Monday, January 15, 2018

Second Circuit Holds Flu Shot Reminder Did Not Violate the TCPA

The Second Circuit has affirmed a lower court decision that a flu shot reminder sent by text message by a medical provider did not violate the Telephone Consumer Protection Act (the “TCPA”).  The decision is important because it interprets the 2012 FCC Healthcare Exemption as providing an exemption as to prior written consent rather than a wholesale exemption from consent.  Latner v. Mount Sinai Health System, Inc., 2018 U.S. App. LEXIS 114 (2nd Cir. Jan. 3, 2018).

The limited record indicates that Mr. Latner visited Mt. Sinai in 2003 for a routine health examination.  At that time, he filled out new patient forms including a “New Patient Health Form” which contained his contact information, as well as an “Ambulatory Patient Notification Record” granting the hospital and its facilities consent to use his health information “for payment, treatment and hospital operations purposes.”  In 2011, Mr. Latner visited Mt. Sinai again and declined any immunizations.  In 2014, Mt. Sinai, through a third-party vendor, sent Mr. Latner the following text message: “Its flu season again.  Your PCP at WPMG is thinking of you! Please call us at 212-247-8100 to schedule an appointment for a flu shot…”  Latner at *3.  The message was sent to all active patients, including Mr. Latner, that had visited the office in the three years prior to the date of the text.

Mr. Latner filed a putative class action, alleging that the text message violated the TCPA.  The hospital moved for judgment on the pleadings and asserted, as an affirmative defense, Mr. Latner’s prior express consent. Latner, 1:16-cv-00683 (S.D.N.Y.), Dkt. No. 42. 

In affirming the district court’s ruling, the Second Circuit did a two-step analysis.  It first determined whether the communication was covered by the 2012 FCC Healthcare Exemption and secondly, determining whether Mr. Latner had provided effective consent. 

The Second Circuit concluded that the communication was covered by the 2012 FCC Healthcare Exemption.  Under the 2012 FCC Telemarketing Rule, prior written consent is required for autodialed or prerecorded telemarketing calls.  The Rule, however, contains an exemption for covered healthcare providers in certain instances.  The court determined that the Healthcare Exemption exempts from written consent “calls to wireless cell numbers if the call ‘delivers a ‘health care’ message made by, or on behalf of, a ‘covered entity’ or its ‘business associate’ as those are defined in the HIPPA Privacy Rule.”  “HIPPA defines health care to include ‘care, services, or supplies related to the health of an individual’… and exempts from its definition of marketing all communications made ‘[f]or treatment of an individual by a health care provider… or to direct or recommend alternative treatments’ to the individual.” Id. at *5.  Both the district court and the Second Circuit concluded that the text message qualified for the FCC’s Healthcare Exemption.

The Second Circuit then moved to the issue of prior express consent and reviewed the terms of the consent provided by Mr. Latner in his 2003 consent forms.  Of particular importance to the court, the forms provided consent to use Latner’s information “to recommend possible treatment alternatives or health-related benefits and services.” Id. at *6-7.    The court concluded that the language of the forms therefore provided prior express consent to receive text messages concerning a “health related benefit” such as a flu shot.

The opinion is important for a few reasons.  First, it clarifies that the Healthcare Exemption only exempts covered communications from written consent and is not a wholesale exemption as to consent. Secondly, the opinion emphasizes the importance of carefully worded consent provisions.  All business verticals which use automated messaging, calls or text messages should review their intake documents to ensure that consent is properly addressed as to the scope of any contemplated telecommunications and then should again review any contemplated mass communications prior to being made in light of their consent documents.  Finally, the opinion notes by footnote that the text message (which was sent in 2014) was not covered by the FCC’s 2015 Healthcare Treatment Exception because “there is no language in the 2015 FCC order suggesting any intent to make the Exception retroactive, much less justification for any asserted retroactivity, precluding its application in this instance.” Id. at FN 2.

