In a 51-47 vote on April 18, the U.S. Senate voted in favor of invalidating 2013 guidance from the Consumer Financial Protection Bureau that targeted purported discrimination in the automobile finance market.  The resolution passed on party lines, with Senator Joe Manchin (D-W.Va.) the lone Democrat to join Republicans in voting to overturn the guidance. 

As we reported here, Senator Jerry Moran (R-Kan.) introduced a resolution in March to overturn the CFPB’s highly controversial Bulletin 2013-02, which set forth the CFPB’s interpretation of the Equal Credit Opportunity Act (ECOA) as applied to pricing in indirect automobile lending.  The Bulletin targeted dealer markups, a practice whereby an automobile dealer charges a consumer a higher interest rate than the rate at which an indirect lender is willing to purchase the consumer’s retail installment contract.  The Bureau expressed concern that indirect lenders afforded too much pricing discretion to dealers, potentially opening the door to discrimination against protected groups, including women, AfricanAmericans, and Hispanics.  Further, the Bureau also announced in the Bulletin its intent to use a disparate treatment or disparate impact theory to hold an indirect auto lender liable for allowing prohibited pricing differences created by a dealer’s conduct. 

In March 2017, Senator Pat Toomey (R-Penn.) asked the Government Accountability Office whether the Bulletin qualified as a rule subject to Congressional review.  The GAO concluded that the Bulletin was indeed a rule and, as a result, should have been subject to Congressional review.  Based on the decision, Toomey co-sponsored with Moran the resolution to kill the guidance. 

The resolution moves now to the House of Representatives for a vote.

We are pleased to announce that Troutman Sanders partner Ronald Raether will make a presentation on, “Incident Response Plans: Avoiding Common Mistakes through a Table Top Exercise,” at the Fraud & Breach Prevention Summit at the Hyatt Hotel in Dallas, Texas on April 24th, 2018 at 10:50 a.m. Ronald will also be on a panel discussion, “Know Your Attacker: Lessons Learned from Cybercrime Investigations,” on April 24th, 2018 at 4:00 p.m.

Ronald’s presentation will give attendees insight on:

  • Response to IRPs and why it matters
  • Privilege of Breach Response Efforts
  • Table Top Exercise and Goals
  • Purpose of the Incident Response Team
  • Membership of the Incident Response Team and Training
  • Walkthrough several common incident scenarios

Ronald’s panel discussion will give attendees insight on:

  • Today’s most prevalent cybercrime schemes
  • Traits of the threat actors that are most common
  • Lessons learned from actual crime investigations

ISMG hosts the Fraud & Breach Prevention Summit yearly in different locations across the United States. The conference will bring industry leaders from across the globe speaking on specialties ranging from IoT and the use of deception technology, on-going business email compromise trends, DDoS for extortion and ransomware attacks.

ISMG has designed its sessions to address the needs of CISOs, fraud and risk teams, security and IT professionals, and many others by providing hands-on tools, real-world problems and solutions for attendees to be able to take back to their office.

To register or obtain additional information, visit the ISMG Website. For a 10% discount on registration, use code: SAVE10%

On March 19, the United States District Court for the Western District of New York granted summary judgment to a debt collector who was sued for allegedly violating the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692p, by including language in a form letter that referred to the tax implications of accepting a settlement offer. 

The underlying facts are that on or around July 13, 2015, debt collector Financial Recovery Services, Inc. (“FRS”) sent a form collection letter to plaintiff Mary Rozzi Church, stating that she owed $2,170.50, and offering her three separate “settlement opportunities” to pay the balance for less than what was owed.  Following the details of the settlement offers, the letter stated the following: 

These settlement offers may have tax consequences.  We recommend that you consult independent tax counsel of your own choosing if you desire advice about any tax consequences which may result from this settlement.  FRS is not a law firm and will not initiate any legal proceedings or provide you with legal advice.  The offers of settlement in this letter are merely offers to resolve your account for less than the balance owed. 

Church argued that the language contained in the letter, wherein FRS stated that “these settlement offers may have tax consequences,was a false representation or deceptive means in connection with the collection of a debt in violation of 15 U.S.C. § 1692e because an unaccepted offer does not have any tax consequences and the least sophisticated consumer would be confused by the statement. 

The Court, however, agreed with FRS and found that even the least sophisticated consumer would read the entirety of the statement and understand that any potential tax consequences attach only once the offer has been accepted and, as such, the statement was neither deceptive nor misleading in violation of the FDCPA. 

