Archives for June 2017

The CFPB’s decision to change course on one key aspect of its debt collection rulemaking was not only unexpected by industry and consumer advocates alike, but an important sign that the debt collection industry should not otherwise ignore. 

First the background. In July 2016, the CFPB issued its Outline of Proposals under Consideration for the regulation of debt collection (the “Outline”). The Outline came in advance of a Small Business Review Panel (“Panel”) to gather feedback from small debt collection industry representatives. The Panel convened in late August 2016. One of the key elements in the Outline was a requirement to ensure that debt collectors substantiate the debt, in other words that debt collectors had the right supporting information about the debts they were collecting. While this sounds sensible, in practice it is problematic; mandating that debt collectors verify the accuracy of the debts on behalf of their 1st party clients is potentially impossible when collectors have no assured access to underlying debt documentation. 

The industry responded and did so effectively both in their oral presentations at the Panel proceedings and in their written comments. Many industry participants also met with the CPFB to discuss the particular topic of substantiation. This outreach has resulted in the Bureau now concluding that issues of “right consumer, right amount” should be a rule geared more toward 1st party creditors instead of 3rd party debt collectors. The Bureau will still move forward with its remaining proposals for 3rd party debt collection, which will include consumer understanding initiatives and limitations on consumer communication, but will look to shift its focus on substantiation to include 1^st parties. A notice of a proposed rule for 3^rd party debt collection is still some time away due to continuing research.  

Although the industry should pat themselves on the back for their advocacy, it is important to remember a critical component that was part of the CFPB’s decision; advocates saw the issue of substantiation as a problem as well. You have to look no farther than the National Consumer Law Center’s (NCLC) comments to the Advanced Notice of Proposed Rulemaking. On page 49, “Rules should require the original creditor and any debt buyer to pass on the information to the next buyer” [emphasis added]. So while the CFPB’s decision was as much about listening to industry, it was also about identifying where both sides agreed. (It should be noted, however, that the NCLC opposed any changes to Foti, while the Outline recommended a clear Foti fix). The NCLC issued a press release applauding the CFPB’s decision on substantiation.   

The CFPB has sent a signal to all stakeholders in the debt collection space: reach out and collaborate with each other. One industry group, the Consumer Relations Consortium (CRC) has been doing this for several years and it seems to be working. We as an industry should go back and look at all the comments of all consumer advocates and see where we can find key topics of agreement and then work from there. The industry wants rules and what better way to achieve that then through consensus from all sides. 

For 1st party creditors, the time is now to consider issues of data integrity and effective collaboration with debt collectors they hire. Creditors will now have to consider documentation issues at the front end of the initiation of the loan in order to substantiate it on the back end, and proactive efforts in advance of the upcoming rulemaking on 1st and 3rd party substantiation programs should begin immediately. Needless to say outreach to advocates must be part of the advocacy strategy. The CFPB appears to be moving toward the realization that we all live in a credit based eco-system and a holistic approach, involving all stakeholders in the debt collection market, is warranted.  

Last Thursday marked my last Consumer Advisory Board (CAB) meeting. All outgoing members were asked to say a few words; in my comments I thanked the CFPB staff who coordinated the CAB for all their hard work. They are truly an incredible group of dedicated public servants, who as I stated, spent the last three years “schlepping” all CAB members from one meeting to another, as well as from one end of the country to the other. I thanked the Director and told him that while we have had our differences and that I do not agree with a lot of the Bureau’s priorities, I have a tremendous amount of respect for him and what he has accomplished from ground zero. Finally, I thanked all my fellow CAB members and told them I was privileged to have been included in this special group. I told the consumer advocates in the room that I valued my experience on the CAB because it gave me an opportunity to know people with whom I would never have had the opportunity to collaborate. Finally, I suggested they remember that what we all have in common is much greater than our differences. We as an industry need to build on that understanding.   

On May 26, 2017 a federal judge in Florida issued an order in an appeal from a Bankruptcy Court proceeding that could have a chilling impact on the consumer litigation activities of a local Bankruptcy Trustee and Special Counsel to the Trustee. The case is Cadlerock Joint Ventures, L.P. v. Christine Herendeen and Thomas A. Lash (Case No. 16-cv-2046, U.S. D.C. Middle District of Florida).

A copy of the Order can be found here. 

Background 

The case was decided by the Honorable James S. Moody, Jr., United States District Court Judge.  

From the court’s order: 

“The procedural history of this individual case is extensive and adequately summarized in the parties’ briefs. The essential issue here is whether the Bankruptcy Court should have sanctioned the Bankruptcy Trustee and Special Counsel based on their common practice and conduct of filing meritless cases. Special Counsel has a paralegal attend § 341 Meetings of Creditors in order to solicit potential violations of consumer protection acts against creditors. That common practice gave rise to the filing of this meritless case against Appellant Cadlerock Joint Ventures, L.P.” 

The parties have a slightly different perspective on the facts of the case. A copy of the Cadlerock brief can be found here.  A copy of the Lash brief can be found here. A copy of the Herendeen brief can be found here. 

