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While the debt collection industry spent 2022 focused on Regulation F and the Hunstein cases, consumer attorneys remained diligent in filing a record number of other FDCPA lawsuits against debt collectors on 2022. Further, the most effective strategies for defeating these FDCPA cases shifted recently, with motions to dismiss again being considered "the first arrow from the quiver" used by debt collectors to prevail in some of these matters. 

In this episode of The Debt Collection Drill videocast, Moss & Barnett attorneys Aylix Jensen and Mike Poncin discuss specific techniques and strategies that debt collectors are using to defeat recent FDCPA cases, including the use of motions to dismiss and arbitration clauses.

Transcript:

Speaker 1 (00:04):

Welcome to the Debt Collection Drill, the video cast featuring Moss & Barnett shareholders, John Rossman and Mike Poncin providing sage tips for collection and compliance.

Mike Poncin (00:17):

Welcome to another addition of the debt collection drill. I'm Mike Poncin, attorney at Moss & Barnett, and today we are switching up the format a little bit, instead of John Rossman joining me, we have Aylix Jensen, an attorney in our financial services department who has been working with John and I for some time now. Aylix, great to have you.

Aylix Jensen (00:34):

Thank you, Mike. Happy to be here.

Mike Poncin (00:36):

We've got an exciting episode as I mentioned. We're going to discuss various victories, strategies for 2022 and what we've seen in case law recently. Aylix, everybody wants to talk about Hunstein cases. It's still on everybody's mind. What's the 11th Circuit going to do? What are other courts around the country going to do? What have you seen generally with Hunstein cases?

Aylix Jensen (00:56):

Generally what I've been seeing lately is a lot of standing issues. Courts either sua sponte have been raising standing issues or defendants or have been raising standing issues, and so that's sort of been the main focus as of right now.

Mike Poncin (01:12):

It's somewhat unique because as courts have pointed out, you often have defendants arguing for standing and the consumers arguing against it. But at the same time, we've seen plenty of cases in which the defendants have filed motions to dismiss out of the gate and oftentimes resulting in a dismissal base upon standing, which means that it can be refiled typically in state court. So we have seen some cases be refiled in state court. So that's one strategy.

Mike Poncin (01:37):

There's another strategy which we've done at our firm is we have filed a couple of motions for summary judgment where we've taken discovery of the consumer, been able to set forth the entire record before the court, after the court cleared us for standing and we've filed it based upon the fact that their information was not shared, that there's no damage, there's no claim, and we are waiting for a decision in one such case out in New York so that's another option.

Mike Poncin (02:04):

But recently we've seen another case where there was a motion for summary judgment and that was the Tuken v. Halstead case. Aylix, could you discuss that case?

Aylix Jensen (02:12):

In that case, the plaintiff alleged FDCPA violations and among those violations was a Hunstein claim. As Mike mentioned, the parties went through discovery and then the defendant brought a motion for summary judgment and the court ultimately found that there was no standing in that case. What's interesting is, for being at the summary judgment stage, the way that the plaintiff has to prove standing changes and so at that point, once standing is challenged as a factual basis, the plaintiff was required to provide proof of standing, which the court found that the plaintiff was unable to do.

Mike Poncin (02:54):

It's an interesting strategy. Of course the dismissal was without prejudice, which means that it could be filed again in state court. However, the facts are pretty bad for the consumer. The consumer admitted that they benefited from the letter, they actually made payment. There were no damages, they had no proof that anybody at the letter vendor had seen the information. So it would be questionable to file that type of case in state court. I'm sure a state court judge would see right through that pretty quickly.

Mike Poncin (03:23):

So moving on, another thing that I've actually seen, and some people may disagree with me, but there have been some common sense rulings that have come down as of late where courts have tossed out cases based upon the facts or a plain reading of the letter, which in the past may not have happened. Aylix, are you familiar with any such cases?

Aylix Jensen (03:41):

There's a recent case Wilson v. AFNI from the Northern District of Illinois. In that case the debt collector called the consumer while the consumer was at work and when what the debt collector thought was a consumer answered the telephone, she actually denied her identity and the debt collector left a message asking for the consumer to call back at a time that was most convenient for the consumer. Once that phone call ended, the consumer did call back the debt collector but then ended up filing a lawsuit, claiming an FDCPA violation. In that case the defendant brought a motion for summary judgment and in addition to arguing that the claims lacked merit, the defendant also raised a standing issue. Interestingly, the court agreed with the defendant that the plaintiff had not established standing but also went further and considered the merits of the FDCPA claim.

Mike Poncin (04:46):

It's very nice when you see a judge actually do that, when they address the standing and they don't have to by the rules address the merits, but the judge went on to address the merits and find that there was no valid claim.

Mike Poncin (04:56):

Something I've seen a lot of, we all know that sometimes consumers will try to trick the debt collectors into a violation. We had a recent case where we were able to obtain a summary judgment victory based upon where the consumer or the recipient of the phone call had lied about their identity and misled and when they had said stop calling did not repeat themselves when asked because the collector had said, "I didn't understand you. Could you repeat it?" The court granted summary judgment. So we've seen cases where the courts are willing to look at the evidence, apply the evidence and say, "No, this isn't misleading. There's no violation." It's been refreshing to see. But I know, Aylix, recently you had a victory I believe in the Williams case. Could you tell us about that case?

