Fair Debt Collection Practices Act – Consumer Financial Services Watch

Massachusetts Supreme Judicial Court Holds Passive Debt Buyers Are Not Debt Collectors Under Massachusetts Law

Apr 17 2018

The Massachusetts Supreme Judicial Court recently held in Dorrian v. LVNV Funding, LLC,[1] that “passive debt buyers” are not “debt collectors” required to be licensed under the Massachusetts Fair Debt Collection Practices Act[2] (“MDCPA”).

Dorrian is a class action lawsuit filed by borrowers in default who alleged that defendant LVNV Funding, LLC (“LVNV”) was operating as a debt collector without being licensed under the MDCPA.[3] Notably, the plaintiffs did not sue the third-party LVNV contracted with to handle all collection and servicing, which was licensed as a debt collector under the MDCPA. The trial court certified the class and granted summary judgment in the borrowers’ favor on their claims that LVNV violated the MDCPA by operating as an unlicensed debt collector.[4]

CFPB Director Informs Consumer Advisory Board That Bureau Will Not Shy Away from Issuing Debt Collection Proposed Rule

Jun 15 2017

By Brian M. Forbes, Gregory N. Blase, Andrew C. Glass and Roger L. Smerage

In prepared remarks delivered to the Consumer Advisory Board on Thursday, June 8, 2017, Consumer Financial Protection Bureau Director Richard Cordray explained that the CFPB is moving forward with its long-anticipated debt collection rules. K&L Gates previously chronicled the CFPB’s efforts to promulgate debt collection rules here, here, and here.

The Director emphasized his view that new debt collection rules are necessary because of the age of the Fair Debt Collection Practices Act—enacted in 1977—and the statute’s inability to fit modern methods of communication. According to the Director, the forthcoming rules would benefit consumers and industry participants by clarifying what constitutes unfair collection practices. Substantively, the Director focused on the portion of the CFPB’s July 2016 outline aimed at ensuring that debt collectors possess correct information about debts they are seeking to collect and consumers who owe those debts. In a notable shift, the Director indicated that the CFPB is prepared to issue a single set of debt collection rules relating to the gathering of information by and transfer of information between first-party creditors and third-party debt collectors. Acknowledging that the shift will require the CFPB to take some additional time to iron out “intertwined issues,” the Director suggested that the CFPB will try to fast-track other aspects of its proposed rulemaking, including the information third-party debt collectors must disclose to consumers and the manner in which third-party debt collectors interact with consumers.

K&L Gates will continue to monitor and report on further developments.

Delaware’s No-Usury-Cap Rule Deemed Unenforceable as Contrary to New York Public Policy in FDCPA Class Action

Apr 03 2017

By Andrew C. Glass, Roger L. Smerage, and Brandon R. Dillman

The Southern District of New York recently refused to enforce Delaware’s no-usury-cap rule in a long-running Fair Debt Collection Practices Act (“FDCPA”) class action, concluding that the rule violates New York public policy. See Madden v. Midland Funding, LLC, 2017 WL 758518 (S.D.N.Y. Feb. 27, 2017). In Madden, the plaintiff claimed that the defendants charged her an interest rate in excess of the limit imposed by New York law, triggering a violation of the FDCPA. The case has a long history. We first addressed the case in a client alert after the Second Circuit determined that National Bank Act preemption does not apply to debt purchased by independent, third parties. The United States Supreme Court declined to review the Second Circuit’s decision, a ruling about which we blogged.

Leave the “Tow Truck Guy” Alone: The Ninth Circuit Rules Foreclosure of a Deed of Trust Is Not Debt Collection

Nov 10 2016

By Andrew C. Glass, Gregory N. Blase, Roger L. Smerage, and Joshua Butera

The Ninth Circuit recently clarified when a trustee of a deed of trust acts as a debt collector under the Fair Debt Collection Practices Act (“FDCPA”). In a break from other courts of appeal, the Ninth Circuit held that when a trustee carries out the contractual and statutory requirements for foreclosing property subject to the deed of trust, the trustee does not act as a debt collector. The Ninth Circuit reasoned that in so acting, the trustee does not seek to collect monetary debt from the debtor. In so holding, the court broke with other courts of appeals.

To read the full alert, click here.

Change Order: The CFPB Previews Its Proposed FDCPA Regulations

Aug 10 2016

By Andrew C. Glass, Brian M. Forbes, Gregory N. Blase, and Roger L. Smerage

The Consumer Financial Protection Bureau (“CFPB”) recently took the next step toward promulgating regulations under the Fair Debt Collection Practices Act (“FDCPA”) by releasing its “Outline of Proposals under Consideration and Alternatives Considered” (the “Outline”). The Outline sheds light on the approach the CFPB may take in regulating the debt-collection industry. As detailed in this alert, the proposed approach would implement comprehensive and substantial changes.

To read the full alert, click here.

CFPB Takes Aim at Marketplace Lenders

May 16 2016

By David Christensen

Last Fall, in its 2015 Rulemaking Agenda, the Consumer Financial Protection Bureau (“CFPB”) signaled its intent to “to develop rules to define larger participants in markets for consumer installment loans.”[1] Under the Dodd-Frank Act, the CFPB is authorized to issue “larger participant” rules to define entities in a particular market for consumer financial products or services. The issuance of such rules opens the door for supervisory and examination authority over such entities. Fast forward to Spring 2016, when the CFPB announced that it is accepting complaints from consumers regarding alleged problems with online marketplace loans, and it appears that the CFPB has marketplace lenders squarely in its sights.[2]

A Careful Balancing Act: Second Circuit Requires Debt Collectors to Disclose When a Consumer’s Current Balance May Increase Due to Interest and Fees

Apr 01 2016

By Andrew C. Glass, Gregory N. Blase, Roger L. Smerage and Eric W. Lee

In Avila v. Riexinger & Associates, LLC, No. 15-1584, — F.3d —, 2016 WL 1104776 (2d Cir. Mar. 22, 2016), the Second Circuit Court of Appeals construed the scope of Section 1692e of the Fair Debt Collection Practices Act (“FDCPA”). Section 1692e prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” The Second Circuit held that when notifying consumers of their current account balance, Section 1692e requires debt collectors to disclose when the balance may increase due to interest and fees and identified certain safe harbor language discussed herein.

To read the full alert, click here.

Two for the Price of One? The First Circuit Holds that a Violation of the FDCPA is a Per Se Violation of the Massachusetts Consumer Protection Statute

Feb 06 2015

By: Brian M. Forbes, Laura P. Rich

A recent decision by the United States Court of Appeals for the First Circuit, McDermott v. Marcus, Errico, Emmer & Brooks, P.C., may have broad implications for persons and entities involved in debt-collection activities in Massachusetts. In McDermott, the First Circuit addressed the scope of the Massachusetts consumer protection statute, M.G.L. c. 93A, § 11 (“Chapter 93A”) and its interplay with the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (“FDCPA”). While prior decisions from the First Circuit had suggested that a violation of the FDCPA may also be a per se (intrinsically or by itself) violation of Chapter 93A, the Court took a fresh look at the issue in McDermott and made clear that it is. Notably, the coupling of FDCPA claims with a state unfair and deceptive trade practices statute could provide plaintiff debtors with additional avenues of relief, including statutory damages and injunctive relief.

To read the full alert, click here.

Tag:Fair Debt Collection Practices Act