Archives for June 2020

Updated 6/29/2020 at 4:07PM to reflect that the Supreme Court requested the appellate court review whether the government’s petition to enforce the CID should be denied.

The question of whether the Consumer Financial Protection Bureau’s (CFPB) structure is constitutional or not has been floating around the judicial system for a couple of years now. As of today, we finally have an answer. Today, the U.S. Supreme Court (SCOTUS) issued an opinion finding the CFPB’s structure unconstitutional in the Seila v. CFPB.

The main issues raised regarding the constitutionality of the CFPB’s structure revolve around the separation of powers clause. Specifically, the question of whether having a single director removable by the President only for cause is problematic considering the CFPB’s unique independence as a federal agency. SCOTUS decided it was a problem indeed, but one that can be remedied through severability—meaning the rest of the rules surrounding the CFPB’s function and structure can remain intact.

The opinion poignantly concludes:

We therefore hold that the structure of the CFPB violates the separation of powers. We go on to hold that the CFPB Director’s removal protection is severable from the other statutory provisions bearing on the CFPB’s authority. The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will.

The decision discusses the differences between the Federal Trade Commission, where for-cause removal of commissioners was allowed by SCOTUS in a prior court decision, and the CFPB:

Unlike the New Deal-era FTC upheld there, the CFPB is led by a single Director who cannot be described as a “body of experts” and cannot be considered “non-partisan” in the same sense as a group of officials drawn from both sides of the aisle. Moreover, while the staggered terms of the FTC Commissioners prevented complete turnovers in agency leadership and guaranteed that there would always be some Commissioners who had accrued significant expertise, the CFPB’s single-Director structure and five-year term guarantee abrupt shifts in agency leadership and with it the loss of accumulated expertise.

Specifically regarding the lack of accountability in the single-director structure, the opinion states:

The CFPB’s single-Director structure contravenes this carefully calibrated system by vesting significant governmental power in the hands of a single individual accountable to no one. The Director is neither elected by the people nor meaningfully controlled (through the threat of removal) by someone who is. The Director does not even depend on Congress for annual appropriations. See The Federalist No. 58, at 394 (J. Madison) (describing the “power over the purse” as the “most compleat and effectual weapon” in representing the interests of the people). Yet the Director may unilaterally, without meaningful supervision, issue final regulations, oversee adjudications, set enforcement priorities, initiate prosecutions, and determine what penalties to impose on private parties. With no colleagues to persuade, and no boss or electorate looking over her shoulder, the Director may dictate and enforce policy for a vital segment of the economy affecting millions of Americans.

The Seila case arose from a consumer law firm that received a Civil Investigation Demand (CID) from the CFPB. One of the arguments raised is that Seila’s injury is not traceable to the constitutional defect. The SCOTUS disagreed, and remanded the case with instruction to review whether the Government’s petition to enforce the CID should be denied.

insideARM Perspective

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This is a huge decision. While the fix may seem simple—just change the removal structure—that actual issue is much deeper. Since the CFPB’s CID in Seila is remanded to review whether the CID should be set aside, what happens to all other CIDs that were issued prior to this decision? What about the CFPB’s prior enforcement actions and rulemaking efforts? Seems like the next few months will help us answer the big “what if” question that’s been on our minds ever since the constitutionality issue was first raised.

Despite indicating that it is still set to publish its final debt collection rules sometime this year, the Consumer Financial Protection Bureau (CFPB) published a notice in the Federal Register today that it will do further testing of its model validation notice. This round will including conducting “cognitive interviews to assess the effectiveness and validate the performance of the Bureau’s model collection validation notices.”

The main goal of the interviews will be to determine how consumers locate and use the information in the notice. The two specific issues the CFPB will focus on are:

(1) Whether the consumer can locate and use important information effectively, such as information about the debt, information about the consumer’s rights, and information about how the consumer may respond if they so choose; and

(2) How consumers view and respond to paper and electronic versions of the model validation notice.

Comments Period

The CPFB is requesting comments—due by July 29—on this new round of testing. The questions to be commented on include the typical questions for information collection, such as whether the information is necessary, the burden of collecting the information, ways to enhance the information collection process, and ways to minimize the burdens of the collection process.

insideARM Perspective

Oddly enough, the Federal Register notice does not include the model validation notices to be tested, so it might be presumed that it will be the same model validation notices the CFPB proposed in its Notice of Proposed Rulemaking (NPRM) last year. If that is the case, there are some serious issues to consider, such as those addressed in the Consumer Relations Consortium (CRC) comment to the NRPM.

