Federal Appeals Court Rules That Debt Collectors Cannot Indirectly Send Legally-Required Notices To Consumers Through Hyperlinks In Emails and Text Messages – Which Is Exactly What the CFPB is Trying to Allow
Washington D.C. (August 29th, 2019) – The U.S. Court of Appeals for the Seventh Circuit has cast doubt on the legality of the Trump CFPB’s debt collection proposal with its ruling earlier this month that debt collection agencies are prohibited from asking consumers to click on hyperlinks to obtain legally-required notices about outstanding debt because it runs afoul of the Fair Debt Collection Practices Act. *See details below. Consumer advocacy group Allied Progress called on CFPB Director Kraninger go back to the drawing board with her bureau’s proposal to let debt collectors send consumers unlimited texts and emails without prior permission, including messages with hyperlinks to critical account information.
“The Trump debt spam proposal was a bad deal for consumers to begin with, and now it may be illegal to boot,” said Jeremy Funk, spokesman for Allied Progress. “The bureau clearly hasn’t thought through the potential consequences of consumers suddenly getting inundated with emails from purported debt collection agencies they’ve never heard from before, with instructions to click on hyperlinks to who knows where. Some consumers might miss notices from legit companies because they have good reason to be skeptical of clicking on random hyperlinks sent to their cell phones. Worse, what’s to stop hackers from taking advantage of the situation by sending out illegitimate debt collection notices designed to phish personal information like Social Security and credit card numbers?
Added Funk: “Now that the Seventh Circuit has made clear that putting consumers in situations like this is illegal, Director Kraninger should pull her debt collection rule immediately and rewrite it so that it actually protects consumers, not the bottom line of the GOP’s debt collection industry donors.”
The public comment period is currently set to close September 19th on the CFPB’s proposal to give debt collectors more options to harass and invade the privacy of consumers. The Trump spam plan rewards the debt collection industry with “almost everything” on their wish list despite racking up among the highest number of consumer abuse complaints and millions of dollars in fines and legal penalties for misconduct. Allied Progress recently released an analysis showing the debt collection industry trade groups have spent over $2.1 million on federal lobbying since Trump took office, and debt collectors have donated over $343,000 to Republican political campaigns since 2016.
WHAT YOU NEED TO KNOW:
Kathy Kraninger May Have To Hit The ‘Reload’ Button On Her Debt Collection Rule After A Federal Court Ruled That Industry Can’t Use Hyperlinks To Send Notices To Consumers
A Federal Appeals Court “May Have Thrown A Wrench Into” Kathy Kraninger’s Debt Collection Rule, Ruling That Collectors Cannot Indirectly Send Legally-Required Notices To Consumers Through Hyperlinks In Emails, Text Messages, And Other Electronic Communications.
A Federal Appeals Court “May Have Thrown A Wrench Into” Kathy Kraninger’s Debt Collection Rule, Which Could Let Collectors Send Certain Disclosures To Consumers Indirectly Through Hyperlinks.
A Federal Appeals Court “May Have Thrown A Wrench Into” A Part Of The CFPB’s Debt Collection Rule That Would Allow Collectors To “Validate Consumer Debts” Through Electronic Communications Like Text Messages And Email. “A federal appeals court may have thrown a wrench into the Consumer Financial Protection Bureau’s plans to allow debt collectors to validate consumer debts through text messages, email and other electronic communications.” [Evan Weinberger, “Appeals Court Throws Wrench Into CFPB Debt Collection Rewrite,” Bloomberg Law, 08/27/19]
The CFPB’s Debt Collection Rule Would Potentially Allow Collectors To Direct Consumers To Websites Via Hyperlink Rather Than Directly Sending Them Validation Notices, Which Must “Contain The Amount Owed, The Name Of The Creditor To Whom The Debt Is Owed And Other Disclosures.” “One of the things the CFPB wants to do is allow collection firms to send validation notices through electronic communications, and potentially direct consumers to separate websites using hyperlinks. Debt collectors are required to send validation notices within five days of their first contact with consumers. The notices must contain the amount owed, the name of the creditor to whom the money is owed and other disclosures.” [Evan Weinberger, “Appeals Court Throws Wrench Into CFPB Debt Collection Rewrite,” Bloomberg Law, 08/27/19]
The Court Ruled That Using Hyperlinks To Refer Consumers To Disclosures Would Be A Violation Of The Fair Debt Collection Practices ActAs They Require Consumers To Complete Several Steps Before Accessing Legally-Required Information.
