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Does minor human involvement disqualify a telephony device as an automatic telephone dialing system, or “ATDS,” for purposes of liability under the Telephone Consumer Protection Act? In a significant decision, a District Court in the First Circuit held that it does.

In Hatuey v. IC System, Inc., plaintiff Josie Hatuey alleged that ICS violated the TCPA and Fair Debt Collection Practices Act when it continued to place calls to his cellular phone using an ATDS despite his having informed ICS that he was not the debtor or intended recipient of the call.

Hatuey obtained the cell phone through his place of employment and received calls from ICS, which was intending to contact Brian O’Neil. Hatuey claimed that ICS violated Section 1692d of the FDCPA because the calls were intended to “annoy, abuse or harass” him.  The number of calls was in dispute, and despite claiming that ICS contacted him multiple times per week, Hatuey could not offer any proof to substantiate the claim. In granting summary judgment in favor of ICS, Judge Douglas Woodlock held, “Even drawing all reasonable inferences in favor of Mr. Hatuey, this volume and pattern of phone calls does not raise the inference of an intent to harass. It only suggested that ICS sought to get in touch with the correct debtor.”

Hatuey also claimed that ICS violated the TCPA because the calls were placed to his cellular phone using an ATDS and he had not provided consent for such calls. The Hatuey Court granted summary judgment in favor of ICS, holding that what distinguishes an ATDS is the capacity of the system to dial telephone numbers from a list without human intervention: “Even if I were to accept a broad reading of the FCC’s definition of an ATDS as a system which may draw phone numbers from a database, rather than only through a random or sequential number generator, there would be no genuine issue of material fact on Mr. Hatuey’s TCPA claim. Both Mr. Hatuey and ICS agree that the relevant calls were placed using a system known as LiveVox HCI, and that this system requires a human ‘clicker agent’ who must manually click a button to place a call. This alone disqualifies the LiveVox HCI system as an ATDS under the TCPA,” Judge Woodlock wrote.

TCPA and FDCPA cases around the country are replete with examples of plaintiffs seeking to recover damages from debt collectors for calls placed to “recycled” numbers.  The Hatuey decision serves as an example that such cases can be successfully defended.

On October 17, the Office of Information and Regulatory Affairs released the CFPB’s fall 2018 rulemaking agenda.  In the preamble to the agenda, the CFPB notes that the agenda lists the regulatory matters that the agency “reasonably anticipates having under consideration during the period from October 1, 2018 to September 30, 2019.”

Implementing Statutory Directives.  According to the CFPB, much of its rulemaking agenda focuses on implementing statutory directives.  Those statutory directives include:

  • The directive by the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”) that the CFPB engage in rulemaking to (1) exempt certain creditors with assets of $10 billion or less from certain mortgage escrow requirements under the Dodd-Frank Act, and (2) develop standards for assessing consumers’ ability to repay Property Assessed Clean Energy (“PACE”) financing; and
  • The Dodd-Frank Act’s directive that the CFPB, prior to any public disclosure, modify or require modification of loan-level data submitted by financial institutions under the Home Mortgage Disclosure Act (“HMDA”) so as to protect consumer privacy interests.

Continuation of Other Rulemakings.  In addition, the CFPB notes that it “is continuing certain other rulemakings described in its Spring 2018 Agenda.”  Those continuing rulemaking efforts include:

  • Anticipated rulemaking to reconsider the 2017 Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule; 
  • Anticipated rulemaking to reconsider its 2015 HMDA rule, for instance, by potentially revisiting such issues as the institutional and transactional coverage tests and the rule’s discretionary data points; and 
  • Anticipated rulemaking to address how to apply the 40-year-old Fair Debt Collection Practices Act (“FDCPA”) to modern collection practices.

