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Consumer Arbitration Agreements: 7.6.2 History of the Old Rule, Now Rescinded

Despite a rather tortured history, the Department’s first rule limiting the use of arbitration was in effect until July 1, 2020. Even though no longer effective after July 1, 2020, schools will have difficulty enforcing arbitration requirements for students who are no longer enrolled in the school at that time.

Consumer Arbitration Agreements: 7.6.3 Substance of the Old Rule

The 2016 rule indicated that limits on arbitration are part of the agreement between the Department and the school to participate in the federal Direct Loan program. The rule’s limits on mandatory arbitration and class action waivers apply to agreements with students who have obtained federal Direct Loans or benefited from Direct Parent PLUS Loans, and applies to claims regarding the making of the federal Direct Loan or the provision of educational services for which the loan was obtained.

Fair Debt Collection: 7.2.5.2.2 Implied threats to sue

The Third Circuit finds that a letter indicating that the collector “could” refer a debt to an attorney and “could” institute suit could be found to be a violation as implying to a least sophisticated consumer that suit would be instituted.316 A statement can be viewed as a threat of litigation where it warns that if payment is not made immediately, the consumer “may” be subject to court costs and attorney fees.317 The FTC Commentary states that a “debt collector may state that certain

Fair Debt Collection: 7.2.5.3.1 Introduction

A threat, explicit or implied, is actionable under FDCPA § 1692e(5) if either the threat is unlawful or the collector does not intend to take the threatened action. If there is no intent to act on a threat, the threat need not be to take an unlawful action. FDCPA § 1692e(5) applies to a threat to take any action, as long as the consumer can convince the court that the collector does not intend to take the action.

Fair Debt Collection: 7.2.8.4.3 Informing the debt collector of the dispute

The debt collector—whether it is a debt buyer, collection agency, or collection attorney—has an obligation to include the consumer’s dispute when it knows or should know of that dispute.499 A debt collector certainly knows of the consumer’s dispute where the consumer directly informs the debt collector of the dispute.

Fair Debt Collection: 7.2.11.5 Other Situations Where FDCPA § 1692e(11) May Not Apply

Courts generally find that a debt collector need not provide the FDCPA § 1692e(11) notice where the collector is responding to the consumer’s communication.651 However, Regulation F (effective November 30, 2021) provides that where a consumer initiates communication with the collector after receiving a limited-content message, the collector must provide a FDCPA § 1692e(11) disclosure.652

Fair Debt Collection: 7.2.14.1 Generally

A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:

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Fair Debt Collection: 7.3.6 The Least Sophisticated Consumer Standard

As discussed in § 3.2.1.2, supra, the majority of circuit courts have adopted the least sophisticated consumer standard to evaluate alleged FDCPA violations, while a few have adopted a similar standard evaluating whether the “unsophisticated consumer” would find the language of the collection letter deceptive, and one court has applied a “r

Fair Debt Collection: 7.3.9.2 Materiality as to Consequences of Payment or Non-Payment

Misleading the consumer as to the consequences of payment or non-payment will almost always be material because it will affect the consumer’s decision-making as to payment of the debt. Misrepresentations that the amount due will continue to increase if payments are not promptly made are thus material,808 because this can affect the consumer’s decision to pay promptly.809

Fair Debt Collection: 7.3.9.3 Materiality as to Inaccuracy of the Amount Due

A collector’s misstatement of the amount due, such as by including unauthorized charges, should almost always be considered material,818 unless the discrepancy is found to be de minimis.819 The misstatement of the amount due can lead to the consumer paying amounts not owed.820 Understating the amount due can also be material in that this, too, may affect the consumer’s repayment decision.821 Confusing

Fair Debt Collection: 7.4.7.1 Generally

A common debt collector practice is to seek payment by offering the consumer to settle for less than the full amount if the consumer makes one payment for the settlement amount, or starts a series of payments pursuant to the settlement, or just agrees to the settlement terms. Offers to settle a time-barred debt and use of such settlements to revive a time-barred debt are discussed at § 7.4.9, infra.

Fair Debt Collection: 7.4.9.3 Suits on Time-Barred Debts

Prior to Regulation F (effective November 30, 2021), numerous courts had concluded that suing on a time-barred debt violated FDCPA § 1692e (deception) or § 1692f (unfairness).965 Regulation F codified this, providing that, “[a] debt collector must not bring or threaten to bring a legal action against a consumer to collect a time-barred debt.”966

Fair Debt Collection: 7.4.9.4 Threats to Sue on Time-Barred Debts

Prior to Regulation F (effective November 30, 2021), courts consistently found FDCPA § 1692e violations where a collector threatens to sue on time-barred debt.982 FDCPA § 1692e(5) prohibits “the threat to take any action that cannot legally be taken” and suing on a time-barred debt is an action that cannot be legally taken.983 The practice should also violate FDCPA § 1692e(2)(A) (debt’s legal status) and § 1692e(10) (deception) because, by threatening, the collector “implicitly represented that

Fair Debt Collection: 7.4.9.5 Time-Barred Proofs of Claim in Bankruptcy Cases

In Midland Funding, L.L.C. v. Johnson,990 the Supreme Court held that a debt buyer’s proof of claim in a chapter 13 bankruptcy case on an obviously time-barred debt was not “false” or “deceptive” in violation of FDCPA § 1692e or unfair under FDCPA § 1692f. The debt collector, Midland Funding, filed a proof of claim that stated the last time that any charge appeared on Johnson’s account was in May 2003, well beyond the six-year Alabama statute of limitations.

Fair Debt Collection: 7.4.9.6.1 Introduction

The statute of limitations is a defense to a lawsuit on a debt, but, except in Mississippi, Wisconsin, and, for debts owned by a debt buyer, North Carolina,999 it does not extinguish the debt.1000 For that reason, it is not always deceptive to seek voluntary payment on a time-barred debt.

Fair Debt Collection: 7.4.10.1 Generally

Millions of lawsuits are filed to collect on consumer debts, and almost all result in default judgments.1027 Collection law firms file these suits in astonishing volumes, and often will little effort to investigate a case or to carefully draft legal pleadings. 1028

Mortgage Servicing and Loan Modifications: 4.2.6.4 Coverage, Limitations, and Exemptions

The Dodd-Frank Act amendment provides that the requirement is applicable to all “home loans,” a term not defined by the Act that is presumably broader than “residential mortgage loans.”294 The final regulation implements the statutory language by providing that the requirement applies to any consumer credit transaction secured by a “consumer’s dwelling.”295 Thus, the rule applies to open-end, home-secured loans such as HELOCs.296 By not limiting ap

Mortgage Servicing and Loan Modifications: 4.2.12 Private Remedies for Violation of the TILA Servicing Requirements

The Dodd-Frank Act’s mortgage servicing provisions are within part B of TILA.417 Section 1640(a) of TILA provides that part B violations lead to TILA private remedies of actual and statutory damages and attorney fees, in both individual and class actions.418 Claims must generally be brought within one year of the date on which the violation occurred, although equitable tolling may be appropriate in certain circumstances.419