Archives for April 2016

Law Firm No Longer Needs to Be Licensed as Debt Collector in Mass – The Story Behind the Reversal

April 10, 2016 By Leave a Comment

In an April 1, 2016 letter the Massachusetts Division of Banks (Division) has reversed its position regarding licensing of law firms as debt collectors in the state.  The Division now says that a Massachusetts law firm and/or other similarly situated law firms will not need to become licensed to engage in debt collection in the Commonwealth.

The April 1 letter was issued to the law firm of Lustig, Glaser &Wilson, P.C. (LGW) in response to a request for an opinion relative to whether LGW would be required to obtain a debt collector license from the Division in order to engage in consumer debt collection activity in the Commonwealth. The requests for an opinion go back to correspondence from LGW on September 19, 2013 and October 21, 2013.

The road to this April 1 opinion has been long and had several twists and turns. First, the Division waited almost 2 years before initially responding to the LGW request. On November 2, 2015 (Opinion No. 13-018) the Division determined that LGW would, in fact, need to be licensed as a debt collector based on the activities specified in their request for an opinion. Then, approximately two months ago, on February 11, 2016, the Division issued further clarification on that November 2, 2015 opinion (Opinion No. 16-002), but did not change the fact that they felt the law firm needed to be licensed as a debt collector.

In December of 2015 LGW filed an action in Suffolk County Superior Court seeking Declaratory Relief regarding the licensing issue. LGW requested an Order that the law firm was not a “debt collector” that needed to be licensed.

The Division filed its Answer on January 29, 2016.

On February 24, 2016 LGW filed a Motion for Judgment on the Pleadings.

On April 1, 2016 the Division filed a Motion to Extend the time to Answer the LGW motion.

On that same day, the Division issued their opinion that LGW will not need to become licensed.

The earlier opinions (Nos. 13-018 and 16-002) are withdrawn by the April 1 letter.  The relevant portion of the latest letter reads as follows:

Since the issuance of the November 2″d letter, the Division has reconsidered its recent interpretation of the attorney-at-law exemption set forth at Mass. Gen. Law ch. 93, § 24. As a result of the Division’s further consideration of the statutory language of ch. 93, § 24, the Division has determined that it will withdraw its November 2nd opinion (and its related follow up opinion dated February 11, 2016) as of today’s date. Therefore, the Division will not require LGW, or other similarly situated law firms, to become licensed solely because LGW is primarily engaged in consumer debt collection or regularly collects consumer debt. As this appears to be the question you presented in your September and October of 2013 correspondence, the Division has determined that this is responsive to your request.

insideARM Perspective

insideARM contacted LGW for comment. Kenneth C. Wilson, the firm’s Managing Attorney responded:

 “What we thought was a simple, straight forward issue resulted, two years later, in a response that was totally unanticipated and we believe clearly contrary to the legislature’s intent and the Division’s own regulations.”

“While our attempts to convince the Division to change its position regarding attorney licensing both before the November Opinion Letter issued and then prior to our initiation litigation seeking declaratory relief failed, we are very pleased that the Division has now re-considered its position and rescinded the requirement.”

The latest opinion is good news for LGW and “other similarly situated law firms.” However, the first question to be considered is, What is the definition of “other similarly situated law firms?” It seems likely that law firms from outside the Commonwealth must still be licensed as they are “not similarly situated.” What is not clear is whether firms located outside the Commonwealth, but with member attorneys licensed to practice law in the Commonwealth, will be subject to licensing.

This single issue seems to have been a gigantic waste of time and resources.  What is fascinating is that if you go to the Banking Division website you will find a link to a 2006 Opinion Letter (Opinion 06-059) that discussed and resolved the attorney exemption to the debt collector licensing requirement ten years earlier.

There is no reference to the three opinion letters in this case connected to that 2006 opinion.

