In a first-of-its-kind partnership with a municipality, CFPB Director Richard Cordray and Chicago Mayor Rahm Emanuel jointly announced a framework for sharing of information between the City and the CFPB. Under the agreement, Chicago becomes the first city in the nation to agree to directly report alleged violations of federal consumer financial protection laws and regulations to the CFPB.
Director Cordray’s prepared remarks noted that the CFPB “want[s] to know what you are seeing and how that informs what we should be doing – where our supervision and enforcement teams should focus their attention, and what problems our policymakers should undertake to fix.” Cordray suggested that similar agreements with other municipalities may be forthcoming, noting that “[c]ollaborations like this one are at the heart of our efforts to improve how consumer financial markets work for people…. By working together, we can succeed in educating, empowering, and protecting our citizens.”
In his prepared remarks, Mayor Emanuel announced additional actions that the City is taking:
- On December 12, 2012, the City Council will introduce new proposed ordinances (a) to regulate and license debt collectors and to enforce compliance with fair debt collection laws and (b) to give its Department of Business Affairs & Consumer Protection enhanced supervision and enforcement powers against businesses for alleged violations of federal and state consumer financial protection laws.
- The City will collect information on “predatory and deceptive acts associated with home repair loans, payday loans, small dollar loans, reverse mortgage products, and mortgage origination and servicing.”
- The City plans to tighten zoning regulations to “limit the proliferation” of payday lenders, auto-title lenders, and “other predatory financial services.”
Filing a collection lawsuit during the 30-day debt validation period can get a collector in hot water unless he is really careful. The United States Court of Appeals for the Second Circuit recently decided a case where Citibank hired a law firm to collect Janet Ellis’s alleged credit card debt. The law firm, Solomon & Solomon, promptly sent the FDCPA required notice advising her of the debt and informing her that she had 30 days in which to dispute its validity. Otherwise the firm would assume the debt was valid. So far, so good.
The Fair Debt Collection Practices Act requires that within five days of its initial communication with a consumer, a debt collector must send a written “validation notice” setting forth the consumer’s right to dispute the debt. The consumer then has 30 days in which to send a notice to the debt collector that he disputes. During this 30-day period, the debt collector generally is free to continue collection activities so long as they do not “overshadow” or are not “inconsistent” with the disclosures in the validation notice.
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Robert Duff began representing James and Christy Gastineau approximately three years after they filed suit in the Southern District of Indiana raising Fair Debt Collection Practices Act (“FDCPA”) claims. Duff was the third attorney to represent the Gastineaus in the case. Although Duff claimed that he had thirteen years of litigation and consumer law experience, his only other FDCPA case resulted in a default judgment. In the Gastineaus’ case, Duff’s representation began after substantial discovery and motion practice had already been completed. Nonetheless, Duff successfully negotiated a $45,000 settlement on the first scheduled day of trial. Duff requested a fee award in excess of $140,000, based in part on his hourly rate of $250 per hour. Citing Duff’s lack of experience and late entry into the case, the District Court reduced Duff’s hourly rate to $150 per hour and cut the number of hours he was allowed to recover. Duff appealed.
The Seventh Circuit observed that the calculation of attorney’s fees is driven by the ”lodestar method,” which is simply the mutliplication of a reasonable hourly rate by the number of hours reasonably expended by the attorney. Further, the Seventh Circuit noted that the federal district court’s have the discretion to adjust the result of the lodestar method based on factors such as the complexity of the legal issues, the degree of success, and the public interest advanced by the litigation.
In affirming the District Court, the Seventh Circuit noted that, particularly because of Duff’s late entry into the proceedings, the case “should have been a relatively straightforward FDCPA action.” Further, the Seventh Circuit held that the District Court did not commit clear error when it concluded that a substantial portion of the hours Duff billed on the case — over 500 total — were for learing the law. In closing, the Seventh Circuit found that “[t]his is clearly the case of an experienced district judge that considered the various factors in setting a reasonable attorney’s fee and provided a sufficient explanation.” Based on this, the Seventh Circuit found no abuse of discretion.
In Donohue v. Quick Collect, Inc., Case No. 09-35183 (9th Cir. Jan. 13, 2010), the Ninth Circuit interpreted two sections of the Fair Debt Collection Practices Act (“FDCPA”) and held that a collections agency did not violate the FDCPA because the original payment terms between the appellant and her dental practice did not constitute a forbearance agreement under Washington State law. Additionally, the court held that the collections agency did not violate the FDCPA when it mislabeled the interest owed on the debt. The court found that the overall amount owed by the appellant was correct and, therefore, the mislabeled interest was not “materially false.”
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A recent case out of Connecticut waves a yellow flag at debt collectors who file lawsuits within 30 days of sending a consumer a validation notice under the Fair Debt Collections Practices Act (“FDCPA”). On January 13, 2010, the Second Circuit Court of Appeals held that a law firm and two of its lawyers violated the FDCPA, 15 U.S.C. § 1692 et. seq., when it filed suit against a debtor during the 30-day validation period without providing additional explanation to the debtor about how the lawsuit affected the notice. Ellis v. Solomon and Solomon, P.C., et. al., No. 09-1247-cv (2d Cir. Jan. 13, 2010).
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In a recent decision, the Alaska Supreme Court found that requiring a debt collector and attorneys to comply with Alaska’s Unfair Trade Practices and Consumer Protection Act (UPTA) does not infringe on their Constitutional right to petition the government as set out in the Noerr-Pennington doctrine. (Pepper v. Routh Crabtree, APC, et al., No. 6437 (Nov. 20, 2009).
In Pepper, plaintiff Robin Pepper allegedly wrote 15 bad checks. The affected merchants assigned the dishonored checks to CRI, LLC (“Checkrite”) for collection, who retained the Routh Crabtree APC law firm to recover the debt. Routh Crabtree sent a demand letter to Pepper to an address that did not appear on the dishonored checks, was not an address at which Pepper had ever lived and did not appear to correspond to an actual building. When Pepper did not pay the debt, Routh Crabtree filed suit in state court to collect the debt and personally served Pepper with the summons. The Alaska Legal Services Corporation (ALSC) notified Routh Crabtree that it would be representing Pepper, but that there was insufficient service of process therefore Pepper would not be filing an answer. Without notifying ALSC, Checkrite sought the entry of default judgment against Pepper, which the court entered. Thereafter, Checkrite withdrew its petition for default judgment. On that same day, Pepper sued Routh Crabtree, the attorney Richard Crabtree and Checkrite in state court, alleging that the following three acts constituted “unfair or deceptive acts or practices” in violation of the UTPA: (1) the written demand was in violation of Alaska law (AS 09.68.115) which requires that written demands be personally delivered or sent via first class mail to “the address shown on the dishonored check”; (2) Pepper is mentally disabled and therefore defendants made a false averment to the court when they stated that she was competent; and (3) the attorney defendants violated Alaska law that required them to notify Pepper’s attorney before applying for entry of default judgment.
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