A copy of the entire opinion can be found here. 

This decision is part of a growing body of cases centering around similar language regarding potential tax consequences on settlement offers made by debt collectors.  Debt collectors should evaluate this decision and review their policies and procedures to minimize potential liability under the FDCPA for “tax consequences” disclosures.  We will continue to monitor court decisions to identify and advise on new compliance risks and strategies.


On April 3, both the City and County of San Francisco amended the Fair Chance Ordinance (“FCO”) – their existing ban-the-box law – to align it with the new, corollary California law (AB 1008) that took effect on January 1, 2018. San Francisco’s new amendments take effect on October 1, 2018.

The amendments to the existing FCO include:

  • Removing the restriction that employers, housing providers, contractors, and subcontractors may inquire about, require disclosure of, and base housing and employment decisions on convictions for decriminalized behavior that are seven years old or less. There is no seven-year limitation in the amended FCO.
  • The FCO will now apply to employers that employ five or more persons (previously it was 20 or more).
  • A first violation can result in a penalty of up to $500, whereas previously none was assessed.
  • A second violation can result in a penalty of up to $1,000 (previously up to $50). Subsequent violations can result in penalties of up to $2,000 (previously up to $100).
  • If multiple people are impacted by the same procedural violation at the same time, the violation would be treated as one violation for each impacted person (previously treated as a single violation rather than multiple violations).
  • Penalties must be paid to the person impacted by the violation, not the City/County of San Francisco.
  • The right to sue is no longer limited to the City Attorney. Any employee or applicant whose rights have been violated can sue.
  • Employers are now prohibited from inquiring about, requesting disclosure of, or utilizing a person’s conviction history until after a conditional offer of employment has been made (the previous measure limited inquiry until after either a live interview or conditional offer).

Troutman Sanders will continue to monitor related legislative developments concerning employment background screening and employee hiring.

The District of Nevada recently applied the D.C. Circuit’s decision in ACA International v. FCC and granted summary judgment in favor of the defendant on plaintiff’s Telephone Consumer Protection Act claim.  Specifically, the Court held in Marshall v. The CBE Group, Inc. that CBE’s phone system does not qualify as an automatic telephone dialing system, commonly referred to as an “ATDS.”

Plaintiff Gretta Marshall filed suit against CBE, a third-party debt collector, alleging that it violated the TCPA and the Fair Debt Collection Practices Act through its collection efforts related to her outstanding bill.  Marshall alleged that CBE’s agents used an ATDS to contact her in violation of the TCPA.  CBE places calls using a Manual Clicker Application (“MCA”), requiring the call agent to click a bullseye on a computer screen to place a call.  When a CBE agent clicks the bullseye, a call is sent through a cloud-based connectivity pass-through, LiveVox, and then the CBE agent is connected with the person to whom the call is placed.

In analyzing CBE’s “communication infrastructure,” the Court stated that in light of the ACA v. FCC decision, it would apply the statutory language defining an ATDS, resulting in a focus on whether CBE’s phone equipment has the capacity to produce or store phone numbers to be called using a random or sequential number generator.  The Court noted that the overwhelming authority held that “point and click” dialing systems, used in unison with cloud-based pass-through services, did not qualify as ATDSs due to the human intervention required to place the call.  Applying this rationale, the Court found that CBE agents who were required to click the bullseye were “integral to initiating outbound calls.”  This finding weighed in favor of finding that the MCA, used with LiveVox, was not an ATDS.

Further, the Court dismissed Marshall’s allegations that LiveVox, the cloud-based pass-through, placed the calls and qualified as an ATDS.  Marshall argued that because LiveVox could perform call progress analysis (such as maintaining call logs), it actually initiated the call, not CBE.  Ultimately, the Court found that Marshall had not presented any evidence or legal authority sufficient to create a genuine dispute of material fact as to LiveVox’s alleged qualification as an ATDS.  Specifically, Marshall did not show that LiveVox’s ability to track calling information meant that LiveVox has the capacity to produce or store telephone numbers to be called, using a random or sequential number generator, and to dial the numbers.

Given the human intervention necessary to place calls using MCA and Marshall’s failure to create a genuine dispute of material fact regarding LiveVox’s role, the Court held that CBE did not use an ATDS to place calls to Marshall.

