Archives for March 2022

The way debt collection agencies communicate with consumers is evolving rapidly. You need to know how digital consumer communication strategy has changed – or hasn’t changed – at your vendor / partner debt collection agencies. Want to find out how to evaluate your agency partner’s performance and digital debt collection strategy efficiently? Want to make sure agency partners have consumer communication strategies in place that are both effective and consumer friendly?

The following KPIs will tell you a LOT about the state of your partner’s digital communcation strategy.

Opt-Out Rates

How many consumers are opting out of a particular digital campaign? Individual opt-outs could indicate a specific consumer preferring a different communication channel or time, but a higher overall opt-out rate might mean your agency is inundating consumers with contacts.

What’s more, a high opt-out rate across all of your partner’s digital channels is a red alert that their digital strategy is not consumer friendly. While Regulation F doesn’t specifically provide limits on SMS or email contact, it’s not a total blank check. Your agency partner still needs to be concerned with UDAAP and potential harassment allegations. And so do you.

Even outside of regulatory and legal concerns, there is an element of reputation risk for you here, too. Consumers will only tolerate so much before becoming irritated with your agency partner, and by extension, your brand.

Click Through & Open Rates

How many customers are clicking on your agency partner’s emails and paying? Or clicking on a hyperlink in a SMS to visit their portal? This is a KPI you need to receive from your agency partners. If click through and open rates are abysmal, then the strategy isn’t effective.

Not every consumer who receives a text or email from an agency will click it or open it, and the target rates will vary based on where the account is in its lifecycle. It’s important to establish a baseline early for the click through and open rates, and monitor those rates for major fluctuations. Emails especially are sensitive to being labeled as spam, so it’s important to maintain a reasonable open rate on those campaigns.

Inbound Call Volumes

As your agency partner’s outbound communication efforts (SMS and email) increase, their inbound call numbers should follow suit. Even if they have a great customer portal and web chat, the increased outbound efforts should result in increased inbound calls (unless your partner has two way email or texting, but not many are advanced in this area yet). Your partner should be shifting their frontline agents to fielding more inbound calls, and an increase in inbound calls is a clear indicator that their outbound digital communication campaigns are working effectively.

And Don’t Forget to Make Sure the Documentation Is Right

Your partner’s digital strategy should be well documented and they should be able to show it to you in the form of process flows and policies and procedures. Ask to see how the strategy and tools they are using flow through their Compliance Management System and Change Management Process. (Yes, they should be following their CMS and Change Management Process when their digital strategies change!)

Your agency partner should also have a good understanding of several KPIs (including the ones listed above). They should be tracking and documenting those KPIs to share with you.

When you thoroughly review the documentation behind your partner’s digital strategy, you’ll not only understand it better now, but you set the foundation for more effective audits in the future.

So I just got done watching Selection Sunday.

Pretty much what you see every year. Too many Big 10 teams in the field. Not enough Pac 12 teams. But it all ends up the way it’s supposed to.

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I thought about doing a TCPAWorld bracket but I settled on a more traditional “power ranking.”

Who are the most dangerous Plaintiff’s lawyers out there bringing the big TCPA cases?

To be sure, the TCPA remains as dangerous as ever. WebRecon stats confirm what we all already knew–TCPA litigation exploded to start the year, over 30% higher than last year.

And that’s no surprise.

Facebook has operated like a half-dose of penicillin. It wiped out all the weakest ATDS suits, but the stronger cases have survived and multiplied. Plus the plaintiff’s bar has shifted to prerecorded calls and DNC claims to good effect.

That leaves callers hoping to dodge TCPA suits–some valid, some fraudulent–at the highest clip since 2016. Not good.

So for all of you folks fielding new TCPA suits and wondering if the guys on the other side are any good here is the Czar’s official opinion. Obviously, I’ve tangled with everyone on this list multiple times–in many cases dozens of times.

So if you ever wonder whether the lawyer suing you should be taken seriously or not, you can trust the TCPAWORLD official POWER RANKING of TCPA plaintiff’s lawyers.