Thursday, January 11, 2018

Debt Collection Letter's Inclusion of Court Costs Was Not Deceptive

Any opinion that starts out by stating “[t]his case is about $82.00” is not likely to go well for one party and in this instance, that was the case for Nestor Saroza.  A New Jersey district court recently held that a debt collection letter was not false or deceptive when it included court costs in its demand for the balance.  In Saroza v. Lyons, Doughty & Veldhuis, 2017 U.S. Dist. LEXIS 208913 (D.N.J. Dec. 19, 2017), the collection law firm filed a collection suit seeking recovery of the balance due ($9,971.55), plus court costs.  Its subsequent collection letter demanded a balance of $10,053.55.  The difference, $82.00, was comprised of court costs.  The consumer filed suit asserting that the demand letter violated the FDCPA because the $82.00 was not part of the debt.  The demand letter in question read as follows:


Re: Capitol One Bank (USA), N.A. v. NESTOR SAROZA

Docket No. DC-00065-16

Amount Due: $10,053.55


We have filed suit to recover the balance due in the above matter. However, our goal is to resolve the debt in a way that is manageable for you. We encourage you to contact us. If you would rather not call us, you can ask questions and/or make a settlement offer or payment arrangement proposal via our website: . . . .


In support of dismissal, the law firm presented the credit card agreement which provided for the recovery of the creditor’s collection expenses, attorneys’ fees and court costs and pointed to the collection suit to support its argument that the letter was accurate.  The consumer meanwhile argued that the letter did not explain the filing fees were included and thus, was false, deceptive or misleading.  According to the court, “[i]n essence, the line Saroza wants this Court to draw seems to be that collection notices which say ‘with costs’ are permissible under the FDCPA but those that add the costs into the requested sum are not.”  Saroza at *7-8.  The court declined to do so.  Instead, the court determined that this was a distinction without a difference - particularly where the costs are accurate and the consumer was on notice from the Customer Agreement that this could happen.

The court also rejected the consumer’s argument that the omission of the court costs from the summons issued by the state court, coupled with the letter, was misleading.  In doing so, the court noted that the summons was issued by the court not the defendant and placed the burden on Saroza to read the complaint served with the summons.

In dismissing the law suit, the Court made clear that certain basic responsibilities fall upon a consumer – to read the documents provided to him by the creditor and debt collector.  The Court further emphasized a theme that we are seeing more and more: that the FDCPA will not allow liability for bizarre or idiosyncratic interpretations of collection notices and preserves a quotient of reasonableness and presumes a basic level of understanding and willingness to read with care.  See Wilson v. Quadramed Corp., 225 F.3d 350, 354-55 (3rd Cir. 2000)

Wednesday, January 3, 2018

District Court Takes Expansive View of "Deceptive or Misleading" Practices under FDCPA

By Zachary Dunn

The FDCPA prohibits a debt collector from using “any false, deceptive, or misleading representation” in connection with the collection of a debt. See 15 U.S.C. § 1692e.  Recently, the Eastern District of New York took an expansive view of section 1692e, thereby making truthful statements a violation of the statute’s mandates.

In Islam v. Am. Recovery Serv., 2017 U.S. Dist. LEXIS 180415 (S.D.N.Y. Oct. 30, 2017), the plaintiff, Fatema Islam, failed to pay the balance due on her credit card with Bank of America, N.A., and Bank of America responded by placing Islam’s account with American Recovery Service (“ARS”) for collection.  Id. at *2.  ARS sent a letter to Islam on August 11, 2016 stating, in relevant part, that “[a]s of the date above, you owe $14,413.78.”  The letter also included a table of information which provided other details – such as identifying Bank of America as the original creditor,” noting that the “total amount of the debt due as of charge-off" as $14,413.78; declaring that the “total amount of interest accrued since charge off” was $0, and further notifying Islam that the “total amount of non-interest charges or fees accrued since charge-off” was $0.  After the table, the letter again advised Islam that “[t]he balance owed above reflects the total balance due as of the date of this letter. The itemization reflects the post charge-off activity we received from Bank of America.” Id. (emphasis added).   

Bank of America maintained a policy that any charged off account would not accrue any new interest or fees after the date of charge off.  Consistent with that policy, the balance on Islam’s account had not grown since it was charged off on August 4, 2016.  Based solely on the language of the August 11, 2016 letter, Islam filed suit alleging that the letter was false or misleading in violation of 15 U.S.C. § 1692e.

The court agreed, and based its analysis on the Second Circuit’s 2016 decision in Avila v. Riexinger & Associates, 817 F.3d 72 (2d Cir. 2016).  In Avila, the Second Circuit encountered a case in which a collection letter disclosed the “current balance” of the debt, but did not disclose that after the date of the collection letter, the account was continuing to accrue interest and late fees.  Id. at 75-76.  The Second Circuit held that because the collection notice “did not disclose that the balance might increase due to interest and fees,” it was a “deceptive [or] misleading representation” of the amount due under the general prohibition of 15 U.S.C. § 1692e.  Id.

