Articles Posted in Consumer Law

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Midland sent six letters to the Schultzes, attempting to collect separate outstanding debts that had been outsourced to Midland for collection after default. None of the debts exceeded $600. Each letter offered to settle for less than the full amount owing and each stated: We will report forgiveness of debt as required by IRS regulations. Reporting is not required every time a debt is canceled or settled, and might not be required in your case.” Since the Treasury only requires an entity to report a discharge of indebtedness of $600 or more to the IRS, the Schultzes claimed that the statement was “false, deceptive and misleading” in violation of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692. Their putative class action complaint was dismissed. The Third Circuit reversed, finding that the statement may violate the FDCPA. A dunning letter is false and misleading if it implies that certain outcomes might befall a delinquent debtor, when legally, those outcomes cannot occur. Even if the least sophisticated debtor can distinguish between “may” and “must,” the language at issue references an event that would never occur. It is reasonable to assume that a debtor would be influenced by potential IRS reporting and that, if that reporting cannot occur, it could signal a potential FDCPA violation regardless of the conditional language. View "Schultz v. Midland Credit Management, Inc." on Justia Law

Posted in: Consumer Law, Tax Law

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Plaintiffs, convicted of drug offenses between 1997 and 2007, applied to Southeastern Pennsylvania Transportation Authority (SEPTA) for jobs that involved operating vehicles. Each filled out a form disclosing his criminal history and authorizing SEPTA to obtain a background check. SEPTA denied them employment. SEPTA did not send Plaintiffs copies of their background checks before it decided not to hire them, nor did it send them notices of their rights under the Fair Credit Reporting Act (FCRA), which required SEPTA to send both before it denied them employment, 15 U.S.C. 1681b(b)(3). Plaintiffs filed a putative class action, which the district court dismissed for lack of standing, reasoning there was only a “bare procedural violation,” not a concrete injury in fact because Plaintiffs alleged that SEPTA denied them jobs based on their criminal history, which Plaintiffs disclosed before the background checks. The Third Circuit affirmed the dismissal of the claim based on failure to provide notice of FCRA rights. Plaintiffs became aware of their FCRA rights and were able to file this lawsuit within the prescribed limitations period, so they were not injured. The court reversed the dismissal of the claim based on failure to provide copies of the consumer reports. That right exists whether the report is accurate or not; FCRA clearly expresses Congress’s “intent to make [the] injury redressable.” View "Long v. Southeastern Pennsylvania Transportation Authority" on Justia Law

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The Levins allege that HRRG violated the Fair Debt Collection Practices Act, 15 U.S.C. 1692- 1692p by leaving telephone voice messages that did not use its true name, did not meaningfully disclose its identity, and used false representations and deceptive means to attempt to collect a debt or obtain information about a consumer. They complained that messages in which HRRG went by the name of “ARS” were insufficient to identify it as HRRG or even as “ARS ACCOUNT RESOLUTION SERVICES,” which is HRRG's alternative business name. The Third Circuit reversed, in part, the dismissal of the complaint, finding that the Levinses stated a plausible claim that HRRG violated section 1692e(14)’s “true name” provision, but have not stated plausible claims under 1692d(6) or 1692e(10). ARS is neither HRRG’s full business name, the name under which it usually transacts business, nor a commonly used acronym of its registered name. With respect to section 1692d(6), the court stated that the messages provided enough information about the caller’s identity for the least sophisticated debtor to know that the call was from a debt collector and was an attempt to collect a debt. Nothing in the messages rises to the level of being materially deceptive, misleading, or false under section 1692e(10). View "Levins v. Healthcare Revenue Recovery Group, LLC" on Justia Law

