Archives for July 2021

The U.S. Court of Appeals for the Eighth Circuit recently affirmed the entry of summary judgment in favor of a mortgage servicer against a borrower’s claims that it violated the federal Fair Debt Collection Practices Act (FDCPA).

In so ruing, the Eighth Circuit concluded that the communications at issue regarding denial of the borrower’s loss mitigation application were not made in connection with an attempt to collect on the underlying mortgage debt, and thus not actionable under the FDCPA, 15 U.S.C. 1692, et seq., and that the inclusion of boilerplate “Mini-Miranda” language stating that the communications were “for the purpose of collecting a debt” did not automatically trigger the protections of the FDCPA.

A copy of the opinion in Heinz v. Carrington Mortgage Services, LLC is available at:  Link to Opinion.

In September 2016, the assignee to a twice-modified mortgage loan initiated foreclosure proceedings and advised the homeowner-borrower that a foreclosure sale was scheduled for Aug. 1, 2017.  The borrower again applied for loss mitigation assistance but was notified in March and May 2017 that his application was incomplete for failure to provide required documentation and was no longer under review.

On July 11, 2017, the borrower’s mortgage loan was transferred to a new servicer.  After being provided notice of the transfer, the borrower spoke with a representative of the servicer who confirmed that the Aug. 1, 2017 foreclosure sale would proceed, but invited the borrower to submit a loss mitigation package if he wished to prevent the sale. 

The borrower contacted the Minnesota Attorney General’s Office for assistance, who agreed to represent the borrower and whom the borrower asserts he relied upon to relay communications and information regarding his loan from the servicer.

The foreclosure sale was subsequently postponed to Sept. 9, 2017, and later to Nov. 14, 2017. Between August and November 2017, the borrower submitted requests and documentation for mortgage assistance, and the Minnesota AG’s Office notified the borrower that, on Nov. 7, 2017, the servicer confirmed to the AG’s office that the borrower’s application was complete and would force postponement of the foreclosure sale while awaiting a final determination.

Nevertheless, the scheduled sale proceeded on Nov. 14, 2017, where the mortgagee purchased the property.  The borrower subsequently received a letter from the servicer dated two days after the sale, which advised him that his loss mitigation application had been canceled and would not be considered. 

During the six-month redemption period, the AG’s Office requested that the servicer rescind the sale on the borrower’s behalf.  The servicer responded that it would not rescind the sale.  The letter explaining the decision stated that the borrower failed to provide all requisite documentation to complete the loss mitigation application and that the home had been sold to a third-party bidder at the foreclosure sale, although it had been sold to the mortgagee.

The borrower filed suit against the servicer in Minnesota state court, alleging that the servicer violated the FDCPA by making false representations about the borrower’s loss mitigation application and the foreclosure sale by ignoring his application and delaying communications so that the borrower could not take advantage of his legal remedies, along with various state law claims and requests for injunctive relief seeking rescission of the foreclosure sale and preventing eviction.  The servicer removed the action to federal court, and by the summary judgment stage, the borrower’s FDCPA claim was the lone remaining cause of action. 

The trial court granted summary judgment in the servicer’s favor, concluding that its communications and conduct with the borrower were not in connection with an attempt to collect a debt and that any post-sale communications were immaterial as they had no impact on the borrower’s legal rights.  The borrower timely appealed.

On appeal, the lone issue before the Eighth Circuit was whether certain challenged communications and conduct were made in connection with the collection of a debt. 

These included the servicer’s: (i) pre-sale letter canceling his loss mitigation application for purported failure to provide requested documents; (ii) response to the AG’s complaint; (iii) representations by phone to the AG’s office that the borrower’s application was sent to underwriting and awaiting a decision, and; (iv) post-sale letter stating that the servicer did not receive all necessary information to complete the application before the deadline (along with prior representations it was complete) and that the property was sold to a third party (when, in fact, it was sold to the mortgagee). 

The borrower argued that the trial court erred in granting summary judgment because the evidence presented was sufficient to allow a jury to conclude that the servicer used false, deceptive, and misleading representations and unfair and unconscionable means to collect on the underlying mortgage debt and erroneously narrowed the “animating purpose” test.

As you may recall, the Eighth Circuit employs the “animating purpose test” to consider whether certain statements for conduct are in connection with the collection of a debt for the purposes of section 1692e of the FDCPA, which prohibits the use of any false, deceptive, or misleading representation or means in connection with the collection of a debt.  McIvor v. Credit Control Servs., Inc., 773 F.3d 909, 914 (8th Cir. 2014).

Under this test, “for a communication to be in connection with the collection of a debt, an animating purpose of the communication must be to induce payment by the debtor.” Id.  “Though ‘[t]he “animating purpose[]” of the communication is a question of fact that generally is committed to the discretion of the jurors, not the court,’ where ‘a reasonable jury could not find that an animating purpose of the statements was to induce payment,’ summary judgment is appropriate.” Goodson v. Bank of Am., N.A., 600 F. App’x 422, 431 (6th Cir. 2015).

