Archives for June 2018

TREVOSE, Pa. — NCB Management Services, Inc., a privately held national debt buyer and collection agency, has successfully secured a new senior credit facility of $150 million through a leading alternative asset manager with over $14 billion in assets under management that specializes in providing capital to growing businesses.  

Ralph N. Liberio, President & CEO of NCB Management Services, Inc., commented on the recent transaction, saying: “This transaction marks a significant milestone in NCB’s proud 24-year history. This new facility provides NCB with a strong borrowing capacity along with the necessary financial flexibility to access credit that is needed to properly grow and scale our business over the next several years.  We are extremely pleased with the expansion of our credit facility as it will provide ready access to capital for our portfolio acquisition efforts.”

The refinancing efforts were led by Marcelo Aita, currently Board Advisor at NCB who stated, “The team at NCB demonstrated that a well-run company with the right strategic outlook can attract the capital it needs to support future growth for years to come.” As the former President & CEO of NCB he knew exactly what it would take to complete a transaction like this. Aita added, “Securing the right type of capital is a process that starts with a strong management team, a clear financial vision, and financial partners that truly understand a company’s potential.” NCB was also advised by Chartwell Financial Advisors and represented by Frost Brown Todd, LLC. and Andrew J. Blady of Sessions, Fishman, Nathan & Israel LLC.

NCB has invested more than $150M in portfolio acquisitions and has acquired north of $3.3B in unsecured consumer receivables both direct from creditors as well as other debt buyers.  “This credit facility will provide NCB the ability to more effectively manage our capital in a manner that we believe will continue to enhance shareholder value”, stated James LaSala, Chief Financial Officer for the company.

NCB continues to concentrate their debt buying and servicing attention in the “Unsecured Consumer Credit” verticals, specifically within the credit card, unsecured consumer loan and auto-deficiency asset classes.  The company purchases both non-performing and semi-performing portfolios.  They have more than two-decades of experience buying and servicing these types of debt and want to continue leveraging their new financial and operational capacity.  To learn more about partnering with NCB, reach out to one of the executives at NCB and start an exploratory conversation.

About NCB Management Services, Inc.

NCB Management Services, Inc., established in 1994, is headquartered in the Philadelphia area with satellite offices in Jacksonville, FL and Sioux Falls, SD.  NCB is a recognized Accounts Receivable Management (ARM) industry leader as well as a nationally respected debt buyer. The company is partially owned by its employees through an Employee Stock Ownership Plan (ESOP). The NCB ESOP is a company-funded defined contribution retirement plan established in 2014 for the benefit of NCB employees.

In an unusual weekend announcement, on Saturday a White House spokesperson announced that President Trump has selected Kathy Kraninger, an associate director at the Office of Management and Budget (OMB) under Mick Mulvaney, as his nominee to lead the Bureau of Consumer Financial Protection. Kraninger was on nobody’s reported short list… or at least if she was, it was an extremely well-guarded secret.

According to Kraninger’s Linkedin profile, she graduated in 1997 from Marquette University, and in 2007 from Georgetown University Law Center. She has been at OMB since March 2017. In the ensuing years she served as deputy assistant secretary for policy at the Department of Homeland Security, and also worked at the Transportation Department.

White House spokeswoman Lindsay Walters said in a statement that Kraninger “will bring a fresh perspective and much-needed management experience to the [bureau], which has been plagued by excessive spending, dysfunctional operations, and politicized agendas. As a staunch supporter of free enterprise, she will continue the reforms of the Bureau initiated by Acting Director Mick Mulvaney, and ensure that consumers and markets are not harmed by fraudulent actors. The White House hopes that she will be promptly confirmed by the Senate.”

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The announcement is drawing criticism from both sides. Karl Frisch, executive director of consumer group Allied Progress, said, “This looks like nothing more than a desperate attempt by Mick Mulvaney to maintain his grip on the C.F.P.B. so he can continue undermining its important consumer protection mission on behalf of the powerful Wall Street special interests and predatory lenders that have bankrolled his career. Kraninger has absolutely no relevant experience that indicates she is qualified to be America’s chief consumer advocate.”

On the conservative side, J.W. Verret, a professor at George Mason University’s Antonin Scalia Law School, said she is a “mid-level budget staffer lacking expertise, chosen to lead one of the most powerful agencies in the government.” He compared her nomination to the ill-fated confirmation process for Harriet Miers, the Supreme Court nominee chosen by President George W. Bush who was rejected by fellow Republicans as unqualified. Verret is also a colleague of Todd Zywicki, who was reportedly an early contender for the BCFP job, and re-emerged late last week as one of two remaining finalists. 

The banking industry was pleased with the pick. American Bankers Association president and CEO Rob Nichols released this statement,

“We congratulate Kathy Kraninger on her nomination to lead the Consumer Financial Protection Bureau. Her experience at OMB alongside Acting CFPB Director Mick Mulvaney, along with her years of work on Capitol Hill and in the executive branch, would serve her well in this important position. We trust she shares our interest in ensuring consumers have access to the financial products they want and need, while maintaining the protections they deserve.

