Attention ARM Leaders: Debt Collection Payment Portals are Communications Under the FDCPA

Editor's Note: This article previously appeared on the Ontario Systems Blog and is republished here with permission.

Consumer attorneys have found a new weakness in the debt collector’s compliance armor: consumer-facing websites. As debt collectors increase their use of and reliance on consumer-facing websites to support their collection efforts and facilitate payments, the number of consumer lawsuits claiming these websites violate the FDCPA are also increasing. The recent case of Odneal v. Midwest Recovery Systems LLC (N.D. Ind. April 24, 2020), highlights the risks associated with consumer-facing websites used in a third-party debt collection context.

The Facts and the Ruling

In this matter, Plaintiff Odneal discovered a debt on his credit report owned by the defendant, Midwest Recovery Systems. Odneal promptly went to Midwest’s website to get more information and was directed to Midwest’s online payment portal.

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Odneal filed an action claiming the defendant violated the Fair Debt Collection Practices Act by failing to disclose the time-barred nature of the debt that appeared on its website and the risk of reviving the debt if Odneal made a payment.

Note the defendant did not invite the consumer to visit its consumer portal; rather, the consumer found it all by himself in a google search, after learning of the debt on his credit report.

In response, the defendant debt collector brought a motion to dismiss the case on the grounds its website was not a communication in connection with the collection of a debt and therefore did not trigger the requirement to include disclosures otherwise required in letters, texts, emails, and calls. The Court denied the defendant’s motion explaining it is plausible that a payment portal satisfies the definition of a communication under the FDCPA (the conveying of information regarding a debt directly or indirectly to any person through any medium), and therefore survives the motion to dismiss.

The Standard of Review

In making its decision to deny the defendant’s motion, the Court did not apply the least sophisticated consumer standard or the unsophisticated consumer standard, nor did it apply a strict liability standard. Rather it applied the very broad trickery standard of review. The court explained the FDCPA is an extremely broad statute and is “essentially a rule against trickery.” Rueda v. Midland Credit Mgmt., Inc., No. 19 C 1739, 2019 WL 3943681, at *1 (N.D. Ill. Aug. 21, 2019) (quotation marks and citation omitted).

The Take-Aways for Debt Collectors

It remains to be seen how the Court will ultimately decide this case. It is possible the defendant will prevail and this Indiana Court will agree a debt collector’s website is not a communication in connection with the collection of a debt, particularly if the debt collector did not invite the consumer to its website. However, I highly doubt it. Litigation over this issue is rampant.

In the short span of time between the date this motion was briefed and the time the Court issued its ruling, the Central District of Illinois alone issued three decisions[1] addressing debt collection websites in favor of “confused and misled” consumers based on fact patterns similar to the case at bar.

Practitioner Tips

#1 – Understand the FDCPA defines the term “communication” as “the conveying of information regarding a debt directly or indirectly to any person through any medium.” 15 U.S.C. § 1692a. As such, courts may interpret your consumer-facing websites as 1) having conveyed some information, 2) regarding the consumer’s debt (the amount due), and 3) through a medium (the portal itself) in satisfaction with the statutory definition of a communication, albeit indirect.

#2 – To be safe, consider your consumer-facing websites and consumer facing payment portals to be communications in connection with the collection of a debt and respond accordingly.

#3 – Include a terms and conditions document on your website that can be accessed, printed and saved by the consumer or patient for future reference. Be sure to require the consumer to click to agree to each iteration of your terms and conditions document.

#4 – Do not forget to include any state disclosure requirements that apply to communications with consumers in connection with the collection of their debt.

#5 – Several states require unique disclosures for the collection of accounts for which the statute of limitations has expired. Make sure you display such disclosures in connection with any time-barred debts/accounts.

#6 – Make sure you have outside counsel review your consumer-facing websites on a regular basis as you do your paper letters, email templates, and text templates.

#7 – Recognize that by including the full Miranda warning as required by the FDCPA (“This communication is from a debt collector. This may be an attempt to collect a debt. Any information obtained would be used for that purpose.”), courts may consider the disclosure to be objective evidence that you are using your website as an indirect means to collect a debt.

#8 – Understand defending a case against a debt collector alleging its website is a communication in connection with the collection of a debt becomes increasingly more difficult as the interactions with the consumer become more direct. For example, offering the consumer an opportunity to accept or negotiate a settlement, negotiate and arrange a payment arrangement, log a dispute, or request information about their debt using your website may be closer to a direct communication in connection with the collection of a debt than if the consumer finds their way to your website on their own.

#9 – Ensure your website, as well as its mobile-friendly counterpart, are easy, intuitive, and in full compliance with the Americans with Disabilities Act (ADA). Visit the Resources page on the Ontario Systems website to read my additional blog articles on ADA compliance.

#10 – Include your agency’s privacy statement on your website and provide consumers with information explaining how they may ask you to delete their information. [Note: There are reasons why you may not need to comply with such a request if the information you have collected about the consumer is subject to an exemption.]

Bottom line – As these lawsuits continue to increase in volume, you must prepare for the risks associated with consumer-facing websites used in a third-party debt collection context. Protect yourself by following these 10 basic tips. 

Want to easily pull up all cases regarding the definition of a communication?
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