The borrower argued that the Supreme Court of the United States in Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 1029, 1036 (2019) indicated that nonjudicial foreclosure is a debt collection activity, even if the FDCPA exempts nonjudicial foreclosing parties from the definition of “debt collector.”  Therefore, the borrower argued, each of the identified communications were in connection with the attempt to collect a debt. 

However, the Eighth Circuit noted that, because the Supreme Court statement in Obduskey was rendered in consideration of whether a party qualified as a “debt collector” for the purposes of the FDCPA, and not in consideration of specific communications regarding foreclosure proceedings, the communications at issue still required individual consideration.  McIvor, 773 F.3d at 915 (although nonjudicial foreclosure is a debt collection activity, it does not follow that any communication generated during a nonjudicial foreclosure is made “in connection with the collection of a debt.”).

Reviewing the content of each of the communications, the appellate court agreed that none were made in connection with the collection of a debt. 

Specifically, neither the pre-sale letters to the borrower and AG’s office, nor the phone call between the servicer and the AG’s office evidenced any mention of the loan apart from identifying information and did not provide amounts due or demands for payment.  See Bailey v. Sec. Nat’l Servicing Corp., 154 F.3d 384, 388-89 (7th Cir. 1998) (holding that the communication was not made in connection with the collection of a debt because it merely described the status of the debtor’s account and the consequences of missing future payments); See, e.g., Grden v. Leikin Ingber & Winters PC, 643 F.3d 169, 173 (6th Cir. 2011). 

To the contrary, the Eighth Circuit found that these communications arguably thwarted the servicer’s attempts to arrange for payment of the mortgage indebtedness.  Similarly, the post-sale letter contained only basic identifying information of the loan and was not an attempt to collect a debt because the property had already been sold, and thus, any purported misrepresentations were also immaterial.  See Hill v. Accounts Receivable Servs., LLC, 888 F.3d 343, 346 (8th Cir. 2018) (“[B]ecause ‘[a] statement cannot mislead unless it is material, [] a false but nonmaterial statement is not actionable.’”

Moreover, despite the inclusion of a Mini-Miranda statement including language that the communications were “for the purpose of collecting a debt,” the boilerplate language did not automatically trigger the protections of the FDCPA. Gburek v. Litton Loan Servicing LP, 614 F.3d 380, 386 n.3 (7th Cir. 2010); Goodson, 600 F. App’x at 432 (“[T]he standard disclaimer language—which stated that [the mortgagee] was ‘a debt collector attempting to collect a debt’—did not, by itself, transform the informational letter into debt collection activity.”).

Because the servicer’s conduct was not made or carried out in connection with an attempt to collect a debt, the Eighth Circuit also rejected the borrower’s arguments that the servicer ignored the borrower’s loss mitigation application and delayed communications to run out the statute of limitations on a potential claim of a violation of the Minnesota dual-tracking statute in violation of § 1692f.

Accordingly, the trial court’s entry of summary judgment in the servicer’s favor was affirmed.

EDINA, Minn. — On July 16, 2021, Financial Recovery Services made a donation of $5,000 to the Courage Kenny Foundation, which will help support the work of the Allina Health Courage Kenny Rehabilitation Institute.

FRS’ support will fund innovative programs, groundbreaking research, and exceptional services that help people achieve health, wellness, and independence. These funds will help to provide people with injuries and disabilities access to new adaptive technologies, which offer increased independence.

“We hope that this donation can make a difference for as many people as possible,” FRS President Brian Bowers said. “We love the work that Courage Kenny does and we’re proud to support their programs, which help injured and disabled people in such a critical way.”

The Courage Kenny Foundation advances the mission and goals of the Courage Kenny Rehabilitation Institute by maximizing the quality of life for people of all ages and abilities, delivering comprehensive, person-centered rehabilitation throughout life.

Financial Recovery Services’ Values and History

Continual service to its communities is one of FRS’ core values. FRS and its employees regularly partner with nonprofits and charities including the Salvation Army, Toys for Tots, The Center Against Sexual and Domestic Abuse, Special Olympics Minnesota, and the 363 Days Food Program.

Financial Recovery Services was formed in March 1996 by two collection industry veterans, Brian Bowers and Wade Davis. The company has more than 225 employees in five call centers and three training facilities, located in Minnesota, Wisconsin, South Dakota, and Jamaica. FRS provides comprehensive custom collection and receivables management solutions to mid-sized and large organizations. FRS has excelled in debt collections and receivables management, has won numerous awards, and distinguished itself as a proven partner for a diverse range of companies and institutions in the financial services, retail, telecommunications, and utility, industries.

