Collection Law Firms in the Cross-hairs of Regulations

Massachusetts Attorney General Maura Healy filed a lawsuit against Lustig, Glaser & Wilson, P.C. stemming from allegations that the law firm "repeatedly sued consumers for debts they did not owe or debts that were inaccurate," according to a news release from the attorney general.

The lawsuit was filed less than a week before the Consumer Financial Protection Bureau and Frederick J. Hanna & Associates, P.C., et al. reached a joint settlement in a similar case after nearly two-and-a-half years of investigation.  The settlement between the CFPB and the Hanna firm marked the end of an unprecedented federal lawsuit which the CFPB filed against Hanna in the U.S. District Court for the Northern District of Georgia.

In both instances, the volume of the collection lawsuits looks to have been a major factor in attracting the attention of the regulators.  The CFPB claimed the Hanna firm violated the FDCPA and the Consumer Financial Protection Act in its process of filing consumer lawsuits using affidavits of claim from the creditors in state court debt collection proceedings.  In the Massachusetts case, the Attorney General alleges the firm, "violated the state's consumer protection laws in pursuit of debts and its use of judicial proceedings." The complaint includes allegations that the firm filed more than 100,000 debt collection lawsuits in Massachusetts.  Notably, the Massachusetts Attorney General is seeking injunctive relief, restitution to consumers and civil penalties from the Lustig law firm.

Supreme Court Holds an Unaccepted Rule 68 Offer of Judgment Does Not Moot the Case

On January 20, 2016, the U.S. Supreme Court ruled 6-3 in favor of a consumer in the class action TCPA case Campbell-Ewald Co. v. Gomez, No. 14-857, 2016 WL 228345, ---S.Ct.---- (U.S., Jan 20, 2016).  The Court addressed the principal question of whether an offer of judgment for complete relief extended to the lead plaintiff in a purported class action (that had not yet been certified as a class) rendered the plaintiff's class claims moot when the plaintiff rejected the offer.  This question has been the source of frequent litigation and circuit conflict in many other class actions.

The Court held that an unaccepted settlement offer or offer of judgment to satisfy the named plaintiff's individual claims does not moot the case when the complaint seeks relief on behalf of the plaintiff and a class of persons similarly situated.  The case was remanded back to the U.S. District Court for the Central District of California to decide the case.

[The Court also considered whether the doctrine of derivative sovereign immunity applies to claims for violation of the TCPA, and held that federal contractors do not share the Government's absolute immunity from liability and litigation.]

The facts: in 2005 the U.S. Navy entered into a contract with the defendant, Campbell-Ewald Co., where Campbell would provide recruiting and advertising services.  As part of this contract, Campbell orchestrated more than 100,000 Navy-branded text messages to cell phone subscribers.  Many of the texts were issued to individuals who had not opted-in to receive such messages.  The named plaintiff, Jose Gomez, filed a class action complaint against Campbell, alleging that the company had violated the TCPA by sending text messages to nonconsenting recipients.  Before Gomez moved for class certification, Campbell extended a Rule 68 offer of judgment and a separate settlement offer to Gomez which Gomez refused.  Campbell argued that this offer of "complete relief" to Gomez rendered his individual and class claims moot.

At trial, the U.S. District Court for the Central District of California held that Gomez's claims were not moot, and when Campbell appealed that ruling, the U.S. Court of Appeals for the Ninth Circuit affirmed the district court decision.  Campbell petitioned the U.S. Supreme Court for review, which was granted on May 18, 2015.

Justice Ruth Bader Ginsburg issued the Court's majority opinion affirming the Ninth Circuit's holding.  Justice Ginsburg explained that Gomez's complaint was not eliminated by Campbell's unaccepted offer to satisfy his individual claim.  The Court's majority applied basic principles of contract law, reasoning that "Campbell's settlement bid and Rule 68 offer of judgment, once rejected, had no continuing efficacy.  Absent Gomez's acceptance, Campbell's settlement offer remained only a proposal, binding neither Campbell nor Gomez.  Having rejected Campbell's settlement bid, and given Campbell's continuing denial of liability, Gomez gained no entitlement to the relief Campbell previously offered."

