Archives for May 2018

This afternoon Judge Thomas C. Wheeler of the U.S. Court of Federal Claims granted the Department of Education’s (ED) motion to dismiss the case of FMS v. USA as moot, and lifted the February 26, 2018 preliminary injunction that prevented ED from recalling in-repayment accounts.

Here is an excerpt from the Order published today:

For reasons to be explained in a more substantive Opinion in the coming days, the Court GRANTS the Government’s motion to dismiss, LIFTS the February 26, 2018 PI, DENIES Plaintiffs’ motions for leave to file supplemental pleadings, and DENIES Performant’s motion for partial dismissal as MOOT. The Clerk is directed to dismiss Plaintiffs’ complaints without prejudice. No Costs. For the sake of judicial continuity and efficiency, any new protests that may be filed challenging ED’s decision to cancel the solicitation should indicate that they are related to the FMS Investment Corp. line of cases.

For those who need the incredibly short recap…This all started in 2014 when the five-year 2009 contract ended, and new large-firm awards were delayed. Eventually, contracts were awarded in 2016 to seven large companies, down from 17 on the previous contract. This led to dozens of protests by firms that believed the process was flawed and unfair. So began Chapter Two of the matter, with a “re-do” of the solicitation, which resulted in awards to just two large companies. This led to more protests, and finally… nothing. No large company awards at all, as ED cancelled the whole solicitation on May 3, 2018, rescinded the contract awards from the two companies, and filed a motion to dismiss the litigation. And so began Chapter Three, with 13 parties opposing that motion.

For those who want to review all of the details, click here for the full coverage of the Department of Education collection contract on insideARM.

insideARM Perspective

True to form, Judge Wheeler made a prompt decision following the deadline for filing motions, which was only two days ago. He says there will be a more substantive explanation of his thinking in the coming days, so we’ll look forward to that.

For now, I would expect those firms who still hold in-repayment accounts as part of the 2015 Award Term Extensions to receive letters recalling those accounts as early as next week.

I would also expect to see a new round of litigation filed; at least one firm — Automated Collection Services, Inc. (ACSI) — promised as much in their filing on Wednesday.

As CEO of one of the nation’s leading Accounts Receivable agencies, Gordon Beck goes to great lengths to ensure his collections agents are happy. With the implementation of an Intelligent Virtual Assistant, Diversified Consultants will be dramatically reducing the amount of time their agents spend on non-revenue generating transactions.

 

To learn more about how Diversified Consultants is supercharging their agent productivity with Artificial Intelligence, download the full interview here.

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There were three filings yesterday in the case of FMS v. USA (Department of Education, or ED).

1. ED’s reply in support of its motion to dismiss the case as moot and to lift the February 2018 preliminary injunction preventing the recall of “in repayment” accounts
2. An amended complaint by plaintiff Progressive Financial Services, Inc. (Progressive), asserting additional grounds of protest relating to ED’s actions
3. A reply by plaintiff Pioneer Credit Recovery, Inc. (Pioneer) to various parties’ requests for an extension of the February 2018 preliminary injunction preventing the recall of in-repayment accounts

The Department of Education Response

As insideARM reported on May 21, ten firms filed opposition to ED’s motion to dismiss the case as moot (given that ED decided to cancel the entire Solicitation for unrestricted private debt collectors). The firms all basically argued that the move – based on a new operational strategy that is as of yet unimplemented — was irrational.

Yesterday ED responded to the opposition, saying that their arguments are premature and unfounded, and that their claims should be addressed via new protests of the cancellation. Further, ED argues that any such protests, however, cannot cure the claims that the cancellation of the Solicitation rendered moot.

ED claims that the gross data about rising student debt defaults cited by those opposing their motion is irrelevant until new protests are filed and reviewed against an administrative record specific to the decision to cancel. ED says the record supporting the decision will show that the arguments are baseless, and that the contracting officer determined that,

“[t]here is presently more than sufficient capacity, through at least 2024 to perform any Debt Collection Services that may be needed. The 11 active small business contracts are capable of handling 750,000 new accounts per month. The contracting officer estimated the current need, even excluding the eventual impact from the enhanced service provider(s), to be approximately 120,000 new accounts per month… This leaves a cushion of over 600,000 accounts per month while ED transitions to the enhanced servicer(s).”

ED further claims that the plaintiffs cite no case law, and no case law exists, to support a finding that the claims directed at the prior award decision are not moot, so those claims should be dismissed.

As to the matter of the recall of in repayment accounts, ED says it is willing to voluntarily stay any recall subject to the injunction until June 30, 2018. A notice of intent to recall the accounts on that date would be sent to the relevant PCAs on June 15, 2018.

