2 FDCPA Research on Debt Collectors and Loan Servicers

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Jackson v. Countrywide Home Loans, Inc., Dist. Court, MD Alabama 2012

In the Court's first Memorandum Opinion and Order dismissing Plaintiff's Complaint with leave

to re-file, the Court was unable to conclude, based upon Plaintiff's pleadings, whether

Defendants qualified as "debt collectors" for purposes of the FDCPA. (Mem. Op. 6-8.)

Kaltenbach v. Richards, 464 F. 3d 524 - Court of Appeals, 5th Circuit 2006

We therefore hold that a party who satisfies 1692a(6)'s general definition of a "debt collector"

is a debt collector for the purposes of the entire FDCPA even when enforcing security interests.

The district court did not consider whether Richards fits the general definition of a debt collector.

We therefore REVERSE the district court's dismissal and REMAND the case for proceedings

not inconsistent with this opinion.

Williams v. WELLS FARGO BANK, NA, Dist. Court, WD Washington 2012

On January 10, 2012, the Court dismissed all claims, except for the Fair Debt CollectionsPractices Act ("FDCPA") claim against Wells Fargo. Dkt. 65.[1] In denying Wells Fargo's motion

to dismiss the FDCPA claim ("First Motion"), the Court rejected the argument that Wells Fargowas not a "debt collector" under the FDCPA. Id. at 10-13. The Court explained that Plaintiffs,who stopped making payments on the loan in or about May 2009, had been in default for morethan a year at the time that MERS assigned the deed of trust to Wells Fargo in June2010. Id. Because Plaintiffs had been in default at the time that Wells Fargo acquired the deedof trust, the Court ruled that the FDCPA treated Wells Fargo as a debt collector (and not acreditor). Id.

In the instant motion, Wells Fargo again moves to dismiss the FDCPA claim relying primarily onthe same argument that it is not a debt collector under the statute. Dkt. 69. But, unlike last time,Wells Fargo now contends that it acquired the loan not in July 2010 after Plaintiffs' default, as itpreviously argued, but in June 2007 before Plaintiffs stopped making payments on the

underlying loan. Id. at 5; Dkt. 77 at 5. Wells Fargo argues that the so-called "new evidence"

i.e., that it serviced the loan at issue from June 2007 through Plaintiffs' default causes it to falloutside the statutory definition of "debt collector" and discharges any potential liability under theFDCPA. Id.; Dkt. 69 at 5. Separately, Wells Fargo argues that, notwithstanding whether or not itis a debt collector, Plaintiffs have failed to submit any evidence in support of their FDCPA claim.

Clark v. Capital Credit & Collection Serv., 460 F. 3d 1162 - Court of Appeals, 9th

Circuit 2006

Most important, because the FDCPA is a remedial statute aimed at curbing whatCongress considered to be an industry-wide pattern of and propensity towards abusing

debtors, it is logical for debt collectors

repeat players likely to be acquainted with thelegal standards governing their industryto bear the brunt of the risk.[6]As we have oftrepeated, it does 1172*1172not seem "unfair to require that one who deliberately goesperilously close to an area of proscribed conduct shall take the risk that he may crossthe line."FTC v. Colgate-Palmolive Co., 380 U.S. 374, 393, 85 S.Ct. 1035, 13 L.Ed.2d904 (1965);see alsoSwanson, 869 F.2d at 1228. Other than as permitted by 1692c(c), a debt collector who has received a cease communications order from adebtor must not contact the debtor unless it has received a clear waiver of that order.
http://scholar.google.com/scholar_case?q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&case=6460342450828836031&scilh=0#[1]http://scholar.google.com/scholar_case?case=3928774407677620154&q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&scilh=0#[6]http://scholar.google.com/scholar_case?case=3928774407677620154&q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&scilh=0#[6]http://scholar.google.com/scholar_case?case=3928774407677620154&q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&scilh=0#[6]http://scholar.google.com/scholar_case?case=11494711422413316319&q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&scilh=0http://scholar.google.com/scholar_case?case=11494711422413316319&q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&scilh=0http://scholar.google.com/scholar_case?case=11494711422413316319&q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&scilh=0http://scholar.google.com/scholar_case?case=11494711422413316319&q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&scilh=0http://scholar.google.com/scholar_case?case=11494711422413316319&q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&scilh=0http://scholar.google.com/scholar_case?case=3437014988721629398&q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&scilh=0http://scholar.google.com/scholar_case?case=3437014988721629398&q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&scilh=0http://scholar.google.com/scholar_case?case=3437014988721629398&q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&scilh=0http://scholar.google.com/scholar_case?case=3437014988721629398&q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&scilh=0http://scholar.google.com/scholar_case?case=3437014988721629398&q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&scilh=0http://scholar.google.com/scholar_case?case=11494711422413316319&q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&scilh=0http://scholar.google.com/scholar_case?case=11494711422413316319&q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&scilh=0http://scholar.google.com/scholar_case?case=3928774407677620154&q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&scilh=0#[6]http://scholar.google.com/scholar_case?q=%22Fair+Debt+Collections+Practices+Act%22+%2Bvalidation+%2Bdebt&hl=en&as_sdt=80003&as_ylo=2012&case=6460342450828836031&scilh=0#[1]


