Archives for January 2018

On January 22, 2018, the U.S. Supreme Court issued an opinion where it resolved a jurisdictional split regarding the impact of 28 U.S.C. §1367(d)’s limitations period tolling on state law claims that are pending in federal court. 

A court can only hear a claim over which it has subject-matter jurisdiction. Federal courts generally do not have subject-matter jurisdiction over state law claims. However, a federal court may exercise what is called “supplemental jurisdiction” over state law claims that arise from the same case or controversy as a federal claim before the court.  E.g., allegations that one collection letter violates both the FDCPA and a state-equivalent law.

Section 1367(d) provides that if a federal court exercises supplemental jurisdiction over a state law claim, the limitations period for the state claim “shall be tolled while the claim is pending [in federal court] and for a period of 30 days after it is dismissed unless state law provides for a longer tolling period.”

There is a jurisdictional split regarding whether §1367(d) pauses the limitations clock on the state claim while it is pending in federal court or whether the clock continues to run but the plaintiff is afforded a 30 day grace period to file the claim in state court after the federal court dismissal. Of note, this is only applies to dismissals due to lack of supplemental jurisdiction over the claim. It does not apply to a dismissal on the merits, which would not trigger §1367(d). 

In Artis v. District of Columbia, 583 U.S. ____ (2018), an opinion written by Justice Ginsburg, the U.S. Supreme Court ruled that the former definition applies. 

Read the decision here. 

Facts of the Underlying Case 

Petitioner Stephanie Artis filed a lawsuit against the District of Columbia on a federal employment discrimination claim as well as several related state law claims, including a violation of the District of Columbia Whistleblower Act and other wrongful termination claims. This suit, which included both federal and state claims, was filed in federal court within the statute of limitations for all claims. The statute of limitations for the state law claims expired two years after Petitioner filed the federal court case.

On June 27, 2014, two and a half years after the federal court case was filed, the court dismissed Petitioner’s only federal claim. Since the sole federal claim in the suit was dismissed, the court declined to exercise supplemental jurisdiction over the state law claims and dismissed them as well.

Petitioner filed her state law claims in state court fifty-nine days after the federal court dismissal. The state trial court granted Respondent’s motion to dismiss the claim due to it being time barred.  The trial court reasoned that the statute of limitations expired during the pendency of the federal court case so Petitioner only had a thirty day grace period to file her claims in state court per §1367(d).  The D.C. Court of Appeals affirmed this decision.  The case was ultimately reviewed and reversed by the U.S. Supreme Court.

Majority Opinion

In its decision, the Court reversed the D.C. Court of Appeals decision and decided that §1367(d) effectively stops the clock on the limitations period for a state claim while it is pending in federal court. 

The Court reviewed the evidence provided of other court interpretations and statutory use of each reading of the statute. In this review, the Court found that the grace period interpretation is “a feather on the scale against the weight of decisions in which ‘tolling’ a statute of limitations signals stopping the clock.”

Petitioner argued that if the stop-the-clock interpretation were Congress’ intent, then there would be no need for the 30 day grace period portion of the statute. This argument did not persuade the Court, which found that this 30 day grace period is intended as “breathing room” for a plaintiff that files her claim in federal court very close to the expiration of the statute of limitations. The Court dismissed the argument that a plaintiff can solve for this by pursuing the claim in state court while the federal case is pending, stating that this is inefficient and wastes already strained judicial resources. 

The majority opinion also addressed the constitutional issue of whether this interpretation of §1367(d) exceeds Congress’ enumerated powers and encroaches on state sovereignty. The majority opinion rejected both of these arguments.

Justice Gorsuch crafted the dissenting opinion, in which he was joined by Justice Kennedy, Justice Thomas, and Justice Alito.  

Industry Perspective

Many states have their own equivalent of the FDCPA. Since such state claims are usually filed in federal court along with federal FDCPA claims, firms and agencies in the debt collection industry should take note of this decision. U.S. Supreme Court decisions are binding on all courts and jurisdictions in the United States, both state and federal. 

The opinion may seem negative at first blush, but its impact to the industry will not be as widespread. Since §1367(d) only applies to claims that are dismissed due to the court declining to exercise supplemental jurisdiction, it will have no impact on state claims that a federal court decides on the merits. Once a claim is decided on the merits, res judicata principles prevent the plaintiff from re-litigating the claim against the same defendant in another court. The only recourse at that point is an appeal.