We also appreciate Acting Director Mulvaney’s willingness to review the Bureau’s policies and priorities to ensure they are meeting the Bureau’s mission, and we hope Ms. Kraninger will build on that foundation. We look forward to learning more about her views on specific regulatory issues during the confirmation process.”

insideARM Perspective

While Verret compares this nomination to the Miers Supreme Court debacle, to me it is reminiscent of something much more recent — former CFPB Director Richard Cordray’s eleventh hour elevation of his top aide Leandra English. English was also a little-known manager who – it seemed to many – was hand-picked to continue the work of her boss, in spite of her lack of name recognition and political gravitas. I recall searching in vain for a photo of English when the announcement was made. Evidently nobody else could find one either, until finally she was photographed by the press in a meeting with lawmakers following Cordray’s announcement. In this case, other than the photo I pulled from Kraninger’s Linkedin profile, I note that the Wall Street Journal had to go back to 2008 to locate one.

Meanwhile, Mulvaney said just last week that he had not been involved in the process of choosing his successor. According to a report last Tuesday, Mulvaney told reporters he was recently told by White House Counsel Don McGahn that the Trump administration will adhere to a June 22 deadline for selecting a permanent CFPB director. He said that Treasury Secretary Steve Mnuchin and top White House economic advisers Larry Kudlow and Kevin Hasset have been leading the search, and “Once they name a person I look forward to working with him or her to get that person up to speed.”

This seems hard to believe, given how closely Mulvaney must work with Kraninger at OMB. It also seems unlikely that Trump wouldn’t have asked Mulvaney for his opinion about her.

One has to wonder whether keeping Mulvaney in office long enough to make permanent change (or at least change that is super-difficult to reverse) is the driver of this selection. 

Ballard Spahr’s Alan Kaplinsky did the research on Section 3345(a)(2) of the Federal Vacancies Reform Act (FVRA) – which Trump used as the source of his authority to appoint Mulvaney as Acting Director – earlier this year. He noted, “[if the first] nomination is rejected, withdrawn, or returned by the Senate, Mr. Mulvaney can continue to serve for another 210 days and assuming the President makes a second nomination within that 210-day period, Mr. Mulvaney can continue to serve until the second nominee is confirmed or for no more than 210 days after the second nomination is rejected, withdrawn, or returned. Given [this], Mr. Mulvaney’s service as Acting Director could potentially continue into 2019.”

In a tweet, the Credit Union National Association (CUNA) said, “We are hopeful that under her leadership, the Bureau will recognize the unique structure of credit unions and the enormous benefit that credit unions provide to 110 million members.”

MINNEAPOLIS, Minn. – CenterPoint Legal Solutions, a leader in skip tracing, non-performing judgment programs, litigation and ancillary legal services is moving offices this month to facilitate its current and future expansion. 

CenterPoint has seen an increase in business over the last several years from a combination of increased market share from existing clients as well as new client programs. In order to maintain the quality of service that its clients are familiar with, it was time to move to a larger space in order to increase capacity of scale.

“This is a very exciting time for our CenterPoint family,” said Aaron Rose, President and Managing Member of CenterPoint.   “We are grateful for our client partnerships and look forward to our expansion.”

Over the next several months, CenterPoint will be further concentrating on developing its ancillary products to offer current and prospective clients additional services. This includes: File Evaluations, Balance Reconciliation, Substitution of Counsel Filings, Assignment of Judgment Filings, Judgment Renewals, Domestications and other back office related functions.

“Our new office allows for continued operational success which wouldn’t be possible without our loyal and committed employees”, said Mark Hutchins COO and Co-Owner of CenterPoint. “We truly have one of the best teams in the industry.”

The official office move will take place on Friday June 15, 2018. To celebrate the occasion CenterPoint will be hosting an office christening celebration for its 40 plus employees.

To learn more about CenterPoint Legal Solutions please visit www.centerpointls.com or contact Aaron Rose at 877-258-1598 or email arose@centerpointls.com.

The Defendant in Bad Reyes is going to have to wait to appeal the court’s ruling on ATDS functionality.

Recall that Estrellita Reyes v. Bca Fin. Svs. (aka “Bad Reyes“) is part III in our post-ACA Int’l ATDS functionality saga.  Following the court’s ruling – which found that the FCC’s 2003 and 2008 predictive dialer rulings remained valid following ACA Int’l – the Defendant asked the court to certify its ruling for immediate interlocutory appeal to the Eleventh Circuit. The court recently denied that motion, finding that the case did not meet the three conditions required for certification: (1) a “controlling question of law”; (2) a “substantial ground for difference of opinion” as to that question of law; and (3) that an appeal must “materially advance the ultimate termination of the litigation.”

But before we get into the court’s analysis, there’s one thing to note. The decision opens with the comment that the motion had been filed because the Defendant was “unhappy” with the court’s ruling. Well, who wouldn’t be? But Defendant’s emotions aside, that pretty much set the tone for the rest of the ruling in which the court shot down each argument made by Defendant in seeking certification.

First, the court ruled that the mere fact that Defendant disagreed with the court’s ruling establishes neither a controlling question of law, nor a substantial ground for difference of opinion.

Second, the court ruled that the fact there are other district courts that have reached different conclusions (i.e. Marshall and Herrick) didn’t matter because those were non-binding, out-of-circuit authorities – and that decisions by courts within the Eleventh Circuit were in alignment.

