Archives for June 2016

TransUnion Presents Portfolio Scoring: How a Data-Driven Strategy Can Improve Collections

June 26, 2016 By admin Leave a Comment

2016-05-tu-webinar-portfolio-scoring-email-header

The mission of every modern debt collection organization is simple: collect more money faster, at a lower cost and with improved consumer satisfaction. Balancing recovery performance while maximizing recovery amounts presents a myriad of challenges, however.

It can be difficult to navigate the complex web of dynamic consumer behavior and preferences; regulatory uncertainty at the Federal, state and municipal levels; rapidly changing client requirements; and the need for consumer-centric operations. An effective scoring strategy acts as a compass leading you to better predict which consumers in your debt portfolio have the highest likelihood and ability to pay.

Listen as Charlie Wise, Vice President of TransUnion’s Innovative Solutions Group; and Peter Ghiselli, Vice President of TransUnion’s Third Party Collections, division explain how recovery scores can help you:

* Prioritize inventory to enable smarter decisions throughout the workflow

* Align agent skill with the likelihood of recovery at an individual account level

* Optimize operational efficiency by increasing speed to recovery

* Intelligently allocate fixed and variable expenses

TransUnion Presents Portfolio Scoring: How a Data-Driven Strategy Can Improve Collections
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Accounts Receivable Management

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Executive Change: PRA Group Names Former GE Exec as Chief Financial Officer

June 26, 2016 By admin Leave a Comment

NORFOLK, Va. — PRA Group, Inc. (Nasdaq:PRAA), a global leader in acquiring and collecting nonperforming loans, today announced that on August 10, 2016, Pete Graham will be joining the company as executive vice president and chief financial officer.

Graham is a seasoned finance executive with more than 20 years focused on the financial services industry across a broad range of sectors including lending, leasing, insurance and asset management.

As a 14-year veteran of General Electric Company (GE), Graham served most recently as a finance executive on the GE Capital exit plan team, focused on GE’s disposition of the majority of GE Capital. His previous positions within GE Capital include chief financial officer for GE Commercial Distribution Finance and GE Capital Markets. He also served as global controller for Treasury and Global Funding Operations and controller and manager of Financial Planning and Analysis for GE Asset Management.

Pete Graham

Prior to joining GE, Graham was with KPMG LLP for 10 years where as a senior manager he led audit and advisory teams serving clients in the financial services industry in insurance, banking and asset management. His tenure with KPMG included three years living and working in Switzerland while leading teams across Europe. Graham earned a Bachelor of Science in accounting from the University of Connecticut and is also a Certified Public Accountant.

Kevin Stevenson, president and chief administrative officer of PRA Group, said, “We are pleased to announce the addition of an experienced, international chief financial officer. Pete’s past work in the financial services industry, both directly and while in public accounting, fits our needs well. In addition, his background also includes managing funds in 30+ different currencies, complex hedge accounting and legal structures, and financial planning and analysis. In summary, Pete Graham is exactly what we were looking for and will be extremely beneficial to PRA Group as we continue to expand and grow both domestically and internationally.”

About PRA Group
As a global leader in acquiring and collecting nonperforming loans, PRA Group returns capital to banks and other creditors to help expand financial services for consumers in the Americas and Europe. PRA Group companies collaborate with customers to help them resolve their debt and provide a broad range of additional revenue and recovery services to business and government clients.

PRA has been recognized as one of Fortune’s 100 Fastest-Growing Companies for three years, one of Forbes’ Best Small Companies in America for eight consecutive years since 2007, and one of Forbes’ Best Midsize Employers in America in 2016. For more information, please visit www.pragroup.com.

Executive Change: PRA Group Names Former GE Exec as Chief Financial Officer
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Accounts Receivable Management

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Debt Collection Rule Making Moves to SBREFA Phase

June 26, 2016 By admin Leave a Comment

insideARM has learned from multiple industry sources that the Consumer Financial Protection Bureau (CFPB) has scheduled the next step in debt collection rulemaking, the Small Business Regulatory Fairness Enforcement Act (SBREFA) hearing, for the week of August 22, 2016. The exact date has not been announced; several firms have been invited to “reserve that week” on their calendar to participate as Small Entity Representatives (SERs).

