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TCPA: Ninth Circuit Court Expands the Definition of an Autodialer

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.

Timeliness of Claims for Surplus Funds in a Foreclosure

Timeliness of Claims for Surplus Funds in a Foreclosure

We want to make you aware of a recent court ruling from the Florida Supreme Court in Bank of New York Mellon v. Glenville, 43 Fla. L. Weekly S333 (Fla. 2018) that provides clarification on the deadline to file a claim for surplus funds following a foreclosure sale.

With the steady rise in home prices throughout Florida, more and more foreclosed properties are selling at foreclosure sales for amounts that exceed what the foreclosing lending is owed on its final judgment. These monies that exceed what the foreclosing lender is owed in their final judgment are called “surplus funds”. When you have surplus funds, all junior lienholders who were included as defendants in the foreclosure lawsuit may file a claim for the surplus funds. The Court will then hold a hearing to determine how the surplus funds should be awarded. The general rule in Florida is that the funds are to be paid to the junior lien holders who filed a claim based on their lien priority, with any remainder being awarded to the record owner of the property at the time that the lis pendens is recorded. Section 45.032 (2), Florida Statutes. Any junior lienholder who wants to make a claim has 60-days to file their claim. Where the lower Courts disagree is on the question of when that 60-days begins to run. Some Courts held that a junior lienholder had 60-days from the date of the foreclosure sale to file their claim. While other Courts held that the deadline did not begin to run until the Clerk issued the Certificate of Title. The Supreme Court in its holding in Glenville resolved any disputes among the lower Courts by holding that the 60-days begins to run once the Clerk issues the Certificate of Disbursements.

If your financial institution holds a junior mortgage or judgment and has been named as a defendant in a foreclosure, it may be entitled to surplus funds, should they exist. It is our practice, that upon request, we file an answer on behalf of the financial institution and then monitor the case for a final judgment and foreclosure sale date. Upon completion of the foreclosure sale, we will monitor for possible surplus funds, and should any exist, we will file a claim for those funds before the newly allotted deadline.

Please note that this email is meant to inform and educate our clients. This 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 the attorneys at Sorenson Van Leuven, PLLC.

Court Holds that Direct Dropped Voicemails are Covered by the TCPA

Court Holds that Direct Dropped Voicemails are Covered by the TCPA

Earlier this week, a Federal Judge in Michigan, ruled that the Telephone Consumer Protection Act (“TCPA”) covers so-called “direct drop” voicemail. The case is Karen Sanders v. Duck O’Neal, Inc., Case No. 1:17-cv-335, 2018 WL 3453967 (W.D. Mich. July 16, 2018). This opinion is the first known opinion to address this technology.

The case involved VoApp’s DirectDrop voicemail product. This product allows a pre-recorded message to be directly “dropped” or delivered to a consumer’s voicemail without the consumer’s telephone ringing or showing a missed call. VoApp and similar vendors have argued that this technology is not governed by the TCPA. The Judge ruled that the TCPA does apply, finding that “[c]ourts have consistently held that voicemail messages are subject to the same TCPA restrictions as traditional calls.”

The Judge wrote as follows:

“As a remedial statute, the Court construes the TCPA broadly in favor of Saunders. The statute itself casts a broad net—it regulates any call, and a “call” includes communication, or an attempt to communicate, via telephone. Both the FCC and the courts have recognized that the scope of the TCPA naturally evolves in parallel with telecommunications technology as it evolves, e.g., with the advent of text messages and email-to-text messages or, as we have here, new technology to get into a consumer’s voicemail box directly. The TCPA was enacted in 1991; the equivalent act at that time could be considered a party recording a message directly on an answering machine’s cassette tape without ever calling the number—an infeasible technological feat absent physical access to a consumer’s answering machine.”

Note that this ruling does not hold that this technology is unlawful under the TCPA, only that the use of this technology must comply with the TCPA. Further, this order is just one ruling on this matter, and there is likely to be a contrary ruling in the future. Nevertheless, if your Credit Union uses a direct drop service to collect on consumer accounts, the Credit Union should determine if such service is being used in compliance with the TCPA.

CFPB’s Recent Consent Order on Debt Collection Practices

CFPB’s Recent Consent Order on Debt Collection Practices

On June 13, 2018, the CFPB issued a Consent Order it entered into with Security Group, Inc. and its subsidiaries. The Consent Order relates to collection actions engaged in by Security Group, Inc. The consent order requires Security Group to pay a civil money penalty of 5 million dollars.

