CONSUMER FINANCE LITIGATION Recent Developments and Trends 2012

CONSUMER FINANCE LITIGATION Recent Developments and Trends 2012 NCHELP Winter Legal Meeting January 20, 2012 New Orleans, Louisiana Kent A. Lambert Baker Donelson Bearman Caldwell & Berkowitz PC 201 St. Charles Avenue Suite 3600 New Orleans, LA 70170 504. 566. 5252 klambert@bakerdonelson. com

FAIR DEBT COLLECTION PRACTICES FDCPA’s Venue Provision [15 U. S. C. § 1692(a)(2)(B)] • Hess v. Cohen & Slamowitz, 637 F, 3 d 117 (2 nd Cir. 2011) − provision construed in accordance with state laws governing structure of its courts − filing suit in incorrect state court creates liability − EVEN WHERE BASED ON LIMITATIONS AS TO JURISDICTION, SO LONG AS TIED TO DEFENDANT’S RESIDENCE § selecting wrong city court within a particular county … § EVEN WHERE STATE LAW ALLOWS FOR TRANSFER OR RE -FILING

FAIR DEBT COLLECTION PRACTICES Conduct within Collection Suits Grdn v. Leiken, Ingber & Winter PC, 643 F. 3 d 169 (6 th Cir. 2001) • Document attached to complaint that could be interpreted by defendant as indicating it was already in default held actionable as false, misleading, or deceptive practice − “Least Sophisticated Consumer” standard

FAIR DEBT COLLECTION PRACTICES Conduct within Collection Suits Mc. Cullough v. Johnson, Rodenbury & Lavinger, 637 F. 3 d 939 (9 th Cir. 2011) • Propounding admission requests in collection suit seeking admission collector knew or reasonably should have known were untrue actionable under FDCPA

FAIR DEBT COLLECTION PRACTICES Conduct within Collection Suits Mc. Cullough v. Johnson, Rodenbury & Lavinger, 637 F. 3 d 939 (9 th Cir. 2011) • Demand for attorneys’ fees where not authorized by applicable law or contract is violation of FDCPA − imposes standard of care greater than that applicable under F. R. C. P. 11 and analogous state law provisions

FAIR DEBT COLLECTION PRACTICES Pursuit of Time-Barred Debt Mc. Cullough v. Johnson, Rodenbury & Lavinger, 637 F. 3 d 939 (9 th Cir. 2011) • Collection suit filed on debt rendered uncollectible under applicable statute of limitations violates FDCPA − “Bona Fide Error” Defense …?

FAIR DEBT COLLECTION PRACTICES Pursuit of Time-Barred Debt Huertas v. Galaxy Asset Management, 641 F. 3 d 28 (3 rd Cir. 2011) • Where collection does not threaten or initiate suit, seeking to collect on time-barred debt not actionable − “Least Sophisticated Consumer” standard − Defense versus Extinguishment

FAIR DEBT COLLECTION PRACTICES Obtaining Debtor’s Credit Report Huertas v. Galaxy Asset Management, 641 F. 3 d 28 (3 rd Cir. 2011) • No FDCPA violation for obtaining debtor’s credit report to assist with collection [15 U. S. C. § 1681 b(a)(3)] − collection of account originated by way of a credit transaction

FAIR DEBT COLLECTION PRACTICES Communications with Debtor Tinsley v. Integrity Financial Partners, 643 F. 3 d 416 (7 th Cir. 2011) • Rejected contention that contacting debtor’s attorney to try to collect on disputed claim violated FDCPA − “consumer” ≠ debtor’s attorney − avoid discouraging pre-suit settlements

FAIR DEBT COLLECTION PRACTICES Communications with Debtor Grdn v. Leiken, Ingber & Winters PC, 643 F. 3 d 169 (6 th Cir. 2011) • Providing inaccurate information about debt in response to direct inquiry from debtor may not be actionable under FDCPA − “ministerial response to debtor’s inquiry” versus “in connection with collection of any debt”

