CFPB Bites of the Month – 2023 Annual Review – Debt Collection

In this article, we share a timeline of our monthly “bites” for 2023 applicable to debt collection. If debt collection in 2023 had a theme it would be medical debt. Medical debt woes transcend political parties and affect nearly all demographic groups. As the CFPB has pointed out, and as almost every American knows, medical bills are confusing and insurance disputes are common. The CFPB took aggressive action in 2023 to curb medical debt collection practices and to ensure that medical debt collectors are collecting on accurate, undisputed amounts.

While it was active and aggressive, the Bureau clearly sensed an existential threat to its authority. The U.S. Supreme Court’s decision about its funding structure loomed in the background for most of the year. And the Bureau’s public statements throughout 2023 took pains to highlight the authority of states and the Federal Trade Commission to enforce the Fair Debt Collection Practices Act and the Consumer Financial Protection Act’s prohibition on unfair, deceptive, and abusive acts and practices.

Bite 10: CFPB Finds 33% Decline in Collections Items on Consumer Credit Reports

On February 14, 2023, the CFPB released a report showing a one-third drop in collection tradelines on credit reports, from 261 million tradelines in 2018 to 175 million in 2022. The share of consumers with collection tradelines on their credit report also dropped by 20%. The CFPB indicated that reductions may be due to a strong labor market and emergency pandemic-related programs, but that the decline was also driven by fewer reports related to medical bills. The CFPB’s market monitoring found that medical debt collectors are moving away from furnishing information to credit reporting agencies. According to the CFPB, medical debt may be more difficult to verify, and the CFPB’s data integrity concerns may have made these collectors unsure of their ability to comply with the Fair Credit Reporting Act. Nonetheless, the CFPB found that medical collections tradelines remain a majority (57%) of all collections items on consumer credit reports. However, the nationwide consumer reporting agencies announced upcoming changes to medical collections reporting that will remove amounts less than $500 and paid medical collection tradelines from consumer reports. While this will reduce the total number of medical collections tradelines, the CFPB estimates that half of all consumers with medical collections tradelines will still have such tradelines on their reports.

Bite 9: CFPB Issues Fair Debt Collection Practices Act Report Focused on Medical Debt Collection

On November 16, 2023, the CFPB issued its annual FDCPA report. The report noted that servicemembers, older adults, and other consumers submitted 8,500 complaints related to medical debt collections in 2022 (15% of all debt collection complaints sent to collection agencies for review and response in 2022). The report noted that the most common type of complaint across all types of debts was that the debt collector was attempting to collect debt that the consumer does not owe. The report also outlined CFPB and state agency efforts to stop inaccurate medical collection and highlighted state efforts to combat deceptive medical debt collection practices as well as the authority of states to enforce the federal FDCPA and FCRA and the Consumer Financial Protection Act’s prohibition on unfair, deceptive, or abusive acts or practices. The report also included updates on the debt collection market more broadly, noting the rapid rise in consumer debt in 2022 and attributing it to, among other factors, higher inflation, interest rates, and consumer demand. Finally, the report summarized the CFPB’s debt collection supervisory, rulemaking, and enforcement activity, the FTC’s debt collection enforcement activity, including in connection with small business debt collection, and CFPB education and outreach initiatives, such as providing sample letters for use with debt collectors.

Bite 8: Supervisory Highlights Report finds Violations Across Array of Financial Products Including Servicing and Debt Collection

On July 26, 2023, the CFPB released its latest Supervisory Highlights, addressing concerns, particularly UDAAP concerns, across various financial services. The CFPB found, during examinations, that debt collectors continued collection attempts on work-related medical debts after receiving sufficient information that debts were uncollectible under state workers compensation laws, that auto finance servicers engaged in the practice of blanket cross-collateralization by accelerating and requiring payments from all consumers on unrelated debts, such as credit cards, before consumers could reclaim their repossessed vehicles, and that payday lenders engaged in certain unfair, deceptive, or abusive collection activity, such as having language in their credit agreements that prohibited consumers from revoking their consent to certain methods of communication and falsely threatening to garnish wages.

