Archives for October 2016

Yesterday the Consumer Financial Protection Bureau (CFPB)
published a notice in the Federal
Register amending its prior Compliance Bulletin on supervision of Service
Providers. A copy of yesterday’s notice can be found here.

The prior Compliance Bulletin (No. 2012-03), was originally issued
in 2012. In that document the CFPB outlined expectations in the introductory
paragraph.

“The
Consumer Financial Protection Bureau (CFPB) expects supervised banks and
nonbanks to oversee their business relationships with service providers in a
manner that ensures compliance with Federal consumer financial law, which is
designed to protect the interests of consumers and avoid consumer harm. The CFPB’s
exercise of its supervisory and enforcement authority will closely reflect this
orientation and emphasis.”

 Later in the
original Bulletin the CFPB discusses the use of “Service Providers”: 

“The CFPB
recognizes that the use of service providers is often an appropriate business
decision for supervised banks and nonbanks. Supervised banks and nonbanks may
outsource certain functions to service providers due to resource constraints,
use service providers to develop and market additional products or services, or
rely on expertise from service providers that would not otherwise be available
without significant investment. However, the mere fact that a supervised bank
or nonbank enters into a business relationship with a service provider does not
absolve the supervised bank or nonbank of responsibility for complying with Federal
consumer financial law to avoid consumer harm. A service provider that is unfamiliar with the legal requirements
applicable to the products or services being offered, or that does not make
efforts to implement those requirements carefully and effectively, or that
exhibits weak internal controls, can harm consumers and create potential
liabilities for both the service provider and the entity with which it has a
business relationship. Depending on the circumstances, legal responsibility may
lie with the supervised bank or nonbank as well as with the supervised service
provider.” [Emphasis Added by
insideARM.]

The revised
Bulletin is now CFPB Bulletin No. 2016-02, Service
Providers. The summary in the Federal
Register states: 

“The Bureau is reissuing its guidance on service providers,
formerly titled CFPB Bulletin 2012–03, Service Providers to clarify that the
depth and formality of the risk management program for service providers may
vary depending upon the service being performed—its size, scope, complexity,
importance and potential for consumer harm—and the performance of the service
provider in carrying out its activities in compliance with Federal consumer
financial laws and regulations. This amendment is needed to clarify that
supervised entities have flexibility and to allow appropriate risk management.”

 The revised
Bulletin inserts the following additional language: 

“The Bureau expects that the depth and formality of
the entity’s risk management program for service providers may vary depending
upon the service being performed—its size, scope, complexity, importance and
potential for consumer harm—and the performance of the service provider in
carrying out its activities in compliance with Federal consumer financial laws
and regulations. While due diligence does not provide a shield against
liability for actions by the service provider, it could help reduce the risk
that the service provider will commit violations for which the supervised bank
or nonbank may be liable as discussed above.” 

The Federal Register notice
indicates that the newly revised Bulletin 2016-02 will be released on the CFPBs
website on Oct. 31, 2016. 

insideARM
Perspective

The new additional language is an interesting and welcome
addition to this particular Compliance Bulletin.  It confirms what many ARM compliance people
believed was common sense and practical. ARM industry companies were put on
notice with the original Bulletin that they had exposure for not supervising
their service providers.  The issue was
always: What level of supervision for what service providers?

All service providers are not created equal.  The level of due diligence and supervision
for a letter vendor, data provider, collection agency or law firm collecting on
accounts should be different than the level of supervision for a service
provider such as the operator of the vending machine in a break room. The key
is making a risk based decision based upon the potential for “consumer harm.”
This revision recognizes that fact.

Yesterday the Federal Trade Commission (FTC) hosted a forum
– the second in its FinTech series – on peer-to-peer payment systems.
Peer-to-peer payment systems are online services – often in the form of mobile
apps – that allow consumers to share and/or send money electronically. These
systems make it easier for consumers who may not carry cash to send and receive
money from other people quickly.

The
forum panel discussion was labeled: Peer-to-Peer
Payments – Their Emergence and Path Ahead. Participating in the panel were
the following individuals: Jo Ann Barefoot, Matt
Van Buskirk, Beth Chun, Patrick Eagan-Van
Meter, Brian Peters,
Duane Pozza, and Christina
Tetreault. Their bios and backgrounds can be found on the FTC website for the forum.