It is mid-July as I write this. There are four months until Regulation F is implemented. (I know some of you may think, “But the extension!” However, the effective date on the CFPB’s page remains 11/30, so we’re going to stick with that.)

As many are no doubt aware, there are a lot of moving parts, not just with implementation of these new requirements, but management of these new requirements. And what has become clear, moderating webinars, listening in to other webinars, talking with compliance and operations people, and just paying attention is this: If you aren’t automating, you are setting yourself up for failure. Generally, mistakes can be mistakes and learning opportunities. For the debt industry, mistakes are actually dollar signs at best.

Here’s a fun question for two different audiences: 

Owners, CEOs: How many of your processes are automated and regularly audited? 

Compliance and Operations: How many of your processes aren’t automated and the audit process is, “Well, Terry just does that part and we have no idea how and look, it gets done, we can just never, ever, fire Terry or let Terry leave”? 

To the owners, CEOs, compliance managers and operations managers who felt deeply seen by those questions: don’t judge yourself. We’re in a highly regulated industry with thin margins. That initial outlay for automation can look steep when you have not just one Terry — but six or seven. 

When tasks that are better automated are, instead, the responsibility of employees, the risks may not seem immediately apparent, especially if you have someone capable in charge of that task. Here are five reasons you want to invest in automation: 

1) Terry Leaves. Or goes on vacation. Or has a catastrophic event. That can be the first wobble in a spinning top you thought was going to spin forever. In the worst case, Terry was doing things you didn’t know Terry was doing, and you only find out once Terry is gone. You now have a gap in your processes. 

2) You Can’t Replace Terry Once Terry’s Gone (We Miss You Already Terry). In situations where an automated process is automated by Terry, a human, and not T.E.R.R.Y., the latest in collection technology, you are more vulnerable than you’ve ever been. This key task is now going undone. 

3) No One Knows What Terry Is Doing/Did/No Longer Does. Again: processes that rely on a human person will stop working when that human person is gone. The other key point: Terry might not even know that Terry’s doing something that needs auditing or automation. Terry just thinks, “This is part of my job.” Leaving automated tasks unautomated puts your company at risk of non-compliance. 

4) The Longer You Wait to Automate What Terry’s Been Doing By Hand, the Messier Untangling Those Processes Will Be. Automation isn’t as simple as flipping a switch. And the longer Terry tracks what Terry’s tracking, and fiddles with what Terry’s fiddling, the less sure you can be that you’re capturing all the data-points necessary, or even fully understanding what Terry does. 

5) You Can’t Afford to Not Automate. Automation smoothes out processes, making them reliable, measurable, and dependable. It also allows Terry to focus on things Terry might be better at. (And, of course, this is just life under capitalism: you may find that you don’t need Terry. Which can free up resources.) 

There is never a good time to switch everything about your current business. It is absolutely going to be disruptive and there will be headaches.  

But having said all that: Can you really afford not to?

For an indepth look at the ins and outs of automation, check out Telrock’s whitepaper: Automation is Key to Collections Success: What You Need to Know

SACRAMENTO, Calif. –The Debt Collector Licensing Act (Fin. Code § 100000 et seq.) (DCLA), which takes effect Jan. 1, 2022, requires any person engaging in the business of debt collection in California to be licensed by the Department of Financial Protection and Innovation (DFPI). (Fin. Code § 100001(a)). If you are a debt collector collecting debt in the state of California you must submit an application on or before Friday, Dec. 31, 2021. Once you have submitted your application, you may continue operating as a debt collector in California while your application is pending. If you submit an application after this date, you will be required to wait for the issuance of a license before you can operate in California. (Fin. Code § 100000.5(c)).

The application will request financial and other information and will need to be submitted via the Nationwide Multistate Licensing System & Registry (NMLS). In addition, applicants will need to submit fingerprints through the California Department of Justice’s electronic fingerprint submission Live Scan Service. The application will be available on NMLS starting Sept. 1, 2021.

For further information about debt collectors’ licensing requirements please refer to the DFPI’s Debt Collectors web page and FAQs. The DFPI looks forward to reviewing applications and welcoming our new licensees.

If you wish to continue operating as a debt collector in California starting from Jan. 1, 2022, we strongly recommend that you start gathering the necessary information to ensure timely filing of your application by the Dec. 31, 2021, deadline. Failure to submit an application by this deadline and continued operation without a license may result in enforcement actions.

To avoid missing important updates, you are strongly encouraged to check the DFPI website periodically and subscribe to the DFPI’s email subscription service.

iA Strategy & Tech chair Erin Kerr talks to Keith Walch from Spring Oaks Capital on the foundations of a strong debt sales strategy.

You’ll learn:

• Why compliance is such a critical component to debt sales
• Why the cleanliness of your customer data may make or break your debt sale prospects
• What it means to be “fair and reasonable” and why it matters
• Which key qualities will help you identify a good debt sale partner

Also, hopefully, you caught The Status and Outlook of Debt Buying featuring Keith Walch, Bob Deter, and Rui Pinto-Cardoso at iAST, if not, the session is available on-demand to attendees until 9/30

This interview is part of the Innovation Council’s Think Differently Series. The full intereview transcript is below.

