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FDCPA & FCRA Recent Case Update

Christy A. Ames Member Stites & Harbison, PLLC 400 West Market Street Louisville, KY 40202 502-779-5849 cames@stites.com

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FCRA – Garnishment Summons not an Adverse Action FDCPA – Garnishment Summons does not violate Cease-and-Desist

Scheffler v. Messerli & Kramer, P.A., 2015 U.S. App. LEXIS 11158 (8th Cir. June 29, 2015). • Defendant law firm received judgment for their client against

plaintiff.

• Plaintiff alleged he sent a cease-and-desist letter, though plaintiff did not provide evidence of letter.

• Without notice to the plaintiff, law firm attempted to enforce judgment by serving with garnishment summons.

Ruling:

• Garnishment summons qualifies as FDCPA notice of available remedies; this communication is permissible after cease-and-desist letter.

• Garnishment summons does not qualify as an adverse action under FCRA.

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FDCPA– Attorney Liability & Court Filing

Miljkovic v. Shafritz & Drinkin, P.A., 2015 U.S. App. LEXIS 11252 (11th Cir. June 30, 2015). • Creditor obtained judgment against debtor. Debt collector attorneys then served

a writ of garnishment on the debtor’s wages in order to collect the debt. • Debtor claimed filing of garnishment proceedings was abusive, misleading, and

unfair under several provisions of FDCPA. • Debt collector attorneys moved to dismiss, arguing that FDCPA does not apply to

representations made in court filings by attorneys and that a filing of garnishment was not an actionable communication under FDCPA.

• District court agreed with debt collector attorneys and dismissed case. Ruling: • FDCPA applies to attorneys who regularly engage in debt collection activity,

even when that activity includes litigation and even when the attorneys’ conduct is directed at someone other than the consumer.

• Attorneys are subject to FDCPA liability when filing court proceedings against debtors.

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FDCPA– Implied Demands for Payment

Pinson v. Albertelli Law Partners LLC, 2015 U.S. App. LEXIS 11829 (11th Cir. July 9, 2015).

• Law firm defendant sent three letters to plaintiff after plaintiff defaulted on

mortgage. Plaintiff claimed letters violated FDCPA by failing to make disclosures.

• First letter was in response to debtor’s request for validation; it did not mention amount owed or discuss repercussions of non-payment. Other two stated amount of debt, described repayment, and discussed ramifications of non-payment.

• District court dismissed FDCPA claims for all three because “animating purpose” was to respond to plaintiff’s request.

Ruling:

• Eleventh Circuit affirms dismissal of FDCPA claim for first letter; reverses for two others.

• Demand for payment may be implied when the letter states the amount owed, provides payment instructions, and expresses purpose is to collect debt.

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FDCPA– Disputing Report not Requisite

McLaughlin v. Phelan Hallinan & Schmieg, LLP, 756 F.3d 240 (3d Cir. June 26, 2014). • Mortgagee incorrectly believed mortgagor was in default and hired a law firm to issue

a letter about the debt. • The letter included attorneys’ fees that were greater than the amount incurred. • The mortgagor did not dispute the letter with the mortgagee but instead immediately

filed suit under FDCPA. • Mortgagee attempted to dismiss the claim for failure to follow validation procedures

in FDCPA. Ruling: • Third Circuit overturned District Court’s dismissal for failure to follow FDCPA

verification procedures; plaintiffs may bring FDCPA claim without having previously disputed the debt in accordance with FDCPA procedures.

• Validation procedures are not prerequisite to an FDCPA claim.

See Kaymark v. Bank of Am., N.A., 783 F.3d 168 (3d Cir. 2015)(reversing dismissal of FDCPA claim that relied on McLaughlin finding that a statements made in a foreclosure complaint are within the FDCPA’s purview).

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FDCPA– Prejudgment Interest Allowed by State Law but Not Expressly by Contract

Diaz v. Kubler Corp., 785 F.3d 1326 (9th Cir. May 12, 2015). • Debt collector sent letter to debtor seeking balance of amount owed

and interest at 10% per annum.