Progressive’s Amended Complaint

Progressive argues that because it has requested leave to file a supplemental complaint, the Government’s motion to dismiss the original complaint is now moot. Although ED argues that the Court no longer has jurisdiction in the case because the subject (the Solicitation) has been cancelled and any opposition must be in the form of a new bid protest, Progressive argues that the Court does retain jurisdiction. Further, Progressive asserts that because ED’s decision to cancel the Solicitation is improper, the Court retains jurisdiction over Progressive’s entire protest. Their argument states,

“Progressive’s protest grounds concerning the evaluation of its proposal and the awardees’ proposals remain viable (Counts I-III, and VII), and should be decided by the Court in accordance with the Rules of this Court. However that determination cannot exist until the Court first determines whether ED’s cancellation decision was reasonable. If the Court grants relief to Progressive under Count IX of its Supplemental Complaint, the effect would be a return to the status quo that existed before ED made the decision to cancel the Solicitation, namely, a flawed evaluation and improper awards to Performant and Windham. If Counts I-III, and VII of Progressive’s Complaint are dismissed now, and Progressive prevails under Count IX, Progressive will have to re-file its protest to obtain full relief. 

Accordingly, it is premature to dismiss Counts I-III and VII at this time, before the Court determines whether ED’s cancellation decision was proper. Upon prevailing under Count IX, Progressive will seek relief in the form of an award to Progressive, as an offeror who offered a superior proposal, or, in the alternative, will seek an Order from the Court requiring ED to re-evaluate the proposals, proceed with the procurement, and make an award as required by the Solicitation and federal law. Thus, the interests of judicial economy and efficiency weigh against the outright dismissal of Progressive’s underlying protest grounds as moot, without further analysis regarding the proprietary and reasonableness of ED’s cancellation decision.”

Pioneer Responds to Requests for Extension of the Preliminary Injunction

First, a bit of background on Pioneer’s positioning in the case. The company was one of five contractors that was suddenly terminated by ED in February 2015. This launched the first round of litigation in the unrestricted contract debacle.

Meanwhile, the new contract decision process continued. When the first round of awards was finally announced on December 9, 2016, Pioneer did not make the list.

So, back to the wrongful termination appeal related to the old contract…ultimately, two of the five firms – Enterprise Recovery Systems, Inc. (now Alltran Education) and Pioneer — won their appeal, and received Award Term Extensions (ATEs) on April 28, 2017.  

Now, back to Pioneer’s the current response to other plaintiff’s requests for an extension of the February 26, 2018 preliminary injunction. That injunction prevented the recall of in-repayment accounts that are with firms that received ATEs in 2015 (when the 2009 contract ended) – not the ATE held by Pioneer.

Pioneer argues that the Court should not extend the injunction, but rather should dissolve it because the protests and all relevant facts upon which they were based are no longer relevant. “The February 26 PI was based on specific alleged errors regarding the evaluation of proposals and ED’s recalling of accounts in light of its new awards…The questioned data is no longer operative because ED has cancelled the procurement and made clear that it will not under any circumstances rely on the data that the Court questioned in its February 26 PI decision.”

insideARM Perspective

Judge Wheeler has typically provided swift decisions following filing deadlines. All we can do is watch.

If you want more history on the case, see our full archive here.

Transworld Systems Inc. (TSI) announced yesterday that it has completed a comprehensive financial restructuring of the Company’s debt and equity.

According to the announcement, the recapitalization was implemented via a voluntary, out-of-court transaction and did not impact TSI’s customers, operations, facilities, or employees.

The restructuring decreased the Company’s outstanding debt by approximately $460 million, or 91%, through (i) an exchange of the Company’s 9.5% Senior Notes due 2021 (the “Notes”) for new debt and new common equity, (ii) a partial repayment and extension of the Company’s revolving credit facility, and (iii) a $39 million equity capital injection into the Company.

“The successful completion of this transaction provides TSI with significant financial flexibility to invest in the business to drive growth,” said Joe Laughlin, CEO of TSI.  “We are pleased to partner with Clearlake Capital, Platinum Equity and our other new equity holders.  I would like to thank our customers, employees, vendors and regulators for their patience and support as we moved through this process.”

TSI is an analytics-driven provider of accounts receivable management, healthcare revenue cycle, and loan servicing solutions.

If you haven’t yet learned about efforts by carriers or software providers to block or label automated calls to consumers, you soon will. Or at least you certainly should. When you dig in, you’ll learn that there are more than 500 application (app) providers, which consider themselves ‘editorial services,’ and four major carriers (though there are many more smaller ones) which have recently been given permission by the Federal Communications Commission (FCC) to a) not deliver certain calls and b) provide their customers with the ability to opt-in to additional blocking/labeling services to help avoid fraudulent or unwanted calls.

All of this has left the heads of legitimate call originators spinning. Recently, Verizon posted guidance for these firms on its website. The carrier suggests the following best practices, which can help avoid being blocked or inappropriately labeled.

Follow practices known to constitute good call center hygiene.

