Archives for June 2017

With the RFP “Do-Over” in process one might think the ED RFP litigation would be on hold.  That would be an incorrect assumption. Attorneys for ED and the various firms involved in the RFP litigation are still generating billable hours and pumping out enough pleadings to kill a small forest. The most significant activity has occurred in the past 7 days.  

First – the quick background

insideARM last wrote about the Department of Education (ED) RFP on June 1, 2017. In that article we reported on a significant order issued by the judge presiding over the litigation surrounding the RFP and subsequent protests. As noted in that article, Chief Judge of the United States Court of Federal Claims, Susan G. Braden, issued an order extending indefinitely her Preliminary Injunction prohibiting ED from placing any accounts to any ED Private Collection Agency (PCA) “until the viability of the debt collection contracts at issue is resolved.” 

Meanwhile, as also noted in that article, the ED RFP “Do-Over” is in progress.  Tomorrow, June 16, 2017, is the due date for the submission of revised proposals (unless ED extends the deadline, as they have in the past). Assuming no extension, ED will be evaluating past performance and management approach, selecting the most advantageous proposals, making responsibility determinations and addressing other pre-award activities through August 24, 2017. ED says it will make awards on August 25, 2017. 

Now, the latest

On June 9, 2017 Alltran Education, Inc. (Alltran) filed two separate pleadings. 

The first was a Notice of Appeal of Judge Braden’s Preliminary Injunction. Specifically, Alltran is appealing that aspect of the injunction that prohibits ED from allowing Alltran to perform under its award-term extension (“ATE”) contract (i.e., Task Order No. ED-FSA-17-O-0007 under Contract No. GS-23F-0291K). insideARM wrote about that award on May 3, 2017.  

The second pleading was a Motion to Stay the Preliminary Injunction (as to Alltran).  Specifically, Alltran requests that the Court stay the portion of the injunction currently prohibiting ED from “transferring work” to Alltran’s award-term extension (“ATE”) contract (i.e., Task Order No. ED-FSA-17-O-0007 under Contract No. GS-23F-0291K).

The most recent activity occurred yesterday, June 14, 2017. The court issued a new order denying ED’s earlier motions to dismiss the lawsuits previously filed by Continental Service Group, Inc. (ConServe) and Pioneer Credit Recovery, Inc. (Pioneer). A copy of this latest order can be found here. 

ED had asked the court to dismiss these lawsuits as “Moot” since ED was proceeding with their RFP “Do-Over”. Though she viewed ConServe and Pioneer to be in different situations, Judge Braden disagreed with ED. 

As to ConServe, Judge Braden wrote: 

“The Government’s May 19, 2017 Notice Of Corrective Action, however, did not “completely and irrevocably eradicate[] the effects of the [] violation[s]” alleged in the March 28, 2017 Complaint. At present, Continental has no contract under which it can receive new debt collection accounts. Consequently, Continental is not able to compete for new accounts, until the corrective action is complete and the ED awards new contracts under the Solicitation.” 

As to Pioneer, Judge Braden wrote:

“Pioneer appears to be in a different position, because, on April 28, 2017, Pioneer was offered an award term extension task order under a prior contract. See Coast Professional, Inc. v. United States, No. 15-2017, (Editor’s Note: This was the same ATE that was given to Alltran and referenced above.) Nevertheless, the ED’s corrective action plan does not moot Pioneer’s April 10, 2017 Complaint, because it does not require that the ED stay collection work by the seven awardees of the disputed contracts. If the ED assigns debt collection work to the awardees of the disputed contracts, the amount of collection work available to Pioneer will decrease. Accordingly, Pioneer will suffer a loss of work. Therefore, the corrective action plan does not “completely and irrevocably eradicate[] the effects of the [relevant] violation.” 

The Government previously has represented to Pioneer and the court that the ED “will not transfer any accounts under any of [the seven current] contracts, or otherwise authorize, order or accept any work under those seven contracts, pending the resolution of this protest.” But, the May 19, 2017 Notice of Corrective Action and the May 25, 2017 Amendment To Defendant’s Notice Of Corrective Action did not mention any stay of collection work by the current awardees. Therefore, the court has determined that the ED’s corrective action plan does not moot Pioneer’s case. If Pioneer, however, is completely satisfied with the Government’s representations, it may voluntarily dismiss the April 10, 2017 Complaint, pursuant to RCFC 41(a)(1)(A)(ii).” 

insideARM Perspective 

So, the ED RFP story continues with the addition of these latest chapters.  One of the most interesting items in this latest order was this sentence: 

“The Government previously has represented to Pioneer and the court that the ED “will not transfer any accounts under any of [the seven current] contracts, or otherwise authorize, order or accept any work under those seven contracts, pending the resolution of this protest.” 