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Mahon v. Credit Bureau of Placer County Inc., 171 F. 3d 1197 - Court of

Appeals, 9th Circuit 1999

We conclude the evidence established, without a genuine dispute of any material fact, that the

Notice sent to the Mahons on September 21, 1995 was received by them shortly thereafter.They did not request verification of the debt to Dr. Bowen until June 5, 1996, almost nine

months later. For their request to have been effective, it had to be made within 1203*1203 thirty

days from the date they received the Notice from the Credit Bureau. 15 U.S.C. 1692g(a)(3).

The Mahons' tardy request for verification of the debt, therefore, did not trigger any obligation on

the part of the Credit Bureau to verify the debt. Even if it did, however, the Credit Bureau, when

it received the June 5, 1996 request, promptly contacted Dr. Bowen's office, verified the nature

and balance of the outstanding bill, learned that monthly statements had been sent from Dr.

Bowen's office to the Mahons for over two years, and established that the balance was still

unpaid. The Credit Bureau then promptly conveyed this information to the Mahons, along with

an itemized statement of the account. Although the Mahons did not request verification of thedebt within the time provided by the statute, the Credit Bureau properly verified the debt

anyway.

The Mahons failed to request verification of the debt within thirty days following their receipt of

the Notice, but when the Credit Bureau received their tardy request, it promptly verified the debt

anyway, just as the statute would have required had the Mahons made a timely request.

The goal of every collection agency is to reduce the risk of being sued or, for thatmatter, the risk of being threatened with a possible suit. In my mind, the bestway to avoid the threat of litigation is to set up your agencys practices and

procedures so that they are designed to prove your compliance with the law.Designing your policies in this way not only makes it tougher for a debtor to sueyou in the first place, but it also provides you with a powerful defense bona fide

error- if you do make a mistake and are sued.

A good example of how an agency can set up its policies and procedures to defeat adebtors claim was demonstrated in a recent case wherein I defended the agency.(Mahon v. Credit Bureau of Placer County, 171 E.3d 1197 (9th Cir. 1999).) TheMahons had incurred a debt for medical services rendered in 1993. The doctors

office continued to send monthly bills to the Mahons for more than two years withno response. Eventually, the doctors office assigned the collection to the Credit

Bureau.

The agency used a computerized collection tracking and filing system. Thecomputerized system automatically generated collection letters, and it also acted asan electronic filing system for each collection account, recording all collectionactivities, including which notices were sent, to whom, and when. Prior to mailing,the agencys employees would invariably count the number of outgoing noticesagainst the number of accounts assigned for mailing in that days outgoing batch
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of letters. The collection notices were then automatically addressed, stuffed, andposted by another machine that also noted the number of letters handled. Aftermailing, the agency monitored each account, routinely noting whether an envelopewas returned undelivered.

On September 21, 1995, the Credit Bureaus computer software generated its first

written collection letter, and the letter was mailed pursuant to the proceduresoutlined above. Second and third notices subsequently were mailed according to theabove policies and procedures. No notation was made in the agencys records thatany of the three letters had been returned. Likewise, no notation was found in thecomputerized collection notes which indicated the Mahons responded to the letters,either orally or in writing. The testimony from the Credit Bureau was that if aresponse had been received, it would have been invariably noted in the collection

notes.