1. Provide a consistent, real, and user-dialable telephone number with every call you make.  Calls with a calling party number that is invalid or not assigned to the caller are often associated with spam. You may want to consult your account representative at your service provider if you are unsure about this best practice.
2. Do not “random wardial” and do not call unassigned numbers frequently. Unreasonable answer and completion rates are often associated with spam.
3. Align the context and content of your calls to a specific traceable calling party number for the duration of that number’s assignment to a particular campaign.  Avoid using the same telephone number for multiple purposes. For example, using the same number for marketing, surveys, and support callbacks would typically increase the likelihood of being categorized as spam.  It is recommended that numbers that are re-assigned for other purposes or allocated to other providers go through a 45-day waiting period.
4. Avoid unusual spikes in traffic volumes, and follow and document your expected and normative call pattern description (e.g. 10,000 caller per day).
5. Comply with “Do Not Call” lists and other TCPA requirements, and provide a number / contact information that called parties can use to prosecute or report any alleged violations of law.
6. Provide and document a consistent Calling Name profile that matches the context of the calls you are making and your callback information.

Use common sense to minimize the risk that consumers report your calls as spam or file complaints about you with government agencies.

1. Legitimate calling parties should never use abusive language, call too frequently, have perceptible delays in the quality or reliability of connection, or make unsolicited calls at odd hours.
2. Legitimate callers should always provide clear identification of the calling party, along with clear-and-easy opt-out directions.

Also of note is that Verizon recently announced it was the first to release robocall screening assist for landlines. (emphasis added)

As Amy Perkins — Chief of Content for insideARM — shared in her recent article, Call Blocking/Labeling: Big Impact, But Little Understanding, this matters to collection and recovery leaders because:

• If you contact customers via the telephone, you will be impacted (the impact may have already started).
• If your calls are inappropriately flagged as spam calls, they may be blocked by carriers or by mobile phone apps.
• If your calls aren’t blocked, but are mislabeled (the analytics companies will decide how legitimate calls are labeled) on the caller ID, you may not get through to your customers.
• If you take no action, there’s a high probability you will see a sharp decline in RPC rates and your customers will be in the dark.

insideARM Perspective

Most legitimate collection operations likely already comply with most of the above recommendations (although some of us in the industry have also been working to educate carriers and app developers about the nuances of calling patterns in collections). However the toughest challenge may be the last item – “Legitimate callers should always provide clear identification of the calling party…” …except if you are a debt collector whose name might give that away.

Regulators, please take note: the requirements of the Fair Debt Collection Practices Act (from 1977) says that collectors may not communicate about a debt with a third party, except in limited circumstances. The definition of “communicate” has been very broadly defined by the courts over the years and has led to volumes of litigation related to leaving voicemail messages (among other things), because standard voicemail technology required a consumer to listen to a recording in the open, where others might hear. 

So, consumers are demanding to know who is calling them and why. Carriers and hundreds of software companies have jumped into the fray to help — with the full encouragement of the FCC and other regulators. But providing this information to consumers in the case of debt collection is likely considered a violation of the FDCPA (there’s a HIPAA issue too, as it relates to healthcare accounts, but we’ll leave that for another time). It’s time to revisit this broad definition of third party disclosure and give consumers the information they want.

insideARM will be covering this topic in depth at the upcoming First Party Summit in Dallas, June 4-6.

In a recent decision, the Eastern District of New York (“E.D.N.Y”) answered a question left open by the Second Circuit in Taylor v. Financial Recovery Services, Inc., 886 F.3d 212 (2d Cir. 2018). In Taylor, the Second Circuit explicitly refused to answer the question of whether the safe harbor language is required if interest may accrue on the account at some point in the future.  In Medzhidzade v. Kirschenbaum & Phillips, P.C., No. 17-CV-6452, 2018 WL 2093116 (E.D.N.Y. May 3, 2018), the court gave its answer: No. 

Read the decision here. 

Factual & Procedural Background 

Kirschenbaum & Phillips, P.C. mailed a collection letter to plaintiff for a Discover account that included the balance as of the date of the letter and the safe harbor language adopted by Avila v. Riexinger & Assocs., 817 F.3d 72 (2d Cir. 2016). The account was static while placed with Kirschenbaum & Phillips, but the cardholder agreement entered into between plaintiff and Discover provided for daily accrual of interest and for Discover to recover its legal costs from plaintiff where permitted by law.

Plaintiff filed a lawsuit against Kirschenbaum & Phillips alleging the letter failed to accurately state the balance owed. Motions for summary judgment were filed where two main issues were presented to the court. First, whether the Avila safe harbor language was sufficient under the itemization requirements of Carlin v. Davidson Fink LLP, 852 F.3d 2017 (2d Cir. 2017). Second, whether it was appropriate to include the Avila safe harbor language where the account balance was static but may increase at some time in the future. 

The Decision 

On the Avila/Carlin issue, the judge decided consistently with the prior E.D.N.Y. decision on the issue.  Specifically, the court found that Carlin is applicable only in the limited circumstance where the amount listed on the letter is an estimated pay off balance. Since the letter from Kirschenbaum & Phillips contained the balance as of the date of the letter, the court found that Carlin was inapplicable. 

On the second issue, the court decided that the Avila safe harbor disclosure is not required where an account is static, even if it may increase in the future. In reaching this decision, the court looked to the cardholder agreement. The court recognized that there was a distinction between what the debt collector may do versus the rights of the creditor. The cardholder agreement that allowed for accrual of interest was between Discovery – not Kirschenbaum & Phillips – and plaintiff, since there was no evidence presented to show that Discover allowed Kirschenbaum & Phillips to collect interest. Because of this, the court decided that the Avila safe harbor language would not be appropriate in the letter. 