Aylix Jensen (05:38):

In that case, the debt collector sent a collection letter to the consumer and at the top of the letter directly under the date, it included a text box that identified the creditor and the merchant. In the letter the name of the consumer, the first name Vincent, was misspelled. There was one letter missing, the N was missing from the name. The consumer filed a lawsuit claiming FDCPA violations based on the fact that the debt collector failed to identify the creditor and then also mischaracterize the debt and raised the issue of the misspelling of the name as support for his argument.

Mike Poncin (06:27):

That's a claim that we've actually seen, not just us I'm sure everybody, where the creditor name is not listed exactly correct, by listing the name of the bank and then the merchant under which the card was issued oftentimes even though you're providing more information to help the consumer identify the credit card, you often are faced with a lawsuit arguing that you have not properly identified them. Courts are seeing through that and not holding debt collectors to task when they do provide sufficient or more than enough information to identify what the credit card, what the debt is in regard to.

Mike Poncin (07:01):

Aylix, another strategy that we do see from time to time of course is the bonafide air defense. Are you familiar with any cases that have addressed that as of late?

Aylix Jensen (07:10):

There was a recent case as well. In that case, what happened was the defendant also filed a motion for summary judgment challenging standing and then also raised the bonafide error defense. The court actually did find that the plaintiff had established standing, but the defendant was able to prevail on the bonafide error defense. The court essentially found that the defendant did have policies and procedures. So what the claim was in that case was that the debt collector failed to notate the dispute on the consumer's credit report and so based on the debt collector's records, it showed that the debt collector did in fact go through the process of notating the dispute, but for whatever reason it didn't show up. So by asserting that bonafide error defense and demonstrating that the debt collector does have proper policies and procedures in place that should have avoided that error, they were able to prevail on a motion for summary judgment.

Mike Poncin (08:18):

A good case and a good example of showing why it's important to have those procedures. But of course that was a 1692 E8 type claim, which I know we all see the failure to update the credit report timely. Now Aylix, there was another recent case that just came out of the 10th Circuit where they addressed the least sophisticated consumer standard in a materiality context. Could you tell us about that case?

Aylix Jensen (08:38):

In that case, the debt collector was collecting on a student loan debt and the consumer filed a lawsuit alleging FDCPA violations based on E and F, claiming that the debt collector only identified itself later on in the letter and was trying to mislead the consumer. What's interesting about that case is at the trial level, the debt collector succeeded on a motion to dismiss and then it went to the 10th Circuit Court of Appeals who affirmed the motion to dismiss but considered the materiality issue on a reasonable consumer basis as opposed to a least sophisticated consumer basis.

Mike Poncin (09:25):

And that was a 1692 E claim with regards to misrepresentations and as the court noticed, it's the Tavernaro case, the court noted that circuit courts around the country have agreed to the fact that with regards to E claims there is a materiality standard, which means that the misrepresentation has to be material and in many circuits to the least sophisticated consumer, but the 10th circuit I think got it right and said there's not much difference between a least sophisticated consumer because they're supposed to be able to read and understand general concepts. And so the court in the 10th Circuit said no, we're going to use the reasonable consumer standard. So nice case law just came out earlier this week.

Mike Poncin (10:06):

Aylix, another thing we'd like to address is strategies. When a client receives a claim under the FDCPA, what can they do with it? Of course there's always the option to look at the settlement numbers, but if you're going to litigate, there's various options. There's a motion to dismiss where you can file a motion with the court in which the pleadings are accepted as true. These come in handy with regards to standing in letter claims. Aylix, what are some other strategies that clients can use?

Aylix Jensen (10:33):

Some other strategies that we've had great success with is filing a motion to compel arbitration. So in that case, the agreement would need to have an arbitration provision, but if that is an option, then that can prove to be very beneficial.

Mike Poncin (10:49):

The nice thing about arbitration, one thing we've had success with is when a client has sent out the collection letters and whatnot and they end up in arbitration, if they own the debt or are in a place where they're able to acquire the debt, to file a counterclaim on it. Because a lot of what we see these days with FDCPA claims are no damages claims. So you end up before an arbitrator with a consumer who has no damages, faced with a counterclaim for a $500, 2000, 3000, $8,000 counterclaim, which is essentially a slam dunk. The arbitration forms do allow counterclaim based upon the debt so that's something we've used in the past with some success in order to try to prevail and make it so that people are less inclined to bring claims in the future.

Mike Poncin (11:34):

Of course. Another thing that we've seen is summary judgment is a great tool to use when you go through the discovery. I have a case right now where the consumer is claiming, "Hey, I didn't understand the amount due. You listed this amount and just I don't understand it." Looking through other cases they filed, they've had the same exact amount sent to them by three other debt collectors so getting that consumer in a deposition to ask him how he was confused about the amount owing is going to be fun. So summary judgment is a useful tool, which it's more costly, but it's a great way to get the facts out there and present them to the court so you can get a ruling on it.

Mike Poncin (12:10):

Thank you, Aylix. That's all we have today. We hope you've enjoyed the episode and have a great day everybody.

Speaker 1 (12:15):

This video is provided only as a general discussion of legal principles and ideas. Every situation is unique and must be reviewed by a licensed attorney to determine the appropriate application of the law to any particular fact scenario. If you have legal questions, consult with an attorney. The listener of this video cast will not rely upon anything herein as legal advice and will not substitute anything contained herein for obtaining legal advice from an attorney. No attorney-client relationship is formed by this video cast and Moss and Barnett assumes no liability for any errors contained herein or for changes in the law affecting anything discussed herein.