CFPB Issues New Proposed Rule on Time-Barred Debt

On Friday, February 21, 2020, the CFPB issued a Supplemental Notice of Proposed
Rulemaking, proposing a rule to amend Regulation F, which implements the Fair Debt
Collections Practices Act (FDCPA). The new, supplemental proposed rule seeks to
amend an earlier proposed rule issued by the CFPB last May. The May 2019 proposed
rule was aimed at third-party debt collectors and was intended to create regulatory
guidance on compliance with the FDCPA. The May 2019 Proposed Rule has yet to be
adopted as a final rule.

The supplemental proposed rule requires
debt collectors to make certain
disclosures when collecting on timebarred
debts. A time-barred debt is a debt
where the applicable statute of limitations
has expired. The required disclosures
would require that a collector inform the
consumer that the debt is time-barred and
that the debt collector will not sue to
collect it. Further, if state law allows for the revival of the debt, the debt collector must
inform the consumer that revival can occur and the circumstances under which it can
occur. The supplemental proposed rule includes model notices to provide consumers
regarding the collection of time-barred debts.
The comment period runs for sixty days from the date that the supplemental notice of
proposed rulemaking is published in the Federal Register. SVL will continue to monitor
the CFPB’s actions to regulate debt collection and will provide information to our clients
regarding the same. We also will address any new regulatory issues at our seminar, The
SVL SourcExpo, in July. Additional information on the SVL SourcExpo can be found
here: www.svllaw.com/sourcexpo-2020/.

A Large Change to Small Claims Court

In a previous SVL update, we highlighted the changes to County Court Jurisdiction in Florida. (That SVL Update can be found under the News tab of our website: www.svllaw.com, where we explain that the Florida county court jurisdiction is increasing to $30,0000.00.) Considering those changes which take effect on January 1, 2020, the Florida Supreme Court has approved a new rule that changes the jurisdictional limits of small claims court. Currently, small claims court jurisdiction includes cases where the amount in dispute is up to $5,000.00. The new rule raises the limit to $8,000.00 effective January 1, 2020.

If your Credit Union handles its own small claims cases, you can now file suit on claims where the principal balance is $8,000.00 or less. If you do not take advantage of small claims court to pursue charge-off debts without the use of a lawyer, now may be the time to consider using it to increase your recoveries in 2020.

Should you have any questions about small claims court or need training on the pursuit of debts through small claims court, do not hesitate to contact one of the lawyers at SVL.

Changes to County and Circuit Court Jurisdiction in Florida

On May 24, 2019, the Governor signed House Bill 337 which was previously passed by the Florida legislature. This law makes major changes to the jurisdictional limits of the Florida Courts. Currently, county courts in Florida have jurisdiction of all claims up to $15,000.00 and circuit court has jurisdiction for claims in excess of $15,000.00.

Under this new law, the jurisdiction of county court is increased to $30,000.00 effective January 1, 2020. As a result, after January 1, 2020, the jurisdiction for the circuit courts will be for any claims in excess of $30,000.00. Then on January 1, 2023, the jurisdiction of the county court is increased to include claims up to $50,000.00, which will give the circuit courts jurisdiction in any claim in excess of $50,000.00.

This law does not impact the jurisdictional limits of small claims court. Small claims court is a division of county court and currently small claims court and small claims procedures apply to claims up to $5,000.00.

Should you have questions about this law, please do not hesitate to contact a lawyer at Sorenson Van Leuven for further guidance.

CFPB Publishes Proposed Debt Collection Rule

Today, the CFPB issued a Notice of Proposed Rulemaking (NPRM) to implement the Fair Debt Collection Practices Act (FDCPA). The proposal is aimed at providing consumers with protections against harassment by debt collectors. The proposed rule is aimed at four goals: (1) establishing a clear, bright-line rule limiting call attempts and
telephone conversations; (2) clarify consumer protection requirements for certain consumers facing debt collection disclosures; (3) clarify how debt collectors can communicate with consumers; and (4) prohibit suits and threats
of suit on time-barred debts and require communication before credit reporting.