In March insideARM hosted a webinar entitled, “Top Five Takeaways for the Debt Collection Industry from the Arbitration SBREFA Panel.” The summary slides can be viewed here. Based on this outline, here is what we might expect to see in the coming weeks/months:

SERS are selected and receive initial communications regarding the SBREFA process
Documents released publicly and to SERS including an outline of proposals
Introductory phone call with SERs
Materials discussion phone call with SERs
SER in-person meeting with SBREFA Panel
SER written materials due (30 days following the live Panel)

In May insideARM published an article by Jane Luxton from ClarkHill that detailed the follow up to the Arbitration SBREFA Panel. She noted that, based on input from the SERs, the Panel made thirteen recommendations to the CFPB. She also noted,

“It appears the Bureau was unpersuaded by the SERs’ comments, saying repeatedly that after carefully considering these views, “the Bureau preliminarily finds that the proposed rule would be in the public interest.” Where not outright rejecting the SERs’ arguments, the Bureau indicates its willingness to receive further comment. No doubt, further comment will be forthcoming and, at a minimum, the SBREFA report provides both significant questions the Bureau – and potentially the courts – must address, and a good set of themes for other interested parties to build on during the comment period that is now beginning.”

Debt collection – which some might say is a far more complex topic than arbitration – is sure to draw quite a bit of input from all stakeholders. The majority of the ARM industry has been waiting and hoping for the CFPB to use its rule making authority to provide clarity to many grey areas surrounding debt collection laws. Many, many hours have been invested over the last several years by industry groups and individual companies to educate the Bureau on the nuances of debt collection laws and processes.

It seems we may soon get a peek at the direction this is headed.

Note: No official announcement has been made by the CFPB regarding the timing of the SBREFA Panel. The information above is based on information gathered from a number of industry sources.

Debt Collection Rule Making Moves to SBREFA Phase
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Accounts Receivable Management

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Judge Slashes Consumer Attorney’s Fee Request After Accepted Offer of Judgment

June 26, 2016 By admin Leave a Comment

A federal Judge from the Eastern District of Tennessee has dramatically reduced a consumer attorney’s request for an award of attorney’s fees and costs in Fair Debt Collection Practices Act (FDCPA) cases involving an accepted Offer of Judgment. The cases were LaPointe v. Midland Funding, LLC (Case Nos. 2:15-CV-171 and 2:15-CV-172, United States District Court, Eastern District of Tennessee)

Background

The plaintiff in this case filed two separate Complaints against the defendants on June 22, 2015. The two cases raise claims under the FDCPA. The two Complaints are virtually identical. Both raised claims against the same defendants for violations of the FDCPA regarding the collection to two debts originally incurred by the plaintiff to two different creditors, i.e. Wal-Mart and JC Penney.

Defendants filed their Answers on August 24, 2015. On the same day, the defendants filed a Motion to Consolidate the two actions. Also on the same day, the defendants tendered Offers of Judgment to the plaintiff in both cases. These Offers consented to Judgments against the defendants for $1001.00 plus attorney’s fees and costs for each case.

According to plaintiff’s counsel’s records, counsel began working on responses to the Motion to Consolidate the same day the defendants tendered the Offers of Judgment on August 24, 2015. Counsel’s time records confirm that he waited until September 8, 2015, to inform the plaintiff of defendants’ Offers of Judgment. Plaintiff accepted these offers the same day they were presented to him. Almost two hours before filing notices of accepting the Offers of Judgment, plaintiff’s counsel filed responses to the Motion to Consolidate.

On September 8, 2015, the plaintiff notified the Court of his acceptance of the Offers of Judgment by filing notices with the Court. The Court entered the Judgments on September 9, 2015. Thus, the Motion to Consolidate was rendered moot. Then, on September 23, 2015, the defendants tendered to plaintiff two checks for $1,001. 00.

On October 19,2015, plaintiff’s counsel filed the instant Motions for Attorney’s Fees and Costs. In case number -171, counsel seeks $7,133.00 in attorney’s fees and costs of $470.90 in costs for a total of $7,603.90. In case number -171, counsel seeks $6,650.50 in attorney’s fees and $467.47 in costs for a total of $7, 117.97. The combined request was for attorney’s fees of $13,783.50 and costs of $938.37, for a total of $14,721.97.

The defendants opposed the motions, arguing:

That the total request of $14,721.97 for duplicative and unnecessary work on two identical lawsuits should not be honored and the award should be reduced
That the cases should have been brought in one suit
That a majority of the work claimed was performed after the Offers of Judgment
That the hourly rate requested was excessive

The Opinion

The Opinion and Order were issued by J. Ronnie Greer, United States District Court Judge.

The Judge began his opinion with a review of the federal fee-shifting statutes like the FDCPA. He wrote:

“Attorney’s fees for successful litigants under federal fee shifting statutes are commonly calculated using the “lodestar” method of multiplying the number of hours reasonably expended by a reasonable hourly rate. The reasonableness of the hours expended and the attorney’s hourly rate must be considered on a case-by-case basis.