 

Law Firm No Longer Needs to Be Licensed as Debt Collector in Mass – The Story Behind the Reversal
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Accounts Receivable Management

Filed Under: News

How the “Three Lines of Defense” Philosophy Can Help Your Agency Through an Audit

April 10, 2016 By Leave a Comment

In many organizations, it’s not uncommon to find diverse teams made up of auditors, compliance officers, internal control specialists, and business line owners, who are all working together to assist in managing the risks of their company.

However, given the differences in duties and responsibilities by each of those functions — especially in how they assess and manage the risks and controls — it is hard to have coordination across all lines. It can be and still does remain a challenge for many companies.

The final session of insideARM’s compliance- and operations-themed webinar series, ARM-U, was helmed by the Chief Risk Officer and the General Counsel for Encore Capital, and looked, in part, specifically at this issue.

The specific focus was on a Three Lines of Defense philosophy: the idea that a company can enhance communications on risk management and control by clarifying essential roles and duties. As a position paper published by the Institute of Internal Auditors described it, “[The Three Lines model] provides a fresh look at operations, helping to assure the ongoing success of risk management initiatives, and it is appropriate for any organization — regardless of size or complexity. Even in organizations where a formal risk management framework or system does not exist, the Three Lines of Defense model can enhance clarity regarding risks and controls and help improve the effectiveness of risk management systems.”

FIRST LINE OF DEFENSE

  • Business Unit/Operations

SECOND LINE OF DEFENSE

  • Corporate Legal
  • Compliance
  • Enterprise Risk Management (ERM)

THIRD LINE OF DEFENSE

  • Internal Audit

The First Line of Defense is Business Unit/Operations. They’re responsible for maintaining the effective internal controls and ensuring that risk mitigation procedures and plans are in place that help drive compliance day in and day out. As Keith Carlson, Director of Risk Auditing and the acting Chief Risk Officer for Encore Capital explained, “When you think about it, the businesses closest to what they do know what their operational goals are, what the expectations are, and they have a vested interest in ensuring that those processes and controls are in place to effectively manage risk.”

The Second Line of Defense can easily be mistaken as redundant, according to Carlson. But that actually isn’t serving your business at all.
Business units “get caught up with the goals,” says Carlson, “sales goals, production goals, collection goals.” The risk, then, is in what happens when the first line of defense deteriorates. The Second Line of Defense, then, reinforces the first.

  • Some of the functions of the Second Line that assist the First Line are:
  • Supporting or helping create policies and procedures
  • Training, educating, facilitating and monitoring the business on their risk management processes
  • Helping to provide the risk management frameworks
  • Helping the business identify emerging trends or risk, which is extremely important, given our change in regulatory environment
  • Any kind of financial pronouncements

The Second Line also helps educate on any risk tolerance or appetite changes, and it can assist the business in the development of processes and controls to mitigate that risk. The Second Line, then, in summary, is there to help the First Line monitor and test the adequacy of their internal control environment.

And last but not least is the Third Line of Defense, which is essentially an internal audit in most organizations. For companies that don’t have a dedicated IA source or staff, an external body that they use to assess or audit that’s independent from the First and Second Lines of Defense, is essentially what the Third Line is.

The Third Line will provide management with an independent objective assessment of the controls that are put in place to mitigate the risks and ensure that they’re functioning appropriately. Even in more detail, the internal audit function provides assurance to the board and senior management on the effectiveness of governance, risk management, and the internal control environment, including the manner in which the First and Second Line of Defense achieves risk management; and also the efficiency and effectiveness of the control objectives that were put in place by the First Line.

In summary, the Three Lines of Defense, in a highly regulated industry such as the debt indsutry, has become a must and a norm. Regulatory bodies such as the CFPB, the FTC, and the OCC are all expecting to see this type of framework in this industry.

How the “Three Lines of Defense” Philosophy Can Help Your Agency Through an Audit
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Accounts Receivable Management

Filed Under: News

Executive Change: Marc Gruskoff Joins Cascade RM as EVP Operations

April 10, 2016 By Leave a Comment

PETALUMA, Calif. – Cascade Receivables Management, LLC (Cascade RM) is excited to announce the newest addition to its’ team: Marc Gruskoff.  Joining Cascade RM as Executive Vice President of Operations, Gruskoff is responsible for both internal and external collection operations, as well as the addition of new product lines and services to expand upon Cascade RM’s core offerings.