Third, the court ruled that the appeal would not “materially advance the ultimate termination of the litigation” because, even assuming the Eleventh Circuit reversed, the case would still need to go to trial. The parties would still need to litigate the issue of whether the device used by Defendant was an ATDS (granted, under the statutory text of the TCPA, rather than the FCC rulings), and – here’s the kicker – it wouldn’t matter anyway because Defendant itself had not moved for summary judgment on the issue (hence the appeal would only result in a reversal of the court’s ruling on Plaintiff’s summary judgment motion).

Defendant came out 0 for 3 here but, no doubt, the bar for certifying a ruling for interlocutory appeal is high. But query: should it really be a Circuit Court of Appeal that decides this issue of ATDS functionality? Or should it be left to the FCC? If anything, Worse Reyes might very well be the poster child for primary jurisdiction stays in TCPA cases.

In May the Federal Communications Commission (FCC) published a Notice seeking comment on how it might re-interpret the Telephone Consumer Protection Act (TCPA) in light of the recent D.C. Circuit Court Decision in ACA International v. FCC. Yesterday was the comment deadline. Among the organizations providing input was the Bureau of Consumer Financial Protection (BCFP or Bureau). You can read their full comment here.

While the Bureau doesn’t suggest specifics, the gist of the comment supports communication between consumers and collectors through modern channels,

“[T]he Bureau believes that a properly circumscribed definition of [ATDS] could be critical to fostering communications between consumers and debt collectors, servicers, and other financial service providers.”

In March 2018, a court reversed several key provisions in the FCC’s 2015 TCPA expansion, including the FCC’s autodialer definition as well as the regulator’s approach to the treatment of consent and reassigned phone numbers. Many stakeholders had been waiting for the outcome of the case since it was filed by ACA International within days of the 2015 Declaratory Ruling and Order. The March 2018 decision left the FCC back at square one, with industry once again calling for clarification of the law, but hoping that this time the definition will be different.

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One might look at this and say that the Bureau does not have jurisdiction over the TCPA…and one would be correct. But in the age of mobile-only households we are seeing a convergence of laws.

First, privacy guidelines in the Fair Debt Collection Practices Act (FDCPA) — the jurisdiction of the Bureau — say that debt collectors can’t reveal the purpose of their call until they confirm they have the right person on the phone.

Second, because of an aggressive initiative by the FCC, carriers and software companies, mobile phones are delivering more information about a call right on the screen, as the call comes in, so the consumer can decide whether to answer, hang up, delete, or complain.

Third, as insideARM readers likely know, there is widespread confusion over the concept of consent to call a mobile phone using an automated dialer: Do we have consent? What constitutes consent? Is it passed by the creditor to their service providers? How can it be revoked? While some might say the only purpose of using an automated dialer is to make more calls faster — and they would in part be correct, automated dialers do reduce cost and allow for more calls to be made — there are also important consumer benefits to the technology. Automated equipment also automates compliance. To expect human beings to comply perfectly with varying state and federal laws governing when, how often, and under what conditions a consumer may be called is unrealistic. 

Fourth, to require manual contact ignores consumer preference, which increasingly favors digital channels such as text, email, and private messaging. Which brings us back to the Bureau’s comment, including this:

“Notably, the Bureau is engaged in an ongoing rulemaking focused on debt collectors under the Fair Debt Collection Practices Act (FDCPA) concerning debt collection practices, including calling behavior by debt collectors. Since the FDCPA was enacted in 1977, technological developments have raised concerns about the application of the FDCPA’s restrictions on collector communications with consumers. In 1977, placing a telephone call was a manual process that required a caller to dial a telephone number one digit at a time. Since then, development of predictive dialers and other outbound dialing technology has substantially reduced the cost to callers, such as debt collectors, of placing telephone calls and has enabled debt collectors to place many more calls at a very low cost. Consumers, however, consistently complain about frequent or repeated collections telephone calls.

The Bureau’s rulemaking is considering, among other topics, collector telephone calling behavior. The Bureau also is evaluating alternatives that would reduce uncertainty surrounding the use of newer technologies that could facilitate communication and conform more closely to consumers’ preferences. Input from stakeholders has helped and will continue to help the Bureau understand the practical ramifications of potential new rules. The Bureau’s goal is to develop standards which will protect consumers without imposing unnecessary or undue costs on debt collectors.”

insideARM Perspective

So why is this interesting? Because, as the Bureau notes, it is currently engaged in debt collection rulemaking, and is contemplating rules that will impact collectors’ ability to communicate with consumers through modern channels (those other than U.S. postal mail and landlines). We don’t often get an official statement about the Bureau’s latest thinking. The fact that they would state publicly that they are developing standards to address this issue is promising for the industry.

Yesterday we covered the ARM industry’s contributions to the Bureau of Consumer Financial Protection (BCFP or Bureau) Request For Information (RFI) regarding its rulemaking process. This article highlights the contribution by the recently fired Consumer Advisory Board (CAB). 

Prior to their release from service, the CAB Chair and Vice Chair created a survey to solicit input from members regarding the four RFIs they felt were most relevant for the group, including:

• Bureau Public Reporting Practices of Consumer Complaint Information
• Bureau External Engagements
• Bureau Rulemaking Process
• Bureau’s Adopted Regulations and New Rulemaking Authority

The survey garnered 39 responses, or 71% of all current and former CAB members, representing the following fields:

While the group’s submission covered four topics, I’m just going to cover the rulemaking input for now. 