Bite 7: CFPB Addresses Collections on Discharged Student Loans

On March 16, 2023, the CFPB released a bulletin addressing unlawful collection of discharged student loans. The CFPB alleged that certain loan servicers illegally returned loans to collections after bankruptcy courts had discharged those loans. The CFPB directed those servicers to return the payments and to immediately stop unlawful collection tactics. Certain student loans are eligible for discharge in bankruptcy, including loans made to attend unaccredited schools, loans to students attending less than half-time, loans made in amounts in excess of the cost of attendance, and loans made to cover fees and living expenses incurred while studying for the bar exam or other professional exams. CFPB examiners claim that certain student loan servicers are failing to distinguish between these discharged loans and others, and as a result, are collecting discharged debt. The CFPB announced that it expects servicers to proactively identify discharged student loans, permanently cease collections, and refund consumers affected by unlawful collections in the past. The CFPB put student loan servicers on notice that it intends to examine their handling of discharged student loans.

Bite 6: CFPB Issues Advisory Opinion on Zombie Mortgages

On April 26, 2023, the CFPB issued an advisory opinion on what it calls “zombie” mortgages. These are mortgages for which the statute of limitations has expired, sometimes called “time-barred debt.” According to the CFPB, debt collectors were attempting to collect on second lien mortgages over a decade after the homeowners defaulted. In prepared remarks, Director Chopra stated that many of these “zombie mortgages” date back to the leadup to the 2008 financial crisis, when lenders offered 80/20 mortgages, which was a first lien loan for 80% of the value of the home and a second lien loan for the remaining 20% of the value of the home. Most lenders did not collect on those second mortgages, and instead sold them to debt buyers. The CFPB’s advisory opinion explains that a covered debt collector who brings, or threatens to bring, a foreclosure action to collect a time-barred mortgage debt violates the Fair Debt Collection Practices Act and Regulation F. Director Chopra said that the CFPB is looking for covered debt collectors who are breaking the law, and that the CFPB will be working closely with state agencies to pursue offenders. FDCPA actions can be brought by private plaintiffs, the CFPB, and state attorneys general.

Bite 5: CFPB Kicks off Medical Bill Rulemaking

On September 21, 2023, the CFPB announced that it is beginning a rulemaking process to remove medical bills from credit reports. The CFPB says these efforts will help families financially recover from medical crises, stop collectors from collecting on bills that consumers may not owe, and ensure that creditors are not relying on inaccurate data. The CFPB cited to a 2022 report indicating that approximately 20% of Americans have medical debt. The CFPB also noted research indicating that medical billing data is less predictive of future repayment than reporting on traditional credit obligations, and that inaccuracies in billing are common due to insurance disputes and medical billing practices. The CFPB outlined proposals under consideration, which include prohibitions on: (1) the inclusion of medical debt and collection information on consumer reports; (2) a creditor’s use of medical collections information when evaluating credit applications; and (3) “coercive” debt collection practices, including the use of the credit reporting system to leverage payments on medical debts. The CFPB is currently reviewing information and public responses to recent hearings and inquiries as part of the rulemaking process.

Bite 4: The CFPB Takes Action to Halt Debt Collection Law Firm Activities

On January 11, 2023, the CFPB announced a settlement with a debt collection law firm that the CFPB claims bombarded consumers with “junk” lawsuits—lawsuits not supported by adequate documentation. The CFPB claims that fewer than a dozen attorneys filed more than 99,000 debt-collection lawsuits, many of which without supporting documentation. The CFPB further alleged that the law firm falsely represented that attorneys were meaningfully involved in preparing and filing the lawsuits, violating the FDCPA and CFPA. The proposed settlement prohibits the law firm from filing any new lawsuit against a consumer unless it has certain specified documents supporting the debt (including the name of the original creditor, evidence that the consumer authorized the debt, the chain of title supporting any sale, and an itemization of the debt) and certifies that the attorney whose name will appear on the complaint has reviewed those documents for consistency with the complaint. The order also requires the company to dismiss any pending lawsuit where it cannot satisfy these requirements. The order also required payment of a $100,000 penalty, deposited into the CFPB’s civil penalty fund. Director Chopra also warned that “[t]he CFPB will be scrutinizing large financial companies that enlist debt collection outfits operating lawsuit mills.”

