DEERFIELD BEACH, Fla. — Starmark Financial is excited to announce the expansion of a new 80+ seat call center facility in Trevose, Pa. located just outside of Philadelphia. The new location will feature all new amenities and technology for employees allowing Starmark a greater footprint for its purchasing business and collection partners. 

“The decision to expand back into the Philadelphia area, and expand our presence was the next logical step in our growth strategy” said Founder and CEO Brett Silver. “The area has a vast pool of experienced and diverse talent, which will undoubtedly increase our productivity and results. We will have the opportunity to further expand our staff and capabilities in both our purchase and contingency business sectors. This strategic initiative will give our company the ability to penetrate new vertical markets and diversify our financial service offerings.”

Starmark expects to double its current staff in the next 6 to 8 months with the new expanded office space. Additionally, Starmark will begin hiring in the Philadelphia area for collection staff and supervision positions immediately. To apply confidentially please visit www.starmarkfin.com.

On February 26, 2024, a Florida state court, following federal law concepts, ruled under state law that a plaintiff’s alleged statutory violations, with the only “injury” being a fear of future harm, lacked the required standing to stay in state court.

In Scott v. Collectco, Inc. d/b/a EOS CCA, The Sessions Firm defended EOS when the plaintiff alleged violations of the FDCPA and state law negligence claims. Specifically, the plaintiff claimed a collection letter was sent utilizing a third-party letter vendor (Hunstein “violation”) and had misleading language regarding the deadline to dispute.

Relying on developing Florida law that analyzed standing based on 3 familiar principles: injury in fact, causation, and redressability, the court found no real injury. Said differently: no objective injury, no right to file in state court.

The court specifically ruled that the plaintiff failed to plead any “concrete, particularized, and actual or imminent” injury.

Florida courts are starting to trend towards only allowing cases with actual injuries and throwing out speculative injury cases.

MIAMI, Fla. — Pollack and Rosen has announced Sr. Vice President Robert Russo is retiring from the accounts receivables management industry after 40 years of devoted service. 

Bob began his career in 1983 with Citibank, NA in Rochester, NY, and went on to work with lenders/issuers, debt purchasers, law firms, and agencies and most recently held the position of Sr. Vice President with Pollack & Rosen, P.A. a Miami-based creditors rights law firm.

Bob is looking forward to traveling, spending time with grandchildren and boating with his family on the Connecticut Shoreline.

“I would like to thank my family, my colleagues and clients, along with all of the talented and hardworking people that I have met along the way.”

Joe Rosen said, “Working with my friend was an honor and a pleasure.  Bob will be missed by his colleagues.  His efforts and professionalism at Pollack & Rosen have been admired and appreciated.”

Consumer reporting dominates complaints to the Consumer Financial Protection Bureau (CFPB), according to a new report.The Congressional Research Service (CRS), a nonpartisan shared staff to congressional committees and Members of Congress, issued a report discussing the CFPB’s consumer complaint process and public database. Their review of the consumer complaints submitted to the CFPB in fiscal year 2023 revealed that the significant majority (over 80%) were related to credit reporting.

The Dodd-Frank Wall Street Reform and Consumer Protection Act required the CFPB to establish a consumer complaint system and to publish an annual report to Congress summarizing complaints received during the previous year. Consumer complaint information is publicly available on the CFPB’s website. The complaint database includes the submission date, information regarding the consumer financial product, the consumer’s issue with the product, and the company’s response to the consumer, among other things.

CRS’s report shows that in fiscal year 2023, credit reporting ranked as the most common product category about which consumers complained, comprising 80.5% of all complaints. That lead was followed far behind by complaints related to debt collection (5.5%), credit or prepaid cards (4.5%), checking or savings accounts (4.1%), and mortgages (1.9%).

The three most common issues reported to the CFPB related to credit reporting were incorrect information on credit reports (30.8% of complaints), improper use of credit reports (27.6%), and problems with a credit reporting agency’s investigation into a complaint (21.9%). These three types of complaints alone made up 80.3% of all complaints received by the CFPB during fiscal year 2023.

This CRS report confirms what is also apparent from increased litigation filings and the continued influx of direct consumer complaints sent to FCRA regulated businesses: consumer reporting continues to be a hotbed of activity for consumer complaints.

February 2024 was another busy month for the CFPB. In this month’s article, we share some of our top “bites” covered during the February 2024 webinar.

Bite 10: News Organization Sends FOI Request to CFPB

On February 19, 2024, an online newspaper sent a Freedom of Information Act (FOIA) request to the CFPB, asking for details about recipients of funds from the CFPB’s Civil Penalty Fund. When the CFPB collects funds as penalties for enforcement actions, it uses the money to compensate the victims of those alleged violations. However, if the CFPB determines that it cannot locate actual victims or if the amounts are too small to allocate, the CFPB may instead send the money to nonprofits and other organizations that foster consumer education and financial literacy. According to the news site, the CFPB’s financial reports only provide the names of the companies who paid into the fund, and do not list the specific groups that received funds. The group sent its FOIA request on February 16th, seeking the names of all organizations that have received payments from the fund since the CFPB’s formation in 2011.