This has been assumed, but not been made completely clear by other activity in the case.

insideARM will continue to monitor this story and report on new developments. We have often been asked for a summary of all our articles on the subject. This page provides a running history of our ED related coverage. 

This article originally appeared as an Alert on ClarkHill.com, and is republished here with permission.

The U.S. Department of Health and Human Services Office for Civil Rights (“HHS”) recently issued a quick response checklist to outline steps a HIPAA covered entity or business associate should take in response to a cyber-related security incident. The HHS checklist offers general, step-by-step guidance for healthcare providers in the event of a security incident that includes: (1) immediately executing response procedures and contingency plans to fix technical problems to stop a security incident; (2) reporting a security incident to appropriate law enforcement agencies; (3) reporting all cyber threat indicators to federal and information-sharing analysis organizations; and (4) reporting a breach to the HHS as soon as possible (but no later than 60 days after the discovery of a breach affecting 500 or more individuals). 

While the HHS checklist is certainly a practical resource for healthcare providers, it does not (and absolutely should not) alleviate a healthcare provider’s responsibility to create, implement, and continuously test/update an incident response plan (“IRP”) tailored to that provider’s circumstances and vulnerabilities. Relying solely on the HHS checklist without an IRP will surely result in panic-based reactions with no structure to guide next steps when a cyber-related security incident inevitably occurs. Further, because of the strict requirements contained in the HIPAA Security Rule – including a duty to identify and respond to security incidents, mitigate harmful effects, and document security incidents and outcomes – a healthcare provider must be particularly vigilant in being cyber-prepared.  

Effective and adequate cybersecurity requires early preparation to ensure an appropriate and effective response later. The HHS checklist, though helpful, should be viewed merely as one of a multitude of best practice guides issued by federal agencies for health care providers and other businesses in developing and implementing cybersecurity measures. For more information about how to best respond to a cyber-related security incident and protect your business against a cyber-attack, see the Department of Justice’s Incident Response Procedure Instructions or the Federal Trade Commission’s Data Breach Response Guide. Please contact Jonathan Klein at (215) 640-8535, jklein@clarkhill.com or another member of Clark Hill’s Cybersecurity team if you have any questions.

This article was authored by Jonathan L. Pompan, Alexandra Megaris, and Katherine M. Lamberth. It was previously posted on Venable.com and is re-published here with permission. You may also want to review “What’s Inside the CFPB Enforcement Policies and Procedures Manual 2.0,” by the same authors.

An internal Consumer Financial Protection Bureau (CFPB) playbook and memo reveal how key decisions are made throughout the examination process, who is responsible for making those decisions, how information is evaluated, and the intersection between CFPB examinations, investigations, and enforcement.

Although many institutions supervised by the CFPB look to the CFPB Supervision and Examination Manual and Supervisory Highlights to know what to expect during examinations, even companies accustomed to government examination can find the process to be particularly opaque and confusing. To shed light on the CFPB examination process, we obtained through a Freedom of Information Act (FOIA) request the CFPB’s Supervision, Enforcement, and Fair Lending (SEFL) Examination Playbook (Playbook) and SEFL Integration Memorandum (Memorandum).

A copy of the Playbook and Memorandum are available for download here.

The documents show that the outcome of a CFPB examination will depend on multiple decision makers, at various stages, and the importance of such factors as the exam findings and matters requiring attention, whether there is a violation of law, deterrence, variety of products and potential violations, size and complexity of the institution, self-correction, history, and cooperation. Companies that disagree with the examination findings should provide substantive input and objections to the findings, present additional information and documentation at the earliest stages possible, and consider appropriate remediation steps, if any.

The Examination Process

The Playbook identifies and describes the key decisions that arise at each stage of the examination process, as well as who within the CFPB is responsible for making and implementing each key decision. The purpose of the Playbook is to provide guidance to decision makers on their roles and responsibilities, referred to as “decision rights,” throughout the examination or target review.

As outlined by the Playbook, the examination process is composed of four stages: scoping, on-site analysis, off-site analysis, and report review. An overview of each of the activities that are conducted at each stage is provided below, as are key decisions and corresponding decision rights.