(Dis?)Honorable Mentions:

• Manny and Ignacio Hiraldo, Hiraldo P.A. —It’s amazing that these two came as close as they did to making a list of real hitters in the TCPAWorld. A couple of years back I’d have considered these folks on the “lesser track.” But they have become quite a bit stickier and fiercer in litigation. If they maintain the current trajectory–especially given their increasing volume–they are likely to find themselves ranked next year.

• Billy Howard, The Consumer Protection Firm — Billy enjoys a well-deserved reputation for attempting to bully defense lawyers–which is always an interesting strategy for a guy working on a contingency. Still, he deserves credit for bucking the trend of Plaintiff’s lawyers being “lazy.” The guy works hard–even if its for the wrong side.

10. Tav Gomez and Frank Kerney,  The Consumer Lawyers

Tav is the former head of the Consumer Protection Department at Morgan and Morgan–one of the largest Plaintiff’s firms in the world. He and Frank have recently ventured out on their own creating the stunningly-successful “Consumer Lawyers” network of representation.

While these guys tend to focus on high-volume individual suits–as opposed to class actions–they always drive hard bargains. And they are absolutely serious about spending money to make money–they end up taking 10 depositions in every case they work.

Mercifully they’ve moved on to mostly handling FCRA matters–which is why they’re at the bottom of this list. But if they sue you in a TCPA case, take it seriously.

9. Alex Burke, Burke Law Offices, LLC

Known affectionally as “Red” for his amber hair, Burke has been the behind-the-scenes mastermind of numerous multi-million dollar TCPA settlements. He tends to join up with others in pursuing TCPA class actions these days, and is getting his hands dirty less and less–at least it seems that way to me.

Still, Burke knows the TCPA and the art of litigation extremely well. And like others on this list, he is not afraid to fight–and fight hard–when pushed. Both due to his lengthy career in TCPAWorld and due to his current aptitudes, Burke ranks 9th on this list.

8. Keith Keogh, Keogh Law, LTD

The “Iceman” of TCPAWorld, Keith has always been cool as a cucumber–or cooler.  And he never blinks when it comes to driving a huge price tag in a TCPA class action. He still owns the single most valuable TCPA settlement in history when judged on a per-class member metric. The Hageman class settlement saw a stunning resolution worth over $1,600 per class member.

Like Burke, Keith has largely taken a backseat to others these days–you only need so many Rolls Royces I guess– but the folks working at Keogh’s shop are still very talented and driven lawyers. Do not take a filing by Keogh lightly.

7. Avi Kaufman, Kaufman, PA

Kaufman is the anti-Keogh in many ways. While Keith is always calm and sometimes comes across as strikingly debonair, Kaufman is an odd combination of hot-headed and rigid. Plus he has the worst website of any Plaintiff’s lawyer I know of.

Despite these considerable deficiencies, Avi Kaufman has risen quickly from his defense firm roots to become one of the most accomplished TCPA Plaintiff’s lawyers out there. With more than one multi-million dollar settlement already under his belt, Kaufman continues to deliver good results for the class, even in tough cases. Probably because–like someone else I know–he’s simply smart enough to overcome his significant personality quirks.

Don’t let his seeming lack of sophistication fool you. Kaufman PA is well funded, and Avi is a smart advocate. Take any filings from his office seriously.

6. Anthony Paronich, Paronich Law PC

The “Wolf of TCPAWorld” has a well-earned reputation as a ruthless litigator and a shrewd negotiator. He somehow manages a large volume of cases with a relatively limited infrastructure while remaining a threat to “go all the way.”

Paronich’s greatest failing–which he views as a strength–is his reliance on “repeat player” Plaintiffs. This *ahem* controversial tactic assures his class representatives have “experience” while endlessly raising the specter of foul play.

Did Paronich’s latest client really just get a cold call from left field, or might he have set up that call himself? That’s the question callers always seem to be asking themselves when faced with a lawsuit by the “Wolf.” But that’s often part of Paronich’s trap. While Defendants focus their fire on the named class representative, he’s off obtaining class data. Sometimes he loses

https://tcpaworld.com/2021/10/04/tcpaworld-after-dark-the-lonesome-death-of-ken-johansens-career-as-a-professional-plaintiff/

. But when he wins–it can be absolutely devastating.