Bite 9: Fintechs ask CFPB to Regulate Earned Wage Access

On February 7, 2024, a fintech trade association sent a letter to the CFPB asking the CFPB to establish rulemaking governing earned wage access transactions. The trade group’s letter to Director Chopra urged the CFPB to begin a rulemaking process to regulate the industry in a way that would be consistent across the states – a move that consumer advocates claim is designed to stall state efforts and head off revised advisory guidance from the CFPB. Various state legislatures are considering regulating earned wage access programs, some of them seeking to regulate the transactions as credit.

Bite 8: The CFPB’s Enforcement Work in 2023

On January 29, 2024, the CFPB published a summary of its 2023 enforcement actions, and noted its expanding capacity for enforcement going forward. The CFPB noted that in 2023, it filed 29 enforcement actions and resolved 6 previously filed lawsuits through final orders. Those orders led to agreements to pay $3.07 billion dollars to consumers, and approximately $498 million dollars in civil money penalties. The CFPB identified “key actions” from the past year, which included an order against an auto title lender that allegedly violated servicemember protections, an action against a large bank for alleged fee violations, an order against a different large bank for alleged discrimination practices, a lawsuit against a lender who the CFPB claims pushed consumers into refinances, an action against a credit reporting company, and a settlement with a credit repair firm. The CFPB noted that 2023 was the first time that a team of technologists dedicated to enforcement matters joined the CFPB, and that in 2024, the CFPB is significantly expanding its enforcement capabilities by hiring more attorneys, along with additional analysts, paralegals, e-litigation support specialists, economists, and more.

Bite 7: Report on Credit Card Rates by Institution Size

On February 16, 2024, the CFPB’s Office of Markets issued a report based on results from its Terms of Credit Card Plans survey. The survey has been running since 1990, but the CFPB recently enhanced the survey to collect more details on the types of credit card plans issuers offer. According to the CFPB, larger banks offer credit card products with worse terms and interest rates than smaller banks and credit unions, regardless of the borrower’s credit risk. The report found that the 25 largest credit card issuers charged customers interest rates of 8 to 10 points higher than small- and medium-sized banks and credit unions. The CFPB claimed that larger credit card issuers were also more likely to charge annual fees; 27% of these cards carried an annual fee, compared with 9.5% for cards offered by smaller issuers. The CFPB concluded that a lack of competition is likely responsible for the higher rates and charges at the largest issuers. The top 30 credit card companies represent about 95% of credit card debt, and, according to the CFPB, the top 10 dominate the market. The CFPB noted that these reports are a part of the CFPB’s larger push to jumpstart competition in the credit card market, which will include the development of rules on open banking and increased scrutiny on comparison websites.

Bite 6: Statement of Principles on Appraisal Bias

On February 12, 2024, the Federal Financial Institutions Examination Council (FFIEC) issued a statement of principles to its member entities, which include the CFPB along with the other prudential regulators like the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Federal Reserve Board, National Credit Union Administration, and the FFIEC’s State Liaison Committee. The FFIEC noted that these principles were being communicated to mitigate risks that may arise due to potential discrimination or bias in appraisal and evaluation practices and to promote credible valuations. The statement focused on consumer compliance and safety and soundness examination principles. The FFIEC noted that valuation discrimination and bias can cause consumer harm, lead to violations of law, have a detrimental impact on communities, undermine an institution’s credit decisions, and negatively impact its safety and soundness. According to the FFIEC, this statement of principles should not be interpreted as new guidance to supervised institutions or as evidence of an increased focus on appraisal practices. Rather, the statement is meant to offer transparency into the examination process and to support risk-focused examination work.

Bite 5: CFPB Issues Revised Supervisory Appeals Process

On February 16, 2024, the CFPB announced that it has issued a procedural rule, updating the process by which financial institutions can appeal supervisory findings. According to the CFPB, the new rule will broaden the group of CFPB officials who are eligible to evaluate appeals, will increase the options for resolving an appeal, and will make other clarifying changes. Under the revised appeals process, a Supervising Director will select an appeals committee of three CFPB managers with relevant expertise who did not work on the matter being appealed, instead of requiring managers from the Supervision department. There is now also a new option for resolving an appeal– institutions can now remand the matter to Supervision staff for consideration of a modified finding, in addition to the existing options of upholding or rescinding the finding. Additionally, institutions may now file an appeal of any compliance rating or finding, not only an adverse rating.

Bite 4: CFPB Proposes Another Rule on Bank Fees

On January 24, 2024, the CFPB announced that it has proposed a rule on banking fees, which will stop new “junk fees” on bank accounts. This proposed rule would block financial institutions from charging fees on transactions that are declined at the time of a “swipe, tap, or click.” According to the CFPB, these fees include those that are charged for declined debit card purchases and ATM withdrawals, as well as some declined peer-to-peer payments. The CFPB claims that fees that are declined at the time that the transaction is attempted are rare and that financial institutions almost never charge these fees, but this rule is a proactive step to make sure that financial institutions do not start imposing these fees as technology advances and real-time declinations are more feasible. Director Chopra said that they will “continue to rid the market of junk fees today and prevent new junk fees from emerging in the future.” If finalized, this rule will apply to banks and credit unions, and certain peer-to-peer payment companies. The application of the rule to peer-to-peer payment companies will depend on how the payments are processed, as real-time payments or as ACH debits, and on whether the company offers a stored value account or links to a deposit account. Comments on the proposed rule are due by March 25, 2024.