Marc Gruskoff

Marc Gruskoff

Gruskoff comes to Cascade with over 20 years of industry experience in leadership roles with key industry participants: CompuCredit/Jefferson Capital Systems, GMAC/Triadvantage Credit Services, Bank of America and BankOne/FirstUSA

Throughout his career, Gruskoff has proven to be an engaged, interactive partner to the industry, promoting the growth and success of its’ constituents.

“Marc adds to Cascade RM’s already strong foundation built upon human capital, technology and compliance management.  I’m excited to see him grow Cascade’s operations in depth of existing products and services and breadth in adding ancillary services that help our clients to be more profitable” said Cascade RM’s Managing Director, Lee Brockett.

“Marc will expand upon Cascade RM’s core competencies even further, refining areas of our business that reiterate Cascade RM’s position as a forerunner in the accounts receivable management industry” added Director of Business Strategy, Nick Curry.

“I am proud to have become a part of the Cascade RM team.  Cascade RM’s commitment to its’ consumers, employees and industry partners is paramount and the reason for their continued success and strong growth trajectory” added Gruskoff.

About Cascade Receivables Management, LLC

Cascade RM is a nationally-licensed account receivables management company with its headquarters located 35 miles north of San Francisco in Petaluma, CA.  Cascade RM’s sister company, Cascade Capital, LLC, is a well-established debt purchase and specialty finance company. Cascade RM and Cascade Capital are committed to the compliant and ethical treatment of consumers and patients.

Contact Nick Curry at (888) 417-1531 x 1003) to learn how Cascade RM can customize a receivables management solution to fit your specific company needs.

Executive Change: Marc Gruskoff Joins Cascade RM as EVP Operations
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Accounts Receivable Management

Filed Under: News

Compliance Professionals Forum Heads to Pennsylvania to Host Compliance Meeting

April 10, 2016 By Leave a Comment

The Compliance Professionals Forum (CPF) hosts its second 2016 regional peer meeting, A Candid Conversation about Compliance, in Philadelphia, PA, on Wednesday, April 13.

Compliance professionals of all levels will learn from each other and walk away with strategies to ease their compliance headaches.

“When people come prepared both to share and listen, these meetings can be extraordinarily productive,” said Mike Bevel, Director of Education for the Compliance Professionals Forum. “As the facilitator, I work really hard at making the room as comfortable a space as I can for the free sharing of ideas. Each meeting is confidential, and trust is necessary. Even when we can’t all agree on the answer, the conversations themselves are so valuable.”

It was the “most valuable time spent in a long time,” said past participant Scott Loyd of Credigy.

Regional peer meetings give attendees a peek into what membership to the Compliance Professionals Forum is all about. CPF members can attend monthly conference calls to talk through compliance and operational concerns and learn from their peer group’s experiences.

The complimentary* meeting takes places at the offices of Clark Hill LLC:

One Commerce Square

2005 Market Street, Suite 1000

Philadelphia PA  19103

It will run from 10 am to 3 pm. Space is limited.

To register, visit www.compliancepf.com/event/PA2016.

* Please note: there is a $25 reservation fee. This fee is waived for Compliance Professionals Forum members.

About the Compliance Professionals Forum

insideARM created the Compliance Professionals Forum, a membership organization that provides professionals responsible for compliance related to communicating with consumers about a debt with  up-to-the-minute compliance insight, how-to guidance and tools. The Compliance Professionals Forum brings together professionals for compliance conversations on a regular basis to help members operate with confidence and know where their organization stands against like-minded agencies.

 

Compliance Professionals Forum Heads to Pennsylvania to Host Compliance Meeting
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Accounts Receivable Management

Filed Under: News

Jay Rickman Jr., the President/CEO at AMCOL Systems in Columbia, S.C., Passed Away on April 5 at age 55

April 10, 2016 By Leave a Comment

Jay Rickman Jr., the President/CEO at ACA member company AMCOL Systems in Columbia, S.C., passed away on April 5 at age 55.

