Decision in Ricketson v. Experian Information Solutions, Inc. Clarifies the Law on Fair Credit Reporting

On July 18, 2017, the United States District Court for the Western District of Michigan issued an important decision in the case of Ricketson v. Experian Information Solutions, Inc., a case brought by Westbrook Law PLLC under the federal Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq. In the Ricketson case, the plaintiff challenged Experian’s practice of rejecting consumer disputes without investigating them as required by the FCRA.

After noticing an inaccuracy in his Experian credit report, the plaintiff sent a dispute letter to Experian. Instead of investigating the disputed item as the FCRA requires, Experian sent a letter to the plaintiff stating that it had received a “suspicious request” that it believed was from a third party, and would not be investigating the disputed item. The Ricketson lawsuit resulted.

Experian challenged the lawsuit on various technical grounds. It argued that because the disputed information was never shared with any potential creditors, there could be no harm and no standing to hold Experian liable. It also argued that the evidence could not support a finding that its violation of the FCRA had been willful.

In its opinion, penned by Chief Judge Robert J. Jonker, the court rejected Experian’s arguments, finding that the investigation and disclosure requirements of the FCRA must be construed strictly, in order to avoid exactly the kind of harms the plaintiff suffered – mental stress and emotional distress linked to being deprived of accurate information about his credit standing. The court also held that Experian’s policies and procedures for handling disputes could support a jury verdict of willfulness, and thus give rise to punitive damages.

The FCRA is a comprehensive legal framework that strictly controls procedures for maintaining, correcting, and dispensing credit information about consumers. The court’s decision in Ricketson affirms the continuing vitality of the FCRA in protecting consumers’ rights not only to ensure that the information provided by credit reporting agencies about them is accurate, but also to be kept informed about the contents of the credit reporting agencies’ files.

If you discover that inaccurate information about your accounts, debts, or personal information is being reported by a credit reporting agency, contact us to learn more about your legal rights under the FCRA.

TJW

Supreme Court Releases Consumer-Unfriendly Opinion in Santander – What Does It Mean?

Yesterday, the U.S. Supreme Court released an opinion highly anticipated by consumer lawyers as well as the debt collection industry, in the case of Henson v. Santander Consumer USA, Inc. This case dealt with the question of whether a purchaser of defaulted debts, which then attempts to collect those debts from consumers, counts as a “debt collector” that is subject to strict consumer protections provided in the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (“FDCPA”).

To grasp the potential impact of this case, one needs to understand the structure of the consumer debt collection industry as it exists today:

The first step is origination, when the consumer first incurs a debt to a creditor such as a bank, credit card issuer, other lender, wireless provider, or cable company.

When the consumer defaults on a debt–usually by failing to pay–one of two things may happen: (1) the original creditor may hire a third-party debt collection company to attempt to collect the debt, generally through telephone calls and collection letters; or (2) the original creditor may attempt to collect the debt itself for some period of time.

Often, once the debt becomes sufficiently aged, the creditor sells, or assigns, the debt to a debt buyer. The debt buyer pays the creditor only a fraction of the face value of the debt, then attempts to recover as much of the debt as possible from the consumer by various means, often including telephone calls and collection letters.

The final stage in the process is a lawsuit filed by collection attorneys acting on behalf of the debt buyer. Most of these lawsuits are not contested, and result in default judgments that are slowly collected through wage, bank account, and tax refund garnishments.

It has long been settled law that, under the FDCPA, third-party debt collection companies and collection attorneys ARE “debt collectors.” Most federal courts found that debt buyers were “debt collectors” as well, including the United States Court of Appeals for the Sixth Circuit, which establishes precedent for federal courts in Michigan. Generally, circuit precedent found that creditors collecting their own debts could NOT be “debt collectors” unless a rare exception applied.