Bite 3: CFPB Announces Funds Distribution in Debt Relief Case

On February 15, 2024, the CFPB announced that 8,571 consumers who were allegedly harmed by a student loan debt relief business and a related general debt settlement company will receive checks totaling more than $10.9 million dollars. The CFPB sued the two companies and their shared CEO in 2020, alleging that consumers were charged illegal upfront fees in violation of the Telemarketing Sales Rule and that the companies used deceptive tactics in violation of the Consumer Financial Protection Act (CFPA). The alleged illegal conduct occurred from 2015 until 2022, when a district court entered an order that imposed civil penalties and required consumer redress, along with injunctions. The CEO is banned from debt-relief services for five years, and the two companies were permanently banned from debt-relief services and from obtaining referrals from companies purporting to make or arrange loans. The funds distribution will come from the Civil Penalty Fund as well as CFPB- administered redress.

Bite 2: CFPB Announces Resolution of Long-Running Suit

On February 8, 2024, the CFPB announced that it has entered into a settlement on an enforcement suit against a foreclosure relief firm that dates back to 2014. The case was originally brought by the CFPB, the FTC, and 15 states against a foreclosure relief operation and four individual attorneys, who allegedly charged millions of dollars in advance fees for legal representation that was never provided. The CFPB won a judgment in 2019, but due to multiple appeals by the defendants, had not come to a resolution until this settlement was reached. The settlement agreement will require the defendants to pay $10.9 million in consumer redress and a $1.1 million penalty into the CFPB’s Civil Penalty Fund. The individual defendants are covered by 8- or 5-year bans from the mortgage assistance industry, under the district court’s original order.

Bite 1: CFPB Announces Joint Action Against Debt Relief Company

On January 19, 2024, the CFPB, along with the attorneys general of 7 states, announcedthat that they filed a lawsuit against a debt relief company, two individuals, and “a web of affiliated shell companies.” Allegedly, the company advertised that it provided loans to help pay down debts, but when consumers called to inquire about the loans, they were told they didn’t qualify and were instead encouraged to enroll in debt relief services, which required immediate payment into an escrow account. The CFPB alleges that the companies provided little or no debt relief. The CFPB and the involved states alleged that the companies collected hundreds of millions of dollars in fees in advance of any settlement payments, in violation of the Telemarketing Sales Rule. The lawsuit also alleges that the company falsely led consumers to believe that attorneys were conducting the debt-relief negotiations, when those were actually done by the debt-relief firm and its employees. The CFPB claims that this is a violation of the CFPA’s prohibition on unfair, deceptive, and abusive acts or practices.

Extra Bite: FTC Charges Cash Advance Provider

On January 24, 2024, the FTC announced an action against an online cash advance provider and its founders. According to the FTC, the online cash advance company claimed it would charge consumers $1.99 per month to subscribe to services, and that consumers could access up to $50 instantly. But, the FTC claimed that consumers could only access $20 and were charged a $4 for instant cash. Allegedly the company told consumers requesting the larger advance that an algorithm could increase the advance amount over time, but the FTC claims the algorithm didn’t exist. The FTC also alleged that the company engaged in practices it calls “dark patterns” to make it difficult to cancel subscriptions. The FTC also alleges the company did not consider public assistance income, declining advances to public assistance recipients, but nevertheless charging them for a monthly subscription. In a settlement order, the parties agreed to (i) pay $3 million in consumer refunds; (ii) stop deceiving consumers about the use of an algorithm or artificial intelligence; (iii) get consumers’ express, informed consent for charges; (iv) provide an easy method for cancellation; (v) stop deploying discriminatory practices; (vi) enact a fair lending program; and (vii) create and maintain records of consumer testing.

Still hungry? Please join Hudson Cook for our next CFPB Bites of the Month. If you missed any of our prior Bites, including the webinar that covered the above topics, request a replay on the Hudson Cook website here. 

——————

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.

ROCKVILLE, Md. — Greenberg Advisors (GA), a leading advisory firm for M&A transactions in RCM, HCIT, ARM, and BPO, is pleased to announce the release of its year-end M&A Updates for these sectors. The M&A Updates discuss the key investment and acquisition trends in these markets, based on GA’s highly-active, specialized M&A practice and its proprietary data assets.

In ARM, the 4th quarter acquisition of private equity-backed commercial debt specialist ARMStrong Receivables Management proved to be the year’s largest transaction. Interestingly, 2023 was the first year since 2016 that healthcare didn’t lead the charts in transaction volume – it was replaced this year by the commercial segment. GA continues to see the more “relationship” transactions completed among firms located in similar geographic regions, often among shareholders who run in similar circles and/or have known each other for years. Lastly, independent strategic buyers continue to dominate the buyer universe, and when combined with private equity-backed firms, strategics were responsible for 96% of all transactions! View these ARM trends and many more here.