Key Issue 

Judge Moody defined the issue: 

“As Appellant (Cadlerock Joint Ventures, L.P.) stated during oral argument, this appeal turns on the Bankruptcy Court’s decision to limit the sanctions proceeding to the facts of this case alone. By limiting its review to this singular case, the Bankruptcy Court concluded that there was not “a whiff of an abuse of process . . .” The Bankruptcy Court focused on the fact that the adversary proceeding complaint was dismissed within the safe harbor time period and concluded that any erroneous allegations contained in the complaint were therefore harmless. 

In narrowly limiting its review, the Bankruptcy Court was unable to consider certain statistical evidence that was presented to this Court during the pendency of this appeal about the Trustee’s and Special Counsel’s pattern and practice of filing similar meritless lawsuits. This evidence goes to the heart of the sanctions issue—that is, whether it is an abuse of process under § 105(a) for a bankruptcy trustee to invite a law firm’s paralegal to solicit claims at the 341 hearing, and then permit the filing of adversary proceedings without any further inquiry into the claims’ merits. 

If the Bankruptcy Court had permitted discovery on this statistical evidence, it may have had a different perspective and may have reached a different conclusion about the appropriateness of sanctions. The evidence, if true, raises grave concerns about the Trustee’s conduct in this case and prior cases. In a larger sense, this evidence raises a concern about an abuse of the overall bankruptcy process.” (Emphasis added by insideARM.) 

The court’s determination 

Judge Moody found the following: 

“The evidence suggests that Appellees have made a habit of routinely filing thousands of lawsuits against creditors with little investigation of the facts and alleging identical boilerplate language. The boilerplate complaints are supported by only the Trustee’s leading line of questioning at a debtor’s 341 hearing. Creditors are forced to settle or spend attorney’s fees to defend these meritless lawsuits, or are left with no option but to execute a joint stipulation of dismissal with prejudice, thereby waiving any subsequent claim for sanctions or attorney’s fees to compensate them. The statistical evidence suggests that more than 1/3 of all cases filed (864 out of 2,494) were voluntarily dismissed with no recovery for the bankruptcy estate. 

In denying sanctions under 11 U.S.C. § 105(a), the Bankruptcy Court noted in its Order on Special Counsel’s Amended Motion for Summary Judgment that if it “believed that the Trustee and Special Counsel had engaged in any wrongdoing, that the public was endangered by their conduct, or that there was any mockery of the Court’s processes,” it would impose sanctions. But it would be impossible to conclude whether the public, or creditors, were negatively impacted by the Trustee’s and Special Counsel’s conduct because the Bankruptcy Court limited the record to the facts of this case and then granted summary judgment in Appellees’ favor. Restricting discovery in this manner was error because Appellees’ conduct in similar cases is highly relevant to determine whether an abuse or “mockery” of the bankruptcy process occurred and whether it will continue to occur.” 

Judge Moody ultimately determined:

“The Court concludes that the Bankruptcy Court committed error when it granted summary judgment in Appellees’ (Herendeen and Lash) favor prior to permitting limited discovery regarding Appellees’ conduct in similar cases. Statistical evidence regarding Appellees’ similar filings was presented to this Court, which the Bankruptcy Court did not have the opportunity to review. Accordingly, the Court reverses and remands on this narrow and limited issue so that the Bankruptcy Court can consider this statistical evidence, determine if additional discovery is necessary, and, in light of this evidence and any additional discovery, make supplemental findings of fact on the issue of whether sanctions are appropriate in this case.” 

insideARM Perspective 

insideARM normally writes an original perspective on cases we cover, however, in this case, we are going to simply reprint comments from Judge Moody as they are probably better than any commentary we could write on our own. 

Judge Moody wrote: 

“Finally, the Court is compelled to comment further on the issue of whether Appellees’ conduct constitutes inappropriate solicitation. As the Court previously noted, it has serious concerns about the Trustee’s conduct of having a paralegal from Special Counsel’s office attend the 341 hearing to essentially “drum up” business, especially when the Trustee has a financial interest in monies recovered (up to 25%), but has nothing to lose if the suit is frivolous. The Court understands that the solicitation issue is skirted because the Trustee, not the debtor, owns all assets (not claimed as exempt), including all causes of action previously owned by the debtor. Because the Trustee has invited the lawyer—or his paralegal—to attend, the questions posed by the lawyer to ferret out a claim are not technically a “solicitation.” But, taking this reasoning further, the Trustee could invite a whole panel of lawyers to attend the 341 hearing. These lawyers, sitting like birds of prey, could pose questions about: potential car accident claims; recent medical treatment or surgeries; recent injuries; overtime claims; or about whether the debtor had received improper legal advice. At some point, while perhaps successfully avoiding the “solicitation” issue, such conduct would constitute an abuse of the bankruptcy process. 

Regardless of the technicalities, if one out of every three or four cases filed are meritless, something is wrong with the process. On remand, the Bankruptcy Court should consider whether allowing this process to continue without correction is abuse.” (Emphasis added by insideARM)

In Flecha v. Medicredit (Flecha v. MEDICREDIT, INC., Dist. Court, WD Texas 2017), Texas District Court Judge Lee Yeakel has denied a request by Medicredit to dismiss the case on grounds that there is no basis for the Plaintiff’s complaint. The case is allowed to continue. Nina Flecha has alleged, in a class action case, that Medicredit threatened her with litigation to scare her into paying her medical bill, without any real intent to sue, which, if true, would constitute a violation of the Fair Debt Collection Practices Act (FDCPA).

