Archives for July 2017

Pennsylvania Attorney General Josh Shapiro announced last week that he is creating a Consumer Financial Protection Unit to protect Pennsylvania consumers from financial scams. He also announced the appointment of Nicholas Smyth, who helped create the federal Consumer Financial Protection Bureau (CFPB), as Assistant Director of the Office of Attorney General’s Bureau of Consumer Protection with a dedicated focus on financial initiatives.

According to the announcment:

The effort will focus on lenders that prey on seniors, families with students, and military service members, including for-profit colleges and mortgage and student loan servicers.

The focus of consumer financial protection shows Attorney General Shapiro’s commitment to protect Pennsylvanians from scams. In recent weeks, Attorney General Shapiro filed a lawsuit with other Attorneys General against Education Secretary Betsy DeVos, after DeVos announced plans to roll back a critical student lending rule, and he also took action with colleague Attorneys General, urging the Federal Communications Commission to allow telephone companies to block illegal robocalls.

Smyth brings expertise in auto finance, student lending, debt collection and issues impacting military families. At the CFPB, Smyth led the investigation of the subprime auto lender Drivetime, which resulted in an $8 million settlement in 2014. He worked on CFPB v. ITT Educational Services, Inc., the CFPB’s first enforcement action against a for-profit college. Smyth also worked on an investigation of U.S. Bank’s MILES Program, a subprime auto finance program for military service members, which led to $6.5 million in consent orders.

Before joining the CFPB as its fourth employee, Smyth was part of a team at the U.S. Treasury Department that drafted and revised the CFPB’s enabling act, the Consumer Financial Protection Act of 2010 (Title X of the Dodd-Frank Act).

insideARM Perspective

This action comes amidst a serious push by Republicans in Congress to eliminate — or at a minimum restructure the CFPB, subject it to Congressional budget approval, and fire its Director, Richard Cordray.

Other states have also taken steps to double down on consumer finance laws, which has caused some to be accused of overreach. This article published in March accuses the Minnesota Department of Commerce. The article quotes a letter sent to Governor Mark Dayton by three Republican members of the Minnesota House of Representatives,

“[Court opinions and other legal filings published in the last several months] paint a disturbing picture of dubious motivation and disregard for the law, in which the good work of public servants is overshadowed by the inappropriate behavior of a few high-level officials. These conclusions come not just from adverse parties, but from state and federal judges of high regard. “

Two particular cases are mentioned as examples. Neither are debt collection related, but both are similar to arguments that have been made against the CFPB. One is a so-called consumer protection case pursued in the absence of supporting evidence; the other concerns the state’s apparent ability to collect any or as much personal data as it deems necessary to pursue an investigation.

In February, Maria Vullo, New York’s Superintendent of Financial Services, sent this letter to state legislators that highlighted conflict between the Governor and the Attorney General over a proposal related to the structure of the state’s financial services regulatory bodies. The Attorney General had sent a letter describing a proposal by the Governor to be,

“Wholly unnecessary overreach by the Executive that would alter the enforcement arrangement the Legislature established when creating DFS, resulting in unnecessary and harmful overlapping state enforcement authority, which could jeopardize ongoing and future investigations.”

Vullo says,

“The Governor’s Proposals only serve to protect New Yorkers from misconduct committed by banks and insurers, student loan servicers, and bad actors. The Proposals do not create overlapping enforcement jurisdiction. The Proposals do not alter the balance of authority between DFS and the Attorney General. And the Proposals do not require additional or duplicative funding for DFS. The Attorney General’s opposition to the Proposals are based on nothing other than petty concerns over turf.”

While quite a few states have had their own consumer protection laws for years, it seems that the current uncertainty at the federal level will only serve to fuel activity among states to revisit, strengthen, or augment existing laws or enforcement structures.  

RICHARDSON, Texas – RGS Financial, Inc., a leading BPO and ARM services provider, is pleased to announce the recent addition of Rob Norwood as Vice President of Sales. Mr. Norwood, a 24-year veteran of the credit and collections industry, has led national sales teams in a career that has helped fuel the growth of several companies engaged in collections and revenue cycle management. He has demonstrated an unwavering commitment to client satisfaction and is knowledgeable in multiple collection verticals.

“I am extremely excited about the opportunity to help RGS garner new business relationships as well as help support our current clients”, said Mr. Norwood. “RGS has a great reputation and commitment to service to their clients and the engagement of the people their clients serve. They have a history of valuing their employees and are on the cutting edge with regard to data security, privacy regulations, and compliance. “

Mike Ryalls, RGS CSO, said “We are thrilled to have Rob join the RGS team.  He has a proven track record of successful sales and has been responsible for the extensive growth of companies in the financial services, student loan, and health care segments. We are very excited to combine his business acumen and client-centric sales approach with our great team.” 

