Archives for August 2018

Last week, insideARM published an article about a Northern District of Illinois case that barred a plaintiff’s attempt at claim splitting where a Fair Debt Collection Practices Act (FDCPA) claim involved two separate accounts but arose from the same set of facts against the same defendant. The issue of claim splitting came up again in the midwest, this time before the Seventh Circuit Court of Appeals.

On August 13, 2018, the opinion in Portalatin v. Blatt, Hasenmiller, Leibsker & Moore, LLC, Nos. 16-1578 and 17-3335 (7th Cir. Aug. 13, 2018) found that a plaintiff cannot recover for the same FDCPA claim against two separate defendants.

Factual and Procedural Background

Blatt, Hasenmiller, Leibsker & Moore, LLC (Blatt) filed a lawsuit against plaintiff to collect on a debt owed to Midland Funding, LLC (Midland) within the state circuit court — but not the same municipal district court — where plaintiff resides. After Blatt filed this suit, the Seventh Circuit published its opinion in Suesz v. Med-1 Solutions, 757 F.3d 636 (7th Cir. 2014) (insideARM previously published an article about the Suesz decision). In Suesz, the Seventh Circuit reversed its precedent and found that a debt collection action must be filed in the smallest venue available where the plaintiff resides. In the instant case, that means within the municipal district where plaintiff resides.

Blatt fixed this issue and refiled the case in the correct municipal district. Regardless, since the Seventh Circuit made its decision in Suesz retroactive, plaintiff sued Blatt and Midland for violating the FDCPA by not filing the collection action against plaintiff in the correct venue.

At some point, plaintiff settled the matter with Midland. The settlement agreement stated that it resolved all claims. Through a motion to dismiss and a later a motion to alter or amend the judgment entered against Blatt, both of which were denied by the district court, Blatt argued that plaintiff’s settlement with Midland made the FDCPA claim against Blatt moot. Blatt appealed these denials to the Seventh Circuit.

The Decision

The court, agreeing with Blatt, found that the claim against Blatt should have been dismissed by the district court. The court noted that the settlement agreement with Midland resolved all claims in the action, including the FDCPA claim against Blatt. Since plaintiff’s suit contained an additional non-FDCPA claim against Midland, the court briefly discussed whether a settlement can be apportioned between claims in such a way that a plaintiff still has a piece of the pie available against a second non-settling defendant. While the court noted that such a breakdown is allowed, it is not an issue here since the settlement agreement failed to provide any allocation for the settlement funds other than to resolve all claims.

The court also pointed to the text of the FDCPA where damages are limited to $1,000 on an individual basis per action, not per claim or per defendant. The court stated that Congress if congress intended FDCPA damages to be allowed in any other way, it would have explicitly stated so in the statute, citing as an example the Freedom of Access to Clinic Entrances Act. In the instant case, the claims against Midland and Blatt are indivisible — they pertain to the same set of facts and are the same FDCPA violation. Since plaintiff is only entitled to one FDCPA award per action and that award was accounted for in the settlement with Midland, the Seventh Circuit found that the district court should have dismissed the case and plaintiff should not have been awarded attorneys fees from Blatt.

insideARM Perspective

In the judicial context, damages are intended to make an injured plaintiff whole again — not better off than he or she was prior to the injury. Congress very clearly stated that as far as statutory damages are in play for the FDCPA, making plaintiff whole has a limit per action, not per claim or per defendant. The midwest appears to be a hotbed for FDCPA claim splitting, which attempts to make a plaintiff more than whole in regards to damages. The trend appears clear: one set of facts equals one FDCPA award. Since this is a Seventh Circuit decision, it will be binding precedent on the lower courts within the jurisdiction, which includes district courts in Illinois, Wisconsin, and Indiana. It can also be used as guidance to courts around the country if this issue pops up elsewhere.

CARROLLTON, Texas — The CMI Group organized a company-wide event, partnering with the Children’s Advocacy Center for Denton County’s (CACDC) Back to School Drive.

This year’s donation included 80 backpacks and countless wish list items that totaled more than $950.00 to the CACDC. “We are thrilled at the success of the back to school drive,” said Alma Rabago, Account Resolution & Office of the President Manager at The CMI Group. “Giving back to the community is important to us at CMI. We value the impact we can make as an organization, and we look forward to our next event!”

The Children’s Advocacy Center for Denton County is a non-profit agency that works with law enforcement, the District Attorney’s Office, Child Protective Services, and medical professionals on the
investigation and prosecution of severe child abuse cases in Denton County.

