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SCOTUS Leaves CFPB Intact, But Allows for Removal of Director for Any Reason

Posted By Administration, Monday, June 29, 2020

June 29, 2020

By Brit Suttell

Barron & Newburger, P.C.

Earlier this morning the United States Supreme Court issued its long-anticipated decision in Seila Law LLC v. Consumer Financial Protection Bureau. In the opinion written by Chief Justice Roberts, the Court held that Congress overreached when it limited the President’s power to remove the single director of the Bureau. Although some observers thought that the Court might remand based on standing grounds, the Court found there was an active and live controversy between the parties.

Upon holding that the CFPB’s structure was incompatible with the structure of the Constitution and the separation of powers, the Court next turned to whether that provision (removal of the Director for cause, only) could be severed. This brought more agreement among the justices who held, 7-2, that the provision could be severed. 

The question left unanswered by the Court was whether the civil investigative demand propounded upon Seila Law was enforceable. The CFPB argued that all acts of the CFPB had been properly ratified, but the Court remanded the case to the Ninth Circuit Court of Appeals “to consider whether the civil investigative demand was validly ratified.” A copy of the opinion can be found here.

 

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Historic Decision to Celebrate Pride

Posted By Administration, Wednesday, June 17, 2020

by Nathan Willner

NCBA Government Affairs Officer

It could not be more appropriate as those around our country celebrate Pride Month that the U.S. Supreme Court (SCOTUS) rendered its historic ruling on workplace discrimination.

In a 6-3 decision in Bostock v. Clayton County, the SCOTUS held that gay and transgender employees can institute litigation against their employers under Title VII for discriminating against them because of their sexual orientation or gender identity.

Title VII of the Civil Rights Act of 1964 outlaws employment discrimination on the basis of race, color, religion, sex and national origin.

While previously a majority of states permitted discrimination based on a person’s sexual orientation or gender identity, the ruling in this matter provides for actions to be brought under Title VII. 

The Court, in an opinion written by Justice Neil Gorsuch, began its analysis by considering the definition of the word “sex.” The Court noted that Title VII prohibits taking certain actions “because of” sex, meaning “sex” can be one of multiple factors. 

Justice Gorsuch noted: “From the ordinary public meaning of the statute’s language at the time of the law’s adoption, a straightforward rule emerges: . . .  If the employer intentionally relies in part on an individual employee’s sex when deciding to discharge the employee—put differently, if changing the employee’s sex would have yielded a different choice by the employer—a statutory violation has occurred.” 

Chief Justice John Roberts and Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan joined the majority opinion.

Justice Samuel Alito wrote a lengthy dissenting opinion which Justice Clarence Thomas joined. Alito described the majority opinion as “legislation.” He noted that neither “sexual orientation” nor “gender identity” are listed in Title VII as grounds for prohibited discrimination. 

Justice Brett Kavanaugh wrote a shorter, solo dissent opining that it is Congress’ and the President’s responsibility to amend Title VII, not the Court’s, but also applauded the hard work by the LGBTQ+ community.

National Creditors Bar Association is committed to diversity and inclusion and recently formed a Diversity & Inclusion Committee. If you are interested in joining, please reach out to robin@creditorsbar.org.

 

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Collectors Poised to Benefit from Appeal Court Ruling Dismissing FDCPA Lawsuit for Lack of Standing

Posted By Administration, Tuesday, June 16, 2020

By Ronald S. Canter, Esquire

The Law Offices of Ronald S. Canter, LLC

In Frank v. Autovest, LLC, 2020 WL 3053199 (D.C. Cir., June 9, 2020), the United States Court of Appeals for the District of Columbia Circuit dismissed for lack of Article III standing a consumer’s FDCPA lawsuit based on the filing of false affidavits in a debt collection lawsuit.

Phyllis Frank was first sued in state court by the purchaser of her delinquent automobile loan. Verifications supporting the collection lawsuit falsely stated that the affiants were employed by the debt buyer, when, in fact, the affiants worked for the collection agency hired by the debt buyer. The consumer also alleged that the debt buyer’s attorney filed a false affidavit in support of a request for attorney fees.