Scoping

Scoping involves setting examination priorities and schedules across markets and for individual examinations. It also includes conducting pre-examination activities such as preliminary information requests and determining the scope of the examination. Key decisions that arise during this stage, and relevant decision makers, include the following:

• Examination Priorities. The Assistant Directors (ADs) for the Office of Supervision Policy (OSP) and the Office of Fair Lending (FL) are responsible for determining examination priorities.
• Examination Schedule. Regional Directors (RDs) in the Office of Supervision Examinations (OSE) are responsible for determining the timing and sequence of examinations for the calendar year.
• Specific Scope and Schedule. The Examiner-in-Charge (EIC) is responsible for making decisions regarding the scope of the examination, the preparation of the Information Request, and the examination schedule. These decisions involve determining which activities will be conducted during the examination and relevant modules, and which items of information are pertinent to the examination of the particular institution.

On-Site Analysis

On-site analysis involves conducting interviews, observing the institution, transaction testing, and other examination processes that assess the institution’s compliance with federal consumer financial laws and potential violations. After the on-site examination is complete, additional time may be granted for the off-site analysis of relevant factual findings and other information.

• Formal Documentation and Modifications. The EIC is responsible for making decisions regarding formal documentation of the examination, including appropriate work papers and Fact Verification Memoranda. These decisions involve identifying and clarifying examination procedures and findings. The Field Manager/Senior Examination Manager (FM/SEM) is responsible for making decisions regarding modifications to the scope of the examination once it has commenced.
• Initial Examination Findings. The EIC is responsible for conducting the closing meeting and making related decisions, including any preliminary examination findings, expected corrective actions, recommended rating, or next steps. The EIC is also responsible for preliminarily deciding whether an examination is “clean”—i.e., does not involve any potential violations of federal consumer financial laws—and eligible for review on an expedited track. The Assistant Regional Director (ARD), the OSP AD, and the Office of Enforcement (ENF) are responsible for approving review of an examination on an expedited review track.

Off-Site Analysis

Off-site analysis involves escalating potential violations of federal consumer financial laws discovered during the examination and determining whether an enforcement or supervisory action should be pursued. It is at this stage that collected information and findings can lead to an enforcement action.

• Interpretations of Non-Routine Questions of Law. If an examination involves potential violations of federal consumer financial laws, the OSP Program Manager is responsible for determining whether an interpretation is required, and for framing the potential violations through preparation of a memorandum seeking the interpretation. For non-routine questions of law, the Legal Division is responsible for determining whether a violation has occurred, except where the question of law involves a regulation – then the Office of Regulations is responsible for the determination.
• PARR Letter. A Potential Action and Request for Response (PARR) Letter notifies the institution that the CFPB is considering whether to propose a supervisory or enforcement action, based on preliminary findings of potential legal violations. The FM/SEM is responsible for determining whether a PARR letter should be sent. The OSP Program Manager is responsible for drafting the PARR Letter, which is approved by the RD.
• ARC. Decisions on whether potential legal violations should be escalated to the Action Review Committee (ARC) are also made by the FM/SEM, who drafts the ARC memorandum to support the ARC’s evaluation of relevant facts and law in determining whether public enforcement is appropriate. The ARC evaluates over thirteen factors spread among four categories: violation, institution, policy, and justice. The RD is ultimately responsible for approving the ARC memorandum. The ARC then recommends to the Director whether the matter should be handled through the supervisory process or public enforcement action.

Report Review

• Expedited Review. Under the expedited track, the examination report is reviewed by the FM/ SEM and the OSP Program Manager and Deputy AD. The ARD is responsible for collecting input from the OSP POC and finalizing the report, which is then approved by the RD.
• Full Review. Under the full-review track, the examination report is reviewed by the FM/ SEM, the OSP Program Manager and Deputy AD, the Legal Division, and staff of the Office of Enforcement. The ARD is responsible for collecting and incorporating input, and finalizing the report after the content has been reviewed and ratified by the OSE AD, OSP AD, RD, and SEFL Associate Director.

In addition to providing further information on key decisions throughout the examination process, the Memorandum contains sections on:

• SEFL Coordination and Prioritization: Includes information on SEFL strategy, information sharing and scheduling, and tool choice (i.e., oversight through examination or investigation)
• Enforcement Attorneys’ Role in Examination Work
• Action Review Committee (ARC) Process
• Compliance and Disposition of Required Actions

Supervisory Appeals

The Playbook and Memorandum do not provide any information or guidance on the examination appeals process, which remains an area for which the CFPB has not provided any public statistics and there is little substantive transparency. That said, in our experience, the appeal of supervisory matters benefits from having a robust submission of relevant information during an examination, and doing so can help to stave off an enforcement recommendation. The CFPB appeals policy states that only facts and circumstances upon which a supervisory finding was made will be considered by the appeals committee, and that it is an appellant’s burden to show that the contested supervisory findings should be modified or set aside.