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About CMI

CMI is a 100% employee-owned, full-service receivable management firm providing leading-edge solutions to customers nationwide. Through its subsidiaries, CMI delivers innovative revenue cycle, accounts receivable management, and contact center solutions resulting in enhanced operational efficiency and increased revenue for its customers. Founded in 1985 and serving a multitude of industries, CMI has headquarters in Carrollton, Texas, with satellite offices in Dallas and Rochester, Minn. For more information, visit www.thecmigroup.com.

On August 23, the Senate Committee on Banking, Housing, and Urban Affairs will vote to determine whether Kathy Kraninger will become the next director of the Bureau of Consumer Financial Protection (BCFP or Bureau).

President Donald Trump announced Kraninger as his pick for lead role at the BCFP back in June. Kraninger underwent questioning at a Senate confirmation hearing in July, where she remained tight lipped for the most part. The confirmation hearing was followed by a some pointed written questions from Sen. Elizabeth Warren (D-MA). It is unknown whether those questions were answered or will be answered prior to Thursday’s vote. The vote, originally scheduled for early August, was postponed by the Committee just before a brief recess.

The commissioners from the Federal Communications Commission (FCC) appeared for a congressional oversight hearing today. The majority of the hearing revolved around net neutrality and the race to 5G, with the first (and very brief) mention of robocalls about an hour and a half into the hearing. As of hour two and a half, there was virtually no mention of the Telephone Consumer Protection Act (TCPA) by the Senators; Chairman Pai mentioned it only briefly.

Senator Ed Markey (D-MA) first raised the robocall issue, commenting that robocalls continue to be a concern that is “driving people crazy.” Sen. Markey asked the FCC’s Chairman Ajit Pai how the Commission intends to proceed to put protections in place.

Chairman Pai stated that the FCC is taking a two-pronged approach to deal with the robocall issue: regulation and enforcement. He briefly elaborated on the second prong, stating that the FCC is the number one consumer protection authority on the issue and has issued fines. Chairman Pai also stated that the FCC issued a public notice after the D.C. Circuit’s decision and is taking public input on how to proceed. insideARM previously wrote about the request for input.

Later in the hearing, Senator Richard Blumenthal (D-CT) brought up a piece of legislation he introduced titled Repeated Objectionable Bothering of Consumers on Phones Act (ROBOCOP Act), which addresses the issue of robocalls. Sen. Blumenthal sought the commission’s support of the act. Commissioner Rosenworcel stated her support; the other commissioners agreed to review the Act.

Senator Shelley Moore Capito (R-WV) asked whether the robocall issue was the same or different than the call spoofing issue. Chairman Pai confirmed that spoofing is indeed one of the most insideous parts of robocalling.

At the time this article was published, there were no other mentions of these issues.

insideARM Perspective

The FCC has certainly had a busy year, as was evident in this hearing. Previously, insideARM published articles about letters sent to Chairman Pai by a group of Democratic and a group of Republican senators. While issues related to the TCPA and robocalls is a focal point for the ARM industry, they are only some of many issues that the FCC is addressing. It is unfortunate that Chairman Pai did not comment further on the regulation prong of the issue.

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On July 23, 2018, the Bureau of Consumer Financial Protection (BCFP or Bureau) denied a petition to modify or set aside its second Civil Investigative Demand (CID) against Firstsource Advantage, LLC (Firstsource). Together, the petition and order comprise of 61 pages. Below are highlights of each.

The CIDs and the Petition

According to the redacted petition filed by Firstsource, the BCFP issued its first CID in April of 2017. Prior to receiving the first petition, Firstsource received ample communication from the BCFP in regards to what prompted the CID. The company states in its petition that, despite its belief there was no violation of the Fair Debt Collection Practices Act (FDCPA), it chose to be transparent with the BCFP and responded fully to the CID.

On September 28, 2017, the Bureau issued a second CID against Firstsource. Firstsource filed a petition to set aside or amend this second CID for several reasons, including:

1. There was no FDCPA violation and the documents received by the BCFP from the first CID supports this statement.
2. The second CID should be set aside because the BCFP had no justification for issuing it. Firstsource claims the Bureau failed to identify a reason to believe that the company violated the FDCPA in any capacity.
3. Firstsource called out the communication received from the BCFP regarding the first CID and that the CFPB provided no such communication prior to the second CID.