After the debt collection case was dismissed, the consumer filed an FDCPA suit based on the filing of false affidavits in the collection case. The Federal District Court hearing the case granted the collector’s motion for summary judgment on the basis that the false statements in the affidavit were immaterial.  The appellate court took a different approach, dismissing the case for lack of standing.

Because Federal Courts are courts of limited jurisdiction, the appellate court first examined whether the consumer had standing under Article III of the United States Constitution which requires a “concrete and particularized injury and fact traceable to the Defendant’s conduct and redressable by a favorable judicial order”. See, Frank v. Autovest at *2. The consumer’s deposition testimony revealed that she did not take any action or fail to take any action because of the alleged false affidavits and that she was not subjectively confused or misled by the affidavits. The Court ruled that the consumer lacked standing and explained the difference between the objective “unsophisticated consumer” standard used to analyze claims under the FDCPA with the subjective standing inquiry, namely whether the Plaintiff suffered a cognizable injury based on misrepresentations in the affidavits. 

The Court recognized that, in certain circumstances, a Plaintiff may be able to submit evidence of investigatory injuries such as resources spent in uncovering or confirming the truth or falsity of the statements. The Court held that a Plaintiff suffering a purported “informational injury” through denial of access to truthful information must establish that he or she suffered some particular harm that Congress sought to prevent by requiring the truthful disclosures. However, the Court reasoned that because the Plaintiff disclaimed detrimental reliance or any other harm based on the alleged false affidavits, she lacked standing to bring her claim. Frank v. Autovest at *3.

This decision may represent a turning point in FDCPA litigation where only statutory damages are sought. Defense counsel seeking to pursue a lack of standing argument should study this decision thoroughly and prepare for pre-trial discovery focusing on the Plaintiff’s detrimental reliance on alleged false statements and any harm flowing therefrom in order to put a standing argument in the proper framework.

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NCBA Members Demonstrate Good Judgment; Maryland Court to Vacate Hundreds of Affidavit Judgments

Posted By Administration, Thursday, May 21, 2020
Updated: Tuesday, May 19, 2020

by Nathan Willner

Government Affairs Officer

The COVID-19 pandemic resulted in many court systems throughout the United States shutting their doors. Pursuant to the Administrative Order issued by the Maryland Judiciary, court offices, administrative offices, units of the Judiciary, and the Offices of the Clerks of the Circuit Courts, and the clerks’ offices of the District Court were closed beginning on March 17, 2020 through June 5, 2020. During this time, the District Court matters to be heard included matters that were absolutely necessary, including bail reviews/bench warrants, emergency evaluation petitions, and quarantine and isolation violations. But as all other civil matters were to be stayed during this time, many members of NCBA's state creditors bar association (SCBA) affiliate Maryland-DC Creditors Bar Association were surprised to see that Affidavit Judgments continued to be entered by the Baltimore City District Court.

Many attorneys would have taken the position that this is a court issue; if the court feels it appropriate to enter these judgments, who are they to be concerned? In Maryland, after service of the complaint, should the consumer not file a Notice of Intention to Defend, the complaint is forwarded to a Judge for review. In most cases, the uncontested matter results in the routine entry of an Affidavit Judgment. Once a judgment is entered, the plaintiff can exercise further collection actions through garnishment or attachment as prescribed by Maryland law.

The problem that immediately jumped out at the Maryland attorneys was, what if the reason the consumer didn’t contest the matter was, they didn’t think they had to. Courts were closed, matters stayed, and deadlines extended, so it would seem reasonable for someone to think that they could wait to take action to deal with the lawsuit once the courts reopened.