Bite 3: CFPB Shuts Down Medical Debt Collector

On December 15, 2023, the CFPB announced an action against a medical debt collector, alleging that the collector illegally attempted to collect unverified medical debts after consumers disputed their validity. The CFPB claims the collector violated the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. The CFPB noted that the FDCPA requires debt collectors to stop collecting disputed debts without substantiating documentation. The CFPB also noted that the FCRA requires furnishers to conduct a reasonable investigation and notify consumer reporting agencies when a consumer disputes a debt. The CFPB alleged that the medical debt collector failed to follow these provisions of the FDCPA and FCRA. The CFPB permanently shut down the collector, and banned it from engaging in any collection activities, debt buying, debt selling, and consumer reporting. The collector must also instruct consumer reporting agencies to delete all collection accounts for all consumers and pay a $95,000 penalty to the CFPB’s civil penalty fund.

Bite 2: CFPB Orders Medical Debt Collector to Pay Redress and Penalties

On June 8, 2023, the CFPB ordered a medical debt collector to pay $1.675 million to the civil penalty fund as well as an unspecified amount in consumer redress for alleged debt collection and credit reporting violations. The CFPB claims that in thousands of cases, the debt collector continued to attempt to collect unsubstantiated debts after consumers disputed their validity, risking consumer harm (the CFPB claimed consumers may have been pressured or induced to pay debts they did not owe). The CFPB also accused the debt collector of sharing the disputed information with consumer reporting agencies, which, the Bureau claimed, “likely” resulted in inaccuracies on consumers’ credit reports. Under the order, the debt collector must pay the penalties, provide redress to consumers, cease unlawful activity, and cooperate with CFPB examinations for the duration of the order.

Bite 1: CFPB Orders Payment of More Than $24 Million Related to Debt Collection and Consumer Reporting

On March 23, 2023, the CFPB ordereda debt collector to pay more than $24 million for allegedly violating a 2015 CFPB order, divided evenly between consumer restitution and a civil penalty to be deposited into the CFPB’s victims relief fund. The CFPB claims the collector collected unsubstantiated debt, failed to provide required documentation and disclosures, sued or threatened to sue without the required documentation, and sued consumers after the statute of limitations had passed. In addition, the CFPB claimed the collector violated the Fair Credit Reporting Act by failing to inform consumers about investigation outcomes, failing to timely resolve disputes, and conducting unreasonable investigations. The 2015 order required the debt collector to pay more than $27 million in consumer refunds and penalties for allegedly unlawful debt collection activities. The CFPB’s new proposed order will require the debt collector to pay $12 million to consumers and an additional $12 million to the CFPB’s civil penalty fund, improve operations, and fix alleged failures to respond to consumers.

We predict 2024 will continue to be a year full of CFPB activity in medical debt collection. However, with household debt ballooning—thanks to the double whammy of inflation and higher interest rates—expect the Bureau to continue scrutinizing traditional credit collection, personal property repossessions, and foreclosures. And we won’t be surprised if the Bureau’s (and entire Executive Branch’s) scrutiny of “junk fees” seeps into debt collection oversight and enforcement.

Still hungry? Please join for our next CFPB Bites of the Month. Here is our lineup for 2024. If you missed any of our prior Bites, request a replay on our website.

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This article is provided for informational purposes and is not intended nor should it be taken as legal advice.  The views and opinions expressed in this article are those of the authors in their individual capacity and do not reflect the official policy or position of the partners of Hudson Cook, LLP or clients they represent

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Coast Promotes Lisa Reese to Senior Vice President of Compliance

GENESEO, N.Y. — Coast Professional, Inc. (Coast) is pleased to announce the promotion of Lisa Reese to Senior Vice President of Compliance. With more than 26 years of experience in collections and a wealth of knowledge from a number of departments including Compliance, Operations, and Auditing, Ms. Reese began her career at Coast in 2018 as the Senior Director of Compliance. She later earned a promotion to Vice President of Compliance. Throughout her tenure at Coast, she has provided leadership and support to teams of legal, quality assurance, training, and Compliance employees while maintaining a track record of protecting consumer rights. 