In RCM and HCIT, demand for high-quality businesses remains incredibly strong, which has continued to buoy valuation multiples. While the year had its challenges, in line with M&A markets across most sectors, a number of notable RCM and HCIT transactions crossed the finish line in Q4. Those Q4 deals represented over 75% of the year’s transaction value and provided massive amounts of optimism for those seeking liquidity events in 2024 and beyond. Billing and Consulting topped the list of services acquired, while Analytics and Patient Engagement led the technology offerings. Strategic buyers won out on more deals than financial buyers, as the latter often found it too challenging to overcome the increased cost of capital while remaining competitive for transactions. More RCM and HCIT investment trends and data can be found here.      

Brian Greenberg, CEO, commented: “There was a groundswell in the second half of the year, as investors shrugged off economic headwinds and started bidding aggressively on assets. Overall, investment activity was reasonably vibrant for the year. We look forward to advising in more highly-strategic deals where we’re able to utilize our relationships and specialized knowledge of the market to identify the most natural fit in each of our transactions.”

GA is working with buyers interested in commercial collections, 3rd and 1st party healthcare collections, and RCM functions such as billing and denials management. Our team would be happy to discuss these opportunities with owners that are open to exploring a sale. 

About Greenberg Advisors 

Greenberg Advisors, LLC provides world-class M&A and strategic advisory solutions to Business Services and Technology companies in the Revenue Cycle Management (RCM), Healthcare Information Technology (HCIT), Accounts Receivable Management (ARM), and Business Process Outsourcing (BPO) sectors.

Focused on these sectors for over 25 years, the firm’s professionals offer a comprehensive, yet highly specialized perspective from which to advise clients, resulting in the completion of over 150 M&A, valuation, and strategic planning engagements. These client successes reflect Greenberg’s distinct client-first approach, deep sector expertise, objective point of view, and work ethic.

February 2024 was another busy month for the CFPB. In this month’s article, we share some of our top “bites” covered during the February 2024 webinar.

Bite 10: News Organization Sends FOI Request to CFPB

On February 19, 2024, an online newspaper sent a Freedom of Information Act (FOIA) request to the CFPB, asking for details about recipients of funds from the CFPB’s Civil Penalty Fund. When the CFPB collects funds as penalties for enforcement actions, it uses the money to compensate the victims of those alleged violations. However, if the CFPB determines that it cannot locate actual victims or if the amounts are too small to allocate, the CFPB may instead send the money to nonprofits and other organizations that foster consumer education and financial literacy. According to the news site, the CFPB’s financial reports only provide the names of the companies who paid into the fund, and do not list the specific groups that received funds. The group sent its FOIA request on February 16th, seeking the names of all organizations that have received payments from the fund since the CFPB’s formation in 2011.

Bite 9: Fintechs ask CFPB to Regulate Earned Wage Access

On February 7, 2024, a fintech trade association sent a letter to the CFPB asking the CFPB to establish rulemaking governing earned wage access transactions. The trade group’s letter to Director Chopra urged the CFPB to begin a rulemaking process to regulate the industry in a way that would be consistent across the states – a move that consumer advocates claim is designed to stall state efforts and head off revised advisory guidance from the CFPB. Various state legislatures are considering regulating earned wage access programs, some of them seeking to regulate the transactions as credit.

Bite 8: The CFPB’s Enforcement Work in 2023

On January 29, 2024, the CFPB published a summary of its 2023 enforcement actions, and noted its expanding capacity for enforcement going forward. The CFPB noted that in 2023, it filed 29 enforcement actions and resolved 6 previously filed lawsuits through final orders. Those orders led to agreements to pay $3.07 billion dollars to consumers, and approximately $498 million dollars in civil money penalties. The CFPB identified “key actions” from the past year, which included an order against an auto title lender that allegedly violated servicemember protections, an action against a large bank for alleged fee violations, an order against a different large bank for alleged discrimination practices, a lawsuit against a lender who the CFPB claims pushed consumers into refinances, an action against a credit reporting company, and a settlement with a credit repair firm. The CFPB noted that 2023 was the first time that a team of technologists dedicated to enforcement matters joined the CFPB, and that in 2024, the CFPB is significantly expanding its enforcement capabilities by hiring more attorneys, along with additional analysts, paralegals, e-litigation support specialists, economists, and more.

Bite 7: Report on Credit Card Rates by Institution Size

On February 16, 2024, the CFPB’s Office of Markets issued a report based on results from its Terms of Credit Card Plans survey. The survey has been running since 1990, but the CFPB recently enhanced the survey to collect more details on the types of credit card plans issuers offer. According to the CFPB, larger banks offer credit card products with worse terms and interest rates than smaller banks and credit unions, regardless of the borrower’s credit risk. The report found that the 25 largest credit card issuers charged customers interest rates of 8 to 10 points higher than small- and medium-sized banks and credit unions. The CFPB claimed that larger credit card issuers were also more likely to charge annual fees; 27% of these cards carried an annual fee, compared with 9.5% for cards offered by smaller issuers. The CFPB concluded that a lack of competition is likely responsible for the higher rates and charges at the largest issuers. The top 30 credit card companies represent about 95% of credit card debt, and, according to the CFPB, the top 10 dominate the market. The CFPB noted that these reports are a part of the CFPB’s larger push to jumpstart competition in the credit card market, which will include the development of rules on open banking and increased scrutiny on comparison websites.