Jay Rickman Jr.

Jay Rickman Jr.

Rickman Jr. had been active in ACA International for nearly 29 years and worked extensively to advance the collection industry. He was politically active, served on numerous ACA committees, and became an ACA Fellow in 2013. He was also the Past President of the South Carolina chapter of the Healthcare Financial Management Association.

“Jay and his family have always been very actively involved and leaders in our industry,” said ACA International President Jim Richards. “Our thoughts and deepest condolences go out to Jay’s father, Jay Sr; his mother, Mary; and all of the rest of his family and friends during this difficult time.”

Visitation has been scheduled from 5:30-7:30 p.m. Friday, April 8, at Holy Trinity Greek Orthodox Church, 1931 Sumter Street in Columbia, S.C. Funeral services are scheduled at the church from 11 a.m. to noon on Saturday, April 9.

 

Jay Rickman Jr., the President/CEO at AMCOL Systems in Columbia, S.C., Passed Away on April 5 at age 55
http://www.insidearm.com/daily/debt-collection-news/jay-rickman-jr-the-presidentceo-at-amcol-systems-in-columbia-s-c-passed-away-on-april-5-at-age-55/
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Accounts Receivable Management

Filed Under: News

Call For Presentations: First Party Outsourcing Summit, October 17-19, 2016

April 10, 2016 By Leave a Comment

insideARM announces its Second Annual First Party Outsourcing Summit and the launch of the website for the event. The Summit is set for October 17-19, 2016 at the Eaglewood Resort & Spa in Itasca, Illinois (just 20 minutes northwest of Chicago’s O’Hare airport). Agenda details will be published in the near future. Registration for the event will open June 1, 2016; you can “pre-register” by entering your email address at the website.

Last year’s inaugural First Party Outsourcing Summit was the talk of the ARM industry. First Party Outsourcing was a topic that had long been ignored at industry events.  The capacity crowd exceeded all expectations. The hotel block was sold out. Conference rooms were full. Still, the attendees unanimously provided positive feedback. In light of all the positive “buzz” about the event within the industry, this year the event is being held in a larger facility to accommodate the expanded crowd that is expected.

Eaglewood Resort & Spa

Eaglewood Resort & Spa

The unique First Party Outsourcing Summit program is designed for senior level executives at all types of credit grantors and call centers.  The sessions will reflect the diversity of the industries that will be represented; from financial services to telecom to healthcare to utilities to retail and all points in between.

Last year’s faculty included speakers from organizations such as Sprint, AT&T, Vanderbilt University Medical Center, Kohls Department Stores, and Direct TV. This year’s Summit will feature a similarly diverse lineup.  The sessions will cover both customer care and collections. Session topics will range from Operations to HR to Technology to Legal and Compliance.

Call for Speakers/Presentations

When developing the conference agenda, the insideARM goal is to provide a balanced program. The preferred session format is collaborative, interactive discussions rather than lectures. We are looking for fresh sessions to be led by speakers of the highest quality who represent the diversity of ARM/Call Center industry. Experience speaking at other industry events is not required.

Credit Grantors, Call Center Representatives and Call Center Service or Product Providers are invited to submit presentation proposals for the conference. insideARM encourages presentations from professionals from diverse organizations and fields.

To submit a Presentation Proposal please email Tim Bauer at tbauer@insidearm.com or call Tim at (770) 650-9872.

In order to maximize high quality networking among attendees, there is no Exhibit Hall at this event.  Instead, the conference is underwritten by a small group of sponsors. For sponsorship information please email Aaron Steinberg at aaron@insidearm.com or call Aaron at (240) 499-3836

Call For Presentations: First Party Outsourcing Summit, October 17-19, 2016
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Accounts Receivable Management

Filed Under: News

ED Announces Ambitious Plan to Create Loan and Debt Management Software

April 10, 2016 By Leave a Comment

Today on HomeRoom, the official blog of the U.S. Department of Education (ED), the Department announced plans to launch “one of its biggest initiatives to date” – the creation of a software system to manage all Direct Student Loans, including both servicing and debt collection.