When the Wolf comes stalking, don’t open the door.

5. Daniel Hutchinson/John Selbin Lieff Cabraser

These two need no introduction. As machine gun litigators in Lief Cabraser’s heavy artillery shop, they pack a mighty wallop. While not as artful as some of those higher on the list, these folks have firepower to spare. And they’re true believers of the Ahab variety–always after that great white whale. Sure they’ve lost more than a few times, but they’ve also earned such notorious TCPA wins such as Cordoba and Brown.

It’s unlikely you would take a class action from LC lightly anyway, but take it from me–these folks have earned their reputation.

4. Jay Edelson, Edelson PC

Probably the most brilliant plaintiff’s-side litigator on this (or any) list, Edelson PC owns the largest privacy jury verdict in history with their trouncing of Visalus.

Luckily for TCPAWorld, Jay finds litigating TCPA cases boring–plus they distract from his volleyball games. So he doesn’t file a whole ton of them anymore.

But if you ever see Edelson PC on the caption of a complaint naming your business, my goodness you better take it seriously.

3. Abbas Kazerounain, Kazerouni Law Group

The “Godfather” of TCPA class actions and one of the original architects of the entire concept of mass TCPA suits, Abbas is an absolute TCPAWorld legend. And the fact that he’s a pretty good guy just makes it all that much harder to stomach his endless success.

While he is best known as the guy who brought the world the stunning Marks appellate victory Abbas is known in TCPAWorld circles as the guy who has cracked more companies for multi-million dollar settlements than any other living person.

Abbas has grown tired of buying fancy cars and airplanes and has moved on to operating ADR centers. So like others on this list he is less concerned with TCPA class actions than he used to be. Nonetheless, any time KLG shows up on a caption you better be ready to rumble.

Nobody is better funded than Abbas. And although he sometimes plays coy, he is an absolute monster of a litigator.

2. Bursor and Fisher, PA

I don’t want to give these guys credit, because I just don’t like them very much. And they probably prefer it that way.

Still, with the largest TCPA settlement in history to their name and a string of big victories under their belt, they belong near the top of this list. Whether I like it or not.

Heck, they once even got a major defense firm to switch sides and help them. 

Tread very carefully when you’re staring down Bursor and Fisher. Ruthless might be a euphemism.

1. Mike Greenwald, Greenwald Davidson Radbil, PLLC

I remember the first time I squared off with Greenwald back in 2011 like it was yesterday. Here–I thought after four days of deposition testimony–is an attorney who absolutely gets it. Sharp as they come. Understated. Relentless.

I was able to defeat him them–earning the first ever mootness victory post-Genesis (a move that the Supreme Cout outlawed in Campbell Ewald)–but he’s been stalking big prey ever since.

He was the guy behind “bad reyes”–the case that single-handedly brought predictive dialers back within the TCPA after ACA Int’l.

And he–along with his partner Aaron Radbil–is the architect of the most devastating class certification theory ever devised by a TCPA lawyer. Indeed, I seem to be the only one who can defuse it as the firm has now crumpled company after company with their recycled number wrecking ball.

There’s a reason I ask him when he’s going to retire every time I speak to him.

The folks at Greenwald Davidson are the ultimate monsters lurking in the TCPAWorld woods. By the time they sue you, it may already be too late.

In seriousness, when I give TCPA compliance advice its often the GDR firm I have in the back of my mind when I’m trying to help folks to avoid devastating exposure. When you’re even in the Czar’s head you definitely have earned your top spot on the TCPAWorld POWER Rankings.

————–

Well that’s it folks. Hope you enjoyed this. I’m sure I just ruffled a few feathers–but what else is new?

I just call it as I see it. And I am the Czar.

Until next year.