• No contractual provision allowed the interest sought.

Ruling:

• Ninth Circuit reverses District Court’s granting of summary judgment against defendant.

• A judgment awarding prejudgment interest allowable under state law “merely vindicates a pre-existing right to interest instead of creating it.”

• Since there was no contractual prejudgment interest provision, the default statutory rate of 10% per annum applied.

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FDCPA– Statute of Limitations, Discovery Rule & Equitable Tolling

Goodson v. Bank of Am., N.A., 600 Fed. Appx. 422 (6th Cir. January 28, 2015). • Debtor alleged two letters violated the FDCPA because the creditor

was misidentified.

• Debtor brought suit more than two years later.

• Debtor alleged fraud caused her not to uncover the alleged violation.

Ruling:

• Affirmed district court’s granting of defendant’s motion for summary judgment.

• Equitable tolling rule does not apply because the debtor could have discovered alleged violation with reasonable diligence.

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FCRA – Statute of Limitations

Mack v. Equable Ascent Fin., LLC, 748 F.3d 663 (5th Cir. April 11, 2014). • Plaintiff brought FCRA suit after two year statute of limitations set by FCRA §

1681(p)(1).

• Defendant argued that his two-year clock from discovery should be measured against his discovering the ability to bring the cause of action.

Ruling:

• Plaintiff barred by statute of limitations.

• 2-year statute of limitations after discovery; 5-year after injury for all FCRA claims.

See also

• Rocheleau v. Elder Living Constr., LLC, 2015 U.S. Dist. LEXIS 53152 (E.D. Mich. Apr. 23, 2015)(following Mack).

• Moore v. Rite Aid Hdqtrs Corp., 2015 U.S. Dist. LEXIS 69747 (E.D. Pa. May 28, 2015)(holding that the 2 year statute of limitations applies but the claim is saved due to the relation-back doctrine).

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FCRA – Verifying Identity as Permissible Purpose

Bickley v. Dish Network, LLC, 751 F.3d 724 (6th Cir. May 13, 2014). • Provider of television services received call from identity thief who gave

plaintiff’s social security number.

• Provider searched credit history of plaintiff to verify identity.

• Plaintiff later sued, alleging a violation of FCRA in requesting and using credit report without having a “permissible purpose.”

Ruling:

• Sixth Circuit upheld summary judgment for defendant. Verifying identity is a permissible purpose.

• FCRA permits using consumer report to verify a potential customer’s identity.

See Rand v. Citibank, N.A., 2015 U.S. Dist. LEXIS 14695 (N.D. Cal. Feb. 6, 2015)(denying motion to dismiss and holding the plaintiff sufficiently pleaded that there was no permissible purpose when plaintiff alleged defendant should have known that an identity thief was initiating the transaction).

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FCRA – Disclosures Under 1681g & Loan Modifications Beals-Bartlett v. Bank of Am., NA, 2015 U.S. App. LEXIS 8301 (4th Cir. May 20, 2015).

• Borrowers claim that they did not receive the required FCRA disclosures in connection with their loan modification application.

Ruling:

• Affirming District Court’s granting of defendant’s motion to dismiss.

• Holding FCRA disclosures under 1681g are not required in connection with loan modifications.

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FCRA – Reasonable Procedures for Accuracy

Childress v. Experian Info. Solutions, Inc., 2015 U.S. App. LEXIS 10623 (7th Cir. June 23, 2015). • Plaintiff filed bankruptcy in 2006 but voluntarily withdrew her petition. • Plaintiff alleged willful FCRA violation because CRA did not report that her

petition had been voluntarily withdrawn since the beginning. • Plaintiff alleged that CRA’s procedures were unreasonable because the CRA

should monitor dismissals, not ask plaintiff to provide verification of bankruptcy withdrawal.

Ruling: • Affirmed summary judgment granted in favor of CRA. • The Act provides "whenever a consumer reporting agency prepares a

consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates." § 1681e(b).

• The procedure implemented by CRA, not the one proposed by plaintiff, was reasonable.

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Questions?