Prior to the establishment of the CFPB depository, institutions were the only members of the consumer finance industry subject to federal supervision. The paradigm shifted with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), which vested the CFPB with broad regulatory powers, including the authority to examine certain non-depository institutions for compliance with the federal consumer financial laws.

The CFPB has supervisory authority over depository institutions with over $10 billion in assets, as well as payday lenders, mortgage companies, private student lenders, and larger participants of other consumer financial markets, such as debt collection and credit reporting. In accordance with the Dodd-Frank Act, supervision is risk-based, and in exercising its authority the CFPB must focus on the institutions and products that pose higher degrees of risk to consumers. Through examinations, the CFPB is responsible for assessing institutions’ compliance with the federal consumer financial laws and detecting risks posed to consumers and markets for consumer financial products and services.

On June 12, 2017, the Supreme Court of Appeals for the State of West Virginia issued an opinion that a debt collector did not violate West Virginia Code § 46A-2-125(d) (1974) by calling a consumer over 250 times during an eight-month period. The court reversed a earlier, opposite decision reached after a bench trial. The case is Valentine & Kebartas, Inc. v. Lenahan (Case No. 16-0127, WV Supreme Court of Appeals).

A copy of the opinion can be found here. 

The version of West Virginia Code § 46A-2-125 in effect at the time of the bench trial in this case states as follows:

No debt collector shall unreasonably oppress or abuse any person in connection with the collection of or attempt to collect any claim alleged to be due and owing by that person to another. Without limiting the general application of the foregoing, the following conduct is deemed to violate this section:

(a) The use of profane or obscene language or language that is intended to unreasonably abuse the hearer or reader;

(b) The placement of telephone calls without disclosure of the caller’s identity and with the intent to annoy, harass or threaten any person at the called number.

(c) Causing expense to any person in the form of long distance telephone tolls, telegram fees or other charges incurred by a medium of communication, by concealment of the true purpose of the communication; and

(d) Causing the telephone to ring or engaging any person in telephone conversation repeatedly or continuously, or at unusual times or at times known to be inconvenient, with the intent to annoy, abuse, oppress or threaten any person at the called number.

Background 

The court’s opinion concisely outlined the facts in the case. Valentine & Kebartas (V&K) is a third-party debt collector who purchased Mr. Lenahan’s delinquent consumer account from ADT, a home security system provider. ADT informed V&K that Mr. Lenahan owed $1,349.53 on the account. The facts are undisputed that Mr. Lenahan informed ADT that he denied owing the debt. Similarly, there is no dispute that Mr. Lenahan never notified V&K that he denied owing the debt. 

V&K’s collection efforts commenced with a March 9, 2012, letter to Mr. Lenahan notifying him of V&K’s intent to collect the debt on the ADT account. Mr. Lenahan admitted receiving the letter. Thereafter, V&K made telephone calls to the telephone number provided by ADT for Mr. Lenahan. 

The number of telephone calls placed by V&K to Mr. Lenahan is also not in dispute. Between March 10 and 25, 2012, V&K called Mr. Lenahan twenty-two times. Between March 26 and 28, 2012, they placed seventeen additional calls to Mr. Lenahan. Beginning on March 29 and continuing through November 17, 2012, V&K attempted 211 more calls to Mr. Lenahan at times after 8:00 a.m. but before 9:00 p.m. on various days, never more than six times per day. The parties agree that V&K attempted to call Mr. Lenahan 250 times during the eight-month period between March 10, 2012, and November 17, 2012. 

Mr. Lenahan never answered the 250 phone calls and V&K never left a message. Lenahan kept no record of the phone calls and never contacted V&K to dispute the debt. 

Following the 250 attempted telephone calls, the record indicates that three additional phone calls from V&K were answered by Mr. Lenahan on November 17, 19 and 20, 2012. Mr. Lenahan argued at trial that he informed V&K during one or more of these three phone calls that he was represented by counsel. He asserted at trial that one or two of the subsequent calls were made in violation of West Virginia Code § 46A-2-128, which among other things limits a debt collector from contacting a consumer once the debt collector received notice that the consumer is represented by counsel. The circuit court did not rule on this claim and neither party raised it on appeal. Therefore, the court did not address the issue. 

Mr. Lenahan filed suit against V&K in March 2013. During a bench trial on February 2, 2015, a V&K representative and Mr. Lenahan were the only two witnesses who testified. On May 22, 2015, the circuit court ruled in a memorandum opinion that V&K’s unanswered telephone calls to Mr. Lenahan violated West Virginia Code § 46A-2125(d)(1974). On January 15, 2016,⁵ the circuit entered its Verdict Order awarding Mr. Lenahan $75,000 in damages. V&K filed this appeal. 