DULUTH, Ga. — Crown Asset Management, a specialty finance and receivables management firm, is announcing its 2021 Agency of the Year and Firm of the Year awards. The Award Winners were selected from the company’s national network of partner collection agencies and law firms. The award selection process consists of an annual review completed at the start of each new year after the finalization of all performance reviews, compliance audits, and evaluations from the previous year. The Crown leadership team compiles and unifies the quantifiable data to develop a final overall score reflecting the year’s big-picture performance. 

While all of the company’s trusted partners must operate “above par” to be onboarded and maintained as part of the network, these awards honor and reward exceptional consistency and excellence. These professional organizations demonstrated outstanding standards of compliance, consistently reflected ethical and honorable practices, and delivered superior results. This year, one collection agency and two law firms received the highly regarded annual recognition for their business practices and commitment to the integrity of our industry. 

2021 Firm of the Year: An Unprecedented Tie

This year, Crown is awarding two firms who reached an unprecedented tie in overall standing, as well as repeat performance from both firms. Although 2021 brought its own challenges, each of these organizations demonstrated impressive compliance and overall performance standards throughout the year. 

Blitt & Gaines, P.C. 

Blitt & Gaines, P.C. began its partnership with Crown in 2011 and is a nationally recognized collection law firm with a concentration in legal collection of consumer and commercial debt throughout the Midwest. The firm is headquartered in Vernon Hills, IL, with additional branch offices across the Midwestern United States and Arizona. The firm attributes its continued success to its hard-working and dedicated support teams and a compliance team that ensures collection practices are consistent and compliant. Crown previously recognized the firm as Firm of the Year in 2018.

Gordon, Aylworth & Tami, P.C. 

Gordon, Aylworth & Tami, P.C. joined Crown’s legal network in 2004 and is a respected high-volume creditors’ rights law firm practicing collection litigation throughout the Pacific Northwest. With attorneys licensed in Oregon, Washington, and Idaho, the firm is dedicated to working collaboratively with consumers to resolve their outstanding debts. The firm believes strongly in ethical consumer interactions and strives for superb compliance at every level. As the 2020 Firm of the Year, Crown is recognizing the firm for the second consecutive year.

Agency of the Year

Superlative RM 

Superlative RM began its partnership with Crown in 2014 and has continuously maintained exceptional compliance and service levels. Their depth of knowledge, industry experience, and quality of service continues to set them apart and provide the basis for additional growth. This is the second year in a row Superlative has achieved this honor. 

Honorable Mentions

D&A Services, LLC – Agency 2nd Place

D&A Services, LLC is a multi-state asset recovery company serving the needs of national, state, and local financial institutions throughout the United States.

January Technologies, Inc. – Agency 3rd Place

January Technologies is a digital collections company focused on utilizing technology to provide a more streamlined, compliant, and effective resolution process for borrowers and creditors alike.

Stillman Law Office – Law Firm 3rd Place

Stillman Law Office is a collection firm headquartered in Farmington Hills, MI providing exceptional collections services for creditors.

Grateful for Our Partners

“We always want to make sure our network is representative of the same standards we strive for in compliance and performance. The little things go a long way for every stakeholder involved,” saidBrian Williams, Crown CEO, Manager, and Founder. “We want to thank the winners and all of our partners for their hard work and dedication. We’re grateful for the partnership and look forward to continuing to grow together!”

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 while ensuring the best possible experience for consumers. They are an RMAI Certified Receivables Business headquartered in Duluth, GA.

PETALUMA, Calif. — The Cascade365 Family of Companies is excited to announce that Shaun Ertischek was appointed the Chief Compliance Officer and General Counsel of Cascade Receivables Management, LLC. 

In this role, Mr. Ertischek will oversee all compliance, regulatory, litigation, and contractual matters for the company. He will take a proactive and strategic role in ensuring enterprise-wide compliance with all applicable laws in collaboration with the management team. The compliance team will report directly to him in support of the company’s efforts to mitigate risk and ensure the responsible liquidation of accounts receivable.    

Mr. Ertischek has over 16 years of experience in the legal and compliance field within the accounts receivable management industry.  Prior to joining Cascade, he served as Chief Compliance Officer and General Counsel at Sequium Asset Solutions, LLC, a national collection agency and outsourced call center. He also spent ten years as General Counsel for TRAKAmerica, a legal network management company, and previously served as in-house counsel at Cavalry Portfolio Services, LLC, a debt buyer and collection agency.  Additionally, Mr. Ertischek spent time in private practice at law firms handling both litigation and transactional financial law matters. 