In a detailed and pointed dissenting opinion, Chief Justice John Roberts thoroughly examined and criticized the majority opinion's reliance on contract law to resolve the central issue in the case.  Chief Justice Roberts said, "[t]he majority is correct that because Gomez did not accept Campbell's settlement, it is a "legal nullity" as a matter of contract law. The question, however, is not whether there is a contract; it is whether there is a case or controversy under Article III. If the defendant is willing to give the plaintiff everything he asks for, there is no case or controversy to adjudicate, and the lawsuit is moot."

Grounding his dissent on the prohibition against federal courts issuing advisory opinions, Chief Justice Roberts, joined by Justices Scalia and Alito, explained that they dissented from the majority opinion because "federal courts exist to resolve real disputes, not to rule on a plaintiff's entitlement to relief already there for the taking."

The Campbell-Ewald case has significant ramifications for "no-injury" statutory damage class action lawsuits filed under federal statutes such as the FCRA, the TCPA and the FDCPA. In those suits, plaintiffs often seek the specific damages provided for by statute, not actual damages. As a result, a plaintiff's maximum recovery can be predetermined. Prior to the Supreme Court's decision in Campbell-Ewald, if a defendant made a Rule 68 offer of judgment in the statutory amount, plus attorneys' fees, the plaintiff's claim could be mooted because the plaintiff would have been considered afforded complete relief. But now, under the Campbell-Ewald decision, defendants may not successfully utilize a Rule 68 offer to moot the litigation.

However, Campbell-Ewald has not completely eliminated Rule 68 as a class action defense tool. Although a mere offer of the sum owed is insufficient to eliminate a court's jurisdiction to decide the case to which the offer related, Justice Roberts confirmed in the dissent that "[t]he good news is that this case is limited to its facts. The majority holds that an offer of complete relief is insufficient to moot a case. The majority does not say that payment of complete relief leads to the same result. . . . the majority's analysis may have come out differently if Campbell had deposited the offered funds with the District Court. . . . This Court leaves that question for another day - assuming there are other plaintiffs out there who, like Gomez, won't take 'yes' for an answer."

Although the Campbell-Ewald decision "does not prevent a defendant who actually pays complete relief - either directly to the plaintiff or to a trusted intermediary - from seeking dismissal on mootness grounds," the Court, unfortunately, did not consider the practical aspects of how a defendant might actually pay for complete relief, rather than merely offer complete relief, when a plaintiff in a variety of contexts may be entitled to not only fixed statutory damages, but also attorneys' fees, which are in an undetermined amount.

New Colorado AG Website Prompts Mandatory Revisions to Collection Notices

Colorado Updated the Website Address Required on all Debt Collection Notices

The Colorado Attorney General's Office announced in a recent e-mail sent to Colorado licensees that the website address required to be listed on all initial debt collection communications has been updated.

Collection agencies should immediately update initial notices sent to Colorado consumers so that the state-specific disclosure on the letters lists the correct website address.   Initial notices must be updated to the following text:


Strikingly, the text of the Colorado statute requiring the disclosure has not been amended and still currently lists the old website address for the Attorney General's office. However, be advised that the statute specifically stipulates, "if the web site address is changed, the notification shall be corrected to contain the correct address."

Along with the new website address, the Attorney General's Office also announced that all Office email addresses now coincide with the new website and end in, to include the  main licensing and registration email address, which is now listed as: (note the change from "cab" to "car").  The old email addresses will only reroute to the new system for a limited time, so it highly recommended that you update your records now to ensure proper delivery of any emails sent to the Colorado Attorney General's Office in the future.

Recent Court Decisions Impacting the Industry

Favorable Decision Regarding Voicemails

An Oregon federal court issued a favorable opinion for the industry in December of 2015 in Peak v. Professional Credit Service. The voicemail at issue in the case was very similar to the voicemail from the well known Zortman opinion. The court held the voicemail was a communication, but not a communication "with" a third party. According to the court, it would be unfair to hold debt collectors liable for third party communications in these situations, unless it was reasonably foreseeable that a third party could overhear the message. Some of the factors the court found worked in the collector's favor were; (1) it was not reasonably foreseeable that a third party could hear the message (2) it was a cell phone; (3) the voicemail greeting identified only the plaintiff; and (4) plaintiff indicated it was the "best" number to reach her. The court noted that if only one of those three factors had been present, there would have been an issue of fact as to whether the disclosure was reasonably foreseeable, but because all three factors were favorable to the collector, the court granted summary judgment in favor of the collector.

