, Sen. Dianne Feinstein (D-CA) introduced a bill (S. 141) that would limit the misuse of SSNs and establish criminal penalties for such misuse.
  • On January 14th, Rep. Sue Wilkins Myrick introduced a bill (H.R. 531) that would amend title II of the Social Security Act to require that the Commissioner of Social Security notify individuals of improper use of their SSNs.

At present, there is no indication that any of these bills will move.  We continue to expect, however, that before it adjourns, Congress will take up SSN privacy legislation.

Caller ID

  • On January 7th, Sen. Bill Nelson (D-FL) introduced a bill to prohibit manipulation of caller identification information.
  • On February 23rd, Rep. Bobby Scott (D-VA) introduced a bill to prevent caller ID “spoofing”.
  • On March 3rd, Rep. Eliot Engel (D-NY) introduced a bill (H.R. 1258) that would prohibit manipulation of caller identification information by causing any caller identification service to transmit misleading or inaccurate caller identification information with the intent to defraud or cause harm.

Given the challenges presented by the Telephone Consumer Protection Act and by other restrictions on phone messaging, DBA is closely tracking Caller ID legislation.

Payday Lending

  • On February 26th, Rep. Luis Gutierrez (D-IL) introduced a payday lending bill to provide addition consumer disclosures and protections.
  • On April 1st, Rep. Joe Baca (D-CA) introduced a bill to preempt state payday lending laws and establish consumer disclosure requirements.

There are at least 4 other bills (H.R. 1608, H.R. 1640, S. 500, S. 582) that would establish a national usury rate.  At least two of these bills were introduced with the intent to regulat the payday lending industry, but all legislation setting a maximum interest rate will directly impacts the availability of payday loans. 

Miscellaneous

  • Identity Theft – On January 6th, Rep. Elton Gallegly (D-CA) introduced a bill (H.R. 123) that would amend the Fair Credit Reporting Act to establish additional reporting requirements for consumer reporting agencies to enhance the detection of identity theft.
  • Data Breach – On January 6th, Sen. Dianne Feinstein (D-CA) introduced a bill (S. 139) that would require Federal agencies, and persons engaged in interstate commerce, in possession of data containing sensitive personally identifiable information, to disclose any breach of such information.
  • Personal Information – On January 9th, Rep. Ted Poe (R-TX) introduced a bill (H.R. 427) that would prohibit the transfer of personal information to any person or business outside the United States without notice.
  • Text messaging – On March 9th, Rep. Phil Gingrey (R-GA) introduced a bill (H.R. 1391) that would direct the Federal Trade Commission to revise the Telemarketing Sales Rule to explicitly prohibit the sending of a text message containing an unsolicited advertisement to a cellular telephone number listed on the national do-not-call registry.
  • Posthumous debt collection – Sen. Charles Schumer (D-NY) met with Federal Trade Commission Chairman Jon Leibowitz and requested an investigation into whether posthumous debt collection practices violate the Fair Debt Collection Practices Act. Schumer is seeking an accounting of how many debt collection firms engage in the practice and recommended that the FTC require debt collection firms to notify the relatives they contact that there is no legal obligation to pay the debts.

State and City Legislation

Maryland

Senate Bill 423 would require debt collectors to attempt to collect debt from a primary borrower before collecting from a cosigner.

New Mexico

The New Mexico Attorney General recently asked for comments on debt collectors being required to tell consumers if they are collecting on a debt which is passed the statue of limitations.  DBA International submitted comments to the proposed Rules and Regulations concerning the Collection of Debts; Title 12, Trade, commerce, and Banking; Chapter 2 Consumer Protection.

DBA made several points in the Comment including:

  • The collection of past statute consumer debts is allowed by case law, the FDCPA and the FTC Position Paper without disclaimers.
  • New Mexico case law actually allows the collection of past statute consumer debt without a disclaimer.
  • The New Mexico Rules of Civil Procedure protect legal conclusions from Disclosure.
  • The Proposed Rule would increase consumer confusion and expose debt collectors to potential liability under the FDCPA.
New York State

Bill A04804 provides new debt collection requirements and administrative enforcement by the consumer protection board; requires that every notice of a past due debt sent to a debtor must separately state certain information; authorizes the consumer protection board to establish an administrative enforcement process to process debt collection complaints; authorizes the consumer protection board to access a fine per violation.