The Supreme Court Opinion

As noted above, the West Virginia Supreme Court reversed the trial court decision. The court focused its “attention on whether the circuit court erred in determining that the volume of V&K’s telephone calls to Mr. Lenahan constituted abuse or unreasonable oppression by virtue of “causing a telephone to ring . . . repeatedly or continuously . . . with intent to annoy, abuse, oppress or threaten” under West Virginia Code § 46A-2-125(d).” 

The court examined cases in other jurisdictions that discussed call volume under 15 U.S.C. § 1692d(5), of the Fair Debt Collection Practices Act, (FDCPA ) the provision of the “FDCPA” nearly identical to West Virginia Code §46A-2-125(d) and felt that the compelling argument was that call volume alone, absent evidence of other  abusive conduct, is insufficient to sustain a claim. 

The court wrote: 

“Clearly, the weight of federal authority requires some evidence of intent to establish liability under the federal equivalent to West Virginia Code § 46A-2-125(d). We agree with the reasoning of these federal courts interpreting a nearly identical statute. We similarly find that the volume of unanswered calls in this case does not establish intent in violation of West Virginia Code § 46A-2125(d). Rather than answer any one of the 211 calls made by V&K in compliance with federal law over eight months, Mr. Lenahan remained silent and never informed V&K of the simple fact that he disputed the debt. Accordingly, we find that the circuit court erred as a matter of law in finding that V&K violated West Virginia Code § 46A-2-125(d).

The calls continued because Mr. Lenahan never answered the telephone calls and never informed V&K that he contested the debt. The circuit court made an inference of intent to “harass or oppress” based upon its own inability to “fathom any possible legitimate purpose” for V&K’s auto dialer placing more calls over a three-day period in the third week of its eight-month collection effort than it placed in the first two weeks. The circuit court surmised that after a certain amount of unanswered calls, a reasonable debt collector should know that the consumer does not want to be contacted. However, the circuit court’s inference was based entirely on the volume of calls and no other evidence.”

insideARM Perspective 

To be perfectly honest, this result is surprising, not because of the court’s reasoning, and not because of the particular facts presented. It is surprising because of the venue. West Virginia has a reputation as being VERY pro-consumer. Many third-party agencies dramatically restrict collection calls into West Virginia and proceed with extreme caution in dealing with West Virginia accounts under the theory that the RISK/REWARD analysis suggests the potential exposure is not worth the potential revenue derived from additional activity on those accounts. 

This is a very positive outcome considering the above.

This article previously appeared on Ontario System’s blog and is republished here with permission.

Traditionally, financial services organizations including the third-party debt collection industry have been slow to adopt technology that enhances communication with consumers. Complex and conflicting federal laws make letters and phone calls a crutch, and fear of lawsuits tend to cripple even the most savvy businesses. But consumers are demanding change, and it is time for the industry to step up its game.

According to Christoph Bene, Managing Director at Brock Capital Group speaking to Forbes, the ARM industry needs to take note:

“Fifty years ago, debt collection agencies relied on annoying phone calls and form letters sent through the mail to encourage people to pay their past due accounts. Today, with the ubiquitous use of smart phones, texting, email and social media, the debt collection industry… still mainly relies on annoying phone calls and form letters.”

Ask a millennial, and you will learn they could not agree more. Younger generations opt for a digital form of communication before answering a phone call. They will read many tens of text messages before listening to a single voicemail. They will visit a website before placing a return call to a financial services organization. They will chat before shooting off an email. And the very last thing they will ever do is write a letter and drop it in a big, blue, metal receptacle at the end of a driveway – the mailbox. In short, they will exhaust every form of person to person avoidance behavior before engaging in a phone conversation with a live person.

Equally significant is the fact users of one or more types of digital communication channels are more likely to engage using other media channels than those who avoid digital technology altogether. For example, those who use text messaging to communicate are also more likely to use the web, IVR or email. This means once you engage with a consumer digitally it’s more likely the consumer will employ the same or similar types of communication channels to communicate with you in the future.

So how do we evolve our business strategies to meet these new consumer communication preferences? The answer is simple. Use a variety of communication methodologies to meet the needs of your consumer population. Doing so means considering the following:

1. Multi-channel communication systems – If you have ever worked in education or marketing, you know adult learners do not all learn alike. Some prefer to read, some prefer to listen – It varies upon the person and the generation. But make no mistake, a single communication system will no longer reach all the consumers we need to reach for effective debt management. We need to provide options that meet people at their convenience and preference.