Adverse Decision When Leaving a Message with a Third Party

Halberstam v. Global Credit and Collection Corp., No 15-5696, 2016 WL ------- (E.D.N.Y. Jan 12, 2016).

The collector called the consumer's number, a third party answered, stated the consumer was not home yet and asked to take a message. The collector then gave his name and number. When the collector was specifically asked what the call was regarding, the collector said it was about a "personal business matter."

The issue before the court was whether the collector, whose telephone call to a consumer is answered by a third party, may leave his name and number for the consumer to return the call, without disclosing that he is a debt collector, or whether the debt collector must refrain from leaving callback information and attempt the call at a later time.

The federal district court in New York ruled that the collector must not answer those questions, end the call, and try again later. The court's reasoning was that the collector withheld information about his identity as a collector, and this may induce the consumer to contact the debt collector - because the consumer does not know whose call he is returning. The court explained that the consumer may not wish to speak to the collector, and it was the undisclosed nature of the message with the third party that induced the consumer to call the collector. The court found that this is an undesirable result and so the debt collector must refrain from leaving callback information and attempt the call at a later time.

The key points/facts from this case are that if a third party asks, the collector is to state the name of their employer. Prior to that, they are required to give their name only. So the only information that was given that is not covered by the FDCPA are the call back number and personal business matter. This is a single district court decision that we understand is likely to be appealed to the 2nd Circuit Court of Appeals. The firm suggests you understand the theory of liability, review your procedure for interacting with third parties, and watch this case as it develops on appeal.

From the MAPlist:

There has been a significant amount of recent activity on this issue arising from the consumer bar - to include matters involving several members of the Halberstram family. We have gathered from our colleagues and friends who also defend the industry that there are several consumer plaintiff attorneys who are likely training their plaintiffs to have family members answer the phone and solicit a message from the collector.

Be aware of this issue if you regularly come in contact with NY and/or NJ firms such as: Harvey Rephen, Natasha Santiago, David Palace, Barshay Sanders, Fishbein and Maximov.

The path of least liability suggest that in this region collectors should respond: "No. Thank you. Have a nice day" if a third party asks to take a message.

West Virginia Updates State Debt Collection Law

Signed into law March 31, 2015, the new state code clarifies the West Virginia Consumer Credit and Protection Act, §46A-1-101, et seq., by bringing the West Virginia code into line with language of the FDCPA.

Read a copy of the reformed legislation in its entirety here.

The following points paraphrase the highlights of the reformed legislation and cite to the relevant sections of the code:

§46A-2-125. Oppression and abuse, (b) declares unanswered telephone calls will not be treated the same as calls that result in an actual conversation.  Pursuant to the revised code, a debt collector may not engage a person in telephone conversation without disclosing the collector’s identity, and never with intent to annoy, harass or threaten any person at the called number.  Previously, the requirement applied to the placement of telephone calls, which was interpreted to include any unanswered calls to consumers.   Therefore, unanswered calls no longer trigger disclosure requirements and only calls resulting in conversations will be subject to claims that the collector intentionally harassed the consumer.

§46A-2-125. Oppression and abuse, (d) declares it a violation to call any person more than 30 times per week or engage any person in telephone conversation more than 10 times per week.

§46A-2-128. Unfair or unconscionable means, (e) defines what is proper notice to the collector that a consumer is represented by an attorney.  Pursuant to the law, the collector has a 72-hour grace period after receiving written notice of attorney representation before contacting the consumer will constitute a violation.  Notice to the collector must be in writing (on paper or electronically), from the consumer or the attorney, stating that the consumer is represented by an attorney specifically regarding the subject debt.  The notice must clearly state the attorney’s name, address and telephone number and be sent to the debt collector’s registered agent, identified by the debt collector at the office of the West Virginia Secretary of State or, if not registered with the West Virginia Secretary of State, then to the debt collector’s principal place of business.  The collector’s regular account statements and other notices required to be provided to the consumer shall not constitute prohibited communications under this section.

This subsection also states that the collector is not prohibited from communicating with the consumer if the attorney consents to the collector contacting the consumer directly, or if the attorney fails to answer the collector’s attempts to discuss the debt.  However, the code does not define how long the collector must give the attorney to respond.