Further Planning.  The CFPB also notes that it “has a number of workstreams underway that could affect planning and prioritization of rulemaking activity, as well as the way in which it conducts rulemakings and related processes.”  Those workstreams include:

  • Ongoing efforts to reexamine rules that the Bureau issued to implement Dodd-Frank Act requirements concerning international remittance transfers, the assessment of consumers’ ability to repay mortgage loans, and mortgage servicing;
  • Ongoing efforts to reexamine rules implementing a Dodd-Frank Act mandate to consolidate various mortgage origination disclosures under the Truth in Lending Act and Real Estate Settlement Procedures Act;
  • Ongoing efforts to reexamine the requirements of the Equal Credit Opportunity Act (“ECOA”) concerning the disparate impact doctrine, in light of recent Supreme Court case law and Congressional disapproval of a prior Bureau bulletin concerning indirect auto lender compliance with ECOA and its implementing regulations; and
  • Ongoing efforts directed at determining whether rulemaking or other activities may be helpful to further clarify the meaning of “abusiveness” under section 1031 of the Dodd-Frank Act.

We are proud to announce that Troutman Sanders partner David Anthony will be a featured speaker at the Practising Law Institute’s 23rd Annual Consumer Financial Services Institute at the Practising Law Institute (PLI) Center in New York City on March 26-27, 2018.

In its 23rd year, topics will focus on a broad array of recent regulatory, enforcement and litigation issues relating to mortgages; auto finance; credit, debit and prepaid cards; marketplace lending and Fintech; deposit accounts; student loans; and other products and services. We will also focus on new developments pertaining to fair lending, and the TCPA, FDCPA, FCRA, Military Lending Act and SCRA. Join us and our esteemed faculty for an insightful review of this dynamic area of legal practice.

David will speak on a panel entitled “Fair Credit Reporting Act & Debt Collection Issues” on Monday, March 26 from 4:00 – 5:00 p.m. The panel will discuss reporting on authorized user accounts, and what it means for defining “accuracy,” viability of standalone disclosure claims, dangers of class trials on statutory damages claims, impact of the Equifax data security breach on FCRA litigation, and increasing public and private litigation directed at debt collection mills.

On January 10, the FTC issued a report summarizing the themes and key takeaways from a recent workshop it jointly hosted with the National Highway Traffic Safety Administration (NHTSA) on privacy and security issues related to connected and autonomous cars.

The report – styled a “Staff Perspective” – noted several important themes that emerged from the joint workshop:

  • Companies “throughout the connected car ecosystem” will collect data from vehicles, including car manufacturers, component manufacturers, third-party component manufacturers, and auto insurance companies.
  • The data collected from vehicles will include not only aggregate and non-sensitive data but also “sensitive personal data” about the occupants of vehicles, including “fingerprint and iris pattern” data used for authentication purposes.
  • Given the variety of companies that will collect data and the types of data that will be collected, “consumers may be concerned about secondary, unexpected uses” of the data.
  • Connected and autonomous vehicles will present cybersecurity risks that can potentially be exploited.

Consistent with those themes, the report stressed that “addressing consumer privacy concerns is critical to consumer acceptance and adoption of the emerging technologies behind connected cars.”

It also stressed that the industry should voluntarily adopt “best practices” for mitigating cybersecurity risks, including industry-wide information sharing regarding cyber vulnerabilities, segregated network design, ongoing risk assessment and mitigation efforts, and implementation of government and standard-setting agency guidelines.

The FTC’s report is available here.

The United States District Court for the Central District of California recently granted summary judgment to Sirius XM Radio, Inc. in a putative class action under the Driver’s Privacy Protection Act (“DPPA”).

As background, plaintiff James Andrew alleged on behalf of himself and a putative class that Sirius sent solicitation letters using personal information obtained from motor vehicle records in violation of the DPPA’s limits on marketing uses.  Prior to the filing of Sirius’ motion for summary judgment, counsel for Sirius explained to Andrew’s counsel that the satellite radio broadcaster had not obtained the “personal information” of Andrew or any other class members from the state’s Department of Motor Vehicles but instead obtained Andrew’s name, address, telephone number, and vehicle information from a combination of Auto Source, the dealer from which Andrew purchased the vehicle, and the United States Postal Service’s change of address database.  Despite Sirius providing Andrew’s counsel with declarations supporting these facts, Andrew refused to dismiss the suit.

