insideARM Announces Collections & Recovery, a New Resource for Consumer Lending Professionals in Collections

POTOMAC, Md. — insideARM, the industry’s premiere source for in-depth collections industry news and analysis, and The iA Institute are proud to announce the launch of Collections & Recovery, a brand-new industry resource designed specifically for consumer lending professionals in collections and recovery strategy, vendor oversight, or compliance. 

The new resource covers evolving trends and practices in digital collections, compliance and vendor management, omnichannel communication strategy, consumer behavior data, and more. Sign up for the free, weekly Collections & Recovery newsletter here.

“We could see that there was an information gap for collections & recovery professionals at creditors. There was certainly a need for insight about collections strategy, but also for legal and compliance analysis.” said Erin Kerr, Director of Content for Collections & Recovery. “Strategy, technology, and compliance are deeply intertwined, especially in today’s regulatory environment. Creditors want to know how their efforts compare to the efforts of other creditors. They want to know about new regulations, but specifically how those regulations affect their collections efforts. We created Collections & Recovery as a source for both timely collections news and in-depth analysis.”

Collections & Recovery grew out of – and replaces – iA Strategy & Tech, an industry resource from insideARM focused on collections strategy and digital collections. Collections & Recovery covers some of the same subjects as insideARM, but approaches all topics from the creditor’s point-of-view. 

Recent articles from Collections & Recovery include: 

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About the iA Institute

The iA Institute is a media company that provides news, education, events and community for professionals in consumer finance. Our initiatives cover three broad audiences: 3rd party collectors and debt buyers, creditor executives in collections and recovery, and female professionals across financial services. 

Learn more about The iA Institute here.

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Hunstein Isn’t Over: 4 Things You Need to Know

The 11th Circuit’s September 8, 2022 Opinion dismissed Hunstein (Opinion)[1]. That’s good news, right? It is, but debt collectors cannot assume all of the industry’s Hunstein-related problems are gone. The opinion did not completely address the underlying issue nor serve as a permanent bar to these types of actions in all courts, which means Hunstein can absolutely continue to affect the industry. Read on for a practical breakdown of the Hunstein dismissal, what it says, what it doesn’t say, and what it all means.

Confused? You’re not alone. If the dismissal was unequivocally good for the industry, how can the Hunstein problems still exist? The answer is in the legalese of the 80-page Opinion. 

Here are the top four things you need to know about the dismissal: 

1. The case was dismissed because Mr. Hunstein lacked the standing to bring it.

While it may seem like a procedural nuance or irrelevant legalese, to understand the future of Hunstein-type cases, it is crucial for debt collectors to pay attention to why the case was dismissed.  

“[F]ederal courts have limited jurisdiction” (Opinion- page 7). Part of this limitation requires the party bringing an action in federal court to have what is called “standing” to bring the action. “Standing” requires a legal analysis which includes, in part, a determination regarding whether a litigant bringing a suit has suffered an “injury in fact.” Not every statutory wrong causes an injury capable of supporting standing (Opinion- page 9), and “a pure statutory violation is not enough to establish harm” (Opinion- page 21).

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Citing the U.S. Supreme Court’s 2021 Transunion decision, which held, “no concrete harm, no standing,” the Court explained that to show he suffered an “injury in fact,” Mr. Hunstein would need to tie his alleged harm to an analogous cause of action at common law[2]. The Supreme Court was clear in Transunion that without a comparable common law cause of action, there is no injury, and a standing analysis fails. 

Mr. Hunstein claimed the harm he suffered by the debt collector sending data to a third-party letter vendor was analogous to the common law tort of ‘public disclosure of private facts.’ The majority of the 11th Circuit Court of Appeals judges disagreed, finding that even if the letter vendor’s employees saw Mr. Hunstein’s information, disclosing information to private individuals is not the same as publicly disclosing facts. Therefore, in the Court’s opinion, Mr. Hunstein failed to show any actual harm and lacked the requisite standing to bring an action in federal court. Because Mr. Hunstein’s complaint failed to show he had sufficient standing to bring the action in federal court, his lawsuit was dismissed without prejudice[3]. 