A situation that might trigger §1367(d) is where a case is filed in federal court alleging both an FDCPA and a state claim and the court dismisses an FDCPA claim for lack of standing per Spokeo. Since the only federal claim was dismissed, there is no similar case or controversy for the court to attach the state law claim to, thus prohibiting it from exercising supplemental jurisdiction. In this situation, the limitations period for the state law claim will have tolled – or paused – while the claim was pending in federal court. 

Conclusion 

In sum, a federal court exercising supplemental jurisdiction over a state law claim stops the clock on the limitations period for that claim.  Agencies and firms that are regularly sued on both federal and state claims in federal court – or that remove such claims to federal court – should keep this opinion in mind.

SARASOTA, Fla. – TEC Services Group, Inc. is pleased to announce their annual Scholarship Program, now in its third year. The program is open to individuals employed in the Accounts Receivables Management (ARM) industry and their dependent children. Selected participants will be awarded up to $1000 in scholarship funds. Applicants are eligible to receive an award up to four times during the term of their undergraduate program.

TEC began the program in 2016 as another way to give back to the community and show continued support to the ARM industry. Last year, TEC awarded four scholarships and expects even greater participation this year. To be eligible to participate, applicants must be a United States citizen and will be required to participate in an essay, provide academic achievements and community involvement.  

“Each year, TEC supports educational development through our annual World Vision donations and Scholarship Program; we believe education is the foundation for greater opportunities and are happy to sponsor programs that provide those opportunities for success.” Says Tom Sweat, President of TEC Services Group.

For more information about the program or to request an application, please contact TEC directly at (941) 375-0300 or Scholarship@TECsg.com. All applications and supporting materials must be received on or before May 31, 2018.  Scholarship recipients will be announced in August 2018.

About TEC Services Group
TEC Services Group, Inc. is a premier consulting firm serving as a trusted advisor and strategic partner to the Credit and Collections industry. Since 1998, TEC has provided professional, advisory and analytical consulting services using highly specialized subject matter experts. Our team members average 20 years of experience in Credit & Collections and we apply that expertise to every project we touch. At TEC, we commit ourselves to helping our clients achieve higher levels of IT and Operational excellence. TEC is your long-term partner invested in your success.  More at www.TECsg.com.

This article previously appeared on the Maurice Wutscher Consumer Financial Services Blog and is republished here with permission.

The U.S. Court of Appeals for the Seventh Circuit recently held that “debt collectors cannot immunize themselves from FDCPA liability by blindly copying and pasting the Miller safe harbor language” where that language is inaccurate under the circumstances.

Accordingly, the Seventh Circuit reversed the trial court decision granting the debt collector’s motion to dismiss.

A copy of the opinion in Boucher v. Finance System of Green Bay, Inc. is available here.

The plaintiff debtors were Wisconsin residents who incurred and defaulted on debts for medical services.  Their creditors sold those debts to the defendant collection agency, which in turn sent the debtors a letter with the following statement:

“As of the date of this letter, you owe $[a stated amount].  Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater.  Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check.  For further information, write to the above address or call [phone number].”

The debtors filed a complaint alleging the letter was false because under Wisconsin law, the agency could not lawfully or contractually impose “late charges and other charges.”  The debtors further alleged that the letter “causes unsophisticated consumers to incorrectly believe that they will avoid such charges, and thus benefit financially, if they immediately send payment.”  The debtors claimed the letter was therefore false, misleading, and deceptive in violation of section 1692e of the Fair Debt Collection Practices Act.

The agency filed a motion to dismiss arguing that it complied with the FDCPA as a matter of law because the allegedly false statement tracked the safe harbor language provided by the Seventh Circuit in Miller v. McCalla, Raymar, Padrick, Cobb, Nichols, & Clark, LLC, 214 F.3d 872 (7th Cir. 2000).  The agency further argued that although it was not lawfully entitled to impose “late charges and other charges,” reference to such charges was not materially misleading because it was entitled to charge interest.

The trial court granted the motion to dismiss, and the debtors appealed.

On appeal, the Seventh Circuit first analyzed whether the letter was “materially false, misleading, and deceptive” in violation of section 1692e.  In determining that it was, the court first looked to the language of the letter, which provided: “[b]ecause of interest, late charges and other charges that may vary from day to day, the amount due on the day you pay may be greater.”

Although it did charge interest, the agency admitted that it could not impose “late charges or other charges” under Wisconsin law.  “Therefore, the dunning letter falsely implies a possible outcome – the imposition of ‘late charges and other charges’ – that cannot legally come to pass.”  Thus, the statement was “misleading to an unsophisticated consumer because ‘[t]his is not the type of legal knowledge we can presume the general public has at its disposal.’”