About RGS Financial

RGS Financial is a nationally recognized BPO and accounts receivable management company. RGS boasts proven capabilities and strategies for exceeding the needs of both clients and consumers.

RGS is built on a solid foundation of these core business values:

• Professional integrity
• Client and customer respect
• Attentive service
• Focused responsiveness
• Dedication to achieving solutions
• Business accountability

The RGS founding partners set out from the beginning to establish a company based on solid business values. These values are who RGS is and reflect what RGS provides both its clients and the consumers it serves. RGS leaders have leveraged their diverse experience to build solutions that exceed today’s typical business objectives. In addition, the expertise of RGS employees means that each customer is treated with the utmost respect. 

Rob Norwood can be reached at rob.norwood@rgsfinancial.com or phone 803.448.2799

Today the Consumer Financial Protection Bureau (CFPB) published guidance on new timelines for the Notice of Proposed Rulemaking (NPRM) for debt collection. 

The guidance appeared in two separate locations:

Kelly Cochran, Assistant Director for Regulations, published a post in the CFPB blog titled Spring 2017 rulemaking agenda. Read the blog here. 

The section on debt collection reads as follows: 

“We are also engaged in rulemaking activities regarding the debt collection market, which continues to be the single largest source of complaints to the federal government of any industry. We are concerned that because consumers cannot choose their debt collectors or “vote with their feet,” they have less ability to protect themselves from harmful practices.

In January 2017, we published the results of a survey of consumers about their experiences with debt collection. We have also received encouragement from industry to engage in rulemaking to make the standards clear and address issues of concern under the Fair Debt Collection Practices Act (FDCPA), such as the application of the FDCPA to modern communication technologies under the 40-year-old statute. We released an outline of proposals under consideration in July 2016 concerning practices by companies that are “debt collectors” under the FDCPA, in advance of convening a panel under the Small Business Regulatory Enforcement Fairness Act (SBREFA) in conjunction with the Office of Management and Budget and the Small Business Administration’s Chief Counsel for Advocacy to consult with representatives of small businesses that might be affected by the rulemaking. Building on feedback received through the SBREFA panel, we have decided to issue a proposed rule later in 2017 concerning debt collectors’ communications practices and consumer disclosures. We intend to follow up separately at a later time about concerns regarding information flows between creditors and FDCPA collectors and about potential rules to govern creditors that collect their own debts.”

Emphasis added by insideARM. 

Also, published today on the website of the Office of Information and Regulatory Affairs, Office of Management and Budget was a more definitive date for the NPRM. The date listed on that site was 9/00/2017. See that notice here. 

insideARM last wrote about the proposed rulemaking on June 8, 2017, when CFPB Director Richard Cordray spoke at the summer meeting of the CFPB’s Consumer Advisory Board. At that time he 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. 

For additional background read insideARM’s detailed coverage of the CFPB’s debt collection rulemaking:

CFPB Outlines Debt Collection Rulemaking Proposals

insideARM Perspective on CFPB Outline of Proposed Debt Collection Rules – Communication Part 1 (Contact frequency and voicemail messages)

insideARM Perspective on CFPB Outline of Proposed Debt Collection Rules – Communication Part 2 (General time, place, and manner restrictions; decedent debt; and consumer consent)

insideARM Perspective on CFPB Outline of Proposed Debt Collection Rules – Information Integrity (Data integrity, data transfer, substantiation, validation notice)

insideARM Perspective on CFPB Outline of Proposed Debt Collection Rules – Litigation and Time-Barred Disclosures

What Collectors Really Need to Know About the CFPB’s Proposed Rules – a podcast by Attorney John Rossman

15 Industry Experts React to CFPB Outline of Proposed Debt Collection Rules

Webinar: CFPB Rulemaking and Overview (August 16, repeated on August 18) – free for Compliance Professionals Forum members; $59 for others

President of FMA Alliance Shares Experience at Debt Collection SBREFA Hearing

Creditor Rights Law Firms Well-Represented on CFPB’s Small Business Review Panel

Small Business Representative Shares Her Thoughts About Yesterday’s Debt Collection SBREFA Hearing

insideARM Perspective

While the two notices deliver similar messages, industry insiders believe that the September timeframe will be difficult to meet. The CFPB has a heavy agenda right now. Most suspect that the “later in 2017” description in the Spring 2017 rulemaking agenda the is most accurate. 

insideARM will continue to monitor and report on this critical item.

In an opinion published earlier this week, a federal judge in New York pulls open the curtain to shed light on the practices and relationship between credit repair organization Credit Shield 360 (CS360) and the New Jersey-based law firm RC Law Group, PLLC. The case is Taylor-Burns v. AR Resources, Inc. (Case No. 16-cv-1259, U.S.D.C. Southern District of New York.