In her new role as Senior Vice President of Compliance, Ms. Reese will continue to oversee the Compliance department, ensuring its functioning as an objective body that evaluates compliance issues and concerns within the organization. In addition, Ms. Reese will work with General Counsel and outside legal counsel in the review and implementation of statutory and regulatory requirements to ensure compliance and assist Coast departments in the analysis of contractual requirements impacting Coast departmental operations. Ms. Reese will oversee all ongoing activities related to the development, implementation, maintenance of, and adherence to the organization’s compliance program addressing federal and state laws generally, privacy, data security, consumer protection, and receivables management. 

“Ms. Reese embodies an unparalleled source of enthusiasm and leadership within the Compliance Department,” says Michael Del Valle, Coast’s General Counsel and Chief Compliance Officer. “Her talent for inspiring excellence in her team members, coupled with her unwavering commitment to ensuring regulatory compliance, makes her an invaluable asset to our company. Her elevated responsibilities in this new role will undoubtedly bolster the efforts of our Executive Leadership team in crafting strategic initiatives and guiding company planning. Congratulations, Lisa, on this well-deserved achievement” 

Ms. Reese is certified as a Credit and Compliance Collection Officer® (CCCO) by ACA International and a 2021 Bronze Stevie Award honoree in the “Female Executive of the Year- Business Products – 11 to 2,500 Employees” category. She was instrumental in Coast‘s selection as a Training APEX Award winner  (previously Training 100, formerly Training 125) by Training Magazine for five consecutive years (2020-2024), a worldwide ranking of organizations that excel at training and human capital development. Ms. Reese’s team was also influential in Coast being named a 2023 Better Business Bureau Torch Award recipient.

About Coast Professional, Inc.

Coast Professional, Inc. is a contact center and accounts receivable management company dedicated to respectful and ethical communication with consumers. Coast provides essential collection and business process outsourcing services to hundreds of campuses, universities, federal, state, and county governments, municipalities, and courts. Coast is an eight-time honoree on the Inc. 5000 list for America’s Fastest-Growing Private Companies provided by Inc. Magazine and in 2021, was distinguished for the sixth time as one of the “Best Places to Work In Collections” by insideARM.com and Best Companies Group. More about Coast can be found at www.coastprofessional.com.

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Third Circuit Finds Pennsylvania Lending Law Does not Regulate Collection of Charged-off Debt

On February 7, the U.S. Court of Appeals for the Third Circuit affirmed a lower court’s decision to grant a debt collector’s (the defendant) motion for judgment. The defendant argued that its efforts to collect plaintiff’s charged-off debt via a proof of claim in a bankruptcy proceeding was not limited by, or in violation of, the Pennsylvania Consumer Discount Company Act (CDCA). The plaintiff, who obtained a loan from a third-party small-dollar lender licensed under the CDCA, defaulted on the loan and the licensed lender subsequently charged off and sold plaintiff’s debt to a company that was not licensed under the CDCA. 

After filing for bankruptcy, the plaintiff sued the defendant and alleged a FDCPA violation when the defendant filed a proof of claim during the bankruptcy proceeding to collect the outstanding balance on the charged-off loan. The plaintiff’s argument was premised on claims that the defendant could not lawfully collect the debt because the CDCA dictates that a licensee may not sell CDCA-authorized contracts to an unlicensed person or entity. As such, the plaintiff argued the proof of claim violated the FDCPA’s prohibition against “false, deceptive, or misleading” representations in connection with the collection of a debt. The 3rd Circuit disagreed.   

Relying in part on a letter from the Pennsylvania Department of Banking and Securities confirming that the CDCA does not apply to an unlicensed entity that purchases or attempts to collect on charged-off consumer loan accounts of debtors in bankruptcy, the appellate court held that “[t]he CDCA is a loan statute, not a debt collection statute,” and that “entities in the business of purchasing and collecting charged-off consumer debt are not subject to the CDCA’s regulatory scheme.” The 3rd Circuit held that selling charged-off obligations is not the same as selling the defaulted loan contract. Rather, it is selling unsecured debt, which falls outside of the CDCA’s scope. The court concluded that the CDCA’s prohibitions were inapplicable and could not be the basis for the FDCPA violation.

