Archives for April 2017

A United States District Court judge in Minnesota has dismissed, with prejudice, a Telephone Consumer Protection Act (TCPA) case that appeared to be a “relatively straightforward case,” but instead mushroomed into contentious and costly litigation.  The case is Ung v. Universal Acceptance Corporation, (Case No, 15-127 U.S. District Court, MN). 

The case was originally filed on January 20, 2015, and was assigned to the Honorable Richard H. Kyle, U.S. District Court Judge, MN. insideARM originally wrote about it on August 16, 2016. In that article, we reported that Judge Kyle, relying on the Supreme Court case of Spokeo v. Robbins, (136 S.Ct. 1540 (2016), denied a request to dismiss the plaintiff’s TCPA claim for lack of standing.

Though we have not previously written a second story on the case, we have included it one other time in our TCPA Resources/Caselaw grid. On January 24, 2017 Judge Kyle denied Ung’s request for class action certification.

The latest act in this case involved a motion for summary judgment brought by Universal Acceptance Corporation (Universal).

Editor’s Note:  A motion for summary judgment is based upon a claim by one party (or, in some cases, both parties) that contends that all necessary factual issues are settled or so one-sided they need not be tried. The summary judgment is appropriate when the court determines there no factual issues remaining to be tried, and therefore a cause of action or all causes of action in a complaint can be decided upon certain facts without trial.

Background 

Judge Kyle’s April 6, 2017  Memorandum Opinion and Order provides a concise background on the case and, at the same time, provides insight into his subsequent opinion: 

“On the surface, this is (and should be) a relatively straightforward case; indeed, the events giving rise to the action are undisputed. As is often the case, however, things are not quite as simple as they might seem. Universal is the financing arm of Interstate Auto Group, Inc., d/b/a CarHop (“CarHop”), an Edina, Minnesota company that sells used cars nationwide to people with poor or no credit. A person interested in buying a CarHop vehicle must submit a financing application listing credit references and the name of the buyer’s landlord. This provides Universal with contact information for persons who could pass along messages if the buyer were to fall behind on the vehicle’s payments.

Ung was one such individual whose contact information was provided by a car buyer. In 2013, Joseph Holley purchased a Kia Sorrento from a CarHop location in Crystal, Minnesota; he provided Ung’s name and cell-phone number, listing Ung as his landlord. Holley eventually fell behind on the Kia’s payments and Universal began placing calls to Ung. It is undisputed that between June and October 2014, Universal called him twelve times on his cell phone. Ung alleges that each of these calls was placed without his consent and, accordingly, violated the TCPA.

The foregoing is, in essence, the entire crux of this case. But against this simple backdrop, the parties have attempted to drag the Court down a rabbit hole, raising complex arguments about the intricacies and capabilities of the telephone system Universal used to call Ung.”

In a footnote to this statement, Judge Kyle commented: 

The parties’ arguments and blizzard of briefing remind the Court of Alice, having passed through the looking glass, exclaiming, “It seems very pretty . . . but it’s rather hard to understand! . . . Somehow it seems to fill my head with ideas – only I don’t know exactly what they are!” Lewis Carroll, Through the Looking Glass, ch. 1.           

This, according to the parties, is because the TCPA only prohibits calls made using an “automatic telephone dialing system [ATDS] . . . to any telephone number assigned to a . . . cellular telephone service.” 47 U.S.C. § 227(b)(1)(A)(iii) (emphasis added). The statute defines an ATDS as “equipment which has the capacity (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” § 227(a)(1). The parties’ entire dispute, therefore, has devolved into a question about the phone system on which Universal called Ung’s cell phone: Ung contends that it qualifies as an ATDS, while Universal contends it does not. The parties have submitted nearly 100 pages of briefs – and a small mountain of documents – addressing the intricacies and capabilities of Universal’s telephone system, and having pored over those submissions, the Court concludes that no genuine issue of fact exists, as set forth below.” 

The Court’s Decision 

As noted above, Kyle granted Universal’s motion for summary judgment. The key to his decision was a determination that Universal did NOT use an ATDS to call the plaintiff. 

Per the opinion: 

“According to the Federal Communications Commission (FCC) – which is tasked with enacting regulations to implement the TCPA, 47 U.S.C. § 227(b)(2) – the hallmark of an ATDS is the ability to dial numbers without human involvement. As early as 2003, the FCC recognized that the “basic function” of an ATDS is “the capacity to dial numbers without human intervention.” The FCC has never wavered from this “human intervention” requirement, repeatedly reiterating that the capacity to independently place calls without the involvement of a live person remains central to determining whether telephony qualifies as an ATDS. 

There are two key reasons for this. First, the FCC’s interpretation hews to the TCPA’s text, which requires that an ATDS have the “capacity” to “dial” telephone numbers. 47 U.S.C. § 227(a)(1) (emphasis added). Without the capacity to dial on its own, telephone equipment simply cannot be an ATDS. Second, the FCC’s interpretation hews to the purpose behind the TCPA, which was aimed at slowing (if not stopping) the rapid increase in telemarketing calls.

The FCC’s understanding of this “basic function” of an ATDS proves critical in this case, because there is no genuine issue here that Universal’s calls to Ung – and every other landlord whose contact information was provided by a CarHop customer – required human intervention.” 

However, plaintiff argued that human intervention was irrelevant to whether Universal’s telephone equipment qualifies as an ATDS. In support, he noted that in a July 2015 Order, the FCC declined to “adopt a ‘human intervention’ test” for whether telephony qualifies as an ATDS. 