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

Background 

Plaintiff Tonya Taylor-Burns filed a lawsuit against AR Resources, Inc. (ARR) on January 11, 2016. The lawsuit was removed to federal court on February 18, 2016. The suit alleges that ARR failed to list an account as disputed after she purportedly sent a letter to ARR disputing the debt. She alleges that ARR’s failure to report the debt as disputed violates multiple provisions of the FDCPA. She is requesting actual damages, statutory damages, attorney’s fees, and costs. 

Plaintiff was deposed on September 13, 2016. During her deposition, she identified the purported dispute letter (Letter) that was dated June 5, 2015. Plaintiff testified at her deposition that she did not write, send, or sign the Letter. She testified that CS360 sent it. The Letter was sent via facsimile from 1-303-991-7930, which is a Denver, Colorado area code. Plaintiff was not in Denver, Colorado on June 5, 2015; she resides in Manhattan.

CS360, the entity that sent the letter, is a credit repair agency. Plaintiff contacted CS360 around May of 2015 to obtain credit repair services. Plaintiff and CS360 produced an undated copy of a Collection Shield 360 Service Agreement (CS360 Agreement) with Plaintiff’s purported electronic signature. The CS360 Agreement states that Plaintiff is not responsible to pay CS360 for the deletion of collection accounts. However, CS360 is entitled to “receive a fee of $150.00 per Deleted Collection account only from FDCPA settlement funds collected for Client in excess of $200.00.”

The CS360 Agreement provides that it shall only receive payment from FDCPA settlement funds. 

The CS360 Agreement also authorizes CS360 “to share any info [sic] that could be a potential claim against such companies with RC Law Group so that it may pursue such claims on my behalf.” CS360 and RC Law Group, the firm representing Plaintiff in this action, both do business at 7150 Parsons Avenue, Flushing, NY. 

Plaintiff testified that she did not sign any fee agreement with RC Law Group. But, after her deposition, Plaintiff also produced an undated Retainer Agreement with RC Law Group (RC Law Agreement) bearing her purported electronic signature. The RC Law Agreement states that Plaintiff retained RC Law Group” to provide legal advice and services for suits and issues that may arise under the Fair Debt Collection Practices Act.” The RC Law Agreement also states that “the Client ‘s agents should also be treated as clients, including Collection Shield 360.” 

Finally, Plaintiff stated in her deposition that she did not sustain any actual damages. 

The RC Law Agreement provides that the Plaintiff would receive 20% of the settlement amount on a FDCPA statutory award up to $1,000, but her portion of the settlement would not be less than $200. As such, RC Law Group would retain 80% of a $1,000 statutory FDCPA award. Further, RC Law Group is entitled to retain 45% of any actual damages recovered under the FDCPA, and all attorney’s fees and costs awarded under the FDCPA. The Agreement also states that it “is to be interpreted in accordance with the laws of the State of New York and with the ethical requirements of that jurisdiction.”

During the course of discovery, ARR took the deposition of David Bergida, who was the corporate designee of CS360. He stated that he did not think that CS360 would receive any payment from RC Law Group if RC Law Group was successful in recovering money for the Plaintiff in the instant action. However, Bergida testified that RC Law Group compensates CS360 for referring clients to RC Law Group.

After discovery, Defendant moved for summary judgment to dismiss the complaint on April 5, 2017.  

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 Opinion 

The CS360 Agreement 

ARR did not dispute that it received the Letter, or that it did not report the debt as disputed; rather, ARR argued that the Letter was written and sent without actual or apparent authority because CS360 is a credit repair organization, subject to the Credit Repair Organizations Act (“CROA”), 15 U.S.C. § 1679 et seq., and the contract between the Plaintiff and CS360 did not meet the CROA requirements. Thus, the issue is whether ARR, the debt collector, received a valid dispute of the debt. 

The CROA requires a written contract between the client and the organization to include several mandatory terms and disclosures. The CROA makes any contract not in compliance with the CROA void and unenforceable.

The court found that the CS360 Agreement failed to comply with seven different requirements of the CROA and therefore void and unenforceable. 

The Honorable Robert W. Sweet, U.S. District Court Judge wrote:

“The lack of a CROA- compliant contract between CS360 and Plaintiff – and therefore the lack of a valid contract between CS360 and Plaintiff – means that CS360 had no authority to send the Letter on Plaintiff’s behalf. 

As previously noted, the Plaintiff testified that she did not prepare, sign, or send the Letter. She contacted CS360, which sent the Letter on her behalf. Therefore, no valid dispute was made, ARR cannot be liable for an alleged failure to report the debt as disputed, and the ARR motion for summary judgment dismissing the Complaint is granted.” 

The RC Law Agreement 

The court then addressed the issue of whether the RC Law Agreement violates New York’s champerty laws and ethical rules.

Editor’s Note: The Merriam Webster dictionary defines champerty as follows: “a proceeding by which a person not a party in a suit bargains to aid in or carry on its prosecution or defense in consideration of a share of the matter in suit.” 