Bite 6: Statement of Principles on Appraisal Bias

On February 12, 2024, the Federal Financial Institutions Examination Council (FFIEC) issued a statement of principles to its member entities, which include the CFPB along with the other prudential regulators like the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Federal Reserve Board, National Credit Union Administration, and the FFIEC’s State Liaison Committee. The FFIEC noted that these principles were being communicated to mitigate risks that may arise due to potential discrimination or bias in appraisal and evaluation practices and to promote credible valuations. The statement focused on consumer compliance and safety and soundness examination principles. The FFIEC noted that valuation discrimination and bias can cause consumer harm, lead to violations of law, have a detrimental impact on communities, undermine an institution’s credit decisions, and negatively impact its safety and soundness. According to the FFIEC, this statement of principles should not be interpreted as new guidance to supervised institutions or as evidence of an increased focus on appraisal practices. Rather, the statement is meant to offer transparency into the examination process and to support risk-focused examination work.

Bite 5: CFPB Issues Revised Supervisory Appeals Process

On February 16, 2024, the CFPB announced that it has issued a procedural rule, updating the process by which financial institutions can appeal supervisory findings. According to the CFPB, the new rule will broaden the group of CFPB officials who are eligible to evaluate appeals, will increase the options for resolving an appeal, and will make other clarifying changes. Under the revised appeals process, a Supervising Director will select an appeals committee of three CFPB managers with relevant expertise who did not work on the matter being appealed, instead of requiring managers from the Supervision department. There is now also a new option for resolving an appeal– institutions can now remand the matter to Supervision staff for consideration of a modified finding, in addition to the existing options of upholding or rescinding the finding. Additionally, institutions may now file an appeal of any compliance rating or finding, not only an adverse rating.

Bite 4: CFPB Proposes Another Rule on Bank Fees

On January 24, 2024, the CFPB announced that it has proposed a rule on banking fees, which will stop new “junk fees” on bank accounts. This proposed rule would block financial institutions from charging fees on transactions that are declined at the time of a “swipe, tap, or click.” According to the CFPB, these fees include those that are charged for declined debit card purchases and ATM withdrawals, as well as some declined peer-to-peer payments. The CFPB claims that fees that are declined at the time that the transaction is attempted are rare and that financial institutions almost never charge these fees, but this rule is a proactive step to make sure that financial institutions do not start imposing these fees as technology advances and real-time declinations are more feasible. Director Chopra said that they will “continue to rid the market of junk fees today and prevent new junk fees from emerging in the future.” If finalized, this rule will apply to banks and credit unions, and certain peer-to-peer payment companies. The application of the rule to peer-to-peer payment companies will depend on how the payments are processed, as real-time payments or as ACH debits, and on whether the company offers a stored value account or links to a deposit account. Comments on the proposed rule are due by March 25, 2024.

Bite 3: CFPB Announces Funds Distribution in Debt Relief Case

On February 15, 2024, the CFPB announced that 8,571 consumers who were allegedly harmed by a student loan debt relief business and a related general debt settlement company will receive checks totaling more than $10.9 million dollars. The CFPB sued the two companies and their shared CEO in 2020, alleging that consumers were charged illegal upfront fees in violation of the Telemarketing Sales Rule and that the companies used deceptive tactics in violation of the Consumer Financial Protection Act (CFPA). The alleged illegal conduct occurred from 2015 until 2022, when a district court entered an order that imposed civil penalties and required consumer redress, along with injunctions. The CEO is banned from debt-relief services for five years, and the two companies were permanently banned from debt-relief services and from obtaining referrals from companies purporting to make or arrange loans. The funds distribution will come from the Civil Penalty Fund as well as CFPB- administered redress.

Bite 2: CFPB Announces Resolution of Long-Running Suit

On February 8, 2024, the CFPB announced that it has entered into a settlement on an enforcement suit against a foreclosure relief firm that dates back to 2014. The case was originally brought by the CFPB, the FTC, and 15 states against a foreclosure relief operation and four individual attorneys, who allegedly charged millions of dollars in advance fees for legal representation that was never provided. The CFPB won a judgment in 2019, but due to multiple appeals by the defendants, had not come to a resolution until this settlement was reached. The settlement agreement will require the defendants to pay $10.9 million in consumer redress and a $1.1 million penalty into the CFPB’s Civil Penalty Fund. The individual defendants are covered by 8- or 5-year bans from the mortgage assistance industry, under the district court’s original order.

Bite 1: CFPB Announces Joint Action Against Debt Relief Company

On January 19, 2024, the CFPB, along with the attorneys general of 7 states, announcedthat that they filed a lawsuit against a debt relief company, two individuals, and “a web of affiliated shell companies.” Allegedly, the company advertised that it provided loans to help pay down debts, but when consumers called to inquire about the loans, they were told they didn’t qualify and were instead encouraged to enroll in debt relief services, which required immediate payment into an escrow account. The CFPB alleges that the companies provided little or no debt relief. The CFPB and the involved states alleged that the companies collected hundreds of millions of dollars in fees in advance of any settlement payments, in violation of the Telemarketing Sales Rule. The lawsuit also alleges that the company falsely led consumers to believe that attorneys were conducting the debt-relief negotiations, when those were actually done by the debt-relief firm and its employees. The CFPB claims that this is a violation of the CFPA’s prohibition on unfair, deceptive, and abusive acts or practices.