The argument made in the blog is that the servicers that ED contracts with have varying skills; some are good at data management, some are good at reaching out to borrowers. They want to take the system part off everyone’s plate and let them focus on the service.

These are the benefits ED says this new system will provide:

  • Department of Education-branded communication that is standard–eliminating differences that now exist among multiple servicers that co-brand borrower communications–and that will help borrowers stay on top of their debt and avoid confusion about who is servicing their loan.
  • A streamlined borrower experience via a single web portal through which all borrowers can find the latest information about their loans, make payments and apply for benefits–eliminating the need to know the name of their servicer.
  • Better customer service practices that will be common for all borrowers and that meet high standards to ensure borrowers’ needs are met consistently, regardless of what contractor is providing that customer service.
  • Reduced, and, to the extent practical, eliminated loan transfers and other borrower disruptions that can make it hard for borrowers to keep current with their loan payments and seek help when they need it.
  • Enhanced oversight and accountability that will ensure that borrowers are treated fairly and given clear, actionable information at every step of the repayment process, including enhanced customer service practices and a new complaint system to empower borrowers when something is not right.
  • A single platform for all Federal student loans allowing for a more seamless connection for future customer service centers.

On April 4, 2016 ED issued a Solicitation and Statement of Objectives for Phase I of the Federal Aid Servicing Solution. Offers must be received no later than 3:00 PM Eastern on May 9, 2016.

As of the time of this article, there were (9) comments posted to the blog. All of them more articulate and insightful than is typical of blog comments, which tend to include a lot of typos, grammatical errors, and profanities. Three of them are optimistic about the idea. In all cases, there is skepticism that ED – and the servicers – are up to the task. One of them offers an interesting analogy that sums up the current state of the education finance system:

“So basically, all you guys are doing is creating a new consolidated website/portal for student loans.

Thats it?

Do you guys think that we (read: millennials) are stupid? How does this do anything to help the current student loan bubble?

Here’s a rather sober analogy. Lets say you’re a prisoner at a labor camp, and have to complete a certain amount of labor to be freed (loan debt). If you don’t complete a certain amount of labor per day, it’s added on to your jail sentence (interest).

Once day, the guards come over to you and say “hey, you can work less each day, but we’re going to stretch your jail sentence to 20+ years” (PAYE). But if you have extra work left you didn’t finish at the end of the 20 years, you’re going to have to do it all at once, without sleep (tax bomb at the end of PAYE – oftentimes more than the original amount.

Fast toward to today – the jail guard (you guys + this website) have announced “we’re going to keep you at just one labor camp, and not move you around (multiple loans, different websites) to make it easier for you to preform your labor!

Do you expect us to be GLAD? We still have to pay off the loans regardless. Most millennials are technologically savvy – making a new consolidated website/portal does absolutely NOTHING to help us long term.

I’m calling you guys out – seeing articles like this is absolutely infuriating.”

insideARM Perspective

This proposed initiative is enormous. The stated objectives for the new system are solid. They are both practical and responsive to consumer needs. In particular, the potential for a “streamlined experience via a single web portal through which all borrowers can find the latest information about their loans, make payments and apply for benefits–eliminating the need to know the name of their servicer” should be welcome news to any student with loans being serviced by multiple entities.

HOWEVER, let’s also be realistic. Ed does not have the greatest track record when it comes to developing and implementing new systems. As noted above, this project is going to impact both servicing and collection of defaulted student loans.

In 2010 Federal Student Aid (FSA), an office of ED, began work on development of a new Debt Management Collection System (known as DCMS2). That system was only for the management of the collection of defaulted student loans – or ½ of the scope of this initiative.

The project was fraught with delays and challenges, as reported by an October 24, 2015 Office of Inspector General (OIG) report “Review of Debt Management Collection System 2 (DMCS2) Implementation.” It is best to read this report with an empty stomach.