Judge Sweet wrote: 

“New York adopted the prohibition against champerty by statute, providing: 

An attorney or counselor shall not:

Directly or indirectly, buy, take an assignment of or be in any manner interested in buying or taking an assignment of a bond, promissory note, bill of exchange, book debt, or other thing in action, with the intent and for the purpose of bringing an action thereon.           

The facts set forth above establish that CS360 identifies potential individuals to act as plaintiffs in consumer protection lawsuits filed by RC Law Group. The CS360 Agreement states that CS360 provides free credit repair services to clients, and CS360 receives payment of $150.00 “from FDCPA settlement funds collected for Client in excess of $200.00.” However, CS360 is not a law firm and cannot represent clients in FDCPA lawsuits. The CS360 Agreement further provides that CS360 is authorized “to share any info that could be a potential claim against such companies with RC Law Group so that it may pursue such claims on my behalf.” RC Law Group identifies CS360 as a client in its fee agreement. As evidenced by the CS360 Agreement, the RC Law Agreement, and the deposition of Bergida, CS360 and RC Law Group are intertwined entities, generating revenue through the filing of lawsuits such as this one.

The CS360 Agreement and the RC Law Agreement show that these entities’ operations depend upon clients signing over the majority of their interests in their lawsuits to CS360 and RC Law Group, allowing the entities to pursue FDCPA claims as they please and share in the majority of any recovery. 

Given that there is no evidence of actual damages in this case, Plaintiff therefore stands to recover at most $200, and likely only $50 after payment of CS360’s $150 fee for a successful FDCPA claim. Through the RC Law Agreement and CS360 Agreement, RC Law Group has directly or indirectly taken over an interest in the Burns’ cause of action, which is prohibited by the champerty laws of New York. 

Lastly, the opinion also discusses three potential violations of the New York Rules of Professional Conduct: 

“Rule 1.8 (i) of New York Rules of Professional Conduct prohibits a lawyer from acquiring a proprietary interest in a lawsuit. By taking an 80% contingent fee on statutory damages and 45% contingent fee on actual damages, in addition to all attorney’s fees and costs, RC Law Group took a proprietary interest in this lawsuit. 

Rule 5.4 prohibits a lawyer from sharing legal fees with a non-lawyer. The CS360 Agreement states that RC Law Group pays CS360 $150.00 out of FDCPA settlements that RC Law Group obtains on behalf of clients such as Burns. 

Rule 7.2 prohibits a lawyer from compensating a person or organization to recommend or obtain employment by a client. During Bergida’s deposition, he testified that RC Law Group compensates CS360 for referring clients to RC Law Group. 

Based on the violations of the New York Rules of Professional Conduct, and the champerty laws discussed above, ARR’s motion for summary judgment is granted and the Plaintiff’s claim for attorney’s fees is dismissed.” 

insideARM Perspective

The opinion paints a disturbing picture for the ARM industry. ARM firms are dealing with high volumes of dispute letters from “credit repair” organizations throughout the United States. Some reputable, some not. 

It is impossible to know whether the sender has an agreement that is in compliance with the CROA. Therefore, it would not be prudent policy to ignore all disputes from a credit repair organization based upon the court’s opinion in this case. 

Is the fact situation described in this matter an anomaly? Who is to know? Who wants to spend money in attorney fees to find out in a specific case? On the other hand, defendants in a FDCPA suit that clearly originated from a credit repair organization would be wise to conduct discovery similar to the discovery in this case to dig into the relationships between a consumer, a credit repair organization, and a law firm. 

Finally, for those interested, the CS360 website can be found here. The RC Law Group website can be found here.

This article originally appeared on Maurice Wutscher’s Consumer Financial Services Blog and is republished here with permission.

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The U.S. Court of Appeals for the Fifth Circuit recently affirmed summary judgment under the Fair Debt Collection Practices Act (FDCPA) in favor of the debtor and against a debt collector, where the debt collector failed to mark the debtor’s account as disputed when it credit reported the account.

The debt collector admitted that it had not marked the account as disputed because it incorrectly believed that credit reporting a debt as disputed was subject to the requirements of 15 U.S.C. § 1692g, which governs validation of a debt and the treatment of disputed debts.

In so ruling, the Fifth Circuit also rejected the debt collector’s Spokeo argument, holding that the alleged violation provided sufficient standing.

A copy of the opinion in Sayles v. Advanced Recovery Systems is available at:  Link to Opinion.

The debt collector sent two letters to the debtor about a debt.  Nearly a year later, the debtor ran his credit report and discovered a debt that he did not recognize.  He sent a letter to the debt collector disputing the validity of the debt but got no response.  The debtor ran his credit report again six weeks later and found that the debt collector had updated the trade line to reflect some of the information from his letter but had failed to mark the account as disputed. The debtor sued the debt collector asserting that it had violated section 1692e(8) of the FDCPA.