Kyle responded to that argument: 

“But contrary to Ung’s assertion, this does not render human intervention irrelevant to the inquiry. Rather, the FCC’s 2015 Order simply made clear that there are no bright-line rules for determining when calling equipment is an ATDS, and human intervention remains a factor – a key one – to be considered in the analysis. This is precisely why the 2015 Order also provides that “[h]ow the human intervention element applies to a particular piece of equipment is specific to each individual piece of equipment, based on how the equipment functions and depends on human intervention, and is therefore a case-by-case determination.” 

Finally, Kyle addressed the issue of future “capacity” of a piece of equipment to become an ATDS.  He wrote: 

“Ung also makes much of the fact that in its 2015 Order, the FCC recognized that a telephone system may have the “capacity” to autodial calls even if not presently being used for that purpose. (Mem. in Opp’n at 6-7 (citing authority for the proposition that the “capacity of an autodialer is not limited to its current configuration but also includes its potential functionalities”).) Yet, by this logic, almost any telephone equipment could be considered an ATDS. It does not take a creative mind to envision a 1960s-era rotary phone attached to modern computer equipment, rendering the rotary phone capable of dialing telephone numbers, but no one would suggest a rotary phone is an ATDS because of this “potential functionality.” Indeed, the FCC cited this very example in its 2015 Order when cautioning against stretching the definition of an ATDS too far.” 

insideARM Perspective 

At insideARM we usually like to provide our own, unique, perspective to a case. However, in this case, the conclusion of Judge Kyle provides a better perspective than anything we could write.  Judge Kyle concluded his opinion with the following: 

“What started as a simple case more than two years ago has now wended its way through more than 200 docket entries, including several Motions to Dismiss, a failed mediation, a Motion for Class Certification, and the instant Motion for Summary Judgment. In the Court’s view, it is now time for this case’s journey to come to an end. Because the evidence does not suggest Ung was called using an ATDS, his TCPA claim fails as a matter of law, and Universal is entitled to summary judgment. 

Based on the foregoing, and all the files, records, and proceedings herein, IT IS ORDERED that Universal’s Motion for Summary Judgment (Doc. No. 194) is GRANTED, and Ung’s Complaint (Doc. No. 1) is DISMISSED WITH PREJUDICE. LET JUDGMENT BE ENTERED ACCORDINGLY.”

Yesterday, insideARM reported on the public release of the Government Accountability Office (GAO) decision on protests filed in response to the December 2016 awards of Department of Education (ED) contacts for Private Collection Agency (PCA) services.  In yesterday’s article, we promised a more detailed review of the decision. The protests themselves are subject to a GAO protective order and unavailable to the public. The GAO document that was released to the public is a redacted version of the decision. Thus, it is difficult to fully understand some parts of the decision.  

As noted in yesterday’s article, an award was to be made to the responsible offeror or offerors that submitted a proposal which conformed to the solicitation and was determined to be the “most advantageous” to the government. For the purposes of determining which proposals were the most advantageous, the agency was to consider three factors: (1) past performance; (2) management approach; and (3) small business participation. Past performance and management approach were equal in importance, and small business participation was less important than either of the other factors.

The decision was written by Susan Poling, GAO General Counsel. Ms. Poling provided two charts that depicted ED findings for the 3 critical factors. The charts showed the following:

Ms. Poling then addressed the issue of the timeliness of some of the protests. Several of the intervenors and ED had sought dismissal of several of the protests, arguing that they were untimely. Poling disagreed. 

Several intervenors and ED also argued that the protesters are not interested parties to challenge the agency’s evaluation of the awardees’ proposals. Again, GAO disagreed and concluded that the protesters are interested parties to challenge the awardees’ evaluations. 

The decision then moved to the root of the problems with ED’s awards – the evaluations of the key factors. 

Past Performance Evaluations – Generally 

GAO identified a number of concerns with ED’s evaluation of proposals under this factor. Per the decision:

“Some of the errors appear to have impacted the evaluation of several proposals. In such circumstances, we address below the nature of the concern and highlight representative examples. In other instances, the errors appear to have been unique to individual proposals. 

As a general matter, we will review an agency’s past performance evaluation to determine whether the evaluation was conducted fairly, reasonably, and in accordance with the solicitation’s evaluation scheme. We will question an agency’s evaluation conclusions where they are unreasonable or undocumented. Additionally, it is fundamental that a contracting agency must treat all offerors equally, and therefore it must evaluate offers evenhandedly against common requirements and evaluation criteria.”

GAO also noted as a problem the fact that the agency appears in several circumstances to have unreasonably either ignored or discounted relevant information bearing on the quality of offerors’ past performance if it was not included in one of ED’s prior Contractor Performance Assessment Reporting System (CPARS) reports.

They found that this applied the evaluation of Delta Management Associates, Inc. (Delta), Texas Guaranteed Student Loan Corp (TG), and Van Ru Credit Corporation (Van Ru). 

Ms. Poling wrote:

“[There was]……….a pattern by the agency of neglecting to consider, or unreasonably discounting, relevant past performance information, based on what appears to be the agency’s fixation on ED’s prior Contractor Performance Assessment Reporting System (CPARS) reports to the exclusion of other past performance information. It is apparent that the agency unreasonably relied almost exclusively upon CPARS reports in lieu of reasonably considering available past performance information, which the agency itself identified as being highly relevant.” 

Other Specific Past Performance Evaluation & Documentation Concerns 

The decision next moved to a discussion of other past performance evaluations and documentation concerns. 

Ms. Poling noted:

“The record also reflects certain other anomalies in the evaluation of offerors’ past performance. Notwithstanding the protesters’ detailed rebuttals to the agency’s contemporaneous evaluation findings, in many instances the agency’s reports fail to respond–either specifically or generally–to the protesters’ arguments.”

Automated Collection Services, Inc. (ACSI) 

ACSI submitted its own proposal, as well as an additional proposal as part of a contractor team. GAO referred to ACSI when addressing the proposal submitted by ACSI, and the ACSI Team when addressing the proposal submitted by ACSI as part of a contractor team. 