In his opposition brief to Sirius’ motion for summary judgment, Andrew argued that “the DPPA extends beyond information obtained from a state’s DMV and includes Defendant’s use of information obtained from the driver license Plaintiff provided to Auto Source and the information Auto Source input [into a computer program] to prepare and submit a DMV change of ownership form for the vehicle Plaintiff purchase[d].”

In granting Sirius’ motion, the Court held that “[l]ike the Supreme Court and the vast majority of other courts to have analyzed the issue, this Court interprets the DPPA’s definition of ‘motor vehicle record’ as requiring that the DMV be the source of the ‘record.’”  The Court further held that “[i]nterpreting the statute as Plaintiff suggests and construing a ‘motor vehicle record’ to include a driver license would render the definition’s use of both ‘record’ and ‘pertains to’ as surplusage because the driver license would be ‘pertaining’ to itself and ignore the requirement that it also be a ‘record.’”  Further, Andrew’s “reasoning would criminalize the conduct of, and create civil liability for, the Good Samaritan who finds a lost wallet and uses the name and address found on the driver license found in the wallet to return the wallet to its owner.  Acknowledging that a driver license is not itself a ‘motor vehicle record’ ‘contained in the records’ of the DMV avoids such absurd results.”

The Court ultimately concluded “that the undisputed facts establish that Defendant did not ‘use’ ‘personal information’ ‘from a motor vehicle record’ when it obtained Plaintiff’s name, address, phone number, and vehicle information from Auto Source’s [computer program] and the Postal Service’s change of address database.”  As such, the DPPA’s limits on marketing uses did not apply.

The case is Andrews v. Sirius XM Radio, Inc., No. 5:17-cv-01724 (C.D. Cal.).

The U.S. Chamber of Commerce and other business groups have filed a federal lawsuit seeking to invalidate the Consumer Financial Protection Bureau’s Rule banning class action waivers in arbitration provisions contained in financial institutions’ contracts with consumers.  Compliance with the Rule would be required beginning March 19, 2018.  The lawsuit was filed in the United States District Court for the Northern District of Texas.

The Lawsuit

The lawsuit seeks declaratory and injunctive relief to invalidate the Rule, and it challenges the Rule on procedural and substantive bases.

The Chamber of Commerce and the coalition allege that, because the CFPB authorized the Rule without conducting the type of “narrow” study of arbitration issues mandated by the Dodd-Frank Act, the Rule violated the Administrative Procedures Act and is therefore invalid.

The lawsuit also alleges that the “opaque and flawed” study conducted by the CFPB was not “fair, unbiased [or] thorough” and that it ignored and misinterpreted key data in issuing the final Rule, which did not show that such clauses negatively affect consumers.  It also states that the Rule ignores the federal policy favoring arbitration.

Finally, the lawsuit alleges that the CFPB is itself unconstitutional.

The Substance of the Rule

The Rule contains requirements that apply to a provider’s use of a “pre-dispute arbitration agreement” that is entered into on or after the compliance date.  The Rule defines “pre-dispute arbitration agreement” as an agreement that (1) is between a covered person and a consumer, and (2) provides for arbitration of any future dispute concerning a covered consumer financial product or service.  The form or structure of the agreement is not determinative;  an agreement can be a pre-dispute arbitration agreement under the Rule regardless of whether it is a standalone agreement, an agreement or provision that is incorporated into, annexed to, or otherwise made a part of a larger contract, is in some other form, or has some other structure.

The Rule prohibits a provider from relying on a pre-dispute arbitration agreement entered into after the compliance date with respect to any aspect of a class action that concerns any covered consumer financial product or service.  That prohibition may apply to a provider with respect to a pre-dispute arbitration agreement initially entered into between a consumer or a covered person other than the initial provider, such as debt collectors seeking to collect on the contract or assignees of the contract.  The CFPB also specifically stated that the Rule applies to “indirect automobile lenders,” using them as an example of covered entities.