As you may recall, section 1692e(8) of the FDCPA (15 U.S.C. § 1692e(8)) prohibits a debt collector from communicating or threatening to communicate false credit information, which includes the failure to communicate that a disputed debt is disputed.

Entirely separate from that prohibition are the requirements in section 1692g of the FDCPA (15 U.S.C. § 1692g) concerning the validation and verification of debts.  Section 1692g(b) requires, among other things, that a consumer must dispute the debt in writing within 30 days after receiving the validation notice from a debt collector.

The debt collection agency admitted that it had not reported the account as disputed to the credit reporting agencies, but argued that it was not required to do so because the debtor had not disputed the debt in writing within 30 days after receiving the validation notice.  The debt collector reasoned that section 1692e(8) incorporates the requirements of section 1692g, perhaps because both address “disputes.”

However, the Fifth Circuit held that is where the debt collector went wrong.

The Court held that the requirements of section 1692g are unique to the validation process in which the debt collector validates the debt and the debtor has the opportunity to get additional information to verify the debt.  The debt validation process does not apply to credit reporting of disputed debts, the Fifth Circuit held.  Under section 1692e(8), disputed debts, no matter how or when they are disputed, must be credit reported as disputed.

The Fifth Circuit held that a debtor can contact a debt collector at any time in any manner to state that the debtor disputes the debt and the debt collector will have to credit report it as disputed.  Thus, the Court held, if the debtor calls the debt collector months or years after the validation letter has gone out and disputes the debt, the debt collector does not have to verify the debt under section 1692g but it does have to mark that debt as disputed in its credit reporting.

The Court went a step further and explained that the language of section 1692e(8) “requires no notification by the consumer, written or oral” for the requirement to credit report a debt as disputed to kick in.  The Fifth Circuit noted that section 1692e(8) states that a debt collector must report a debt as disputed where it “knows or should know” that the debt is disputed.

The Court explained that this means that if the debt collector has any information or knowledge that a debt is disputed, even if the knowledge did not come from the debtor, the debt collector must report it as disputed.  While it may be difficult to imagine what knowledge a debt collector might have that could independently inform it of a dispute apart from some type of communication from the debtor, this ruling makes clear that it is something debt collectors should be on the lookout for.

The Fifth Circuit also rejected the debt collector’s Spokeo argument finding that the stated violation provided sufficient standing. Accordingly, the Court affirmed summary judgment in favor of the debtor and against the debt collector.

Today in San Antonio, Texas the Federal Trade Commission (FTC) is hosting a “Military Consumer Financial Workshop: Protecting Those Who Protect Our Nation” at Trinity University, to examine financial issues and scams that can affect military consumers, including active duty servicemembers in all branches and veterans.

According to an FTC announcement, the one-day workshop also will discuss FTC resources available to military consumer advocates and representatives on financial readiness and fraud prevention. The workshop will bring together military consumer advocates, consumer groups, government representatives (local, state, and federal), military legal services and legal clinics (including those at universities), and all service branches and industry representatives.

Topics of discussion will include:

• Auto purchase, financing, and leasing
• Student and other lending, including installment credit practices
• Debt collection
• Financial literacy and capability, including identity theft and financial resources
• Avoiding scams

The “Military Consumers’ Experience in Debt Collection” panel includes:

Moderator:

• Thomas Kane
  Senior Attorney, FTC Division of Financial Practices

Panelists:

• Anthony Davis 
  Team Lead, Community Readiness Consultant, Military and Family Readiness, JBSA Lackland Air Force Base
• Timothy Gasaway 
  Managing Attorney, Veterans Legal Assistance Project, Texas Legal Services Center
• Olha N. M. Rybakoff
  Senior Counsel, Tennessee Office of Attorney General
• Mark Thompson
  Owner and President, T. L. Thompson & Associates

Mark Thompson is the Owner and President of T.L. Thompson & Associates, Inc., a Dallas, Texas based agency started by his father in 1976. He enlisted in the U.S. Navy in 1976 and was trained as an Operations Specialist (Radar Operator). After transferring to the Naval Reserve in 1989, Mr. Thompson was recalled to Active Duty for Operation Desert Storm in 1991, eventually retiring as a Chief Petty Officer in 2000.

Upon returning home in 1992, Mr. Thompson entered the family business and joined his two brothers as a Collector, later becoming the Training Manager, then Collection Manager, and eventually General Manager. Becoming active in his state organization, Mr. Thompson served as President of the American Collectors Association (ACA) of Texas in 2000—the very same year he was honored as the ACA Instructor of the Year. The experience of having been deployed overseas in combat zones, coupled with his knowledge as an ACA Instructor, has given Mr. Thompson a unique insight into the challenges facing all armed forces members, and the ability to effectively train collectors on how to treat service members with the dignity and respect that they have earned.

insideARM Perspective

insideARM published a press release yesterday regarding a webinar co-produced by the Consumer Relations Consortium (CRC) and Consumer Action designed for community based organizers who work directly with consumers to offer an “insider’s perspective” on how to start a dialogue with a legitimate debt collector, and how to spot a scam. While not focused on the military, that webinar (like the FTC’s workshop) is another great example of a partnership between industry and groups representing consumers to educate the public on how to protect themselves from financial scams.