While the Islam court found Avila to be “factually distinguishable,” it held that Avila’s analytical framework dictated the outcome.  The court explained that the language of ARS’ letter – that Islam’s debt was $14,413.78 “as of the date of” the letter – suggested that Islam’s debt was in “a dynamic state.”  Islam, at *10.  “‘[A]s of the date’ suggests that on a different date, the amount of the debt may be different – and, of course, anyone would understand that it won't get any smaller without payment. But the undisputed fact is that, contrary to this suggestion, the amount of this debt will never be different, never get greater.”  Id.  Islam, as the embodiment of the “least sophisticated consumer,” was therefore “subtly incentivized to pay now to avoid paying more later, when, in fact, there never would be ‘more later.’”  Id.  This caused ARS to possibly receive money that it might not have received but for the language “as of the date of this letter,” which makes that language misleading or deceiving.  The court went on to hold that the misleading or deceiving communication was material, because if the least sophisticated consumer had known that the debt would never get any bigger, she might have chosen to pay another debt.  Id.  

This case serves as a troubling example of truthful statements being interpreted as misleading or deceiving.  See id. at *9 (“The courts are to some extent simply burdening the collection industry with a continuing portfolio of litigation that potentially raises the cost of credit for all consumers.”).  Though all statements in ARS’ letter were factually correct – including the statement that Islam’s debt was $14,413.78 as of the date of the letter – the letter was nevertheless deemed to be “misleading or deceiving” because the least sophisticated consumer may incentivized into paying a valid debt they might not have otherwise paid.  To comply with the reasoning of Islam, creditors and debt collectors may wish to craft demand letters without the phrase “as of the date of this letter” if the debt will not increase, or to maintain a policy under which charged off debt continues to accrue interest and fees.

Zachary Dunn is an attorney practicing in Smith Debnam's Consumer Financial Services Litigation and Compliance Group. 

Monday, November 13, 2017

District Court Clarifies FDCPA Bar Date in Letter Cases

By Caren D. Enloe

When does the statute of limitations begin to run for a letter that runs afoul of the FDCPA?  That is the issue which was presented in a recent case before the Eastern District of New York.  In Gil v. Allied Interstate, LLC, 2017 U.S. Dist. LEXIS 182824 (E.D.N.Y. Nov. 3, 2017), the consumers filed suit June 5, 2017 seeking damages under 15 U.S.C. §1692g for a letter dated June 1, 2016.  The defendant contended that the claims were time barred under the FDCPA’s one year statute of limitations and argued that the violation occurred on the date the letter was sent and that that letter was send on June 1, 2016.  The plaintiff, on the other hand, contended that the statute began to run on the date the letter was received.

The court agreed with the plaintiff and ruled that the one year statute of limitations begins to run on the date that the consumer receives the debt collection letter.  In doing so, the court noted that additional facts might have rendered a different result.  First, the court noted that the complaint did not include the date the letter was received.  Secondly, and more importantly for the defense, the defendant didn’t provide any indicia as to when the letter was mailed.  Had there been evidence that the person who mailed the letter followed “regular office practice and procedure” or had actual knowledge of having mailed the document, the presumption that a mailed document is received three days after the date on which it was sent might have rendered the claims time barred. Id. at *9-10. 


Thursday, October 26, 2017

Congress Votes to Repeal CFPB’s Arbitration Rule

By Zachary Dunn
October 26, 2017

The Senate voted on Tuesday, October 24, to repeal the CFPB’s Arbitration Rule first proposed in May of 2016 and issued in its final form in July. The rule would have imposed limitations on the use of pre-dispute arbitration agreements by covered providers of consumer financial products and services. 

Under the Congressional Review Act, 5 U.S.C. § 801 et seq, Congress had 60 legislative days from the date of final rule enactment to pass a joint resolution of disapproval to block the rule from taking effect.  The House of Representatives passed its resolution of disapproval on July 25, 2017 by a vote of 231-190, and the Senate passed its resolution on Tuesday by a vote of 51-50.  Senators Lindsay Graham of South Carolina and John Kennedy of Louisiana broke away from their Republican colleagues to vote against the measure, and Vice President Mike Pence cast the deciding vote in favor of the resolution.