Courts may consider several factors to determine the basic lodestar fee and whether to make adjustments to it. Factors relevant to determination of the lodestar and any adjustments are: “(1) the time and labor required by a given case; (2) the novelty and difficulty of the questions presented; (3) the skill needed to perform the legal service properly; ( 4) the preclusion of employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (1 0) the ”undesirability” of the case; ( 11) the nature and length of the professional relationship with the client; and (12) awards in similar cases.

While the lodestar method is the appropriate starting place for determining attorney’s fees, the inquiry does not end there. Other considerations may lead the district court to adjust the fee. The most critical factor in determining the reasonableness of a fee award is the degree of success obtained. Where the purpose of the litigation is to recover damages, then the district court must consider the amount and nature of damages awarded when determining attorney’s fees. Where the plaintiff achieves only partial success against the defendant, the district court must consider whether the plaintiff achieved a level of success that makes the hours reasonably expended a satisfactory basis for making a fee award.”

The Judge then moved to the specifics of these cases.

“The defendants’ arguments are well-taken. First, the time spent in drafting two form-based Complaints is excessive and unreasonable. Second, the time spent drafting responses to the Motion to Consolidate and drafting the Fee Petitions is excessive and unreasonable. Third, the time spent reviewing Court orders and correspondence is excessive and unreasonable. Fourth, the time billed for communicating with the plaintiff is excessive. Fifth, the time billed for drafting the Rule 26(f) report is unreasonable. Sixth, much of the work was unneeded, considering the timing of the Offers of Judgment. Seventh, the fees incurred for preparation of the fee petition must be reduced.”

The Judge determined that plaintiff’s counsel should be awarded fees and costs; however, the fees sought were reduced to a total of $2,033.88. The judge awarded total costs of $938.37. A copy of the Judge’s Opinion and Order can be found here.

insideARM Perspective

It is always interesting the read an opinion of a strong Judge. In this matter the Judge reduced the requested attorney’s fees by over 80%. From $13, 783.50 to $2,033.88. That is dramatic. The Judge also reduced the attorney’s hourly rate from $300/hour to $250/hour in determining that amount. That is amazing.

The Judge then took the spreadsheet of the billing entries from the plaintiff’s counsel and commented on almost every entry. He rejected duplicate time entries in the two files. He rejected the proposed time for “copied and pasted” Complaints. He agreed with the defendants that two lawsuits were unnecessary. Finally, he also rejected entire time entries after the Offer of Judgment was received and suggested the time spent was also unnecessary.

This is two cases in a row that are very favorable to the industry. Yesterday insideARM reported on a case involving potential sanctions for a consumer lawyer failing to provide meaningful review of a case prior to filing.

This case also was critical of a consumer lawyer’s handing of a matter. While two instances do not make a trend, it is nice to see some common sense applied to these types of cases.

Judge Slashes Consumer Attorney’s Fee Request After Accepted Offer of Judgment
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Accounts Receivable Management

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NJ District Court Slams Consumer Attorney for FCRA Suit Filed without “Meaningful Review or Investigation”

June 26, 2016 By admin Leave a Comment

Is it acceptable to allege in court that a reasonably accurate credit record is, in fact, not accurate and therefore in violation of the FCRA? Nope. That’s according to U.S. District Court for the District of New Jersey Judge Renée Marie Bumb, who dismissed what she termed a “frivolous” lawsuit against Experian in the recent, twinned cases Glenn Williams v. Experian and Lorissa Williams v. Experian.

The case involves credit disputes filed by both Williamses against Experian, which had determined and reported that each Plaintiff had filed two chapter 13 bankruptcies in the District Court of NJ. Both plaintiffs had disputed the bankruptcies, prompting Experian to reinvestigate. Experian sent an Automated Consumer Dispute Verification (ACDV) to Lexis Nexis, which is Experian’s public records vendor; Lexis Nexis subsequently confirmed the accuracy of the bankruptcy attributions. Experian then informed the plaintiffs of the dispute process results.

Experian may have considered the matter settled, but Experian’s mailbox suggested otherwise. Between 2011 and 2014, seven dispute letters were sent to Experian regarding either Glenn Williams’s or Lorissa Williams’s reports.

In filing suit against Experian, Plaintiffs’ counsel alleged that Experian violated the FCRA by failing to delete inaccurate information from their credit file after reinvestigation and failing to follow reasonable procedures to assure maximum possible accuracy of the credit report. Plus, the Plaintiffs sued for defamation for reporting the “false and negative alleged bankruptcies.”

False and negative how? That proved tricky argument for Plaintiffs counsel to make. According to court documents, counsel provided no evidence whatsoever that the bankruptcies in question were not real and accurately reported. Counsel presented nothing more than the online dispute forms originally submitted to Experian. What’s more, the Plaintiffs’ identifying information are all over the bankruptcy court documents – documents which the Plaintiffs did not dispute. (Believe it or not, counsel for the Plaintiffs actually argued that there are imposters posing as the Plaintiffs. The court asked for evidence to back up the theory. Didn’t get it.)