Mr. Ertischek earned his Juris Doctorate from New York Law School.  He is also a graduate of Binghamton University, holding dual bachelor’s degrees in both Economics and Philosophy, Politics & Law (PPL).  He has been awarded the Credit and Collection Compliance Officer (CCCO) and the International Federation of Certified Collection Executives (IFCCE) designations by ACA International, Inc.

“I am ecstatic that Shaun has joined the team,” said Lee Brockett, Managing Director at Cascade. “His experience and expertise will help ensure that our legal, compliance and risk mitigation efforts are best in class.  Shaun will be instrumental in Cascade’s ongoing success as we continue a trajectory of sustained growth.”

“I am honored to work with the talented executive team at Cascade to further enhance their strong culture of compliance,” said Mr. Ertischek. “Cascade is a true leader in the world of accounts receivable management, collections, debt purchase and specialty finance.  I am excited to support the organization’s endeavors, including strengthening its compliance management system and helping to structure innovative solutions for its clients.” 

About The Cascade365 Family of Companies 

Cascade365 is a brand identity representing a family of companies focused on the responsible liquidation of accounts receivable.  Headquartered in the San Francisco Bay area, the Cascade365 Family of Companies are recognized leaders in the accounts receivable management, revenue cycle and specialty finance industries. Cascade365’s suite of products and services include AR Purchase and Finance, Master Servicing, Third Party Collections, and Revenue Cycle Optimization.  The Cascade365 Family of Companies believes in promoting financial accountability while treating consumers and patients in a fair, dignified, and lawful manner.  For more information, please contact Jeffery Howell, Director of National Sales at 707-244-2298 or via email at jhowell@cascade365.com.

On March 15, the Federal Trade Commission (FTC or Commission) released a consent agreement with Electronic Payment Systems and its owners John Dorsey and Thomas McCann (collectively, EPS) for allegedly opening credit card processing merchant accounts for fictitious companies on behalf of Money Now Funding (MNF).

The complaint filed against EPS alleges that it had opened 43 different merchant accounts for fictitious businesses on behalf of MNF, which aided that company in laundering millions of dollars of consumers’ credit card payments. Moreover, the complaint alleges that EPS knew these merchant accounts were fake and aided MNF in its illicit activities.

In 2015, MNF settled allegations with the FTC that it had telemarketed worthless business opportunities to consumers and falsely promised that consumers would earn thousands of dollars in income. Thus, according to the FTC’s complaint, MNF engaged in credit card laundering by creating fictitious companies that, through a sales agent, submitted applications for merchant accounts to EPS, which then opened merchant accounts in the names of these fictitious companies. The alleged victims’ credit card charges were processed through those accounts, rather than through one merchant account in the name of MNF.

“Companies involved in payment processing can’t ignore red flags that fraudsters are using the system to steal people’s money,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “It’s urgent that our authority to get money to consumers be restored, but in the meantime, we’ll do everything we can to stop scammers and those who help them.”

The consent agreement will be subject to public comment, after which the Commission will determine whether to make the proposed consent order final. The FTC is unable to seek monetary redress due to the Supreme Court’s decision in AMG Capital Management v. FTC, discussed in our blog post here. However, under the consent agreement, EPS would be (1) prohibited from credit card laundering and any other actions to evade fraud and risk monitoring programs, (2) prohibited from providing payment processing services to any merchant that is, or is likely to be, engaged in deceptive or misleading conduct, as well as to any merchant that credit-card industry monitoring programs have flagged as high-risk for certain reasons, and (3) required to conduct detailed screening of potential merchants that conduct outgoing telemarketing or are engaged in certain activities that could harm consumers.