New York City

On March 18, 2009 Mayor Bloomberg signed into law Int. 660-A, effective July 16, 2009 requiring licensing of debt collection attorneys and passive debt buyers.  The new code sections also require the following:

20-493.1  Required collection practices.  In addition to any practices required under any federal, state or local law, a debt collection agency shall:

  1. In any permitted communication with the consumer, provide:
    1. a call-back number to a phone that is answered by a
      natural person,
    2. The name of the agency,
    3. the originating creditor of the debt,
    4. the name of the person to call back, and
    5. the amount of the debt at the time of the communication.
  2. Confirm in writing to the consumer, within five business days, any debt payment schedule or settlement agreement reached regarding the debt.

20-493.2          Prohibited collection practices.  In addition to any practices prohibited under and federal, state or local law, a debt collection agency shall not:

  1. Attempt to collect or contact a consumer regarding a debt after such consumer requests verification for such debt until such agency furnishes such consumer written documentation identifying the creditor who originated the debt and itemizing the principal balance of the debt that remains or is alleged to remain due and all other charges that are due or alleged to be due;
  2. Contact a consumer about or seek to collect a debt on which the statute of limitations for initiating legal action has expired unless such agency first provides the consumer such information about the consumer’s legal rights as the commissioner prescribes by rule.        