2. Integrated contact management – Siloed communication systems, at least in the world of financial services, have become dinosaurs. To effectively communicate with people and manage their preferences in terms of time, place and manner, we need integrated contact management systems that tie to an agency’s software and provide accurate and holistic information to the debt collector about each consumer’s behavior.

3. Individually-tailored communication – Combining analytics with Big Data will determine the best way to engage a debtor, as opposed to just addressing a general demographic category. Leveraging those sources of information means the ARM industry would be able to select the most appropriate mode of communication, the wording and tone of the message, the best time of day and frequency to engage, and even the type of payment options offered.

4. Intelligent rules engine – ARM operators today need rules engines that not only follow new collections rules and regulations, but also track and update changes in real time. Rules engines not only drive effective, compliant consumer communications, they help collect money.

5. Website as Communication Management Hub – Most debt collectors have websites, but few know how to employ one as a tool to manage consumer communication preferences. At minimum, a robust website should provide consumers with information about their rights under the law; a place to register complaints; a way to request documentation about the debt; a page to grant and revoke consent to dial, text and email; a portal to manage communication preferences, settlements and payment arrangements; and of course a page to authorize and make electronic payments.

Consumers are not the only ones demanding a menu of communication options to manage their debt. Regulators are working with industry groups to help companies better understand how to enhance consumer communications using a menu of technology driven communication channels. Do not be left behind. Take steps now to employ a multi-channel communication platform designed to meet the needs of your consumer population.

— 

Interested in learning more about this topic? Watch the replay of Rozanne Andersen’s webinar New Channels, New Tactics: Improving Performance with New Consumer Communication

This article originally appeared as an Alert on ClarkHill.com, and is republished here with permission.

Pursuant to Executive Order 13772, issued February 3, 2017, the Department of Treasury has issued a report, A Financial System that Creates Economic Opportunities for Banks and Credit Unions (the “Report”), which sets forth the Trump Administration’s plan to implement core principles to regulate the United States Financial Services Systems. The goal of these reform proposals is to promote individual decision-making regarding investments, to ensure efficiency and accountability in the operation of each administrative agency, and to provide competition and growth for the American economy. 

This report discusses potential reforms to the depository system, which covers banks, savings associations, and credit unions of all sizes, types and regulatory charters. Subsequent reports will discuss capital markets reform, asset management, insurance and housing reform. 

Some of the highlighted proposals are as follows: 

1)      Addressing the U.S. Regulatory Structure

• Reduce fragmentation of administrative work; promote cooperation and clear jurisdiction for each agency.
• Expand the authority of the Financial Stability Oversight Council (FSOC) (appointment of a lead regulator when multiple agencies have different interpretations of the law).
• Improve the effectiveness and accountability of the Office of Financial Research. 

2)      Refining Capital, Liquidity and Leverage Standards

• Raise the threshold of the Dodd-Frank stress test to $50 billion; eliminate the mid-year test; provide more independency for the banking institutions.
• Elimination of the Comprehensive Capital Analysis and Review (CCAR) qualitative assessment as non-transparent.
• Standardize processes for risk-weighting assets to simplify the capital regime.
• Amendment of the Liquidity Coverage Ratio (LCR) to apply only to international active banks. 

3)     Providing Credit to Fund Consumers and Businesses to Stimulate Economic Growth

• Recalibrate capital requirements that place an undue burden on individual loan-asset classes for mid-sized and community financial institutions.
• Restructuring of the Consumer Financial Protection Bureau (CFPB) regarding its regulatory responsibilities and accountability: 
  1. Its director should be removable by the president at will or, in the alternative, restructure the CFPB as an independent multi-member commission.
  2. Fund the CFPB through the annual appropriation process.
  3. CFPB should inform all regulated entities of its interpretation of the law before subjecting them to its regulations. 

4)      Improving Market Liquidity

• Considerations to adjust the Supplementary Leverage Ratio (SLR) and enhanced SLR (eSLR). Provide exceptions for cash on deposit with central banks, U.S. treasury securities and initial margin for centrally cleared derivatives from entering the denominator of total exposure.
• Significant amendment of the Volcker Rule to make it simpler and decrease unnecessary burdens. Banks with less than $10 billion in assets should not be subject to the rule. 