We noted in yesterday’s article that “in several instances, the ED contracting officer, who was also the source selection authority (SSA) disagreed with the ratings initially assigned by ED’s lower-level evaluators, and adjusted the ratings.” 

The ACSI Team challenged the SSA’s decision to change its past performance rating, which ED’s technical evaluation committee (TEC) evaluated as highly satisfactory, to neutral. Ms. Poling agreed with the protester that the SSA’s determination to change the ACSI Team’s past performance rating was inconsistent with the terms of the solicitation, and was otherwise unreasonable. 

TG

TG also challenged the agency’s assessment of an overall satisfactory rating of its past performance. GAO agreed that the record does not support the reasonableness of the agency’s evaluation of TG’s past performance. The TEC found TG’s three past performance references to be highly relevant, and the agency noted positive indicators of performance on TG’s highly relevant contracts; nonetheless, the agency assigned TG a satisfactory rating overall. Ms. Poling concluded “that the agency’s documented evaluation does not reasonably support the agency’s evaluation of TG’s past performance.”

Williams & Fudge, Inc. (W&F) 

W&F argued that the SSA improperly downgraded its past performance to marginal. The record reflected that the TEC evaluated W&F’s past performance as satisfactory. The SSA, while adopting the TEC’s underlying evaluation findings, disagreed with the TEC’s overall satisfactory rating, and instead rated W&F’s past performance as marginal solely because of the relatively small size of the references. The GAO agreed with W&F. Poling wrote: 

“We find that the SSA’s assignment of a marginal rating for W&F’s past performance was unreasonable. We find that the SSA’s assignment of a marginal rating for W&F’s past performance was unreasonable. Accordingly, at worst, W&F’s past performance should have been rated neutral.” 

Collecto Inc. d/b/a EOS CCA (Collecto)/TG/General Revenue Corporation (GRC) 

Collecto, TG, and GRC argued that the agency failed to adequately document and support their satisfactory ratings. In response to the protests, the TEC Chair asserted that the TEC declined to afford certain protesters more credit in the evaluation of their past performance because those protesters presented past performance information “in a self-serving manner” without providing “concrete details. 

Poling determined: 

“These assertions are unreasonable for several reasons. First, these concerns were not documented and are not supported by the contemporaneous record. Second, the nature of the TEC Chair’s criticism is unreasonable and unsupported. Therefore, we find the agency’s post hoc justifications for its ratings are unsupported by the record and unreasonable.” 

The decision next turned to arguments made by some of the protests concerning the companies that were awarded. Two issues were raised. Failure of one awardee to disclose negative judgments and failure of 5 awardees to disclose material changes in key personnel. insideARM refers readers to pages 20-23 of the decision for the GAO discussion of these matters. Note: The GAO sustained the protest of Gatestone & Co International, Inc (Gatestone) with respect to certain of the awardees’ failure to update their proposals based on a material change. 

Failure to Consider Totality of the Proposals 

This section of the decision applied primary to GRC and Collection Technology, Inc. (CTI). But 4 other protesters had similar issues. 

Poling determined: 

“To reach the consensus management score, the TEC reviewed section A of the offerors’ proposals (which included their management plans and key personnel resumes), while the quality control evaluator (QCE) evaluated the QCPs. The evaluators, however, do not appear to have contemporaneously reviewed the entirety of the offerors’ proposals with respect to their complete management approaches (i.e., management plan, key personnel resumes, and QCP). The agency’s cabined review of proposals under the management approach factor, however, resulted in an unreasonable evaluation in several instances. This was because offerors logically organized their proposals in accordance with the solicitation’s instructions, but were penalized by the agency’s failure to consider the merits of the management plan and QCP in a holistic manner as contemplated by the RFP’s evaluation criteria. 

In several other cases, it appears that the agency similarly failed to reasonably consider the entirety of the offerors’ management approaches (i.e., the management plan and QCP). Therefore, the evaluation of the following additional protesters’ management approaches appear to have suffered from similar flaws as addressed in this section: ACSI; the ACSI Team; Collecto; and W&F.” 

Other Unstated Evaluation Criteria 

The GAO also determined that ED imposed additional unstated evaluation criteria in the evaluation of proposals for GRC, ACSI, the ACSI Team, CTI, Performant Recovery, Inc (Performant), Progressive Financial Services, Inc. (PFS), Allied Interstate LLC (Allied). GAO determined that any evaluation on this basis with respect was unreasonable. 

Other Evaluation & Documentation Concerns 

The GAO identified other evaluation and documentation concerns that negatively impacted Delta, the ACSI Team, GRC, Van Ru, and Collecto. 

Summary of the Sustained Protests 

Poling summarized the decision to sustain to protests. 

“As set forth above, the record shows that the agency’s evaluation of proposals was unreasonable in numerous respects. Our review shows that the proposals were reasonably evaluated in some respects, but that the evaluation was unreasonable in many other respects. 

Accordingly, we conclude that the following protesters have established a reasonable possibility of competitive prejudice to prevail in their bid protests: DMA; GRC; TG; ACSI; the ACSI Team; CTI; Performant; Allied; Collecto; Van Ru; PFS; Gatestone; and W&F. “ 

The decision then turned to the protests that were denied. 

Sutherland Global Services (Sutherland) 

The GAO determined: 

“We find no basis to question the agency’s determination that Sutherland’s proposal warranted an unsatisfactory rating under the small business participation plan factor. The record reflects that Sutherland failed to submit the required participation plan and otherwise failed to commit to meeting the 31 percent minimum mandatory small business subcontracting set-aside requirement.” 