2. The Opinion doesn’t expressly address whether sending data to a letter vendor violates the FDCPA.

You might ask how it can be that the Court dismissed the case but didn’t actually address whether sending data to a letter vendor violates the Fair Debt Collection Practices Act (FDCPA)[4]. The answer to this question lies in the legal reason the case was dismissed. 

There are several different reasons why a federal court might dismiss a lawsuit. In addition to dismissing a case for lack of Article III standing (as was done here), courts can also dismiss claims for the failure to state a claim upon which relief can be granted [5]. Conceptually these dismissals are not alike and they have distinctly different impacts on future cases. 

A dismissal for the failure to state a claim for which relief can be granted means that even on their proverbial “best day in court,” a plaintiff has not alleged anything for which a court can grant relief. In other words, something may have happened, but so what? Conversely, a dismissal based on a lack of Article III standing means that the federal court cannot hear the case. A dismissal granted on this basis does not delve into the allegations and whether a litigant will be successful. Instead, as explained above, it asks, “should this action be brought before this court?” 

In 2019, the Middle District of Florida dismissed Mr. Hunstein’s complaint for the failure to state a claim for which relief can be granted, explicitly holding, “Hunstein is unable to state a claim for relief under the FDCPA because the communication from [the debt collector] to [the letter vendor] was not made in connection with the collection of a debt.” In April 2021, the Eleventh Circuit Court of Appeals’ opinion addressed both issues, holding both that Mr. Hunstein had the standing to bring the action in federal court and that he stated a claim for which relief could be granted (i.e., sending data to a letter vendor could be an FDCPA violation). 

Although the October 2021 substitute opinion focused heavily on the Article III standing issue, it did not deviate from the position that Mr. Hunstein stated a claim for which relief could be granted. In February 2022, after vacating the substitute opinion and deciding a full panel of the Eleventh Circuit would rehear the matter, the court limited the parties’ legal briefs to the standing issue, essentially limiting the argument to whether Mr. Hunstein could file suit in federal court (i.e., standing), not whether the claim itself (sending data to a mail vendor) is a viable cause of action under the FDCPA. 

Consistent with this directive, the September 8, 2022, Opinion and directive to dismiss the case did not address whether sending data to a mail vendor in and of itself is an FDCPA violation. To be clear: they did not say it was a violation of the FDCPA, but they also didn’t say it was not. Instead, as discussed above, the Court parsed through the Transunion decision and the definition of “publicity” to evaluate where Mr. Hunstein had the requisite standing to bring the lawsuit in federal court. That said, the Court opined that they do not believe Congress intended the FDCPA to target debt collectors’ vendor usage (Opinion- page 22).

3. Hunstein copycat suits can still be filed in state courts.

Since the Hunstein Opinion did not resolve whether sending data to a letter vendor violates the FDCPA, it does not preclude consumers from filing Hunstein-style cases in state courts. As explained by Manny Newburger of Barron & Newburger, PC, in this article regarding the dichotomy between state and federal courts, “When a case is dismissed from a federal court for lack of Article III standing, that is not a decision ‘on the merits,’ and the defendant has not ‘won.’ The plaintiff may be able to re-file in state court, depending on the state’s own standing jurisprudence.” In that same article, Mr. Newburger discussed why it might be more beneficial for consumers to file suits in their local state courts. Illustrating this point, there have already been instances where consumers sought to move their Hunstein copycat cases to state courts instead of litigating them in federal court. 

4. Pay attention to the pleadings- others may succeed where Mr. Hunstein failed.

In the Opinion, the Court explained that, as plead, Mr. Hunstein did not meet the threshold requirements for standing. Further, the Court pointed out the ruling is relative only to this plaintiff in this action stating, “[t]he fact that one plaintiff, Hunstein, has not pleaded injury under this statute does not show that no one else can or will” (Opinion- page 23). “Standing inquiry centers on whether a given plaintiff has pleaded an injury, not whether a cause of action is generally proper” (Opinion- page 23). Combine that with the Court noting that “Hunstein did not allege that a single employee read or understood the information about his debt, leaves him with a statutory violation only” (Opinion- page 22), and a case can be made that a different plaintiff pleading differently, might be more successful.