Background

In June 2016, Nina Flecha (“Flecha”) filed a class action suit under the FDCPA alleging that Medicredit had sent her a letter containing a false threat to sue. Flecha argued that since Seton Medical Center Hays (“Seton” is Medicredit’s client and the original creditor on an unpaid $5,166.71 medical bill)  does not sue consumers for medical debts, the collection letter caused an FDCPA violation.  Medicredit filed an instant Motion for Judgment on the Pleadings in the fall of 2016, citing Federal Rule of Civil Procedure 12(c), alleging that Flecha did not have a valid claim for relief under the FDCPA because the collection letter did not contain an explicit threat of litigation.

The court denied Medicredit’s motion, finding that a dismissal would only be appropriate  when/if it is apparent that not even a “significant fraction of the population would be misled” by the contents of a collection letter. A review of the purpose of the FDCPA is offered, reminding us:

15 U.S.C § 1692(e). Section 1692e generally prohibits “false, deceptive, or misleading representation[s] or means in connection with the collection of any debt.” 15 U.S.C. §1692e. The section provides a non-exhaustive list of examples of such conduct, including “[t]he threat to take any action that cannot legally be taken or that is not intended to be taken,” and “[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.” 15 U.S.C. §1692e(5) and (10). Congress “clearly intended the FDCPA to have a broad remedial scope” and “[t]he FDCPA should therefore be construed liberally in favor of the consumer.” Daugherty v. Convergent Outsourcing, Inc., 836 F.3d 507, 511 (5th Cir. 2016) (quoting Serna v. Law Office of Joseph Onwuteaka, P.C., 732 F.3d 440, 445 n. 11(5th Cir. 2013)).

Importantly, Seton does not deny Flecha’s claim that it does not sue patients to collect outstanding medical bills. There is also no dispute about the contents of the collection letter in question, which states, in part: 

“…a determination must be made with our client as to the disposition of your account…voluntary resolution is doubtful…DO NOT IGNORE THIS NOTICE.” (emphasis in original) 

Medicredit argued (relying on Jenkins v. Union Corp., 999 F. Supp. 1120, 1136 (N.D. Ill. 1998) that Flecha has no claim under § 1692e(5) because the letter in question does not outright mention litigation, or imply the pursuit of litigation. However, many courts have established that explicit threat is not required in order to establish a violation of § 1692e(5), and Judge Yeakel noted that the Texas court is not bound by the Jenkins ruling, adding that the “the standard articulated by Jenkins is far from the controlling rule regarding what is necessary to state a § 1692e(5) claim.” 

Instead, the court decided that “a plaintiff is permitted to offer evidence at a summary judgment or trial stage to show that indeed the language confuses the unsophisticated consumer.” In the eyes of the judge, at this stage of the case, Flecha has brought a plausible claim that Medicredit violated 15 U.S.C. § 1692e(5) by threatening legal action it had no intention of pursuing. The case will proceed to its next stage.

insideARM Perspective

This case is still in the pleading stage, and we’ll continue to watch it unfold. However, Flecha v. Medicredit already holds a gift for the healthcare provider community. 

This is an auspicious moment in the history of the modern healthcare business: With the rise of high deductible health plans, an unprecedented influx of insured healthcare consumers are bound to enter third-party collections too hard and too soon thanks to overdue, unmanageable and surprise self-pay medical bills. Although better patient financial service options are proliferating, and both billing and collection agencies are seeing excellent results from a softer and more flexible revenue cycle approach, traditional collection methods like Medicredit’s are still most common. We expect to see many more cases of the same ilk in the near future as a result.

How can the provider community shunt the infection? 

I wrote a series not long ago for insideARM about how providers can take steps to audit their collection agencies to ensure the presence of a solid compliance protocol. Many collection agencies have call monitoring programs in place (many using voice analytics software to flag potential call center compliance issues), and some even have dedicated audit teams that review flagged calls and address breaches by agents. A smaller number put their written communications under the looking glass, especially routinely, as would be prudent, since case law on these issues does evolve. 

It’s worth considering the guidance of the judge in Flecha, who re-capped a slew of written collection letter statements that have been sufficient to create a fact question on whether or not collection letters contained threatening language: 

• “[i]tem has been referred for Collection Action” and “[w]e will at any time after 48 hours take action as necessary and appropriate to secure payment in full;” Pipiles, 886 F.2d at 25-26.
• referenced settling matters “out of court” and “unless we receive your check or money order, we will proceed with collection procedures;” Baker, 677 F.2d at 778-79.
• “[f]ailure to pay this debt immediately can result in involuntary resolution;” Samuel v. Approved Credit Solutions, 2015 WL 4548745, at *3 (S.D. Ind. July 28, 2015).
• directing consumer to pay debt “so that further action by our office can be avoided;” Canlas v. Eskanos & Adler, P.C., 2005 WL 1630014 at * 2 (N.D. Cal. July 6, 2005)
• if debtor did not “work with” creditor, “further steps would be taken.”  Perretta v. Cap. Acquisitions & Mgmt. Co., 2003 WL 21383757 at *4 (N.D. Cal. May 5, 2003).