The Seventh Circuit U.S. Court Of Appeals Ruled That Using Hyperlinks To Direct Consumers To A Debt Validation Notice “Does Not Comply With The Fair Debt Collection Practices Act (FDCPA).” “The U.S. Court of Appeals for the Seventh Circuit on Aug. 8 found that using hyperlinks to direct consumers to a debt validation notice does not comply with the Fair Debt Collection Practices Act. The decision in Lavallee v. Med-1 Solutions LLC comes as the CFPB is taking comments on a May proposal for the first-ever federal rules for debt collection.” [Evan Weinberger, “Appeals Court Throws Wrench Into CFPB Debt Collection Rewrite,” Bloomberg Law, 08/27/19]
The Court Found That An Email Validation Notice “Violated The FDCPA” Because The Debt Collector Did Not Identify Itself In The Email And The Included Hyperlink “Required Several Steps Before The Debtor Could Get The Relevant Information.” “The appellate panel found that a collector that attempted to send a validation notice through email violated the FDCPA because the message provided no information that it was from a debt collector and the hyperlink required several steps before the debtor could get the relevant information.” [Evan Weinberger, “Appeals Court Throws Wrench Into CFPB Debt Collection Rewrite,” Bloomberg Law, 08/27/19]
The Court Ruled That Debt Collectors’ Communications Containing Hyperlinks Were Only A Means To Access Legally-Required Disclosures And Could Not Be Counted As Disclosures In And Of Themselves.
The Court Ruled, “We’ve Already Rejected The Argument That A Communication ‘Contains’ The Mandated Disclosures When It Merely Provides A Means To Access Them.’” “‘At best, the emails provided a digital pathway to access the required information. And we’ve already rejected the argument that a communication ‘contains’ the mandated disclosures when it merely provides a means to access them,’ the Seventh Circuit’s opinion said.” [Evan Weinberger, “Appeals Court Throws Wrench Into CFPB Debt Collection Rewrite,” Bloomberg Law, 08/27/19]
The Debt Collector In The Case Claimed Its Email Was Akin To An Envelope Containing A Disclosure Letter, But The Court Rejected This Comparison Calling Its Email, “A Letter That Provides Nothing More Than The Address Of A Location Where The Message Can Be Obtained.” “Med-1 analogizes the information available through a hyperlink in an email to the information printed on a letter inside an envelope. The analogy is inapt. An envelope is merely a means of transmitting a letter bearing a substantive message. The letter in Med-1’s analogy clearly ‘contains’ the information it imparts. Conversely, Med-1’s emails contained nothing more than hyperlinks—gateways to an extended process that ends in the relevant message. The proper analogue is a letter that provides nothing more than the address of a location where the message can be obtained. That hypothetical letter, like the emails here, doesn’t “contain” the relevant information.” [Lavallee v. Med-1 Solutions LLC, Case No. 17-3244]
It Is “Much Less Likely” That Consumers Can Receive Adequate Disclosure Through Hyperlinks.
Consumer Advocates Have Argued That Validation Notices Sent Through Hyperlink Will “Make It Much Less Likely That Consumers Will Find Out About Debts They Potentially Owe.” “Consumer advocates argue that allowing collectors to send those notices via email or text, and requiring the consumer to click through a hyperlink, will make it much less likely that consumers will find out about debts they potentially owe.” [Evan Weinberger, “Appeals Court Throws Wrench Into CFPB Debt Collection Rewrite,” Bloomberg Law, 08/27/19]
“‘Empirical Research Has Demonstrated That Consumers Rarely Click On Links To Disclosures,’” Sometimes Out Of Fear That Clicking A Link Will Give Their Device A Computer Virus.“‘Maybe consumers fearing viruses won’t click on the links. Empirical research has demonstrated that consumers rarely click on links to disclosures,’ said Jeff Sovern, a professor at St. John’s University School of Law.” [Evan Weinberger, “Appeals Court Throws Wrench Into CFPB Debt Collection Rewrite,” Bloomberg Law, 08/27/19]