The first theme addressed the concept of whether Bureau rules should be subject to Congressional approval. The overwhelming majority (nearly 87%) said they should not. The following CAB member comments represent minority and additional viewpoints:

“Additional safeguards would help ensure that the Bureau’s rulemaking activity is consistent with Congressional intent. The Bureau is empowered to make rules with regard to Federal consumer financial law. This authority enables the Bureau to protect consumers across the financial marketplace, but it is a broad and vague mandate. Additional safeguards, up to and including Congressional review of major CFPB rules, would help the Bureau to exercise its properly delegated authority.”

“CFPB should use rulemaking in some areas where it has instead used enforcement to convey policy. It should also avoid retroactive enforcement on standards that were unclear, due to lack of rulemaking and guidance, unless the company involved is engaging in willful mistreatment of customers.”

The next theme covered methods the Bureau uses to obtain data and analyses for use in developing proposed rules. In this case, respondents were able to choose multiple answers (i.e. check all that apply). The overwhelming majority selected all answers:

• The CFPB should issuea a call for data to members of industry, academia and consumer groups (89.74%)
• The CFPB should take proactive steps to encourage stakeholders to engage in research or provide data on issues that are the subject of a rulemaking, such as providing resources for research or making industry data confidential (74.36%).
• The CFPB should conduct its own research on issues that are the subject of rulemaking (89.74%).

Additional input included:

“With the nation’s largest financial institutions each holding a significant market share that can now be accurately represented in frequently updated, financial institution-specific, polling methods, there’s no justification for not using this method to understand how new rules may affect outcomes (on a financial institution-specific basis). The results simply offer too much value to ignore.”

“The CFPB should increase coordination with other agencies on research and policy, to accelerate joint learning and policy thinking.”

“Collect data from community-based organizations.”

“The CFPB should have all research that it uses peer reviewed and subject to information quality standards. In addition, they should survey and interview actual consumers of financial products.”

“The complaint database is also a great resource for obtaining data from the real world.”

“The CFPB should get OMB approval for requiring data production from 10 or more regulated entities when appropriate. As someone who works extensively with data, there are real problems with voluntarily produced data—one does not know if it is reliable, exactly what the data report, and how good the quality of the data is. The idea that the CFPB would rely on data provided voluntarily by regulated entities or consumer groups is troublesome. Academics rarely have original, hand-collected data, and when they do, they aren’t going to share it until they’ve worked it over themselves first.”

“Any data used in a rulemaking should be made public and not be given confidential status.”

“The CFPB’s data on certain topics have been questionable in my mind, especially as it relates to sample size. It would be helpful for the Bureau to partner with academics and industry expers in conjunctino with the Bureau’s research activities.”

“The CFPB should maximize its use of data (whether public or not) held by other government agencies.”

The final theme covered CAB members’ impressions of how seriously their input, and the input of a broad range of stakeholders, is considered by the Bureau director and senior staff.

As it related to the input of CAB members:

• 64.1% agreed that their input was seriously considered
• 15.4% somewhat agreed
• 5.1% somewhat disagreed
• 2.6% disagreed
• 12.8% had no opinion

As it related to the input of a broad range of stakeholders:

• 71.8% agreed that stakeholder input was seriously considered
• 12.8% somewhat agreed
• 7.7% somewhat disagreed
• 2.6% disagreed
• 5.1% had no opinion

The following additional comments were offered:

“My experience with the rulemaking process is that the Director and senior staff, prior to December 2017, seriously considered and invited CAB feedback. Based on very limited experience with the new Director, I do not know if CAB feedback is sought out and seriously considered.”

“Just to be clear, I am responding to these questions based on my experience with the CAB when Director Cordray headed the Bureau. We have not met in person since Mick Mulvaney was appointed to lead the Bureau. My experience since Mulvaney took over has been different. Long-scheduled meetings have been canceled, changed, or shortened, which has had the effect of decreasing the ability of CAB members to engage productively with the Bureau.”

“It used to do so before the current administration moved in and made/is making every effort to shut down the CFPB.”

“I’m very concerned that the opportunity to give constructive feedback is changing under the new leadership.”

“I feel that the rulemaking process could be more transparent and collaborative with the CAB and other regulators.”

“I’m a new member and can’t say the process has been transparent to me.”

“The CAB was often the last to learn anything under Director Cordray, which meant that by the time the CAB could give feedback on a proposed rule, the train had already basically left the station.”

“The answers above are based on rulemaking prior to the current Administration. I hope it continues.”

“Certainly that is how the CAB operated during my 5 years of service before the new CFPB director.”

“The CAB has engaged productively in the CFPB rulemaking process. We bring a unique perspective. For example, when the Bureau was going through the small dollar loan rulemaking, a CAB committee that include payday lending, financial institution, fintech, and consumer advocacy perspectives engaged together in offering feedback through the pre-rule process as well as through the public comment process. Though the CAB group did not arrive at consensus, having diverse perspectives led to a rich dialogue and beneficial feedback.”

“The CFPB has been far more open to meeting with stakeholders of all stripes, including both industry and advocates, than other financial regulatory agencies, and to creating opportunities for stakeholders with differing perspectives to meet with the Bureau together. It was truly refreshing.” 