What’s the key takeaway so far in Flecha v. Medicredit? Whether you engage third party collections or not, make sure there are established procedures and controls in place to ensure (both internal and vendor) compliance with the FDCPA. Written communications sent on your organization’s behalf at any point in the patient lifecycle are a reflection of your brand and part of the customer experience. They’re also fodder for litigation under the FDCPA. It’s never a bad idea to ask to see which letters your billing and collections vendors are using to communicate with patients. Make a good faith effort to review them in light of FDCPA examination criteria. Document your review. Repeat it routinely and involve other senior leaders in your organization in the effort. An ounce of prevention is worth a pound of cure.

As expected, yesterday the U.S. House of Representatives passed the Financial CHOICE Act, which would significantly alter – among other things – the structure of the Consumer Financial Protection Bureau (CFPB). The bill passed along party lines; it is not expected to survive the Senate.

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) sponsored and has been aggressively promoting the CHOICE Act as essential to rolling back onerous regulations imposed by Dodd-Frank. He claims that Dodd-Frank has contributed to the worst economic recovery of the last 70 years.

With a tagline “growth for all, bailouts for none,” Hensarling says the Act would replace bailouts with bankruptcy, and would provide regulatory relief for small banks and credit unions. The following are the key principles of the Act:

1. Taxpayer bailouts of financial institutions must end and no company can remain too big to fail;
2. Both Wall Street and Washington must be held accountable;
3. Simplicity must replace complexity, because complexity can be gamed by the well-connected and abused by the Washington powerful;
4. Economic growth must be revitalized through competitive, transparent, and innovative capital markets;
5. Every American, regardless of their circumstances, must have the opportunity to achieve financial independence;
6. Consumers must be vigorously protected from fraud and deception as well as the loss of economic liberty; and
7. Systemic risk must be managed in a market with profit and loss

Among the Bill’s details is a restructured CFPB, including:

• Change the name of the CFPB to the “Consumer Law Enforcement Agency (CLEA),” and task it with the dual mission of consumer protection and competitive markets, with cost-benefit analyses of rules performed by a newly-formed Office of Economic Analysis.
• Restructure the agency as an Executive Branch agency with a single director removable by the President at will, and make the agency subject to Congressional oversight and the normal Congressional appropriations process.
• Eliminate the CFPB’s supervisory function and hold it responsible for enforcing the enumerated consumer protection laws.
• Remove the agency’s opaque and ill-defined “unfair, deceptive, or abusive acts and practices” (UDAAP) authority.
• Establish an independent, Senate-confirmed Inspector General.
• Eliminate the CFPB’s sweeping market-monitoring function and require the Agency obtain permission before collecting consumers’ personally identifiable information.

Hensarling says that large financial institutions have not supported the CHOICE Act. The Congressional Budget Office reports that they would be unlikely to raise enough capital to meet the bill’s requirement for substantial regulatory relief.

Reports suggest that the Act in its current form is extremely unlikely to pass the Senate, but that the Trump administration has urged lawmakers to identify adjustments that would allow it to pass. Democrats are aggressively opposed to the bill, staunchly defending the CFPB and Dodd-Frank as essential to leveling the financial playing field for average Americans.

insideARM Perspective

Certainly if the CHOICE Act became law in its current form, leadership changes at the CFPB might produce a different set of rules for the debt collection market. However we do believe that the CFPB will indeed produce debt collection rules – there is significant agreement from all sides that clarity is needed, and that clarity is unlikely to come from Congress.

Today CFPB Director Richard Cordray announced that the Bureau will be separating the “right consumer, right amount” aspect of its debt collection rulemaking in order to ensure that complexities are properly addressed by intertwining rules for both creditors and their clients. 

At its summer meeting of the Consumer Financial Protection Bureau’s (CFPB) Consumer Advisory Board, Director Cordray’s opening remarks addressed multiple topics, including:

1. Transparancy in the credit card market
2. CFPB research into credit invisibility
3. The CFPB’s mandate to collect data on the availability of credit to small business
4. Debt collection rulemaking

The final item on the list kicks off the process that the ARM industry has been waiting for since the release of last summer’s Outline of Proposals Under Consideration and Alternatives Considered for third party debt collection.

The Outline intended to address three core issues:

1. Collecting the right amount from the right consumer
2. Ensuring that consumers understand the collection process and their rights in that process
3. Ensuring that consumers are treated with dignity and respect within the debt collection process

Topics in the Outline were wide-ranging and complex, including:

• Debt substantiation
• Transfer of data from collection agency to collection agency
• Validation notice
• Litigation disclosure
• Time barred debt
• Contact frequency and voicemail messages
• Time, place, and manner of communication
• Decedent debt
• Consumer consent
• Transfer of debt
• Recordkeeping

insideARM covered the details of the proposals and industry reactions extensively (scroll to the bottom of this article for a full list of links to our coverage on this topic).

Following release of the Outline, one key theme echoed by many was the difficulty for third party collectors to adhere to the debt substantiation and data transfer requirements without simultaneous rules also applying to their creditor clients, also referred to by the Bureau as “first” parties.