The Consent Order concludes that Security Group engaged in debt collection practices that were unfair acts and practices in violation of applicable law. In particular, the consent order finds that the following acts by Security Group were unlawful:

  • Making personal visits to consumers’ homes, place of employment, the homes of their neighbors and visiting consumers in other public places, when such visits disclosed or risked disclosure of consumer’s delinquency to third parties, disrupted consumers’ workplaces and jeopardized their employment, or humiliated and harassed consumers;
  • Calling consumers at work, on shared phone lines and/or speaking with co-workers or employers and disclosing or risking disclosure of consumer’s delinquencies to third parties;
  • Calling consumers at work after they had been told that the consumer was not allowed to receive calls at work; and
  • Failing to heed and properly record consumers’ and third parties’ requests to cease contact.

One can read this consent order to indicate that first-party collectors that engage in conduct that the FDCPA would prohibit (even though the FDCPA does not apply to first-party collectors) are at risk of violating the unfair, deceptive, abusive acts or practices (UDAAP) prohibition in the Consumer Financial Protection Act (CFPA). This Order is consistent with the direction of the CFPB before Mike Mulvaney took over as the acting director. However, the Order indicates that the CFPB under the acting director will continue to hold creditors accountable under the FDCPA, even though the law on its face does not apply to first-party collectors.

If you read the Consent Order, you will see that the many of the actual acts of Security Group, Inc., were outrageous and not in line with industry norms. However, what is troubling is the CFPB’s stance on in-person visits. While this order does not specifically prohibit Creditors from using in-person visits, it clearly shows that the CFPB disfavors in-person collection activities and that a creditor who uses this tool does so at the risk of being found in violation of the CFPA’s UDAAP prohibitions.

If your Credit Union uses in-person visits as a collection tool, it needs to determine if the continued use of such a tool is worth the risk. If the Credit Union is willing to assume the risk, it should at least review its policy or procedures to be sure that such visits are not done in such a way to risk disclosure of a delinquent loan to a third party and to limit harassment or embarrassment to the consumer.

As always, if you have any questions about this Consent Order or the use of in-person visits to collect a debt, please reach out to one of the lawyers at SVL.

“Protecting Tenants at Foreclosure Act” is Back

“Protecting Tenants at Foreclosure Act” is Back

Under the 2010 Dodd-Frank Act, there was a provision that protected tenants in a state court residential, foreclosure action. This provision gave special rights to tenants, and as a result, it slowed the foreclosure process down when there was a tenant who qualified for this protection. This law was a frustration to our clients and fortunately, this law sunset or expired on December 31, 2014.

Unfortunately, Congress and the President reenact these protections for tenants in a residential foreclosure under the SB 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act. As you are probably aware, this law was signed into law by the President last week. Based on news reports, it appears that this provision in SB 2155 was not widely known and has surprised many advocates of the new law. As before, the law requires a ninety-day notification to vacate by the lender (or third party new owner) to the hold-over tenant under a “bona fide” lease. This provision for protection to tenants goes into effect 30 days after enactment.

Under the new law, when a lender obtains the property at a foreclosure sale, it may only terminate a bona fide lease after a 90-day written notice to the Tenant. To qualify, the tenant must enter into the lease before “the notice of foreclosure.” Further, a bona fide lease is one in which the tenant is not the borrower’s child, spouse, or parent, and the lease is the result of an arms-length transaction, in which the rent is not substantially less than the fair market rent.

Should you have further questions about this new law or its impact on foreclosures, please do not hesitate to reach out to a lawyer at SVL.

Fifth Circuit Court Vacates DOL’s Fiduciary Rule

Fifth Circuit Court Vacates DOL’s Fiduciary Rule

On March 15, 2018, the Fifth Circuit Court of Appeals vacated the U.S. Department of Labor’s (DOL) fiduciary rule for retirement account advisers. The Court found that the agency had overstepped its authority and that the Obama-era rule’s revised definition of “fiduciary” was unreasonable.

The rule was challenged in a lawsuit by the U.S. Chamber of Commerce and other business groups. This rule was believed to create additional compliance burdens for businesses, including credit unions. CUNA and NAFCU have previously raised concerns about compliance challenges under the rule.

The rule imposes a fiduciary standard of care on broker-dealers and investment advisers if they offered investment advice to consumers investing in a retirement plan. While Credit Unions are prohibited from offering investment advice, the DOL rule would impact advisory services provided through vendors and/or credit union service organizations.

The ruling by the Fifth Circuit Court is at odds with an earlier ruling by the 10th Circuit Court of Appeals. The 11th Circuit Court of Appeals which governs Alabama, Georgia and Florida has not ruled on this issue. Many believe this matter will ultimately be resolved by the Supreme Court, if Congress does not intervene. Currently the DOL has delayed implementation of three fiduciary rule exemption changes from January 1, 2018, to July 1, 2019.

Should you have questions about this update, feel free to contact an attorney at Sorenson Van Leuven. While these issues are outside our area of expertise, we can help connect you with attorneys able to give you guidance if your Credit Union is concerned with the impact of the rule and these court rulings.