Analysis 

This decision is a victory for the industry and provides the much needed support for the last few hanging Avila claims in New York. The Second Circuit left open the question of whether the ability of the account balance to change at some undisclosed point in the future impacts the Avila disclosure requirement due to the issue being raised for the first time on appeal. E.D.N.Y.’s opinion in this case, coupled with the Second Circuit’s denial of en banc review of their Taylor decision, should provide plenty of ammunition for debt collectors’ summary judgment motions.

insideARM maintains a free FDCPA resources page to provide the ARM community a destination for timely and topical information on the Fair Debt Collection Practices Act (“FDCPA”). This page is generously supported byTransUnion.

The centerpiece of the page is a chart of significant FDCPA cases. Case information and analysis is provided by Joann Needleman, a Clark Hill attorney and leader of the firm’s Consumer Financial Services Regulatory & Compliance Group. Where insideARM has published a story on the case, a link is provided.

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Here’s a rundown of just a few of the FDCPA cases in the spotlight in April 2018.

Pavlovich v. Account Discovery Systems, LLC

The issue: Interest language

Industry outcome: Positive

Collection letter stated that “A statement or correspondence may include post charge off interest and/or offer a settlement amount less than the legal now due balance.” The plaintiff attempted a suit stating that the language was confusing. Court found that plain meaning of disclosure was not confusing if read in its entirety.

 

Tiffany Ham v. Midland Funding LLC

The issue: Court costs

Industry outcome: Positive

 

Debt collector filed suit and obtained a default judgement. Debt collector proceeded to a wage garnishment and sought the amount of the judgment, court costs and “probable court costs of $20.00.” Kentucky law requires the judgment creditor pay a $10 fee to the clerk and a $10 fee to the garnishee for a total of $20.00. Consumer says debt collector did not have the right to collect those costs. However, under Rooker-Feldman, the consumer should have made that argument at the trial court level, and cannot make the argument now. Court found that at all times debt collector complied with state law as well as the Court’s order awarding costs.

 

Kasey Velez v. Continental Service Group, Inc.

The issue: Letter, state notification

Industry outcome: Positive

Debt collection letter to a Pennsylvania resident also included a notice under Massachusetts law. Consumer alleged that this was confusing. Court agreed that state specific notice with other state notices in a debt collection letter is not otherwise confusing.

 

Dorrian v. LVNV Funding, LLC

The issue: Passive debt buyer not a debt collector

Industry outcome: Positive

A passive debt buyer was determined not to be a debt collector under Massachusetts statute, G. L. c. 93, § 24.4. The statute contains two separate definitions of “debt collector,” neither of which applied. A “passive debt buyer” is a company that buys debt for investment purposes and then hires licensed debt collectors or attorneys to collect the debt on its behalf. Because this definition covers entities of which the “principal purpose” is the “collection of a debt,” the debt buyer in this instance had no no contact with consumers and the Legislature did not intend for these entities to be treated as debt collectors. The second definition covers entities that “regularly collect or attempt to collect, directly or indirectly, debts owed or due” to another and this definition did not apply because debt buyer deals only with its own debts and  not the debts of another.

 

Rodriguez-Ocasio v. Law Offices of Joseph Molinaro, L.L.C.

The issue: Improper medical disclosure

Industry outcome: Positive

A law firm sued a consumer in state court for past due medical bill. Consumer alleges that documents submitted to court contained medical information that should not have been disclosed. Court granted motion to dismiss. Doctor-patient privilege is not absolute, and to maintain a claim for breach of doctor-patient confidentiality, consumer must allege that doctor did more than send Plaintiffs’ past-due account to a debt collector for payment.

 

Bell v. Northland Group

The issue: Demand letter on settled debt

Industry outcome: Negative

Agency sent a demand letter on debt that had been settled. Agency immediately remedied the situation, but was sued anyway. Agency said it relied on information from its client, but because FDCPA is a strict liability statute, agency’s summary judgment was denied.

 

Kolbasyuk v. Capital Management Services, LP

The issue: Collection letter, amount owed

Industry outcome: Positive

Consumer alleges debt collection letter failed to provide a true and accurate statement of the amount owed. Letter contained safe harbor language found in Avila. Consumer alleges that letter failed to follow the Carlin case. In Carlin, letter spoke of unspecific costs; court found that consumer did not have an understanding of what was immediately owed. It did not result in additional requirements under the FDCPA. Motion to dismiss granted.

 

John H. Burton v. Kohn Law Firm

The issue: Whether or not a debt was a consumer debt

Industry outcome: Positive

Consumer was unable to prove that debt was a consumer debt, especially when consumer denied the existence of the debt. Summary judgment granted for debt collector. 

 

Jackson v. Barton

The issue: Untimely suit-filing by consumer

Industry outcome: Negative

Law firm alleges that consumers FDCPA action was untimely and should relate back to the filing and service of the complaint. Court found that allegation relates to specific conduct which occurred after the filing of the collection action amounts to an FDCPA violation.