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California DFPI Proposes New Regulations Under the Debt Collection Licensing Act

On February 9, 2024, the California Department of Financial Protection and Innovation (DFPI) published a proposed rule to adopt new regulations under the Debt Collection Licensing Act (DCLA). Under the DCLA, a debt collector licensee is required to pay the DFPI Commissioner its “pro rata share of all costs and expenses incurred in the administration” of the DCLA, which is calculated in part based on the licensee’s “net proceeds generated by California debtor accounts,” but the term “net proceeds” was not defined in the statute. 

The proposed rule defines “net proceeds generated by California debtor accounts” to mean “the amount retained by a debt collector from its California debt collection activity.” The proposed rule also specifies the formulas used in calculating the net proceeds depending on the party, including a debt buyer, purchaser of debt that has not been charged off or in default, third-party collector, and first-party collector.

Additionally, the proposed rule requires licensees to file an annual report with the DFPI and specifies the information required in the annual report, including (i) the number of California debtor accounts collected on in the previous year; (ii) the number of California debtor accounts in the licensee’s portfolio as of December 31 of the preceding year; and (iii) the number and dollar amount of California debtor accounts for which collection was attempted, but not successfully collected or resolved during the previous year. Comments to the proposed rule must be submitted by March 27.

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Pedaling for a Purpose: Team VeriFacts Raises Funds for Local YMCA Youth Programs

STERLING, Il. — Traci Oltmans and the VeriFacts team are at it again with the annual Spinathon fundraiser in support of their local Sterling-Rock Falls Family YMCA. Now in their fifth consecutive year of participating, the donations raised will support thousands of area children through financial support for swim lessons, gym memberships, camp attendance, and other summer childcare programs and activities. 

“Our local Y does an amazing job with our youth. The money raised goes towards the scholarship programs which help send kids to summer camp and participate in activities. I just love their entire staff,” shared Traci, Director of Business Development at VeriFacts. “They are so good with the kids in our community, and I want to do a great job for them. It means a lot to me. Every kid deserves a chance to be in activities and have additional outlets outside of their home. Team VeriFacts raised the most money the last two years and I’d like to keep the tradition going. We promise to pedal our hearts out!” 

Donate Today

The Spinathon event takes place on Saturday, February 24, 2024. To support this fundraiser for your Q1 company or personal giving, click here to make an online donation. Click “new donation,” select the 2024 Annual Support Campaign and select Team VeriFacts as the campaigners.

Sterling-Rock Falls Family YMCA

The Sterling-Rock Falls Family YMCA believes “that all kids deserve the opportunity to discover who they are and what they can achieve. That’s why, through the YMCA, children are taking a greater interest in learning; making smarter life choices; and cultivating the values, skills and relationships that lead to positive behaviors, the pursuit of education and goals.” 

As a nonprofit, the Y works to deliver positive change through its presence and partnerships. By connecting people of all ages and backgrounds to bridge the gaps in community needs, the Y mobilizes local communities through programs that build healthy spirit, mind and body for all. 

A Community-Oriented Company

VeriFacts is firmly rooted within its community and takes great responsibility and commitment to giving back. VeriFacts is proud to have a team that works hard and also plays hard. They love opportunities to donate their time, energy, and financial resources to both local and national charitable organizations. For more on VeriFacts’ community involvement, visit vfacts.com. 

About VeriFacts

VeriFacts, LLC is the top employment location and verification service for the receivables management industry. Having been in business for over 30 years, they are committed to offering guaranteed customer location and employment verification services to creditors across the nation. The VeriFacts brand has become synonymous with high-quality service and a positive customer experience. Over the years, their services have expanded into residential location information, data verification, and unique data aggregation. VeriFacts is proud to be a Certified Women-Owned Business by the WBENC.

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Fintech Trade Group Sends Letter to Director Chopra Urging CFPB to Develop Regulatory Approach for Earned Wage Access Products

The American Fintech Council (AFC), a trade group whose members include providers of earned wage access (EWA) products, has sent a letter to Director Chopra urging the CFPB to take steps towards development of a “pragmatic regulatory approach” for regulating EWA products. 