The Court next analyzed the issue of whether the challenged statement was material – i.e., whether it “would influence an unsophisticated consumer’s decision to pay the debt.”  The agency argued that it was not, because the debt was variable, and “[a]ny consumer who owes a variable debt must decide whether to pay sooner than later to avoid that variance, regardless of whether any increase in the amount of the debt is due to the addition of interest, late charges, other charges, or some combination thereof.”

The Seventh Circuit disagreed, ruling that “an unsophisticated consumer understands that these additional charges could further increase the amount of debt owed, thus potentially making it ‘more costly’ for the consumer to hold off on payment.”  Thus, “it is plausible that the fear of ‘late charges and other charges’ might influence these consumers’ choices,” and therefore the statement is material.

Next, the Court addressed the issue of whether the Miller safe harbor applied.  In deciding the issue, the court first discussed the Milleropinion, which dealt with a violation of section 1692g(a)(1) of the FDCPA, which requires debt collectors to send consumers written notice containing “the amount of the debt.”  The Miller court determined that debt collectors are not excused from the requirements of section 1692g(a)(1) simply because the amount of the debt might change daily, but “in an effort to minimize litigation,” the court fashioned “safe harbor” language for debt collectors to use if the amount is variable.

The Miller court ruled that although debt collectors are not required to use the language, “[a] debt collector who uses this form will not violate the ‘amount of debt’ provision, provided, of course, that the information he furnishes is accurate and he does not obscure it by adding confusing other information (or misinformation).”

However, as the Miller case only dealt with section 1692g(a)(1), there was initially a question of whether it even applied to section 1692e.  The Seventh Circuit agreed with numerous district court decisions, and determined that the safe harbor language does apply to section 1692e.

Still, the Court then noted that “even if a debt collector may generally rely on the safe harbor language to avoid liability under § 1692e, Miller’s accuracy requirement still applies.”

In this instance, the agency’s “use of the safe harbor language was inaccurate because [the agency] could not lawfully impose ‘late charges and other charges.’”  Thus, the agency was not entitled to safe harbor protection under Miller.

Accordingly, the Seventh Circuit held that “debt collectors cannot immunize themselves from FDCPA liability by blindly copying and pasting the Miller safe harbor language without regard for whether that language is accurate under the circumstances.”  The Court therefore reversed the decision of the trial court.

This article was co-authored by Andrew Bigart, Partner; and Meredith L. Boylan and Alexandra Megaris, Counsels with Venable LLP.

The resignation of Richard Cordray as director of the Consumer Financial Protection Bureau (CFPB or Bureau) last November marks the end of an era at the often controversial—but never boring—consumer protection agency. Under Cordray’s leadership, the CFPB hit the ground running in 2012 and quickly established a reputation as an aggressive regulator through high-profile enforcement actions and tough examinations of financial services providers. With Cordray’s departure, and President Trump’s appointment of Mick Mulvaney as acting director, it seems the Bureau’s focus will shift, at least in the short term.

Even with change afoot, it’s clear the Bureau’s first five years changed the way consumer financial services providers think about compliance and consumer protection. And while the CFPB may be less aggressive in the near term, the Federal Trade Commission (FTC), banking regulators, and state attorneys general remain active in protecting consumers. The start of 2018 is a good time to review some of the key lessons of the Bureau’s first five years. Even in a deregulatory environment, heeding these basic consumer protection lessons makes business sense and can help minimize potential enforcement risk.

1. Minimize Risk by Putting Consumers First

From the beginning, the CFPB pushed a “consumer first” approach that encouraged financial services providers to evaluate how they design, market, and provide services to consumers. The result was a shift, particularly from the compliance perspective, in the way that many companies interact with their customers. 

The Bureau’s emphasis on empowering consumers is perhaps best exemplified by its consumer complaint database, which allows members of the public to submit complaints through a CFPB portal. While the database remains controversial, and there are frequent calls by industry for it to be abolished, there is little doubt the database has become an integral part of most companies’ internal compliance function. Today, well-run compliance departments monitor the database closely, respond to consumers in a timely manner, and use any lessons learned as part of a larger feedback loop used to identify and remediate compliance deficiencies.

Regardless of what happens to the Bureau, or to its complaint database, the lesson of putting consumers first is an important one that should remain a key part of every company’s day-to-day operations. By considering the potential impact to consumers at every stage of a product’s life cycle, from the design stage to the decision to discontinue a product offering, companies can help minimize risk of consumer harm, reduce consumer complaints, avoid costly investigations and enforcement actions, and build brand and customer loyalty. 

