Archives for September 2017

CARROLLTON, Texas –- SWC Group is excited to announce Kevin Bennick as the newest member of their executive management team. As the Vice President of Business Development, Mr. Bennick will provide leadership in the areas of client acquisition, product development and client services.

With over twenty years of industry experience in both Operational Management and Business Development, Mr. Bennick has built a solid reputation for providing exceptional service by understanding and exceeding clients’ expectations. “We are thrilled about Kevin’s decision to join the SWC Group team. His commitment to excellence and integrity is a perfect match for our culture, and will certainly serve to reinforce the quality service that our clients have come to expect,” says Jeff Hurt, CEO. At SWC Group, our goal is to provide our clients with professional accounts receivable and consumer service solutions based on Value, Integrity, and Performance.

About SWC Group

SWC Group is one of the nation’s leading providers of accounts receivable management and consumer service solutions.  They bring over 40 years of proven experience in the government, tolling, utility, telecommunications, cable, property management, and education industries. SWC Group annually manages billions of dollars in receivable accounts, proudly serving organizations of all sizes—from Fortune 500 private firms to small public agencies. 

 

NEW YORK, N.Y. — After a year of engineering and development using state-of-the-art artificial intelligence engines and proprietary data mining algorithms, Pairity is nearing the launch of its first product, PairityDiscover™. PairityDiscover™ is a tool that allows a user of any skill level to gain insights into a set of accounts whether they be new or old. 

PairityDiscover™ is built upon a platform that leverages some of the world’s most secure cloud computing infrastructure. According to company founder and CEO Gregory Allen, “We built this system so that it is not only as secure as possible, but it is always available.” 

Pairity developed the system to put advanced analytics into as many agencies as possible. As explained by Bradley J. Bartram, Pairity’s COO, “The world is full of advanced tools for researchers and academics. We created our software to eliminate the need for having a Ph.D. on payroll. It’s simple, it’s obvious, and because of the AI, it provides great insights for anyone of any skill-level.” 

As the company nears an early-October limited market launch of this software, they are soliciting agencies to visit their website and signup for the Beta program. This program runs for a limited time and encourages selected users to provide feedback and insights for ongoing development purposes. All while using the AI powered PairityDiscover™ within their organization for no direct cost.

About Pairity 

Pairity is a software company that services the debt collections and accounts receivable industry with advanced solutions for critical challenges. Pairity maintains offices in New York City, Buffalo, and Boston. 

For additional information please visit https://pairity.ai or email us at info@pairity.ai

 

Last Thursday the United States Department of Education (ED) filed its latest status report in the United States Court of Claims. This report was promised in a filing ED made with the court on August 24^th. insideARM wrote about that development on August 29, 2017: 

“Finally, the language in the report is interesting. ED does not say that selections will be made on September 14, 2017. ED wrote: “Defendant respectfully requests that it be allowed to file a status report on September 14, 2017 informing the Court of the status of the corrective action.” It may be that September 14^th will only bring another status report requesting yet additional time to complete the evaluations. “ 

insideARM guessed correctly in that August 29, 2017 article. ED did not announce RFP selections on Thursday. Instead ED provided the following: 

Status of Corrective Action 

In a notice filed on August 24, 2017, we informed the Court that ED’s evaluation teams have completed their review of all proposals, and that evaluation reports were being prepared and should be finalized within the next few weeks. ECF No. 184 (Defendant’s Notice of the Status of Corrective Action dated August 24, 2017). Evaluation reports are now being finalized, with an expected completion date of September 18, 2017. Once the reports are finalized, ED’s Source Selection Authority will perform an integrated assessment to identify the proposal(s) deemed to be most advantageous to the Government, followed by a responsibility determination of each apparently successful offeror. Once a new source selection determination has been made, ED will announce any new award or awards, and/or the termination of previously-awarded contracts, as appropriate. 

As stated in our August 4, 2017 and August 24, 2017 status reports, this corrective action is a top priority of Federal Student Aid, and ED is working diligently to complete the corrective action. Defendant respectfully requests that it be allowed to file a status report on October 5, 2017, informing the Court of the status of the corrective action. (Emphasis added by insideARM) 

The above two paragraphs should have been the end of ED’s status report. But ED also needed to respond to what can only be described as a “bizarre” August 29, 2017 Order from Chief Judge Susan G. Braden.  