This is also not the first time the Bureau will be testing the model notice. The CFPB conducted an initial round of testing the model notice prior to the NPRM. There were several issues with that round of testing, which are again outlined in CRC and other industry group comments to the NPRM.

COVID-19 is having a significant negative impact on the accounts receivable management (ARM) industry and is causing some companies to seek other opportunities outside of our typical business model. An excellent example is discussed in Stephanie Eidelman’s recent insideARM article published on May 12, “The U.S. Needs Thousands of Contact Tracers; Know Who is Ideally Suited? You Are.” Hardly a week goes by without seeing articles about the need for large numbers of staff to reach out to potentially exposed persons. Initially, this would appear to be an opportunity. However, the reality is that our industry has been largely ignored.

ARM companies are particularly suited to outbound calling and communicating with potentially exposed persons while notifying confirmed cases and face to face interviews are typically left to healthcare professionals.

Central Research, Inc. (CRI), like other ARM companies, has aggressively pursued contact tracing opportunities with limited success. The CARES Act virtually stopped industry activity for student loans through September 30, 2020. However, some Department of Education private collection agencies (PCA) have pursued other call center work in an effort to retain staff who would otherwise be without work. One PCA found work with a state unemployment department and CRI also briefly performed a call center service for the Small Business Administration. These are but two examples of industry efforts to keep our staff employed.

When it comes to contact tracing opportunities, what we have found is many municipalities, counties, and/or states are simply not aware of our industry expertise in filling these vital roles. We have seen municipalities and counties seeking to hire local unemployed residents as a first option rather than outsource. Some states are repurposing employees, using volunteers, or using an RFP process to select vendors to perform tracing functions. Many recent RFPs require the use of in-state residents, have a local preference, or favor businesses with contact tracing experience. While COVID-19 contact tracing is relatively new, our industry is limited in the required experience when competing against non-ARM companies with experience in contact tracing. These companies have been successful in capturing many of the opportunities.

CRI is still seeking contact tracing opportunities, and a recent acquisition has given us a chance to not only diversify our offerings but offer a unique contact tracing solution. CRI acquired Global Emergency Response, Inc. (GER) in early March 2020, prior to knowing what the COVID-19 impact would be on our population, economy, and the healthcare system. The company’s Disease Surveillance system was designed to be used for monitoring infectious diseases, such as COVID-19, and is also an excellent solution for employee screening and monitoring. This cloud-based software, available via a web interface or mobile application, expands our offering aimed at helping slow the spread of COVID-19.

During the ARM industry COVID-19 slow down, we encourage spending time expanding into other opportunities suited for ARM experience. At CRI, we are continuing to pursue contact tracing and call center work while devoting significant time marketing GER’s solutions for employee screening, monitoring, and contact tracing. Collectively, our industry can perform more outreach to educate municipalities, counties, and states of the value our industry can offer for COVID-19 related requirements.

CEDAR FALLS, Iowa — Tom Penaluna (Chairman and CEO, CBE) announced today that CBE has donated to establish a fund, in conjunction with the Waterloo Community Foundation, to which contributions can be made in support of the Waterloo Police’s efforts to improve race relations in our local community. These funds will be directed towards the City of Waterloo, Iowa with the goal to assist the City in improving race relations between the Police Department and the Black Community. The City of Waterloo’s new Police Chief, Joel Fitzgerald, has proposed sweeping changes to give officers the very important and relevant training needed to perform their duties in the following areas:

• Procedural Justice/Implicit Bias/Reconciliation Training
• Critical Incident Team Training
• De-escalation Instructor Training
• First Line Supervisor Training

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Penaluna commented, “Earlier this week, I shared CBE’s corporate commitment with our staff to do our part and address social injustices and racism. When our leadership team made those commitments, we understood that government leaders, corporate leaders, and other influencers must move beyond just saying politically correct statements and must take actions to address the decades of discrimination that Black Americans have had to face. CBE strongly believes that everyone has a right to live freely without discrimination, and we stand together to make real and lasting change to impact Black lives.  More importantly, we have been listening to those in our local communities on how to best initiate change, and we want to share the initial steps CBE will take toward our commitments. It is our hope that this additional support will lead to improved race relations between the Police Department and Black Community. Our goal is to raise $250,000.00 to assist with this vital community need. We invite other businesses and citizens of Waterloo to join us in donating to the fund. Again, we know these are initial steps and there is so much more listening, understanding, and action that needs to take place for real change to occur. Many Black Lives have been lost needlessly, and it’s up to every one of us to commit, to act, and to create a better future.”