MINNEAPOLIS, Minn. — DCM Services, the industry leader in estate and specialty account recovery solutions, this week announced the promotion of two key executives: DeAnna Busby-Rast and Shawn Brown.

DeAnna Busby-Rast is promoted to Chief Business Development Officer (CBDO). In her new role, Busby-Rast will lead all strategic sales and marketing as well as oversee all product and service development, internal and external communications and public relations/media management. Busby-Rast, a recognized expert in the call center and receivables industry for more than 20 years, joined DCM Services in 2008. She has since held the titles of Vice President, Senior Vice President and Executive Vice President of Business Development. Prior to joining DCM Services, Busby-Rast led account receivable sales and domestic and international account management for Omnium Worldwide / West Asset Management. Busby-Rast holds a Bachelor of Arts in Marketing Management from Bellevue University.

Shawn Brown is promoted to Chief Financial Officer (CFO). Brown will oversee the integration of all sales objectives and operational plans in support of the company’s vision in addition to leading annual business planning processes around these strategic objectives. Brown, a financial services industry expert with 25 years of experience, joined the DCM Services team in 2012 as Controller and most recently held the Executive Vice President and Controller role. Brown holds his Masters of Accountancy from Truman State University.

“DeAnna and Shawn have been instrumental in elevating DCM Services to a leadership position within our industry,” said Ben Boyum, Chief Executive Officer of DCM Services. “Their focus on client satisfaction, consultative partnering and the provision of innovative solutions has been a key differentiator for our organization.”

About DCM Services

Minneapolis-based DCM Services, is the industry leader in estate and specialty account resolution services, maximizing the value of client portfolios across financial services, healthcare, retail, and telecom industries through innovation and performance. Its recovery solutions offer a full range of services from proprietary web-based solutions to full outsourcing, maintaining an unmatched spectrum of innovative solutions that increase recoveries, protect brand value, and enhance survivor relationships – with respect and sensitivity. For more information on all DCM Services’ offerings, visit www.dcmservices.com. 

As of July 5, 2017, significant changes to West Virginia’s debt collection law are in effect. Senate Bill 536 was passed on April 5, 2017 and approved by West Virginia Governor Jim Justice on April 21, 2017. The Bill includes several changes to West Virginia’s Consumer Credit and Protection Act that will impact debt collectors in West Virginia. This article will address two of the changes.

Statute of Limitations Disclosure 

The statute now requires specified disclosures in all written communication with a consumer regarding a debt that is beyond the statute of limitations for filing a legal action for collection.   

The statute now reads:

46A-2-128. Unfair or unconscionable means. 

No debt collector may use unfair or unconscionable means to collect or attempt to collect any claim. Without limiting the general application of the foregoing, the following conduct is deemed to violate this section: 

(f) When the debt is beyond the statute of limitations for filing a legal action for collection, failing to provide the following disclosure informing the consumer in all written communication with such consumer that:

1. When collecting on a debt that is not past the date for obsolescence provided for in Section 605(a) of the Fair Credit Reporting Act, 15 U. S. C. 1681c: “The law limits how long you can be sued on a debt. Because of the age of your debt, (INSERT OWNER NAME) cannot sue you for it. If you do not pay the debt, (INSERT OWNER NAME) may report or continue to report it to the credit reporting agencies as unpaid”; and
2. When collecting on debt that is past the date for obsolescence provided for in Section 46 605(a) of the Fair Credit Reporting Act, 15 U. S. C. 1681c: “The law limits how long you can be sued on a debt. Because of the age of your debt, (INSERT OWNER NAME) cannot sue you for it and (INSERT OWNER NAME) cannot report it to any credit reporting agencies.” 

Creditors and Debt Collectors Are Given a “Right to Cure”

Before a consumer may bring an action against a creditor or a debt collector for a violation of the Consumer Credit and Protection Act, the consumer must send a written notice to the creditor or debt collector. The notice must identify the alleged violation and give the creditor or debt collector 45 days to make a cure offer. 

If the cure offer is rejected and any final award at a trial is less than the offer, the creditor or debt collector would not be liable for attorney’s fees.  

Critical provisions of the statute now read: 

46A-5-108. Right to cure. 