All of this matters for one basic reason: the FDCPA restricts what “debt collectors” are allowed to do, and creates powerful remedies for consumers when they do not comply with the FDCPA. The FDCPA creates various protections for consumers; for example, it requires debt collectors to identify themselves as debt collectors in communications to consumers, disallows certain conduct in collection lawsuits, outlaws attempts to collect debts no longer owed, limits consumer harassment by telephone, and disallows unfair and fraudulent conduct in connection with debt collection. Consumers harmed by violations of the FDCPA are entitled to sue, and can recover a statutory penalty as well as their attorney fees.

In yesterday’s Santander decision, the Supreme Court unanimously held that debt buyers are not automatically “debt collectors” subject to the FDCPA. According to the opinion, penned by newest Justice Neil Gorsuch, this is so because debt buyers are attempting to collect a debt that is owed to them, and thus are creditors, even though they are not the original creditors.

Taken in isolation, the Santander holding might seem catastrophic for consumers besieged by collection attempts from debt buyers (including such large players as Midland Funding, LVNV Funding, Portfolio Recovery Associates, and others), because the protections of the FDCPA would be unavailable. This would enable debt buyers to use, with impunity, the same harassing and unfair collection methods that “debt collectors” are not allowed to use under the FDCPA.  It is true that the Santander decision is beneficial to some debt buyers at the expense of consumers; however, its impact is limited. Justice Gorsuch carefully points out in the opinion that the court’s decision does NOT mean that debt buyers are NEVER “debt collectors.” Indeed, the text of the FDCPA appears clear that debt buyers ARE “debt collectors” if their “principal purpose … is the collection of any debts.” 15 U.S.C. § 1692a(6). With respect to the largest buyers of defaulted credit card debt–i.e., Midland Funding, LVNV, and PRA–an experienced consumer lawyer should easily be able to prove that their “principal purpose” is debt collection; and they are therefore “debt collectors” subject to FDCPA restrictions.

While the Santander decision does not make the consumer advocate’s job easier, and is likely to spur pernicious innovations in the debt buying and debt collection industry, it is hardly the death knell for the FDCPA. Consumer advocates and watchdogs, including us at Westbrook Law PLLC, will continue to find ways to keep abuses in check.

TJW

Collectors Still Pursuing Debt after Bankruptcy Discharge? It’s Illegal.

Each year, hundreds of thousands of individuals with overwhelming debts file for Chapter 7 or Chapter 13 bankruptcy in order to regain their financial freedom.  The usual goal of bankruptcy is to have one’s debts “discharged,” or declared legally unenforceable and effectively nullified.  This is intended to allow the debtor a “fresh start” to their financial affairs.

But a discharge of debts in bankruptcy does not always stop debt collectors, who may continue to contact the debtor by phone or letter, or even file legal proceedings, after a debt has been discharged.  These post-discharge collection attempts rob the debtor of the “fresh start” he or she fought for in bankruptcy, and are often unlawful, violating various state and federal laws designed to protect consumers from abusive debt collection tactics.

If you are still being chased by debt collectors to pay a debt that was discharged in bankruptcy, Westbrook Law PLLC may be able to make the collection efforts stop, punish the debt collectors for violating the law, and get monetary compensation for you.  Contact us for more information or a free consultation.

If you have not filed for bankruptcy but wonder if it may be right for you, contact us for a referral to a qualified bankruptcy law firm.

TJW

Debtors Bar Seminar Materials Available Here

Yesterday I had the pleasure of presenting on consumer law issues for the Debtors Bar of West Michigan at their annual Martin Luther King, Jr. Day seminar.  My co-panelist, Amanda Narvaes of Drew, Cooper & Anding, and I managed a fairly thorough exposition of Fair Debt Collection Practices Act issues and the Fair Credit Reporting Act, but had to compress the Telephone Consumer Protection Act segment a bit in favor of lunch.  It was a successful event, and I met a number of attendees who are dedicated, as I am, to representing individuals facing serious legal and financial problems.  They confirmed that debtors’ bankruptcy attorneys do in fact frequently spot instances of consumer abuse in their bankruptcy practices.

