May 19

By Bradley B. Vance – Lexology

In Payne v. Progressive Financial Services, Inc., No. 13-10381 (5th Cir. 2014), the United States Court of Appeals for the Fifth Circuit reversed and remanded a Texas district court’s dismissal of the plaintiff’s suit for lack of subject-matter jurisdiction on the ground that the defendant’s unaccepted offer of judgment rendered the plaintiff’s claims moot.

Plaintiff Nicole Payne alleged violations of the Fair Debt Collection Practices Act (“FDCPA”), the Texas Debt Collection Practices Act, and the Texas Deceptive Trade Practices Act in her suit against Defendant Progressive Financial Services, Inc. As a result, Payne requested statutory damages of $1,000, actual damages, attorneys’ fees, and costs on her FDCPA claims.

After filing an answer, Progressive made an offer of judgment pursuant to Federal Rule of Civil Procedure 68. The terms of Progressive’s offer were as follows: 1) entry of judgment against itself in the amount of $1,001 for damages of any kind; 2) plus attorneys’ fees and costs incurred as of the date of the offer and to be determined by agreement or court order; and 3) expiration of the offer fourteen days after service. As a result of Payne’s failure to respond to Progressive’s offer, Progressive moved for dismissal under Rules 12(b)(6) and 12(b)(1). The district court denied Progressive’s 12(b)(6) challenge, but granted its 12(b)(1) motion to dismiss for lack of subject-matter jurisdiction. [read more]

May 16

By Patrick Lunsford – insideARM

The percentage of Americans with at least one account in the third party debt collection system jumped to 14.3 percent in the first quarter of 2014, according to a report released Tuesday by the Federal Reserve Bank of New York.

In the fourth quarter of 2013, the measure stood at 13.8 percent. But the figure from Q1 2014 is still below the all-time high of 14.6 percent set in the first quarter of 2013.

The Federal Reserve Bank of New York’s (FRBNY) Quarterly Report on Household Debt and Credit measures third party debt collection activity – that is, collections not handled by the original creditor – as the percentage of consumers with at least one collection file on their credit report in the past 12 months. The report notes that only a small proportion of collections are related to credit accounts, with the majority of collection actions being associated with medical bills and utility bills.

The report also measures the dollar amount per collection account. That figure fell slightly in the first quarter of 2014 to $1,518 from $1,520 in the previous quarter. [read more]

May 14

By David O. Klein – Lexology

A recent federal district court ruling provides more guidance on how courts define “express consent” under the Telephone Consumer Protection Act (“TCPA”) in the debt collection setting. In Sharp v. Allied Interstate Inc., the court relied on earlier Federal Communications Commission (“FCC”) rulings that had found that prior express consent had been provided by consumers in situations where they had supplied their respective contact telephone numbers to creditors “during the transaction that resulted in the debt[s].” As detailed below, businesses must be careful in when and how they outsource debt collection calls to be made to consumers.

Verizon TCPA Debt Collection Calls Case

Sharp v. Allied Interstate Inc. involved TCPA debt collection calls to a consumer that ordered a “bundled” package of services offered by the telecommunications provider Verizon. The package included telephone services provided by Verizon and television services provided by DirecTV. The plaintiff canceled his bundled package subscription 2 years after ordering it. DirecTV believed that the plaintiff owed an outstanding debt of $86.96. Accordingly, DirecTV retained the services of the defendant, a debt collection agency. Between April and August 2011, the defendant placed 381 automated telephone calls to the plaintiff’s cellular telephone in an attempt to collect on the debt. Although all of the parties agreed that at some point the plaintiff had provided his cellular telephone number to Verizon, none of the parties could conclusively prove where the defendant debt-collector had obtained plaintiff’s cellular telephone number.

Court Rules the TCPA Debt Collection Calls Did Not Obtain Express Consent

The court denied the defendant’s motion for summary judgment. The defendant argued, among other things, that because it does not “harvest,” or independently seek out telephone numbers, it must have acquired the number from the plaintiff himself or from Verizon. The defendant suggested this this fact was sufficient to meet its burden of proving express consent. The court rejected this argument, noting that the burden is on the defendant, and not the plaintiff, to prove prior express consent. The court suggested that an argument could have been made that providing prior express consent to Verizon was also providing express consent to DirecTV, but the defendant never introduced such an argument.