(a) No action may be brought pursuant to this article and articles two, three and four of this chapter until the consumer has informed the creditor or debt collector in writing and by certified mail, return receipt requested, to the creditor’s or debt collector’s registered agent identified by the creditor or debt collector at the office of the West Virginia Secretary of State or, if not registered with the West Virginia Secretary of State, then to the creditor’s or debt collector’s principal place of business, of the alleged violation and the factual basis for the violation and provide the creditor or debt collector forty-five days from receipt by the agent or at the principal place of business referenced above of the notice of violation but twenty days in the case a cause of action has already been filed to make a cure offer, which shall be provided to the consumer’s counsel or, if unrepresented, to the consumer by certified mail, return receipt requested: Provided, That the consumer shall have twenty days from receipt of the cure offer to accept the cure offer or it is deemed refused and withdrawn. When a claim under the provisions set forth in section one hundred one is presented as a counterclaim, cross-claim or third party claim, the notice of right to cure shall be served with the counterclaim, cross claim or third party claim in any manner permitted by the Rules of Civil Procedure. 

(f) No cure offer is admissible in any proceeding initiated pursuant to the provisions of this article unless the cure offer is delivered by a creditor or debt collector to the person claiming loss or to any attorney representing such person prior to the filing of the creditor or debt collector’s initial responsive pleading in such proceeding. If the cure offer is timely delivered by the creditor or debt collector, then the creditor or debt collector may introduce the cure offer into evidence at trial. The creditor or debt collector is not liable for the consumer’s attorney’s fees and court costs incurred following delivery of the cure offer unless the actual damages, civil penalties and any other monetary or equitable relief provided for under this article and articles two, three and four of this chapter are found to have been sustained and awarded, without consideration of attorney fees and court costs, to exceed the value of the cure offer. 

insideARM Perspective 

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The entire Bill should be closely reviewed by compliance professionals.  West Virginia can be a challenging jurisdiction for the ARM community.  

The additional Out-of-Statute requirements should be noted and modifications made to any letters sent on Out-of-Statute accounts to West Virginia consumers. 

At first blush, the Right to Cure Provision appears to be a positive for the ARM community. It would seem that a creditor or debt collector would want to respond to any “right to cure” letter to preserve rights outlined in §46A-5-108(f) above. It will be interesting to see how this provision plays out in the coming months.

According to an announcement by ACA International, the association’s Council of Delegates has elected five ACA members to the Board of Directors. This occurred on Sunday, July 16 as part of the 2017 Convention & Expo in Seattle.

Joining the board for three-year terms are:

• Albert Cadena, president and CEO of USCB America in Los Angeles, Calif.
• G. Scott Purcell, president of Professional Credit Service in Springfield, Ore.

Individuals re-elected to another term are:

• Mike Frost, chief legal officer and general counsel at The CBE Group Inc. in Cedar Falls, Iowa.
• Jim Richards, chairman of Capio Partners in Lawrenceville, Ga.
• Roger Weiss, IFCCE, chief operating officer at CACi in St. Louis, Mo.

The newly elected Board of Directors held its first meeting later in the day Sunday, where the group elected Jack W. Brown III as ACA’s president-elect. Brown is president of Gulf Coast Collection Bureau Inc., of Sarasota, Fla. Meanwhile, the board elected Weiss as the new treasurer.

The ACA Council of Delegates, elected by the units and divisions, represents constituencies and has the primary responsibility of electing the ACA Board of Directors. The Council of Delegates will hold its next meeting July 23, 2018, at the ACA International Convention & Expo in Nashville, Tenn.

ACA’s Board of Directors governs the property, affairs, activities and concerns of the association. The board consists of 15 voting members with staggered terms, plus the CEO and past president as nonvoting members.

This post was co-authored by Jeff Shaffer and Doug Spak. It originally appeared on the RDS Blog and is republished here with permission.

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Based on a March 2015 Settlement Agreement with the New York State attorney general, the country’s three largest credit reporting agencies (CRAs) agreed to overhaul their approach to fixing errors and their treatment of medical debts on consumers’ reports. The three-phase overhaul was scheduled to be completed by 2018.

In a related development in March 2017, the three leading CRAs-Equifax, Experian, and TransUnion-jointly announced that effective July 1, 2017, they will be limiting tax liens and civil judgment data in their reports.

In today’s post, we will take a closer look at this joint action and what it means to both consumers and lenders.

Anatomy of a Credit Bureau Report

The aforementioned Big 3 CRAs keep records on more than 200 million individuals influencing their ability to obtain credit. The data from the three CRA reports are factored into a consumer’s FICO credit score, which is ultimately used by most lenders to determine a loan applicant’s creditworthiness.

Following is an overview of what goes into a consumer’s credit report:

Consumer Information

Otherwise known as the Credit Header, this is the identifying information for each consumer, including name, aliases, address, phone number, previous address, date of birth or Social Security number (SSN). Credit headers have been a source of controversy over the years because some of this customer information is sold in bulk for target marketing programs.