2. Substantiation—Say What You Mean and Mean What You Say

The CFPB flexed its muscles in 2012 and 2013, when it filed a series of enforcement actions challenging the deceptive marketing of credit card “add on” products, such as credit monitoring and identity theft protection products. According to the Bureau, consumers were regularly misled about the nature, benefits, and costs of these products. These cases established a recurring theme that the Bureau would follow in almost every subsequent enforcement action: marketers of consumer financial services must provide consumers with clear, accurate, and truthful information.

On its face, this seems like an obvious and easy-to-implement concept. However, as the credit card “add on” product cases demonstrated, marketing representations that are conditional on certain factors or later-to-occur actions—even if technically truthful—can be considered deceptive. This means that those responsible for creating or approving marketing copy, including marketing scripts, must have a line of sight into fulfillment, billing, and other functions that could impact the veracity of a representation or a consumer’s ability to utilize the service as it was marketed. The need for advertising to be truthful and substantiated, of course, is not unique to the CFPB, which is why companies should continue to design their products, services, and marketing carefully to avoid UDAAP risk. Even if the CFPB pursues a less aggressive enforcement agenda, the FTC, state attorneys general, and state regulators continue to scrutinize company marketing for false, misleading, or deceptive statements, particularly in the debt collection, lead generation, and lending industries.

3. Maintain a Robust Compliance Management System Across Your Business

Financial services providers have invested substantial resources in building and improving upon their compliance management systems (CMS), an area that the CFPB emphasized through its Cordray-era supervisory and enforcement activities. What now, with Cordray’s departure and with the potential for deregulation, at least on the federal level? 

Anecdotally, it appears that many providers—while optimistic that the Bureau will become more laissez-faire—are not rushing to dismantle their CMS programs. This may be attributable to the sheer capital investment they made to implement these systems, but additional factors likely are at play. As noted above, other regulatory agencies—state attorneys general, in particular—have rushed, even before Cordray’s departure, to fill the perceived void created by a Cordray-less CFPB. These regulators tend to care just as much about compliance as the Bureau did with Cordray at the helm, and they have learned from the blueprint established by the CFPB over the past five years. And of course, class action lawyers have never retreated and will continue to survey the landscape for alleged abuses against consumers. In addition, maintaining a CMS, while expensive, also appeals to companies’ bottom line: robust CMS assists corporate boards and other leaders and decision-makers with monitoring, understanding, and improving upon business operations and, frequently, the effectiveness of their corporate vendors and service partners. 

4. Be Mindful of Risks Posed by Employee Compensation Programs

The CFPB under Cordray put a spotlight on incentive-based employee compensation programs and the risks they pose. Following the Great Recession, investigations and litigation focused on the lending practices of banks and mortgage originators, especially compensation plans that rewarded employees with commissions and bonuses based primarily on the number of loans they originated rather than the quality of those loans. The CFPB’s Loan Originator Rule was designed to combat certain of these practices, including those that made compensation contingent on steering customers to certain types of mortgages.

Incentive programs remained a CFPB focus through 2016, with a shift in focus to “add on” products aggressively promoted by financial services providers. The Bureau emphasized that rewarding the risky behavior of employees with compensation risked running afoul of federal and state laws, and financial institutions that did not carefully monitor incentive compensation programs also risked “private litigation, reputational harm, and potential alienation of existing and future customers.” CFPB, Production Incentives Bulletin (Nov. 2016). These risks have not vanished simply because Richard Cordray has left the Bureau.  

Other agencies, including the Office of the Comptroller of the Currency (OCC), are also evaluating sales practices and are likely to take supervisory action to correct risky activities and improve processes surrounding whistleblower complaints. OCC, Office of Enterprise Governance and the Ombudsman, Lessons Learned Review of Supervision of Sales Practices at Wells Fargo (Apr. 19, 2017). And, as with other compliance-related risks, there are the state attorneys generals to contend with. For example, in November 2017, the New York Times reported that the New York Attorney General’s office had launched an investigation into an investment firm’s sales practices, including the firm’s use of sales quotas and employee bonuses. This type of scrutiny is likely to continue, with or without an aggressive CFPB in the mix.

5. If You Lie Down with Dogs, You Get Up with Fleas

A final key lesson from the CFPB’s first five years is that who you do business with matters. Whether it’s a vendor, counterparty, or client, the CFPB made crystal clear that the legal and reputational risk of a transaction with a noncompliant person or entity is significant. In this regard, the Consumer Financial Protection Act gives the CFPB and state attorneys general extraordinary authority to pursue companies and individuals for legal violations committed by their service providers and other third parties. More recently, the OCC issued Bulletin 2017-21, which directs banks to perform rigorous oversight of their third-party relationships, including fintech companies, perceived by some to present higher risk.