5)      Allowing Community Banks and Credit Unions to Thrive

• Simplification of the regulatory regime for these institutions by exempting them from the U.S Basel III risk-based capital regime and, if required, from Dodd Frank’s Collins Amendment.
• Change the CFPB’s ATR/QM rule and increase the total asset threshold for making small creditor QM Loans from $2 billion to a threshold between $5 and $10 billion.
• For federally insured credit unions, raise the scope of application for stress-testing requirements to $50 billion in assets.
• For credit unions, repeal of the requirement to hold more than $100 million in assets to satisfy a risk-weighted capital framework. Introduce a simple leverage test. 

6)      Improving the Regulatory Engagement Model

• The Board of Directors of each banking institution must have clear roles and responsibilities along with accountability. Non-accountability was one of the primary reasons of the financial crisis of 2008.
• Clear distinction between Board and management/no “one size fits all” strategy.
• Modified reform of the rules of regulatory coordination among administrative agencies. 

7)      Enhancing Use of Regulatory Cost-Benefit Analysis

• The Dodd-Frank Act has created numerous administrative agencies to oversee its application, which do not coordinate. Thus, the cost of following the Dodd-Frank Act has increased, especially for mid-size banking institutions.
• Impose a uniform and consistent method that all administrative agencies will use to determine the cost and the benefits of all proposed regulations, which are economically significant.
• Promote cooperation among the agencies, along with public accountability.  

It is unclear how the Administration will make good on these and other proposals. Many of the suggested recommendations will require legislative changes to Dodd Frank. One wild card of course will be whether the independent agencies will adopt these proposals on their own. Organizations that are subject to regulation by these various agencies should consider these proposals as opportunities for outreach and should be putting together wish lists and talking points for future engagement. Clark Hill will continue to monitor the development of these proposals.

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JACKSONVILLE, Fla. — Diversified Consultants Incorporated (DCI) is pleased to announce the promotion of Gordon Beck III to Chief Executive Officer (CEO). 

Gordon previously held the position of Chief Operations Officer (COO) where he performed in all aspects , to include, the company’s goals and driving its vision. The enhanced role will further allow Gordon to concentrate more fully on DCI’s vision and afford him the ability to cement current relationships and to take DCI to new heights.  Gordon said,

“It is a tremendous honor to accept the role as CEO for DCI. This is not just a job to me; this is my family and my life. After two decades with the organization encompassing countless levels of responsibility, to reach the pinnacle of my career at age 39 is a great accomplishment of which I am very proud, but  the journey is just the beginning.  I have a team at DCI that is second to none and our sole mission is to be the greatest call center that this country has ever seen.  My mentor, Charlotte Zehnder, has done so much for me and the entire DCI family and we are all excited to make her proud.” 

Gordon is replacing Charlotte Zehnder, who has long been the matriarch of the company. Charlotte will remain as the major shareholder at DCI and will also serve as Chairman of the Board. When asked about her decision Charlotte said,

‘It was time for me to pull back as CEO of DCI.  Personal goals and family are at the forefront of my thought process. I felt that the time was right as Gordon has been functioning within the CEO role for some time. After twenty years with DCI Gordon not only deserves this opportunity, but has unequivocally earned it. He has my respect and that of all who know him. I am 100% confident that I am turning the reins over to a very competent executive, an incredible man, and a dear friend. There is no doubt that Gordon will continue to move the company onward and upward.”

DCI has three stateside locations, Jacksonville FL, Portland, OR and Louisville KY. The company also maintains a presence in the Philippines and in India. DCI currently employs 940 people with room to grow to 1800 based upon the recent opening of the Louisville KY office, which is Gordon’s hometown. 

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This article was originally published on the Maurice Wutscher blog and is republished here with permission.

A purchaser of a defaulted debt who then seeks to collect the debt for itself is not a “debt collector” subject to the federal Fair Debt Collection Practices Act under an opinion delivered today by the U.S. Supreme Court.

The issue before the Court was whether a purchaser of defaulted debt meets the FDCPA’s definition of a “debt collector” as one who “regularly collects or attempts to collect . . . debts owed or due . . . another.” 15 U. S. C. §1692a(6).

Here, Santander Consumer USA Inc. acquired defaulted loans from CitiFinancial Auto and then began to collect on those loans. The petitioners argued this activity made Santander a debt collector subject to the FDCPA.  The Fourth Circuit Court of Appeals disagreed because the debt purchaser was not seeking to collect a debt “owed . . . another.” The Supreme Court affirmed in a unanimous decision.

The opinion did not consider whether a purchaser of defaulted debt is engaged “in any business the principal purpose of which is the collection of any debts.” §1692a(6).

A copy of the decision in Henson v. Santander Consumer USA Inc. is available here.