“Though this has changed since the change in administration.”

As it relates to the RFI regarding adopted regulations and new rulemaking authority, the CAB survey did not include questions about debt collection (it covered adopted regulations only).

Ironically (or not), this RFI submission would the last official input provided to the Bureau by this body.

PITTSBURGH, Pa. — Credit Management Company (CMC), a Pittsburgh, PA-based accounts receivable management company, has launched a new volunteer program for its employees as part of its continuing mission to give back to the community. 

On June 3, 2018, several employees of CMC volunteered their time at Light of Life Rescue Mission, a non-profit organization that provides a home for the homeless and food for the hungry throughout Allegheny County.

Through efforts from the staff members and volunteers that help support the Light of Life cause, over 190K meals are provided for those in need, 155 people are sheltered nightly and 476 thanksgiving dinner baskets are provided to families in need on the North Side.

CMC employees are gearing up for new volunteer opportunities such as participating with Global Links, a medical relief and development organization dedicated to supporting health improvement initiatives and also participating at the Crafton Celebrates Festival.

Credit Management Company Volunteers pose with Light of Life Rescue Mission staff members and JuJu Schuster, Wide Receiver of the Pittsburgh Steelers.

About Credit Management Company (CMC)
CMC is committed to providing our business partners with optimum accounts receivable management, debt recovery, and customer care programs through expertise, technology, and customer communication.

CMC is well known for delivering exceptional financial recovery outcomes for healthcare, government, higher education, financial services, and commercial entities. All of our clients receive the same exceptional results when partnering with us.

Contact 
Brady Dolan
Sales Support Manager
Credit Management Company
bdolan@creditmanagementcompany.com
412-937-0900 ext.: 161

The comment period for the latest in a series of “requests for evidence” by the Bureau of Consumer Financial Protection (BCFP or Bureau) closed last Thursday. By my count, 52 unique organizations and individuals submitted input to the Bureau’s RFI on its rulemaking process. All submissions can be accessed here on Regulations.gov.

Here is the breakdown of who responded:

Banks/Credit Unions/Other Financial Services (19 groups, 3 individuals)

• American Bankers Association
• American Financial Services Association
• Bridge Credit Union
• Cincinnati Ohio Police Federal Credit Union
• Community Financial Services Association of America
• Credit Union National Association
• Emerald Credit Union
• Financial Service Centers of America
• GROhio Community Credit Union
• Impact Credit Union
• Independent Community Bankers of America
• Integrity Federal Credit Union
• Minnesota Credit Union Network
• Ohio Credit Union League
• Port Conneaut Federal Credit Union
• ProMedica Federal Credit Union
• TDECU
• Village Bank
• Wisconsin Bankers Association
• Anonymous – in support of federal credit unions
• Terry Tucker, a credit union professional
• Jeffrey Schmid, SVP of SBREFA HMDA panelist in support of community banks

Home/Mortgage Related (8 groups, 2 individuals)

• American Escrow Association
• Manufactured Housing Institute
• Mortgage Bankers Association
• National Association of Home Builders
• National Association of Realtors
• National Reverse Mortgage Lenders Association
• Pioneer Title Agency
• Real Estate Services Providers Council (RESPRO)
• Barry Horn, a non-delegated mortgage banker
• Anonymous individual mortgage professional

Debt Collection (3 groups)

• ACA International (ACA)
• RMA International (RMA)
• National Creditors Bar Association (NCBA; formerly NARCA)

Consumers (3 groups, 5 individuals)

• Americans for Financial Reform (representing 45 community, civil rights and legal services groups)
• Consumer Advisory Board
• Cities for Financial Empowerment Fund
• Consumer-Patty Melton
• Consumer-Diana Willis
• Consumer-Kevin Ernst
• Consumer-Amit Narang
• Consumer-David Soffer

Legislators/Regulators/Think Tanks (7 responses)

• Senators Elizabeth Warren & Mark Warner
• Administrative Conference of the United States
• Conference of State Bank Supervisors
• Office of Advocacy, US Small Business Administration
• Senator Catherine Cortez Masto
• Center for Capital Markets Competitiveness
• Competitive Enterprise Institute

Other (2 responses)

• Scratch – a startup fintech (loan servicer)
• McIntyre & Lemon, PLLC (a law firm that represents banks, lenders, trade groups, etc.)

For the insideARM audience, the following summarizes the comments from ARM industry trade groups. Look for a follow up article tomorrow that summarizes the positions of consumer groups and other non-industry responders.

The gist of ACA’s comments:

ACA summed up its input this way –

“Too often, the Bureau’s rulemaking processes have been agenda-driven, lacking in objective evidentiary support, dismissive of both SBREFA small entity representative (“SER”) input and the need for rigorous cost-benefit analysis, and poorly conceived to solve real problems. As discussed more specifically below, the Bureau’s approach to its debt collection rulemaking has prompted objections to a flawed and non-transparent consumer survey; failure to conduct effective consumer disclosure testing; a misconceived SBREFA panel process that failed to include critical participants and issues while inappropriately seeking to impose a “one size fits all” approach; regulatory overreach; and unworkable proposals. With respect to SBREFA, many have observed that the Bureau has treated this important process as an empty, formalistic exercise, obligatorily tacked on the end of the Bureau’s pre-rulemaking schedule, well past the point when the Bureau’s course was set.”