 

Warner v. Ray Klein, Inc.

The issue: Failure to identify current creditor

Industry outcome: Positive

Consumer alleged that agency failed to identify the current creditor. Court disagreed. The FDCPA does not discern between “original creditor and “current creditor.”  FDCPA only requires the collector to identify the name of creditor to whom the debt is owed. Agency complied with the statute by stating this was an attempt to collect a debt and only one creditor was named. Consumer’s attempts to persuade the Court to parse out distinctions between an “original creditor” and a “current creditor” or to find confusing the inclusion of the debt collector’s account number fail in the face of the facts of this case and border on the “idiosyncratic, or peculiar misinterpretations.”

 

Hill v. Accounts Receivable Services, LLC

The issue: Assignment of healthcare debt

Industry outcome: Positive

Agency brought a state court action to collect a medical debt. At the trial agency submitted exhibits—the authenticity of which consumer challenged—purporting to document the assignment. Judge ruled in favor of the consumer saying that exhibits did not show a valid assignment. Consumer sued agency. District court granted judgment on the pleading finding that consumer claims that agency engaged in false and deceptive means by submitting the exhibits was not material. Consumer appealed. 8th Circuit affirmed stating that a debt collector’s loss of a collection action—standing alone—does not establish a violation of the Act. The fact that a lawsuit turns out ultimately to be unsuccessful” does not “make the bringing of it an ‘action that cannot legally be taken. Agency’s inadequate documentation of the assignment did not constitute a materially false representation, and the other alleged inaccuracies in the exhibits are not material.

 

Robinson v. Accelerated Receivables Solutions (A.R.S.), Inc.

The issue: Request for fees

Industry outcome: Positive

Consumer sued agency claiming that request for attorneys fee and pre-judgment interest was improper under state law because the claim was for an account stated rather than services rendered. Nebraska state law does not provide for attorney’s fees and interest on account stated claims. Court disagreed and found that services were rendered in the form of medical services and regardless of who was collecting, that forms the basis of who the claim is characterized.

 

Ruel Nieto v. MRS Associates

The issue: Overshadowing

Industry outcome: Negative*

Agency sent two collection letters to consumer. The first letter was fully compliant with the FDCPA; the second letter, sent less than 30 days after the first, provided consumer with various options for settlement which were due within 15 days of the date of the second letter. Consumer alleged that second letter made her think she no longer had the thirty days promised in the first letter in which to challenge the debt. Court concluded that even if consumer received the first letter the same day Defendant sent it, the second letter could conceivably have required her to make a payment within the 30-day period. That is, for a payment to be received in Defendant’s office “on or before February 15, 2017,” one might reasonably suppose some action was required before February 6, 2017. Under these circumstances, an unsophisticated consumer could reasonably have been confused about whether the payment options in the February 15 letter (the second letter) overshadowed her right (promised in the first letter) to dispute the debt during the full 30−day period.

* Note from Joann Needleman: This is a disturbing case which required the judge to  undergo a far reaching analysis to conclude that a violation occurred

 

McGee v. Rockford Mercantile Agency, Inc.

The issue: Reporting bankruptcy

Industry outcome: Positive

Agency who continued to report debt in bankruptcy prior to discharge does not violate FDCPA.

 

Richard Brannigan v Michael Harrison, Attorney at Law

The issue: Communication with a lawyer

Industry outcome: Negative

Consumer sued law firm over the collection of a medical debt. Consumer claims that the person he spoke with was a lawyer, and thus the law firm violated 1692e(3) because representative gave impression that she was a lawyer. Court found there was a genuine issue of material fact on that issue.

 

Deborah Al v. Van Ru Credit Corporation

The issue: Poorly-worded settlement offer

Industry outcome: Negative

Agency sent consumer a settlement letter and stated that consumer needed to act promptly. Consumer alleges Defendant’s failure to define “promptly” is misleading, as it does not clearly define when the settlement offer expires and statement that agency was not “obligated to renew the offer” was an improper threat. Court could not dismiss claim because “there is only one path by which the [term] ‘promptly’…could be dismissed –if the Court finds that language is plainly not misleading to a significant fraction of the population.” This the Court was not willing to do.  Further, statement that not obligated to renew offer could be misleading. Because the letter had no expiration date for the settlement the language that we are not obligated to renew the offer could be confusing.

 

Michael Lait v. Medical Data Systems, Inc.

The issue: Letter and name of original creditor

Industry outcome: Positive

Consumer alleged that agency’s letter failed to identify the name of the creditor to which the debt is owed in violation of 1692g(a)(2). The matter involved a medical debt and the letter identified the collection agency and stated the “facility name.” The court found the consumer’s claim not to be plausible. The letter stated this was an attempt to collect a debt and it was hard to imagine that the least sophisticated consumer would not think he owes money if not to the facility particularly since it was the consumer himself who personally incurred the medical debt at the facility and whose name was listed on that account. District Court judge reversed the recommendation of the magistrate and dismissed the case for the failure to state a clam.