One might wonder why insideARM would
be interested in this event. The answer is twofold, but it is also really quite
simple.

 First, FinTech (Financial
Technology) is an industry that is absolutely exploding.  The industry is all about using technology to
make financial services more simple and easier to use by consumers. From
marketplace and peer-to-peer lending to peer-to-peer payment systems, the ARM
industry has to know what is happening in the FinTech space. (insideARM has
previously written about the growth of alternative
lending, including marketplace and peer-to-peer lending.

For the ARM industry Fintech
provides not only revenue generating opportunities, but also expense reduction
and efficiency opportunities. The expense reduction and efficiency
opportunities could come from the peer-to-peer payment platforms.

Second, though the
event was produced by the FTC, not the Consumer Financial Protection Bureau (CFPB),
it has become abundantly clear through
rulemaking proposals to date (both at the CFPB and state and levels) that
technology advancements are going to be essential to the success of those
organizations that engage in debt collection (whether creditor, agency, law
firm, or debt buyer). Those who run sophisticated companies need to engage in
regular research and education about current developments in FinTech.

As noted above, this forum was
devoted to FinTech and peer-to-peer payments industry. Examples of companies
and products in this space include, but are hardly limited to Apple Pay, Google
Wallet, PayPal, Venmo, CirclePay, Dwolla, and SquareCash.

These companies and products
could be on their way to replacing previous methods and products used in the
ARM industry for obtaining “urgency payments.” Instead of using credit
card/debit card payments, Western Union, Moneygram or some form of
autopay/check writing service, today’s consumer may be more interested in
making payments using a peer-to-peer payment platform.  A consumer that does not have a checking
account yet wants to make a payment may prefer these alternatives instead of any
of the above “urgency payments” or buying and sending a money order via some
expedited mail or delivery service.

After initial introductions the
panel discussed the benefits of peer-to-peer payment systems to the consumer.
The benefits identified included:

1)    
Affordability

2)    
Accessibility

3)    
Speed of
transactions

4)    
Security

Members of the panel all agreed
that the consumer’s cost to use these payment systems was a significant benefit.
They discussed how historically, it was very expensive for a consumer to use
services such as Western Union or MoneyGram or to use some expedited mail or
delivery service to send funds quickly. 
Several panel members highlighted how speed of a transaction was
critical to the underserved or underbanked segment of the population. These
products can process a transaction in seconds.

The panel members also
discussed who was currently using these products. To the surprise of
nobody, Millennials are currently the largest market segment. However, all panelists
noted that the products were quickly gaining acceptance among other demographic
groups.

The discussion then moved to how
the products were being utilized. Currently 3 types of use were the most
predominant; gifts, bill payments,
and entertainment. These 3 categories were well over 90% of total usage.

The group then moved onto a
discussion of legal issues surrounding the products. The most obvious concern,
money laundering, actually had only a token mention from the group. 

The biggest legal issue facing
the developers of these products was – 
to no surprise, the various state and federal consumer protection
statutes, with particular emphasis on state Deceptive Trade Practices.

The reason consumer protection
statutes were of such concern was a simple statement made during the
discussion: “The consumers that use
these products may be very tech savvy, but they also tend to be very
unsophisticated.”

The panel was also consistent
in their belief that the recently announced CFPB Prepaid Card Rules were
applicable to the peer-to-peer payment solutions.

The panel next turned its
attention to some of the risks in this market. 
The risk of fraud exists on three fronts. First, international criminal
and sophisticated hackers have and are likely to continue targeting companies
in this space. That creates exposure. Second, as many of these products are
utilized on a handheld device (i.e. a smartphone) the risk of fraud exists if
that device is not secure and is lost or stolen. Third, old scams that have
existed forever have simply moved their scam to this new platform. A scam that previously
involved a stolen checkbook and forged signature has just moved from paper to
the digital world.

Finally, the panel moved to a
discussion of privacy concerns. What transaction data is being retained and
could that data be used? Again, much of this issue might be mitigated by
security and privacy settings on a smartphone when the application is
installed.

The insideARM Perspective

The program was fascinating.
The products discussed are innovative. These are products the ARM industry
should know about.

insideARM
recommends a review of the program. Usually the FTC archives their webcasts.
Past webcasts of FTC events are available at www.ftc.gov/videos.
However, as of this morning the broadcast was not yet on the site. It is likely
to be available in the near future.