The District of Nevada is one of the first courts to apply the decision from ACA International v. FCC when interpreting the definition of an ATDS.  The decision in Marshall v. CBE indicates that courts will be able to simplify their analysis of whether a telephone system qualifies as an ATDS under the TCPA by eliminating the need to determine “potential functionalities” of a calling system and instead focusing on the calling systems’ “capacity to store or produce telephone numbers to be called, using a random or sequential number generator.”

We previously reported on the Seventh Circuit Court of Appeals’ decision in Oliva v. Blatt, Hasenmiller, Leibsker & Moore, LLC, 864 F.3d 492 (7th Cir. 2017).  In Oliva, the sharply-divided Seventh Circuit held that the debt collector was liable under the Fair Debt Collection Practices Act even though the collector followed a longstanding law on venue selection, including the Seventh Circuit’s own controlling precedent at the time.  The Supreme Court has now denied the debt collector’s petition for review of the Oliva ruling.

As we explained in our previous post, the case arose out of the debt collector’s choice of venue in filing a collections lawsuit.  The debt collector relied on the Seventh Circuit’s 18-year-old controlling precedent interpreting the FDCPA’s venue provision and probably never foresaw that its entirely justified conduct would result in FDCPA liability.  The problem was that of timing.  During the pendency of the debt collection lawsuit, the Seventh Circuit overruled itself, thus rendering the debt collector’s choice of venue erroneous.  When the borrower sued, the trial court entered a judgment for the debt collector on the grounds of a bona fide error defense.  Sitting en banc, the Seventh Circuit reversed on the grounds that the new precedent applied retroactively and, therefore, the debt collector’s conduct violated the FDCPA even though it had not at the time of the conduct.  The Seventh Circuit also rejected the debt collector’s argument that its venue choice was subject to a bona fide error defense.

In its petition to the Supreme Court, the debt collector led with a quote from Justice Kennedy’s dissent in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, L.P.A., 559 U.S. 573 (2010).  The majority in Jerman held that the bona fide error defense under the FDCPA applies to mistakes of fact and not mistakes of law,  no matter how justified.  In his dissent, Justice Kennedy predicted that the Supreme Court’s holding would result in liability where a debt collector follows a “particular practice [that] is compelled by existing precedent … if that precedent is later overruled.”

This is exactly what happened here.  As the debt collector emphasized, the issue with the Seventh Circuit’s expansive reading of Jerman is that it characterized the debt collector’s error as an unprotected “mistake of law” despite the undisputed fact that, at the time of the conduct at issue, there was no mistake at all.  To be sure, the debt collector’s choice of venue did not become a mistake until the Seventh Circuit changed its controlling precedent and retroactively applied it to the debt collector’s conduct after it took place.

As a result of the Supreme Court’s denial of the debt collector’s petition, the Seventh Circuit’s ruling stays in place, along with all the unfortunate ramifications that will likely follow.  In fact, the Seventh Circuit already relied on Oliva in a recent decision and held that a defendant’s reliance on the Seventh Circuit’s prior precedent did not absolve the defendant from liability under the FDCPA.

We will continue to monitor Oliva’s progeny as it develops.

We are pleased to announce that Troutman Sanders Partner Mary C. Zinsner will moderate the Government and Financial Regulation Leaders Roundtable at the Women Leaders in Financial Services Law and Compliance Conference at the James Hotel in New York City on May 10th, 2018 at 4:30 p.m.

ACI hosts the Women Leaders in Financial Services Law and Compliance conference each year to help women learn about key developments in various legal and regulatory sections, as well as helping individuals learn about leadership and professional development. Individuals at this conference will have the chance to participate in discussions regarding challenges and opportunities that women face daily in finance. There will be open participation to engage in direct conversations about the top legal developments affecting the industry while having substantive legal topics that are designed to empower women in this space. Attendees will:

  • Gain valuable tips and advice for successful networking
  • Learn how to develop a leadership skill that is invaluable to succeed in your organization
  • Network with highly talented women in legal and compliance from across the country
  • Learn best practices to address unwanted advances and other workplace toxins
  • Stay up to date with ongoing regulatory changes and what is to be expected in the future

To register or obtain additional information, visit the ACI conference website.

Within days of realizing a data breach incident had occurred, Under Armour, Inc.—the owner of the popular calorie counting application, MyFitnessPal—began notifying its users of the breach that impacted approximately 150 million user accounts.  According to the data breach notice, the MyFitnessPal team learned on March 25 that an unauthorized party acquired data associated with MyFitnessPal user accounts.  The affected information included user names, email addresses, and passwords, but users’ payment card data remained secure since that information is collected and processed separately by MyFitnessPal.