The lawyers reached out to the Court and asked if maybe the entry of these judgments was just an oversight, or they were left over from matters that were to be decided before the pandemic’s full affect was reduced to an Administrative Order. What they discovered, however, was that this local court felt that since these cases were uncontested, they might as well deal with them administratively now, before the massive influx of new cases starts to bog the court systems down. One response the lawyers received was, if consumers felt that the judgments were entered in error, they could always file a motion with the court to vacate the judgment. This would, however, put the burden to deal with the judgment on the consumer, many who may not know what their rights are especially during the unprecedented pandemic-related court closures.

Feeling that consumers should not be placed in this situation, NCBA members under the leadership of the Maryland-DC Creditors Bar Association, were not satisfied by the rationale being given to them. They took their concerns to the Chief Judge of the District Court of Maryland. Joining with traditionally consumer-centric pro bono legal service groups, they explained that the entry of these judgments - even where uncontested - was just not the right thing to do. Basic due process and fairness are the cornerstone of our judiciary and entry of civil judgments at this time seemed to be in direct contravention of these cherished principles.

As a result of the local SCBA’s advocacy, partnering with consumer groups, the Chief Judge agreed, this was not the time to enter Affidavit Judgments even if procedurally allowed. The Court announced that all of the judgments entered will be vacated and reset in the ordinary course once the Maryland Court system resumes normal operations.

NCBA could not be prouder of the actions taken by the MDCBA leadership. While attorneys have the obligation to zealously represent their clients, they also have the ethical and moral obligation to make sure there is a fair and transparent system that all litigants can adhere to. It would have been understandable to just take no action and let the Court deal with the concerns, but that’s not who our members are. Just because you can do something doesn’t mean you should. NCBA members adhere to a code of conduct that mandates strict adherence with the law and the highest level of professionalism. There is never a wrong time to demonstrate good judgment. 

 

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The Answer is NOT "I'm Going to Disneyland" - Court Issues Temporary Restraining Order in Massachusetts

Posted By Administration, Thursday, May 7, 2020
                           

By Manuel H. Newburger

Barron & Newburger, PC

 

Hey, Collection Industry. You just won a temporary restraining order (TRO) against Massachusetts Attorney General Maura Healey, blocking enforcement of her emergency regulations that bar calls from debt collectors and litigation by both debt collectors and creditors. What are you going to do now?

If you collect in Massachusetts it is likely that you are asking yourself that question. I will suggest some relevant considerations for determining what you do next.

The order is a temporary restraining order. Such an order is intended to protect the status quo until a final determination of the merits of the plaintiff’s claim. ACA International’s Complaint seeks the final remedies of declaratory and permanent injunctive relief. Until those claims are decided the ACA has not won the war, but it has certainly won the first battle. However, what if the Attorney General wins at trial? What if she appeals? Are you willing to take on for your business the risk of ignoring the rules before there is a final judgment?

Realistically, the order is well-written. It preliminarily finds the constitutional defects that I have raised in webinar discussions for the last few weeks. So setting aside the fact that the final battle has not yet been fought, what does this order mean?

The starting point for your analysis is really the final sentence of the order: “This Order is intended to have no impact on any other law or regulation regarding debt collection that is now in force.” The TRO does not impair the preexisting Massachusetts Attorney General Debt Collection Regulations. It does not impair the FDCPA. The judge has made that clear. Therefore, you cannot call consumers at times or places that you know or should know are “inconvenient.”  In normal times, this prohibition is used mostly to limit the timing of calls. but these are normal times.

The problem is not limited to Massachusetts. As shelter-in-place orders continue, businesses stay closed, and thousands of people a day are diagnosed with COVID-19, could any of the following make a call “inconvenient”? 

  • The consumer has been furloughed for over a month and has no idea if or when the furlough will end.
  • The consumer has been informed that her employer is filing for bankruptcy protection and is not reopening.
  • The consumer has children whose school will not be reopening until fall and who must be home-schooled.
  • The consumer has been stuck alone, sheltering in place, and is severely depressed.
  • The consumer is recovering from COVID-19.
  • The consumer is suffering from COVID-19.
  • The consumer has a family member who is recovering from COVID-19.
  • The consumer has a family member who is suffering from COVID-19.
  • The consumer has a family member who has died from COVID-19.