Donation Information

Racial Equality Training Fund
Waterloo Community Foundation
P.O. Box 1253
425 Cedar Street
Waterloo, IA 50704

Editor’s Note: This article was originally published on the Maurice Wutscher blog and is republished here with permission.

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Yesterday ARM industry trade associations Receivables Management Association International, ACA International, and the New York State Collectors Association, along with the National Creditors Bar Association and the New York State Bar Association submitted a joint letter to the New York City Department of Consumer and Worker Protection (formerly the Department of Consumer Affairs) requesting a 60-day extension to the effective date of its new language preference rules. 

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This is not the first request by industry. Earlier this month, in response to a similar request, the agency agreed to suspend enforcement of the rules for 60 days but did not extend the June 27 effective date.

The rules require collection agencies to record the “language preference” of consumers and the number of consumers engaged by the collection agency in a language other than English. Debt collectors are also required to request and record a consumer’s “language preference” and make other disclosures in the course of collection activities.

Prior to the effective date, the rules received no written comments and no testimony was given during an April public hearing. In their previous letter, the same associations noted the comment period occurred during the height of the COVID-19 crisis in New York and little notice was provided. The agency did not notify its licensees of the proposed rules, although it had sent communications to them concerning other matters during the same period.

“As is evident from our conversation on June 17, 2020, as well as from the included requests for clarification, there is still substantial clarification needed on the Preferred Language Rule to make it workable for our industry and to avoid unintended consequences that are detrimental to consumers,” yesterday’s industry letter notes. 

There are many problems with the rules beginning with the lack of any definitions for their most critical terms. But the most glaring failure of the rules is the ambiguity concerning what is a “language preference.” Public entities that are required by law to develop Language Access Programs use guidance such as that issued by the U.S. Department of Justice (DOJ) (67 FR 41455) which asks the agency, among other things, to consider the number or proportion of limited English proficiency (LEP) persons being serviced.

According to the U.S. Department of Health and Human Services, LEP persons are those for whom English is not their primary language and “have difficulty communicating effectively in English.” But what the rules focus on is a person’s preference, even if they can effectively (or even fluently) converse in English. In fact, English could be the person’s primary language, but under these rules that fact is not considered.

ON-DEMAND WEBINAR NOW AVAILABLE

I will discuss the new rules with Marina Banje, Senior Compliance Counsel of Cavalry Portfolio Services, LLC, and my partner Eric Rosenkoetter during a webinar now available on demand. With just a few days to go before the rules become effective, we will explore implementation of the disclosure and reporting requirements and share our thoughts on how the agency might be viewing the many ambiguous requirements the new rules impose. Click here to register.

Editor’s note: This article is provided through a partnership between insideARM and Squire Patton Boggs LLP, which provides a steady stream of timely, insightful and entertaining takes on TCPAWorld.com of the ever-evolving, never-a-dull-moment Telephone Consumer Protection Act. Squire Patton Boggs LLP—and all insideARM articles—are protected by copyright. All rights are reserved.

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The United States Court of Appeals for the Ninth Circuit has declined a chance to revisit its 2018 decision in Marks v. Crunch San Diego, LLC that an automatic telephone dialing system (“ATDS”) under the Telephone Consumer Protection Act (TCPA) includes a device that “stores telephone numbers to be called, whether or not those numbers have been generated by a random or sequential number generator.”

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The opportunity came in an appeal by Portfolio Recovery Associates, LLC in challenging a District Court ruling, applying Marks, that the company had employed an ATDS in debt collection efforts. Back in February of this year, Portfolio sought an initial hearing of its appeal before the entire court sitting en banc. Portfolio asked the Ninth Circuit to resolve “an unambiguous and growing” conflict among Federal appellate decisions, with Portfolio reportedly describing the Ninth Circuit as an “ever-more-isolated outlier” on the ATDS issue. Of course, since February the Ninth Circuit’s Marks reading of the TCPA was joined by the Second Circuit in Duran v. La Boom Disco (https://tcpaworld.com/2020/04/07/la-boom-goes-the-dynamite-second-circuit-holds-tcpas-atds-definition-includes-devices-that-can-call-from-lists-and-not-just-random-fire-dialers/).

The Court’s denial of an en banc hearing came in a terse two-sentence order, indicating that no judge had supported such an en banc proceeding. Perhaps the lack of interest was encouraged by the fact that Marks was no longer an “outlier,” but now had Duran’s company. With the Ninth and Second Circuits facing off against the Seventh and Eleventh Circuits where does the ATDS path lead next?