Extra Bite: FTC Charges Cash Advance Provider

On January 24, 2024, the FTC announced an action against an online cash advance provider and its founders. According to the FTC, the online cash advance company claimed it would charge consumers $1.99 per month to subscribe to services, and that consumers could access up to $50 instantly. But, the FTC claimed that consumers could only access $20 and were charged a $4 for instant cash. Allegedly the company told consumers requesting the larger advance that an algorithm could increase the advance amount over time, but the FTC claims the algorithm didn’t exist. The FTC also alleged that the company engaged in practices it calls “dark patterns” to make it difficult to cancel subscriptions. The FTC also alleges the company did not consider public assistance income, declining advances to public assistance recipients, but nevertheless charging them for a monthly subscription. In a settlement order, the parties agreed to (i) pay $3 million in consumer refunds; (ii) stop deceiving consumers about the use of an algorithm or artificial intelligence; (iii) get consumers’ express, informed consent for charges; (iv) provide an easy method for cancellation; (v) stop deploying discriminatory practices; (vi) enact a fair lending program; and (vii) create and maintain records of consumer testing.

Still hungry? Please join Hudson Cook for our next CFPB Bites of the Month. If you missed any of our prior Bites, including the webinar that covered the above topics, request a replay on the Hudson Cook website here. 

——————

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.

ROCKVILLE, Md. — Greenberg Advisors (GA), a leading advisory firm for M&A transactions in RCM, HCIT, ARM, and BPO, is pleased to announce the release of its year-end M&A Updates for these sectors. The M&A Updates discuss the key investment and acquisition trends in these markets, based on GA’s highly-active, specialized M&A practice and its proprietary data assets.

In ARM, the 4th quarter acquisition of private equity-backed commercial debt specialist ARMStrong Receivables Management proved to be the year’s largest transaction. Interestingly, 2023 was the first year since 2016 that healthcare didn’t lead the charts in transaction volume – it was replaced this year by the commercial segment. GA continues to see the more “relationship” transactions completed among firms located in similar geographic regions, often among shareholders who run in similar circles and/or have known each other for years. Lastly, independent strategic buyers continue to dominate the buyer universe, and when combined with private equity-backed firms, strategics were responsible for 96% of all transactions! View these ARM trends and many more here.

In RCM and HCIT, demand for high-quality businesses remains incredibly strong, which has continued to buoy valuation multiples. While the year had its challenges, in line with M&A markets across most sectors, a number of notable RCM and HCIT transactions crossed the finish line in Q4. Those Q4 deals represented over 75% of the year’s transaction value and provided massive amounts of optimism for those seeking liquidity events in 2024 and beyond. Billing and Consulting topped the list of services acquired, while Analytics and Patient Engagement led the technology offerings. Strategic buyers won out on more deals than financial buyers, as the latter often found it too challenging to overcome the increased cost of capital while remaining competitive for transactions. More RCM and HCIT investment trends and data can be found here.      

Brian Greenberg, CEO, commented: “There was a groundswell in the second half of the year, as investors shrugged off economic headwinds and started bidding aggressively on assets. Overall, investment activity was reasonably vibrant for the year. We look forward to advising in more highly-strategic deals where we’re able to utilize our relationships and specialized knowledge of the market to identify the most natural fit in each of our transactions.”

GA is working with buyers interested in commercial collections, 3rd and 1st party healthcare collections, and RCM functions such as billing and denials management. Our team would be happy to discuss these opportunities with owners that are open to exploring a sale. 

About Greenberg Advisors 

Greenberg Advisors, LLC provides world-class M&A and strategic advisory solutions to Business Services and Technology companies in the Revenue Cycle Management (RCM), Healthcare Information Technology (HCIT), Accounts Receivable Management (ARM), and Business Process Outsourcing (BPO) sectors.

Focused on these sectors for over 25 years, the firm’s professionals offer a comprehensive, yet highly specialized perspective from which to advise clients, resulting in the completion of over 150 M&A, valuation, and strategic planning engagements. These client successes reflect Greenberg’s distinct client-first approach, deep sector expertise, objective point of view, and work ethic.

This blog shares actions proven to prepare for regulatory exams by adopting a proactive and informed approach. At a high level, to prepare for regulatory examinations, organizations should adopt a proactive and informed approach. Staying abreast of regulatory changes and updates is crucial, and the bank should establish a robust Compliance Management System (CMS) that encompasses policies, procedures and controls aligned with current regulatory requirements. Regular internal audits and risk assessments must be conducted to identify and rectify compliance gaps, with a commitment to promptly address any deficiencies discovered.

Start Exam Readiness Planning by Identifying High Risk Functions and Performing Risk Assessments

Clients often ask, “We have an upcoming exam and are not sure where to start – what do we do? There are certainly some common standards, but our answer often varies by client, based on many factors that must be considered before planning readiness activities. These factors include:

• Who is the examiner (e.g., CFPB, OCC, FRB, FDIC, NCUA, State)?
• What functions (if known) are being reviewed during the exam?
• What is the context for the exam (is it the first exam conducted by a particular regulatory agency or the fourth exam?)
• What is the maturity of the individual client’s risk and control infrastructure?