A few other notable points:

  • The case was dismissed without prejudice, meaning the allegations can be updated, and Mr. Hunstein can file again. He may also choose to appeal.

  • Judge Newsom, who wrote both the original Hunstein opinion and the substitute opinion, vehemently disagreed with the majority opinion and attempted to illustrate a circuit split on the standing issue.

The complete September 8, 2022 Opinion dismissing the lawsuit can be found here.

insideARM Perspective:

The September 8, 2022, Hunstein Opinion was a monumental win, and the above points are not meant to rain on the parade of the ARM industry. That said, dismissing Mr. Hunstein’s lawsuit did not wipe the last 18 months away, and it may not have put the debt collection world back where it was in early April of 2021. Debt collectors should celebrate the long-awaited return to common sense of the Eleventh Circuit but should be careful not to think the race is entirely over like this guy. There might be a few things yet to resolve. 

The ultimate success of any lingering Hunstein issues is another story whose ending is still to be written. As always, debt collectors should proceed cautiously when changing policies, processes, and procedures and keep in mind the defensibility of their actions. 

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[1]  Case No: 19-14434 (11th Cir. 2022)

[2] For a concise definition of “common law,” see this article from Cornell Law School’s Legal Information Institute. 

[3] “Without prejudice” means Mr. Hunstein has a limited time frame in which he may file the lawsuit again if he so chooses. 

[4] The statute at issue is 15 USCA 1692c(b).

[5] For more detail on these types of dismissals, see this Thomson Reuters article.

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Want to make sure you understand the Hunstein ruling? In The Hunstein Ruling Explained: A Guide for Non-Lawyers, a new, short webinar from insideARM and Research Assistant, we’ll translate this dense, 80-page ruling from legalese into plain English and provide a tight set of coherent, practical takeaways on this critical issue, including: 

  • How this ruling will affect your Hunstein copycats
  • What this ruling means for the future of litigation
  • Which precautionary measures you may still need to take with vendors
  • If you can use letter vendors without worry in the 11th Circuit

September 19, 2022, at 2 pm EST. Register here

Hunstein Isn’t Over: 4 Things You Need to Know

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Radius Global Solutions Receives DebtNext Accredited Partner Certification

AKRON, OH — DebtNext Software announced that Radius Global Solutions received the DebtNext Accredited Partner Certification.  This program includes an on-site review, a detailed interview process with key management associates and a method to demonstrate an agency’s comprehensive policies, procedures, and best practices around the use of the DebtNext Platform(dPlat) across mutual clients. The findings report and certification create a new way for ARM Vendor’s to share its story as an industry leader.

“We are extremely proud to receive the certification as an Accredited Partner with DebtNext. We have been partnering for several years now, and the benefits of having their ‘official Seal of Approval’ are obvious” said Scott Ross, Executive Vice President of Sales, and Marketing at Radius.  He continued that “the third-party assessment has already been shared with our clients and prospects and will be part of our proposals and marketing efforts going forward.” 

“I wanted to take this opportunity to thank Radius Global Solutions for entrusting us to provide our services related to the DebtNext Accredited Partner Certification Program.  We appreciate the opportunity this provided to do a deeper dive into your overall operations, and as reflected in the findings report, showcase the hard work and focus you and your team have put in to distinguish your company” said Paul Goske, President DebtNext Software

For more information on the DebtNext Accredited Partner Certification Program please contact us at sales@debtnext.com.

About Radius Global Solutions

When clients demand solutions to difficult challenges, Radius Global Solutions is the answer. A Leading Provider of Digitally Integrated Collections and Business Services, Radius has carefully and purposefully, developed significant expertise across all stages of the customer lifecycle providing Integrated Customer Acquisition/Sales, Customer Care, Receivable Management, and Business Processing services to some of the largest and most well-respected companies in the U.S. We are 100% focused on driving performance in a compliant manner while delivering a POSITIVE CUSTOMER EXPERIENCE to today’s more mobile and digitally connected consumers.