As a result of these developments, companies have rolled out robust due diligence and audit programs to properly vet and manage third-party relationships. Regardless of how the CPFB, state attorneys general, and other regulators wield this authority in the future, prudent financial institutions will continue to perform diligence on their partners and condition the award of servicer bids or contracts on such partners’ willingness and ability to comply with diligence and audit expectations.  

Perspective

For consumer financial services providers the Cordray era was a blur of heightened enforcement, aggressive supervision, and new expectations for compliance and prudent business practices. While the CFPB may be less aggressive moving forward, consumer financial services providers should remember the lessons they learned during the past five years—there are plenty of other regulators and private litigants that will remain aggressive in protecting consumers from unfair, deceptive, or abusive acts or practices.  

CEDAR FALLS, Iowa –– CBE Companies (CBE) made a meaningful difference in the communities where it operates and beyond in 2017 through charity projects.

CBE employees made financial donations throughout the year and volunteered in local events through the variety of initiatives that comprise the CBE Cares program. CBE Cares includes all of CBE’s charitable opportunities in the communities of Cedar Falls and Waterloo, Iowa; New Braunfels, Texas; and Manila, Philippines. 

CBE employees raised more than $160,000 for non-profit charitable organizations in 2017. 

“Our employees consistently generate creative ideas for how best to serve their communities when it comes to fundraising and volunteer projects. I’m proud of the generosity displayed by our people throughout the year,” said Chad Benson, CBE President and Chief Executive Officer. 

Employees take the lead in charitable efforts

CBE employees organize and execute each of CBE’s charity projects. Some of the ways CBE employees gave back to their communities in 2017 include:

United Way

Employees contributed over $76,000 to local chapters in CBE communities. Voluntary employee payroll contributions and the month-long United Way campaign in October make up the majority of the United Way effort. Fundraising events included contests, food sales, silent auctions and raffles, which contribute to a fun and competitive atmosphere.

 

Pay It Forward

The months of May and June marked CBE’s eighth annual Pay It Forward project. Employees worked together in teams to select a cause and determine how to make a difference, whether through volunteerism or donations. CBE volunteer efforts included construction on a Habitat for Humanity home, food drives for a local food bank and tree planting in the City of San Pablo, Philippines, to maintain the forest and help water production. 

Leader In Me

CBE provides both leadership and financial support for the Cedar Valley Leader in Me program. The program helps elementary and middle school students develop life skills and self confidence. Leader in Me builds leaders based on the principles set forth in Stephen Covey’s The 7 Habits of Highly Effective People. 

Partners in Education

CBE’s long-standing partnership with Lincoln Elementary school in Waterloo, Iowa, continued to assist with needs of staff and students in 2017. CBE employees contributed more than $4,500 to its Partners in Education school over the course of the year. Beyond the financial donation, employees volunteered to serve at events, as mentors and in a pen pal program. 

Casual for a Cause

Regular, ongoing employee contributions at CBE locations allow them to wear casual clothing, including jeans, throughout the year to benefit local, non-profit organizations. The Casual for a Cause initiative raised more than $76,000 for local charities selected by employee committees at each location. In 2017, charities benefitting from the program included the One Mix Program at KBOL radio, House of Hope, Magical Mix Kids, Cystic Fibrosis Foundation, Cedar Valley Hospice, Beyond Pink Team, the New Braunfels Community Emergency Response Team and $12,000 to Red Cross for hurricane relief. 

About CBE Companies

Founded in 1933, CBE Companies is a global provider of outsourced call center solutions. The company specializes in first and third party debt collection, fraud and customer care services. Our ability to constantly adapt, evolve and stay ahead of the regulatory environment sets us apart from other providers. We’ve implemented the controls necessary to meet the most stringent requirements of federal contracts, as well as heavily regulated and complex Fortune 500 companies. This sustained focus on thought leadership and continual investment inevitably benefits all of our clients by mitigating present and future risk.

CBE accepts change as the rule, not the exception, and has created an environment in which individuals thrive and creativity is valued. Our guiding principle is happy employees equal happy clients. With over 1,000 people in five locations globally, CBE Companies can deliver the right solution in the right location(s) for your ever-changing business needs. CBE’s corporate headquarters is located in Cedar Falls, Iowa, with two facilities in Waterloo, Iowa, and additional facilities in New Braunfels, Texas and Manila, Philippines. The organization is consistently recognized as a local Employer of Choice. It has also been recognized by Workplace Dynamics as one of Iowa’s Top Workplaces.

