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Fair Debt Collection: 7.4.13 Unlicensed Debt Collection

Thirty-two states require at least some debt collectors to be licensed, registered, or bonded.1281 Because section 1692e(5) of the FDCPA prohibits threats “to take any action that cannot legally be taken or that is not intended to be taken,” a threat of a collection lawsuit by a debt collector that is not licensed according to state law may violate that provision. The FDCPA § 1692e(5) violation is not that the collector is unlicensed, but rather that the lack of a proper license according to state law makes the threatened action unlawful.

Fair Debt Collection: B.3.10 CFPB, Bulletin 2022-01: Medical Debt Collection and Consumer Reporting Requirements in Connection with the No Surprises Act

This guidance reminds debt collectors that the FDCPA’s prohibition on misrepresentations “includes misrepresenting that a consumer must pay a debt stemming from a charge that exceeds the amount permitted by the No Surprises Act.” It also reminded furnishers, including debt collectors, that “the accuracy and dispute obligations imposed by the FCRA and Regulation V apply with respect to debts stemming from charges that exceed the amount permitted by the No Surprises Act.”

Fair Debt Collection: 7.4.13a.2 FDCPA Claims Where Medical Debt Violates the Federal No Surprises Act

Effective generally for medical insurance plan years beginning on or after January 1, 2022, the federal No Surprises Act1299 protects consumers with private health insurance from surprise medical bills when they receive emergency services, non-emergency services from nonparticipating providers at participating health care facilities, and air ambulance services from nonparticipating providers of air ambulance services.

Fair Debt Collection: 7.4.13a.3 Nursing Home Debt

Under the Nursing Home Reform Act, a nursing facility that participates in Medicaid, or a skilled nursing facility that participates in Medicare, may not request or require as a condition of a resident’s admission or continued stay that the facility receive a guarantee of payment from a third party, such as a relative or representative.1302 Contractual provisions that violate that prohibition are illegal and unenforceable.

Fair Debt Collection: Introduction to Summary of State Debt Collection Statutes

This Appendix summarizes state debt collection practices statutes. It includes debt collection statutes of general applicability, plus statutes relating to collection of child support debts. Selected statutes applicable only to particular industries are noted in the footnotes, especially in states that do not have generally applicable debt collection statutes. The Appendix does not include state UDAP statutes except to the extent that they include provisions directed specifically at debt collection.

Fair Debt Collection: 11.11.2.2.3 Commonality

Federal Rule of Civil Procedure 23(a)(2) requires that issues of law or fact be common to the class.895 Defense challenges to commonality are often, in fact, arguments about whether the case has merit, and therefore are inappropriate.896 However, the Supreme Court, in both Wal-Mart Stores, Inc. v. Dukes,897 and Amgen Inc. v.

Fair Debt Collection: 11.11.3.1 Generally

The FDCPA provides for statutory damages in class actions, in addition to actual damages, as follows:

(a) Except as otherwise provided by this section, any debt collector who fails to comply with any provision of this subchapter with respect to any person is liable to such person in an amount equal to the sum of—

* * *

Fair Debt Collection: 11.13.8.5 Upward Adjustments to the Lodestar

The Supreme Court ruled in City of Burlington v. Dague1281 that the lodestar under a federal fee-shifting statute may not be adjusted upwards to compensate for the riskiness of a case or the contingent nature of litigating fee-shifting claims. And in 2010, the Supreme Court elaborated in Perdue v. Kenny A. ex rel. Winn1282 that enhancements are only permissible in “rare and exceptional circumstances.”

Fair Debt Collection: 11.2.2.2 “Transaction of Business” Test in Long-Arm Statutes

Courts usually interpret the statutory “transaction of business” test as broadly as possible within the minimum contacts standard required by the due process clause of the Fourteenth Amendment. The Supreme Court, in International Shoe Co. v. State of Washington,40 required that the nonresident defendant have minimum contacts with the forum state “such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’”41 McGee v.

Fair Debt Collection: 11.2.3 Federal Court Venue

Federal suits may be brought in any judicial district in which the defendant “resides, if all defendants are residents of the State in which the district is located” or in which a substantial part of the events or omissions giving rise to the claim occurred.57 The federal venue provisions should therefore be construed to permit suit to be brought in any competent federal court of a state that has long-arm jurisdiction over the defendant.58 Unlike claims of improper jurisdiction, objections to venue

Fair Debt Collection: 11.3.1 Overview

Creditors, debt buyers, or those collecting on behalf of creditors or debt buyers often seek to thwart a consumer’s FDCPA or state claims by attempting to enforce a mandatory arbitration clause found in the credit agreement between the original creditor and the consumer. These clauses require consumers to bring legal claims in private arbitration as opposed to litigation in court.

Fair Debt Collection: 11.3.2 Defendant Must Produce Arbitration Agreement Binding on the Consumer

Debt buyers and debt collectors wishing to take advantage of the arbitration agreement entered into between the consumer and the creditor have the burden of presenting to the court that actual arbitration agreement. The Federal Arbitration Act does not require arbitration of disputes, but only enforces arbitration agreements that have been validly created. Production of the actual agreement is also essential to determine what parties and disputes are covered by the agreement and whether any aspect of the agreement is unenforceable.

Fair Debt Collection: 11.3.3 Debt Buyer’s Right to Enforce the Creditor’s Arbitration Agreement

When a debt buyer seeks to force a consumer’s debt collection claim into arbitration, the debt buyer has initial hurdles to overcome. The debt buyer must produce the credit agreement binding on the consumer that contains an arbitration requirement, the debt buyer must prove that it has been assigned the credit agreement,103 and it must prove it has rights to enforce the creditor’s arbitration agreement.

Fair Debt Collection: 11.3.4.1 Generally

Third-party collectors and collection attorneys typically do not enter into contracts with the consumer, and thus there will be no arbitration agreement between these parties. Instead, the collector or attorney will seek to piggy-back onto an arbitration agreement between the creditor and consumer.

Fair Debt Collection: 11.3.4.2 Primacy of the Arbitration Agreement’s Language

Courts first look to the plain language of the contract and the relationship between the collection agency or attorney and the original creditor to see whether the arbitration agreement extends to cover parties with that relationship to the original creditor.116 For example, one version of the GE Money Bank arbitration clause stated that it applied to disputes between the consumer and “us,” defined as the creditor’s parents, subsidiaries, predecessors, successors, assigns, employees, officers, and directors.

Fair Debt Collection: 11.3.4.3 Is the Collector an Agent?

A collection agency or collection attorney can only enforce an arbitration agreement as the agent of the creditor or the creditor’s assignee if there is an agency relationship. To shield themselves from liability for a debt collector’s misconduct, creditors and debt buyers often state in their contracts with debt collectors that the debt collectors are independent contractors and not agents. In that case, a debt collector should not be able to take advantage of language that an agreement applies to the creditor’s agents.135

Fair Debt Collection: 11.3.5.1 Waiting Too Long to Enforce Arbitration Agreement

A defendant debt buyer, debt collector, or collection attorney can waive the right to enforce an arbitration agreement by waiting too long in the court litigation to raise the arbitration requirement. By acting inconsistently with a known right, to the consumer’s prejudice, the defendant has waived the arbitration requirement.148 Such may be the case when the defendant first raises the arbitration requirement after extensive discovery, motions to dismiss or summary judgment, or other litigation activity.