[Editor’s Note: “First Party” collections typically refers to either a creditor collecting on their own debt, or an outsourced firm collecting in the name of the creditor – or owner of the debt. These collectors are viewed as an extension of the creditor, while “Third Party” collectors communicate with consumers under their own name, i.e. first parties will say, “I am calling from ABC credit card company about your account,” while third parties will say, “I am calling from CDE collection agency about your credit card account with ABC credit.”  However, creditors also sometimes have their own in-house collection departments. This category of collectors is not currently subject to the Federal Debt Collection Practices Act (FDCPA). The theory has been that, because the communications are in the name of the creditor, there is a motivation by that creditor to maintain a good relationship with the consumer as well as the company’s reputation — therefore, the potential for harassment is much lower, and market forces eliminate the need for regulation. The CFPB and consumer advocates, however, have suggested that regulation of this category is indeed needed; that who is doing the collecting is irrelevant, and that consumers require similar protections either way.]

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The Outline of Proposals described above was issued in advance of the required Small Business Regulatory Fairness Enforcement Act (SBREFA) hearing — a step that by law must be incorporated into rulemakings. Last year’s SBREFA hearing covered third party collectors only. The Bureau subsequently announced it would convene a separate panel – and issue a separate outline – to address first party rules. 

Today, Director Cordray said he had listened to the concerns and had decided that one aspect that they had intended to address with the Proposals Under Consideration — collecting the right amount from the right consumer — would be best handled by addressing first and third party rules simultaneously. He said that intertwining the rules is the only way to ensure that collectors have the right information. 

Interestingly, this really incorporates a dynamic that is slightly different than “first party” collections — it addresses the relationship between the creditor and its client, and the creditor’s responsibilities in the collection process. In any event, Cordray said that this topic, “right consumer, right amount,” will be addressed after the other two.

The Director did not mention timing, however we anticipate that the CFPB will release its latest Regulatory Agenda update at any time now (this agenda is released twice per year – in the fall and spring – but has yet to be released for spring 2017). Historically, as it relates to debt collection, the agenda releases have simply pushed the pre-rule phase out by several months. Based on today’s announcement, it seems that we may see something more specific in the coming update.

JACKSONVILLE, Fla. — Diversified Consultants Incorporated, the industry leader in Telecom and Cable satellite collections, today announced the hiring of Nick Jarman as Senior Vice President.  Nick has previously held positions with Central Credit Services and was co-owner of Delta Outsourcing Group based in St Louis MO.  In addition, Nick was a previous board member for the ACA and writes regularly for ‘Collector’ magazine. 

Gordon Beck COO of Diversified Consultants Incorporated said: “It’s very difficult for any organization to be 100% sure of the employees that they bring in. In this case however, given Nick’s previous experience, his previous results and his appetite for continuous improvement, the decision was an easy one. We feel fortunate to welcome Nick to the DCI family.”

Nick Jarman stated: “The idea of working with DCI, the penultimate collection company in its specialty, was something that I have long thought of doing. When the opportunity arose, I jumped at it. I look forward to working with all employees at DCI and to contribute in every way possible to ensure that DCI stays on the road of continuous effectiveness and continuous improvement. I am honored to be afforded this opportunity.”

As the SVP for DCI, Nick’s responsibilities will encompass all of DCI’s departments.

TARZANA, Calif. — Jonathan Neil & Associates, Inc. (JNA), one of the premier 3rd party collection agencies in the country, is proud to announce the launch of its newly designed website. The new website features a more engaging look and a streamlined user experience. Enhancements include improved functionality for desktop and mobile users, more in depth information on core Services, Industries served and added pages for a Letter from the President and Careers.

John Student, President and CEO of JNA, released a statement following the launch of their new website:

“During the past 36 years, we have experienced extraordinary growth and change at Jonathan Neil & Associates, thanks largely to our continued commitment to placing the trust of our clients above all else. The double-digit growth of our company since 1981 reflects our commitment to building trust with our clients and our ability to provide efficient and economical approaches to collections. Over the years, we have successfully achieved key milestones, made significant advancements in technology and strengthened our position as one of the leading agencies across the country. 

The success of JNA is largely due to our philosophy that ‘our business is an extension of your business’. We do not take a ‘one size fits all’ approach to collections, and every aspect of our service is customized to meet the specific requirements of our client. Our commitment to developing personalized, long term relationships with clients has resulted in higher client satisfaction, and the continued growth of our company for over three decades.

As with every successful company, JNA recognizes that our employees are our greatest asset. We hire the most knowledgeable professionals in the industry who follow best practices to attain maximum dollar recovery, while always remembering to protect the image of the companies they represent. We take pride in knowing that our management team and many of our Collection Specialists have been employed for over 20 of our 30 plus years in business. 

JNA holds the prestigious Certificate of Compliance from the Commercial Law League of America and the International Association of Commercial Collectors. We are also certified and accredited by the Commercial Collection Agencies of America.

 Today, the JNA team is focused on the future and how we can expand our services globally, forge strategic alliances with companies that provide complementary technologies, provide value added services, and deliver the highest quality service in the industry.”

Contact:

John Student President & CEO
18321 Ventura Boulevard, Suite 1000
Tarzana, CA 91356
Direct (818) 668-2525
www.jnacollect.com

insideARM is proud to announce the 2017 Best Call Centers to Work For winners. This survey and award program is designed to celebrate excellence among call center work environments in customer care, collections, and outsourcing. 

We established the program in 2008 as the Best Places to Work in Collections. Now in our 10^th year of the program – and as the lines between collections, care, and outsourcing are blurring – we felt it was time to expand the tent. We re-named the program Best Call Centers to Work For, and expanded the eligibility beyond just collection firms. 