For more information about CBE Companies, please visit www.cbecompanies.com or call 888-386-0273.

Yesterday several industry groups filed comments with the Federal Communications Commission (FCC) regarding mechanisms to resolve erroneously blocked calls.  

On November 17, 2017 the FCC adopted rules to allow call carriers to block unwanted or illegal “robocalls.” The rules now allow voice service providers to block calls in these four categories:

1. Calls from a phone number placed on a “do not originate” list by the number’s subscriber
2. Calls from invalid numbers, like those with area codes that don’t exist
3. Calls from numbers that have not been assigned to a provider
4. Calls from numbers allocated to a provider but not currently in use

At the same time, the FCC issued a Further Notice of Proposed Rulemaking (FNPRM) to gather input on ways to minimize the effects of calls blocked in error. The deadline to submit comments on the FNPRM ended yesterday. Multiple groups submitted input, including the Professional Association for Customer Engagement (PACE) — the Consumer Relations Consortium was a co-signer of these comments, as was Alorica, Inc. — and ACA International.

In addition to providing detailed context, PACE suggested:

1. Require carriers to offer a call blocking mitigation service for callers and called parties
2. Provide a speedy Commission complaint procedure for callers whose requests to have their calls unblocked are ignored or denied
3. Implement effective and appropriate reporting requirements to gather and make publicly-available data related to call blocking and blocking mitigation.

Among other guidance, ACA International suggested that the FCC should require providers who offer call blocking services, whether provider initiated or consumer initiated, to:

1. indicate a call has been blocked on a per-call basis using a defined, unique signaling code;
2. make available a defined, easy to use mechanism for callers to inquire about the blocking status of a number or set of numbers; and
3. make available a defined, easy to use mechanism for callers to challenge the status of a blocked number or set of numbers. 

The full ACA International comment can be downloaded here.

The full PACE comment can be downloaded here.

Others who submitted comments include:

Comcast Corporation
CTIA (representing the Wireless Industry)
Danal, Inc.
Encore Capital Group
First Orion
Montgomery County, Maryland
National Council of Higher Education Resources (NCHER)
Noble Systems Corporation
The Voice of the Net Coalition
ZipDX

insideARM Perspective

For more background on this topic, including robocall labeling – which is not addressed in the FNPRM, please read the following insideARM coverage:

November 20, 2017: FCC Issues New Proposed Robocall Blocking Rules; Collectors Have a Unique Challenge

September 19, 2017: FCC Committee Meets About Unwanted “Robo” Calls; Makes More Recommendations.

September 11, 2017: The Gathering Avalanche: “Robocall” Blocking, and What Can be Done

Call labeling poses a challenge unique to debt collectors because of the potential for third party disclosure of the purpose of the call. Industry groups have been in dialogue with robocall application developers to identify a practical solution, however it has proven difficult to identify a label that 1) serves the purpose of providing accurate information to consumers, 2) prevents third party disclosure, and 3) is applicable to all possible types of debt.

As promised last week by Acting Director Mick Mulvaney, today the Consumer Financial Protection Bureau (CFPB or Bureau) released its Request for Information (RFI) regarding Civil Investigative Demands (CID). Per the announcement, “this RFI will provide an opportunity for the public to submit feedback and suggest ways to improve outcomes for both consumers and covered entities.”

The CFPB will begin accepting comments once the RFI is printed in the Federal Register, which is expected to occur on Friday, January 26. The deadline to submit comments is 60 days following the date of publication (so, likely March 27, 2018).

The RFI contains a list of 11 topics related to CIDs, but noted that the nonexhaustive list is meant to assist in the formulation of comments and is not intended to restrict the issues that may be addressed. The topics include:

1. The Bureau’s processes for initiating investigations, including 12 CFR 1080.4’s delegation of authority to initiate investigations to the Assistant Director of the Office of Enforcement and the Deputy Assistant Directors of the Office of Enforcement;

2. The Bureau’s processes for the issuance of CIDs, including the non-delegable authority of the Director, Assistant Director of the Office of Enforcement, and the Deputy Assistant Directors of the Office of Enforcement to issue CIDs;

3. Specific steps that the Bureau could take to improve CID recipients’ understanding of investigations, whether through the notification of purpose included in each CID or through other avenues, including facilitating a better understanding of the specific types of information sought by the CID;