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St. Pierre used New Jersey E-ZPass and agreed to maintain a positive balance in a prepaid account from which highway tolls are automatically deducted. When he failed to maintain a positive balance, E-ZPass assigned his account to a private debt collection agency, which sent St. Pierre a collection letter for $1,200.75. The envelope in which the letter was sent had a glassine window through which was visible St. Pierre’s name and address, a “quick response” code and St. Pierre’s account number. The Fair Debt Collection Practices Act, 15 U.S.C. 1692a-1692p, prohibits the use of “any language or symbol, other than the debt collector’s address, on any envelope when communicating with a consumer by use of the mails,” in the collection of a “debt,” defined as an “obligation . . . of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes.” The district court concluded that the matter was not a debt, but a legal obligation in the nature of a tax. The Third Circuit affirmed the dismissal of St. Pierre’s suit. Violation of section 1692f(8) is a legally cognizable injury that confers standing on St. Pierre but the FDCPA is not implicated where, as here, the bulk, if not all services rendered, are made “without reference to peculiar benefits to particular individuals or property.” View "St. Pierre v. Retrieval Masters Creditors Bureau, Inc." on Justia Law

Posted in: Consumer Law

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Tepper took a home equity line of credit with NOVA Bank secured by a mortgage. The Pennsylvania Department of Banking closed the Bank. The FDIC was its receiver. Tepper stopped receiving statements but attempted to remit payments. The FDIC neither cashed nor returned the check. Rather than attempt further payments, Tepper waited for a statement. Months later, the FDIC declared the loan to be in default and sold it, assigning the mortgage, to Amos, an Illinois LLC that is not a lender but only purchases debts for collection. Amos mailed Tepper letters demanding lump-sum payments and sent a notice, containing a higher amount due, stating that it intended to foreclose, then filed a foreclosure action. Amos was not yet registered to do business in Pennsylvania. Tepper requested loan statements and to resolve the default. An Amos officer refused to provide statements and said the Tepper home belonged to Amos. Amos's attorney sent an email attempting to collect an even higher amount. Tepper filed suit under the Fair Debt Collections Practices Act. The court decided: Amos is a “debt collector” under 15 U.S.C. 1692a(6); the loan is a “debt” (1692a(5)); and Amos violated the Act but was not liable for failing to register. The Third Circuit affirmed that Amos is a debt collector. Whether an entity acquired the debts it collects after they became defaulted does not resolve whether that entity is a debt collector: an entity whose principal purpose is the collection of any debts is a debt collector regardless whether it owns the debts it collects. View "Tepper v. Amos Financial LLC" on Justia Law

Posted in: Consumer Law

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The day Krieger fell victim to a credit card scam and discovered a fraudulent $657 charge on his bill, he contacted his card issuer, Bank of America (BANA), and was told that the charge would be removed and that, pending “additional information,” BANA considered the matter resolved. Krieger’s next bill reflected a $657 credit. Over a month later Krieger learned that BANA was rebilling him for the charge. He disputed it again, in writing. After BANA replied that nothing would be done, he paid his monthly statement and then filed suit, citing the Fair Credit Billing Act (FCBA), 15 U.S.C. 1666, which requires a creditor to take certain steps to correct billing errors, and the Truth in Lending Act (TILA), 15 U.S.C. 1601, which limits a credit cardholder’s liability for the unauthorized use of a credit card to $50. The Third Circuit reversed dismissal by the district court, first rejecting a claim that Krieger’s complaint was untimely. Only when BANA decided to reinstate the charge did the FCBA again become relevant, so that the 60-day period began to run. A cardholder incurs “liability” for an allegedly unauthorized charge when an issuer, having reason to know the charge may be unauthorized, bills or rebills the cardholder for that charge; the issuer must then comply with the requirements of section 1643, and when a cardholder alleges those requirements were violated, those allegations may state a claim under TILA section 1640. View "Krieger v. Bank of America NA" on Justia Law