About DebtNext Software

DebtNext Software has been delivering robust solutions for their clients’ recovery management needs since its founding in 2003. They utilize advanced technology combined with a breadth of industry knowledge to build function-rich solutions to drive recovery optimization and the management of third-party collection vendors. Their industry leading Platform is currently used by some of the nation’s largest utility, telecommunications, financial services and accounts receivable management firms to fully illuminate their recovery management processes.

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The CMI Group Certified Women’s Business Enterprise

PLANO, TX  — The CMI Group, an employee-owned company (ESOP) and the industry-leading solutions provider to clients nationwide, announced today the company has been officially designated as a Certified Women’s Business Enterprise (WBE) by the Women’s Business Enterprise National Council (WBENC). WBENC is the largest certifier of women’s business enterprises in the United States and a leading advocate for women business owners, leaders and entrepreneurs.

“We could not have achieved this certification without the participation of our dedicated owner-employees, and we are incredibly proud of all of our owners,” said Carrie Finney, President and CEO of The CMI Group. “This certification positions The CMI Group within business markets and verticals that are committed to partnering with WBEs and organizations such as ours.”

The rigorous certification process includes a review of business documentation and confirmation that the business is owned, operated and managed by a majority of women. With more than 600 employees in its global operations, The CMI Group is a 100% ESOP company, giving every employee a vested interest in the company’s growth and success.

“WBE certification aligns with our organization’s values and our commitment to our owner-employees, partners and customers,” continued Finney. “This certification is significant because The CMI Group can now help our partners and customers achieve their supplier diversity goals and demonstrate their commitment to fostering diversity and equity.”

The CMI Group was established in 1985 with a simple focus that relationships matter. Relationships are the fundamental bond between The CMI Group and our owner-employees. Additionally, we believe that relationships are the trust between The CMI Group and our clients. Learn about working with The CMI Group by touring our Contact Center of Excellence.

About The CMI Group, Inc.

The CMI Group, a leader in contact center support services, accounts receivable management, customer care, revenue cycle management, and omnichannel communications, is a 100% employee-owned solutions provider to clients nationwide. Through its subsidiaries, The CMI Group delivers innovative business process outsourcing, revenue cycle, accounts receivable and contact center solutions resulting in enhanced operational efficiency and increased revenue for its clients. The CMI Group believes there is power in relationships and success occurs when individuals collaborate on a common objective. For The CMI Group, relationships matter because they lead to optimum results. Visit thecmigroup.com for more information.

The CMI Group and The CMI Group logo are trademarks of The CMI Group and/or its subsidiaries.

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CRC Suggests California DFPI Amend its Data Retention and Other Proposed Regulations

In July 2022, the California Department of Financial Institutions (DFPI) published proposed regulations that would impact licensing, reporting, and record retention. On August 29, 2022, the Consumer Relations Consortium (CRC) submitted comments to the DFPI to address the proposal’s conflicts with other California laws, confusing definitions, and unreasonably burdensome requirements.

The CRC’s comments were prepared by Legal Advisory Board (LAB) members Joann Needleman of Clark Hill, Brit Suttell of Barron and Newburger, along with Stefanie Jackman and Jonathan Floyd* of Troutman Pepper.  

In its comments, the CRC asked the DFPI to modify its proposed regulations as follows: 

  • Update licensing requirement definitions to ensure they are not duplicative of other California laws. Duplicative licensing requirements place an unnecessary burden and expense on debt collectors. By clarifying the definition to reference other California licensing laws, the DFPI would resolve potentially duplicative requirements.

  • Clarify that “goods sold” includes “services rendered.” The proposed regulation requires licensees to calculate the “net proceeds generated by California debtor accounts.” However, “goods sold” does not accurately reflect the services debt collectors perform for their clients. By clarifying the definition, the DFPI would more accurately reflect the variety of services that debt collectors provide to their clients. 

  • Reduce the proposed records retention requirement of seven years down to three years. Seven years is longer than any other state or federal requirement. This time period conflicts with other California record retention requirements and puts consumer data at risk long after an account is resolved. 