4. The nature and scope of requests included in Bureau CIDs, including whether topics, questions, or requests for written reports effectively achieve the Bureau’s statutory and regulatory objectives, while minimizing burdens, consistent with applicable law, and the extent to which the meet and confer process helps achieve these objectives;

5. The timeframes associated with each step of the Bureau’s CID process, including return dates, and the specific timeframes for meeting and conferring, and petitioning to modify or set aside a CID;

6. The Bureau’s taking of testimony from an entity, including whether 12 CFR 1080.6(a)(4)(ii), and/or the Bureau’s processes should be modified to make expressly clear that the standards applicable to Federal Rule of Civil Procedure 30(b)(6) also apply to the Bureau’s taking of testimony from an entity;

7. The Bureau’s processes for handling the inadvertent production of privileged information, including whether 12 CFR 1080.8(c) and/or the Bureau’s processes should 6 be modified in order to make expressly clear that the standards applicable to Federal Rule of Evidence 502 also apply to documents inadvertently produced in response to a CID;

8. The rights afforded to witnesses by 12 CFR 1080.9, including limitations on the role of counsel described in 12 CFR 1080.9(b) in light of the statutory delineation of objections set forth in 12 U.S.C. 5562(c)(13)(D)(iii);

9. The Bureau’s processes concerning meeting and conferring with recipients of CIDs, including, for example, negotiations regarding modifications and the delegation of authority to the Assistant Director of the Office of Enforcement and Deputy Assistant Directors of the Office of Enforcement to negotiate and approve the terms of satisfactory compliance with civil investigative demands and extending the time for compliance;

10. The Bureau’s requirements for responding to CIDs, including certification requirements, and the Bureau’s CID document submission standards; and

11. The Bureau’s processes concerning CID recipients’ petitions to modify or set aside Bureau CIDs.

You can view the RFI, which includes instructions for submitting comments, here.

insideARM Perspective

As covered entities, larger market participants (LMP) in debt collection – those with $10 million or more in annual receipts from collection activities (specifically excluding debt collected that were originally owed to a medical provider) – likely have a good deal of feedback for the Bureau. The CFPB rule establishing the LMP definition was finalized in October 2012. Since that time, the Bureau has conducted investigations of dozens of industry firms.

 

OGDEN, Utah —- DAKCS and PDCflow are promoting support for the elderly through volunteerism. The local Utah software companies recently partnered with La Roca Girls’ Development Academy soccer teams to provide an opportunity for residents of Genesis, Washington Terrace Healthcare Center — which specializes in short-term rehabilitative, long term and hospice care — to visit with youths in the community and benefit from their attention and service. 

Top management at both PDCflow and DAKCS have had firsthand experience with eldercare in their own lives, and witnessed the neglect our older generations experience. These encounters inspired the local companies to pursue a project that would directly benefit the older individuals in our society who are often forgotten. 

“We have always believed in people helping people,” says DAKCS President, Lex Patterson. “This sponsorship gave us the opportunity to connect generations in our community that touched lives in various important ways. We feel fortunate to be part of this program.” 

Because the La Roca Development Academy requires athletes to complete service hours each season, the companies sponsored four teams of young women, contingent on a service project aimed at providing a benefit for the elderly. The resulting activity at Genesis Healthcare Center was a great success.

Assistant Director of Operations for La Roca Futbol Club, Laura Coffee, took charge of organizing the service hours for the academy participants, providing separate age-appropriate projects for each group of girls. Both activities will provide long-term benefits to those who call this center home. 

“It was phenomenal to watch these girls open up,” said Coffee. “Some of them have never been exposed to the atmosphere of a care center and the ailments some of the residents there are facing. The experience was enlightening, and I think in the end the girls got just as much out of it as the adults did.” 

The two younger teams, ages 13 to 14, worked with staff of the center to clean and organize all drawers and cabinets in the center’s activity room. The newly straightened area will make activity time easier for Genesis employees and volunteers to carry out, and more enjoyable for residents to attend. 

The older athletes, ages 16 to 18, participated in interactive time with the residents of the healthcare center. The girls offered personal styling assistance, including nail painting, to all residents interested in the activity. 

The older group also led craft time, helping participants decorate “Gratitude Jars.” This project will keep residents optimistic well into the future as they write their positive day-to-day experiences on slips of paper and store them in these cheerful jars. During hard times, residents can revisit pleasant memories by reading the papers they’ve stored in their jars.