Although this particular RFI had to do with process issues, ACA also commented on the substance of the proposals in the July 2016 Outline provided in advance of the SBREFA hearing. The group expressed concern over the following topics:

• Regulatory overreach
• The introduction of the concept of “warning signs”
• Validation notice requirements that go beyond statutory mandates
• Unworkable proposals, such as: no definition of the key term “dispute”; no process for responding without running afowl of third party disclosure rules; failure to consider feasibility of proposals for transfer of data between first and third parties.

The gist of RMA’s comments:

This RMA comment summarized its response –

“The Bureau issued the ANPR in November 2013 – nearly five years ago. As of now, we expect the Bureau to issue a Notice of Proposed Rulemaking (“NPRM”) in March 2019, with final rules to be issued at least several months after that. To have a rulemaking go on for six or more years is, to say the least, lengthy. This has created substantial uncertainty for our industry, the banks that sell to us, as well as our investors and consumers. Courts across the nation have issued a host of different and often conflicting decisions for virtually every aspect of collections in the absence of formal rules. The result is, simply put, a web of different standards and rules across states and sometimes across cities and counties. It is also worth noting that the Bureau’s various Consent Orders have also added a layer of uncertainty to whether certain industry business practices, although not prohibited under the law, are permissible. We urge the Bureau to move forward with well-considered debt collection rules faster than has been the case to date, in order to provide a federal standard that creates certainty and clarity for the industry and the consumers we serve.”

In addition, RMA urged the Bureau to apply any future rulemaking only to accounts that are charged-off or go into default after the effective date of the rules, not retroactively.

Finally, like ACA, RMA also made reference to specific debt collection rule content such as “the promotion of communication between collectors and consumers, including the potentially harmful impact of unduly restrictive contact caps and modern communication methods (e.g., email, cell phone, text and voicemail messages) that are not reflected in the Fair Debt Collection Practices Act that was enacted over four decades ago.

The gist of NCBA’s comments:

Not surprisingly, NCBA highlighted its position that the Bureau should not engage in rulemaking that would effectively regulate the practice of law, as this would violate the separation of powers doctrine of the Constitution.

As to the rulemaking process, NCBA highlighted the fact that when the debt collection ANPR was issued, stakeholders were initially given 60 days to respond to more than 160 questions (that timeframe was extended by 30 days, but it was still tight). Further, the group commented,

“Other than the ANPR, the Bureau did not request any other additional information about debt collection processes other than to issue several Requests for Information (RFI) on the consumer credit card market as part of the Card Act, which incorporated some requests regarding debt collection. The Bureau started the process of disclosure testing on consumer disclosures but that research was discontinued. It appears that the Bureau conducted most of its fact finding about debt collection behind closed doors with stakeholders.

NCBA members have been very hesitant to provide the Bureau with data since client information is subject to attorney-client privilege and confidentiality. In instances where data could be provided, NCBA members have not been willing to do so for fear that the Bureau could use the information against them in enforcement actions. For instance, the Bureau has in the past asked about forms and processes law firms use to document the review of files. Those requests were made subsequent to enforcement actions already brought against law firms alleging those law firms failed to adequately review files prior to a collection action. Under the circumstances, NCBA members saw no benefit in providing this information to the Bureau. If the Bureau truly seeks honest feedback and information from industry it must be done so on the condition of immunity, especially in markets where rules have not been written as in the case of debt collection. Instead of writing rules from the beginning of the Bureau’s inception, the Bureau chose to engage in the process of “regulation by enforcement”. This course of action resulted in the debt collection industry, including debt collection attorneys, [being un-]willing to provide the information that could be used to support the Bureau’s enforcement activities.

At no time after the ANPR did the Bureau seek information on cost-benefits analysis from NCBA members. NCBA’s ANPR response in 2014 identified that the costs of compliance over the prior 3 years had increased by over 300%. That data point was of no concern to the Bureau in subsequent engagement.

NCBA also commented on specific content in Bureau proposals, suggesting that “aspects of the Bureau’s Outline of Proposal for Debt Collection (Outline) failed to consider the breadth and scope of the debt collection marketplace and how attorneys represent their clients in the process.” The group specifically raised these issues:

• Pre-litigation disclosures and intent to sue
• Proposed rules cannot be retroactive
• Proposals did not take into consideration relationship between first parties and third party collectors
• Proposals introduced but did not define the overly broad concept of “warning signs”
• Proposals failed to clearly define dispute
• Proposals for transfer of information may be impossible from a technology and formatting standpoint, and provided no basis to treat revocation and consent differently
• Proposals related to statute of limitations disclosure do not value the difficulty of calculating the statute of limitations on a given account
• One size fits all nature of various proposals would create additional confusion for all

Of course, the debt collection industry has only experienced pre-rule activities.

As a representation of input from non-debt collection-related supervised entities that have experienced the full rulemaking cycle with the Bureau, the following is the gist of the input from RESPRO. The suggestions that follow the opening comment sound like they could apply to just about any industry.