In the event the Bureau decided not to set aside the second CID, Firstsource argued that it should be modified. The company claimed that responding to the CID as currently written would be unduly burdensome as it would require manually reviewing hundreds of thousands of audio files. The petition also argued that the second CID targets certain accounts that are time barred by the FDCPA’s statute of limitations.

Firstsource also requested confidential treatment of its petition and the BCFP’s response thereto.

BCFP’s Order Denying Petition

The BCFP’s order, signed by Acting Director Mick Mulvaney, denied Firstsource’s petition in its entirety, except that it agreed to redact certain portions of the petition.

The Bureau refused to set aside the CID, stating that the standard for issuing a CID does not require a narrative or meaningful dialogue about the investigation. Instead, the BCFP found that it only needs to state the nature of the conduct constituting the violation, which it claims it did.

The BCFP also declined to modify the petition, largely relying on vague and procedural reasoning. The BCFP ruled that Firstsource’s statement that responding to the CID would require manual review of hundreds of thousands of audio files was not sufficiently specific to qualify as unduly burdensome. The Bureau also declined to modify the CID so that only a sample of call recordings would need to be produced because the request to do so was not timely submitted.

As for Firstsource’s argument that the CID requests information about accounts that are time-barred by the FDCPA’s statute of limitations, the Bureau responded that the order states the FDCPA was not the only statute being investigated — the BCFP was also looking into any potential violations of the Consumer Financial Protection Act (CFPA). The statute of limitations under the CFPA is three years from the time of discovery, not from the time the violation occurred. Since the Bureau has not yet discovered a violation, the statute of limitations has not yet been triggered, thus making it okay to request the information. The BCFP topped off this argument by stating that, “here, the Bureau seeks the recordings in question to determine (and discover) whether there has been a violation” — thus effectively triggering the statute of limitations if a violation is found.

insideARM Perspective

CIDs are generally confidential matters, but they may become public if a company chooses to challenge the demand for information, which is what occurred here. Due to this, companies likely weigh carefully their decisions to challenge CIDs in order to prevent needlessly publicizing that they are in the BCFP’s crosshairs.

Responding to CIDs is a burdensome process; to have to do it twice in a row is even more so. As this is the second CID issued against Firstsource in a short amount of time, it is interesting that the BCFP would deny some requests on procedural and somewhat vague grounds. Denying the request to provide samples of recordings due to the timing of the request falls flat on an informed reader. It is also hard to imagine how listening to hundreds of thousands of audio files does not qualify as an unduly burdensome request when such a task would require significant manpower to complete.

With that said, the most interesting portion of the order is the discussion on the statute of limitations. If the statute of limitations does not begin to run until a violation is discovered and the BCFP has the ability to issue CIDs with no time limit in order to discover such violations, which would then trigger the statute of limitations once discovered, then it seems that liability is open ended…forever?

As we reported a couple weeks back, U.S. Sen. John Thune (R-S.D.) submitted a letter to FCC Chairman Ajit Pai–signed by several other Republican Senators– urging a rollback of the Commission’s broad reading of the Telephone Consumer Protection Act (TCPA) following ACA Int’l. 

Senator Thune is not just any old senator however. He is the chairman of the Senate Committee on Commerce, Science, and Transportation and, in that capacity, he has convened a hearing titled “Oversight of the Federal Communications Commission (FCC)” and asked (ordered?) the Commissioners to have a word about, inter alia, the TCPA. In other words, it seems the FCC’s Commissioners just got called to the principle’s office.

The hearing is to take place on August 16, 2018 and will allow the “Senators the opportunity to ask commissioners questions about topics of critical importance to their states and constituents” including–not surprisingly– the FCC’s efforts to “combat[] robocalls.”  Notably, all four of the sitting Commissioners are scheduled to attend. Video of the hearing will be available here, and you better believe we’ll be watching.

It’ll be interesting to see what questions the Committee members have for the Chairman and the remaining Commissioners. We’ll be paying especially close attention for any comment regarding the possible timing for a ruling on the Public Notice. Expect a swift report from TCPAland.com after the hearing. More to come…

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Editor’s note: This article is provided through a partnership between insideARM and Womble Bond Dickinson. WBD powers our TCPA case law chart and provides a steady stream of their timely, insightful and entertaining take on this ever-evolving, never-a-dull-moment topic. WBD – and all insideARM articles – are protected by copyright. All rights are reserved.