  • Update the records requirement with appropriate definitions to provide clarification and more accurately reflect the debt collection process. The proposed regulation requires licensees to maintain records regarding “direct” or “indirect” communication but fails to define either term. It also requires debt collectors to provide a summary of a contact or message that results in payment but fails to explain how a debt collector should determine which communication led to a payment or how to address scenarios where a payment is made after a string of several communications.  

The complete comment filed by the CRC can be found here

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About the Consumer Relations Consortium

The Consumer Relations Consortium(CRC) is an organization comprised of more than 60 national companies representing the diverse ecosystem of debt collection including creditors, data/technology providers and compliance-oriented debt collectors that are larger market participants. Established in 2013, CRC is evolving the debt collection paradigm by engaging stakeholders—including consumer advocates, Federal and State regulators, academic and industry thought leaders, creditors and debt collectors—and challenging them to move beyond talking points and focus on fashioning real-world solutions that actually improve the consumer experience. CRC’s collaborative and candid approach is unique in the market.  CRC is managed by The iA Institute. Follow the CRC on LinkedIn here

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*not member of the Legal Advisory Board

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Convoke Launches New Freeform Product

ARLINGTON, Va. – September 7, 2022 – Convoke, a leader in SaaS solutions for the debt collection market, is pleased to announce the launch of a new product: Freeform – a secure and auditable file-sharing tool built for collaboration between credit issuers and third parties.

Freeform

Freeform is designed to be a flexible, secure, and easy-to-use collaboration platform for credit issuers, collection agencies, law firms, and debt buyers. With Freeform, users can upload, share, view, and download files easily – all in one centrally managed location. With its clear, intuitive design, Freeform provides endless flexibility for its users’ needs. Whether for background checks, third-party audits, ad hoc document sharing, or any other use case, Freeform can support it. It is built with security in mind on Convoke’s trusted, independently audited architecture with no data stored in the public cloud. Whether it’s commercial sharing systems, other shared drives, or email, all current solutions pose serious security issues and lack systemic organization. Freeform overcomes these problems by allowing Convoke customers to share files securely and easily.

“We are very pleased to present this new product to the recovery industry,” said David Pauken, CEO of Convoke. “Credit issuers and their third parties need an easy, flexible, and secure method to send and receive unstructured files on a trusted platform which they can audit to ensure it meets their strict security protocols. Until today, no such solution existed in the market. Convoke is confident that Freeform will add significant value to what we offer to our customers through our existing platform.”

Convoke will continue to develop and expand the capabilities of Freeform to fit the changing business and regulatory requirements of credit issuers. Freeform adds to the existing value that Convoke provides to the collections market and foreshadows more innovative products still to come.Convoke Logo

About Convoke

Convoke is an oversight management system that is transforming the way credit issuers manage third-party debt collection, leveraging a decade of experience for the issuers it serves. It provides unprecedented transparency and accountability, facilitating issuer debt validation and third-party oversight.  With its powerful reporting, tracking, and auditing capabilities, issuers are able to have confidence that they are in compliance with internal and regulatory requirements. Convoke enables credit issuers to grow recovery, reduce costs, improve compliance, and protect their brand. Convoke is headquartered in Arlington, VA. For more information on Convoke, please visit www.convokesystems.com. 

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TrueML Names Steve Carlson as President, Plans to Accelerate Software Development

LENEXA, Kan. — One True Holding Company d/b/a/ TrueML, a financial technology software company developing machine learning-driven products that revolutionize the debt collection process, today announced that Steve Carlson will join the company as president. He joins as TrueML readies to accelerate its growth, with plans to expand its industry leading software solution, doubling run rate to reach more consumers with a digital first experience.

TrueML develops software including patented machine learning technology to create a digital-first debt collection process that aligns with consumer communication preferences. Formerly One True Holding Company, the financial technology company rebranded in July 2022 as TrueML to bring more focus to its machine learning software development, which is a key aspect of its overall growth strategy. As a mission-driven company, TrueML aims to bring solutions to the marketplace that redefine how creditors and consumers engage in debt collection. 