To some degree these issues reflect problems with which debt collectors deal every day. The difference is that, in the COVID-19 era, the number of these issues that collectors encounter are likely to be substantially greater.

Nothing in the TRO excuses debt collectors from the duty not to communicate with consumers a times or places that they know or should know are inconvenient. Nothing in the TRO prevents Attorney General Maura Healey from opening an investigation on any debt collector about whom her office receives complaints about harassing or inconvenient calls. You say your people are “solid” and well trained? No problem. After you produce to the AG all of your policies and procedures, hundreds (or even thousands) of collection files, and hundreds (or even thousands) of call recordings you just have to hope that: (1) the AG agrees with you; and (2) all of your calls were flawless. You can meet that standard, right?

I said weeks ago that your collectors need to be “compassionate questioners.” I stand by that. They are your first line of defense. It is not about Massachusetts; it is about every state. The questions your collectors ask are the start of your defense.

If you ask a consumer if she is working, and she says “yes,” your collector has just provided you with an argument for why it is not such a bad thing to call that consumer. Asking “how are you doing” opens the door to gathering useful information. Saying: “It sounds like things are pretty tough right now. Is there anything we could do to make it possible for you to resolve your account?” may not get you a payment, but it may get you respect, praise, and (most importantly) a willingness to talk to you next month as things improve.

Can you call into Massachusetts? As of today, technically, yes. My hope is that this sparks an appropriate internal discussion. 

 

Manny

 


For more information or questions regarding this NCBA Member Briefing please contact Manny Newburger at mnewburger@bn-lawyers.com

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The National Creditors Bar Association (NCBA) Supports Exemption of CARES Act Stimulus Payments from Garnishment

Posted By Administration, Thursday, April 16, 2020
April 16, 2020

[UNIVERSITY PARK, FL] Consumers are faced with many challenges as they deal with the unprecedented coronavirus pandemic and the resulting state of emergency.  In response, Congress enacted the CARES Act to “provide emergency assistance and health care response for individuals, families, and businesses affected by the 2020 coronavirus pandemic” and provides for stimulus payments to be dispersed to the public.  While the CARES Act does not explicitly designate these payments as exempt from garnishment, the NCBA believes that these funds should be treated similarly to other government payments that are exempt from garnishment (e.g., social security, disability, and veterans’ benefits).  NCBA already has and will continue to encourage its members to lead in identifying, offering, and utilizing existing hardship policies and extending hardship accommodations, including the cessation of garnishments, to any consumer who is adversely affected  by the current health crisis.
 
As the CARES Act authorizes the Treasury Department to issue “regulations or other guidance as may be necessary to carry out the purposes of” the Act, NCBA supports the Treasury Department to establish regulations that would allow banks to preclude these much needed stimulus payments from any form of garnishment.  The NCBA is committed to ensuring that the much-needed emergency assistance be utilized exclusively by the country’s most vulnerable in their time of need.
 

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Court Brief: Graziano on Chopping Block Before 3rd Circuit En Banc Hearing (Part II: Conclusion)

Posted By Administration, Tuesday, March 31, 2020

by Andrew M. Schwartz

Gordon Rees Scully Mansukhani, LLP

On February 19, 2020, Gordon Rees Scully Mansukhani’s Appellate Practice Group Co-Chair Jack Cohn, with the assistance of GRSM partners Peter Siachos, Sean Flynn, and Andrew Schwartz, argued before the en banc panel, seeking the overruling of the holding in Graziano v. Harrison, 950 F.2d 107 (3rd Cir. 1991). 

On March 30, 2020, the 3rd Circuit issued its decision on the en banc review of Riccio v. Sentry Credit.

The questions before the en banc panel were (1) “Does 15 U.S.C. § 1692g(a)(3) allow debtors to orally dispute a debt’s validity?” and (2) “Should [the] en banc Court resolve a circuit conflict by overturning a three-decades-old panel decision which has been eroded by intervening Supreme Court authority?”