The Rule requires that, upon entering into a pre-dispute arbitration agreement, a provider must ensure that certain language set forth in the Rule is included in the agreement.  Generally, the required language informs consumers that the agreement may not be used to block class actions.

The Rule also requires providers that use pre-dispute arbitration agreements to submit certain records relating to arbitral and court proceedings to the CFPB.  The requirement to submit these records applies to: (1) specified records filed in any arbitration or court proceedings in which a party relies on a pre-dispute arbitration agreement; (2) communications the provider receives from an arbitrator pertaining to a determination that a pre-dispute arbitration agreement does not comply with due process or fairness standards; and (3) communications the provider receives from an arbitrator regarding a dismissal of or refusal to administer a claim due to the provider’s failure to pay required filing or administrative fees.

The CFPB will use information it collects to continue monitoring arbitral and court proceedings in order to determine whether there are consumer protection concerns that may warrant further Bureau action.  The CFPB is also finalizing provisions that will require it to publish on its website the materials it collects, with appropriate redactions as warranted, to provide greater transparency into the arbitration of consumer disputes.

Looking Forward

Congress still has time to invalidate the Rule under the Congressional Review Act, although a crowded and log-jammed legislative agenda has called into doubt whether action will be taken by the early November deadline.

A change in leadership at the CFPB could also be in the cards, with CFPB Director Richard Cordray being closely watched for a possible run for governor in Ohio.  New leadership could, in theory, take action to stop the Rule.

However, the court challenge has been long expected as a major effort by business interests to thwart the Rule.

Troutman Sanders LLP advises clients both within and outside the CFPB’s authority in developing and administering consumer arbitration agreements.  The Firm has a nationwide defense practice representing financial institutions and other consumer-facing companies in a plethora of types of class actions and individual claims.  Troutman Sanders will continue to monitor the proposed implementation of the Rule and this lawsuit, along with related ongoing legislative efforts to invalidate the Rule.

A recent federal court decision granting summary judgment to a plaintiff on a claim that a lender violated the Fair Credit Reporting Act (the “FCRA”), 15 U.S.C. § 1681 et seq., by failing to conduct a “reasonable” investigation of a credit reporting dispute – an issue normally reserved for a jury – illustrates the difficulty creditors have in managing the legal risks in furnishing information to consumer reporting agencies.  It also illustrates the particularly high risks creditors face in handling claims of identity theft, and the risks they run when they fail to take advantage of multiple disputes to address a problem. 

On September 21, 2017, the District Court for the Eastern District of Virginia resolved cross-motions for summary judgment in favor of Plaintiff David W. Wood (“Wood” or “Plaintiff”) in a case against Defendant Credit One Bank (“Credit One” or “Defendant”) for violations of the FCRA.  See Wood v. Credit One Bank, No. 3:15-cv-594 (E.D. Va. Sept. 21, 2017).  Wood alleges that he was the victim of identity theft after a Credit One credit card account was opened in his name, and that Credit One failed to investigate and remedy inaccurate credit reporting after he submitted multiple disputes with consumer reporting agencies (“CRAs”).  The Court agreed, holding that Credit One had failed to conduct a reasonable investigation into Wood’s disputes, failed to accurately report the results of its investigations, and inaccurately reported that Wood opened and was responsible for the account in question.      

Here are the facts.  On June 11, 2013, Credit One received a credit application and opened a credit card account (the “Account”) in Wood’s name.  The application included identifying information for Wood, but a primary e-mail address belonging to another individual. The Account was activated three days later.  On the same day, a request to add an authorized user to the account was submitted, but the request was denied because the voice “was not recognized to be one that would match the Account details.”  Testimony by Credit One’s representative suggests that the request was denied because the gender of the caller did not match that of the account holder.  The credit limit was exceeded shortly after the Account was opened, no payments were ever made, and Credit One eventually sold the account. 