TrueML’s mission is supported by data scientists, financial services industry experts and customer experience enthusiasts collectively building technology to serve people in a digital-first way by recognizing their unique needs and preferences as human beings and endeavoring toward ensuring nobody gets locked out of the financial system. 

“TrueML is building solutions to help consumers navigate financial distress, which is a mission around which I am excited to rally,” said Carlson. “We have seen how the adoption of digital-first platforms has expanded the reach of consumer credit offerings, but tools for managing the rest of the credit life cycle remain underdeveloped, especially for consumers living a digital-native life. TrueML has built a tremendous team of innovators who are working to solve this problem, and I look forward to the opportunity to lead the company to even farther-reaching success.”

With more than 20 years of leadership experience in financial services at companies such as HSBC, Chase and Intuit, Carlson is a versatile and strategic fintech executive, advisor and board director who delivers increased value by scaling companies for accelerated growth. Previously the CEO at ForwardLine Financial, where he now serves as executive chairman, Carlson also serves as a consultant and advisor to numerous venture capital and private equity funds, as well as multiple early-stage and mid-market financial services firms in the U.S. and Latin America. He is recognized as a mission-driven industry innovator and collaborative, high-impact leader who has delivered results in diverse emerging-growth and large-scale businesses. A veteran of working with regulators and having served on the CFPB’s Consumer Advisory Board, Carlson brings invaluable experience with the fintech landscape, regulatory challenges and market dynamics that impact TrueML’s business.

“We’re thrilled to have Steve join our team as we expand our capabilities and accelerate our mission to revolutionize the way consumers engage with financial services,” said Ohad Samet, co-founder and CEO of TrueML. “As a founder, CEO and board member, Steve has extensive industry experience and brings his broad and deep fintech network to our ecosystem, which will support us in our continued expansion with more tech-oriented prospects and clients. His addition to the team will increase our span of management, allow us to streamline decision making, and add a depth of experience that will undoubtedly advance our business goals.”

TrueML was born in 2013 after Samet had a negative experience with an overdue bill, and he and his brother Nadav set out to create better experiences and more productive outcomes for distressed borrowers and creditors alike. Since then its subsidiaries have served more than 20 million consumers with a compliant digital-first approach. To learn more about TrueML, its subsidiaries and their products, visit www.TrueML.co, and follow on social media @TrueMLco.

About TrueML

TrueML is a software company developing machine learning-driven products that prioritize customer experience and revolutionize the experience of consumers seeking financial health. The mission-driven team of data scientists, financial services industry experts and customer experience fanatics are building technology to serve people in a way that recognizes their unique needs and preferences as human beings and endeavoring toward ensuring nobody gets locked out of the financial system.

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Credit Eco to Go: Fairness as a Service [Podcast]


Show Notes

Ensuring #fairness at all levels in financial services is the new norm. But how do you do it and how do you know when it is achieved? Kareem Saleh, CEO and Founder of FairPlay AI stops by #CreditEcoToGo to talk about his platform and new #ai fairness methodologies, which do a better job in assessing risk, while at the same time expanding opportunities for credit access. Kareem tells us that “fairness through awareness” and machine-learning algorithms always need to be challenged and refined. Rather than settling for one result, Fairplay exposes their algorithms during model development for alternative outcomes that might not have been well-represented in the first round of data, making the data more sensitive to disadvantaged groups. Kareem hopes this philosophy will enable all financial service entities within the credit cycle, to continue to harness data for the benefit of all consumers. #financialservice #equalaccess #fintech 

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DISCLAIMER – No information contained in this Podcast or on this Website shall constitute financial, investment, legal and/or other professional advice and that no professional relationship of any kind is created between you and podcast host, the guests or Clark Hill PLC. You are urged to speak with your financial, investment, or legal advisors before making any investment or legal decisions.

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Joseph Partain Joins Healthcare Revenue Cycle Leader Wakefield & Associates to Deliver Attorney-Driven Complex Claims Resolution

AURORA, Colo. — Wakefield & Associates, one of the largest healthcare revenue cycle solutions companies in the nation, announced today that industry veteran Joseph Partain has joined the  organization in an executive role to provide attorney-driven complex claims solutions to healthcare providers nationwide. 