The 3rd Circuit answered both questions in the affirmative.

The March 30, 2020 decision concluded that Graziano was no longer good law in the 3rd Circuit and, in doing so, fell in line with the 2nd, 4th and 9th Circuits. The en banc panel resorted to a contextual reading of Section 1692g, as a whole, and reached the conclusion consistent with its fellow Circuits, that Section 1692g permits both oral and written disputes.

The 3rd Circuit acknowledged that the holding in Graziano ran afoul of this interpretive canon, the rule against surplusage. As the Graziano decision rendered Section 1692g(a)(3) meaningless (a trivial “amuse-bouche” for 1692g(a)(4)).

Ultimately, the 3rd Circuit determined that the plain meaning of Section 1692g(a)(3) permitted a debtor to orally dispute her debt.

Importantly, the Court rejected Riccio’s request to curb the retroactive application of the en banc holding, so that Riccio’s claims against Sentry, and the claims of many other matters of equal import pending in the district courts, would be determined under the Graziano precedent. Further, in footnote 5, the 3rd Circuit provided an “out” for those debt collectors that followed the Graziano holding by adding an “in writing” requirement in its Section 1692g(a)(3) disclosures.

During the en banc argument, Jack Cohn argued that the least sophisticated consumer standard was an anomaly that did not fit within the contours of the FDCPA. While the en banc panel did not address this issue, footnote 6 sets the stage for this fundamental fight – whether the least sophisticated consumer standard comports with the ordinary meaning of the FDCPA.

Read the Riccio v. Sentry decision and judgment.

 

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Largest Federal Response in U.S. History Passes U.S. Senate

Posted By Administration, Thursday, March 26, 2020

The CARES ACT, the largest federal response in U.S. history contained in H.R.748, provides immediate relief to those affected by COVID-19. The bill passed the United States Senate by a vote of 96-0. NCBA was pleased to see that the bill does not specifically include any prohibition on debt collection.

The CARES ACT provides, among other things, medical assistance to our first responders and patients on the front lines, monetary assistance to the middle class and those who have lost their job, relief to small and large businesses who have been forced to shut down, and direct aid to states and municipalities to continue providing essential services.

A few of the major provisions of the legislation that may be helpful to you, your businesses, and employees include:

  • For eligible small business, sole proprietors, independent contractors, and other self-employed individuals, the measure provides loans that can pay for utilities, rent, mortgage, and payroll. The borrower is eligible for loan forgiveness for the first eight weeks of the loan. The Small Business Administrator has no more than 15 days after the date of enactment to issue regulations. 
  • For eligible businesses that are not small, the measure provides $500 billion to the Treasury’s exchange stabilization fund. This fund will provide loans, loan guarantees, and other investments with direct lending of $25 billion for passenger air carriers, $4 billion for cargo air carriers, and $17 billion for businesses important to maintaining national security. The remaining $454 billion is eligible for direct lending if they meet certain criteria. This includes prohibitions on stock buy backs and the loan must be used to retain at least 90 percent of the workforce.
  • For those who lost employment due to the pandemic the measure provides robust unemployment insurance. Self-employed, independent contractors and those with limited work history will be eligible for assistance. The assistance will include an additional $600 per week for each recipient and provides an additional 13 weeks of benefits to those who remain unemployed after state unemployment benefits are no longer available.
  • In addition, all U.S. residents with adjusted gross income up to $75,000 ($150,000 married) are eligible for a full $1,200 (2,400 married) rebate. They are also eligible for an additional $500 per child. Americans will not be required to do anything to receive a rebate check as the IRS will use a taxpayer’s 2019 tax return or their 2018 return if they have not yet filed. The rebate will reduce by $5 for each $100 of the taxpayer’s income that exceeds $75,000 and completely phases out at $99,000.
  • The bill ensuring that all testing for COVID-19 is covered by private insurance plans. Additionally, there will be free coverage of a vaccine within 15 days for COVID-19 when such a vaccine is available. 