In that Order, Judge Braden granted ED’s request to file another status report on September 14^th and directed ED “to file their September 14th status report in their appeal of Braden’s May 31, 2017 preliminary injunction, currently pending in the United States Court of Appeals for the Federal Circuit, No. 17-2155, together with: (1) corrections regarding the transcript of a hearing convened by the court on May 2, 2017; and (2) an e-mail sent by the court’s law clerk on April 21, 2017, that was attached to the August 29, 2017 Order.”

The August 29^th order continued with two additional paragraphs that were almost nonsensical. But, apparently Judge Braden wanted to make certain the record was complete for the Court of Appeals. Judge Braden wrote: 

“The Government should supplement their Appendix by filing all pages of the transcript of the afternoon hearing on May 2, 2017 to provide complete context. These pages are required to correct the narrative on pages 20–21 of the Government’s August 15, 2017 brief on appeal, wherein the counsel for the Department of Justice contends that the court excluded Plaintiffs and Plaintiff-Intervenors from participating in a conference convened by the court in its chambers. As the transcript demonstrates, on pages 30–31, it was the court’s perception that all parties that wished to participate in the conference attended. In addition, the court ordered counsel for the small business-intervenors removed by a Court Security Officer (“CSO”), because she shouted at the court and interrupted the proceedings. 

With respect to the e-mail, at page 15 of the Government’s August 15, 2017 brief on appeal, counsel for the Department of Justice stated “the trial court acknowledged having contacted the Secretary of Education’s office via e-mail to attempt to force the United States into mediation.” But, as the April 21, 2017 e-mail from the court’s law clerk evidences, the court had no direct communication with the Secretary of Education nor did the court “attempt to force the United States into mediation.” Court Ex. A. Instead, the court explained that it issued an Order on April 19, 2017, so that the parties could negotiate a global solution. In addition, counsel for all parties were copied on the e-mail.” 

As a result of the August 29^th order, ED needed to provide a further response in the September 14^th status report. Per that status report ED states: 

“As explained below, we will comply with the Court’s order by seeking leave to file this status report and other materials described in the August 29 Order with the Federal Circuit.” 

ED then tells Judge Braden:

“As an initial matter, no appendix has yet been filed in Continental Service Group, Inc. et al. v. United States et al., Nos. 2017-2155, -2156, -2157, -2158, -2159, -2160, -2210, -2212, -2214, -2215, -2216, -2221, and -2342 (Fed. Cir.). A joint appendix will be filed after the completion of the briefing by all parties. 

Further, because the Government specifically cited the pages in the transcript (pages 30-31, designated as Appx101481-101482) to which the Court refers in its August 29, 2017 Order, pursuant to Federal Circuit Rules, these pages will be included in the joint appendix.

In addition to these materials that are sure to be included in the joint appendix to be filed with the Federal Circuit, in accordance with the Court’s order, we are seeking leave from the Federal Circuit to file the afternoon session of the May 2 hearing transcript in its entirety as an attachment to the Government’s status report. Even if the Federal Circuit denies our motion for leave, the specific transcript pages cited in the Court’s order will be part of the joint appendix when it is filed under normal operation of the Federal Circuit’s rules.

In addition, defendant will also seek leave from the Federal Circuit to file the redacted and highlighted version of the Court’s email dated April 21, 2017 to James Manning, Office of the Secretary of Education, and the law firm of John Ashcroft, expressing the Court’s view of the need for a skilled mediator in this case. This e-mail was not previously designated for inclusion in the joint appendix because it was not filed in Court, but we will include this document in our motion for leave to file this status report with the Federal Circuit. 

insideARM Perspective 

insideARM would love to tell its readers the meanings of Judge Braden’s August 29^th order and ED’s September 14^th response to that order. Unfortunately, this writer is simply not smart enough to decipher the two items. 

It appears Judge Braden is concerned that the Court of Appeals for the Federal Circuit be given all of the background documents and all transcripts of hearings held in the Court of Federal Claims. It appears that ED has the same concern. Yet, both seem compelled to point it out. 

The case has had so many plots and sub-plots that it is hard to predict where it will go next. For example, insideARM did not previously write about one of those sub-plots. Over the past 10 days, ED and Progressive Financial Services, Inc. (Progressive) had a dispute over ED initiating “a limited recall of student loan accounts to provide immediate relief to student borrowers affected by the devastation of Hurricane Harvey.” 