Fair Debt Collection Practices Act (FDCPA) Case Law

  • Attorney representation – On January 9th, a federal district court in California held that a creditor’s knowledge that a debtor is represented by counsel with respect to a debt cannot be imputed on a debt collector.  The court concluded that the debtor failed to state a valid claim under the FDCPA against the debt collector, because the debtor did not allege that the debt collector had actual knowledge of the debtor’s representation prior to contacting the debtor regarding collection of the debt.
    (Offril v. J.C. Penny Company, Inc., CA No. 08-5050 PJH, 2009 U.S. Dist. LEXIS 1169, 1/9/09)
  • Statute of Limitations – On January 21st, a federal district court in Pennsylvania held that a FDCPA claim could stem from a pattern of repeated conduct constituting a continuing violation, rather than being considered discrete acts, for purposes of filing the complaint within the FDCPA one year statute of limitations. The court concluded that the test for a continuing violation should focus on the affirmative unlawful conduct and not the lingering effects of the unlawful conduct. In this case, the court denied the defendant’s motion to dismiss because the plaintiffs sufficiently alleged that harassing telephone calls could be a continuing violation of the FDCPA.
    (Tucker v. Mann Bracken, LLC, PA Civil No. 1:08-CV-1677, 2009 U.S. Dist. LEXIS 3962, 1/21/09)
  • Third Party Communications –On January 28th, the U.S. Court of Appeals for the Eleventh Circuit held that a letter containing debt information sent from one mortgagee to a second mortgagee is not a communication in violation of the FDCPA. The court concluded that the FDCPA prohibition against debt communications with third parties does not apply to creditors involved in the same foreclosure proceeding as the second mortgagee would necessarily know about the defaulted debt.
    (Acosta v. Campbell, 11th Cir. No. 07-10373, 2009 U.S. App. LEXIS 1732, 1/28/09)
  • Initial Communications – On January 27th, a federal district court in Kentucky denied a defendant debt collector’s motion for summary judgment in a FDCPA matter in a case where the debt collector sent an initial communication which the plaintiff claimed had not been received.  While acknowledging that the FDCPA does not literally require receipt by a debtor of an initial communication with specific information about a debt, the court allowed the matter to proceed in order for the record to be developed as to whether the debt collector received any notification from the postal service as to the status of the delivery or as to a forwarding address for the debtor when attempting to communicate the debt information as required under the FDCPA.
    (Campbell v. Credit Bureau Systems, Inc., et al., KY Civil Action No. 08-CV-177-KSF, 2009 U.S. Dist. LEXIS 5762, 1/27/09)
  • Company Name – On January 13th, a federal district court in Massachusetts court held that a creditor need not use its full business name or its name of incorporation to avoid coverage under the FDCPA. The court concluded that even the least sophisticated consumer could not conclude that “Verizon Massachusetts” was a third party collection agency unrelated to “Verizon” or “Verizon New England”.
    (Chiang v. Verizon New England Inc., MA Civil Action No. 06-cv-12144-DPW, 2009 U.S. Dist. LEXIS 5621, 1/13/09)
  • Debt Verification – On January 29th, a federal district court in California held that granted summary judgment in favor of a plaintiff alleging violations of the FDCPA by a debt collection company for failure to verify a debt before continuing collection efforts. The court concluded that the debt collector “made no real effort to verify the debt” as the company merely requested additional information from the plaintiff, failed to obtain the original credit application, obtained no additional information from the seller of the debt or the original creditor, and only reviewed a transaction history on the account.
    (Casas v. Midland Credit Management, Inc., CA Case No. 07cv1124 LAB (NLS), 2009 U.S. Dist. LEXIS 8422, 1/29/09)
  • Debt Verification – On February 26th, a federal district court in West Virginia held that alerting consumers of their right to stop the collection process if they exercise the right for verification under the FDCPA § 1692g(a) is not one of the five enumerated rights Congress requires of debt collectors to include in a dunning letter. The court rejected a prior interpretation of the FDCPA by the Seventh Circuit when concluding that the court has no authority to require “transitional language” that would make consumers aware of the related consequences of exercising their right to verification of the debt under the FDCPA.
    (McCormick v. Wells Fargo Bank, WV Civil Action No. 3:08-0944, 2009 U.S. Dist. LEXIS 15406, 2/26/09)
  • Debt Buying Documentation – On February 18th, a federal district court in Illinois held that a debt buyer, which filed a state court complaint to collect on a credit card debt, was not in violation of the FDCPA when the debt buyer submitted only an affidavit in support of the claim without further documentary evidence of the debt. The court concluded that filing a collection lawsuit without the immediate means of proving the debt is not a false, deceptive, or misleading representation under the FDCPA, because the debtor is entitled to request more information or details at trial.  The court also held that the debt buyer’s automated collection system database that created the record of the debt from the original creditor’s records was reasonable. The court stated that any rule that would require financial institutions to verify every entry in the account history of every loan bought from another institution would be “an untenable proposition absent a red flag concerning the recordkeeping practices of the prior institution.”
    (Krawczyk v. Centurion Capital Corp. et al., IL Case No. 06-C-6273, 2009 U.S. Dist. LEXIS 12204, 2/18/09)
  • GLB Privacy Notice – On March 10th, a federal district court in Illinois held that when a privacy notice and opt out provision is sent by a debt buyer, pursuant to obligations under the Gramm-Leach-Bliley Act, as the second page of a mailing that contains a debt collection letter, the notice is a communication in “connection with the collection of a debt.”  Because the FDCPA prohibits communications in connection with debt collection between a debt collector and a third party, the court concluded that the opt out provision of the privacy notice violates the FDCPA by falsely representing the debtor’s rights.  Further, the court held that the privacy notice’s stated intent to disclose such information to third parties unless the debtor opts out is an action that the debt buyer could not legally take.  The court commented, however, that the debt buyer could have avoided the results by sending the privacy notice and opt out as a separate mailing from the debt collection letter.