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Editor’s note: RMA International is urging caution when interpreting this decision.

This article previously appeared on Ballard Spahr’s CFPB Monitor and is re-published here with permission.

A federal district court in New Jersey dismissed a putative class-action lawsuit against Total Card, Inc. (TCI), a South Dakota-based debt collector. The plaintiff alleged that TCI violated the Fair Debt Collection Practices Act (FDCPA) when it attempted to collect time-barred debts with payment plan solicitations.

According to the lawsuit, TCI sent a collection letter to a New Jersey consumer who owed $1,648.56 on a past-due cellular telephone bill. The collection letter stated that resolving the debt would “put an end to the calls and letters attempting to collect on this account,” but because of the age of the debt, the collector would not file a lawsuit or report the debt to a credit reporting agency.

Despite the time-barred debt disclosure, the plaintiff claimed that the letter was “misleading” under sections 1692e and 1692f of the FDCPA because it failed to advise consumers whether a new debt or contract would be formed or whether the statute of limitations would be revived if the consumer made a payment. TCI, by contrast, argued that under Huertas v. Galaxy Asset Mgmt., a debt collector may seek voluntary repayment of a time-barred debt under the FDCPA if “the debt collector does not initiate or threaten legal action in connection with its debt collection efforts.”

The court granted TCI’s motion to dismiss. The court first rejected the plaintiff’s argument that the collection letter attempted to create a new contract or enforceable debt. Rather than create a new contract, the court held that the collection letter intended only to collect voluntary payments on existing debts. In so holding, the court relied on the letter’s language that any payments would “full[y] and final[ly] resol[ve] . . . this account!,” “satisfy past financial obligations,” and “resolv[e] your account in full.”

Next, the court rejected the plaintiff’s argument that the collection letter was misleading because it did not warn consumers that partial payments may revive the statute of limitations. This holding relied on a feature of New Jersey statute-of-limitations law providing that a promise to pay only restarts the statute of limitations if it is unconditional and in a signed writing. The court reasoned that a letter that asks a consumer to “[s]imply check a box” to select an installment payment plan is not an unconditional, signed writing. Finally, the court held that the letter was not misleading because it did not threaten legal action and contained a time-barred debt disclosure.

The upshot of the decision is that the court reaffirmed a collection agency’s right to collect time-barred debt, provided it does not do so in a misleading manner. We have previously covered issues involving time-barred debt here. Collecting time-barred debt continues, however, to invite litigation and regulatory attention. It is therefore important to follow state law closely and avoid even the appearance of threatening legal action while keeping in mind the least-sophisticated-consumer standard.

Attorneys in Ballard Spahr’s Consumer Financial Services Group regularly advise clients on compliance with the FDCPA and state debt collection laws and defend clients in FDCPA lawsuits and enforcement matters. The Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance.

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Copyright 2017 Ballard Spahr LLP. Reprinted with permission. Content is general information only, not legal advice or legal opinion based on any specific facts or circumstances.

Yesterday, Receivables Management Association International (RMA) issued a statement urging its membership and the broader receivables management industry to proceed with caution when interpreting the United States Supreme Court ruling in the case of Henson v. Santander.

In this unanimous decision, the Court determined that Santander Consumer USA, Inc. did not fall under the plain meaning of the term “debt collector” in the federal Fair Debt Collection Practices Act (FDCPA) when it purchased defaulted loans originated by another lender and proceeded to collect on these loans because it was not seeking to collect the debts “owed another”. The act of purchasing the loans meant that the debt was owed to Santander—not another entity.

However, the Court left open the question of the applicability of the alternative FDCPA definition of “debt collector” which states that it also applies to “any business the principal purpose of which is the collection of any debts” (emphasis added). This unanswered question by the Supreme Court raises questions for debt buying companies who purchase and actively collect on their own debt. While these companies would not be collecting debt owed another, they are still engaged in collecting debt.

While all judicial decisions are based on the facts contained in the case, it is conceivable that the Santander decision may be used by debt buying companies that operate solely as an investment vehicle and do not engage in any debt collection activity themselves (aside from acquisition) to argue they are not subject to FDCPA regulation. However, RMA would urge all companies that operate under either the active or passive business model to consult with legal counsel before making any operational changes.

In the end, RMA does not see the Santander decision as lessening the consumer protections required of its membership due to the rigorous requirements of RMA’s Receivables Management Certification Program (RMCP). RMA estimates that over 80 percent of consumer receivables in the United States that have been sold on the secondary market are owned by companies who are RMCP certified and thereby bound by standards that already go above and beyond the requirements of the FDCPA.