On September 7, 2017 ED provided notice of a program to recall accounts that met that criteria. On September 8th Progressive filed a motion with the court for emergency relief to stop the recall. On that same day, ED filed a response to that motion. On September 12^th Judge Braden issued an order denying the request for emergency relief. 

All we can do is continue to monitor the litigation and report when and where appropriate.

 

Editor’s Note: See here for a link to an insideARM page that provides a history of our ED-related articles. The page is automatically updated as new stories are written.

Yesterday in a Fair Debt Collection Practices Act (FDCPA) case, a federal judge in California denied a plaintiff’s motion for reconsideration of the court’s prior decision and granted a defendant’s motion for sanctions for having to respond to the request for reconsideration. The case is Shepard-Hall v. Gordon and Wong Law Group PC (Case No 2:16-cv-1361, U.S.D.C., Eastern District of California). 

This case highlights the cost to defend frivolous FDCPA cases and the difficulty in obtaining sanctions to fully compensate for the expense.

A copy of the court’s Memorandum and Order can be found here.

Background 

Asset Acceptance, LLC (not a party to the action) retained defendant Gordon & Wong Law Group PC (G&W) to enforce a state court judgment entered against plaintiff Shepard-Hall for the balance on a Dell Financial Services account. On February 23, 2016, G&W filed a writ of execution to garnish plaintiff’s wages, which was served on plaintiff’s employer by the Sacramento County Sheriff’s Office. On April 8, 2016, the parties agreed by phone to settle the debt for a single payment of $3,000. Plaintiff was represented by the Price Law Group, APC, (“PLG”) during these negotiations. 

On April 15, 2016, G&W faxed a letter to PLG reflecting the settlement terms. PLG then called G&W, informing them that plaintiff’s wages had been garnished by $834.09 that morning, and the parties agreed to reduce the $3,000 settlement by the amount garnished. Four days later, G&W sent a new settlement letter to PLG, reflecting the new terms, and also faxed a notice to the Sacramento County Sheriff’s Office to terminate the garnishment effective immediately.

On that same day—that is, four days after the new agreement was reached—plaintiff sent G&W a signed copy of the original settlement agreement and the full $3,000, not deducting the amount garnished as specified in the new agreement.

On April 29, 2016, as a result of an error by the Sheriff’s Office (emphasis added by insideARM), plaintiff’s wages were garnished again, even though the Sheriff’s Office had been notified of the garnishment’s termination. Because the garnishments resulted in overpayment, G&W voided the check it had received from the first garnishment, and instructed the Sheriff’s Office to return the second garnishment to Plaintiff, which it did.

On May 5, 2016, G&W received a letter from PLG demanding $4,000 in order to avoid suit under the FDCPA. Defendant refused to pay the $4,000. Plaintiff, by and through its attorneys, PLG, filed a lawsuit about a month later. The suit alleged that G&W violated the FDCPA by reason of the above activity.

G&W moved 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. 

On June 20, 2017, the court granted G&W’s motion for summary judgment and judgment was entered in favor of G&W. In the same order, the court also granted G&W’s motion for sanctions under Federal Rule of Civil Procedure 11, due to the frivolous nature of plaintiff’s suit. Plaintiff’s counsel (PLG) were ordered to pay G&W’s attorney’s fees associated with defending the frivolous suit in the amount of $29,507.

On June 23, 2017 plaintiff brought a motion for reconsideration of the imposition of sanctions. G&W opposed that motion and sought additional sanctions for having to respond to the motion for reconsideration. 

The Court’s Order 

The Honorable Morrison England, Jr. was clearly not enamored with plaintiff’s attorneys and their arguments, writing:

In sum, Plaintiff’s counsel does not address the bases for sanctions outlined in the Memorandum and Order imposing them, and accordingly has not shown that the imposition of sanctions was clearly erroneous. Accordingly, Plaintiff’s Amended Motion for Reconsideration is DENIED.

 The court then discussed G&W’s request for additional sanctions. He wrote:

“Defendant claims sanctions are warranted because Plaintiff’s motion for reconsideration “simply reiterates the same arguments that the Court already rejected,” and because the motion “contains numerous false statements.”

The Court finds that Plaintiff’s motion for reconsideration is recklessly frivolous, so as to warrant sanctions under the Court’s inherent authority.”

The court goes into detail about plaintiff’s counsel’s “misstatements” in the motion for reconsideration. Judge England wrote: 

“All of these misstatements are at least reckless. Furthermore, Plaintiff’s reliance on these misstatements renders Plaintiff’s motion for reconsideration frivolous, providing the “additional factor” required for the Court to impose sanction under its inherent authority when a party acts recklessly.”