Public Record

Credit reports also reflect information pulled from public records, including:

• Judgments from civil actions
• Tax liens from both state and federal authorities
• Bankruptcies, both Chapter 7 and 13

Credit History (i.e. trade lines)

The credit history is the centerpiece of a credit report and includes a breakdown of a consumer’s debt, including:

• Late payments (30 days and longer)
• Outstanding debt (the amount owed or size of the payment for installment loans)
• The total amount of credit currently available to the consumer (e.g., if you have a credit card with a credit limit of $8,000, even if you only use $1,000 of it a month)

This information appears for any institution that has extended credit to the consumer, such as banks, credit card companies, mortgage lenders, or auto-finance companies. This information remains on the credit report for seven years.

Inquiries and New Accounts

Businesses generate credit inquiry requests when they check a consumer’s credit worthiness. Inquiries may or may not affect a consumer’s FICO score. FICO scores reflect only voluntary inquiries prompted by a credit application. FICO scores factor in a variety of inquiries to a consumer’s credit score:

• The number of recent credit inquiries.
• Time since credit inquiry.
• A FICO score does not take into account any involuntary inquiries made by businesses with whom the consumer did not apply for credit, inquiries from employers or the consumer’s own request for a credit report.

FICO scores also look at the number of recently opened accounts and the time since those accounts were opened, in each case by type of account.

SOURCE: Myfico.com

Credit Reporting: An Imperfect Science

Lenders use credit scores to make quick, uniform decisions about a consumer’s creditworthiness. A credit score plays a critical role in most lending decisions. Yet, according to a 2015 report by the FTC, one in five consumers has at least one error on one of the three major credit reports. Since 2011, the Consumer Financial Protection Bureau (CFPB) reports that approximately 8 million credit report disputes have been filed with the three CRAs.

To further complicate this issue, courts don’t record all identifiable information on all public records; for example, Social Security numbers or dates of birth typically do not appear in civil litigation records. As a result, the CRA may append civil litigation information to a consumer’s report based solely on the consumer’s name and address, which may result in civil litigation being reported against a consumer with a similar name to the actual litigant. Without information such as date of birth or Social Security number, it is difficult for the CRAs to distinguish betweenconsumers with similar names.

Because of these reporting challenges, there is renewed focus on improving standards for public record keeping. Most notably, they are pushing to apply better identity-matching criteria and updating records more frequently.

What the Recent Decision Means

The joint action taken by Equifax, Experian and TransUnion will go into effect July 1, 2017. To be clear, the CRAs were not required to drop public records data as a result of the 2015 NY attorney general settlement agreement. However, they were required to establish standards to ensure accuracy. Because most public records lack the consumer identifying information, such as Social Security number, the CRAs realized they wouldn’t be able to meet the accuracy standards, thus last month’s joint decision to remove a significant amount of tax lien and civil judgment data from their credit reports.

Judgments and tax liens are often the most negative items on a credit report. By dropping these public records, it is estimated that credit report scores could increase from 20-40 points for a portion of consumers for whom the CRAs have records.

Removing tax liens and civil judgments from credit scores will make risk assessment trickier for lenders. It’s not just that credit scores for many consumers will become dubious, possibly over-stating a consumer’s credit worthiness. It’s that consumers with liens and judgments are particularly risky (possibly twice as risky to default on loan payments based on various estimates). It will be impossible to tell two consumers apart based solely on their credit score. Let’s say two consumers each have scores of 700. One may have lots of public records and the other none. But they will appear to be equal in terms of risk. However, if the majority of the bad public records are now not reported or scored, the consumers who had previously had them on their credit report will suddenly be mixed in with people who have better credit.

It’s Still About the Basics

Indeed, some consumers will benefit from the recent adjustments to credit reporting and scores by the major CRAs. But a solid credit score will still be tied to the same fundamentals that have guided credit worthiness for decades. Here’s a handy reminder of what one needs to do to improve and maintain a strong credit score:

Sources:

http://www.zerohedge.com/news/2017-03-13/12-million-americans-are-about-get-artificial-boost-their-fico-scores

http://investorplace.com/2017/03/credit-report-changes-2017-credit-score-may-go-soon/

https://www.selflender.com/blog/free-credit-score-fico-whats-the-difference.html

http://www.myfico.com/crediteducation/questions/why-three-scores.aspx

http://www.pymnts.com/news/2017/low-scores-may-soon-be-on-the-rise-as-some-negative-data-is-coming-out-of-fico/

http://www.fool.com/ccc/check/check04.htm

https://www.savvyoncredit.com/credit-bureaus-sell-personal-information/

https://ag.ny.gov/pdfs/CRA%20Agreement%20Fully%20Executed%203.8.15.pdf

http://consumersunion.org/wp-content/uploads/2014/04/Errors-and-Gotchas-report.pdf