The gist of the RESPRO comments:

“The Bureau’s TRID effort obviously did not lead to simplification. To this day there are many uncertainties as well as concrete issues such as the needlessly confusing disclosure of title insurance that in many states is simply contrary to reality. That is but one issue in the grand scheme of things. Is this the most efficient and effective regulation it can be? Is it even close? No. However, industry has invested so much in compliance because it was clear at the time that there was no turning back, that it would likely be more costly to scrap the whole mess and implement a truly useful and simple system that starts with a one page GFE that might have a box with the APR on it. I will not revisit the reams of good suggestions that have been made and ignored over the last two decades. My only point is a) that this is not how a good rule or regulation is made and b) this is exactly how many regulations are made.

Below are some suggestions to improve regulations and perhaps develop more of a model process that yields efficient regulations that do no more and no less than required.

• The Bureau should err on the side of simplicity and evaluate the true costs and benefits of what it is doing. Most regulatory agencies have broad authority and the Bureau has some of the broadest. It should use this authority to do LESS, when less is simply better. Regulations should not be a make work project for lawyers.
• The Bureau should take small business concerns seriously and also use practitioners as a resource. There are many knowledgeable people in Washington to be sure, but they are not the people who will have to live with these rules day in and day out. It is important to reach out to those who will and take their suggestions seriously. Many of the problems with TRID and other rules could have been avoided by listening more closely to practitioners.
• When issuing rules, continue to issue practitioner guides. Though there always can be improvement, the Bureau has been good at issuing guides. Of course, the guides should be able to be explicitly relied upon (perhaps included in the final rule) and not contain disclaimers warning against such.
• The Bureau should be more generous in using trial implementation periods where appropriate and useful. Much TRID consternation could have been avoided if the Bureau utilized the explicit statutory authority to institute a trial period.”

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 by TransUnion. 

The cornerstone of the page is a chart of significant FDCPA cases. Click on the link in the chart for the complete text of the decision. Where insideARM has published a story on the case, we provide a link. 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. 

Ninteen cases will be added to our FDCPA chart, which makes May a busy month of wins and losses for the industry. Below are a few important highlights.

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Heroux v. Callidus Portfolio Management Inc. & Messerli & Kramer

Win or Loss? Loss

Issue(s): Misleading discovery, misrepresenting the creditor, seeking post charge-off interest, seeking affidavit costs

The defendants brought a debt collection action against a consumer, Jason Heroux, for a credit card account. At the time the complaint was served, the law firm also served discovery. (This turned out to be the Wrong Thing to Do.) Heroux never answered the complaint or the discovery, so a summary judgment was entered in the state court action. That’s when Heroux counter-sued, claiming that discovery was designed to mislead, deceive and confuse. The Court agreed. 

As Joann Needleman adds, “This case highlights the problems of applying the FDCPA to litigation activity. In no other practice area is attorney conduct reviewed, retroactively, which permits an adversary to scrutinized the conduct of opposing counsel.”

Ortiz v. Diversified Consultants, Inc.

Win or Loss? Win

Issue(s): Validation

The defendant, Rene Ortiz, didn’t believe he owed the $68.40 AT&T said he did. He sent a dispute, the collection agency responded, and that’s where the trouble begins. Ortiz claimed that the collection agency, Diversified Consultants, failed to adequately validate the debt, confirming the balance but giving a different account number. (The Court wrote, “To be sure, the account number on the AT&T billing statement…did not match the account number listed on DCI’s June 8, 2016 letter, although it is far from clear whether the account number on the DCI letter referred to the AT&T account number or DCI’s own internal account number.”) Regardless of account numbers, etc., the Court used a previous case, Mahon, to find that the minimum required for “verification of a debt involves nothing more than the debt collector confirming in writing that the amount being demanded is what the creditor is claiming is owed.”

Medzhidzade v. Kirschenbaum & Phillips, P.C.

Win or Loss? Loss

Issue(s): Interest disclosure

The letter Kirschenbaum & Phillips sent to the plaintiff, Marina Medzhidzade, used Avila safe harbor language, even though the debt itself was not accruing interest. The letter only stated the balance, with no breakdown. Per the court, although this letter correctly states the amount of the debt under § 1692g, its use of the Avila is misleading under § 1692e.

Joann Needleman adds, “This decision seems to suggest that if no interest is accruing and you use Avila language then there needs to be something that says interest = $0.00.”

Griffen Lee v. Charles G. McCarthy, Jr.

Win or Loss? Loss

Issue(s): Collection jurisdiction, who can collect in Florida

Joann Needleman said, “This case is confusing.” And she’s not wrong.

Griffen Lee claimed that Illinois attorney Charles G. McCarthy, Jr., had no authority to collect the $448.50 that Lee owed because McCarthy was not registered as a consumer collection agency as required by Florida statute.

McCarthy said he was not required to register as a debt collection agency in Florida because he was from out of state and exempted under the Florida statute. The Court disagreed.

An out of state debt collector is defined as a debt collector who collects debt from debtors in Florida that are originated outside the state as well as solicits debt collection accounts from credit grantors who have a presence in the state. The exemption to the statute, however provides that the debt collector does not solicit debt accounts from credit grantors in the state.

McCarthy submitted an affidavit which said he does not solicit account from companies within the state. This didn’t help him. The Court found he was not an out of state debt collector and thus not entitled to the statute.

As Joann Needleman explains, “It is unclear how any out of state debt collector would have the benefit of the exemption.”

This article first appeared today on TCPAland and is published here with permission.

Ok, confession time–I love TCPAland.