However, the court only imposed additional sanctions of $500!

G&W had requested “$11,555.50 in sanctions as the attorney’s fees incurred by plaintiff’s frivolous motion.” The court felt that $500 in additional sanctions was sufficient to deter plaintiff’s counsel’s conduct. 

insideARM Perspective  

The court’s reluctance to impose meaningful additional sanctions is frustrating.  This case highlights the substantial challenges involved in defending frivolous lawsuits. G&W could have settled this case for the original demand of $4000. But, since they felt they did nothing wrong (and the judge ultimately agreed with them) they chose to defend the case. Good for them. But, it is always a tough business decision. Sometimes you have to just say “no.”

In this case the legal fees to defend the case were $29,507 to win the initial summary judgment and $11,555.50 to respond to the motion for reconsideration, for a total cost of $41,062.50. They received a sanction award to cover the initial $29,507. Assuming that amount has been paid, they are out over $11,000 in total.

insideARM maintains a FDCPA Caselaw chart. Even a cursory review of that chart will show multiple cases that highlight the challenges to recovering attorney’s fees to defend suspect FDCPA cases.

 

Today insideARM is running a Press Release from DCM Services (DCMS). It is an announcement that I have been named the new CEO of DCMS, effective October 23, 2017. I feel like the announcement needs a little companion story. 

I started doing some consulting work for insideARM in August of 2015. In January of 2016 I joined the company full time as President, working for and with Stephanie Eidelman. I have absolutely loved my position and my time at insideARM. I loved working from home (that 30 step commute was outstanding). I was sure I was going to stay until I retired. But, every now and then, life throws you a curveball. 

I grew up in Minnesota. Though I left Minnesota in 1996, I am a Minnesotan. I have diligently read the Minneapolis and St. Paul newspapers online every day since I left. I follow the Minnesota sports teams. Though I hate cold weather, Minnesota is still my home. 

Several weeks ago, I was approached about the opportunity at DCMS. Having been in the industry for a number of years, I often hear from executive recruiters about potential opportunities. I have politely said “no thanks” to every opportunity since I joined insideARM. I was firm that I was never going back into the agency world again. 

But, as I thought about the opportunity, I was reminded of two totally unrelated news events from the past. First, Sean Connery once vowed to “never again” play James Bond (Agent 007) after the 1971 film Diamonds are Forever. But, we know that he did return to the role in Never Say Never Again. So, a change of heart can happen to anyone. 

Second, in 1985, when I was still living in Minnesota, Lou Holtz was the Head Football Coach at the University of Minnesota. When he resigned to take the head coaching job at Notre Dame he explained that he had a provision in his U of M contract that allowed him to leave for one job – the head coach of Notre Dame. 

I have told people that DCMS is my Notre Dame opportunity. It was the one job that would make me consider leaving insideARM. DCMS is not a traditional collection agency.  It is different. The work efforts are different. The company culture is different. It fits me.  

insideARM has been a great experience for me. Working with Stephanie Eidelman has been terrific. We accomplished a lot together during the past three years. Our Compliance Professionals Forum (CPF) is thriving. We have over 200 active members.

A concept that Stephanie and I both had around the same time, the Consumer Relations Consortium (CRC), is having a positive impact on the ARM industry. There are over 30 Larger Market Participants (LMPs) that meet on a regular basis to address industry issues. 

In 2015, we created a new industry conference that is truly unique. The Fourth Annual First Party Summit (FPS) will be held in Dallas June 4-6, 2018. That event has grown every year. Stephanie and I think that it is now the model for effective ARM industry conferences – collaborative, informative, and collegial.

In 2016, we also quietly launched the One-to-One Appointments Forum. We created an event that allows for intimate, pre-scheduled meetings between creditors and potential vendors. It has been a huge success. Next year we will hold our third Forum. 

Our flagship product, the ARM insider, our newsletter that is delivered four days per week (Mon-Thu) has gotten better and better. I like to think that our insideARM Perspective is a huge differentiator. We not only relay the critical news, but we offer our opinion on what the news means to the industry. 

Finally, I must talk about the insideARM team. Most people have no idea that a very small group of people work very hard every day to deliver all of the above products. To Aaron Steinberg, Mike Bevel, Jeff Hearn, Kerry Murphy, Berta Bustamante, Debra Panitch, and Mark Eidelman, I can only say THANK YOU. I am amazed every day at your level of engagement. 