That report found that “FSA could not ensure that its outside contractor delivered a fully functional DMCS2 because FSA did not develop an adequate plan, ensure the supplier met milestones, or use appropriate systems development tools.”

The report also references earlier OIG reports that highlighted glaring weaknesses throughout the delayed implementation process. Some of the problems directly impacted consumers. They included:

  1. inability to process rehabilitated loans and receive collections through administrative wage garnishments,
  2. DMCS2 inability to accept some debt accounts transferred from Title IV Additional Servicers, and
  3. DMCS2 inability to protect certain accounts from private collection agency placement (for example, accounts that were in bankruptcy or assigned to the Department of Justice)

In May 2013 insideARM published a story about the changes to ED’s tracking system that may have resulted in either overpayments or underpayments to its 23 PCAs. That story referenced a May 15, 2013 OIG report. Even then, the identified problems were shocking.

In short, while the ED announcement is positive news for student borrowers, it must be viewed with an eye towards history.  To create the desired system will be an incredibly heavy lift for the department.

ED Announces Ambitious Plan to Create Loan and Debt Management Software
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Accounts Receivable Management

Filed Under: News

Encore Capital Group Wins Motion to Compel Arbitration in Putative FDCPA Class Action

April 10, 2016 By Leave a Comment

A federal judge in Michigan has dismissed a proposed class action accusing publicly traded debt buyer Encore Capital Group [ECPG (NASDAQ)] and its affiliated entities of suing consumers over old debts that were no longer legally enforceable.  The Judge ruled that that the case must be decided in arbitration.

The opinion in the case, Hilton v. Midland Funding LLC, et.al. (Case No. 15-10322, U.S. District Court, ED MI, Southern Division) was issued by the Honorable Linda V. Parker on March 31st.

Background

In September 2004, Plaintiff Eric Hilton (Plaintiff) opened a credit account through Dell Financial Services, LLC (DFS) to purchase a computer. The financing for the account was provided by CIT Bank and the servicing of the Account was provided by DFS. Plaintiff made payments on the account but subsequently defaulted. The Account was charged off in 2007, though it appears that Plaintiff made some payments subsequent to charge-off, but those payments stopped sometime in 2008. DFS, subsequently sold Plaintiff’s debt to Midland Funding, LLC. (Midland).

Midland engaged a law firm to attempt collection of the account. In 2014 the law firm sued Plaintiff in state court on behalf of Midland on the debt. The state court action ultimately reached settlement.

On January 23, 2015, Plaintiff filed an action in federal court asserting that Midland, acting through Midland Credit Management, (MCM) and on behalf of Encore Capital Group, Inc. (Encore) impermissibly directed the law firm to file a debt collection lawsuit, suing Plaintiff on the Account after the applicable statute of limitations expired. Plaintiff asserted that, by doing so, the Defendants (including the law firm) engaged in unconscionable collection methods by filing suit on a time barred debt, in violation of the Fair Debt Collection Practices Act (FDCPA). Plaintiff also sought to pursue the claims on behalf of a class of similarly situated individuals.

Defendants collectively moved to compel arbitration, based on the underlying contractual agreement. The sole issue before the court was whether the arbitration provision of the credit agreement requires the court to compel arbitration.

Defendants argued that by using the Account, Plaintiff agreed to the terms and conditions set forth in the credit agreement for the account. Defendants asserted that “one of the terms and conditions Plaintiff agreed to was an arbitration provision that permits Defendants to elect mandatory, binding arbitration of any claim arising between them and Plaintiff. Defendants argued that the Federal Arbitration Act (FAA) requires the court to “stay this action until such arbitration has been had in accordance with the terms of the agreement.”

Plaintiff, in its responsive brief, argued that the motion to compel should be denied for the following reasons: (1) Defendants have waived their right to arbitrate; (2) a trial by jury should be had to determine whether the arbitration agreement can be enforced against Plaintiff; and (3) should the Court compel arbitration, the matter should proceed to arbitration as a class action.