 

Spurlock v. Receivables Management Partners, LLC.

The issue: Interest disclosure

Industry outcome: Positive

Agency’s collection letter did not disclosure interest because agency had policy not to seek interest unless client approved the matter for suit. When they filed suit interest was pled. Court disagreed and found collection letter accurately stated the amount due at the time of the letter so no violation of 1692g(a)(1). Plaintiff also that because letter failed to disclose that interest would continue to accrue in the future it was a violation of 1692e. Court again disagreed, as there is not obligation to inform a consumer that he or she will be required to pay court costs, attorney’s fees, or other statutory penalties if the case proceeds to litigation and results in a judgment.

Three dates in June are of interest to collection agencies, payday lenders and debt buyers: June 1, June 15, and June 30. If you’re doing business in these states, check out the calendars below:

• Alaska
• Arkansas
• Delaware
• Guam
• Hawaii
• Idaho
• Kentucky
• Maine
• Michigan
• Minnesota
• Nevada
• New Mexico
• North Carolina
• Virgin Islands
• West Virginia
• Wisconsin

You can download PDFs of the calendar here:

June 1 and 15 (6/1: Delaware, Maine, Wisconsin; 6/15: Idaho)

June 30 (Alaska, Arkansas, Delaware, Guam, Hawaii, Kentucky, Michigan, Minnesota)

June 30 (Nevada, New Mexico, North Carolina, Virgin Islands, West Virginia)

Each PDF has clickable links, taking you to each state’s website with information about filing.

 

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On Friday May 11^ththirteen firms notified the U.S. Court of Federal Claims that they intend to oppose the Department of Education’s (ED) motion to dismiss FMS et. al. v. United States as moot (two others said they would not oppose the motion, while five more said they want to remain a party to any continuing proceedings). ED is seeking to end this litigation in light of its cancellation of the contested solicitation for unrestricted private debt collection contractors. One week later, on May 18^th, fifteen companies filed their promised responses to the Government’s motion.

FMS Investment Corp. (FMS), the lead plaintiff in the protest, said it is challenging ED’s decision to cancel the Solicitation at issue and “yank the rug out from under FMS and the other Private Collection Agencies (PCAs) despite years of effort and millions spent pursuing a new contract in response to ED’s Solicitation.”

Here is a list of who filed what response, grouped by their situation in the case (including a link to their response):

Of the 15 responding companies, those that were on the 2009 unrestricted Private Collection Agency (PCA) contract but did not receive a new award in the January 2018 do-over:

ACT – Opposes ED’s motion to dismiss.

CBE Group – Opposes ED’s to motion to dismiss.

ConServe – Opposes ED’s motion to dismiss.

FMS – Opposes ED’s motion dismiss, and requests leave to file an amended complaint.

GC Services – Opposes ED’s motion to dismiss.

Progressive – Opposes ED’s motion to dismiss.

Of the 15 responding companies, those that were on the 2009 unrestricted PCA contract, did not receive a new award, but did receive an ATE in April 2017:

Alltran – Supports ED’s motion to dismiss; asserts that new challenges to cancellation of solicitation should be filed as new protests; and argues that February 26, 2018 preliminary injunction should be lifted.

Pioneer Credit Recovery – Does not oppose ED’s motion as long as they are permitted to remain a party to protests. The company asserts its pending protest is not moot if the cancellation does not proceed.

Of the 15 responding companies, those that were on the 2009 unrestricted PCA contract and also received a new award in January 2018:

Windham – Previously on the other side of this litigation, the company opposes ED’s to motion to dismiss.

Performant Corporation, the other of the two firms that ultimately received an award in January 2018, did not file a response.

Of the 15 responding companies, those that were not previously on a Department of Education contract but submitted a bid in the current contested solicitation:

Automated Collection Services (ACSI) – Notifies the court of its intent to file a new bid protest.

Central Credit – Opposes ED’s motion to dismiss.

Gatestone –  Requests leave to file an amended complaint.

Texas Guaranteed – Opposes ED’s motion to dismiss.

Value Recovery Holding – Opposes ED’s motion to dismiss.

Williams & Fudge – Opposes ED’s motion to dismiss, and requests that the court maintains the preliminary injunction.

The following are highlights representing the various responses:

The argument opposing the motion to dismiss

The general gist of the argument made by those opposing ED’s motion to dismiss the case can be summed up by this excerpt from the FMS:

Apparently as a result of [its] “analysis,” the Government concluded sometime between March 19, 2018, and May 3, 2018, that a “substantial change in the requirements to perform collection and administrative resolution activities on defaulted Federal student loan debts” had occurred, which led it to cancel the Solicitation and terminate for convenience the awards to Windham and Performant. Neither the Government nor ED provided any additional information supporting the cancellation decision.