We, too, are focused on
innovation. To this end, The iA Institute (publisher of insideARM) is in the process of
forming an Innovation Council to leverage the collective imagination of big
thinkers from across – and outside – the ARM industry, including creditors,
collectors, and technology organizations. The Innovation Council will work
closely the Consumer Relations
Consortium, also
managed by The iA Institute, to develop ways to address emerging regulations,
better serve consumers, and still manage to remain profitable. If you
think you can contribute, please get in touch.

The FCC hosted the second meeting of the Robocall Strike Force on Wednesday, October 26. The focus: what has been accomplished since the Strike Force had been assembled two months earlier, The result? Depends on whom you ask.

The Strike Force’s intended mission is a commitment to developing comprehensive solutions to prevent, detect, and filter unwanted robocalls. The Strike Force was set in motion by a mandate from FCC Chairman Tom Wheeler, demanding an action plan to address consumer concerns with robocalls and deploy anti-robocall solutions within 60 days.

Did they do it?

“We are not yet where we want to be,” Wheeler said Wednesday. “We’ve not reached the goal. We need solutions now.”

This may have been a lot for Wheeler to expect in 60 days. Wednesday’s meeting looked at three goals:

Goal 1: Robust Call Blocking & Filtering Tools for Consumers

FCC Call for Industry Action:

• Immediately Offer Free Call Blocking & Filtering to Consumers
• Facilitate Call Blocking & Filtering by Downstream Providers

Strike Force Delivered:

• Proposal for Network-to-Device Information Sharing Framework to Give
• Consumers Better Call Data & Call Handling Solutions
• Consumer Outreach Plan with FCC-Hosted Webpage for Call Blocking Resources
• Commitments to Facilitate Call Blocking By Downstream Providers

Work That Remains:

• Consumer Access to Free Call Blocking & Filtering Solutions Now
• Deadline for Development of Network-to-Device Information Sharing Framework 

Success: Not really. Wheeler wanted to see one thing: Immediate call blocking for consumers. The Strike Force delivered…a lot of other things.

Goal 2: Faster Implementation of Caller ID Authentication Standards

FCC Call for Industry Action:

• Accelerate Development & Deployment of VoIP Caller ID Verification Standards
• Implement SS7 Indicator for Verification of Incoming VoIP Calls to Downstream

TDM Carriers

• Conform with Existing Obligations to Transmit Call Routing Information
• Ensure Caller ID Information is Not Altered or Removed

Strike Force Delivered:

• Accelerated Standards Development with Rollout Milestones
• Submission of SS7 Authentication Solution to Standards Body

Work That Remains:

• Deadlines for Full Deployment of VoIP Caller ID Authentication & SS7 Solution
• Provider Commitments to Join AT&T in the “Race to Zero” 

Success: Again, no. (Also again: they had 60 days to deliver, which may have been unfair.)

Goal 3: Solutions to Detect & Mitigate Unwanted Calls

FCC Call for Industry Action:

• Improve Detection & Avoidance of Unwanted Calls Through Creation &
• Management of a “Do-Not-Originate” List

Strike Force Delivered:

• Successful IRS DNO Trial Following FCC Public Notice
• 90% Reduction in IRS Scam Call Complaints
• Increased Participation & Cooperation in Industry Efforts, Including
• Development of Best Practices for Call Blocking & Trace-Back

Work That Remains:

• Expand DNO Trial to Include Additional Providers & Numbers

Success: Yes! The decrease, specifically with regards to IRS scam calls, was significant. Which made Chairman Wheeler expect to see even greater decreases going forward.

insideARM Perspective: Scam IRS calls were the main impetus for this task force — a paradigm the debt industry is familiar with. Leaving aside whether greater regulation will succeed in diminishing phone scams of all stripes, consumers have seen some relief from some kinds of unwanted robocalls.

While the debt industry wasn’t specifically mentioned, it’s not a long step from IRS scam robocalls to debt collection scam robocalls. Consumer protections suggested and offered by this task force have the chance to have influence over the way collection agencies call consumers, too.

insideARM maintains a
free TCPA
resources page to provide the ARM
community a destination for timely and topical information on the Telephone
Consumer Protection Act of 1991 (“TCPA”). This page is generously supported by LexisNexis. See the page here or find it in our main navigation bar from any page on
insideARM. 