I am not leaving insideARM immediately. Ben Boyum, the current CEO at DCMS graciously agreed to stay with the company a while longer so that I could help Stephanie with the transition. I will leave insideARM on October 13^th and join DCMS on October 23^rd. I have a few more articles to write, and planning to do for the CRC and the First Party Summit. 

 

Stephanie Eidelman’s Perspective

As Tim mentioned above, a few years ago we started including the “insideARM Perspective” on many of our articles. In this case I thought it appropriate to make it more personal. 

Working with Tim has been a pleasure. I can truly say that – from day one – we’ve been on the same page on nearly every topic. Our philosophies on management, our approach to business development, and our commitment to doing what’s right, were completely aligned. The last several years have been a true collaboration and I will miss that greatly. Of course, I will be thrilled to return to the type of relationship that we had before – with Tim as an engaged industry leader and participant in our initiatives. 

So, with every door that closes, a window of opportunity opens. As Tim will tell you, his role with insideARM has been a great platform from which to affect the industry as a whole, while stepping back from the day-to-day of managing a collection operation. 

While an exact replacement for Tim Bauer may be impossible, I welcome a new chapter with an industry professional who can bring their own unique talents to insideARM. If this sounds good to you, please get in touch.

 

MINNEAPOLIS, Minn. — DCM Services (DCMS), the industry leader in estate and specialty account recovery solutions, is pleased to announce the appointment of industry veteran Tim Bauer as chief executive officer, effective October 23, 2017. 

Bauer joins DCMS from insideARM, where he has been serving as president. He has also been serving as co-executive director of the Consumer Relations Consortium. Bauer’s prior experience includes key executive roles within the ARM industry, including chief executive officer of Integrity Solution Services, Inc. as well as executive leadership positions at Outsourcing Solutions, Inc. (OSI), OSI Portfolio Services, and Risk Management Alternatives, Inc. (RMA). Bauer is a graduate of St. Mary’s University of Minnesota and Loyola University of Chicago, School of Law. Before joining the debt collection agency world in 1995, Bauer spent 15 years as a partner in the Minneapolis law firm of Messerli & Kramer, P.A.

Bauer’s appointment follows the previously announced retirement of Ben Boyum who has served as DCMS’ chief executive officer since 2011. Boyum, who will maintain his role on the DCMS Board, stated, “I am absolutely delighted to add Tim’s insight, expertise, and industry experience to our team. Even more importantly, Tim is a great cultural fit for DCMS and our clients. DCMS will benefit greatly from Tim’s industry connections as we continue to grow and provide new solutions that meet the needs of our clients and the industries that we serve.”   

Bauer commented, “While I loved my role at insideARM, the opportunity to join DCMS was too much to pass up. The company has a culture of compliance and consumers are treated with dignity and respect. The minute I walked into the DCMS offices, I made my decision. I am thrilled to be joining an outstanding DCMS management team previously assembled and led by Ben.”

“I want to thank Ben Boyum for his leadership and dedication to the organization. We are thrilled that Ben will retain his involvement through an active board seat” said Bill Willhite, managing partner of WILsquare Capital and DCMS board member. “We executed an extensive, nationwide search for the next leader of DCMS and could not be more pleased with its outcome. Tim Bauer brings tremendous industry expertise and, most importantly, shares our commitment to regulatory compliance, client engagement and fits well with DCMS’ corporate-wide culture.”

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.

About WILsquare Capital

WILsquare Capital is a St. Louis-based private equity firm focused on acquiring and growing lower middle market businesses in the Midwest and Southern United States, with an emphasis on business services, niche manufacturing, and distribution and technology companies. The firm is currently investing out of WILsquare Capital Partners Fund I, L.P

Yesterday the Consumer Financial Protection Bureau (CFPB) released its Summer Supervisory Highights report for the first half of 2017 which, among other things, highlighted findings related to debt collection.

You can download a copy of the full report here.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is authorized to supervise banks and credit unions with more than $10 billion in assets, as well as certain nonbanks. These include mortgage companies, private student lenders, payday lenders and others – like debt collection agencies — defined as “larger participants.” Larger debt collection participants are defined as those with annual receipts of more than $10M.

In this latest report, the bureau notes that at one or more entities, the examiners review included activities conducted in a foreign country.