Additionally, the court noted that the plaintiff had been a Verizon telephone service customer before he had ordered the bundled package. Therefore, the court reasoned, the plaintiff may have provided his contact information previously, and not “during the transaction that resulted in the debt owed.” As a result, the court denied summary judgment to the defendant. [read more]

May 13

By Marinka Peschmann –

U. S. Bankruptcy Court, Southern District of New York’s Judge Martin Glenn, presiding over the simultaneous Chapter 11 bankruptcy filings of 51 residential mortgage companies, received a whistleblower filing package today from one of the creditors in this case, a private American citizen, Greg Morse.

The Internal Revenue Service and Securities Exchange Commission received the same package today. Among its contents is Morse’s whistleblower submission of IRS Form 211—Application for Award for Original Information, and SEC Form TCR—SEC Tip, Complaint or Referral, accompanied by voluminous supporting documentation. These federal agencies are mandated to investigate allegations of corruption and fraud.

The 51 bankrupt residential mortgage companies are directly or indirectly owned by Residential Capital, also known as ResCap.

Morse, a commissioned officer was honorably discharged from the U. S. Air Force and the U. S. Navy as an F-4 Phantom fighter pilot. He was one of the initial people who uncovered and successfully prosecuted a federal fraud case regarding the savings and loan debacle in the late 1980’s.

Like millions of Americans, Morse, believed when he refinanced his home mortgage in 2008 that it was legitimate but found out otherwise when he discovered that his chain of title had been broken by Mortgage Electronic Registration Systems, Inc. (MERS). His home in Texas was not and is not in foreclosure. He has never been late or missed a mortgage payment. [read more]

May 2

By RT News

A county court in Pennsylvania ruled against a widow who lost her house over a $6.30 late fee. The property was sold for $116,000 to cover the debt, in what the woman argued was an improper move by the authorities.

The home of Eileen F. Battisti, 53, was sold at a September 2011 tax sale to cover the paltry debt, which arose from an interest rate charge on Battisti’s 2009 tax bill. Beaver County auctioned off the house, with an estimated value of $280,000, selling it for $116,000 to SP Lewis.

“I paid everything, and didn’t know about the $6.30,” she told AP. “For the house to be sold just because of $6.30 is crazy.”

Battisti appealed the move, saying she didn’t know she owed the past due charge until she was notified that her home would be sold. Beaver Country court initially denied her evidentiary hearings on the case, but Battisti turned to the Commonwealth Court in Harrisburg, which in August 2013 ordered the county court to review the case.

Last week, County Judge C. Gus Kwidis ruled against Battisti, saying she had been properly notified of her debt and that the sale followed state law. In his six-page order, the judge said the former homeowner is entitled to $108,039 in proceeds from the sale after her tax obligations are met. [read more]

May 1

By Patrick Lunsford – insideARM

New York State Courts Chief Judge Jonathan Lippman Wednesday announced a set of reforms aimed at increasing requirements for collection agencies and debt buyers who file suits to recover debts from consumers in the state. Although open for public comment, the new rules are expected take effect in June.

The State of New York Unified Court System said that the proposed package of reforms represents the most comprehensive effort by a court system nationally to ensure a fair legal process for all debtors in consumer credit cases.

“While no one disputes that consumers should pay their debts or that businesses have every right to resort to the courts to collect what is legally owed to them, the Judiciary has an obligation to prevent inequitable debt collection practices in the courts and ensure a fair legal process for all litigants. Dubious consumer debt litigation practices can lead to unwarranted default judgments, often with devastating consequences for the debtor ? typically a lower-income New Yorker struggling to support a family and find or maintain a job,” said Chief Judge Lippman.“These comprehensive reforms announced today, together with the ongoing efforts of our partners in the Executive and Legislative Branches, New York’s bar and legal services community, will set a national standard by which consumer debtors receive fair treatment in the courts.” [read more]