Due to this vote, the Rule may not be reissued in the substantially same form, and a new rule that is substantially the same may not be issued.  See 5 U.S.C. § 801(b)(2).

Zachary Dunn is an attorney practicing in Smith Debnam's Consumer Financial Services Litigation and Compliance Group. 

CFPB Issues “Principles” for the Protection of Consumer Authorized Data Sharing and Aggregation

By Caren Enloe
October 26, 2017

With the growth of technology and the development of the fintech market, an unprecedented amount of consumer financial data has become available.  While protections through the FTC Safeguard Rule and EFTA provide certain consumer protections, there are coverage gaps as the regulatory scheme has struggled to keep up with technological advancements. 

In recognition of these competing forces and this growing market of consumer services, the CFPB issued a Request for Information in November of 2016 inquiring as to market practices related to consumer access to financial information and related data aggregation services.  Last week, the CFPB published their findings, as well as their Consumer Protection Principles which are designed to “reiterate the importance of consumer interests to all stakeholders in the developing market for services based on the consumer-authorized use of financial data.”  While the Principles are “not intended to alter, interpret, or otherwise provide guidance on the scope” of existing consumer protections under existing statutes and regulations or establish binding requirements or obligations relevant to the Bureau’s exercise of its rulemaking, supervisory or enforcement authority”, they appear to be the first step in filling some of the current regulatory gaps.

The CFPB Principles address nine general areas of concern:

  • Access.  The Principles recognize the right of consumers to be “able, upon request, to obtain information about their ownership or use of a financial product or service” from the product or service provider.  The Principles also support the consumer’s right to “authorize trusted third parties to obtain such information from account providers to use on behalf of consumers, for consumers benefit, and in a safe manner.”   
  • Data Scope and Usability.  The Principles set forth that the scope of data that may be made available should be broad; however, the data available to “third parties with authorized access” should be limited to that which is “necessary to provides the product(s) or service(s) selected by the consumer and only maintain such data as long as necessary.”
  • Control and Informed Consent.  The Principles emphasize the consumer’s right to control data access and the need for terms as to access, storage, use and disposal to be clearly communicated and understood by the consumer.  The Principles additionally emphasize the importance that the consumer understand and be provided with data sharing revocation terms that can readily and simply be invoked as to access, use and storage of data.
  • Authorizing Payments.  The Principles advocate for separate and distinct authorizations for data access and payment authorization.
  • Security.  The Principles recognize the gaps that potentially exist in the FTC Safeguard Rules and whether or not certain data aggregation providers are required to comply (as they may fall into a gap between covered financial service providers and vendors).  With regard to security, the Principles recognize the need for market participants to securely access, store, use, and distribute data in formats and manners which protect against security breaches.  The Principles further advocate for secure access credentials and effective processes that “mitigate the risks of, detect, promptly respond to, and resolve and remedy data breaches, transmission errors, unauthorized access, and fraud, and transmit data only to third parties that also have such protections and processes” in place.
  • Access Transparency.  Consumers should be informed of or able to readily ascertain “which third parties that they have authorized are accessing or using information regarding the consumers’ accounts or other consumer use of financial services.”  The Principles emphasize the ability of consumers to ascertain the “identity and security of each such party, the data they access, their use of such data, and the frequency at which they access the data.”
  • Accuracy.  The Principles express the expectation that data that consumers access or authorize others to access is current.
  • Ability to Dispute and Resolve Unauthorized Access.  The Principles set forth the expectation that consumers “have reasonable and practical means to dispute and resolve instances of unauthorized access and data sharing, unauthorized payments conducted in connection with or as a result of either authorized or unauthorized data share access, and failures to comply with other obligations , including the terms of consumer authorizations.”
  • Efficient and Effective Accountability Mechanisms.  Commercial participants are held accountable for “the risks, harms and costs they introduce to consumers” and are “incentivized and empowered effectively to prevent, detect and resolve unauthorized access and data sharing, unauthorized payments” and “failures to comply with other obligations, including terms of consumer authorizations.

The Bureau’s Report as to the November RFI reflects consensus amongst stakeholders that market participants need to work together to develop data access and use practices that are based upon a shared set of standards and expectations that address consumer protection.  Those engaged in fintech should carefully monitor developments in this area, as well as the CFPB’s developing position as to their role in regulating the same.