The cornerstone of the page
is a chart of significant TCPA cases. Click on the link in the chart for
the complete text of the decision. Where insideARM has already published a
story on the case, we provide a link. Case information and analysis is
provided by the Bedard Law Group.

TCPA cases in
September and October 2016 brought both positive and negative outcomes for the
ARM industry

Tuck v. Guardian
Protection Services, Inc.

The gist: The District
Court for the Southern District of California granted in part and denied in
part Guardian Protection Services’ motion to dismiss for failure to state a
claim.

Pozo v. Stellar Recovery
Collection

The gist: The District
Court for the Middle District of Florida held that the defendant violated the
TCPA but found there was insufficient evidence to prove a violation of the
FDCPA as well.

LaVigne v. First
Community Bancshares

The gist: The District
Court for New Mexico held that the defendant violated the TCPA and denied the
defendants’ motion to dismiss the case.

Espejo v. Santander
Consumer USA, Inc.

The gist: The District
Court for the Northern District of Illinois granted the defendant’s motion for
summary judgment in one case and denied it in another, and additionally denied
the plaintiff’s motion for class certification.

STERLING, Ill.– VeriFacts Inc., the leader in skip tracing
solutions, is proud to announce the appointment of Stephanie Clark as
President.  Mrs. Clark will be responsible for the strategic leadership of
the company, while maintaining a focus on business development and sales. 

“Stephanie’s dedication to VeriFacts and leadership
experience will strengthen VeriFacts’ position in the financial industry. 
She has a proven record of success and a positive vision for our future,”
said Jim Gabler, owner and Chairman of the Board. 

Stephanie brings 15 years of experience representing VeriFacts’
Sales and Client Services divisions. She had previously transitioned to the
role of SVP, where she continued to expand and strengthen the company.

VeriFacts, Inc. is a family owned, Midwest company, providing high
quality location information and outstanding customer service.  VeriFacts
is well known for developing long lasting business relationships and being a
trusted partner in the financial industry. VeriFacts’ flagship product is
locating verified places of employment with 100% accuracy guaranteed.  To
learn more about VeriFacts visit www.verifactsinc.com.

JACKSONVILLE, Fla. — Stellar Recovery started collaborating
with RevSpring, a company that focuses on revenue acceleration, in June 2016 on
projects to change our letter design and series as well as develop a new
payment portal. RevSpring has been integral in the development and
implementation of a new, unique letter series that includes full color letters,
post cards, and self-mailers now being used to communicate with consumers about
their account. Chief Analytics Office Kendra Vallerelli said “RevSpring made
the whole process easy. It was impressive how they were able to take the ideas
we gave them and turn them into great final products”. The new letters designed
by RevSpring are more appealing to the eye and offers the consumer professional
correspondence regarding their account. Since the implementation of the new
letter series Stellar has seen an increase in consumer responsiveness.

The new payment portal, which went live on October 10, was
created with the idea of allowing the consumer to self-manage their account. It
brings a new compliance level to the account management process. The new, sleek
look of the portal has already proven to be inviting to the consumer. We have
doubled our online payment portal activity since going live. Analytics show
that the new payment portal, which allows consumers to do everything from
negotiating a settlement to viewing all correspondence about their account, is
being used by consumers in lieu of talking to a live agent. Thus, consumer
complaints are down. Consumers are utilizing our website not only to make a
payment, but to discuss and provide feedback versus filing complaints
and suing. With less human interaction there is less risk
and “happier” consumers. “Being in debt is stressful. We are making
our consumers happier with our effortless consumer channel solutions”, said EVP
Kim Harvey. The new products that RevSpring has created is helping Stellar
successfully address every consumer group and maintain a high level of
compliance.

About Stellar Recovery

Stellar
Recovery, Inc is a collection agency
based in Jacksonville, Fl. and is dedicated to excellence in the accounts receivable
industry by meeting and exceeding our client’s expectations. Stellar Recovery
leverages the use of technology to drive effective and efficient collections,
while eliminating risks. Visit our website at www.stellarrecoveryinc.com or contact
us at 904-438-2500.