[Erin]: Today we have Keith Walch here with us to talk about the debt sale industry. Keith has recently joined a debt buyer in the space, Spring Oaks Capital, as their Chief Acquisitions Officer. Prior to joining Spring Oaks Keith spent the last 20 + years on the issuing side of the collections and recovery industry. He has worked for several issuers including credit card issuers MBNA America and Barclays and most recently a fintech issuer Prosper Marketplace, where he launched their current recovery program. Welcome Keith, and thank you for taking the time with us today.

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[Keith]: Thank you, Erin, for having me. I am happy to be here.

[Erin]: For those listening that don’t know you Keith, why don’t tell us a little bit about your background.

[Keith]: Of course. As mentioned, I’ve been on the issuer side for about 20+ years. I started with MBNA as a collector. I worked in both collections and credit, earned my lending authority, prior to entering into management.

I moved into the vendor management and recovery space with Barclays. I came into the about three years prior to the introduction of the OCC Guidance from 2014 on Debt Sale and before the CFPB really stepped into the spotlight on compliance. I became very experienced at vetting and providing oversight for buyers. By the time I left Barclays, I was the lead on all tasks including sale – from vetting, to the contract negotiation, to closing and support. Additionally, I lead bankruptcy servicing and sale, and managed late stage agency and placement streams there.

I think that put me on Prosper’s radar. I started at Prosper in March of 2015 to launch debt sale and the recovery collections strategy. Before coming to Spring Oaks, Prosper had debt sale, bankruptcy servicing and sale, agency placement strategy, legal, and debt settlement strategies mapped out or in place.

I joined Spring Oaks as their Chief Acquisitions Officer in April of 2021.

[Erin]: Thanks so much for that background. Sounds like you were busy at Prosper. After all that time on the issuer side of the business, what compelled you to come to Spring Oaks?

[Keith]: I am glad you asked that question. Candidly, it was a combination of the compelling leadership, and the commitment to the brand protection and technology. Spring Oaks is really trying to do something different here. That starts from the way they hire, to the way they treat the Customers, and the way that they are modeling themselves more as a FinTech company.

The thinking is that my experiences at both a financial institution and launching sales at a FinTech will help position Spring Oaks to become a unique partner and a pioneering FinTech buyer.

[Erin]: Sure, that makes a lot of sense. Would you mind elaborating on that a little bit, though?

[Keith]: Sure. Spring Oaks has hired industry leaders from both the Issuer side of the industry and out of collections side of the industry. The Executive leadership team is truly unique. The commitment to technology is also intriguing. Spring Oaks is diverting a lot of resources to machine learning, and technology collections solutions. Our CTO, in fact, demonstrates that commitment. He created a machine learning, AI, customer interaction company that was purchased and then implemented at a top three credit card issuer. So, through technology we are looking to keep collection costs low, take the least intrusive paths of communication to reach our customers, while doing it compliantly. One of our mottos is that “collections does not need to be a bad experience.” We’re using the contact channels that the customer really wants us to use, when and where they want us to use them. And it will be a really big advantage to us.

[Erin]: Thanks so much for going into that, Keith. So, how does your background fit into the grand scheme of things at Spring Oaks?

[Keith]: I think my background blends well with it. It’s a technology focused debt buyer. I have both the understanding and experience from leading recovery sectors for issuers at financial institutions, but also the experience of launching it at a FinTech. I may have come across similar situations and challenges and obstacles that recovery leaders on the issuer side may need to overcome. And I might be able to find some solutions and work arounds to those obstacles. These are all coming from my own experiences. I come from that un-enviable prioritization schedule and you’re lobbying for tickets when you’re working for a lender in the recoveries department.

[Erin]: That’s really interesting, Keith. I’m sure you have lots of great stories from that side of the house.

[Keith]: I have good ones and not so good ones. But both of those experiences are really needed for success. Sometimes it’s just really understanding what you may not want to do.

[Erin]: Given all your background, do you feel you would be in a good position to advise an issuer on how to launch a recovery department? What would you say to an issuer that is on the fence about selling debt?

[Keith]: Advise no, because every company has a unique set of goals they want to accomplish and a unique set of challenges. I could act, very easily, as a sounding board.

I would offer a few things though. Debt sales is not as daunting as it looks or sounds.

Getting the “buy-in” internally is important. Debt sales as part of your recovery strategy in my opinion is probably one of the easier strategies, and it is by far the quickest return on investment. It can be done with a minimal amount of support to get started and minimal amount of support to maintain for a little while. I am not saying it is easy and hard work is needed; both of them are needed. What I am saying is that it can be done with reasonable resources especially if and when you know what to do and ask for.