    (Miller, et al. v. Midland Credit Management, Inc., et al., IL No. 08 CV 780, 2009 U.S. Dist. LEXIS 18518, 3/10/09)
  • Initial Communications – On February 17th, a federal district court in Maryland held that for all communications after the initial communication a debt collector is no longer statutorily required to disclose that the debt collector is attempting to collect a debt or that it may use information received from the debtor for that purposes.
    (Davis v. R&R Professional Recovery, Inc., MD Civil Action No. RDB-07-2772, 2009 U.S. Dist. LEXIS 11879, 2/17/09)
  • Principal Balance – On February 23rd, the Seventh Circuit Court of Appeals held that the “principal balance” as defined under the FDCPA may represent a sum of money containing interest. The court concluded that the “principal balance” represents the starting or original amount owed. In this case, the amount owed from the perspective of a debt buyer was the total amount being sought regardless of “the nature of the debt owed” to the original creditor in amounts charged by the debtor, interest accrued or imposed fees. 
    (Wahl v. Midland Credit Management, Inc., 7th Cir. No. 08-1517, 2009 U.S. App. LEXIS 3530, 2/23/09)
  • Debt validation – On February 23rd, a federal district court in Connecticut held that service of a collection lawsuit during the time frame for a debtor to request validation of the debt would confuse the least sophisticated consumer when no explanation is provided to the debtor on the relationship between the lawsuit and the debtor’s FDCPA validation rights. The court granted summary judgment for the debtor in concluding that the lack of any clarifying communication by the debt collector was a violation of the FDCPA.
    (Ellis v. Solomon & Solomon, PC, CT Civil No. 3:05cv1623 (JBA), 2009 U.S. Dist. LEXIS 13539, 2/23/09)
  • Validation Notice – On March 9th, a federal district court in New York held that a validation notice placed on the back of a double-sided collection letter was not in violation of the FDCPA because even the least sophisticated consumer would see bolded instructions in large type at the bottom of the front page of the letter that stated “see reverse side of this letter for important information”.
    (Stark v. RJM Acquisitions, LLC, NY 08-CV-2309 (CPS), 2009 U.S. Dist. LEXIS 17666, 3/9/09)
  • Debt Settlement Communications – On February 25th, a federal district court in Pennsylvania held that the FDCPA does not require that a debtor personally send a dispute letter to a debt collection company. The court concluded that a dispute letter may be sent on behalf of a debtor by a debt settlement company and the debt collection company may respond as the debtor’s grant of a limited power of attorney to the debt settlement company provides the necessary consent for the debt collector to communicate about the debt with the third party.
    (Cowell v. Creditors Interchange Receivable Management, LLC, PA Civil Action No. 08-0962, 2009 U.S. Dist. LEXIS 14787, 2/25/09)
  • Principal Balance – On March 4th, the U.S. Court of Appeals for the Seventh Circuit held that “the difference between principal and interest is no more important to the FDCPA than the color of the paper” on which a debt collection letter is sent. The court concluded that “a dollar due is a dollar due”, and a debt collector is required only to state “the bottom line” to the debtor about the amount being sought. The court held that if the debt buyer attempts to classify the obligations into principal and interest amounts in a way that helps customers to understand what has happened in the sale of the debt, this cannot be condemned as a false statement about the debt’s character under the FDCPA.
    (Hahn v. Triumph Partnerships LLC, 7th Cir. No. 08-1521, 2009 U.S. App. LEXIS 5113, 3/4/09)
  • Written Consumer Requests – On March 17th, a federal district court in Indiana held that the FDCPA permits consumers to dispute the validity of debts in ways other than writing, and that a collection letter that contains a writing requirement is a violation of the FDCPA. The court also held that the debt collection company was not unreasonable to assume that the least sophisticated consumer would be able to add three figures listed together in the letter to come up with the total amount owed. The court concluded that a collection letter requesting payment of the amount of the credit, the returned check fee, and attorney’s fees was not in violation of the FDCPA. Finally, the court held that a debt collector was no longer obligated under the FDCPA to send the debtor a validation notice within five days after the initial communication if the debtor has informed the debt collector that the debt has been discharged in bankruptcy. The court concluded that if there is no debt to collect, no further action is required.
    (Campbell v. Hall, IN Case No. 2:06-cv-127 JVB, 2009 U.S. Dist. LEXIS 21416, 3/17/09)
  • Debt Verification – On March 9th, a federal district court in New York held that once a debt collector has sent a debtor verification of a debt, continued letters from the debtor stated that the debt is “in dispute” does not prevent the debt collector from asserting its rights to collect on the amount owed.
    (Daneshrad v. Cohen & Slamowitz, LLP, et al., NY 05 CV 2662 (SJF)(ETB), 2009 U.S. Dist. LEXIS 18173, 3/9/09)
  • Debt Status – On March 16th, a federal district court in Indiana held that attorney’s fees awards from an underlying dispute about maintaining an easement on the plaintiff’s property did not constitute a “debt” subject to the FDCPA. The court concluded that the easement arising from a homeowners association requirements was not a “consensual transaction for the purchase of goods or services and that the FDCPA did not apply.”
    (Walton v. Claybridge Homeowners Assoc., Inc., et al., IN No. 1:07-cv-1484-DFH-WGH, 2009 U.S. Dist. LEXIS 21414, 3/16/09)
  • Statute of Limitations - On April 2, 2009, the Ninth Circuit Court of Appeals held that an Oregon resident using a Providian Bank credit card, which contained a New Hampshire choice of law provision, was subject to Oregon as Oregon law provides that Oregon law applies if the limitation period of another state impose an unfair burden in defending the claim.  (Avery v. First Resolution Management Corporation, No. 07-35726 9th Circuit.  No LEXIS cite available at time of print.
 
   

Prepared by:
DBA Legislative Counsel: Bob Belair · Oldaker, Belair & Wittie, LLP
· 818 Connecticut Avenue, NW, Suite 1100 · Washington, D.C.  20006 · (202) 496-3455 · rrb@obblaw.com
DBA General Counsel: Barbara A. Sinsley · Barron, Newburger, Sinsley & Wier PLLC · 205 Crystal Grove Blvd. #102 · Lutz, Fl. 33548 · (813)500-3636 · bsinsley@bnswlaw.com