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Want to track TCPA trends?
The iA Case Law Tracker helps you do that in less time than it takes to pour your morning cup of coffee.

Recent media reports have warned about increasing federal student loan defaults and called upon Washington to extend the current suspension of payments. In a piece for CNBC, Annie Nova quotes Mark Kantrowitz, a higher education expert, as saying “The payment pause and interest waiver should be extended because the disruption is ongoing and the recovery will be sluggish.”

While experts claim that more delinquencies and defaults are coming the irony is that Congress has already taken action to prevent this without throwing in the towel on the entire $1.4 Trillion in outstanding loans. Decades of bipartisan efforts have produced programs for Federal student loan borrowers that are ideally suited to meet the current circumstances. What is needed now is additional education to explain how to take advantage of these programs.  

A bit of history

In 1994, Congress and then-President Bill Clinton introduced the first income-driven repayment plan called Income-Contingent Repayment (ICR).  The ICR plan allowed borrowers to repay their federal student loans with a monthly payment amount which took into consideration both the borrower’s income level and their family size. If the loans were not paid in full within a specified period (20 or 25 years), the remaining balance was forgiven. Thus, a zero dollar payment could actually enable the borrower to remain in “good standing.”

Congress continued to improve and expand the program under both President George W. Bush and President Barack Obama .

In 2007 the process was updated and made more borrower-friendly by capping the payment amount to 15 percent of discretionary income and provided for loan forgiveness after 25 years.

In 2010 the program was further improved and was called Pay As You Earn (PAYE). This program limited monthly payment amounts to 10 percent of discretionary income and provided for forgiveness after only 20 years.  In 2015 the plan went through further improvements  and called Revised Pay As You Earn (REPAYE).

This all reflects  a long term, bipartisan effort to provide student loan borrowers with the tools and resources to address the very times we are experiencing today. Income-driven repayment is already available to provide relief to the millions who have been so deeply impacted by the Covid-19 pandemic.

These unique plans can allow for reduced payment amounts, many in the amount of $0.00 per month, for up to a year.  Congress even had the foresight to ensure that if you have a $0.00 repayment plan, that those payments would continue to count toward Public Service Loan Forgiveness. Congress and past Presidents have provided student loan borrowers with the options necessary to avoid the painful consequences of delinquency and default.

Back to today

The CARES Act signed by President Trump on March 25, 2020 did a few important things related to defaulted loans:

• It set the interest rate on all outstanding loans at 0% for March 13-September 30, 2020.
• It automatically put all loans (defaulted and not defaulted) into forbearance for March 13-September 30, 2020.
• It eliminated all administrative wage garnishments on defaulted loans for March 13-September 30 (if garnishment did occur, FSA says the money will be returned).
• It provided that, if a borrower was enrolled in a rehabilitation plan prior to March 13, 2020, the payments that would have been due between March 13-September 30 but are automatically in forbearance, will count towards the nine payments required to rehabilitate. For instance: 
• If a borrower enrolled in February and made payments on February 10 and March 10, the $0 payments for April – September will count towards rehabilitation.
• If a borrower enrolls in June, the paperwork would be gathered but the borrower would make $0 payments for June-September. So she would owe only five payments after that vs. a total of nine payments to rehabilitate the loan and get out of default.

• It provided that, if a borrower was enrolled in an Income-Driven Repayment Plan (IDR), $0 payments during the forbearance period would apply towards the requirement for forgiveness.

The CARES Act also prohibited Private Collection Agencies from sending collection letters or making outbound collection calls to defaulted federal student loan borrowers, which means PCAs may not reach out to borrowers to inform them of these programs and opportunities.  The only way a borrower could learn about them is if they happen to read the FAQs on the Federal Student Aid website.

insideARM is told that FSA has made one exception. PCAs may send ONE letter and make ONE phone call to the subset of borrowers who had expressed interest in one of these programs and had made at least one payment since January but had not yet completed their documentation. Without completed documentation, the $0 payments during forbearance will not count. One estimate suggests that there are approximately 150,000 borrowers in this category.

One letter and one phone call rarely prove to be enough to make contact with a borrower. Complicating the matter is that if the collector reaches a voicemail recording rather than a person but the recording doesn’t specifically state the borrower’s name, because of privacy requirements, many PCAs will not leave a message.

This seems to deprive thousands of borrowers of taking advantage of an incredible opportunity to either rehabilitate their loan or get credit towards forgiveness for $0. The Government got this one right ahead of time. Now is the time to put those plans to good use. Let collectors contact borrowers. I’m not talking about garnishment. I’m not talking about demanding payment. I’m talking about education and assistance with paperwork that could offer great relief to struggling consumers.