 

About DAKCS

DAKCS Software Systems is an industry leader in simplifying the process of collections and accounts receivable management. By creating highly configurable, innovative cloud and on-premise software solutions, DAKCS offers a way to run your business faster and more efficient. For over 35 years, DAKCS has delivered on service, automation, and flexibility in one central collection software platform for all types of business. 

For more information, please call our team at 1.800.873.2527 or schedule a few minutes today. https://www.dakcs.com/ 

About PDCflow

PDCflow is a complete Payment Management Solution that is simple, efficient, and secure, so businesses get paid faster. The application allows multi-channel payments, payment authorization with eSignatures, and document delivery for small businesses to enterprise level organizations – all from one central platform. https://www.pdcflow.com/free-esignature-services/

About La Roca

La Roca Futbol Club was established in 2005 to provide a quality competitive youth soccer program in Utah, and has grown to become the most successful club in the state. La Roca FC trains serious youth soccer players who desire an opportunity to develop and showcase his/her skills to the fullest potential. La Roca FC offers players a chance to play at the highest level of state competition and compete in various regional and national tournaments and leagues. In 2016, La Roca was one of 68 clubs selected to participate in US Soccer’s Girls’ Development Academy program. Four La Roca teams comprised of Utah’s top female soccer players now compete in the Northwest division of the US Soccer Girls’ Development Academy. La Roca is a 501(c)(3) corporation under the direction of its Board of Directors. For more information visit www.larocafc.com, or contact the La Roca FC office: 801-825-6040.

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An article today in Fast Company profiled a website called SoloSuit, which helps debtors respond to a lawsuit. The site was developed by students at the Brigham Young University Law School. The group wanted to pick one area of the law where they could make a difference for non-lawyers; they selected debt collection.

The problem, the students described, is that when a consumer is sued by a collector, they must respond quickly — otherwise they will automatically lose the case. But most people don’t respond because they don’t know how. The law students noted that it isn’t hard to do so, but the complaint document doesn’t provide clear direction.

The class underwent training in design thinking, interviewed debtors, mapped out the process, and then started programming.

The website home page is extremely straightforward. It looks like this:

A debtor who has received a complaint answers a series of simple questions and then generates a document they can submit. The site also provides a list of local sources where they can find pro bono legal assistance.

Currently SoloSuit only helps consumers who have been sued for a debt in Utah, however the article says the software will soon expand to cover other states.

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In a memo sent yesterday to Consumer Financial Protection Bureau (CFPB or Bureau) staff, Acting Director Mick Mulvaney provided insight and guidance into his intentions for the new direction of the Bureau.

He reiterated that he intends to enforce consumer protection laws. However he made it clear that this would look different under his watch than it did under former Director Richard Cordray.

He said,

“I think it is fair to say that the previous governing philosophy here was to aggressively ‘push the envelope’ in pursuit of the ‘mission;’ that we were the ‘good guys’ and the ‘new sherriff in town,’ out to fight the ‘bad guys.’

Simply put: that is what is going to be different. In fact, the entire governing philosophy of pushing the envelope frightens me a little. I would hope it would bother you as well.”

He also made it clear that as government employees CFPB staff works for the people who provide credit cards as well as those who use them; those who sell cars as well as those who buy them.

He reiterated his recent announcement that the Bureau would be reviewing everything they do. 

As it relates to enforcement, Mulvaney said they will focus on “quantifiable and unavoidable harm to the consumer,” and will not be looking for excuses to bring lawsuits.

Industry will be pleased to hear his opinion on regulation: 

“[t]he people we regulate should have the right to know what the rules are before being charged with breaking them. This means more formal rulemaking on which financial institutions can rely, and less regulation by enforcement.”

Most significantly for the debt collection industry, Mulvaney announced his intention to prioritize, quoting that a far greater number of complaints received by the CFPB relate to debt collection than to prepaid cards or payday lending (other industries that received rulemaking attention prior to debt collection).

You can read the complete memo here.

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insideARM Perspective

While the Acting Director did not specifically announce a schedule, his comments suggest that debt collection may in fact rise to the top of the rulemaking agenda. Indeed, it had been sort of next on the list under Cordray. Sources with knowledge of the process had told insideARM that a Notice of Proposed Rulemaking (NPR) – the next step in the debt collection rulemaking process – had been written and was in the process of review by attorneys. If this was true, the review was suspended when Mulvaney started the job and put most initiatives on a 30-day hold. 

Of course, industry leaders have anticipated this potential opportunity, and groups have been working on proposals for the CFPB team. This may be the best chance in many years for clarity and modernization of a law enacted when our society looked very different: No cell phones, no email, no internet, virtually no self-pay medical bills or high deductibles… I could go on.