As the Judge Bumb notes, Experian can’t really violate FCRA requirements on accuracy or duty to reinvestigate consumer disputes if its information is factually accurate.

“In the end, there is nothing before this Court to show that Plaintiffs did not file these petitions,” Bumb states. “To the contrary, the evidence all points to the fact that Experian has had to expend resources for over a year and a half litigating a baseless case. And, again, it is most noteworthy that Plaintiffs have not even submitted a sworn document before this Court in support of their claims that they did not file these bankruptcies. In this Court’s mind, this speaks volumes and highlights the nakedness of the allegations … If the information in a consumer’s file was, in fact, correct, then no investigation could have revealed the existence of inaccurate information because there was no inaccurate information to uncover.”

What’s more, Bumb could not resist noting that light-on-review FCRA cases like this are not uncommon and that the court has taken notice.

“This Court is not naïve to the fact that FCRA litigation and its cousin Fair Debt Collection Practices Act (FDCPA)litigation are often pursued on boilerplate pleadings with no ultimate intent or hope that the case proceeds to trial or much past the pleading stage,” she states. “Indeed, to this end, a cursory search of the dockets reveals that Plaintiffs’ counsel appears to have filed hundreds of FCRA and FDCPA actions in the District of New Jersey, many of which did not proceed past several docket entries before the case was terminated. The fact that some portion of FCRA or FDCPA cases present[s] similar factual predicates prone to bulk litigation does not, however, give an attorney license to file a case without any meaningful review or investigation.”

“This Court has little doubt that Plaintiffs filed the bankruptcy petitions, and their mailings to Experian stating otherwise have all the markings of a well-schemed fraud,” she concludes.

The insideARM perspective

As it happens, sometimes turnabout is fair play. insideARM covered the Bock v. Pressler & Pressler case late last year, a case involving a collections law firm that brought suit against a consumer after one of their attorneys reviewed the consumer’s file in “four seconds.” The District Court of New Jersey found that the meaningful attorney involvement standard, which applies to a letter sent by an attorney, can also apply both to pleadings and the filing of a complaint.

The cases of Glenn Williams v. Experian and Lorissa Williams v. Experian show that the courts may have very little patience for quickly filed, largely (if not entirely) baseless suits filed by consumer attorneys, too.

NJ District Court Slams Consumer Attorney for FCRA Suit Filed without “Meaningful Review or Investigation”
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Accounts Receivable Management

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Cost of Financial Regulation Passed along to U.S. Businesses, Study Finds

June 26, 2016 By admin Leave a Comment

More than 75% of American companies are finding that it’s “harder for them to access the financial services they need” in the wake of increased federal financial regulation. That’s according to a new study by the U.S. Chamber of Commerce, who surveyed “more than 300 corporate financial professionals” from “companies of all sizes” about their regulatory experiences.

The Chamber of Commerce found that regulation like Dodd-Frank is directly affecting the activities of the businesses they surveyed, and argue that the costs of regulation are increasingly being passed on to some consumers and employees. Specifically, the Chamber found the following among those surveyed:

79% say their business has been affected by financial regulatory changes
76% believe regulations will not help their company over the next several years
50% say increased bank capital charges have increased their costs
43% say maintaining cash flow and liquidity is a chief concern
29% have increased prices for consumers
19% have delayed or cancelled planned investments

The Chamber doesn’t propose any specific solutions in the study, but asserts that “current financial regulations are making it hard for companies to lift the American economy.” The main issue raised is the problems that come with managing cash flow and liquidity – companies tell the Chamber that current regulations have made things more challenging for them, and that things could get worse if more rules are passed.

The study also points to what the Chamber calls the “trickle-down impact of regulatory overreach on customers.” This impact is said to be particularly damaging on small businesses with less cash on hand. Essentially, companies tell the Chamber that if they have a hard time accessing credit and raising short-term capital, they’ll be less likely to invest in ways that help the economy grow. If things are made easier on businesses, then they’ll help everyone else. The Chamber concludes that “while many of these reforms have improved the resilience of our financial system, a number of policy responses have gone too far and are negatively influencing Main Street companies and their customers.”

insideARM Perspective

The Chamber says that they’re “committed to advancing an agenda that promotes well-functioning and strong capital markets so that American businesses have the tools and resources necessary to drive economic growth.” They argue in this study that fewer regulations would help businesses reach that goal. That said, it seems unlikely that either Congress or anyone at the regulatory agencies will be swayed much by their argument.