The Federal Reserve Bank of New York (New York Fed) recently released its Quarterly Report on Household Debt and Credit. In addition to showing the breakdown of credit origination and delinquency by type of debt, the report points to something interesting: a sharp incline of accounts closing on credit reports and a decrease in the number of consumer credit accounts appearing on credit reports. Specifically, accounts closing increased by 9.7% since the first quarter of 2018.

According to the New York Fed, this change is due to the new National Consumer Assistance Plan (NCAP) which began its rolling implementation in mid-2016 and was fully implemented by late 2017. The NCAP, as discussed in a previously-published article by insideARM, sets additional rules regarding what can be reported and what information is needed prior to reporting an account. For example, collection agencies were advised not to report debts that did not arise from a contract or agreement to pay and not to report medical debt that is less than 180 days old.

This decline in reported collection accounts is likely temporary. According to the New York Fed, once collection agencies accustom themselves to the NCAP requirements, the number of reported accounts in collections is likely to increase from its current point.

The New York Fed accompanied this report with a blog post that discussed NCAP’s impact on consumers’ credit scores. Roughly 18% of consumers saw their credit score increase by over 30 points and 20% of consumers saw their credit score decrease, which, according to the New York Fed, is likely attributed to other negative aspects of the consumer’s credit file. The majority of consumers saw only a slight increase in their credit score.

insideARM Perspective

As the New York Fed pointed out, the sharp decline in reported collection accounts is not surprising considering the implementation of the NCAP. Agencies that credit report dedicate a fair portion of their resources to ensure the process is accurate and runs smoothly. Any time compliance requirements are changed, it takes some time to adjust to the new directions. Agencies with more resources or smaller inventory may be able to pivot quickly, while others may need to put a pause on credit reporting until they can ensure they comply with the new requirements. Once agencies catch up, the number is likely to rise again. However, due to the new restrictions on the type of accounts that may be reported and when, the number is unlikely to stabilize at its former rate from a time when such restrictions were not in place.

DALLAS, Texas — SWC Group launched a second-quarter charity food drive for Metrocret Services and the Coast Bend Food Bank. During this time, SWC Management staff placed team donation boxes throughout their Texas offices in Carrollton and Corpus Christi for employees to submit food donations. Employees also donated money in exchange for the chance to wear jeans throughout the work week. The two offices compiled eight boxes of food products and raised nearly $1,200 in donations.

 “Metrocrest Services and the Coastal Bend Food Bank do great work to help feed and serve our local communities. We are honored to assist them and the families they support with our donations. SWC is thankful for the opportunity to aid those families in need,” says Jeff Hurt, CEO. “We look forward to continued involvement.”

About SWC Group

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

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Companies attempting to navigate the waters of consent revocation in the Telephone Consumer Protection Act (TCPA) context received some relief in Reyes v. Lincoln Automotive Fin. Servs., 861 F.3d 51 (2d Cir. 2017). In Reyes, as previously published by insideARM, the Second Circuit found that contractual consent to be contacted using an automatic telephone dialing system (ATDS) cannot be unilaterally revoked.

The Northern District of Alabama recently agreed with and adopted the Reyes reasoning in its decision in Few v. Receivables Performance Mgmt., No. 1:17-cv-02038 (N.D. Ala. Aug. 8, 2018).

Factual and Procedural Background

In this case, Plaintiff entered into a contract with DISH for television and internet services. In this contract, Plaintiff consented that DISH “and/or any debt collection agency and/or debt collection attorney hired by DISH” to contact her at her phone number ending in 0268 using an automated or predictive dialer to recover any unpaid bills.

DISH placed Plaintiff’s account with Receivables Performance Management (Receivables) to collect on Plaintiff’s alleged debt. After answering a call from Receivables, Plaintiff stated she did not want them calling her anymore. Despite this request, Receivables continued to call Plainitff.

Plaintiff filed a suit against Receivables alleging violations of the TCPA by continuing to call her after she revoked consent. Receivables filed and amended a motion for summary judgment arguing that contractual consent cannot be unilaterally revoked.

The Decision

In a relatively short decision, the court granted Receivable’s amended summary judgment motion.

The court found that the common law concept of consent applies to this situation. The court noted that common law consent can be unilaterally revoked, but not where there is a contractual restristriction that says otherwise. While the court left this sentence standing on its own, most contracts like the one in question contain a clause that states the terms of the contract may only be amended in a writing signed by both parties.