Wood became aware of the Account five weeks after it was activated when he received a bill in the mail.  He testified that he immediately reported it to Credit One as fraudulent and began monitoring his credit with Equifax.  Wood suspected that his mother, Dyan Lollis, and aunt, Frieda Wood, were tampering with his mail.  And in fact, Wood’s mother later submitted an affidavit certifying that the account was opened “against [Wood’s] will” and that she wished to have it transferred back into her name.  But before obtaining that affidavit, Wood reported the fraudulent activity to local police, accusing his mother of opening the account.  Although a police report was prepared, the investigation did not progress, and the Sergeant assigned to the case would eventually opine in an affidavit that she believed Wood was simply trying to have his bill written off.  

In total, Wood testified that he contacted Credit One at least thirty times by letter or phone, although Credit One claimed it only had records of four communications.  Credit One also alleged that they sent two requests for an affidavit of fraud that went unanswered.  What is certain is that Wood began disputing the Account with the CRAs in July 2014.  When Credit One received the Automated Consumer Dispute Verification (“ACDV”) form, it verified the name, social security number, and birthday provided by Wood with its internal records.  Although the address Wood provided did not match Credit One’s records, the company responded to the ACDV by indicating the Account was verified, should be modified as indicated (i.e., with the address Credit One had on file), and reported a Compliance Condition Code (“CCC”) of “XH;” meaning that the account was previously in dispute, but that the dispute was now resolved.  After the first ACDV response, Wood did not dispute the reporting again until the following year.  However, starting in April 2015 and ending in June 2015, Wood sent a total of five ACDVs alleging that the Account was fraudulent.  In each instance, Credit One “verified” the information and reported a CCC of XH – account previously disputed, now resolved.  While Credit One maintained that it performed an investigation after each dispute, at least two of the responses included a notation that Wood was “previously found responsible” and “no further action was taken.”   

Beyond the events that transpired, Credit One’s reporting policies were central to the Court’s decision.  Of the ten CCCs a furnisher – an entity that provides data to CRAs – could use to describe the status of an account in dispute, three were relevant in this case: XB (consumer disputes account information under the FCRA), XC (investigation of dispute complete, consumer disagrees with result), and XH (account previously in dispute, now resolved).  But Credit One’s policies and testimony from their corporate representatives revealed that “[i]n almost all situations” Credit One agents should respond to an ACDV with XH.  And in cases where an account had been purged or sold, such as Wood’s, the policy was to either delete the account (if the consumer was found not responsible) or report XH.  Moreover, testimony revealed that Credit One never responded to an ACDV with XC – that the investigation was complete, but the results were disputed by the consumer – and would apparently forego investigations where an account had been “verified” in the past thirty days.    

The Court’s decision.  The Court first addressed Credit One’s Motion for Summary Judgment, which argued that Wood could not prove actual damages or a willful violation of the FCRA.  With respect to damages, Credit One argued that Wood’s allegations were insufficient because they were only supported by his own testimony – that Wood had offered nothing beyond his own statements to prove emotional distress, lost income, lost credit opportunities, etc.  But the Court rejected this argument and held that Wood’s testimony alone, which it found more than conclusory, was sufficient to create a genuine dispute of material fact and survive summary judgment.  The Court also disagreed that there was insufficient evidence of a willful FCRA violation.  Indeed, the Court held that a reasonable juror could find that Credit One’s actions were willful because, in light of its practice of never reporting when a consumer disagrees with the results of an investigation and relying on findings from prior investigations, it intended to not report the ongoing dispute involving Wood’s Account.  

The Court next addressed Wood’s Motion for Partial Summary Judgment.  First, the Court held there was no genuine dispute over whether Wood opened and was responsible for the Account.  The Court relied on Wood’s uncontroverted testimony that he had never done so and the affidavit by Wood’s mother stating that the account was opened against her son’s will and that she was the rightful owner.  Credit One sought to dispute this evidence by using its responses to Wood’s interrogatories and other testimony, but the Court refused to consider the interrogatory responses after a procedural error by Credit One and otherwise rejected the proffered testimony as conclusory.  The Court then considered if there was a genuine dispute over whether Credit One conducted a reasonable investigation.  The Court determined there was not.  

