Experts React to FDCPA Court Decision on Emailed Validation Notice

Last week insideARM wrote about a court decision that addressed the issue of sending a validation notice via email. (Lavallee v. Med-1 Solutions, LLC (Case No. 1-15-cv-1922, U.S.D.C., Southern District of Indiana). In that article, we suggested that this case was a very important and timely decision as the potential for ARM industry use of email to communicate with consumers is gaining momentum. 

We also suggested that the Consumer Financial Protection Bureau (CFPB) take notice of this case. The defendant in the case was attempting to balance privacy and security concerns with Fair Debt Collection Practices Act (FDCPA) compliance. Unfortunately for the defendant, the judge in this case determined that the process employed by the defendant put them in violation of Section 1692g(a) of the FDCPA. 

insideARM believes we need strong and definitive regulatory direction on this issue. As we have seen in the past with other critical FDCPA issues, we cannot leave it to the courts to write rules governing the industry. That result will lead to conflicting and confusing interpretations. Conflicting and confusing interpretations will lead to never ending litigation. The CFPB needs to step up to the plate in their upcoming rulemaking and not simply punt on the issue as they did in their Outline of Proposed Rules. 

insideARM asked several industry experts for their thoughts on the case and the court’s decision. Here are some of the responses: 

Tim Collins, Chief Compliance Officer, TrueAccord 

“It shouldn't come as a surprise that we are starting to see FDCPA cases involving email used in consumer communication. Due to perceived regulatory uncertainty, it is ripe for the plaintiff's bar. The industry is trying to do the right thing by taking the most conservative approach, which usually results in a less than optimum consumer experience.  As was seen in this case, in order to try and protect the consumer against inadvertently sharing their information with a third party the agency required multiple levels of authentication to get access to information about the debt and the consumer's rights. 

Today, consumers want to be contacted at the right time, with the right content, using the right communication channel, and not by a phone call. That is why we have made consumer centric communication the focus at TrueAccord. It is way too early to know how the courts and regulatory agencies will eventually come out on email but when the dust settles let's hope it is on the side of consumer preference.” 

John Rossman, Attorney at Law, Moss & Barnett. P.A. 

"The Court in this case focused on the fact that there were several steps involved for the consumer to access the validation notice sent via email -- if anything, the Court found that the debt collector's security precautions were too robust and perhaps unnecessary. According to the Court, the prevalence of email scams make it unlikely for a consumer to 'click' on a link from a previously unknown sender. Common sense and consumer expectations dictate that if a consumer provides an email address to a creditor, that alone should be sufficient for a debt collector to email a validation notice to the consumer, with the subject line of the email referencing the creditor and information required by 1692g contained in the body of the email."  

Stefanie Jackman, Attorney at Law, Ballard Spahr 

“This decision further underscores the need for clear regulatory guidance on how first- and third-party collectors can use newer communication technologies in a compliant way under the FDCPA. Consumer studies and anecdotes continue to demonstrate that many consumers prefer to be contacted through email and texts, as opposed to more the traditional communication formats that existed when the FDCPA was enacted.  Regulators and companies share a common interest in wanting to honor consumers' communication preferences. However, absent guidance, creditors and their third-party agents are left in the dark on how to develop compliant communication strategies that will satisfy their consumers' preferences without running afoul of the law.  Clear guidance on this issue is necessary to develop a consistent approach that all companies can implement and comply with going forward.” 

Michael Kraft, General Counsel, The CCS Companies 

“This decision does two things: 

1) It emphasizes the need for some common-sense industry standards under the leadership of the CFPB rulemaking authority that acknowledges consumers’ preferences to avoid mail and phone calls while preserving privacy and insuring that all required disclosures are made to the consumers.

2) It opens the door to further litigation against agencies that are trying to reach consumers using alternative channels that consumers have expressed as their preferences, knowing that they hate to be called and don’t open mail.” 

Manny Newburger, Attorney at Law, Barron & Newburger, P.C. 

“The case is simply a reminder that the use of technology does not change the compliance landscape. The court demonstrates an understanding of the principle that “the computer ate my homework” works no better than blaming it on the dog. For tech-based collection companies with strong compliance programs this case should not present challenges.” 

Rozanne Anderson, Vice President, Chief Compliance Officer, Ontario Systems

“While I applaud the defendant’s ingenuity, I hardly think industry attorneys were surprised by this decision. The FDCPA should always be taken literally and interpreted through the eyes of the consumer. If a client asked me if they could send a validation notice to a consumer by way of a US first class mail scavenger hunt that required the consumer to take seven to eight steps to see their 1692g(a) notice, I would say, “don’t do it”. I think the court would have reached an entirely different conclusion had the defendant obtained the consumer’s consent in accordance with the Electronic Signature in Global Commerce Act (E -sign) and then simply sent the consumer an email which contained the 1692g(a) notice either in the body or attached. [Note: the reason they needed to comply with E – sign is because the validation notice is a disclosure required by Federal law. This means the higher standard of consent must be reached. This would not be necessary had the defendant sent, for example, a payment reminder notice or a receipt for payment]. 

The worse thing about this decision is the negative effect it will have on the industry’s appetite to use email to communicate with consumers. The question is not can we email consumers. The question is how do we do so in compliance with E -sign and the Fair Debt Collection Practices Act.”

Kelly Knepper-Stephens, General Council & CCO, Stoneleigh Recovery Associates, LLC

 “This case shows the need for some limited rules of engagement for agencies who are seeking to use very common forms of communication that consumers both desire and prefer.  Rules like: agencies can email consumers, personal consumer information provided in an email should be secure, and when requested by a consumer any email that has been delivered should be considered received.  Without some kind of regulation or guidance, different opinions will come out around the country that will make it very complicated, if not impossible, to email with consumers.  In this day and age consumers expect that it should be possible for requested information to be delivered immediately.”