The following FDCPA violations were noted:

• Unauthorized communications with third parties
• False representations made to authorized credit card users regarding their liability for debts
• False representations regarding credit reports
• Communications with consumers at inconvenient times

Unauthorized communications with third parties

Under section 805(b) of the FDCPA, a debt collector generally may not communicate with a person other than the consumer in connection with the collection of a debt without permission from the consumer. Examiners determined that one or more entities did not confirm that the correct party had been contacted prior to beginning collection activities. As a result, one or more entities communicated with a third party in connection with the collection of a debt by discussing the debt with an authorized user of a credit card who was not financially responsible for the debt (and who was not otherwise a “consumer” under section 805(b)).

In response to these findings, one or more entities enhanced consumer verification processes to include the verification of first and last names, and confirmation of date of birth or the last four digits of Social Security number, before disclosing the debt or the nature of the call to the consumer. Additionally, one or more entities revised their processes to discuss the debt with an authorized user only after explicit authorization from the cardholder. Lastly, the entities trained their collection agents on the enhanced policies and procedures. [emphasis added]

False representations regarding authorized users’ liability for debts

Under section 807(10) of the FDCPA, a debt collector may not use false representations or deceptive means to collect or attempt to collect any debt. Examiners determined that one or more entities violated the FDCPA by attempting to collect a debt directly from the authorized user of a credit card even though the authorized user was not financially responsible for the debt. The practice of soliciting payment from a non-obligated user in a manner that implies that the authorized user is personally responsible for the debt constitutes a deceptive means to collect a debt in violation of the FDCPA. One or more entities have undertaken remedial and corrective actions regarding these violations, which are under review by Supervision.

False representations regarding credit reports

As noted above, a debt collector may not use false representations or deceptive means to collect or attempt to collect any debt under section 807(10) of the FDCPA. Examiners found that one or more entities made false representations to consumers about the effect on their credit score of paying a debt in full rather than settling the debt for less than the full amount.

As the CFPB explained in a 2013 bulletin, representations about the impact of paying a debt on a consumer’s credit score may be deceptive. The bulletin states that “in light of the numerous factors that influence an individual consumer’s credit score, such payments may not improve the credit score of the consumer to whom the representation is being made. Consequently, debt owners or third-party debt collectors may well deceive consumers if they make representations that paying debts in collection will improve a consumer’s credit score.” In response to these findings, one or more entities amended training materials to remove references to how a consumer’s credit score may be affected by either settling the debt in full or paying the debt in full.

In response to these findings, one or more entities amended training materials to remove references to how a consumer’s credit score may be affected by either settling the debt in full or paying the debt in full.

Communications with consumers at inconvenient times

Under section 805(a)(1)of the FDCPA, a debt collector may not communicate with a consumer in connection with the collection of any debt at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer. Examiners discovered that consumers were contacted by one or more entities outside of the hours of 8:00 am to 9:00 pm (which, in the absence of knowledge to the contrary, may be assumed to be convenient) or at times consumers had previously informed the entities were inconvenient.

These violations were caused by the failure to accurately update account notes and the use of auto dialers that based call parameters solely on the consumer’s area code, rather than also considering the consumer’s last known address. Supervision directed one or more entities to enhance compliance monitoring for dialer systems to ensure that they input system parameters accurately and to ensure that they properly monitor collectors for inputting and adhering to account notations.

Finally, the report notes in its debt collection overview that “at one or more entities, examiners discovered that debt collectors followed client instructions that led to violations of the FDCPA.” There are no specifics provided as to what these instructions were.

insideARM Perspective

insideARM recommends that all debt collection organizations, whether at a creditor, debt buyer, collection law firm or debt collection agency, review the CFPB supervisory highlights reports in detail, and compare findings to your own training practices, policies and procedures.

With that said, two of these latest findings are worth some discussion.

First, confirming that a collector is speaking with the “right party” prior to disclosing any information is perhaps one of the thorniest challenges in collection today. We have written about this issue on several occasions. The Federal Trade Commission, the CFPB, and consumer advocates regularly caution consumers against providing personal information to collectors. This is understandable in today’s identity-theft prone environment. Yet the law requires that debt collectors request such information in order to confirm that they are speaking with the right person before providing any information… including the fact that they are a debt collector (which, by law, they are also required to disclose).