Account Control Technology, Inc. (ACT) 

The GAO determined: 

“We find no basis to question the agency’s determination that ACT’s proposal warranted a marginal rating under the small business participation factor. Additionally, the agency assigned ACT’s proposal a weakness because, in addition to missing the majority of the subcategory goals, ACT did not propose to subcontract to SDB or SDVOSB concerns any of the core debt collection-related activities.” 

Global Receivables Solutions, Inc. (f/k/a West) 

The GAO determined: 

“We find no basis to sustain GRS’s protest because the agency reasonably determined that its past performance was less than satisfactory. The record reflects that the TEC rated GRS’s past performance as unsatisfactory due to performance issues on GRS’s incumbent contract. Specifically, the TEC noted that the protester had received a marginal rating for quality on the most recent CPARS report for its incumbent contract.” 

Alltran Education, Inc (f/k/a ERS) 

The GAO determined: 

“We find no basis to question the SSA’s determination that Alltran’s proposal warranted a marginal rating for past performance. The TEC initially rated the protester’s past performance as satisfactory. In reaching that conclusion the TEC noted that Alltran had highly relevant past performance, including as a prime contractor on the incumbent requirements. The TEC noted that Alltran received a very good quality rating on its most recent CPARS report for the incumbent contract, but also noted that Alltran was rated as unsatisfactory for regulatory compliance based on its 23 percent error rate during the agency’s 2015 focused review. 

The SSA disagreed with the TEC’s satisfactory rating, and instead determined that Alltran’s past performance was marginal. Specifically, in addition to the unsatisfactory history of regulatory compliance on the incumbent contract, she also found that Alltran had been suspended for violating agency policies and procedures in performing debt collection activities for rehabilitation when performing its incumbent contract. 

In this regard, we find nothing unreasonable with the SSA considering the conduct that lead to the suspension when the conduct arose in connection with Alltran’s performance of the incumbent requirements, especially where the concerns were exacerbated by Alltran’s subsequent unsatisfactory regulatory compliance rating following the agency’s focused review.” 

insideARM Perspective 

There is a lot to be digested from this decision.  The story has not ended.  In fact, insideARM has learned that ACT has filed a lawsuit challenging this decision. The complaint is not available to the public. The case is captioned Account Control Technology, Inc v. United States of America, (Case No. 1:17-cv-00493, U.S. Court of Federal Claims). 

insideARM will continue to monitor further developments.

The use of “scripts” by consumers to bait telephone debt collectors into alleged FDCPA violations is a calculated strategy dating back more than 10 years.  Typically a consumer obtains such a script from a consumer attorney or from a website.  The consumer will then make an inbound call to a debt collector and read certain questions off of the script, seeking to maneuver the debt collector to make a statement that facially violates the FDCPA.  These scripts usually include vague, leading questions about interest or credit reporting.  If the debt collector “takes the bait” and makes an unintended mistake, a consumer attorney will sue or send a demand letter to the collection agency shortly after the call. Most collection agencies have in place specific training for collectors to identify and avoid such baiting, focusing on the common scripts and the certain States or geographic areas where such baiting most often occurs.

In the latest episode of The Debt Collection Drill, Attorneys John Rossman and Mike Poncin discuss a new baiting strategy by consumers that is resulting in a substantial number of claims and specific strategies for avoiding liability. 

Download it here: http://traffic.libsyn.com/thedrill/TDCD_ep64a.mp3

On March 29, 2017 insideARM reported that the U.S. Government Accountability Office (GAO) had sustained some of the protests that had previously been filed by those companies not selected in the last Department of Education (ED) RFP for Private Collection Agencies (PCAs).  In that article, we reported that the GAO had sustained the protests of 12 firms, denied the protests of 4 firms, and had not made a decision regarding the protests of 3 firms.

We also reported that the GAO had issued a 40+ page decision on the on the protests. However, that document was not made available to the public at that time. It was sent only to attorneys for the protesting companies under a protective order.  We reported that it was likely a version of that document would be made available to the public in 7-14 days.    

The document has now been released. A copy can be found here. 

Background 

The RFP, was originally issued on December 11, 2015, and subsequently amended four times. It sought proposals for the award of multiple contracts for the collection of defaulted student loans.

An award was to be made to the responsible offeror or offerors who submitted a proposal that conformed to the solicitation and was determined to be the “most advantageous” to the government. For the purposes of determining which proposals were the most advantageous, the agency was to consider three factors: (1) past performance; (2) management approach; and (3) small business participation. Past performance and management approach were equal in importance, and small business participation was less important than either of the other factors. 

ED received 47 timely proposals in response to the RFP. For the purpose of evaluating proposals, the agency constituted a technical evaluation committee (TEC). A separate quality control evaluator (QCE) reviewed the offerors’ quality control plans. A separate small business evaluation committee evaluated and reached consensus ratings for offerors’ small business participation plans. 

After the respective evaluation committees concluded their consensus evaluations, the contracting officer, who was also the Source Selection Authority (SSA), reviewed the evaluation results and communicated with the lower-level evaluators regarding their evaluations. In several instances, the SSA disagreed with the ratings assigned by the lower-level evaluators, and adjusted the ratings. 

The SSA initially identified 10 proposals as being among the “most advantageous” and thus proceeded to conduct responsibility determinations of those prospective awardees. She subsequently found three of the prospective awardees non-responsible, and therefore ineligible for award. Seven firms were ultimately selected. The GAO site showed a total of 47 protests (many firms filed multiple protests). 

The Decision 

As noted in our original story on this matter, the decision is over 40 pages in length. It will take some time to review and digest.  The decision provides specific examples of problems with the evaluation process in all areas. 

insideARM will report in more detail on this decision in the coming days.