The seminar packet contained a version of our presentation slides – the link below includes those slides as well as many other links and resources.

I encourage any debtors’ bankruptcy lawyers–whether seminar attendees or otherwise–to get in touch with me if they have questions concerning potential claims they have spotted or are interested in either a potential co-counsel arrangement or referring clients with consumer issues to Westbrook Law.

TJW

www.westbrook-law.net/dbwm

Spam Text Messages and the Telephone Consumer Protection Act

Nearly every bulk text (SMS) message sent to a cellular phone in the United States violates federal law – specifically, the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227.  Enacted in 1991 primarily to constrain the growing scourge of invasive telemarketing calls, the TCPA has more recently been applied to cases of mass marketing, or “spam,” SMS text messages.  In 2016, the U.S. Supreme Court confirmed that such unsolicited text messages fall within the TCPA’s prohibitions on automatic telephone dialer calls.  Yet bulk text messages remain a commonplace nuisance for most people who rely on cellular phones.

The TCPA provides serious remedies to consumers who receive bulk text messages without their consent: $500 per message, or $1,500 per message for willful violations of the TCPA. These penalties quickly add up given the often repetitive nature of spam text messages.

The TCPA and its penalty provisions were designed to encourage consumers and consumer lawyers to act as “private attorneys general,” effectively assisting the Federal Communications Commission to enforce limitations on telephone system abusers.  If you receive unsolicited bulk text messages, do not just delete them.  Westbrook Law PLLC can assist you to determine whether the law has been broken, enforce the law and, in the process, pursue a monetary recovery for you under the TCPA.

Contact us to arrange a free consultation.

Junk Faxes Violate Federal Law

Most businesses and individuals who maintain dedicated telephone lines for fax machine use have experienced the common annoyance of the junk fax.  The machine beeps, picks up a call, and proceeds to print out an unwanted message from a solicitor that quickly finds its way into the recycling bin.  The practice of junk faxing not only ties up fax lines and wastes paper and supplies; it also violates the federal Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227(b)(1)(C).  Recognizing this pervasive problem and the fact that each junk fax does a measurable but very small amount of damage, to discourage this practice, the TCPA provides for “statutory damages” in the amount of $500 per junk fax, or $1,500 per junk fax for willful violations.  These amounts quickly add up when multiple faxes are received.

Our office has developed expertise in tracking down the elusive origins of junk faxes and in enforcing the TCPA.  If your business or personal fax machine receives junk faxes, DO NOT THROW THEM AWAY.  Keep them, and contact us for a free consultation.

Certification Granted in FDCPA Class Action Babbitt v. ClearSpring Loan Services, Inc.

Today, the United States District Court for the Western District of Michigan issued an order granting class certification in a Fair Debt Collection Practices Act (“FDCPA”) case against default mortgage servicer ClearSpring Loan Services, Inc.  Westbrook Law PLLC member Theodore J. Westbrook, along with veteran consumer lawyer Phillip C. Rogers, were appointed class counsel.

The case, filed by Mr. Westbrook in late 2015, alleges that ClearSpring engaged in a pattern and practice of violating the FDCPA through failing to disclose on its monthly loan statements that ClearSpring was a debt collector.  The FDCPA, 15 U.S.C. Section 1692e(11), specifically requires all debt collectors to make such a disclosure in each communication with a debtor, in an effort to minimize consumer confusion.  As a default mortgage servicer–a company that obtains the right to collect payments after the loan is delinquent or otherwise in default–ClearSpring is a debt collector that must comply with the FDCPA.

The specialized default servicing industry has been growing along with large lenders’ eagerness to offload non-performing loans.  With it, the likelihood of servicers failing to understand or comply with debt collection laws may also be on the rise.  As more class actions are certified, industry players will be forced to bring their practices in line with the strict requirements of the FDCPA.