§46A-3-112. Delinquency charges on precomputed consumer credit sales or consumer loans, (1) doubles the delinquency charges permitted on precomputed consumer credit sales or consumer loans not paid in full within 10 days after its scheduled due date.  The new law allows the greater of (a) or (b):

(a) 5% of the unpaid amount of the installment, not to exceed $30 (formerly $15); or

(b) an amount equal to the deferral charge permitted to defer the unpaid amount of the installment for the period that it is delinquent.

§46A-5-101. Effect of violations on rights of parties; limitation of actions, (1) clarifies that a consumer may only recover up to $1,000 in additional damages per violation, not to exceed either $175,000 or the total alleged outstanding indebtedness. The limitations period applies to all actions filed on or after September 1, 2015.

§46A-5-101. Effect of violations on rights of parties; limitation of actions, (1) redefines the statute of limitations in that no action filed on or after September 1, 2015 can be brought more than four years after the violation occurred.  Previously, the limit was one year after the due date of the last scheduled payment under the credit agreement.

§46A-5-107. Venue, eliminates venue shopping by requiring consumers to bring civil action either in the circuit court of the county in which the plaintiff legally resides at the time of the civil action, last resided in the state of West Virginia, or where the creditor or debt collector has its principal place of business.

Please contact Chad if you would like more information.

American Express Must Defend TCPA Class Action Over Debt Collection Calls Placed by its Third Party Collection Agency

In Ossola, et al v. American Express Company, et al, the TCPA class action suit claims that AmEx is directly liable for TCPA damages even though AmEx did not make the phone calls at issue.  The calls were placed by a third-party collection agency AmEx contracted to work the accounts.  In a motion for partial summary judgment, AmEx argued it should not be held directly liable for actions it did not take.

On February 20, 2015, in Ossola, the U.S. District Court for the Northern District of Illinois disagreed with AmEx and denied its motion for partial summary judgment.  The federal opinion stated, “[W]hether American Express itself actually placed the calls at issue is irrelevant.”  The Ossola court relied on the opinion in Soppet, where the Seventh Circuit held that “[c]alls placed by a third party collector on behalf of that creditor are treated as if the creditor itself placed the call.”  Soppet v. Enhanced Recovery Company, LLC, 679 F.3d 637, 642 (7th Cir. 2012).

The Ossola opinion also referenced a 2008 FCC Order that stated calls placed by a third party collector on behalf of a creditor are treated as having been made by the creditor itself. In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 23 FCC Rcd. 559 ¶ 10 (Jan. 4, 2008).

The February 20, 2015 Ossola opinion was not a ruling on the merits of the case, but merely a rejection of AmEx’s motion for partial summary judgment.  Therefore, the AmEx class action lawsuit will proceed and AmEx will have further opportunity to defend the allegations of AmEx’s direct liability pursuant to the TCPA.

This case is an important example of why creditors must establish express consent from consumers to call consumer cell phones and/or leave automated messages.  The best way to document TCPA consent is to include such language in the underlying consumer credit agreement.  The collection industry must continue efforts to educate creditor-clients about the critical nature of obtaining express consent to avoid TCPA liability and the firm encourages all our clients to have this conversation with your creditor-clients.  Please contact Chad if you would like more information.

The firm will monitor the litigation and update our clients with any important developments.

Read the entire opinion here.

Chad Echols' Spring 2015 Conference Presentations

Chad looks forward to presenting at several conferences in the spring of 2015. His discussions will include current legal hot topics affecting the collection industry, as well as common hurdles faced by the industry such as bankruptcy, the statute of limitations, and proper contract language.

National Association of College and University Business Officers ("NACUBO") 2015 Student Financial Services Conference in Atlanta, GA

March 22nd through March 24th

Wisconsin Association of Student Business Office Personal and Administrators ("WASBOPA") 2015 Conference in Wisconsin Dells, WI

April 13th through April 14th

North Carolina Collectors Assocation ("NCCA") Annual Membership Meeting in Carthage, NC

April 22nd through April 23rd

Colorado Association of Administrators of Student Loans and Accounts Receivables ("CAASLAR") Annual Conference in Vail, CO

April 23rd through April 24th

PacWest Student Financial Services Conference 2015 in San Diego, CA

May 13th through May 15th

New York State Department of Financial Services Implements Debt Collection Regulations

The state of New York recently enacted new debt collection regulations, 23 NYCRR 1, for third-party debt collectors and debt buyers.