WEST MONROE, La. – Coast Professional, Inc. (Coast) presented a check for $7,000 to the Louisiana Baptist Children’s Home & Family Ministries (LBCH) at Coast’s West Monroe office today. Coast’s donation is a result of Coast’s dress down for charity program in which employees donate $20 or more for the option to wear jeans and business casual attire for the month. This donation includes the employee contributions from Coast’s West Monroe, LA office and the company match of up to $1500.

The employees of Coast selected LBCH to be the recipient of the charity dress down program for the months of January, February, and March as a result of the impact that LBCH has in the local area. The employees vote bimonthly for the charity that will receive the donations raised through the dress down program for the upcoming period.

All proceeds from the event will benefit local families and help support LBCH’s mission to provide love, care, and hope in Christ to children and families in need. This includes providing residential child care and foster care, job and life skills training, pregnancy resource ministries, foster care and adoption, and orphan care.

“Coast is incredibly honored to be able to donate to local charities that make a significant positive impact within our community and establish an appreciation of charity throughout our organization,” stated Everett Stagg, CFO and Co-Chairman of the Board of Directors at Coast. He continued, “Our staff selected the Louisiana Baptist Children’s Home & Family Ministries for their efforts to create a better environment for children and families in need in the Monroe, Louisiana area. On behalf of Coast and our employees, we are proud to give this donation to the Louisiana Baptist Children’s Home & Family Ministries.”

Pictured, (From left to right): Everett Stagg, CFO / Co-Chairman of the Board at Coast Professional, Inc. presenting a check to Marc Eichelberger, Director of Communications at the Louisiana Baptist Children’s Home

About Louisiana Baptist Children’s Home & Family Ministries

Since 1899, Louisiana Baptist Children’s Home & Family Ministries has been committed to providing love, care, and hope in Christ for children and families in need. Every day, needs are met and lives are changed through Christ-centered ministries: residential child care for ages 5-17; transitional living for ages 18-21; residential family care for homeless children and mothers; Christian Women’s Job Corps with certified HiSET preparation; Granberry Counseling Centers with 12 statewide locations; mobile pregnancy care center; statewide foster care and adoption ministries; and international orphan care mission trips. More than 4,400 children, families and individuals were served in 2016. The Children’s Home receives no state or federal funding. “Where God’s Love Takes You In” banners greet children and families as they enter our Monroe campus. For more information, please visit lbch.org.

About Coast Professional, Inc.

Coast Professional, Inc. is an accounts receivable management company, dedicated to the respectful and ethical collection of higher education and government debt. Coast provides professional collection services to over 200 campus based colleges and universities, guaranty agencies, and government clients. Coast is a five time honoree on the Inc. 5000 list for American’s Fastest-Growing Private Companies provided by Inc. Magazine and in 2016, was recognized for the third consecutive year as one of the “Best Places to Work In Collections” by insideARM.com and Best Companies Group. Since 1976, Coast has worked closely with clients to increase recoveries by assisting consumers in resolving their financial obligations. Coast’s success is exemplified by exceptional recoveries, superior service, and dedication to the highest levels of compliance.

WEST MONROE, La. – Coast Professional, Inc. (Coast) presented a check for $7,000 to the Louisiana Baptist Children’s Home & Family Ministries (LBCH) at Coast’s West Monroe office today. Coast’s donation is a result of Coast’s dress down for charity program in which employees donate $20 or more for the option to wear jeans and business casual attire for the month. This donation includes the employee contributions from Coast’s West Monroe, LA office and the company match of up to $1500.

The employees of Coast selected LBCH to be the recipient of the charity dress down program for the months of January, February, and March as a result of the impact that LBCH has in the local area. The employees vote bimonthly for the charity that will receive the donations raised through the dress down program for the upcoming period.

All proceeds from the event will benefit local families and help support LBCH’s mission to provide love, care, and hope in Christ to children and families in need. This includes providing residential child care and foster care, job and life skills training, pregnancy resource ministries, foster care and adoption, and orphan care.

“Coast is incredibly honored to be able to donate to local charities that make a significant positive impact within our community and establish an appreciation of charity throughout our organization,” stated Everett Stagg, CFO and Co-Chairman of the Board of Directors at Coast. He continued, “Our staff selected the Louisiana Baptist Children’s Home & Family Ministries for their efforts to create a better environment for children and families in need in the Monroe, Louisiana area. On behalf of Coast and our employees, we are proud to give this donation to the Louisiana Baptist Children’s Home & Family Ministries.”

Pictured, (From left to right): Everett Stagg, CFO / Co-Chairman of the Board at Coast Professional, Inc. presenting a check to Marc Eichelberger, Director of Communications at the Louisiana Baptist Children’s Home

About Louisiana Baptist Children’s Home & Family Ministries

Since 1899, Louisiana Baptist Children’s Home & Family Ministries has been committed to providing love, care, and hope in Christ for children and families in need. Every day, needs are met and lives are changed through Christ-centered ministries: residential child care for ages 5-17; transitional living for ages 18-21; residential family care for homeless children and mothers; Christian Women’s Job Corps with certified HiSET preparation; Granberry Counseling Centers with 12 statewide locations; mobile pregnancy care center; statewide foster care and adoption ministries; and international orphan care mission trips. More than 4,400 children, families and individuals were served in 2016. The Children’s Home receives no state or federal funding. “Where God’s Love Takes You In” banners greet children and families as they enter our Monroe campus. For more information, please visit lbch.org.

About Coast Professional, Inc.