FAIR DEBT COLLECTION PRACTICES Evidence of Conduct Concerning Other Debtors Mc. Cullough v. Johnson, Rodenbury & Lavinger, 637 F. 3 d 939 (9 th Cir. 2011) • 9 th Circuit upheld admission of testimony from other debtor’s concerning defendant’s collection practices − intent − rebut “bona fide error” defense − punitive damages

FAIR DEBT COLLECTION PRACTICES Remedies Mc. Cullough v. Johnson, Rodenbury & Lavinger, 637 F. 3 d 939 (9 th Cir. 2011) * $ 3. 816. 80 credit card debt (plus $5, 536. 81 in interest) • $1, 000 in statutory damages … and $250, 000 for emotional distress • PLUS $60, 000 in punitive damages

FAIR DEBT COLLECTION PRACTICES “Consumer” Includes Non-Debt or Contacted in Error Dunham v. Portfolio Recovery Assoc. , LLC, 663 F. 3 d 997 (8 th Cir. 2011) • “Consumer” in FDCPA is “any person obligated or allegedly obligated to pay any debt” • “Allegedly obligated” includes persons contacted in mistaken belief they are a debtor

FAIR DEBT COLLECTION PRACTICES When Is a Request an FDCPA “Communication” Marx v. General Revenue Corp. , ____ F. 3 d ____, 2011 WL 6396478 (10 th Cir. 2011) • Inquiry to employer regarding debtor’s employment − did not state in connection with a debt − no evidence employer believed it was sent as part of collection effort

FAIR CREDIT REPORTING Preemption of State Law Claims For Furnishing Inaccurate Information • 15 U. S. C. § 1681 t(b)(1)(F) bars state statutory and common law claims related to furnishing information to CRAs − no conflict with 15 U. S. C. § 1681 h(e) − no exception for claims alleging malice or willful intent to injure Purcell v. Bank of America, 659 F. 3 d 622 (7 th Cir. 2011) Mac. Pherson v. JPMorgan Chase Bank NA, , 2011 WL 6450777 (2 nd Cir. Dec. 23, 2011) Ross v. FDIC, 625 F. 3 d 808 (4 th Cir. 2010)

TRUTH IN LENDING Undercutting Signed Acknowledgements Marr v. Bank of America, 662 F. 3 d 963 (7 th Cir. 2011) • Uncorroborated affidavit contradicting signed written acknowledgment sufficient to rebut presumption and defeat summary judgment

TRUTH IN LENDING Undercutting Signed Acknowledgements Balderas c. Countrywide Bank, N. A. , ____ F. 3 d ____, 2011 WL 6824977 (9 th Cir. Dec. 29, 2011) • allegations contradicting provisions in signed written acknowledgment of receipt sufficient to defeat motion to dismiss − rebuttable presumption created by signed acknowledgment can be overcome by contrary allegations of fact

PROCEDURE - CLASS ACTIONS Circuit Split Over Effect of Pre-Certification Offer of Judgment Damasco v. Clearwire Corp. , 663 F. 3 d 891 (7 th Cir. 2011) • 7 th Circuit refuses to follow four other circuits − Holds pre-certification offer of judgment providing all relief sought by consumer asserting putative class action based on violations of Telephone Consumer Protection Act mooted class demands − Rejects “buy-off” theory adopted by four other circuits

TRUTH IN LENDING Standing Guerpo v. Amresco, 13 Fed. Appx. 649 (9 th Cir. 2011) • TILA rescission claim brought by debtor after filing for bankruptcy protection dismissed for lack of standing − cause of action existing before bankruptcy becomes property of estate

Kent A. Lambert Baker Donelson Bearman Caldwell & Berkowitz PC 201 St. Charles Avenue, Suite 3600 New Orleans, Louisiana 70170 504. 566. 5252 klambert@bakerdonelson. com