Yes, that is probably the least surprising confession in the history of the world, but here’s why I love it so much–the TCPA is this simple little statute that is so dizzyingly complex to apply and frequently co-exists with esoteric legal doctrines of near-impossible obscurity.  Bizarre legal scenarios that never seem to arise in any other context crop up on a near-weekly basis here in TCPAland.  Its as if the TCPA were a giant atom smasher for federal constitutional and procedural doctrine and I’m the theoretical legal physicist who gets to study resulting TCPA anti-quarks for the first time, marvel at their structure and composition, and then report my new discoveries to all of you. Its a wonderful life I lead. Truly. I am grateful for it.

Consider our latest ephemeral legal Hadron– what result if Congress dictates that the FCC issue regulations implementing an amendment to a statute and the FCC just doesn’t do it? Is the amendment defective for want of implementing regulations? Or is the amendment applied even without the implementing regulations?

That was the issue faced in Schneider v. Solutions, No. 16-CV-6760 CJS, 2018 U.S. Dist. LEXIS 96125 (W.D.N.Y. June 6, 2018)–although it is just a tiny part of the thorny nest of issues arising under the Congressional amendment to the TCPA pursuant to the Bi-Partison Balanced Budget Act of 2015 (“Budget Act”). (For those keeping score at home, there’s also i) the whole thing about the FCC using the Budget Act amendment to bring the federal government back within the reach of the TCPA after holding that the government was not a “person” subject to the act in the first place; ii) whether, assuming the amendment remains valid, conduct that was previously illegal becomes legal or is still actionable as illegal under the law as it existed at the time (see Silver Petition for Cert.); and iii) the fact that the amendment converts the entire TCPA into a content-specific restriction on speech, triggering strict scrutiny analysis and almost certainly guaranteeing that the statute will one day be struck down as unconstitutional–but we’ll settle for analyzing just the tiny piece addressed by Schneider for now.)

In Schneider the court first had to solve the mystery of the missing BBA implementing regulations– now that would have made a great Nate the Great volume– as the FCC published proposed rules in August, 2016 but never saw them through.

As the Schneider court unravels matters:

Despite the fact that only certain parts of the proposed regulations required approval by the Office of Management and Budget (“OMB”), the FCC chose not to have any of the regulations take effect until OMB gave such approval. See, FCC 16-99 at ¶ 72, 31 FCC Rcd. at 9101; see also, 20 No. 9 Consumer Fin. Services L. Rep. 15 (Sep. 25, 2016) (“The final rules, released on Aug. 11, 2016, will become effective 60 days after the FCC publishes notice in the Federal Register of the Office of Management and Budget’s approval.”). Apparently, however, OMB never gave such approval, and the FCC eventually withdrew its request to OMB, thereby effectively preventing any of the proposed regulations from taking effect.

The parties agreed with the Court’s conclusion that the FCC’s proposed implementing regulations never became effective, but they disagreed as to the effect. Notably, Congress commanded the FCC to implement such regulations within 9 months of the passage of the statute– Indeed, Section 301(b) of the Budget Act states that “[n]ot later than 9 months after the date of enactment of this Act, the [FCC] . . . shall prescribe regulations to implement the amendments made by this section[.]” Plaintiff argued, therefore, that the failure of the Commission to heed this Congressional mandate meant that the amendment was never effective at all. Defendant, of course, disagreed arguing that the lack of an FCC implementing order simply means that the statute is to applied as written.

The Schneider court agreed with the Defendant. In its view, treating the amendment as invalid due to the FCC’s inaction–or, more accurately stated, incoherent actions– with respect to implementing the Budget Act would “thwart the will of Congress and the President …” Schneider at *13. In the Court’s view, the general rule that statutes are effective at the time they are passed applied and the fact that Congress assigned effective dates to other portions of the Budget Act–but not the TCPA amendment–meant that the amendment was immediately effective and valid as of November 2, 2015. See Schneider at *14-15.  The Court also easily distinguished Second Circuit authority to the effect that claims arising under unimplemented regulations do not accrue until the regulation becomes effective– the claim in this case was barred by the statutory amendment, not by the FCC’s unimplemented regulation. Id. at *15-16.

Finally, but most importantly, the Court found that the Defendant is simply not bound by the FCC’s proposed BBA implementing ruling–which, inter alia, limits covered debt collectors to three calls within a thirty-day period and mandates certain affirmative disclosure requirements– because “proposed regulations ‘have no legal effect.’” Schneider at *18.

Notably, the conclusion in Schneider is exactly contrary the decision reached in another case involving Navient just last year– Cooper v. Navient Case No. 8:16-CV-3396-T-30MAP (M.D. Fl. April 21, 2017). In Cooper the Court found that it was bound to apply the FCC ruling implementing the Budget Act as a “final” agency action, even though the Schneider court would later conclude that this same ruling was never more than a “proposed regulation.”  Even more deliciously, the Cooper court subsequently denied Navient’s interlocutory appeal request concluding there was not “a substantial ground for disagreement on the issue of the effect of the FCC’s August 11, 2016 Order.” So not only do these courts not agree on the enforceability of an FCC TCPA order–nothing new there– the Cooper court did not even believe that a reasonable mind could reach the conclusion adopted by Schneider. How much fun is that?

Just another day in TCPAland. The quirkiest place on Earth.