Coast Professional, Inc. is an accounts receivable management company, dedicated to the respectful and ethical collection of higher education and government debt. Coast provides professional collection services to over 200 campus based colleges and universities, guaranty agencies, and government clients. Coast is a five time honoree on the Inc. 5000 list for American’s Fastest-Growing Private Companies provided by Inc. Magazine and in 2016, was recognized for the third consecutive year as one of the “Best Places to Work In Collections” by insideARM.com and Best Companies Group. Since 1976, Coast has worked closely with clients to increase recoveries by assisting consumers in resolving their financial obligations. Coast’s success is exemplified by exceptional recoveries, superior service, and dedication to the highest levels of compliance.

WASHINGTON, D.C. — ACA International, the Association of Credit and Collection Professionals, is disappointed by the opening statement and testimony by Richard Cordray, director of the Consumer Financial Protection Bureau, during Wednesday’s hearing of the House Financial Services Committee. The hearing, scheduled in order to receive the semi-annual report of the CFPB to Congress, was the first appearance by Director Cordray before the committee since the inauguration of President Trump.

“We continue to be distressed at Director Cordray’s habit of insulting and mischaracterizing an entire industry of professionals and small businesses that work incredibly hard on behalf of consumers every single day. Our members and industry work collaboratively in a legal and compliant manner with millions of American consumers to resolve their justly-owed debts,” said ACA International CEO Pat Morris. “We are not, and will never be, a ‘dead-end.’ We are an essential part of the financial services cycle. We help put consumers back on their feet; and in many cases, back on the road to financial recovery and financial literacy.”

Consumers, creditors, and the economy as a whole benefit from the existence of the professional debt collection industry, which is committed to upholding the highest standards of ethical and legal practices. ACA International works diligently to ensure that its membership has the tools and information necessary to educate its workforce—emphasizing the importance of training and understanding diverse consumer needs.

In part of his opening statement before the committee, Cordray said: “Another dead-end market for consumers is debt collection…people deserve to be treated with dignity, whether or not they owe a debt.”

Treating consumers with respect and dignity is a bedrock principle for ACA International, and our members work tirelessly to promote professionalism throughout the industry. Debt collectors are highly regulated and seek to help rid the industry of bad actors that taint the image of the vast majority of collectors. Perhaps the testimony should be amended to read: “People deserve to be treated with dignity, whether or not they work in the credit and collection industry.”

About ACA International

ACA International (ACA), the association of credit and collection professionals, is the largest membership organization in the credit and collection industry. Founded in 1939, ACA brings together third-party collection agencies, law firms, asset buying companies, creditors and vendor affiliates, representing tens of thousands of industry professionals. ACA produces a wide variety of products, services and publications, including educational and compliance-related information; and articulates the value of the credit and collection industry to businesses, policymakers and consumers. www.acainternational.org.

On March 27, a United States District Court judge denied a request to dismiss a Fair Debt Collection Practices Act (FDCPA) case as outside the one-year statute of limitations. The judge held that the “Discovery Rule” applies and that the statute doesn’t begin to run until the plaintiff “discovers” the alleged violation, rather than from the date of occurrence of the activity that gives rise to the cause of action. 

The case is Skinner v. Midland Funding, LLC (Case No 16-4522, U.S. District Court, ND, IL). A copy of the Memorandum and Order can be found here. 

Background 

On April 21, 2016 plaintiff, Lisa Skinner, filed a two-count complaint against Midland Funding, LLC, and Midland Credit Management, Inc. (Midland) for alleged violations of the FDCPA. In her complaint Skinner alleged the following:

• She incurred a debt of $1,405.00 for goods and services on a Chase Bank consumer credit account on which she eventually defaulted.
• Chase Bank charged off her account and stopped charging interest and late fees in June 2011.
• Subsequently, Chase Bank sold the debt to defendant Midland Funding, who then assigned the debt for collection to defendant Midland Credit Management.
• From March 2014 through January 2015, Midland wrongfully charged monthly interest on the debt, which resulted in a balance of $1,589.00.
• From February 2015 through February 2016, Midland did not charge plaintiff additional interest on the debt, but continued to report the $184.00 interest previously charged to plaintiff’s account.
• That defendants had no statutory or contractual right to charge and collect interest on her debt. 

Skinner’s complaint alleged violations of 15 U.S.C §§ 1692f and 1692e of the FDCPA. She alleges that Midland attempted to collect an amount not authorized by the agreement or permitted by law, and that Midland misrepresented the amount and character of the debt and communicated false credit information to Equifax, the consumer reporting agency. 

Midland brought a motion to dismiss the complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure.  

Editor’s Note: A 12(b)(6) motion is based upon the argument that the complaint fails to state a claim upon which relief may be granted. In deciding a motion to dismiss pursuant to 12(b)(6), a district court is “required to accept as true all factual allegations in the complaint and draw all inferences in the facts alleged in the light most favorable to the plaintiff. 

The underlying basis of the motion was that plaintiff’s claims are barred by the FDCPA’s one-year statute of limitations because they arose in March 2014, two years before plaintiff filed her complaint.   

Skinner argued that she did not discover the FDCPA violations until she requested her credit reports in August 2015 and March 2016. She also contended that even if her § 1692f claim fails as outside the statute of limitations, her § 1692e claim survives because defendants reported varying balances in February 2016 and March 2016. 

Defendants countered that argument by contending that the conduct plaintiff challenges in February 2016 is identical to the March 2014 conduct and that plaintiff is improperly relying on the continuing violation doctrine.

The Court’s Opinion 

The court began its discussion by noting that recent decisions in the Northern District of Illinois have held that the discovery rule applies to the FDCPA. Midland argued that the discovery rule should not apply because Congress expressed a clear intent that the statute of limitations should run at the occurrence of the injury rather than the discovery of it. 