In its letter, AFC discusses the “patchwork approach” to regulating EWA products that is emerging at the state level.  While expressing its approval of the “bespoke regulatory framework for EWA” in Nevada and Missouri, AFC states that it “disagrees with the approach of shoehorning EWA products into existing lending laws, pursued by other states.”  (The California Department of Financial Protection and Innovation (DFPI) has issued a proposal that would require providers of income-based advances such as EWA products to register with or obtain a license from the DFPI and comply with the fee and interest rate limits of the California Financing Law (CFL)).  AFC indicates that regardless of the approach taken by states, “pragmatic federal engagement on this matter is necessary.”

AFC observes that the CFPB has to date “opted to pursue less comprehensive or binding guidance with regards to EWA,” citing to the CFPB’s November 2020 Advisory Opinion (AO), and that it initially agreed with this approach “as it allowed the industry to develop responsible options that fit the demands of consumers, without significant limitations to their business models.”  AFC states that it now believes a “more substantive regulatory endeavor, such as a formal rulemaking” is necessary in light of market and state developments since the CFPB issued the AO.  While expressing its preference for notice and comment rulemaking by the CFPB, AFC states that it “remains open to understanding and supporting the regulatory tool that will ultimately serve consumers and responsible industry participants best.”  AFC asks the CFPB “to convene a meeting with relevant stakeholders” to facilitate a discussion regarding regulatory approach.

In the November 2020 AO, the CFPB addressed whether an EWA program with the characteristics set forth in the AO was covered by Regulation Z.  Such characteristics included the absence of any requirement by the provider for an employee to pay any charges or fees in connection with the transactions associated with the EWA program and no assessment by the provider of the credit risk of individual employees.  The AO set forth the Bureau’s legal analysis on which it based its conclusion that the EWA program did not involve the offering or extension of “credit” within the scope of Regulation Z.  In the AO, the Bureau indicated that there may be EWA programs with nominal processing fees that nonetheless do not involve the offering or extension of “credit” under Regulation Z and advised that providers of such programs could request clarification about a specific fee structure by applying for an approval under the Compliance Assistance Sandbox Policy.  (The CFPB announced in September 2022 that it was rescinding the Compliance Assistance Sandbox Policy.)

In January 2022, then CFPB Acting General Counsel (and now General Counsel) Seth Frotman indicated that due to “repeated reports of confusion” caused by the AO, he planned to recommend to Director Chopra “that the CFPB consider how to provide greater clarity on these types of issues.”  While acknowledging that the AO had left open the possibility that an EWA product with nominal processing fees might not be “credit” under Regulation Z, Mr. Frotman suggested that possibility was remote.  More specifically, he noted that the CFPB had expressly limited the AO’s application to EWA programs meeting all of the characteristics set forth in the AO and stated that “products that include the payment of any fee, voluntary or not, are excluded from the scope of the advisory opinion and may well be TILA credit.”  Mr. Frotman also noted that the AO does not speak to whether EWA products would be “credit” under federal laws other than the TILA, such as the CFPA or the ECOA, or under state law.  Mr. Frotman’s comments were made in a letter responding to a letter sent to him by consumer advocacy groups regarding proposed New Jersey legislation on EWA products. 

In December 2023, the CFPB sent a letter to the DFPI commenting on the DFPI’s EWA proposal which would clarify that income-based advances are “loans” under the CFL.  The CFPB noted that the DFPI’s proposed treatment of income-based advances as “loans” is similar to how “credit” and “finance charges” are treated under the Truth in Lending Act and Regulation Z.  The CFPB indicated that it plans to issue further guidance “to provide greater clarity concerning the application of the Truth in Lending Act in this market,” that products “that do not fit within [the very narrow scope of the CFPB’s previous advisory opinion] are not excluded from existing laws,” and that it supports efforts to subject income-based advance products “to rigorous oversight for the full scope of existing state and federal consumer protection and lending laws.”

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CFPB Reports on Student Borrowers’ Experiences During Return to Loan Repayment

As federal student loan repayments resume after a three-year pause due to the COVID-19 pandemic, the Consumer Financial Protection Bureau (CFPB) published an Issue Spotlight on student borrowers’ experiences, using consumer complaints to identify emerging problems.

Key concerns include long hold times and abandoned calls. Borrowers often wait on hold for over an hour, and many give up without receiving assistance. Average call wait times have risen from 12 minutes in August 2023 to over 70 minutes in October 2023, resulting in about half of all calls being abandoned in October 2023, more than double August 2023’s rate of 17%.