In January of 1996, after receiving no response from the Mahons, the Credit Bureaureported the Mahons delinquent collection account to the major credit reporting

agencies. This triggered a response, and on September 20, 1996, the Mahons fieldsuit in federal court alleging violations of the FDCPA, including the Credit Bureauspurported failure to send a written validation of debt notice. The Mahons argued,among other things, that they had not received any of the three letters and that theCredit Bureau could not prove that the Mahons had been sent the letters, much lessthat they had actually received them.

From The Frontline: By Mark Ellis

http://www.ellislawgrp.com/article06frontline.html

Based upon the information provided to me by the Credit Bureau about its policies

and procedures, I moved to dismiss the Mahons lawsuit. I maintained that theCredit Bureaus computerized records, as well as the sworn testimony of theemployees, provided ample evidence that, under the Bureaus regular policies andprocedures, the validation had to have been mailed and it was not returned. Basedupon this evidence, I argued the Mahons must have received the validation of debtsletter and thus the Credit Bureau must have complied with the FDCPA.

The Mahons argued that their testimony was sufficient to prevent summaryjudgment in favor of the Credit Bureau, and that it created a genuine dispute as towhether the validation letter had actually been sent. The Federal District Court,however, disagreed and threw their case out of court. The Mahons appealed, but

the Ninth Circuit Court of Appeals upheld the dismissal. Referencing the CreditBureaus standards procedures, the court wrote: The Mahons offered no evidencethat the Credit Bureau failed to follow it ordinary business procedure in sendingthem the Notice. They simply say they did not receive the Notice. . . We concludethere is no genuine dispute of the fact that the Credit Bureau sent the requiredValidation of Debt Notice to the Mahons. . . (Mahon, at p. 1202.)

As you know, debtors often will allege anything to get out of paying their debts or
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as a basis for bringing a suit. Policies and procedures which faithfully are followedand faithfully documented by your agency help prove what really happened. Whileyou cannot prevent anyone from suing you, your procedures and prevent themfrom winning. Make your agencys policies and procedures are seamless, as theCredit Bureau in Mahon did, and help defeat the claim before it is even brought.Equally important, after a lawsuit is filed, your agencys well-documented policiesand procedures will give your attorney the evidence he or she needs to win yourcase. . . on the front line.

Under the FDCPA, the bona fide error defense is found at 15 U.S.C. 1692k(d);

under Californias Rosenthal Fair Debt Collection Practices Act, the bona fide error

defense is found inCivil Code 1788.30(e)

Blick v. JP Morgan Chase Bank, NA, Dist. Court, WD Virginia 2012

D. The Fair Credit Reporting Act

In their Prayer for Relief, Plaintiffs ask the Court for an order requiring Defendants to"remove any derogatory reporting of the debt from all credit reporting agencies." Compl.21. I liberally construe Plaintiffs' request as a claim arising under the Fair CreditReporting Act ("FCRA"), 15 U.S.C. 1681 et seq. Plaintiffs' claim, however, fails. AsDefendants have noted, the FCRA does not provide a private right of action for a creditfurnisher's alleged failure to report accurate information. Rather, a furnisher only facesliability if a complaint alleges that a furnisher failed to conduct a reasonableinvestigation of a consumer's dispute after being notified of a dispute directly by a creditreporting agency. See 15 U.S.C. 1681s-2(b)(1)(B);Chiang v. MBNA, 620 F.3d 30 (1st

Cir. 2010)(holding a notice of disputed information provided directly by a consumer to adata furnisher does not trigger a furnisher's investigation duties under the FCRA).Plaintiffs' Complaint fails to allege that any Defendant received notification from a creditreporting agency regarding Plaintiffs' dispute, and to the extent alleged, the FCRAclaims fail.

Finally, to the extent Plaintiffs' claims regarding derogatory reporting are construed to beassert state law claims, then those claims are expressly preempted by 15 U.S.C. 1681t(b)(1)(F). "[Plaintiff's state law claims], in the main, are preempted by . . . theFCRA's preemption provision."Ross v. F.D.I.C., 625 F.3d 808, 810-15 (4th Cir. 2010).The Fourth Circuit, in Ross,thoroughly discussed the FCRA and preemption, touchingon some provisions of the FCRA that expressly authorize state law claims[5]; however,Plaintiffs' cursory mention of credit reporting in the Complaint cannot be read toimplicate any of the exceptions discussed in Ross.
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Documents

2 FDCPA Research on Debt Collectors and Loan Servicers