In concluding there was no dispute over whether Credit One conducted reasonable investigations, the Court focused largely on the cursory and repetitive nature of Credit One’s inquiries.  Specifically, in three of the six disputes, Credit One merely verified that the personal information provided on the ACDVs matched its internal records.  But the Court also found that Credit One’s evidence failed to create a genuine dispute of fact because it focused on what Wood apparently did not do instead of contradicting what he claimed he had done.  For example, Wood claimed he had contacted Credit One thirty times, and the company’s only rebuttal to that claim was that it was “not corroborated by Credit One’s account history notes.”  The Court found this to be conclusory, and insufficient to rebut Wood’s testimony of numerous and frequent contact.  And in light of such contact, the Court found Credit One’s practice of simply matching personal identifiers to be an unreasonable response to the disputes.       

Finally, the Court considered whether Credit One correctly reported the results of its investigations into Wood’s disputes.  The Court again concluded that Credit One’s actions ran afoul of the FCRA.  Here the Court focused on Credit One’s use of the CCC of XH, holding that “[b]y reporting a CCC of XH when Wood was continuing to dispute the accuracy of Credit One’s reporting, Credit One ‘create[d] a materially misleading impression,’ that the Account was not in dispute.”  The Court rejected Credit One’s argument that ‘now resolved’ means an investigation has been completed in compliance with the FCRA.  Instead, the Court reasoned that the plain language of the XH CCC implies that any dispute the consumer previously had about the account is settled, or a solution has been found.  In this case, given Wood’s repeated disputes, “Credit One’s investigations clearly did not solve or end the dispute.” 

The important takeaways.  Although this decision does not create binding precedent, the case should put data furnishers on notice that finishing an investigation and responding to an ACDV does not necessarily signal the end of a dispute, and furnishers should report accordingly.  As a threshold matter, a Court granting summary judgment to a plaintiff on the basis that a defendant acted unreasonably – an issue almost always reserved for the jury – shows that this Court took a dim view indeed of the defendant’s conduct.  Factors playing into that negative view included that there are multiple disputes in close proximity to each other, or the consumer otherwise indicates that they disagree with the conclusion of an investigation.  Individual FCRA cases in the past that have resulted in large verdicts often involve multiple complaints and disputes that are handled in a perfunctory manner by a creditor. The case also highlights the importance of establishing policies that allow for more probing inquiries when there are frequent or recurring disputes.  Although time and efficiency are always of concern, relying on previous investigations to dismiss new disputes can have costly repercussions.  And this case signals that Courts may focus more on the impression a particular type of reporting creates over whether the reporting complied with industry standards.  Finally, identity theft disputes have generated a well-deserved reputation as being particularly dangerous for creditors, and this case validates that reputation with yet another bad litigation outcome. 

As always, working closely with counsel to maintain effective policies and procedures can help reduce these risks.  To that end, Troutman Sanders stands ready and able to help your business navigate the ever-changing landscape of FCRA law.

 

On August 23, a federal judge in Illinois ruled that a consumer who had multiple accounts with different creditors assigned to the same collection agency did not effectively revoke consent for all accounts merely by revoking consent for one.  Specifically, the Court said that when a consumer told a collection agency to stop calling him in response to a call made on a specific creditor’s account, it was not a “global” revocation with respect to all remaining creditors.

In Michel v. Credit Protection Association, L.P., et al., plaintiff Matthew Michel incurred debts with two separate creditors – Comcast and Commonwealth Edison (ComEd).  Defendant Credit Protection Association (CPA) received both accounts for collection, but at different times.  CPA first received the Comcast debt and began placing multiple calls to Michel’s cell phone to collect on that debt.  Michel called CPA and revoked his consent to be contacted on his cell phone.  Per Michel’s request, CPA ceased calling on the Comcast account.