To be considered for participation, companies had to fulfill the following eligibility requirements:

• Be a for-profit or not-for-profit business or government entity;
• Be a publicly or privately held business;
• Must be in business a minimum of 1 year;
• Must have U.S. call center operations with at least 15 employees, providing either customer care, outsourced services, collections, or online chat services. Only employees working in the United States are eligible to be surveyed.
• Separate call center locations were asked to apply separately. 

As always, the program is administered by Best Companies Group, which conducts over 40 local, national and industry “Best Places” programs each year. insideARM was not involved in reviewing submissions or determination of awards. 

Companies from across the U.S. entered the rigorous two-part survey process to determine the Best Call Centers to Work For. The first part consisted of evaluating each nominated company’s workplace policies, practices, philosophy, systems and demographics. The second part consisted of an employee survey to measure the employee experience. The combined scores determined the top companies and the final ranking. 

This year, 29 companies met the standard to be selected. The Best Call Centers to Work For list is divided into three size categories: Small (15-49 employees), Medium (50-149 employees) and Large (150+ employees). 

All of us at insideARM applaud the winners on this great accomplishment. This is a rigorous process – it is NOT a pay to play contest. We encourage all call centers who meet the criteria to participate next year. Winning is a great badge of honor. However even those who don’t make the list get something extremely valuable – a blueprint for how they can improve – for virtually no cost.

To view the rankings by size category, and profiles on all of the winners, visit https://www.insidearm.com/best-call-centers/bcctwf-2017/

The following are this year’s winners, in alphabetical order:

Account Management Resources, LLC

American Profit Recovery, Inc.

Americollect, Inc.

A.R.M. Solutions, Inc.

Associated Credit Services, Inc.

Conrad Credit Corporation

ConServe – Fairport

Diversified Consultants Incorporated

Eastern Revenue, Inc.

Eltman Law, P.C.

First Credit Services, Inc.

GB Collects

Healthcare Receivables Group

Hilton Grand Vacations, Grand Vacations Services

Hunter Warfield

InvestiNet, LLC

Investment Retrievers, Inc.

KeyBridge Medical Revenue Care

NetTel USA

Professional Account Services, Inc.

Professional Finance Company, Inc.

Protocol Financial Service, LLC

Sentry Credit

State Collection Service, Inc.

Team Recovery, Inc.

The CCS Companies

Todd, Bremer & Lawson

United Credit Service, Inc.

Williams & Fudge, Inc.

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On May 16, 2016, in an order granting a defendant’s motion for judgment on the pleading a federal judge in Florida ruled that a debt collector’s letter on a time-barred account did not violate multiple provisions of the Fair Debt Collection Practices Act (FDCPA). The case is Valle v. First National Collection Bureau, Inc. (Case No. 16-62751, U.S.D.C, Southern District of Florida.)

A copy of the order can be found here. 

Background 

On October 10, 2016, Defendant, First National Collection Bureau, Inc. (FNCB,) sent the Plaintiff a collection letter in an attempt to collect a consumer debt on an account owned by LVNV Funding LLC. The Plaintiff alleged that she defaulted on the debt more than five years ago and has made no payment toward the debt since defaulting, and therefore any legal action to collect the debt is time-barred. The Plaintiff also alleged that the collection letter violated a variety of provisions of the FDCPA. The Plaintiff sought statutory and actual damages, an injunction prohibiting FNCB from engaging in further collection activities directed at the Plaintiff, and costs and reasonable attorneys’ fees. 

The Defendant did not dispute that the Plaintiff was the object of collection activity arising from consumer debt, or that the Defendant qualifies as a debt collector under the FDCPA. The parties’ dispute concerns whether the Defendant engaged in an act or omission prohibited by the FDCPA.

The matter was before the Court on the Defendant’s Motion for Judgment on the Pleadings.

Alleged Violation of § 1692g(a) of the FDCPA 

15 U.S.C. § 1692g(a) states that, “[w]ithin five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication. . .send the consumer a written notice containing – 

(1) the amount of the debt;

(2) the name of the creditor to whom the debt is owed;

(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;

(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and (5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.” 

The Plaintiff claims that the collection letter violated § 1692g(a) by failing to adequately inform the Plaintiff of these rights, as well as how to exercise these rights. 

However, the court disagreed stating: 

“Accordingly, since the collection letter set forth all of the information required to be provided by 15 U.S.C. § 1692g(a), and neither the Complaint nor the Plaintiff’s briefing identify any specific information that was missing or misleading, the Court grants the Defendant judgment on the pleadings with respect to the Plaintiff’s allegation that the collection letter violated § 1692g(a).” 

Alleged Violation of 15 U.S.C. § 1692f(8) 

15 U.S.C. § 1692f prohibits debt collectors from using “unfair or unconscionable means to collect or attempt to collect any debt,” and subsection (8) specifically prohibits the use of “any language or symbol, other than the debt collector’s address, on any envelope when communicating with a consumer by use of the mails. . .except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business.” 

The Plaintiff alleged that the collection letter violated this provision because the envelope used to mail the collection letter displayed a bar code through the transparent window of the envelope. 