We ask these questions before we begin to construct a readiness plan. While the most logical starting point always varies, there are several steps that can be taken to prepare. Start with identifying high-risk functions that are likely to be the focus areas of the exam. Then, compare the current state against known regulatory expectations for compliance/control. Identification of high-risk functions will help streamline readiness efforts and result in a prioritized list of impacted processes.

Identifying High-Risk Functions to be Exam Ready

Identifying high-risk functions will guide all readiness activities. Typically, once you’re aware of an upcoming exam, there isn’t time to check, double-check and triple-check every process. So, prioritization is a must. These steps can get you ready:

1. Determine Regulatory Applicability and Compare Expectations to What You Currently Do

You must first understand the applicability of all regulations to job functions, as well as regulators’ expectations for compliance and control to compare to current operations.

2. Analyze Complaints to Identify Potential Root Cause Weakness

Important in advance of any exam—but especially so for CFPB exams. This should not be limited to “highest volume” complaint types, as we’ve seen a small handful of complaints be signs of significant errors.

3. Review Recent Enforcement Actions

Review public enforcement actions to gain insights into regulatory expectations and identify where other organizations have been most impacted. This helps pinpoint areas for greater reputational risk.

4. Re-Examine Past Internal Audits of Regulatory Exam Findings

Repeat exam findings must be avoided as should un-addressed internal audit findings. Any function with recent findings should be automatically flagged as a higher risk and prioritized.

How to Perform a Risk Assessment

We recommend performing risk assessments on any impacted processes. The risk assessment finds gaps and helps determine how to address gaps prior to the exam.

Effective risk assessments for exam readiness must meet the following three criteria:

1. They are initiated quickly to give you more time. But, also, it increases the likelihood that results from changes will be evidenced within the examination period. You’ll have a powerful narrative to show a regulator that you were proactive.

2. They are completed independently to be sure that you don’t sacrifice rigor. You don’t need to hire third-party consultants to conduct each assessment. However, ensure that people conducting the assessment have distance from the business line. While subconscious, those close to the operation are more likely to have bias that all is well, which can create residual risk.

3. They are done thoroughly with full knowledge of the regulatory applicability and expectations. Many assessments fall short here. Risk assessments need to be deep—and go to the regulatory element level (i.e., testable elements) to ensure full compliance is addressed through policies, procedures, process maps, and monitoring and validation.

Typically, a risk assessment is completed in a format that allows for easy identification of gaps against a predefined expected state. Using a matrix with some well-defined fields to allow for a consistent prioritization methodology is encouraged. Regardless of approach, what is important is that the gaps identified during the risk assessment are prioritized, acted upon, and implemented in a way that tells a clear story.

Factors for prioritization may include the risk of customer or member harm, financial risk, implementation effort, implementation cost, time required for implementation, and process frequency.  The resulting prioritization document should be designed for handoff to any stakeholder, whether internal or external, seeking clarification on why an identified gap may have remained unaddressed.

Demonstrating a thoughtful approach to prioritization can go a long way with a regulatory body.

Execute the Regulatory Exam Readiness Plan and Establish Corrective Action and Project Structure

Once prioritization is complete, it is time to develop the readiness plan. This activity should ensure that items to be executed prior to the exam are completed. The plan also provides a roadmap sharing when open gaps will be addressed in the future.

The most important components of the exam readiness plan are related to the project management that surrounds its execution.

Effective components of an exam readiness plan include the following:

• Owners at the task and work stream level (one owner per line item)
• Documented due dates and task statuses
• Regularly scheduled working team update meetings
• Regular Steering Committee meetings for key decisions and accountability
• Formal change control processes to govern enhancement implementation
• Dedicated project manager(s) and a central repository

While these items alone are not enough to ensure exam success, they do contribute to the creation of a highly structured, consistent narrative.  It establishes the groundwork for clear likes of accountability, regular communication, and prompt identification of emerging risks.

The Consumer Financial Protection Bureau (“CFPB”) filed an opposition brief (the “Opposition”) on March 12, 2024 in response to a request by plaintiff trade groups to enjoin the CFPB’s final credit card late fee rule (the “Final Rule”) during the pendency of a lawsuit seeking to invalidate the Final Rule. In the Opposition, the CFPB argues that plaintiffs are unlikely to succeed on the merits, and that the Final Rule is consistent with the CARD Act’s mandate that late fees be “reasonable and proportional” to the late payment.

Plaintiff’s reply brief (the “Reply”) in support of its motion for a preliminary injunction (the “Motion”) was filed on Thursday, so the Motion is now fully briefed. The Final Rule, which was issued on March 5, 2024 and published in the Federal Register March 15, 2024, reduces the late fee safe harbor amount to $8 for “large card issuers” and eliminates automatic annual inflation adjustments on the $8 late fee. Absent an injunction, the Final Rule is set to be effective 60 days from today (after publication in the Federal Register).