Soon thereafter, CPA received the ComEd account to collect on, and it began calling Michel’s cell phone in an attempt to collect that debt.  Michel claimed that when CPA contacted him and left messages, it failed to inform him that the calls were for the ComEd account.  CPA replied it had sent letters to Michel regarding the ComEd account, which contained an eleven-digit account number.  Further, CPA referenced that account number when leaving messages for Michel.

Michel sued CPA, claiming it violated the FDCPA and the TCPA when it continued to contact his cell phone using an automatic telephone dialing system (“ATDS”) after Michel revoked consent.  Both parties moved for summary judgment on the sole issue of whether Michel’s revocation of consent for the Comcast account also applied to calls made on the ComEd account.

Claiming he should recover for all calls made to him after revocation of consent, Michel argued that:

(1)     His call to CPA revoked any prior consent regardless of whether it was for Comcast or ComEd;

(2)     He should not have had to decipher the eleven-digit account number to determine which account CPA was calling on; and

(3)     CPA had the ability to perform searches within its database to determine whether Michel had multiple accounts and, therefore, should have placed his cell phone number on a “do not call” list.

In turn, CPA simply argued that Michel’s revocation of consent to his Comcast account did not apply to other subsequent accounts placed by different creditors.  If Michel wanted to revoke consent, he needed to do so on each individual account.

In holding for CPA, the Court found that revocation of consent for one creditor was not revocation of consent for all creditors.  Even though Michel could show he revoked his consent for the Comcast account, that alone was not enough to constitute a global revocation.

The Court noted that when Michel revoked his consent for the Comcast account, he was also returning a call to CPA made on behalf of Comcast.  The Court stressed the “creditor specific” nature of Michel’s actions and found he could not anticipatorily revoke consent for future calls placed by CPA on behalf of other creditors.  Further, the court observed that, though tedious for Michel to distinguish which account CPA was calling upon, the burden fell upon him to make that distinction if CPA provided sufficient identifying factors to separate the accounts.

Lastly, the Court was unpersuaded by Michel’s argument that CPA must cross-reference accounts submitted by all creditors to determine if a consumer had revoked consent for a different creditor merely because CPA has the capacity to do so.  Rather, the Court stated the TCPA simply required CPA to refrain from calling Michel using an ATDS on the Comcast account once consent was revoked.  It does not place an additional burden on CPA to proactively mark a consumer’s cell phone number in anticipation of additional creditors placing accounts that would allow calls to the consumer’s cell phone.

This case provides valuable insight for those collection agencies that represent multiple creditors against the same consumer.  We will continue to monitor this area of the law as these cases develop.

On September 20, the Consumer Financial Protection Bureau issued proposed policy guidance that would modify a mortgage disclosure law in an effort to protect applicants’ and borrowers’ privacy.

In 2015, the CFPB finalized changes to the Home Mortgage Disclosure Act (“HMDA”), which requires lenders to report and disclose to the public certain information about their mortgage lending activities.  The HMDA’s purpose is to help determine whether financial institutions are serving the housing needs of their communities; to assist public officials in distributing public-sector investment and attracting private investment in areas where it is needed; and to identify possible discriminatory lending patterns and enforce anti-discrimination statutes.  To achieve these goals, the CFPB plans to disclose most of the collected data to the public in 2019.

The CFPB proposes to exclude the following data from public disclosure to protect the privacy of applicants and borrowers:

  • the universal loan identification number;
  • the application date;
  • the date of action taken by the financial institution on a covered loan or application;
  • the address of the property securing the loan or, in the case of an application, proposed to secure the loan;
  • the applicant’s credit score relied on in making the credit decision;
  • the unique identification number assigned by the Nationwide Mortgage Licensing System and Registry for the mortgage loan originator;
  • the result generated by the automated underwriting system used by the financial institution to evaluate the application; and
  • free-form text fields used to report the following: applicant or borrower race and ethnicity; the name and version of the credit scoring model used to generate each credit score or credit scores relied on in making the credit decision; the principal reason or reasons the financial institution denied the application, if applicable; and the automated underwriting system name.