“As one of the leading revenue cycle solutions companies in the nation, Wakefield & Associates makes vital contributions to the financial health of medical providers through innovative and proven Revenue Cycle Management (RCM) solutions,” said Matt Laws, CEO of Wakefield. “Joe adds 30 years of legal and revenue cycle operational expertise to Wakefield’s array of service lines and is known in the industry as a well-regarded, versatile and strategic leader, with a history of success leading results-oriented legal operations.”  

Prior to joining Wakefield & Associates, Partain served as the long-standing SVP of Legal RCM Operations & General Counsel/Chief HIPAA Compliance Officer & Corporate Secretary (Chief Legal Officer) at ACT Holdings, Inc. (the parent company for the ACT, Inc. and the Convergent companies, including Convergent Revenue Cycle Management, Inc).

“I am excited to be joining Wakefield & Associates and its leadership team.  I really look forward to taking on this role and building upon the successes and growth that the company is already experiencing.  I am anxious to contribute to future accomplishments to the benefit of Wakefield’s employees, stakeholders and clients,” Joseph Partain said.   

About Wakefield & Associates

Established in 1933, Wakefield & Associates specializes in Revenue Cycle Management Solutions, which includes System Conversions, Call Center Partnerships, Insurance Billing, Process & System Workflow Design, Eligibility Assistance Programs, Out-of-Network Claims resolution, Primary & Secondary Bad Debt Collections, Legal Solutions for over 5,000 medical clients nation-wide. Wakefield & Associates has and continues to make significant investments in people, processes, and technologies that allow us to develop and implement quality solutions that accelerate cash flow and A/R liquidation. Wakefield & Associates has developed effective recovery techniques and partnership collaborations that result in a positive patient experience.

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CFPB Signals Increased Scrutiny of Credit Card Industry Interest Rates

In a recent blog post, the CFPB reported on research into various factors considered significant in explaining current credit card interest rates.  The CFPB reported that over 175 million Americans have at least one credit card, half of which carry a balance that continues to accrue increasingly high interest rates.  In an era that has seen the Federal Reserve Bank aggressively raise interest rates to combat inflation, Americans’ increasing reliance upon credit cards to cover every day expenses has sparked renewed interest in the practices of the credit card industry with respect to interest rates and fees charged.

The research collected in the blog post shows credit card interest rates increased following the Great Recession despite a number of industry indicators suggesting the risk of credit card lending has fallen to an all-time low.  The factors presented include (1) record low charge-off rates (the measure of accounts deemed uncollectable after sustained delinquency); (2) a stagnant percentage of subprime cardholders; and (3) historically low prime rates. 

From these factors, the CFPB blog post posits that the recent increase in credit card interest rates compared to significantly lower risk could account for historic profit numbers reported by credit card banks in 2021, 7% annualized return on assets – the largest reported return in over twenty years.  The blog does not mention, however, that the same Federal Reserve Bank’s Report to Congress noted profitability of only 2.4% in the previous year, nor that the same Report ascribes much of the increased profitability to changes in provisioning for loan losses and not to increases in credit card interest rates.

The blog post focusing on these factors is an indication that the CFPB is poised to increase its scrutiny on the credit card industry in the near future.  It is worth noting, however, that the CFPB is prohibited from imposing a usury ceiling under Section 1027(o) of the Dodd-Frank Act.  Despite the fact that the CFPB blog focuses on a topic (interest rates) over which it is powerless to act, and it does not mention credit card late fees, the CFPB has recently announced that it will be reviewing the maximum permitted late charge under the CARD Act.

Another disquieting statement in the CFPB blog is the observation that the high interest rates may be the result of the dominance in the industry of “a few key players” and a symptom of anti-competitive practices.  Whether that is true or not (and the CFPB has not provided any data to corroborate the statement), the CFPB does not have jurisdiction to enforce antitrust laws.  This has not stopped Director Chopra from repeatedly evoking anti-competitive behavior as the root-cause for many results he does not like. 

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