A Court Makes Headway Ruling Against Unreasonable Claims Against Collection Professionals

The District of Oregon recently addressed third party disclosures in Peak v. Professional Credit Service, case no. 6:14-CV-01856-AA, 2015 WL 7862774 (D. Or. Dec. 2, 2015). Plaintiff spoke with Professional Credit Service (PCS) while driving and confirmed the cell phone was the best contact phone number. Plaintiff allowed her boyfriend to use this cell phone, including reviewing messages. PCS left a message on this cell phone after Plaintiff’s outgoing message invited messages for Plaintiff. Plaintiff’s boyfriend heard the message, which embarrassed Plaintiff. On another occasion, PCS left another message. Plaintiff played the message on speaker phone in her work break room, which was overheard by her employer. Plaintiff’s outgoing message stated:

“Hi, this is Katie and I have an important message from Professional Credit Service. This call is from a debt collector. Please call … .”

Plaintiff sued alleging third party disclosures in violation of section 1692c(b). PCS argued that the messages were not communications with the third parties – especially since the disclosure was not foreseeable. The Court explained that “Congress intended the FDCPA to cause debt collectors to be very careful in the way they communicate with consumers, but it did not intend the statute to completely shut down all avenues of communication and force debt collectors to file a lawsuit in order to recover the amount owed.” The Court recognized that a true strict liability standard, rather than one based on foreseeability, “would invite abuse: upon answering a phone call from a debt collector in a crowded restaurant, the recipient could expose the collector to liability for a hundred unauthorized communications with third parties simply by placing the call on speakerphone.” The Court held that “a negligence standard strikes the right balance because it holds debt collectors liable for failure to take reasonable measures to avoid disclosure to third parties, but does not require them to avoid such disclosure at all costs.” (Peak, supra, 2015 WL 7862774, at *5.)

The Federal Trade Commission (“FTC”) also supports a reasonable foreseeability standard. The FTC commentary recommends liability for a message that is “easily accessible to third parties,” but not if an eavesdropper unexpectedly overhears a collection conversation.” (FTC, Statements of General Policy or Interpretation Staff Commentary on the FDCPA, 53 Fed. Reg. 50097, 50104 (Dec. 13, 1988).)

In this case, the disclosures were not reasonably foreseeable. Plaintiff’s outgoing message invited messages for only one person, Plaintiff. Plaintiff had identified the phone number as the best place to reach Plaintiff and had not requested no messages. And finally, Plaintiff’s phone was a cell phone, as she was driving during one of the calls.

“The cell phone/land line distinction is important because a caller may reasonably assume messages left on a cell phone’s voicemail system will not be accidentally overheard, as they must be accessed through the cell phone itself. By contrast, if any person is in the vicinity of a land line answering machine, that person may overhear a message as it is being left.”

(Peak, supra, 2015 WL 7862774, at *6.)

Hopefully, courts will continue issuing pragmatic rulings to address unreasonable claims by plaintiffs.

Budget Rider Associated with Bills to Raise Debt Ceiling Would Allow Dialer Calls to Cell Phones to COllect Government Debt, Such as Student Loans

The Washington Post reported that the congressional budget deal contains a provision that would permit companies to use dialing equipment to call cellphones to collect money owed to or guaranteed by the government, including federal student loans, mortgages and taxes.  The Department of Education has argued that its student loan servicers would have a better chance of helping borrowers avoid late payments if it was permissible to use dialers to call their cellphones.   “Many student loan borrowers, especially those that may just be graduating, move frequently in addition to no longer having landline phone numbers. It can be difficult for servicers to find a borrower except by using a cell phone number,” according to a Department of Education report issued to the White House earlier this month. President Obama has supported loosening the dialer rules in several budget proposals in an effort to reduce student loan delinquencies and defaults.

According to the latest National Center for Health Statistics report, released in July 2014, 41% person of homes in the United States had only wireless telephones during the second half of 2013.  And according to the same study, about 1/3 of those who have both landlines and cell phones receive all or almost all calls on the cell phones.  Nevertheless, the FCC has remained firmly in opposition to loosening dialer calls related to collections, even though the TCPA was enacted to address marketing calls.  The FCC has refused to comment on the provision in the budget deal bill.

Of course, the NCLC opposes loosening the dialer rules for collection calls. 

Nonetheless, given the bipartisan support for the budget deal, there is a good chance the provision will pass both chambers. House Minority Leader Nancy Pelosi (D-Calif.) was not available for comment, but has signaled to news media that Democrats could provide the votes needed to get a majority in the House.

What Is a Creditor to Do with an Identity Theft Claim, Even One That May Not Be Valid?