In response to the data breach, MyFitnessPal immediately began taking steps to protect the MyFitnessPal community, including:

  1. Providing users with information on how they can protect their data;
  2. Requiring users to change their passwords and urging them to do so immediately;
  3. Monitoring accounts for suspicious activity and coordinating the company’s efforts with law enforcement authorities; and
  4. Continuing to make enhancements to their systems to detect and prevent unauthorized access to user information.

MyFitnessPal also instructed users to change their passwords for other accounts that use the same or similar information as their MyFitnessPal accounts and to monitor all accounts for suspicious activity. It is currently unknown who is responsible for the data breach. However, Under Armour has made it clear that the investigation into the matter remains ongoing.

Under Armour has already earned high marks for its quick response to the data breach, which in large part can likely be attributed to a well-oiled Incident Response Plan that had been tested through tabletop exercises.  This should serve as a reminder that companies are no longer being judged on whether a data incident occurs but rather on how they respond to such incidents—with timeliness being a key component.

According to a recent decision from the California Court of Appeal, mortgage lenders and servicers can, at least under certain circumstances, be “debt collectors” under the California Rosenthal Fair Debt Collection Practices Act, frequently referred to as the “Rosenthal Act.”.

In the case, plaintiff Edward Davidson filed a putative class action suing his mortgage servicer, Seterus, Inc., after allegedly receiving hundreds of phone calls from employees of Seterus demanding mortgage payments that Davidson had already paid or that were not yet due.  The alleged calls included threats to report negative credit information to the credit bureaus and to foreclose on Davidson’s home.  The trial court sustained Seterus’s demurrer, dismissing the complaint with prejudice based on the fact that a mortgage servicer may not be considered a debt collector under the Rosenthal Act.

The California Court of Appeal reversed the trial court’s ruling and held that Seterus and its parent company were subject to the Rosenthal Act for these alleged collection activities.

The Court noted that there is a split in authority among federal district courts that have interpreted the Rosenthal Act, that there is no California authority on the issue, and that there is no language specific to whether entities attempting to collect mortgage debt are subject to, or exempt from, the Rosenthal Act.  However, in adhering to the general principle that civil statutes enacted for the protection of the public should be broadly construed in favor of protecting the public, the Court held that the definitional language in the Rosenthal Act was sufficiently broad to include mortgage lenders and mortgage servicers.  The Court further discussed that collecting on a mortgage is the same as collecting on a consumer debt, which is governed by the Rosenthal Act.  The Court also noted that the definition of a “debt collector” under the Rosenthal Act is broader than its counterpart under the federal Fair Debt Collection Practices Act, which excludes mortgage servicers in certain circumstances.

The Court distinguished the body of case law holding that the foreclosure on a deed of trust does not constitute debt collection activity under the Rosenthal Act.  The Court noted that the present action does not involve foreclosure allegations and that it was not deciding whether a mortgage lender or mortgage servicer can be sued under the Rosenthal Act for any activity that the mortgage servicer undertakes with respect to a mortgage.  The Court held that this was a different question from the one they were currently addressing: whether a mortgage lender or mortgage servicer may ever be considered a debt collector under the Rosenthal Act, the answer to which is “yes.”

Mortgage lenders and mortgage servicers should evaluate this decision and review their policies and procedures in California to minimize potential liability under the Rosenthal Act.  Troutman Sanders is experienced in California debt collection and will continue to provide updates on new legislation, court decisions, and other legal developments in this area of law.

We are pleased to announce that Troutman Sanders attorneys David Anthony, Cindy Hanson and Ronald Raether will be panelists for a NAPBS webinar titled, “Updates, a Case Study & Legal Developments in Background Screening.”

The webinar will discuss recent case studies and case law developments that are currently affecting the background screening industry. The webinar discussion will include an update on Spokeo, Inc. and the effects of the decision by the United States Supreme Court that occurred almost two years ago; and the amicus brief filed in January of this year will also be included in discussion on behalf of NAPBS. NAPBS supports Spokeo, Inc.’s second petition for certiorari to the U.S. Supreme Court and will be discussed.

The new petition has requests that will make the U.S. Supreme Court revisit its prior ruling and add clarity and justification to the divergence in lower court rulings over the past two years. The panelists that have been chosen to speak will provide their own overview of relevant cases with implications for employers and businesses in the background screening industry.