Cost of Financial Regulation Passed along to U.S. Businesses, Study Finds
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Accounts Receivable Management

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SDVOSB Lien Enforcement Taps Penn Credit for Capital, Infrastructure Support

June 26, 2016 By admin Leave a Comment

SAN JOSE, Calif. – Lien Enforcement, Inc. (LEI), a service-disabled veteran-owned small business based in San Jose, California, is pleased to announce it has signed a letter of intent (LOI) with Penn Credit Corporation, of Harrisburg, Pennsylvania, enabling the two firms to cooperate with one another on subcontracting opportunities with Federal Private Collection Agencies (PCAs).

The LOI will enable the companies to work together as follows.

Upon the start of any subcontract(s), Penn Credit will provide vendor support services to LEI to include any and all services not otherwise provided by a PCA to its subcontractors in the normal course of a typical subcontracting relationship.
Penn Credit will provide capital to LEI to assist in the implementation of any subcontract(s) in the form of loans consistent with what is commercially available.

With decades of experience serving government clients dating to 1987, Penn Credit will act as a mentor to LEI not only to provide the assistance outlined above, but also to ensure PCAs who may consider engaging LEI do so with advanced knowledge that its support and capital will work to enable LEI to meet any prequalification or work requirement a PCA may have.

“I have been very pleased to have gotten to know Penn Credit over the last several months and to have the opportunity to work with the folks there,” said Keith Baker, CEO of LEI and a veteran of Operation Restore Hope in the early 1990s, where he was injured while serving aboard the USS Juneau off the coast of Somalia and subsequently received a service-connected disability rating. “Our ability to tap into Penn Credit’s infrastructure as a vendor partner, while accessing the necessary capital at the same time, gives us the wherewithal to meet even the most demanding requirements a PCA may have for a subcontracting partner. This guarantees we will be able to perform at a high level of quality.”

“We are looking forward to imparting our broad knowledge and experience into Keith’s business to help it succeed,” said Donald C. Donagher Jr. Owner & Chief Executive Officer at Penn Credit. “Ultimately, it’s Keith’s business to run, while we can act as a valued-added partner to ensure the success of LEI’s efforts for any PCA.”

LEI is a member of the Fed Cetera Network, an organization comprising dozens of pre-qualified companies PCAs can hire to meet subcontracting goals, including those in all specially-designated socioeconomic groups. “We were pleased to put these two firms together last year to begin these discussions,” said Leah Wilson Conger of the Fed Cetera Network. “We look forward to hearing from others who may want to help our members in the same manner so that those with written commitments from PCAs can have the best chance to succeed for ED in the future while participating in subcontracting opportunities.”

Penn Credit and LEI will remain distinct entities as a result of the transaction. There are no family connections between the two, and both have been in business for years in their own right. Mr. Baker has a long management resume within the industry, a prerequisite for any small business owner asserting a status such as SDVOSB. LEI has significant client relationships, primarily in California. Mr. Baker retains unconditional control of LEI as a result of this transaction.

About Lien Enforcement

Based in a Federal HUBZone in San Jose and an SDVOSB, the staff at Lien Enforcement is continuously trained with modern collection techniques to ensure we offer the highest standard of courtesy and professionalism possible, while maintaining consistent and reliable service. We provide a conscientious and ethical approach to collecting our clients’ accounts and strictly follow the statutes and regulations of the FDCPA, FCRA, and all other laws. We have a calculated approach to managing the receivables process. Our management team has over 20 years of debt collection experience, with a proven track record of delivering measurable results.

About Penn Credit

Penn Credit is a leading accounts receivable management firm with extensive government experience and an expanding higher education client base throughout the United States. Since 1987, Penn Credit has developed the staff, technology, safeguard procedures, and requisite knowledge to perform securely and ethically as a collection vendor. Penn Credit’s qualifications include membership and active participation with ACA International, national licensing, SSAE16 SOC 1 and SOC 2 auditing as well as maintaining PCI-DSS Compliance. Penn Credit diligently pursues accounts placed for collection with the highest efficiency through its facilities in Pennsylvania, New Jersey, and Arizona.

About Fed Cetera

Fed Cetera helps companies in the collection industry pursue opportunities with the Federal government. Federal PCAs have strong incentives to give a portion of their core collections work to qualified small businesses. Companies working with Fed Cetera to pursue subcontracting opportunities recently surpassed $50,000,000 in total billings for their work provided as subcontractors to ED PCAs.