For the benefit of all parties involved, this conundrum needs to be resolved. In addition to creating an incredibly uncomfortable and awkward interaction from the start, this “authentication dance” gets in the way of the quality communication between consumers and collectors that is required to calmly answer questions and resolve debts.

Second, the bureau advises in their report that “Entities can mitigate the risk of an FDCPA violation if they determine whether client instructions would violate the FDCPA before following them.”

This is another common conundrum for many collection agencies. Clients may require certain activity or procedures in their “work standards” that are provided to agencies and often incorporated into contracts. If and when a client suggested/mandated work standard could be deemed to be a FDCPA violation, a UDAAP, or even a risk of potential litigation, the agency needs to have candid discussion with the client about that particular work standard. Clients need to listen and hear concerns. 

If a client insists that the work standard remain, the agency should either walk away from the opportunity (this is very difficult to do when the client is a very large organization promising significant business) or insist on indemnification from the client in the event of suit or regulatory penalties (this is nearly impossible, as collection agencies typically have little to no leverage in negotiating contract terms with very large credtior oganizations).  

What could be very helpful in this situation is if the CFPB in its upcoming rulemaking would eliminate as many grey areas as possible. This would minizmize the gap between client and service provider interpretations of the law.

On August 18, 2017, the United States Court of Appeals for the Ninth Circuit published an opinion in a Fair Debt Collection Practices Act (FDCPA) case against a law firm that misstated the principal and interest due on a credit card loan in a collection effort. 

While the defendant law firm received an unfavorable decision in regard to the FDCPA claim, the court provided a positive disposition for the defendant on the plaintiff’s claim under California’s Rosenthal Fair Debt Collection Practices Act (RFDCPA). The decision highlights the importance of the “Right to Cure” provisions of the RFDCPA. The case is Afewerki v. Anaya Law Group, (Case No. 15-56510) U.S. Court of Appeals, Ninth Circuit). 

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

Background 

Los Angeles Federal Credit Union (“LAFCU”) was owed money by Plaintiff Robel Afewerki, a credit card customer of LAFCU who had fallen behind on payments. LAFCU hired Anaya Law Group to collect the debt and informed them that the principal due was $26,916.08, and that the debt was subject to a 9.65 percent interest rate.

Anaya Law Group filed a complaint on behalf of LAFCU against Afewerki on May 6, 2014 in Los Angeles County Superior Court, alleging that the principal of Afewerki’s debt was $29,916.08 ($3,000 more than he in fact owed) and that the debt was subject to an interest rate of 9.965 percent (a figure that was 0.315 percent too high). 

Afewerki retained a lawyer, who sent a demand for a bill of particulars to Anaya Law Group on June 6, 2014. As she later set out in a declaration, an Anaya Law Group attorney discovered the errors in the complaint for the first time on June 16, 2014, while preparing a response to the demand. She asserted that the errors were inadvertent. Two days later, on June 18, 2014, Anaya Law Group filed a notice of errata correcting the errors. 

The debtor sued the debt collector in federal court for violations of the FDCPA and of the RFDCPA, (Cal. Civ. Code § 1788 et seq.). Each of the parties moved 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 district court granted summary judgment to the debt collector on both claims because it concluded that the errors in the complaint were not material. 

The federal FDCPA, (15 U.S.C. § 1692 et seq.), prohibits debt collectors from making false statements when attempting to collect debts from consumers. However, not all false statements are actionable. To constitute a violation of the FDCPA, a false statement must be “material.” 

The Court of Appeals succinctly described the issue presented: 

What makes a false statement material or immaterial in the debt collection world? Material false statements, we have held, are those that could “cause the least sophisticated debtor to suffer a disadvantage in charting a course of action in response to the collection effort.” Tourgeman v. Collins Fin. Servs., Inc., 755 F.3d 1109, 1121 (9th Cir. 2014). This appeal requires us to consider the materiality of modest overstatements of an amount due and an interest rate.

As to the “materiality” issue, the court concluded: 

“We conclude, however, that the false statements made by the debt collector in this case were material because they could have disadvantaged the least sophisticated debtor in responding to the complaint. 

We agree and conclude that Anaya Law Group’s $3,000 overstatement of the principal due in the state court complaint, exacerbated by the statement of an inflated interest rate, was material.” 