This article was written by David N. Anthony, Ethan G. Ostroff,
and Alice Grabe and originally published on the Troutman
Sanders LLP Consumer Financial Services Law Monitor and
is republished here with permission.  

In  Igor Vayngurt v. Southwest Credit
Systems, L.P., the Eastern District of New York
ruled that a debt collector did not violate the Fair Debt Collection Practices
Act by attempting to obtain payment of a collection fee at the same time as the
principal balance of the debt and requesting prompt contact in the initial
validation notice.

Vayngurt alleged that Southwest Credit Systems
misrepresented the balance due by “falsely represent[ing] that the $38.80
collection fee was due in full as of the date of the Collection Letter” because
the collection fee was not yet incurred.  In this case, a contract between
Vayngurt and his cellular phone provider stated that he “agree[s] to pay
collection agency fees [the creditor] incur[s].”  Vayngurt argued that the
collection fee is a “contingent fee” only incurred at the time the principal
balance is collected.

The Court ruled that Vayngurt and the creditor
intended the collection fee to be owed at the same time as the principal
balance.  The Court further explained that this interpretation is
favorable to the consumer because it “prevents multiple rounds of collection
activity from the same debt” and “allows the collection fee to be negotiated
down at the same time as the principal.”

This case also involved an overshadowing claim
regarding the language used in the collection letter that stated, “We are
willing to work with you, but you must contact our office promptly.”  The
Court ruled that this language did not overshadow the validation notice’s
thirty-day dispute period because “a single sentence requesting prompt contact
does not create an impression of dire urgency” when it immediately follows “the
validation notice, which reference[s] the thirty-day dispute period three
times.”  The Court reasoned that notices requesting “prompt contact …
could be to notify the sender that the debt is disputed, or to seek the
identity of the original debtor” and are thus “regularly found to be consistent
with § 1692g” of the FDCPA.

Payment to
healthcare providers involves three key processes in the revenue cycle:
Insurance follow-up, denials management, and self-pay management. Historically,
the first two have rightfully consumed most of the attention from hospitals,
doctors, and their business offices. But that was then, and this is now: With
the rise of High Deductible Healthcare Plans (HDHPs), and shrinking
reimbursement from government insurers, healthcare providers are seeing a large
portion of their revenue tied up in patient receivables. With little experience
on how to efficiently tackle this problem, providers are faced with a big
challenge. 

To help weather
the storm, we have identified four objectives providers can accomplish to
improve patient follow-up processes in the revenue cycle:

• Build more efficient workflows with a focus on compliance
• Understand your patients’ level of financial ability
• Enhance patient engagement with a full contact management strategy
• Manage disparate data sources for a single patient
  experience 

Establish efficient workflows with a focus on compliance

Between
501(r), a newly-looming gaze from the CFPB, and continuously-evolving patient
and regulatory demands, keeping your train on the rails while speeding up is a
difficult but important task. As you build out your strategy for patient
follow-up, compliance needs to be a key component in the process. Most providers
understand the need to be well-versed when dealing with regulatory standards,
but aren’t particularly savvy when it comes to TCPA, UDAAP, and other regulations
that directly affect how and when they can contact and collect from the patient.
Strict regulations governing how you gain permission to call patients on their
cell phones is one example of limitations they put forth.  As you navigate these obstacles and set up
your processes, be sure to use resources like the insideARM Compliance
Professionals Forum to ensure you have the right procedures in place. 

Understand and act based on each patient’s
ability to pay

Once you
have these processes established, it’s important your operation comes to understand
each patient’s financial ability.  Some
patients can afford to pay while others struggle. Determining these financial capabilities
enables you to focus on helping the latter cases obtain financial assistance or
charity care, in turn driving the approach with each group. For example, those
with an ability to pay should not be contacted immediately after their visit. Give
them time to reach out with questions or make the payment on their own from the
statement they receive. On the other hand, patients with less of a financial
ability to pay should be assigned them to financial counselors for qualification.
The middle range group, those who could have some level of financial ability, may
need structured, long-term payment plans. Reach out to these patients sooner
than later so they understand their options before time elapses and they get
too far behind.   