Not to be confused with the New York City Department of Consumer Affairs, the New York State Department of Financial Services (“NYSDFS”) now requires specific disclosures on all notices to consumers in New York State.  Yes, that means collectors are potentially required to comply with both regulations when collecting in New York City.

Review 23 NYCRR 1 here:

NYSDFS Responds to FAQs 

Helpfully, on February 9, 2015, NYSDFS published answers to FAQs which includes, among other points, valuable information about how to simultaneously comply with the NYSDFS regs and the New York City requirements. We highly recommend you review the NYSDFS Responses to FAQs very carefully.  Please contact the firm with any questions.

Review the FAQs and NYSDFS answers here:

Another critical point raised in the FAQ responses appears in response number 2.  NYSDFS states some collectors may be entirely exempt from the new regulations for collecting debts where credit was “provided by a seller of goods or services directly to a consumer exclusively for the purpose of enabling the consumer to purchase consumer goods or services directly from the seller.”  Please contact the firm to discuss how this exemption may or may not apply to your business.


NYSDFS regulators may impose civil penalties of up to $5,000 per offense for failure to comply with the new regulations.

Consumers do not have a private right of action for a collector’s failure to comply with the NYSDFS regulations.  We may see consumer claims that a collector’s failure to comply with NYSDFS requirements constitutes an FDCPA claim.  It is common for the consumer bar to “bootstrap” claims whereby a NYSDFS claim would allegedly constitute a violation of the FDCPA.  There are cases on both sides of the claim that a violation of state law/regulation constitutes (by itself) a violation of the FDCPA.

The Eleventh Circuit has said that a “violation of state law may support a federal cause of action under the FDCPA.” LeBlanc v. Unifund CCR Partners, 601 F.3d 1185, 1190 (11th Cir. 2010).  However, the Eighth Circuit has clarified that “the FDCPA was designed to provide basic, overarching rules for debt collection activities; it was not meant to convert every violation of a state debt collection law into a federal violation. Only those collection activities that use any false, deceptive, or misleading representation or means, including the threat to take any action that cannot legally be taken under state law, will also constitute FDCPA violations.” Carlson v. First Revenue Assurance, 359 F.3d 1015, 1018 (8th Cir. 2004) (internal quotations omitted).

As long as the collector makes a legitimate effort to comply with the NYSDFS regulations, the Eighth Circuit reasoning coupled with the FDCPA Bone Fide Error defense provides viable defense arguments.

The firm can assist you in reviewing the new disclosure requirements and updating your compliance management department.  Please contact Chad or Bess if you would like more information. ( or

The Echols Firm, LLC Celebrates Three Years

The Echols Firm, LLC has been in business since October 25th, 2011.

I would like thank each client and friend of the firm for your support over the last three years. The firm remains focused on providing exceptional boutique legal services to creditors, debt collection agencies, and debt purchasers. With the ever increasing litigation and regulatory activity that threatens our industry, it is critical to have counsel that understands your specific needs and provides an aggressive and business minded approach to litigation and compliance. I often tell industry executives "you do not need to like attorneys, but you do need to trust one." We take great pride in being that trusted advisor to the collection industry and its executives. Everyone at the firm looks forward to remaining a valuable partner to our clients and friends.


Chad V. Echols

Owner, The Echols Firm, LLC

A client's perspective...

"Williams & Fudge, Inc. faces each and all of the collection industry's challenges with confidence because of the company's trusted relationship with Chad and The Echols Firm. In the current collection environment I am glad to be associated with counsel that understands the issues, that my executive team enjoys working with, and that is focused on defending the collection industry. Chad is my attorney and his firm is an advocate for my company, but most importantly he is my friend."

Gary L. Williams
Owner, Williams & Fudge, Inc.

Chad to guest speak at the 2014 Commercial Law League of America Conference in New York City November 6th.

The Commercial Law League of America's Eastern Region Conference will take place in New York City, NY from November 6th to November 8th. Chad will  take part in a panel on November 6th, along with Robert Perrin of Williams & Fudge, Inc. and John Bedard of Bedard Law Group, P.C. The panel will discuss student loan debt and compliance issues within the collection industry.

  • Founded in 1895, the Commercial Law League of America ("CLLA") is North America's oldest creditor's rights organization. CLLA provides services to the business and credit community in legal, educational, and professional areas of the industry.

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