The Underlying Agreement

The critical provisions in the underlying agreement read as follows:

DELL PREFERRED ACCOUNT CREDIT AGREEMENT

Offered by CIT Bank and serviced by Dell Financial Services

Notice: This Credit Agreement contains an arbitration provision. Under this arbitration provision, you may be required to settle any dispute with CIT Bank, Dell Financial Services and others through arbitration and not through a court proceeding.

Use of Your Account. Your use of the open-end credit offered pursuant to this Agreement or its use by anyone you authorize, shall constitute acceptance of the terms of this Agreement and the Arbitration provision contained in this Agreement. Your use of the Account also acknowledges that you are of legal age to enter into a binding agreement with us.

ARBITRATION NOTICE

THIS AGREEMENT CONTAINS AN ARBITRATION CLAUSE.

PLEASE READ THIS PROVISION CAREFULLY. IT PROVIDES THAT ANY CLAIM RELATING TO YOUR ACCOUNT MAY BE RESOLVED BY BINDING ARBITRATION. YOU ARE ENTITLED TO A FAIR HEARING, BUT THE ARBITRATION PROCEDURES ARE SIMPLER AND MORE LIMITED THAN RULES APPLICABLE IN COURT, AND ARBITRATION DECISIONS ARE SUBJECT TO VERY LIMITED REVIEW. CLAIMS MAY BE ARBITRATED ONLY ON AN INDIVIDUAL BASIS. IF EITHER PARTY CHOOSES TO ARBITRATE A CLAIM, NEITHER PARTY WILL HAVE THE RIGHT TO LITIGATE THAT CLAIM IN COURT OR HAVE A JURY TRIAL ON THAT CLAIM, OR TO PARTICIPATE IN A CLASS ACTION OR REPRESENTATIVE ACTION WITH RESPECT TO SUCH CLAIM.

Applicable Law. The laws of the United States of America, including the Federal Arbitration Act, 9 U.S.C. Sections 1-16(the “FAA”, and the laws of the State of Utah apply to govern this Agreement and your use of your Account.

The court decided the case based upon the briefs submitted. There were no oral arguments.

In the opinion that accompanied the Order Judge Parker decided the following:

  1. The parties agreed to arbitrate.
  2. The scope of the arbitration agreement is broad in scope.
  3. Congress did not intend for FDCPA claims to be non-arbitrable.
  4. The remainder of the proceedings should not be stayed.
  5. Defendants did not waive their right to arbitrate this matter.
  6. The matter should not proceed to arbitration as a class action.

The judge granted defendant’s motion to compel arbitration and ordered the parties to proceed with arbitration of Plaintiff’s claims pursuant to the terms of the agreement to arbitrate.

insideARM Perspective

Much has been written about mandatory arbitration provisions in the past 12 months. The CFPB held a field hearing on the issue in October.  insideARM wrote about two arbitration cases in February of this year.

The CFPB has begun the rulemaking process on the issue. It is likely that mandatory arbitration provisions will be extinct in consumer contracts in the very near future. However, until that time, the decision in this case is a welcome outcome for the defense of FDCPA class action cases.

Encore Capital Group Wins Motion to Compel Arbitration in Putative FDCPA Class Action
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Accounts Receivable Management

Filed Under: News

Witnesses Tell Senate Banking Committee That CFPB Has Hurt Consumers

April 10, 2016 By Leave a Comment

Yesterday the Senate Banking Committee held a hearing to debate the Effects of Consumer Finance Regulations. Witnesses included:

  • Leonard Chanin, Of Counsel with Morrison and Foerster LLP – his testimony
  • David Hirschmann, President & CEO, U.S. Chamber of Commerce Center for Capital Markets Competitiveness – his testimony
  • Todd Zywicki, Foundation Professor of Law and Executive Director of the Law and Economics Center, George Mason University School of Law – his testimony
  • Reverend Willie Gable Jr., Doctor of Ministry and Chairman of the Board, National Baptist Convention USA, Housing and Economic Development Commission – his testimony

Committee Chairman Richard Shelby (R-AL) raised the concerns shared by industry the CFPB remains “one of the least accountable agencies in the federal government,” and that consumers have been harmed by the fact that this has led to companies offering fewer products and services to those the Bureau was intended to help. He continued, “I have long advocated for sensible consumer protections, but I do not believe they should be used as a substitute for an individual consumer’s independent judgment…Also, so-called protections should not be implemented without regard to their costs or their effects on economic growth or the safety and soundness of any particular financial institution.”