This issue only becomes more exaggerated if the provisions of the CARES Act are extended.

OMAHA, Neb. — EarlyOut Services (EOS) and General Service Bureau (GSB), two companies that specialize in   managing healthcare receivables, have launched a new brand identity, logo system and website, which better reflects their Mission and provides them a stronger voice in today’s evolving healthcare revenue cycle industry.  

“We are excited about our new brand and strategic vision, which reinforces our mission and core values – Enhancing the Financial Well Being of Others® through being honest, treating others with dignity and respect, and striving for continuous improvement. With a client-driven strategy that focuses on patient satisfaction, we believe our new brand provides us a stronger position in a competitive marketplace,” said Therese Yakel, CEO of Operations and Co-Owner.  

The brand identity includes a new logo system that works jointly and independently for each entity. The logos reinforce the two companies’ emphasis on healthcare with a subtle medical   cross, created by diagonal shapes that give the logos movement and imply evolution and innovation. The new tagline, “Healthcare Receivables Specialists,” immediately identifies the companies’ sole purpose and dedication to the healthcare industry.  

“The new website, www.eosgsb.com, provides a complete overview of the two companies’ joint offerings, as well as what each company can provide independently. Our career pages were also enhanced. We want the best and brightest to know that our companies provide a fun and dynamic work environment with a real purpose,” said Yakel.  

About

Built on a foundation of honesty, integrity and empathy, EOS + GSB have been industry leaders in Extended Business Office / Early Out Services and Bad Debt Recovery for healthcare organizations nationwide since 1990 and 1947, respectively.

DULUTH, Ga. — Crown Asset Management, LLC announced today that it has hired Shawn P. Bradley as Director of Finance. Mr. Bradley was previously a Senior Director of Business Development for Ovation Partners, an Austin, TX based private credit fund. Prior to Ovation, Mr. Bradley spent nine years at CIBC Bank USA, as a Managing Director in the Specialty Finance Group, where he helped grow the loan portfolio to over $1 billion. He has extensive experience in distressed debt lending and capital markets. He holds both a BBA and MBA from Saint Xavier University where he also played intercollegiate football.

Crown Asset Management is a leading accounts receivable management company headquartered in Duluth, Georgia. Brian K. Williams, Chief Executive Officer, stated: “We have known and worked with Shawn for almost five years and have been continually impressed with his skill and ability, as well as his broad knowledge of distressed consumer receivables. He is talented, a team player, and will be a valuable addition to the Crown team.” Mr. Williams founded Crown in 2004. Mr. Bradley stated: “Having known Brian and the Crown team for a number of years, I am

xcited about the opportunity of joining such a dynamic, high growth company with a talented management team that maintains the highest levels of integrity. I see a multitude of opportunities for well capitalized companies in the ARM industry, and I look forward to helping Crown leverage these opportunities through its next phase of successful growth.”  Mr. Bradley will officially join Crown in July and will be based at the company headquarters just outside Atlanta, GA.

About Crown Asset Management

Crown Asset Management, LLC has purchased over 500 portfolios since 2004 including credit card portfolios, automobile debt, consumer loans, judgments and specialty portfolios. For further information, see www.crownasset.com.

This video is part of the iA Think Differently series. Written by or recorded with members of the iA Innovation Council, the series showcases thought leadership in analytics, communications, payments, and compliance technology for the accounts receivable management industry.

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Today I’m talking with Brian McManamon, president and CEO of TECH LOCK and vice president of RevSpring. TECH LOCK is a data security company that helps clients be more secure by employing and implementing a turnkey, end-to-end managed security and compliance solution. One of the things they’ve been focused on is using machine learning to isolate those few security events that really matter and need to be addressed immediately. This has been no simple task in the past, given the mountain of operating data produced by most agencies.

[Editor’s note: If you are interested in topics like strategy, testing and scenario planning, you should not miss insideARM’s next conference, iA Strategy & Tech – a completely virtual event – July 21-23. It’s a masterclass in collections strategy.] 

Transcript

The iA Innovation Council is a collaborative working group of product, tech, strategy, and operations thought leaders at the forefront of analytics, communications, payments, and compliance technology. Group members meet in person (and lately, virtually) several times each year to engage in substantive dialogue and whiteboard sessions with the creative thinkers behind the latest innovations for the industry, the regulators who audit and establish guardrails for new technology, and educators, entrepreneurs and innovators from outside the industry who inspire different thinking. 

2020 members include:

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