Again, the court agreed with the defendant. The court wrote: 

“The bar code displayed through the window of the envelope does not implicate or identify the Plaintiff as a debtor in any way, nor has the Plaintiff alleged that the bar code identified her as a debtor. In light of the legislative history indicating that § 1692f(8) was intended to be limited to symbols indicating that the contents of the envelope pertain to debt collection, the Court does not find that the mere visibility of a bar code on an envelope containing a collection letter violates § 1692f(8). Accordingly, the Court grants the Defendant judgment on the pleadings with respect to the Plaintiff’s allegations that the Defendant violated 15 U.S.C. § 1692f(8).” 

Alleged Violation of 15 U.S.C. § 1692e(2)(A) 

15 U.S.C. § 1692e(2)(A) prohibits a debt collector from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt,” including the false representation of “the character, amount, or legal status of any debt.” 

The Plaintiff alleges that the collection letter violated this prohibition because it failed to sufficiently inform the Plaintiff that the debt was “absolutely time-barred,” and failed to “adequately disclose the impact making a payment would have, to wit, that making a payment would revive the Consumer Debt, thus making it legally enforceable. 

The collection letter stated, in relevant part: 

The law limits how long you can be sued on a debt. Because of the age of your debt, LVNV Funding LLC will not sue you for it, and LVNV Funding LLC will not report it to any credit reporting agency. In many circumstances, you can renew the debt and start the time period for the filing of a lawsuit against you if you take specific actions such as making certain payment on the debt or making a written promise to pay. You should determine the effect of any actions you take with respect to this debt. 

Again, the court agreed with the defendant, writing: 

“The collection letter specifically stated that FNCB would not sue the Plaintiff because of the age of the debt. The collection letter also specifically disclosed that payment of the debt or a promise to pay the debt could re-start the statute of limitations. Even from the perspective of the least sophisticated consumer, the Defendant did not misrepresent the legal status of the debt. Therefore, the Court grants the Defendant judgment on the pleadings with respect to the Plaintiff’s allegation that the letter violated 15 U.S.C. § 1692e(2)(A).” 

Alleged Violations of 15 U.S.C. § 1692e(10) 

15 U.S.C. § 1692e(10) prohibits “[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.” 

The Plaintiff alleges that the Defendant’s use of the language “will not sue you” was misleading because it implied that the Defendant chose not to sue the Plaintiff when, in reality, the Defendant could not sue the Plaintiff as a matter of law because of the age of the debt. 

The court disagreed, writing:

“The Court disagrees. The phrase with which the Plaintiff takes issue must be read in the proper context. The relevant paragraph states in full: “The law limits how long you can be sued on a debt. Because of the age of your debt, LVNV Funding LLC will not sue you for it, and LVNV Funding LLC will not report it to any credit reporting agency.” Thus, the Defendant informed the Plaintiff that there are legal limits to how long she could be sued for the debt, and then stated that “Because of the age of your debt,” she would not be sued. Read in the context of the entire paragraph, the phrase “will not sue you” is not false or deceptive, even from the perspective of the least sophisticated consumer.” 

insideARM Perspective 

On March 27, 2017 insideARM wrote about another case involving this debt collector and the same letter. See that article here.  The case discussed in that earlier article was from United States District Court in Indiana. As noted above, the case discussed today was from the Southern District of Florida.  The two cases and stories should be read together. 

Here is classic situation where a debt collector now has two different courts deciding the same issue, but with opposite results. 

insideARM contacted FNCB for comment.  Issa Moe, General Counsel and Chief Compliance Officer, responded: 

“We are thrilled with the Court’s decision, particularly as it pertains to the disclosure regarding the time-barred nature of the debt at issue and the impact of certain actions, such as payments, on the statute of limitations.  FNCB takes great care to ensure that every word in its letters is clear and unambiguous to the consumer.  The out-of-statute disclosure challenged in this lawsuit is no exception.  The disclosure is the product of thoughtful analysis by industry leaders of prior judicial decisions and regulatory guidance.  Despite an inconsistent decision regarding a similar disclosure in an Indiana federal court, FNCB intends to stand behind its disclosures.  We hope this decision paves the way for other agencies to do the same.”  

Is there a lesson to be learned from these two cases? I go back to my comment in the March 27, 2017 article:

“Collecting on Out-of-Stat debt continues to be a potential landmine for collectors. “

The road sign should read: “Proceed with Extreme Caution.”

On May 18, 2017, a federal judge in Missouri denied joint motions for summary judgment on the issue of whether a letter that “did not state that interest was accruing”, violated the Fair Debt Collection Practices Act (FDCPA). The case is Mygatt v. Medicredit, Inc. (Case No. 15-1947, U.S. D.C., Eastern District of Missouri). 

A copy of the court’s memorandum and order can be found here.   

Background 

Plaintiff Timberly Mygatt incurred debt as a result of medical treatment she received at Missouri Delta Medical Center (MDMC). Medicredit, Inc. (Medicredit) sent at least two collection letters to Mygatt in an attempt to collect the debt owed to MDMC. 

Medicredit mailed Mygatt a letter, dated December 24, 2014, listing a balance due of $300.23. Medicredit’s December 24, 2014 letter did not disclose that the “Balance Due” of $300.23 would increase after the date of the letter. 

Medicredit mailed Mygatt a letter, dated April 25, 2015, listing a balance due of $308.20. Medicredit’s April 25, 2015 letter did not disclose that the “Balance Due” would increase after the date of the letter. As of April 25, 2015, Medicredit was assessing 9% interest per annum on Mygatt’s debt. 