SDVOSB Lien Enforcement Taps Penn Credit for Capital, Infrastructure Support
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Accounts Receivable Management

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F.H. Cann Receives ATO From Department of ED for Student Loan Collections

June 26, 2016 By admin Leave a Comment

NORTH ANDOVER, Mass. – F.H. Cann & Associates, Inc. (FHC) announced this week that it has received an Authorization to Operate (ATO) from the U. S. Department of Education (ED).

In a long and competitive process, FHC was awarded an ED contract based upon its significant experience in default collections, superior performance, outstanding customer service and strong compliance and security. As a condition to the award, a Private Collection Agency (PCA) is required to go through an arduous Information Technology security assessment conducted by a third party independent Assessor approved by ED. FHC selected Clarus Consulting and followed a specific plan with strict timelines and deliverables laid out and monitored by ED. After a detailed review by ED, FHC was informed on June 2, 2016 that it was granted an ATO making them eligible to receive business from the Department of Education.

Sheri A. Traficante-Cann, President and CEO, stated, “We are thrilled to receive our ATO which highlights the emphasis F.H. Cann has always placed on information security and the safeguarding of our clients’ information.” She went on to say, “We have a great overall staff and, our IT team did a remarkable job in completing all the deliverables on time and providing the documentation to illustrate our security program. Being awarded this contract, which is considered to be the pinnacle of contracts within defaulted student loan collections, is an achievement we are very proud of.” She added, “We invest in people and technology and deliver unparalleled service and responsiveness to our clients and their customers. This is truly a testament to the hard work of our entire staff.”

About F.H. Cann & Associates

Located just north of Boston in North Andover, MA, F.H. Cann & Associates has been a national leader in providing its clients with compliant, best-in-class recovery rates and services since 1999. Its highly-trained, motivated staff specializes in providing solutions to the most difficult account receivables for a broad spectrum of industries including student loans, financial institutions, commercial, state and local governments, and default aversion services. FHC is nationally licensed to perform collection activities in all U.S. states and territories. FHC is a member of ACA International and maintains active and participatory memberships with many of the leading industry trade organizations ensuring we are abreast of any new changes to the industry. FHC is proud to have been named one of the 2015 Best Places to Work in Collections by insideARM, a distinction they have held each year since 2011.

For additional information about F.H. Cann & Associates, Inc., visit www.fhcann.com or contact Rick Broady at rbroady@fhcann.com.

This project has been funded at least in part with Federal funds from the U.S. Department of Education under contract number ED-FSA-14-D-0014. The content of this publication does not necessarily reflect the views or policies of the U.S. Department of Education nor does mention of trade names, commercial products, or organizations imply endorsement by the U.S. Government.

F.H. Cann Receives ATO From Department of ED for Student Loan Collections
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Accounts Receivable Management

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New Study Says CFPB is Going Easy on Financial Institutions

June 19, 2016 By admin Leave a Comment

Over the past four years, the Consumer Financial Protection Bureau (CFPB) has issued a wide range of enforcement actions and consent orders against various kinds of actors, including debt collectors, for alleged violations of federal consumer financial protection laws. But who has been hit the hardest?

A new Tulane Law Review study by University of Utah law professor Christopher Peterson, a Special Advisor to CFPB Director Richard Cordray, finds that banks have paid the most in penalties and restitution. In fact, despite only being subject to a quarter of the CFPB’s enforcement actions, banks have paid more than 60% of the total penalties and restitution collected by the Bureau.

Peterson asserts that the study is independent from the CFPB and doesn’t represent the Bureau’s views, instead focusing on the question of whether “the United States succeeded in creating an effective consumer financial civil law enforcement agency.” To that point, Peterson makes the case in the study that the CFPB is a success, but could be much harsher on financial institutions than it has been thus far.

Peterson asserts the following things in the study:

The CFPB has “built an effective and professional law enforcement staff.”
The CFPB has chosen their cases well, due to their not losing cases and having a minority of enforcement actions challenged by the regulated party. In fact, “no bank has publicly contested a public CFPB enforcement action.”
That the majority of consumer relief has been “awarded in CFPB cases in which the defendants illegally deceived consumers,” and in collaboration “with other state, tribal, or federal law enforcement partners.”
The CFPB has been willing and able to hold individuals at financial institutions liable for illegal acts when warranted.
The CFPB has “proceeded cautiously” when enforcing “abusive” acts and practices.
The Bureau “generated approximately $9.3 million per employee in refunds, redress, and forgiven debts for U.S. consumers.”

The study concludes with Peterson saying that the CFPB’s work in fighting illegal financial practices “should remain a top supervisory and enforcement priority for the Bureau,” arguing that criticism is based on “vapid allegations” which are “thoughtlessly untethered from reality.”

insideARM Perspective

Many financial institutions, both in the ARM industry and in other industries, will likely object to Peterson’s argument that the CFPB has taken it easy with respect to its enforcement actions thus far. (For one thing – in general, the difference in size/revenue between banks and non-bank organizations is vast. So it makes some sense that the absolute dollar amount of penalties would be larger for banks.)