ED has not had a substantial change in in collection requirements. ED is still directed by Congress under the Debt Collection Improvement Act of 1996 (as amended) and Office of Management and Budget (“OMB”) Circular A-129 to collect on defaulted student loan debt, and it is a public and verifiable fact that the instances of loan defaults continue to rise. The only asserted basis for the cancellation—despite years of effort and millions spent by FMS and the other PCAs—is an as yet-undeveloped master plan to have some unidentified party make some unspecified “outreach” to borrowers who are 90-days delinquent in their loan payments. This future master plan, according to ED, has “substantially” changed ED’s debt collection requirements.  

It hasn’t.  It is patently unreasonable for ED to claim that these unspecified “outreach” efforts alone can so alter the rising tide of student loan defaults as to render the current Solicitation superfluous. In 2015, ED added default and delinquency aversion efforts to the current loan servicing contracts. But given that the default rate continues to rise, these prior efforts obviously have failed; and there is no rational basis to suspect that some additional, as of-yet unplanned and unspecified “outreach” efforts will obviate the services requested by the current Solicitation.”

Alltran’s position is different than the others

Alltran’s position is not surprising. The company supports ED’s motion to dismiss, asserts that new challenges to the proposed cancellation of the Solicitation should be filed as new protests, and suggests that the preliminary injunction from Feb. 26, 2018 should be lifted. As one of the two firms that had received an Award Term Extension (ATE) in April 2017, it is in Alltran’s interests to see its potential competitors have to start over, and to be one of just a few firms left standing with the authorization to receive accounts (assuming the February 2018 preliminary injunction is lifted).

Alltran claims in its response,

“[t]he equities no longer favor an injunction.  The plaintiffs’ original theory of harm in support of the injunction was that they might potentially receive an award under the Solicitation, and that their old accounts might then potentially be transferred to those new contracts.  However, ED has cancelled the Solicitation in its entirety, further severing any connection between ED’s recall of the old accounts and the plaintiffs’ new challenges.  To establish harm now, the plaintiffs would need to demonstrate that (1) they might succeed on challenging the cancellation, (2) they might then succeed in requiring ED to reopen the procurement, (3) they might then receive a new award in that reopened procurement, and (4) ED might then choose in its discretion to transfer their old accounts to that new award.  But each step in that process is entirely speculative, and the plaintiffs cannot meet the exacting standard necessary for a preliminary injunction.”

ACSI says it will file a new bid protest

ACSI seems to be following the Alltran proposal by not opposing the Government’s motion to dismiss the current case, and moving directly to file a new protest next week. It will be interesting to see whether others join in this new case, making ACSI the third firm (following ConServe, and then FMS) to take the lead in this year’s-long ED contract debacle.

The Government has been ordered to file its reply by this Wednesday, May 23. Based on this Judge’s past actions, we can expect a quick opinion following the filings.

Background

For those who need the incredibly short recap…This all started in 2014 when the five-year 2009 contract ended, and new large-firm awards were delayed. Eventually, contracts were awarded in 2016 to seven large companies, down from 17 on the previous contract. This led to dozens of protests by firms that believed the process was flawed and unfair. So began Chapter Two of the matter, with a “re-do” of the solicitation, which resulted in awards to just two large companies. This led to more protests, and finally… nothing. No large company awards at all, as ED cancelled the whole solicitation on May 3, 2018, rescinded the contract awards from the two companies, and filed a motion to dismiss the litigation. And so began Chapter Three, with 13 parties opposing that motion.

For those who want to review all of the details, click here for the full coverage of the Department of Education collection contract on insideARM.

On Friday May 11^ththirteen firms notified the U.S. Court of Federal Claims that they intend to oppose the Department of Education’s (ED) motion to dismiss FMS et. al. v. United States as moot (two others said they would not oppose the motion, while five more said they want to remain a party to any continuing proceedings). ED is seeking to end this litigation in light of its cancellation of the contested solicitation for unrestricted private debt collection contractors. One week later, on May 18^th, fifteen companies filed their promised responses to the Government’s motion.

FMS Investment Corp. (FMS), the lead plaintiff in the protest, said it is challenging ED’s decision to cancel the Solicitation at issue and “yank the rug out from under FMS and the other Private Collection Agencies (PCAs) despite years of effort and millions spent pursuing a new contract in response to ED’s Solicitation.”

Here is a list of who filed what response, grouped by their situation in the case (including a link to their response):

Of the 15 responding companies, those that were on the 2009 unrestricted Private Collection Agency (PCA) contract but did not receive a new award in the January 2018 do-over:

ACT – Opposes ED’s motion to dismiss.

CBE Group – Opposes ED’s to motion to dismiss.

ConServe – Opposes ED’s motion to dismiss.

FMS – Opposes ED’s motion dismiss, and requests leave to file an amended complaint.

GC Services – Opposes ED’s motion to dismiss.

Progressive – Opposes ED’s motion to dismiss.

Of the 15 responding companies, those that were on the 2009 unrestricted PCA contract, did not receive a new award, but did receive an ATE in April 2017:

Alltran – Supports ED’s motion to dismiss; asserts that new challenges to cancellation of solicitation should be filed as new protests; and argues that February 26, 2018 preliminary injunction should be lifted.