The Memorandum and Order was written by the Honorable Jorge L. Alonso, United State District Court Judge. Alonso wrote: 

“Dismissing a complaint as untimely at the pleading stage is an unusual step, since a complaint need not anticipate and overcome affirmative defenses, such as the statute of limitations.” Cancer Found., Inc. v. Cerberus Capital Mgmt., LP, 559 F.3d 671, 674 (7th Cir. 2009). However, “dismissal is appropriate when the plaintiff pleads himself out of court by alleging facts sufficient to establish the complaint’s tardiness.” Id. at 674-75. “As long as there is a conceivable set of facts, consistent with the complaint, that would defeat a statute-of-limitations defense, questions of timeliness are left for summary judgment, at which point the district court may determine compliance with the statute of limitations based on a more complete factual record. 

The rule that postpones the beginning of the limitations period from the date when the plaintiff is wronged to the date when he discovers he has been injured is the discovery rule of federal common law, which is read into statutes of limitations in federal-question cases in the absence of a contrary directive from Congress.” Cada v. Baxter Healthcare Corp., 920 F.2d 446, 450 (7th Cir. 1990). 

Absent binding precedent that the discovery rule does not apply to the FDCPA, the Court is persuaded by the reasoning of other courts in this district and applies the discovery rule in this case. While the complaint itself does not explicitly allege when plaintiff first learned of the inaccurate debt reporting, a credit report from TransUnion (attached to the complaint as Exhibit E) run in August 2015 or later, indicates a debt of $1,589.00 (the $1,405.00 initial debt plus the disputed $184.00 in interest). Accordingly, the Court finds that this exhibit supports an inference that plaintiff did not discover the improper credit reporting until August 2015 and may be able to establish a defense to the statute of limitations. For purposes of the motion to dismiss, the Court finds that plaintiff’s complaint, filed in April 2016, is timely.” 

For the reasons set forth above, defendants Midland Funding, LLC and Midland Credit Management’s motion to dismiss is denied.” 

insideARM Perspective 

The key language of Judge Alonso’s order is this: “For purposes of the motion to dismiss, the Court finds that plaintiff’s complaint, filed in April 2016, is timely. As long as there is a conceivable set of facts, consistent with the complaint, that would defeat a statute-of-limitations defense, questions of timeliness are left for summary judgment, at which point the district court may determine compliance with the statute of limitations based on a more complete factual record.” 

This decision may be different as more facts are presented to the court. However, what would likely remain consistent is Judge Alonso’s opinion that the discovery rule applies to FDCPA cases. If that is the case, Midland will need to present evidence that the plaintiff “discovered” the alleged violation more than one year prior to the filing of the suit to prevail on the statute of limitations defense. 

The other key issue to be decided in this is whether Midland did, as alleged, “wrongfully charge interest” on the debt.

Today Consumer Financial Protection Bureau (CFPB) Director Richard Cordray testified before the U.S. House Financial Services Committee. Following brief prepared remarks, Committee Chairman Jeb Hensarling (R-TX) went on the attack, first quoting from a December 21, 2016 National Review article written by attorney Ron Rubin, a former employee of both the CFPB and the House Financial Services Committee.

Hensarling cited that the “unwritten policy was ‘never give them what they ask for,’” and other allegations from the article, and asked whether any of it is true. Cordray responded that he was familiar with the article, that it contained only hearsay, and that he couldn’t respond. Hensarling then got more specific, asking whether he was aware of any Inspector General inquiry into the CFPB’s handling of Congressional inquiry. Cordray said he didn’t know.  Hensarling asked whether Cordray had seen a report from the Inspector General. Cordray: “I’ve gotten dozens of reports. I don’t know what you are referring to. I’d be happy to look into it.” Hensarling: “If necessary, we will subpoena the report.” Cordray: “If you showed me the report and I could refresh myself…” Hensarling: “I’m hoping you can show me a report.” Cordray: “I don’t know. Is it a published report?” This is about as far as that went.

He then moved on to attempt to establish that there is cause for the President to remove Cordray from his office for cause by raising the issue that he has engaged in discretionary rulemakings (such as arbitration and pre-paid card arbitration) while there is still required rulemaking that remains outstanding (such as small business lending).

Rep. Waters (D-NY) then suggested that Director Cordray ignore the entire National Review article, and that she believes he has moved as quickly as possible on the 1071 issue. She then tee’d up the opportunity for Cordray to recount how the bureau uncovered the Wells Fargo problem (laying groundwork for what would be an extremely contentious exchange between Rep. Wagner (R-MO) and Cordray regarding who should really get the credit for exposing the Wells Fargo scandal. She concluded by saying the LA Times accused the CFPB of being “asleep at the wheel.”

Rep. Luetkemeyer (R-MO) then raised the issue of the CFPB’s proposed rule to impose a gag order on companies under investigation, suggesting that it amounts to elimination of due process and is unconstitutional. Cordray responded that they had received Luetkemeyer’s memo on the topic, that he believes they’ve raised legitimate concerns, that they plan to ‘go back to the drawing board on this,’ and that he is confident they will be pleased with a revised proposal.

He then moved to the small dollar lending rule, saying it is so punitive that it will close many businesses, and will deny access to small dollar loans to many consumers who have no other options. He cited the example of “Nick,” who needed a loan to fix his truck, and asked Cordray directly what his solution would be for this. Cordray responded that 14 states have no payday lenders, so tens of millions of American’s seem to be getting by just fine without it. Luetkemeyer said, “No, they are still there. They are just going offshore to borrow the money and those loans are unregulated.”

Other Democrats proceeded to show support for Cordray and the work of the CFPB, while Republicans vigorously attacked him on the issues above, as well as others such as treating rural communities the same as urban ones, even though consumers’ financial options differ greatly; the fact that companies are bullied into accepting consent orders, and that press releases mischaracterize companies’ admission of wrong-doing, and the fact that – even though Cordray’s term ends in July 2018 – he has already served more than 5 years, Congress’s intended term, and isn’t it the right thing to do to step down now (Rep Duffy, R-WI, suggested that would likely be more palatable to Cordray than a messy public hearing about harassment, discrimination, etc. to prove cause for removal).