 

Our work is not over yet:

While this bill does not specifically include any prohibition on debt collection, the passage of H.R.748 is likely not the last action that the Executive and Legislative branches will undertake. Additional bills and efforts may be added to help defeat the virus and its punishing impact on the health and economic well-being of the nation. Many of you have already participated in our “Call to Action”, this effort is very important and we encourage you to participate if you have not already.

 

Next Steps for CARES:

Over the coming days and weeks, the Senate and House of Representatives will be working remotely on more measures to assist the American people who have been subject to personal and economic harm through no fault of their own.

H.R.748 now moves to the U.S. House of Representatives. Pursuant to the message sent by House Majority Leader Hoyer, Members of the House will convene at 9:00 a.m. on Friday, March 27th for consideration of H.R.748. He further advised that due to the limited flight options, Members participating in self-quarantine, and several states mandating stay-at-home orders, they expect the bill to pass by voice vote on Friday.

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NCBA Submits Letter to Trump Administration Regarding Flawed COVID-19 Legislative Proposals Harmful to the Credit Ecosystem

Posted By Administration, Friday, March 20, 2020

In a letter to the Trump Administration, NCBA President Mark Groves and Executive Director Liz Terry addressed concerns that have arisen out of suggestions by certain lawmakers that eliminating the work of the creditors rights attorneys is a prudent action that should be taken in response to COVID-19. House Financial Services Chairwoman Maxine Waters (D-CA) in a March 18 memo proposed prohibiting debt collection during the pandemic. This provision would ban the collection of all consumer debt for 120 days after the pandemic ends. In the letter to the White House we outline the harm these proposed pieces of legislation would have on our industry and the ways in which NCBA attorney members help consumers. 

 

NCBA attorneys: 

  • Remain committed to helping consumers resolve their debt.
  • Play a critical role in educating consumers about legal proceedings and ensuring that they can continue to access credit and services.
  • Work with creditors to help consumers make arrangements that best suit their unique financial situation.
     

View the complete letter to the White House.

 

Additionally, NCBA is working, together with our sister trades (ACA, RMAi and CRC) to execute an appropriate strategy to voice broadly the value of our businesses within the financial ecosystem. 

 

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Federal Court Holds that Service of Complaint on Consumer Represented by Counsel Permitted Under FDCPA Exception for Direct Communication With Consumer With Express Permission of Court

Posted By Administration, Thursday, March 19, 2020

by Ronald S. Canter, Esquire

The Law Offices of Ronald S. Canter, LLC

Lori Lynn Hague received an initial collection notice from a New Jersey based Law Firm attempting to collect on a credit card debt. After Ms. Hague received the letter, her counsel sent a notice of representation to the Law Firm.

The Law Firm then filed a debt collection Complaint on behalf of a credit card issuer and provided the Court with Plaintiff’s home address to serve the Summons and Complaint in accordance with a New Jersey court rule permitting the Clerk to mail the Summons and Complaint to the Defendant. After Ms. Hague was served, she filed suit, claiming that the Law Firm violated the FDCPA’s prohibition on communicating with a consumer after the collector knows the consumer is represented by counsel.

The Law Firm moved to dismiss the lawsuit, asserting that the FDCPA provides a specific exception in 15 U.S.C. §1692c(b)(2) allowing a communication directly with a consumer represented by counsel where “there is express permission of a court of competent jurisdiction.”

The Court dismissed the consumer’s suit, holding that the New Jersey Rules of Court furnish express permission to permit a Complaint to be mailed directly to the consumer. The Court explained that “the FDCPA expressly contains an exception for Court-permitted communication, and numerous courts have relied on this exception in finding that a communication to a represented debtor did not violate the FDCPA when it was permitted by court rules.”

(Case No. 18-11293, United States District Court for the District of New Jersey, decided March 18, 2020.)

Ronald S. Canter, Esquire, a three term member of NCBA’s Board of Directors represented the Defendant Law Firm in this case.

 

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