That said, this study is instructive in understanding how the Bureau views its work internally, and could be seen as a signal that much more aggressive activity from the CFPB will be coming in the future.

For an in-depth look at this subject, be sure to check out insideARM’s report The CFPB’s Consent Orders Regulating the ARM Industry, available now. The report is the first of its kind designed to help the debt collection industry comply with the CFPB’s consent orders. It includes every relevant CFPB consent order – organized, analyzed, and summarized. You can purchase the updated version of the report every quarter, or join the Compliance Professionals Forum and get every update for free, as well as a wealth of other resources, all for one price.

New Study Says CFPB is Going Easy on Financial Institutions
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Accounts Receivable Management

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ConServe Submits Thoughtful Response to FCC Request for Comments on TCPA Exception for Government Debts

June 19, 2016 By admin Leave a Comment

Last week, Continental Service Group, Inc., d/b/a ConServe, a leading private collection agency (PCA) and federal contractor that provides services to the U.S. Department of Education (ED) and the U.S. Department of Treasury, Bureau of Fiscal Service (Fiscal Service), filed comments to the Federal Communications Commission (FCC) Notice of Proposed Rulemaking (NPRM) for the Telephone Consumer Protection Act (TCPA) – FCC 16-57, CG Docket No. 02.278. The complete comments can be found here.

On May 6, 2016 the FCC issued a NPRM, seeking comments on the implementation of a provision of the Bipartisan Budget Act of 2015 (The Budget Act) that excepts certain “robocalls” that are “made solely to collect a debt owed to or guaranteed by the United States” from the TCPA’s consent requirement. Comments were due on or before June 6, 2016.

The ConServe comments begin with introductory remarks objecting to the general characterization of all calls which may be made with the assistance of certain types of telephone equipment as “robocalls.” Conserve argues:

Equating the business of debt collection with telemarketing and other sales practices is unfair
Telemarketing calls and sales calls where there is no pre-existing business relationship are quite different from debt collection calls
Debt collection calls are neither random nor robotic, and require human involvement
Debt collectors do not randomly dial telephone numbers and their activity should not be lumped in with “robocalls”

Next ConServe laid out the reasons why verbal communication with federal borrowers is essential, citing their duty to educate student loan borrowers of loan repayment options. They also cite contractual requirements with ED and Fiscal Service that require the company to engage in verbal communication with the consumer.

The company provides the following data to support the need to contact consumers on their cell phone:

ConServe only establishes contact with 24% of the borrowers who have accounts placed with it for collections
70% of the company’s “right party” contacts are made to a cell phone
65% of right party contacts result in the consumer agreeing to a loan rehabilitation agreement
50% of the borrowers who list a phone number for contact provide a cell phone number as the preferred contact point

The loan rehabilitation process for federal student loans takes 9 months or longer. Missed payments and incomplete financial documentation are barriers to a borrower’s successful loan rehabilitation. Live contact, including subsequent reminders and follow-up calls with borrowers is often vital to success:

On average approximately 50% of the consumers who enter the rehabilitation program need approximately ten (10) follow-up contacts
One in five borrowers, to continue in the program, have needed approximately fifty (50) follow-up calls (which were consented to)

The ConServe comments cover 14 pages; additional items of particular interest to the ARM community in the comments include the following:

Covered Calls: Defining Debt, Default, Delinquency, Servicing, and Other Terms

“Debts” in the Debt Collection Improvement Act of 1996 (“DCIA”) definition includes all debts, whether current or delinquent, matured or unmatured, liquidated or unliquidated, and federal tax or federal nontax. There is no indication that Congress intended the term “debt” in the Budget Act Amendment to include only those obligations that are delinquent or in default. Indeed, Congress has already defined the term “debt” to include that which is both delinquent and in default.

Are Debt Servicing calls covered by the Amendment?

“The plain meaning of the text of the Budget Act Amendment includes servicing calls, which is clearly encompassed by the definition of a federal nontax debt.17 Using Congress’ definition of a debt owed to the United States, the Budget Act Amendment does not differentiate between “servicing” calls and calls made “to collect a debt.” Introducing such a dichotomy into the Budget Act Amendment by regulation is inconsistent with the plain language of the statute.”

“Servicing Calls” Provide Tangible Benefits to the Consumer

“ConServe disagrees that calls made attempting to resolve federal debts can be characterized as anything other than debt collection calls, especially in light of the DCIA definition of a “debt.” To the extent the Commission bifurcates the applicability of the Budget Act Amendment between “servicing” calls and calls made “to collect a debt,” servicing calls should include any call that is made in relation to a debt obligation owed the federal government and the borrower’s rights and obligations attendant thereto.”