As of the time this post was finished, nobody had brought up debt collection (except Cordray, briefly, in his prepared remarks).

Democrats offered the chance to showcase his efforts. Republicans didn’t give Cordray much chance to get a word in edgewise. Whatever side you are on, one must admit, it was no doubt a stressful day for the Director.

Last Friday a three judge panel for the United States Court of Appeals, District of Columbia Circuit, issued a ruling that “the FCC’s 2006 Solicited Fax Rule is . . . unlawful to the extent that it requires opt-out notices on solicited faxes.” The case is Bais Yaakov of Spring Valley v. FCC, Case No. 14-1234 U.S. Court of Appeals D.C. Cir.)

A copy of the court’s opinion can be found here. 

The case involved the Junk Fax Prevention Act of 2005, the Federal Communications Commission’s (FCC) 2006 Order requiring opt-out notices on solicited faxes, a 2008 lawsuit against Anda, Inc. (Anda) for allegedly failing to comply with the opt-out notice requirement for solicited faxes, Anda’s 2010 petition to the FCC, and the FCC’s 2014 Order affirming its position on regulation of solicited faxes. 

Background

The Junk Fax Prevention Act generally prohibits the use of “any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement.” The Act defines “unsolicited advertisement” as “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person’s prior express invitation or permission, in writing or otherwise.” 

In 2006, the FCC issued a rule governing solicited faxes. (Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991; Junk Fax Prevention Act of 2005).  The FCC’s 2006 Order required that companies include an opt-out notice in all solicited faxes. Thus, the 2006 Rule requires a sender of a fax advertisement to include an opt-out notice on the advertisement, even when the advertisement is sent to a recipient from whom the sender “obtained permission.” 

In 2010, Anda sought a declaratory ruling from the FCC clarifying that the Act does not require an opt-out notice on solicited fax advertisements – that is, those that are sent with the recipient’s prior express permission. 

In response to Anda’s petition, the FCC adhered to its interpretation of the Act as providing the FCC with the authority to require opt-out notices on solicited faxes as well as unsolicited faxes (although the FCC said it would waive application of the rule to businesses that sent solicited faxes before April 30, 2015). Commissioner Pai and Commissioner O’Rielly dissented in relevant part. See 2014 Order. 

The Court’s Opinion 

Per the court’s opinion:

“In this case, businesses that send solicited fax advertisements contend that the FCC’s new rule exceeds the FCC’s authority under the Act. The question is whether the Act’s requirement that businesses include an opt-out notice on unsolicited fax advertisements authorizes the FCC to require businesses to include an opt-out notice on solicited fax advertisements. 

Anda is a company that sells generic drugs. As part of its business, Anda faxes advertisements to small pharmacies. Anda’s fax advertisements convey pricing information and weekly specials to the pharmacies. Many pharmacies have given permission to Anda for Anda to send those faxes. 

In 2008, Anda had been sued in a class action in Missouri state court for alleged violations of the FCC’s Solicited Fax Rule. Many of the plaintiff pharmacies in that case admitted that they had expressly given permission to Anda for Anda to send fax advertisements to the plaintiffs. But those plaintiffs nevertheless sought over $150 million in damages from Anda because Anda’s fax advertisements allegedly did not include opt-out notices that complied with the 2006 Rule’s requirements. 

Let that soak in for a minute: Anda was potentially on the hook for $150 million for failing to include opt-out notices on faxes that the recipients had given Anda permission to send.” (Emphasis added by insideARM)

The text of the Act does not grant the FCC authority to require opt-out notices on solicited faxes. We hold that the FCC’s 2006 Solicited Fax Rule is unlawful to the extent that it requires opt-out notices on solicited faxes. The FCC’s Order in this case interpreted and applied that 2006 Rule. We vacate that Order and remand for further proceedings.” 

After the court issued its ruling FCC Chairman (then Commissioner) Pai issued a statement entitled “On the Latest D.C. Circuit Rebuke of FCC Overreach.” In his statement, Chairman Pai commented: 

“Today’s decision by the D.C. Circuit highlights the importance of the FCC adhering to the rule of law. I dissented from the FCC decision that the court has now overturned because, as I stated at the time, the agency’s approach to interpreting the law reflected ‘convoluted gymnastics.’ The court has now agreed that the FCC acted unlawfully. Going forward, the Commission will strive to follow the law and exercise only the authority that has been granted to us by Congress.” 

FCC Commissioner Michael O’Rielly also issued a statement. O’Rielly stated: 

“The D.C. Circuit decision overturning the Anda Order reconfirms the proper and appropriate reading of the law.  It also signals that the court is willing to call the Commission to task for inappropriately creating authority not provided by Congress.  I can only hope this view will be applied elsewhere, such as in the court’s other case involving TCPA overreach.” 

insideARM Perspective 

Readers of this article might question the applicability of this case involving junk faxes to the TCPA litigation that is rampant throughout the ARM industry. The answer can be seen in the two statements above. The ARM industry is well aware of FCC rulings on issues that are seen as outside the scope of the TCPA. The ARM industry is also well aware of the type of litigation exposure that the court highlighted in its opinion. 

Similar type issues were raised in ACA International v. Federal Communications Commission. They are:

• The FCC’s redefinition of an ATDS, including its treatment of “capacity”
• The FCC’s treatment of “prior express consent” 

It should be noted that the ACA International case is also in the Court of Appeals for the District of Columbia. We will see whether this panel’s analysis and Chairman Pai and Commissioner O’Rielly thoughts on this case carry forward to the ACA International case.