Posted in: Banking, Consumer Law

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Rotkiske accumulated credit card debt in 2003-2005, which his bank referred to Klemm for collection. Klemm sued for payment in March 2008 and attempted service at an address where Rotkiske no longer lived but withdrew its suit when it was unable to locate him. Klemm tried again in January 2009, refiling its suit and attempting service at the same address. Unbeknownst to Rotkiske, somebody at that residence accepted service on his behalf. Klemm obtained a default judgment. Rotkiske discovered the judgment when he applied for a mortgage in September 2014. In June 2015, Rotkiske sued under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692 . The district court dismissed the suit as untimely, rejecting Rotkiske’s argument that the Act’s statute of limitations incorporates a discovery rule which “delays the beginning of a limitations period until the plaintiff knew of or should have known of his injury.” The text at issue reads: An action to enforce any liability created by this subchapter may be brought . . . within one year from the date on which the violation occurs, section 1692k(d). The Third Circuit affirmed, based on the statutory text. Congress’s explicit choice of an occurrence rule implicitly excludes a discovery rule. View "Rotkiske v. Klemm" on Justia Law

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After paying a total of $15,493.00 on his $5,000 loan, MacDonald filed a putative class action concerning the loan agreement. He cited RICO and New Jersey state usury and consumer laws, arguing that the agreement is usurious and unconscionable for containing a provision requiring that all disputes be resolved through arbitration conducted by a representative of the Cheyenne River Sioux Tribe (CRST) and a clause that delegates questions about the arbitration provision’s enforceability to the arbitrator. No CRST arbitral forum exists. The agreement also purported to waive all of the borrower’s state and federal statutory rights. The district court denied a motion to compel arbitration. The Third Circuit affirmed, concluding that the agreement directs arbitration to an illusory forum without a provision for an alternative forum, and the forum selection clause is not severable, so that the entire agreement to arbitrate, including the delegation clause, is unenforceable. View "MacDonald v. Cashcall Inc." on Justia Law

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More than 10 years ago, Tatis incurred a debt of $1,289.86 to Bally Fitness. Allied, a debt collector, sent Tatis a letter dated May 18, 2015 stating: “[The creditor] is willing to accept payment in the amount of $128.99 in settlement of this debt. You can take advantage of this settlement offer if we receive payment of this amount or if you make another mutually acceptable payment arrangement within 40 days.” The six-year New Jersey limitations period for debt-collection actions had already run. Tatis filed a class action, alleging that Allied’s letter violated the Fair Debt Collection Practices Act (15 U.S.C. 1692) because Tatis interpreted the word “settlement” to mean that she had a “legal obligation” to pay and the letter “[f]alsely represent[ed] the legal status of the debt" made “false threats to take action that cannot legally be taken,” and used “false representations and/or deceptive means to collect or attempt to collect." The Third Circuit reversed the dismissal of the suit. Collection letters may violate the FDCPA by misleading or deceiving debtors into believing they have a legal obligation to repay time-barred debts even when the letters do not threaten legal action. The least-sophisticated debtor could plausibly be misled by the specific language used in Allied’s letter. View "Tatis v. Allied Interstate LLC" on Justia Law

Posted in: Banking, Consumer Law

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More than 10 years ago, Tatis incurred a debt of $1,289.86 to Bally Fitness. Allied, a debt collector, sent Tatis a letter dated May 18, 2015 stating: “[The creditor] is willing to accept payment in the amount of $128.99 in settlement of this debt. You can take advantage of this settlement offer if we receive payment of this amount or if you make another mutually acceptable payment arrangement within 40 days.” The six-year New Jersey limitations period for debt-collection actions had already run. Tatis filed a class action, alleging that Allied’s letter violated the Fair Debt Collection Practices Act (15 U.S.C. 1692) because Tatis interpreted the word “settlement” to mean that she had a “legal obligation” to pay and the letter “[f]alsely represent[ed] the legal status of the debt" made “false threats to take action that cannot legally be taken,” and used “false representations and/or deceptive means to collect or attempt to collect." The Third Circuit reversed the dismissal of the suit. Collection letters may violate the FDCPA by misleading or deceiving debtors into believing they have a legal obligation to repay time-barred debts even when the letters do not threaten legal action. The least-sophisticated debtor could plausibly be misled by the specific language used in Allied’s letter. View "Tatis v. Allied Interstate LLC" on Justia Law

Posted in: Banking, Consumer Law