As to the RFDCPA claim, the court wrote: 

“Although we disagree with the district court’s conclusion that the misstatements were not material, which was the basis on which the district court granted summary judgment to Defendants, “[w]e may affirm on any basis supported by the record.” Fisher v. Kealoha, 855 F.3d 1067, 1069 (9th Cir. 2017). We conclude that Defendants are entitled to the benefit of a separate defense under the Rosenthal Act, and on that basis we affirm the district court’s grant of summary judgment to Defendants as to the Rosenthal Act claim.”

California Civil Code § 1788.30(d) states: 

A debt collector shall have no civil liability under this title if, within 15 days either after discovering a violation which is able to be cured, or after the receipt of a written notice of such violation, the debt collector notifies the debtor of the violation, and makes whatever adjustments or corrections are necessary to cure the violation with respect to the debtor. 

The notice of errata was filed on June 18, 2014, which was within fifteen days of June 6, 2014, when the demand for a bill of particulars was served. Accordingly, Defendants satisfied the criteria to invoke the defense provided by § 1788.30(d).” 

insideARM Perspective 

The “Right to Cure” provision in the RFDCPA is a very powerful provision, one that is often ignored by companies in the ARM space. On July 19, 2017, insideARM wrote an article about a similar provision enacted in West Virginia. The Consumer Relations Consortium has suggested that the Consumer Financial Protection Bureau (CFPB) consider a similar provision in their upcoming Notice of Proposed Rulemaking. 

Finally, in last month’s version of the Moss & Barnett Debt Collection Drill podcast Moss & Barnett attorneys John Rossman and Mike Poncin discuss a new wave of lawsuits against debt collectors in California which focuses on the font size of certain disclosures. In that podcast, they also discuss the RDCPA “Right to Cure” provision. 

With great sadness the team at Diversified Consultants, Inc. (DCI) announced that Marcus Taylor passed away on Tuesday September 5th, having suffered a heart attack.  

Part of DCI’s initial Louisville, Kentucky hiring class on 05/30/2017, Marcus was a passionate young man whose career was blossoming right before our eyes. There was no doubt the sky was the limit with what Marcus could have accomplished with DCI and within the entire debt collection industry.  

Nicknamed “Fudge” because of a song he sang in front of the initial 90-person training class back in May, Marcus was a loving father to his daughter and devoted husband to his wife.  He was rapidly moving up the ranks of the company and was promoted to Assistant Manager within the first 30 days of being with the company. Marcus was a man who would help someone else before he helped himself and always put others first. He wasn’t only loved by his team and the people directly worked with, but the entire office as a whole.  

The collection industry has lost a true leader whose potential was cut way too short. We ask that you send your thoughts and prayers to not only his wife and young daughter but also the staff at DCI and the entire collection world.

 

LIBERTYVILLE, Ill. — CMAX Finance LLC, a Specialty Lending Finance Company, serving small and medium size debt-buyers with flexible and dependable funding solutions is pleased to announce that it has recently hired David Paris, CRCP and Edward Forbes (“Ed”) as the key leaders of our Marketing and Customer relationship group. Both David and Ed come to CMAX with over 25 years of experience in the ARM industry and are highly respected professionals within all aspects of the Debt Buying industry.    

David has worked on both the direct buying and financing side of the industry and has been a frequent speaker and panel member at the major debt-buying conferences, and has actively served as an Executive Board member and is currently President Elect of RMA (formerly DBA International). David is a graduate of the State University of New York. 

Ed has held a number of senior management positions with JP Morgan/Chase, Fleet Credit Card Services and the Advanta Corporation where he was responsible for collection activities, agency outsourcing, litigation and debt sales. Ed was also the founder and President of Stirling Capital Management LLC, which was focused on debt industry advisory and brokerage activities. Mr. Forbes received his commission in the U.S. Army Reserve after graduating from Valley Forge Military Academy as a Distinguished Military Student and is a graduate of La Salle University. 

Roger Saylor, CMAX CEO stated, “We are extremely excited to be able to bring two high quality and experienced individuals into CMAX to support our growth and improved customer relationship efforts. Their recent efforts are already bearing fruit and we believe that together, CMAX will more than meet its 2018 goal of doubling its annual loan volume.”

About CMAX Finance  

CMAX is dedicated to supporting small and mid-sized clients with both expertise and dependable financing for the purchase of charged-off debt portfolios across the breadth of non-mortgage consumer assets. Since its establishment in 2010, CMAX has provided in excess of $325 million of lending facilities, representing over 1,100 individual facilities to over 85 discrete borrowers.   

For additional information about CMAX and its lending opportunities, please call us at 312-778-8950.