In California, in accordance with Civil Code section 1788.18, if a creditor or debt collector receives a copy of  a police report alleging identity theft or a written statement that the debtor claims to be the victim of identity theft, the creditor or collector must cease collection activities until a review is completed.  If a debtor gives oral notice, the creditor or debt collector must notify the debtor that the claim must be in writing.  If the debtor provides notice in writing but the notice fails to include all of the information identified in section 1788.18(b), and the creditor or debt collector does not cease collection efforts, the creditor or debt collector must inform the debtor what additional information is required.  To continue collection efforts, the review must include all information provided by the debtor and any additional information available to the collector, which could also include that the debtor did not raise this issue previously.  If the creditor or debt collector makes a good faith determination that the information does not establish that the debtor is not responsible for the debt, the creditor or collector may recommence collection efforts. Also, if a creditor or collector decides to cease collection efforts, you cannot draw an inference that the debt is not valid.  But if the creditor or collector ceases collection efforts, they must request deletion of any information provided to any credit reporting agency.  And a debt collector must notify the creditor of the identity theft claim.

Note that California also has an Identity Theft Act, Civil Code section 1798.92, et seq., which allows the victim of identity theft to sue anyone attempting to collect a debt that is the result of identity theft to obtain a declaratory judgment that the debt is not owed by the victim..  After the 30 day notice, the victim can recover actual damages, attorneys’ fees and costs. A penalty of up to $30,000 may also be awarded if it is proven by clear and convincing evidence that the collector or creditor received the 30 day notice, that the collector or creditor failed to diligently investigate the identity theft claim, and that the collector or creditor continued to pursue the debt against the victim.

A dispute letter claiming identity theft would appear to trigger these obligations identified above.  If within the 30 day validation period under the FDCPA, section 1692g(b), a dispute letter would appear to trigger the obligation to validate the debt with the creditor and then respond to the debtor/victim in writing to confirm that the collector validated the debt before continuing collection efforts.

And of course, a dispute letter would trigger reporting the debt as disputed to credit reporting agencies, if information was reported initially. While there is no liability under the FCRA unless the debtor first tells the credit reporting agency, the California Consumer Credit Reporting Agencies Act provides for liability if the furnisher of credit information knows or should have known that the information provided was incorrect (or incomplete).    Thus, an investigation should be completed and any credit information should be updated to reflect accurate and complete information.  (The FCRA also has such an obligation for furnishers, but does not have any liability for violation of this obligation, unless the debtor/victim contacts the credit reporting agency, who then contacts the furnisher.)

And if the dispute letter is a refusal to pay because of identity theft (or any other reason), pursuant to section 1692c(c) of the FDCPA, the collector or creditor must cease communications (with some limited and specific exceptions).  I would interpret a claim of identity theft as a refusal to pay … even if the claim of identity theft is false.  Which does not mean that you have to accept the claim of identity theft – you can still credit report and litigate.  But at least in California, the stakes of doing so are higher because of the potential liability under the Identity Theft Act.  Forewarned is forearmed ….

“Personal Care Products Safety Act” S. 1014: Proposed Legislation that will Have a Huge Impact on the Cosmetics Industry if Enacted

Newly introduced legislation, if enacted, will change the regulation of cosmetics in the United States.

Cosmetics & The Law

On April 20, 2015, Senators Dianne Feinstein (D-Calif.) and Susan Collins (R-Maine) introduced the Personal Care Products Safety Act (S. 1014).  This post provides a summary of keys sections of the proposed bill with a comparison to existing law.

According to the press release issued by Senator Feinstein’s office, the S. 1014 has the support of numerous industry trade and consumer groups, including the following:

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Protecting Your Brand Requires Zealous Policing of Your Marks—Not Just Registration

Cosmetics & The Law

Having a federally registered mark does not mean your brand is safe from potential infringers. Instead, protecting your brand requires zealous policing of your marks.  As an example, in September, a European cosmetics company, Kroma EU, filed a trademark infringement suit in Florida against the Kardashian sisters alleging they began marketing a competing makeup line, called Khroma, after Kroma EU and its founder, Lee Tillett, contacted Kim Kardashian to ask her to represent the line. Apparently, the Kardashians can get press for something other than their social life, fad diets or fashion choices.

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Dazed and Confused? Not after the Recent Supreme Court Decision Holding that TTAB rulings on Confusion are Binding on Federal Courts

The United States Supreme Court recently issued a game-changing opinion on the authority of the Trademark Trial & Appeal Board (TTAB). In B&B Hardware Inc. v. Hargis Industries Inc. et al., the Court concluded that a TTAB decision denying trademark registration on likelihood of confusion can have a preclusive effect in a later federal court infringement action. Continue reading

California’s “Made in USA” Law Upheld as Neither Unconstitutional nor Preempted

Cosmetics & The Law

In the case Louise Clark v. Citizens of Humanity LLC et al., case number 3:14-cv-01404, pending in the U.S. District Court for the Southern District of California, in denying the defendants’ motion to dismiss, the court concluded that California’s “Made in USA” law, Business & Professions Code section 17533.7, is neither unconstitutional nor preempted by federal law.

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