Mygatt alleges that on October 23, 2015, she called Medicredit and was informed that the balance due was $319.44. Mygatt claims she was told that the amount from Medicredit’s April 25, 2015 letter had increased because Medicredit was assessing interest on Plaintiffs MDMC debt. Every dollar of interest that accrued on the MDMC debt occurred after the accounts were placed with Medicredit for collections.

Both parties filed motions for summary judgment.

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. 

The Court’s Memorandum and Order 

Mygatt argued that she is entitled to partial summary judgment with respect to Medicredit’s liability under 15 U.S.C. §1692e(2)(A). See 15 U.S.C. §1692e(2)(A) (“A debt collector may not use any false, deceptive, or misleading representation or means in connection. Mygatt argued that the contents of Medicredit’s December 24, 2014 and April 25, 2015 letters, along with the October 2015 collection call, violate the FDCPA because they informed Mygatt that she had a single “Balance Due” on a medical debt, but with the collection of any debt, Medicredit subsequently assessed and attempted to collect interest beyond the static balance amount listed in the letter. 

Medicredit argued that it did not violate the FDCPA by failing to disclose the accrual of interest in its letters. Medicredit also argued that it is not liable under the FDCPA for failing to specify in its letters that interest was accruing because Mygatt had conceded and admitted that interest was accruing on her debt with Medicredit. 

The Court’s Decision   

As noted above, the judge in this case, the Honorable Ronnie L. White, U.S. District Court Judge, denied both motions for summary judgment. This means the matter will proceed.  

As to the plaintiff’s motion, Judge White wrote: 

“Mygatt maintains that the FDCPA requires debt collectors, when they notify consumers of their account balance, to disclose that the balance may increase due to interest and fees. See Avila v. Riexinger & Assocs., LLC, 817 F.3d 72, 76 (2d Cir. 2016) (“Because the statement of an amount due, without notice that the amount is already increasing due to accruing interest or other charges, can mislead the least sophisticated consumer into believing that payment of the amount stated will clear her account, we hold that the FDCP A requires debt collectors, when they notify consumers of their account balance, to disclose that the balance may increase due to interest and fees .”) (vacating dismissal of the plaintiffs’ claims on this ground). 

Medicredit takes the position that a debt collector is not required by the FDCPA to state that interest is accruing on debt. Medicredit argues that whether a debt collector is required by the FDCPA to state that interest is accruing is a matter that must be evaluated on a case-by-case basis. Medicredit contends that, as a bare minimum, a fact question exists on the issue that precludes summary judgment in favor of Mygatt. 

The Court holds that Mygatt has failed to establish that she is entitled to summary judgment as a matter of law for her claim under 15 U.S.C. § 1692e(2)(A). As an initial matter, the Court notes that the case law from this district cited by Mygatt were all denials of motions to dismiss and have little value in determining a violation as a matter of law. Likewise, district courts have refused to identify a bright line rule of liability. Rather, the district courts evaluated the facts of the cases and refused to dismiss the FDCPA claims on those facts. 

Moreover, the fact that the Eighth Circuit has yet to address whether a debt collector must disclose that interest is accruing on a debt bolsters this Court’s decision to refrain from deciding this issue as a matter of law. Finding that the evidence before the Court is disputed and not amenable to disposition as a matter of law, the Court denies Mygatt’s Motion for Summary Judgment.” 

As to Defendant’s motion, Judge White wrote: 

“Medicredit states that omitting to disclose the accrual of interest in a collection letter is not a violation of the FDCPA. Medicredit acknowledges that several, recent district court cases have held that a debt collector may violate the FDCPA by sending a written demand for payment without specifying interest accruing on the debt. however, notes that the May Court stated that “it would be highly improvident for this Court to establish a bright line rule that a debt collector assessing interest without specifying so in its collection letters is, as a matter of law, liable for violating Sections 1692g(a)(l) and 1692e(2)(A) of the FDCPA. That inquiry, both in these proceedings, and in future cases, will necessarily turn on the particular facts of the case.” 

Medicredit argues that it is not liable under the FDCPA for failing to specify in its letters that interest was accruing because Mygatt has conceded and admitted that interest was accruing on her debt with Medicredit. 

The Court denies Medicredit’s Motion for Summary Judgment. As previously discussed, whether there was a violation of the FDCP A is largely an issue of fact that is not generally amenable to summary judgment. The Court holds that various factual disputes preclude entry of summary judgment. 

The Court finds, without holding, that a reasonable person could find that the balance provided to Mygatt, which did not state that interest was accruing, was confusing. The Court defers to a factfinder to determine whether Medicredit violated the FDCPA.” 

insideARM Perspective 

This decision is not a dispositive outcome in this case. The court merely denied both motions for summary judgment. As a result, this case will continue to either a settlement or a trial where the trial judge or jury will decide whether there was an FDCPA violation.  The case highlights the issue regarding failure to mention whether or not an account is continuing to accrue interest. 

As noted yesterday in our article on Taylor v. Financial Recovery Services, Inc. (Case No. 15-4685, U.S.D.C Southern District of New York), these two decisions should be read together.  The facts in this case are clearly distinguishable from the facts in the Taylor matter. Here, the debt was collector was, in fact, continuing to accrue interest on the account. In Taylor, the debt collector was not accruing interest.