Create multiple engagement channels

Once you
have your process built and groups identified, providers need to build a full
patient contact engagement strategy.  Create
multiple engagement channels beyond the usual statements, including online portal,
IVR, and live agents to engage the patient on their terms.  This not only helps to resolve the balance
but improves patient satisfaction as well. 
With HCAP scores tying Medicare and Medicaid reimbursements directly to
survey results from the patient, providers need to make the patient experience
better enhancing every interaction with their billing process, including the
billing experience.  By building a
patient engagement strategy through your contact management program, you end up
speaking with the right people, at the right time, about the right information.

Combine all patient information in
one place

Finally,
providers need to pull all of the information from their disparate systems into
a single integrated platform.  Most
providers inevitably have resulting from an acquisition, affiliation, or simply
different versions of the same software. 
To the patient, the provider is one. Most find it difficult to
understand why they get more than one bill from their provider.  This creates inefficiencies at the CBO level
as providers rely on multiple patient accounting offices, instead of managing a
single, holistic process. Combining all of this data into one integrated system
enables a single experience for the patient through all of your patient
engagement touch points including your portal, IVR and inbound call center.  It also improves productivity, giving you the
chance to pool resources into one team. 
This gives you one patient, one system, one experience.    

Flexibility
is important when it comes to each and every one of these objectives. Some
providers choose to outsource financial assistance processes and/or self-pay
collections while others do everything in-house, or opt for a hybrid model. Whichever
way you choose, ensure that these four objectives are made standard. Doing so more
often than not results in an efficient, compliant process that provides the
patient centric process you need.  

The Consumer Financial Protection Bureau (CFPB) is a
self-proclaimed 21^st century agency. They back this up with
activities like Project Catalyst, which yesterday released its first-ever
Innovation Highlights Report.

You can access
the full report here.

CFPB Director Cordray also spoke Sunday night at the Money
20/20 conference about promoting consumer friendly innovation. He said, 

“One of
Project Catalyst’s top priorities is to engage closely with companies,
entrepreneurs, and other stakeholders who are at the front lines of innovation…
To help facilitate access and innovation, the Consumer Bureau launched Project
Catalyst four years ago. Back then, this initiative was a novelty for a
banking regulator, both here and around the world. We have since had many
discussions with our counterparts in Europe and elsewhere, and we share a
growing enthusiasm for finding ways to leapfrog forward to products that are
more accessible, more affordable, more convenient, and more empowering of
consumers.”

He highlighted the following developments:

• Expanding access to credit
• Supporting safe consumer financial records access
• Better cash-flow management
• Increasing options for student loan refinancing
• Modernizing mortgage servicing platforms
• Improving credit reporting engagement
• Improving peer-to-peer money transfers
• Supporting consumer savings

Project Catalyst also oversees the Bureau’s “trial
disclosure waiver” policy which is intended to support pilot testing of new
innovative disclosure approaches that could promote transparency and improve
consumer understanding, as well as its “no-action” letter policy, which is
designed to reduce potential regulatory uncertainty for innovative products
that promise significant consumer benefits.

insideARM perspective

We at insideARM applaud the CFPB’s focus on innovation. We
have also recognized the reality (irony?) that the Bureau’s actions are encouraging
innovation in all areas… except debt collection. In that area, the actions and
potential rules seem to be taking the country backwards, reinforcing the use of
snail mail, and not providing sufficient guidance for the use of modern
technology. Some would say that the outline of proposed rules presumes the use
of email, or possibly other methods of communication, assuming one has consent.
But the method of gathering and managing that consent is the devil in the
details. Basically, you’ve got to get consent through one of those methods with
which consumers generally refuse to engage.

Also worth mentioning here is the fact that the clock is
being turned back in the area of calling on the telephone too. While this is
the purview of the Federal Communications Commission and not the CFPB, the
latest innovation in dialing produced by the recent rules is basically… wait
for it… the rotary phone.

We too are focused on
innovation. To this end, The iA Institute (publisher
of insideARM) is in the process of forming an Innovation Council to leverage
the collective imagination of big thinkers from across – and outside – the ARM
industry, including creditors, collectors, and technology organizations. The
Innovation Council will work closely the Consumer
Relations Consortium, also managed by The iA Institute, to develop
ways to address emerging regulations, better serve consumers, and still manage
to remain profitable. If you think you can contribute, please get in touch.