Who can be called? All persons allowed by law.

“The phrase “solely to collect a debt” does not act as a limitation of calls to only the person or persons obligated to pay the debt. Congress had the opportunity to limit the exemption based on the recipient of the call, but declined to do so. Instead, as discussed herein, the Budget Act Amendment’s language makes clear that the availability of the exemption depends on the purpose of the call alone.”

Are calls to persons the caller does not intend to reach, that is persons whom the caller might believe to the debtor but is not, covered by the exception? Yes, all called persons are covered.

“ConServe does not support a rule restricting the applicability of the exemption based on the identity of the recipient and the application of the “one-call window.” To the extent the one-call window adopted by the FCC was already in place prior to the Budget Act Amendment, it is reasonable to conclude that in adopting the Amendment, Congress did not intend such a restriction to apply to the collection of federal debts.

State and federal laws other than the TCPA already limit the information PCAs may reveal to third parties, such as friends and relatives of a delinquent debtor. Other federal laws address the Commission’s concerns regarding inconvenience that may result to third-parties. ConServe is also subject to ED’s rules for third-party collection agencies and is subject to contractual consumer satisfaction and quality benchmarks pursuant to its contract with ED. Furthermore, the FDCPA precludes the disclosure of sensitive consumer information to third parties absent the consumer’s explicit consent.”

Limits on Number and Duration of Covered Calls

“The promulgation of any rules on call number and duration restrictions should be made at a later date, after analysis of the Budget Act Amendment’s efficacy in decreasing borrower defaults, increasing borrower contacts and default resolution rates.

Remedies already exist for student loan borrowers who experience annoyance or are upset by attempted collection contacts. The FDCPA, for instance, allows a consumer to demand the collector cease communication with her and, if a collector makes an unreasonably excessive number of calls, the Act creates a private right of action in consumers against the debt collector. The FDCPA specifically provides that “[a] debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt,” including “[c]ausing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with the intent to annoy, abuse, or harass any person called at that number.

If the Commission elects to impose a call volume restriction, after focused data collection and analysis occurs post-amendment in particular with respect to federal debt, should be crafted to strike the appropriate balance in preventing perceived borrower annoyance and economic reality. Three calls per month (as suggested by the Commission in the NPRM) —even if achieved with a live-connection with the borrower on each attempt—is simply insufficient to provide a reasonable expectation that PCAs can effectively honor the contract terms to collect debts on behalf of the federal government.

If restrictions are required, any call number restriction should be determined by the number of live contacts, not number of calls attempted. Counting calls based on non-answered dials will not serve any purpose beneficial to borrowers and will interfere with the legitimate, beneficial objective of reaching borrowers at an effective rate.

There should be no restriction on the duration for calls made in an attempt to collect federal nontax debt. It can take more than an hour to obtain necessary borrower information, provide required disclosures, and finalize any borrower arrangements. Limiting the duration of a call may force consumers to hurry through important information and prompt borrowers not to ask questions in order to complete the call in the specified time. In addition, either party to a call may terminate it at any time, so it is within the borrower’s discretion to end a call should they wish to do so. Duration restrictions serve no purpose beneficial to consumers and are more likely to harm borrowers’ interests.”

Should covered calls include calls to residential phone lines?

“ConServe opposes any expansion of the Commission’s rulemaking to apply to debt collection calls placed to residential landlines. Congress specified the scope of the Commission’s rulemaking in the Budget Act Amendment, providing that the Commission “may restrict or limit the number and duration of calls made to a telephone number assigned to a cellular telephone service to collect a debt owed to or guaranteed by the United States.” If Congress had intended for the Commission to regulate landlines it would have clearly omitted the term “cellular” from the Budget Act Amendment.”

insideARM Perspective

insideARM applauds ConServe for providing the FCC with well-reasoned comments to the NPRM. Unfortunately, it is likely that the deck is stacked against the PCAs and the ARM industry in this process. Just yesterday the FCC Released the Consumer Advisory Committee’s Formal Recommendations on the TCPA Proposed Rule. See the recommendations here.

The recommendations appear to merely “rubber stamp” the FCC proposals in the NPRM. That is frustrating. Yesterday insideARM wrote about the FCC call for applications to the Consumer Advisory Committee. Let’s hope that the ARM industry seeks greater input on that committee. The Consumer Advisory Committee should have diverse representation. The FCC needs to be challenged on issues like the NPRM.

ConServe Submits Thoughtful Response to FCC Request for Comments on TCPA Exception for Government Debts
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