Pioneer Credit Recovery – Does not oppose ED’s motion as long as they are permitted to remain a party to protests. The company asserts its pending protest is not moot if the cancellation does not proceed.

Of the 15 responding companies, those that were on the 2009 unrestricted PCA contract and also received a new award in January 2018:

Windham – Previously on the other side of this litigation, the company opposes ED’s to motion to dismiss.

Performant Corporation, the other of the two firms that ultimately received an award in January 2018, did not file a response.

Of the 15 responding companies, those that were not previously on a Department of Education contract but submitted a bid in the current contested solicitation:

Automated Collection Services (ACSI) – Notifies the court of its intent to file a new bid protest.

Central Credit – Opposes ED’s motion to dismiss.

Gatestone –  Requests leave to file an amended complaint.

Texas Guaranteed – Opposes ED’s motion to dismiss.

Value Recovery Holding – Opposes ED’s motion to dismiss.

Williams & Fudge – Opposes ED’s motion to dismiss, and requests that the court maintains the preliminary injunction.

The following are highlights representing the various responses:

The argument opposing the motion to dismiss

The general gist of the argument made by those opposing ED’s motion to dismiss the case can be summed up by this excerpt from the FMS:

Apparently as a result of [its] “analysis,” the Government concluded sometime between March 19, 2018, and May 3, 2018, that a “substantial change in the requirements to perform collection and administrative resolution activities on defaulted Federal student loan debts” had occurred, which led it to cancel the Solicitation and terminate for convenience the awards to Windham and Performant. Neither the Government nor ED provided any additional information supporting the cancellation decision.

ED has not had a substantial change in in collection requirements. ED is still directed by Congress under the Debt Collection Improvement Act of 1996 (as amended) and Office of Management and Budget (“OMB”) Circular A-129 to collect on defaulted student loan debt, and it is a public and verifiable fact that the instances of loan defaults continue to rise. The only asserted basis for the cancellation—despite years of effort and millions spent by FMS and the other PCAs—is an as yet-undeveloped master plan to have some unidentified party make some unspecified “outreach” to borrowers who are 90-days delinquent in their loan payments. This future master plan, according to ED, has “substantially” changed ED’s debt collection requirements.  

It hasn’t.  It is patently unreasonable for ED to claim that these unspecified “outreach” efforts alone can so alter the rising tide of student loan defaults as to render the current Solicitation superfluous. In 2015, ED added default and delinquency aversion efforts to the current loan servicing contracts. But given that the default rate continues to rise, these prior efforts obviously have failed; and there is no rational basis to suspect that some additional, as of-yet unplanned and unspecified “outreach” efforts will obviate the services requested by the current Solicitation.”

Alltran’s position is different than the others

Alltran’s position is not surprising. The company supports ED’s motion to dismiss, asserts that new challenges to the proposed cancellation of the Solicitation should be filed as new protests, and suggests that the preliminary injunction from Feb. 26, 2018 should be lifted. As one of the two firms that had received an Award Term Extension (ATE) in April 2017, it is in Alltran’s interests to see its potential competitors have to start over, and to be one of just a few firms left standing with the authorization to receive accounts (assuming the February 2018 preliminary injunction is lifted).

Alltran claims in its response,

“[t]he equities no longer favor an injunction.  The plaintiffs’ original theory of harm in support of the injunction was that they might potentially receive an award under the Solicitation, and that their old accounts might then potentially be transferred to those new contracts.  However, ED has cancelled the Solicitation in its entirety, further severing any connection between ED’s recall of the old accounts and the plaintiffs’ new challenges.  To establish harm now, the plaintiffs would need to demonstrate that (1) they might succeed on challenging the cancellation, (2) they might then succeed in requiring ED to reopen the procurement, (3) they might then receive a new award in that reopened procurement, and (4) ED might then choose in its discretion to transfer their old accounts to that new award.  But each step in that process is entirely speculative, and the plaintiffs cannot meet the exacting standard necessary for a preliminary injunction.”

ACSI says it will file a new bid protest

ACSI seems to be following the Alltran proposal by not opposing the Government’s motion to dismiss the current case, and moving directly to file a new protest next week. It will be interesting to see whether others join in this new case, making ACSI the third firm (following ConServe, and then FMS) to take the lead in this year’s-long ED contract debacle.

The Government has been ordered to file its reply by this Wednesday, May 23. Based on this Judge’s past actions, we can expect a quick opinion following the filings.

Background

For those who need the incredibly short recap…This all started in 2014 when the five-year 2009 contract ended, and new large-firm awards were delayed. Eventually, contracts were awarded in 2016 to seven large companies, down from 17 on the previous contract. This led to dozens of protests by firms that believed the process was flawed and unfair. So began Chapter Two of the matter, with a “re-do” of the solicitation, which resulted in awards to just two large companies. This led to more protests, and finally… nothing. No large company awards at all, as ED cancelled the whole solicitation on May 3, 2018, rescinded the contract awards from the two companies, and filed a motion to dismiss the litigation. And so began Chapter Three, with 13 parties opposing that motion.

For those who want to review all of the details, click here for the full coverage of the Department of Education collection contract on insideARM.