[Erin]: Great, I think that’s really good advice. So, what would you say is the most important aspect for issuers to consider when they are looking for a debt sale partner?

[Keith] There are several. The first one everyone thinks of is price, and that is very important, don’t get me wrong. But there are a few more that I would put in there as just as important. No matter how you look at it, debt sales is the longest relationship of all the recovery streams, so you want one that can go the distance with you. Having a good reputation in compliance, and one that’s genuinely trying to do the right thing. Obviously, stable funding is a great and needed aspect of the purchasing program. Having strong professionalism and strong business acumen are also some musts.

[Erin] So, after some of that vetting is done, how can issuers ensure that their portfolios are ready for a successful sale?

[Keith]: There are a few “check the boxes” that could help some issuers come to market. Clean data, and what I mean by that is accurate customer data on their contact information. Account information. Their media. The documents that support the substantiation of their debt. Also, on that side, for the issuer to have already have in place good customer communications. All of their customer contact data, all of the personal data, have that accessible and transferable. The breakdown of balances. Principle, interest, and fees. The working media: is it workable? Is it transferable? The origination data; the terms and conditions, the statements. If you’re sending goodbye letters (and you should be sending goodbye letters!). Are those being sent to the buyer as well? In the auto world in particular, all of those notices of intent, of deficiency, of repo, and of sale of the vehicle. Also, have awareness that some post-sale support is needed. The relationship doesn’t stop at the sale. There are disputes, affidavits, and media requests that may come down the line. Lastly, just being fair in the contract terms. We’re both companies trying to work together, so, just being fair and reasonable is a great way for an issuer to have a successful sale.

[Erin]: Great, thanks so much for kind of enlightening us on that. On the other side of it, though, what about the companies that ‘don’t need it right now’ due to the current events influencing historical collection highs and historical charge off lows?

[Keith]: That is a great question. Just coming out of the issuer side I am fully aware that collections entry rates and roll rates are at historic lows, stimulus and relief packages have made their impacts, and therefore charge offs are low. Because of that, charge off inventory available for sale is low, and therefore pricing is high. This is your classic supply vs. demand. There will be an eventual economic change as relief programs are expiring, the world opens back up, and people can begin spending and traveling again. Originations have increased.

As spending increases and the economy and life normalizes, money that was previously used to pay down debt will be spent on everyday life. Delinquency and charge offs will come back. Remember, having sales is just part of the strategy. It gives the issuer another recovery option. There is no ramp up needed as you would at an agency or a legal strategy for a bubble of accounts. A buyer can take all of the inventory all at one time. If you aren’t selling today, it is a good idea to enter or re-enter since pricing is high. As mentioned, a little bit of know-how, and some leg work in the short term could show large returns, and quickly, at that.

[Erin]: That’s great information, Keith, and I really appreciate it. So, any parting words or thoughts on this subject?

[Keith]: Yes. I think there is a Part 2 to “Why Debt Sales” and “Why Spring Oaks.”

In both my experiences selling distressed assets to buyers there were a few common themes among buyers that I gravitated towards. The obvious ones and table stakes if you will: compliance, treating the Customer and your brand as you would expect to be treated, and stable and competitive funding. But there are others out there:

Patience and good Partnerships – “Stuff happens.” When you’re working together for a long time, especially in this industry. You want someone who is going to provide solutions and work with you on solutions to help with that “stuff.”

Ease of doing business – You want to do business with someone who is professional and has integrity. You’re going to be working with these people, not everyday, but when you do, you want them to be able to show that appropriate urgency.

Experience – Another big one. Having someone that can be a sounding board, or at least offer unique solutions. A lot of us have been in their shoes. We have a lot of collective experience, it’s only a phone call away

The value of a good partnership especially in debt sales will allow you to focus your attention on the other areas of your business, and we are there when you need us.

————-

Keith Walch is the Chief Acquisitions Officer at Spring Oaks Capital. Erin Kerr is the chair of iA Strategy & Tech and head of strategy content for the iA institute.

This interview was created as part of the iA Innovation Council Think Differently series. You can read more about the Innovation Council here.

Want more collections strategy insight like this delivered right to your inbox? Sign up for the iA Strategy & Tech Newsletter.

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. 

2021 members include:

So a number of folks have recently discussed the fact that the mandate in Hunstein was withheld, as if it was some sort of indicator that the Eleventh Circuit was likely to grant en banc review. While I am on record predicting that the Eleventh Circuit WILL grant a rehearing, the fact that the mandate was withheld does not necessarily portend that result. Indeed, the withholding of the mandate is more-or-less automatic under the rules of appellate procedure as I read them. So I didn’t even mention the issue on TCPAWorld since, you know, it didn’t seem to matter.