Since the Eleventh Circuit, under whose umbrella this court sits, has not ruled on this issue, the court turned to the Second Circuit’s Reyes decision. Using Reyes, the court found that “Ms. Few gave prior express consent to Receivables to make the calls and, because she offered that consent as part of a bargained-for exchange and not merely gratuitously, she was unable to unilaterally revoke that consent. Receivable’s phone calls to Ms. Few, therefore, did not violate the TCPA.”

insideARM Perspective

Many statutes govern communications in our industry. This decision focuses only on the TCPA. Reyes was a pivotal case in the in the context of TCPA consent. While Reyes is only binding on courts within the Second Circuit, it appears that its reasoning is now taking root in other parts of the country. A decision like this helps reinforce the TCPA’s original purpose: to protect against unsolicited telemarketers, not companies with whom the consumer already has a business relationship. 

As part of its August 9^th quarterly earnings announcement, Performant Financial Corporation (Nasdaq: PFMT) revealed it had recently signed an agreement to acquire Premiere Credit of North America (Premiere Credit).

The following are some of the highlights for the second quarter of 2018:

• Total revenues of $31.3 million, compared to revenues of $35.9 million in the prior year period, down 12.8%
• Net loss of $3.6 million, or $(0.07) per diluted share, compared to a net loss of $2.4 million, or $(0.05) per diluted share, in the prior year period
• Student lending revenues in the second quarter were $17.5 million, a decrease of $10.0 million, or 36.4% from revenues of $27.5 million in the prior year period. Reduced revenues from Great Lakes Higher Education Guaranty Corporation accounted for 75% of this decrease year over year, with revenues of $7.6 million in the second quarter of 2018, compared to $15.2 million in the prior year period. 
• Healthcare revenues in the second quarter were $6.1 million, up from $2.1 million in the prior year period. Combined Medicare MSP and audit recovery revenues were $3.5 million in the second quarter, an increase of $3.4 million from the prior year period. Commercial healthcare clients contributed revenues of $2.6 million, an increase of $0.6 million or 30.0% from the prior year period.
• Other revenues in the second quarter were $7.7 million, up from $6.4 million in the prior year period.

The Company also announced that it has signed an agreement to acquire Premiere Credit, a leading provider of recovery services to government, student loan and commercial clients with approximately 330 employees located primarily in Indianapolis and Nashville.  Premiere is an affiliate of ECMC Group, a Guaranty Agency with one of the largest student loan portfolios and a longstanding client of Performant.

Performant announced that it will issue one million shares of its common stock at the closing and will be obligated to issue additional shares of common stock based on revenues associated with the Premiere business over the next five years (estimated to total approximately one million additional shares based on full achievement of revenue targets). 

At closing, Performant and ECMC will enter into a long-term agreement to be ECMC’s primary student loan recovery vendor. Performant will also enter into amendments to its existing credit agreement with ECMC, including an extension of the maturity date by one year to August 2021 and a $10 million increase in Performant’s additional borrowing capacity under this facility.

insideARM Perspective

insideARM spoke with Performant CEO Lisa Im for additional perspective on the Premiere deal, and where she sees opportunity for the company. In the wake of the cancellation by the Department of Education (ED) of the company’s unrestricted private student loan contract (ED cancelled the entire solicitation, not just Performant’s contract), Im reports that this deal gives her firm a longer runway to grow the business in a broader way.

She expects to pursue significant growth on the healthcare side of the business. They already do significant business as a contractor for Centers for Medicare & Medicaid Services (CMS), and in claims auditing. Premiere brings a platform in healthcare collections (which they’ve been building in the wake of the ED contract debacle), which Im expects to use as a base for expansion.

Premiere also has a platform in financial services. Im said that this vertical had been in their technology development plan, but now that they’ve acquired one, this will help them advance more quickly beyond their predominantly healthcare and government client base.

Premiere had been on the 2009 unrestricted ED contract, and received an award in December 2016 when the Department finally announced winners for a new five year contract. That started a wave of litigation by the non-winners, which ultimately led to a re-bid, and a new award in January 2018 to just two companies, Performant and Windham Professionals. This led to a new round of litigation, with seemingly no end in sight. Those two awards were recently cancelled by ED, along with the entire Solicitation.

While Premiere had been primarily a federal student loan collector, it seems they’ve pivoted and developed new capabilities since their 2016 ED contract never materialized. Im noted that they do also have a few valuable state and municipal contracts, which she expects to build upon.