The CFPB also proposes to reduce the specificity of some information disclosed to the public.  For instance, the applicant’s or borrower’s age will be published as a range rather than as a specific number, and property values or loan amounts will be reported in $10,000 increments.

The CFPB has said that these proposed changes seek to maintain a balance of privacy risks and benefits of disclosure, and it has invited public comment on the proposals.

Also on September 20, in a related action, the CFPB issued a final rule modifying Equal Credit Opportunity Act regulations to provide flexibility and clarity to mortgage lenders in the collection of consumer ethnicity and race information.  ECOA is aimed at protecting against discrimination in the financial marketplace and restricts lenders’ ability to ask consumers about their race, color, religion, national origin, or gender, except in certain circumstances.  The finalized rule now allows lenders to ask mortgage applicants more detailed questions about their race and ethnicity and provides lenders the ability to use a broader range of uniform documents, including the Uniform Residential Loan Application.

This past May, Rep. Barry Loudermilk (R-Ga.) introduced H.R. 2359, the FCRA Liability Harmonization Act, which would cap class action damages in Fair Credit Reporting Act claims at $500,000 or one percent of the defendant’s net worth, whichever is less, and eliminate punitive damages.  Such changes would align the Fair Credit Reporting Act with numerous other consumer protection laws already in place, such as the Truth in Lending Act, the Fair Debt Collection Practices Act, the Equal Credit Opportunity Act, and the Electronic Funds Transfer Act.

Specifically, the bill amends Section 616 of the FCRA (15 U.S.C. §1681n) and Section 617 of the FCRA (15 U.S.C. §1681o7):

  1. Willful Noncompliance.—Section 616 of the Fair Credit Reporting Act (15 U.S.C. 1681n) is amended—(1) in subsection (a)—(A) by striking paragraph (2); (B) by redesignating paragraph (3) as paragraph (2); and (C) in paragraph (1)(B), by inserting “and” after the semicolon; (2) by redesignating subsection (d) as subsection (e); and (3) by inserting after subsection (c) the following new subsection: “(d) Class Action Lawsuits.—With respect to a class action (as such term is defined in section 1711 of title 28, United States Code), or series of class actions arising out of the same failure to comply of a person, brought by consumers against a person who willfully fails to comply with any requirement imposed under this title, such person is liable to such consumers in such an amount as a court may determine, except that—“(1) the court may not apply a minimum amount of damages for each member of the class; and “(2) the total recovery (excluding reasonable attorney’s fees as determined by the court) of the class shall not exceed the lesser of—“(A) $500,000; or “(B) 1 percent of the net worth of such person.”
  2. (b) Negligent Noncompliance.—Section 617 of the Fair Credit Reporting Act (15 U.S.C. 1681o7) is amended by adding at the end the following new subsection: “(c) Class Action Lawsuits.—With respect to a class action (as such term is defined in section 1711 of title 28, United States Code), or series of class actions arising out of the same failure to comply of a person, brought by consumers against a person who negligently fails to comply with any requirement imposed under this title, such person is liable to such consumers in an amount equal to the sum of any actual damages sustained by the consumers as a result of the failure, except that the total recovery (excluding reasonable attorney’s fees as determined by the court) of the class shall not exceed the lesser of— “(1) $500,000; or “(2) 1 percent of the net worth of such person.”

Groups in support of this legislation include U.S. Chamber Institute for Legal Reform, U.S. Chamber of Commerce, American Bankers Association, Consumer Bankers Association, Financial Services Roundtable, Credit Union National Association, Retail Industry Leaders Association, International Franchise Association, Electronic Transactions Association, American Financial Services Association, National Association of Professional Background Screeners, Software and Information Industry Association, National Automobile Dealers Association, and Consumer Data Industry Association.

The bill has been opposed by many other associations, including the National Association for Consumer Advocates.

The bill is currently before a subcommittee in the House of Representatives, and a hearing was held on the bill earlier this month.  Troutman Sanders LLP will continue to monitor its progress and any associated legislative developments.