The plaintiffs in the lawsuit are the Chamber of Commerce of the United States of America, Fort Worth Chamber of Commerce, Longview Chamber of Commerce, American Bankers Association, Consumer Bankers Association, and Texas Association of Business. The lawsuit, filed in the United States District Court for the Northern District of Texas just days after the Final Rule was issued, included the Motion seeking a preliminary injunction.

In the Motion, plaintiffs argued that they are likely to succeed on the merits of their claims because (1) the Fifth Circuit has ruled in CFSA v. CFPB that the CFPB’s funding is unconstitutional, and (2) the Rule violates the CARD Act, Truth In Lending Act (“TILA”), and Administrative Procedures Act (“APA”). Plaintiffs also argue card issuers will suffer irreparable harm if the Final Rule takes effect, including the need to incur compliance costs, lost late fee revenue, and lost customer goodwill if they are forced to reduce their late fees to $8 and then subsequently raise them should they prevail in the lawsuit. We discussed these arguments here.

The CFPB asks the court to deny the plaintiffs’ motion for a preliminary injunction, claiming that venue is improper, that the plaintiffs are not likely to succeed on the merits of their statutory claims, and that the “balance of the equities” does not support a preliminary injunction.

In the introduction to its Opposition, the CFPB begins with a policy argument, rather than a legal argument, asserting that the Final Rule eliminates “an outdated and unjustified regulatory safe harbor, which allowed large card issuers to charge late fees billions of dollars in excess of their cost with relative impunity.” The CFPB also notes that the lawsuit was not brought by large card issuers, but instead by allegedly “forum shopping” industry trade groups, and further to its venue argument, claims that the case does not have “a real connection” to the district court in which the suit was filed: According to the CFPB, only one plaintiff, the Fort Worth Chamber of Commerce, is located in the Northern District of Texas, and that organization only identifies one member — based in Utah — as being harmed by the Final Rule.

The CFPB further argues that the Final Rule is the result of a nearly two-year regulatory review process. According to the CFPB, it determined the existing safe harbor amounts for late fees, the process for which was set by the Federal Reserve Board after notice and comment, were “inconsistent” with the CARD Act’s instructions that fees be “reasonable and proportional” to the late payment.

The Opposition contends the plaintiffs read requirements into TILA that do not exist in determining the late fee, and that the CFPB was only required to “consider” the factors enumerated in 15 U.S.C. § 1665d(c) in setting the late fee (including the cost incurred by the creditor, the deterrent effect on the cardholder, and the conduct of the cardholder), and was not required to directly tie the amount of the late fee to those factors. In response to arguments from the plaintiffs that the data utilized by the CFPB did not support the $8 safe harbor amount, the CFPB asserted it had conducted a detailed analysis of available empirical evidence using late fee data from large card issuers in setting the fee amount. Further, the CFPB contended that the express exclusion of post-charge-off costs was proper and consistent with the CARD Act and the APA. According to the CFPB, just because the plaintiffs dislike the new late fee safe harbor does not mean it is inconsistent with the CARD Act.

The CFPB takes the position that the proposed Final Rule effective date, 60 days after publication in the Federal Register (which occurred today), is permissible, despite a legal requirement to the contrary pointed out by the plaintiffs. TILA dictates that regulations “requiring any disclosure which differs from the disclosures previously required” under certain sections of TILA “shall have an effective date of that October 1 which follows by at least six months the date of promulgation.” 15 U.S.C. § 1604(d). In response, the CFPB argues that the Final Rule does not require any different disclosures, but “at most” just changes the amount of the late fee within disclosures that are already required.

Finally, the CFPB states that the balance of the equities weighs against a preliminary injunction, arguing that that the Final Rule “could return around $10 billion to consumers’ wallets . . . [and] [a]s for the large card issuers, they will be fine.”

In its Reply, plaintiffs note that the CFPB does not contest that the plaintiffs are likely to prevail on their claim that the CFPB is unconstitutionally funded based on the Fifth Circuit opinion in CFSA v. CFPB; that the Final Rule will cause plaintiff’s members irreparable harm; or that plaintiff Fort Worth Chamber of Commerce is based in Fort Worth and has impacted members. They argue that venue is proper in the Northern District of Texas as each plaintiff has standing because at least one plaintiff, the Fort Worth Chamber of Commerce, has standing, and that transactional venue would be proper even if they lacked standing as plaintiffs’ members have cardholder customers within the district.

Plaintiffs also address some of the statutory arguments made by the CFPB in the Opposition, observing that the CFPB ignores the plain-meaning of the term “penalty” in the CARD Act and noting that the agency’s limited reading of TILA’s requirements in setting the $8 late fee ignores statutory requirements in favor of policy arguments. They also argue that the CFPB’s assertion that the Final Rule’s 60 day effective date complies with TILA because new disclosures are not required ignores the fact that every large card issuer will be required to provide new disclosures.

We will continue to monitor the case and the court’s decision on the Motion. On Thursday, Judge Reed C. O’Connor recused himself from the case, which has now been assigned to Judge Mark Pittman. Notably, Judge Pittman, a Trump appointee, vacated the Biden Administration’s plan to forgive approximately $400 billion in federal student loans under the HEROES Act of 2003 in November 2022. It is unclear if the reassignment of the case will impact the timeframe for a decision on the Motion, but we expect the court to move quickly.