There are also significant delays in processing income-driven repayment plan applications. As of late October, servicers reported over 1.25 million pending applications, with more than 450,000 pending for over 30 days. Processing times vary, with some servicers taking five times longer than others, putting borrowers at risk of making higher payments than they can afford.

Inaccurate and untimely billing statements are another issue. Errors include premature due dates before the end of the payment pause, inflated monthly payment amounts due to outdated poverty guidelines, and incorrect calculations for new income-driven repayment plans. These mistakes can cause confusion and further strain servicers’ resources as borrowers contact them to resolve these errors.

In the press release that accompanied the release of the Issue Spotlight, CFPB Director Rohit Chopra warned that “if student loan companies are cutting corners or sidestepping the law, it could pose serious risks to individuals and the economy.”

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Saket Sahoo Appointed Chief Operating Officer of Cascade Receivables Management, LLC

PETALUMA, Calif. — The Cascade365 Family of Companies is excited to announce that Saket Sahoo has been appointed Chief Operating Officer (“COO”) of Cascade Receivables Management, LLC (“CRM”). As COO, Mr. Sahoo will oversee CRM’s operations and information technology teams while leading mission-critical initiatives for CRM and its affiliate companies, such as diversifying and growing revenue, implementing key technologies and efficiencies, and cultivating CRM’s workforce offshore.

Mr. Sahoo’s wealth of experience spans two decades and multiple continents. He previously worked for Global Growth, a private investment firm with portfolio companies in the ARM and RCM sectors. During his time there, Mr. Sahoo led M&A activity and designed and implemented strategic growth strategies, while also contributing at the individual portfolio company level. 

Mr. Sahoo most recently served as COO of Affinity Global and as Vice President of CBV Collection Services, Ltd., both Canadian ARM companies operating under the Global Growth umbrella. Prior to Global Growth, Mr. Sahoo was an EVP at Astra Global and a Director at Arrow Financial Services (a Sallie Mae Company). Mr. Sahoo is also a strategic Partner in Connect BPS, an offshore call center business located in South Africa.

Mr. Sahoo possesses a strong track record of driving growth while fostering innovation and maintaining robust profit margins. Throughout his career, he has consistently remained at the forefront of technological advancements and effectively harnessed them to drive transformative change across industries. He holds a Bachelor of Engineering degree in Electronics from D.Y. Patil University and lives in Toronto Canada.

“I’m excited about both the organic and inorganic growth opportunities ahead of us at Cascade365, with sustainability and innovation being key drivers, as we navigate through challenging economic and regulatory climates”, stated Saket Sahoo.

“I am excited to have Saket on team Cascade365”, said Lee Brockett, CEO of the Cascade365 Family of Companies.  “His unique experience and history of success, as both entrepreneur and institutional operator in three different continents, will help fuel Cascade365’s growth without sacrificing operational integrity or customer experience.”

About The Cascade365 Family of Companies 

Cascade365 is a brand identity representing a family of companies focused on the responsible liquidation of accounts receivable. Headquartered in the San Francisco Bay area, the Cascade365 Family of Companies are recognized leaders in the accounts receivable management, revenue cycle and specialty finance industries. Cascade365’s suite of products and services include AR Purchase and Finance, Master Servicing, Third Party Collections, and Revenue Cycle Optimization. The Cascade365 Family of Companies believes in promoting financial accountability while treating consumers and patients in a fair, dignified, and lawful manner. For more information, please contact Jeffery Howell, Director of National Sales at 707-244-2298 or via email at jhowell@cascade365.com.

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First Party vs. Third Party Collections: Contractual Language Matters

The line between first-party and third-party collections can be fuzzy, and consumer attorneys regularly claim first-party collections are subject to the Fair Debt Collection Practices Act (FDCPA). Recently, a court in the Northern District of Illinois found in favor of a first-party debt collector and provided some clarity around how to draw the distinction.

In Mladenov v. R1 RCM Inc., 21-cv-1509 (N.D. Ill. Jan 22, 2024) a consumer brought suit against a debt collection agency for letters sent that allegedly did not comply with FDCPA requirements. The debt in question stemmed from medical services rendered by a hospital following a car accident. The agency sent two statements to the consumer informing them of the debt that was owed; the second was sent after the consumer’s attorney asked the agency to cease all communications. Each letter included some language typically found in third-party debt collection letters.  