After an initial review of the NPRM, it appears
that the rule is mostly limited to third-party debt collectors and would have limited impact on Credit Unions servicing and collecting their own debts. However, the rule does establish standards of harassment that might be used to establish harassment under state statutes that apply to creditors collecting their own debts. The rule also addresses the use of email and text messaging, providing the first federal guidance on the use of these tools in collecting a debt.

The public is invited to submit written comments on the proposed rule. The public will have ninety days from the date that the NPRM is published in the Federal Register to provide public comments on the proposed rule. A copy of the proposed rule can be found here.

We are still in the process of evaluating this proposed rule and will be providing additional information to our clients. In addition, this will be a topic covered at our Credit Union Seminar, August 7-9th in Orlando. Additional information on the seminar can be found on our website under the News tab.

Changes to FATCA and Impact on Lenders

There is a change to the Foreign Account Tax Compliance Act (FATCA) that will have a limited impact on financial institutions. FATCA was enacted into law to combat tax evasion through foreign accounts and investments. Since the law’s enactment, the IRS has been enacting regulations to enforce this law.

A new regulation goes into effect on January 1, 2019. This new regulation impacts insurance companies and requires that insurance companies distinguish between U.S. and foreign financial institutions. If a financial institution has not been identified as a U.S. financial institution, the insurance company will apply a thirty (30%) withholding to certain payouts and the amount withheld will be paid to the IRS. As such, insurance companies will be requesting a W-9 from financial institutions listed as a loss payee on an insurance policy.

Some of our clients have already received demands for a completed Form W-9 from auto insurance companies. We expect that additional insurance companies will make similar demands. As such, when requested, the Credit Union should submit a W-9 to the insurance company to avoid a thirty percent (30%) withholding on any loss payee payment.

Should you have additional questions, please do not hesitate to contact a lawyer at SVL for further guidance and information.

TCPA: Ninth Circuit Court Expands the Definition of an Autodialer

On September 20, 2018, the Ninth Circuit Court of Appeals, issued a written opinion in the case of Jordan Marks v. Crunch San Diego, LLC, Case #14-56834. A copy of the opinion can be found here. The primary issue before the court was the definition of an automatic telephone dialing system (“ATDS”) under the Telephone Consumer Protection Act (“TCPA”).

This opinion is the first written opinion by a Federal Circuit Court since the D.C. Circuit struck down the FCC’s definition of an ATDS earlier this year in its opinion, ACA Int’l v. Fed. Communication Commission 885 F.3d 687 (D.C. Circ. 2018). After the D.C. Circuit struck down the FCC’s broad definition of an ATDS, defense lawyers and business leaders hoped that the FCC and other courts would adopt a more restrictive definition.

Unfortunately, the Ninth Circuit defined an ATDS as “equipment which has the capacity (1) to store numbers to be called or (2) to produce numbers to be called, using a random or sequential number generator – and to dial such numbers automatically(even if the system must be turned on or triggered by a person).” Under the court’s expanded definition, if a phone system can store numbers and then dial such numbers automatically, even if triggered by a person, the system is an ATDS and subject to the TCPA.

While the 9th Circuit has jurisdiction in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington, and its decision is not binding on courts in other parts of the country, this decision will most likely be used by Plaintiff’s counsel to continue to pursue claims under the TCPA. If more courts adopt this expanded definition of an ATDS, most modern business telephone systems will be considered an ATDS. While the definition of an ATDS continues to be a heavily litigated issue, Credit Unions can avoid the concern by making sure that calls placed to consumers are made in compliance with the TCPA. Compliance with the TCPA is best accomplished by having valid written consent from the consumer and maintaining a sound procedure and process to track when a consumer revokes consent.

Please note that this communication is meant to inform and educate our clients and should not be relied upon as a substitute for legal advice as to a specific situation. Should you have any questions, please do not hesitate to contact one of our attorneys at Sorenson Van Leuven, PLLC.