Well one Defendant’s counsel apparently disagreed  and recently went “all in” on the mandate issue urging a district court to stay a Hunstein complaint because, inter alia, the mandate in Hunstein was withheld by virtue of the rules. Indeed the Defendant went so far as to imply Hunstein was not a published decision owing to the mandate being withheld.

It did not go well.

In Durling v Credit Corp Solutions, Case no. 21-61002-CIV-SMITH, Doc. no. 24 (S.D. Fl. Jul. 8, 2021) the court refused to stay a case pending the outcome of the Hunstein en banc petition. Ruling here: durling ruling

The Court held directly that under Circuit Rule 36, “[u]nder the law of this circuit, published opinions are binding precedent. The issuance or non-issuance of the mandate does not affect the result.” So the fact that a mandate was withheld pending the outcome of the rehearing petition did not impact the precedential value of Hunstein, which–in the Durling court’s words– “is the law of this circuit.”

As noted, the Defendant had urged the Court that Hunstein was not a published decision for some reason, which is really weird since.. well, it is. The Durling court made short work of this argument, squarely holding: “the Court notes that Hunstein, 994 F.3d 1341 (11th Cir. 2021), is a published opinion.” Enough said.

The Court also found that Defendant failed to make out a case of hardship or inequity under the Landis standard and noted that the requested stay might be a lengthy one. In the end the Court holds “Defendant has not met its burden of establishing that a stay is appropriate under these circumstances.”

Durling appears to be the first ruling in the nation addressing whether Hunstein complaints ought to be stayed pending the en banc effort. Its a real set back for servicers and collectors that this one went the wrong way. I’d expect to see this case cited far and wide by the Plaintiff’s bar. (Oh, and I just noticed that Greenwald was behind this one–why am I not surprised?)

Still, Durling might be properly read as a case where the Defendant simply advanced arguments that were, shall we say, exotic and failed–as the Court found–to address the core Landis factors with direct evidence. Read in that light, Durling should not be viewed as persuasive authority and perhaps other courts will be more receptive to stays pending an en banc review.

In the end the Hunstein saga will be with us for a while and I suspect Durling will not be the last word on whether Hunstein complaints ought to proceed in the shadow of a VERY well-supported en banc rehearing request.

More to come.

On July 12, 2021, the CFPB announced that it issued a consent order against GreenSky, LLC (GreenSky) for enabling contractors and other merchants to take out loans on behalf of thousands of consumers who did not request or authorize them. Per the consent order, Greensky, which is a non-bank institution located in Atlanta, GA, will be required to pay a $2.5 million civil penalty and refund or cancel up to $9 million in loans.

The CFPB alleged that Greensky used merchants, primarily those providing home improvements, to promote and offer financing to customers before making on-the-spot lending decisions based on criteria provided by its partner banks. Merchants gathered information from consumers and submitted the loan applications to GreenSky. Once a loan was approved, proceeds from the loans bypassed the consumers and were distributed directly to the merchants. Consumers were not required to sign-off or take any other action to complete the loan process; instead, the loan application process was complete upon a successful qualification for the loan. If a consumer qualified for a loan, they would only be able to view the approved loan terms if the merchant chose to share the loan approval screen with the consumer.

Per the consent order, merchants applied to participate in GreenSky’s programs. Once accepted, GreenSky trained the merchants on marketing and promoting GreenSky’s loans, taking consumer information, and submitting loan applications. However, merchants were allowed to submit loan applications for up to two months before they completed training.  Only certain merchants were trained by a live person; the rest received online training only. According to the CFPB’s findings, the training did not adequately address consumer protection laws, annual compliance training was not required, and GreenSky sometimes failed to inform merchants when it changed its programs.

The net result of the above is that at least 6,000 consumers complained that they never applied for a loan or even heard of GreenSky before receiving billing statements, collection letters, and calls from the company. The CFPB’s investigation showed that in at least 1,600 instances, merchants were at fault. In some cases, the merchants used their email addresses instead of the consumer’s email address on the application. Generally, GreenSky only required merchants to provide proof of consumer authorization after a consumer filed a complaint and did not discipline or terminate merchants known to have submitted unauthorized loan applications. According to the CFPB, employees in GreenSky’s merchant risk department were not adequately trained or guided by a consistent set of principles; they were allowed autonomy in dealing with merchant infractions.

Further, the CFPB found that GreenSky failed to timely or adequately respond to complaints.  Until at least 2018, GreenSky lacked policies and procedures regarding how to resolve complaints related to unauthorized loans; thus, resolutions were inconsistent. It took over 75 days to respond to complaints in many instances, and in some cases, it took over six months. Some complaints were closed without ever being resolved or informing consumers of the result of the investigation. Greensky often told consumers they needed to attempt to resolve their issue with the merchant before GreenSky would investigate their complaint.

In addition to the financial penalties, GreenSky must enhance its practices regarding consumer identification, implement an effective consumer complaint management program, exercise effective oversight of third-party merchant partners, and implement consistent standards to govern the write-off of illegal loans.