The consumer paid the debt after the second statement but subsequently filed a lawsuit claiming the debt collector violated the FDCPA. The debt collector defended the suit by claiming the debt was not in default when assigned by its client, and therefore, the FDCPA did not apply. The consumer responded by claiming the cumulative effect of the letters reasonably led him to believe that the collection agency was attempting to collect a defaulted debt. 

The Court agreed with the debt collector and held the FDCPA did not apply to it or the letters it sent. 

In analyzing the issues, the Court pointed out that whether a debt collector is a first-party or third-party collector is a factual determination to be made on a case-by-case basis. The court rejected the consumer’s assertion that the cumulative effect of the letters should be considered. Instead, the court focused on the status of the debt and noted that the contractual agreement between the debtor, creditor, and agency should be used to help establish whether the debt was in default. 

In reaching its conclusion , the court reviewed the agreement between the debt collector and its client and found that pursuant to that contractual language,  the debt collector “acts as an extension of [its client] in servicing and billing patient accounts[,]” and “performs ‘early out’ services through which it resolves ‘balances on unpaid accounts prior to the time that the account is deemed delinquent.’” The debt collector also serves its client by coordinating collections on debt that has defaulted with third-party agencies. Further, at no point did the debt collector or its client treat this debt as in default. Therefore, in the court’s opinion, the contract and undisputed facts showed that the debt collector was only performing precollections for its client and thus was not a “debt collector” under the FDCPA.

Read the full opinion here

insideARM Perspective

For those performing first-party collection services for their clients, or thinking about doing so, this case highlights the importance of the contractual language establishing the first-party, early-out, or pre-collect relationship. In this case, the contract between the debt collector and its client was clear: the debt collector was “acting as an extension” of its client. This phrase and the surrounding language in the contract painted a clear picture for the court and allowed the debt collector to end the lawsuit without the need for a trial. Reading between the lines, had this language been omitted from the contract, or been too broad or otherwise unclear, we might have seen a different result.

First Party vs. Third Party Collections: Contractual Language Matters
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Vertican Technologies Unveils Rebranded Website, Marking a New Era in its Corporate Identity

FAIRFIELD, N.J. – Vertican Technologies, a global leader in the legal collections software industry, proudly announces the launch of its rebranded company website. This milestone tops off their recent corporate identity rebranding which introduced new product logos, streamlining their look, and creating a cohesive visual brand across all their platforms. 

The revamped website reflects Vertican’s enduring legacy and forward-thinking approach in the ever-evolving landscape of the collections industry. With a fresh design and enhanced user experience, the new vertican.com seamlessly integrates access to company news and information empowering clients with robust solutions to navigate the complexities of legal recoveries.

“As we settle into the new year, our rebranded website is a testament to Vertican’s dedication to modernization while providing unparalleled solutions in the receivables technology space,” said Isaac Goldman, Chief Executive Officer. “This is not merely a cosmetic change; it’s a reflection of our commitment to innovation, improving people’s lives, and advancing into the next exciting chapter of our journey.”

Vertican has been serving the legal collections arena for three generations, maintaining continuous ownership and a reputation for visionary innovation. This latest move in their corporate rebranding demonstrates the company’s commitment to scaling ahead in a dynamic business landscape and delivering exceptional products, value, professional services, and client support.

Visit the rebranded website at vertican.com and experience how the Vertican suite of products has provided the legal collections industry with the most powerful, evolutionary, and revolutionary technology for more than four decades.

About Vertican Technologies

For more than 40 years, Vertican Technologies has been the receivables industry leader providing best-in-class technology, making operations more efficient, compliant, and profitable. As the pioneer in developing data standards, Vertican continues to advocate for universal data standards which will increase productivity and reduce errors in the legal collection industry. Vertican’s team of subject matter experts and innovators build comprehensive software packages that automate and streamline the collections cycle. Solutions include: vExchange®, Q-LawE, Collection-Master, vMedia, and legacy YGC Data Standard licensing. Visit www.vertican.com to learn more.

Vertican Technologies Unveils Rebranded Website, Marking a New Era in its Corporate Identity
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