Ranking Committee Member Sherrod Brown (D-OH), lamented the fact that there was only one consumer representative on the Hearing panel, and declared that “The CFPB has been a success. The agency has taken strong actions in a number of consumer finance markets that previously had no federal oversight, including credit reporting, debt collection, payday loans, student loan servicing, and auto finance.” He countered Shelby’s claim that fewer financial products are available to consumers, “Those who say that credit is not available to consumers today are not paying attention. Credit is available and it is growing month after month.”

Zywicki, who published a paper in 2015 entitled “The Law and Economics of Consumer Debt Collection and Its Regulation,” shared his conclusions that new restrictions have burdened consumers. He opened his testimony stating that he supported the need to unify consumer financial protection policy under a single agency, but that the CFPB has “squandered this unprecedented opportunity to modernize the consumer credit system to promote competition, consumer choice, and innovation.”

congressional hearing

He adds that “By stripping consumers of mainstream financial products such as mortgages, credit cards, and bank accounts, Dodd-Frank has driven the most vulnerable into the arms of check cashers, pawn shops, and payday lenders…” Zywicki’s written testimony includes data, which he uses to show –among other things– the reduction in availability of free checking accounts since before Dodd-Frank. He blames this on the Durbin Amendment, which imposed a “hard cap” on permissible interchange fees for debit card transactions. He predicts a similar result when the Bureau announces the anticipated payday loan rule this year, suggesting that the expected imposition of “ability-to-pay” requirements will force approximately 80% of payday lenders out of business.

“Choking off access to payday loans, auto title loans, and other similar products without ensuring the availability of reasonable alternatives could impose substantial harm on many consumers, resulting in bounced checks, eviction, termination of utilities, or even reliance on illegal loan sharks.”

Hirschmann urged the CFPB to use its power to create clarity and consistency:

  • Provide clear rules of the road for financial services companies so they can compete on a level playing field;
  • Use enforcement actions to deter fraud and predation, not to announce new, broadly applicable regulatory policies;
  • Strengthen the Bureau’s own accountability by enhancing transparency and committing itself to fair administrative processes;
  • Limit regulatory duplication and conflict by coordinating with other agencies; and
  • Preserve companies’ use of diverse tools, like arbitration agreements, to manage their relationships with the customers they serve.

Reverend Gable suggested that “Payday loans and their close cousins, car title loans, are an abomination in plain sight,” and shared a story of one consumer who turned a $300 loan into a $2,500 debt, which she lost her car and other personal possessions in order to pay. He also shares that his community has helped to pay the payday loan debts of many individuals and that, had those individuals come to him sooner (before the first payday loan), so that “more of our congregation’s funds could benefit people in need instead of paying off economic predators.” He argues that legislators should limit the cost of credit to 36% annual interest or less.

Like the others who testified, Gable addressed a wide range of topics, including bank overdraft practices, prepaid cards, auto lending, arbitration, and debt collection. As it relates to debt collection, Gable offered only generalities, that “Debt collectors commonly engage in harassment and threats; they commonly attempt to collect debts consumers never owed, or no longer owe…Though existing laws are not as strong as they must be, debt collectors routinely break them.” He suggests that “[new debt collection rules] will permit collection of debts while, we hope, requiring that this collection be done without employing abusive tactics. This is reasonable and necessary. This is not extreme.”

Tomorrow, the Committee will hear from CFPB Director Cordray as he presents his Semi-Annual Report to Congress.

Witnesses Tell Senate Banking Committee That CFPB Has Hurt Consumers
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