The full consent order can be found here.

insideARM Perspective:

Deficient policies and procedures appear to be at the root of many of the allegations against GreenSky. Inconsistent or missing procedures resulted in a lack of oversight of their merchant partners, consistent training, and proper complaint handling. The apparent failure to adequately capture these crucial business functions snowballed into the allegations seen in this consent order, and ultimately the fines and penalties issued by the CFPB. 

This cannot be said enough: entities subject to CFPB oversight must have compliance management systems that include comprehensive written policies and procedures. Verbal, employee-to-employee training is simply insufficient in the current regulatory environment. Written procedures are necessary to ensure uniform compliance leads to inconsistent results. As evidenced by this consent order, the failure to take this crucial step can snowball into a less than desirable outcome for an organization.

This consent order also reiterates that entities subject to CFPB oversight need to continue to ensure that their vendors or partners who interact with consumers remain supervised. It is not sufficient to provide quick training and let the chips fall where they may. Therefore, a comprehensive compliance management system should include written vendor/partner management policies and procedures which detail auditing protocols and how to handle vendors or partners who fail to adhere to legal or other compliance standards.

DULUTH, Ga. — Crown Asset Management, LLC (CAM), a receivables management and specialty finance firm, proudly announces the addition of Stephanie Schenking as CAM’s Agency Relationship Manager. Ms. Schenking has over 20 years of experience in the financial services industry. As Agency Relationship Manager, she will serve as a liaison between CAM and network collection agencies, oversee agency adherence to CAM policy, and manage agency performance. 

Most recently, Ms. Schenking spent nearly 5 years with a reputable master service provider as a Client Servicing Manager. In this role, she was responsible for client service management, agency compliance buildout, and company-wide training. She also served as Director of Client Relations for nearly 4 years with an investment firm. Prior to these positions, she worked with a well-known national investment firm for 10 years as Senior Manager where she held various roles including managing Sales and Trading teams. Ms. Schenking is an RMAI Certified Receivables Compliance Professional and an ACA Credit and Collection Compliance Officer. 

“Stephanie has a keen intellect and a thorough understanding of the financial services industry. She comes to CAM with deep experience in both debt buying/servicing and investments. In addition to her credentials, she demonstrates continual motivation to grow and learn and maintains a positive can-do attitude,” stated Crown CEO and owner Brian Williams. “Her management skills combined with her communication skills as well as her strong understanding of compliance will serve her well in this role. I expect our agency partners will genuinely enjoy working with her and she will be a tremendous asset to the CAM team.” 

Throughout her career, Ms. Schenking has worked in various roles and handled an array of responsibilities including risk management, dispute remediation, customer service, sales management, team leadership, compliance management, training, performance management, and client relationship management. She put that experience to work when she transitioned to the accounts receivables management industry and managed many of the same types of business aspects. She oversaw network, firm, and agency relationships, drove performance, helped onboard new clients, delivered compliance training, developed procedures, and conducted onsite audits of service providers. 

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“Leadership and transparency are traits that I highly value. Based on what I’ve observed since my onboarding, this is a passion I share with CAM team members. The vision is clear and the company, leaders, and management team are simply one of a kind. They have created an organizational culture where each person has the opportunity to thrive and grow as a professional. I’m thrilled to join this wonderful team and look forward to a successful future with CAM,” shared Ms. Schenking. 

Outside of work, Ms. Schenking enjoys spending time with her three children, Isabella (18), Anthony (16), and Joseph (14). Most days she can be found at either a lacrosse or football field watching her boys play. She loves to travel and enjoys live outdoor music. Recently, her family added two fun and zany rescue dogs, aptly named Jim Carey and Chevy Chase. She also serves as President of PTO at her childrens’ K-12 school, VP of membership for her local swim and tennis club, and volunteers at The Community Blood Center. Ms. Schenking earned her BS in Finance from the University of Dayton and is a regular attendee at industry conferences and educational events. 

About Crown Asset Management

Founded in 2004, Crown Asset Management, LLC, is a professional receivables management firm that outsources purchased accounts to a nationwide, proprietary network of collection agencies and law firms. Utilizing a cutting-edge predictive analytical model during pre-purchase portfolio due diligence, their team focuses on achieving appropriate financial returns for investors while ensuring the best possible experience for consumers. They are an RMAI Certified Receivables Business and are headquartered in Duluth, GA.

On July 6, Colorado Gov. Jared Polis signed into law Senate Bill 21-190, the Colorado Privacy Act.  This makes Colorado the third state, behind California and Virginia, to enact comprehensive consumer data privacy legislation.  The act becomes effective July 1, 2023.

Applicability

The Colorado Privacy Act applies to a controller that “conducts business in Colorado or produces or delivers commercial products or services that are intentionally targeted to residents of Colorado,” and:

1. Controls or processes the personal data of 100,000 or more consumers per calendar year; and/or
2. Derives revenue or receives a discount on the price of goods or services from the sale of personal data and processes or controls the personal data of 25,000 or more consumers.

Exemptions

Among other things, the act does not apply to information that is processed in compliance with the Health Insurance Portability and Accountability Act of 1996 Privacy Rule, the Fair Credit Reporting Act, or the Gramm-Leach-Bliley Act.  In fact, financial institutions and affiliates that are subject to the GLBA are themselves exempt. Data maintained for “employment records purposes” is also exempt.

Consumer Rights

The act provides consumers the right to:

1. Opt-out of the processing of their personal data if related to targeted advertising, sale of personal data or certain profiling activities;
2. Access their personal data;
3. Correct inaccurate personal data;
4. Delete personal data, in certain circumstances;
5. Obtain a copy of their personal data in a readily usable format;
6. Appeal a controller’s refusal to act on a request to exercise a right;
7. Contact the attorney general with concerns about an appeal.

Sensitive data, which includes genetic or biometric data, personal data from a child and data that reveals certain personal characteristics, cannot be processed without first obtaining consent.

Security Standards/Risk Assessment

If the processing presents a “heightened risk of harm to a consumer,” a controller must conduct and document data processing assessments that “weigh the benefits that may flow, directly and indirectly, from the processing to the controller, the consumer, other stakeholders and the public against the potential risks to the rights of the consumer associated with the processing, as mitigated by safeguards that the controller can employ to reduce the risks.”

Processing presents a “heightened risk of harm” if it is related to: 1) targeted advertising or profiling in certain circumstances; 2) selling personal data; or 3) processing sensitive data.

Preemption

The act preempts local laws that would seek to regulate the processing of personal data.

Enforcement

The act does not provide a private right of action.  If an alleged violation is not cured within 60 days of notice, the attorney general may bring an action under the Colorado Deceptive Trade Practices Act which allows for injunctive relief and civil penalties “of not more than twenty thousand dollars for each violation.”  Colo. Rev. Stat. § 6-1-112(1)(a).

Rulemaking

The state attorney general is tasked with promulgating rules related to a “universal opt-out mechanism” and may also adopt rules governing the issuance of opinion letters and interpretative guidance.

Impression

The Colorado Privacy Act is similar in many ways to the Virginia Consumer Data Protection Act by staying the course in terms of basic consumer data privacy principles while maintaining a generally industry friendly stance. For more information about state data privacy law and compliance click here.

TAMPA, Fla. — ProVest, an industry leader in serving legal process, announced that it is now fully integrated with Vertican’s Q-LawE platform. Vertican’s software offers many benefits, namely time savings and human data entry error elimination.

“While we pride ourselves on building strong relationships, we know our clients want to save time and money, making the entire process – from service to filing – more efficient and economical,” said ProVest CEO James Ward. “Vertican Technologies has a deep understanding of the credit collections industry. This integrated software solution will help our current and future clients boost file throughput and help ensure accuracy.”

According to Vertican’s Kurt Sund, product owner and creator of Q-Law and Q-LawE, integration is an essential element to client success. “We built an extensive integration into Q-LawE with ProVest to support the entire cycle. Our goal is to automate nearly every part of the legal service process, so ProVest’s clients realize significant savings and efficiencies.” Sund said, “We estimate clients will save 45-60 minutes per lawsuit. Imagine if a firm files 2,000 suits each month, this is no less than 1,500-man-hours, easily eight or more full-time employees!”

There are numerous benefits to automation for ProVest’s clients: status requests, stop service, send billing, invoice validation, credit card reconciliation, and automated document exchange. Additionally, from an accounting perspective, the ProVest integration includes the transfer of suit and process service invoices, which flow into the case’s cost accounting ledger.

Ward said, “As we celebrate ProVest’s 30^th anniversary, we’re pleased to team with Vertican to offer our clients this automated and integrated solution. The benefits are numerous and will help our clients save time and money on every case. Technology adoption is greatly enhancing our industry’s future.”

About ProVest LLC

Founded in 1991, in Tampa, Florida, ProVest plays a critical role by ensuring that defendants in a legal action have been properly served process, thus helping to protect their constitutional rights. ProVest specializes in managing the service of process related to creditors’ rights and mortgage defaults. ProVest annually serves millions of documents for the U.S.’s most notable law firms, financial institutions, and insurance companies. Learn more at provest.com.

About Vertican Technologies

Vertican Technologies provides the collection industry with best-in-class technology, making operations more efficient, compliant, and profitable. Solutions include Q-LawE, vExchange®, Collection-Master, and vMedia. With over 40 years of experience, Vertican’s knowledgeable staff and comprehensive software packages automate and streamline collections. Visit www.vertican.com to learn more.

For more information, please contact Joel Rosenthal at Joel.Rosenthal@ProVest.us.