Troutman Pepper Take:  Although most payment processors do not engage in acts to aid in illicit behavior, this case is important because the FTC was not able to obtain monetary relief as it had in the past due to the Supreme Court’s AMG Capital Management decision. The FTC has been lobbying Congress to codify a statutory structure that will allow such damages, but Congress has failed to do so. We expect the FTC will continue lobbying Congress on this issue. We will continue to inform you about those efforts.

COLUMBUS, OH — Kodak Law, a tech-forward collection litigation law firm, and Levy & Associates, LLC, a leading collection/creditors’ rights firm, are announcing the combination of the two firms. Kodak Law has a large multi-state footprint representing clients in 14 states. Levy & Associates is a well-known firm in the receivables industry that partners with national industry participants and practices in 5 states. 

Going forward, the firm will be known as Levy Kodak Law, LLC. Existing clients of the two firms can expect the status quo at this time and will not be affected in the immediate term for either entity. The two firms are refining their plan for thoughtful integration to occur over the next few years to ensure that clients are able to benefit from the combination without any disruption in the services currently provided by both firms. The long-term benefits to clients will include a combined 18-state footprint and the merging of decades of knowledge and experience with a modern technology platform. 

“We’ve worked hard to get to this point, and we’re excited to take this next step with Yale Levy and his firm. His continued thought leadership and extensive experience will be an asset for us, while our next-level technology will allow us to offer clients truly the best of both worlds,” said Thomas Michael, Managing Member of Kodak Law.

“We look forward to continuing to serve our clients with excellence. Together with Kodak, we will be able to extend our overall scope and provide even greater value for our clients. Over the long term, clients will see access to increased jurisdictions under a unified brand and experience the benefits of new efficiencies found in a modernized platform. Current clients and services will not experience any disruptions as this will all take shape gradually and thoughtfully,” said Yale Levy, President of Levy & Associates. 

The two companies look forward to the opportunity to integrate their distinct strengths and broaden their market services across the industry. 

About Levy & Associates

Levy & Associates, LLC is a creditors’ rights law firm offering a wide spectrum of services to meet the needs of its clients in the credit recovery cycle. Levy & Associates, LLC’s clients include, but are not limited to, consumer and commercial credit grantors, insurance companies, local businesses, medical providers, landlords, and other businesses/non-profits companies. Levy & Associates currently provides legal services in the states of Ohio, Indiana, Kentucky, Maryland, Virginia, and D.C., representing a number of the best-known creditors in the country.

About Kodak Law

Kodak Law is an experienced collection litigation law firm. From its origin, the firm has been leveraging technology to deliver an unmatched experience for its clients, employees, and consumers. The firm’s attorneys and leadership are dedicated to setting and pursuing industry leadership in compliance, technology, and innovation. The firm is headquartered in Pittsburgh, PA, and practices in Arizona, California, Colorado, Florida, Illinois, Minnesota, Missouri, New Jersey, Ohio, Oregon, Pennsylvania, Texas, Washington, and Wisconsin.   

As every TCPA class action lawyer knows, the primary strategy of the Plaintiff’s bar is to serve massively overbroad discovery demands to put enormous pressure on the Defendant to settle for millions of dollars.

No company wants to be turned inside out and have its confidential–and often extremely sensitive consumer financial information- turned over to a plaintiff-side “expert” that will probably store it on a thumb drive in his kitchen junk drawer.

As I explained not long ago, a good set of objections to the typical shotgun style discovery demands TCPA class counsel serve should span over a hundred pages. And failing to properly articulate objections–and support them with suitable evidence in opposing motions to compel–can lead to terrible results.

Example.

In Beard v. John Hiester Chevrolet, No. 5:21-CV-173-D, 2022 U.S. Dist. LEXIS 46202 (W.D.N.C. March 16, 2022) the Court found that defendant failed to demonstrate that the discovery sought is not proportional to the case or should otherwise not be allowed.  Accordingly the Defendant was ordered to produce:

• documents concerning Defendant’s relationship with third-party vendors involved in making the alleged calls (RFP 2 (written agreements), RFP 3 (written communications), RFP 4 (receipts and invoices);
• call logs and other information concerning the individuals to whom prerecorded messages were sent by Defendant or its vendor (RFPs 8, 9, 10; Interrog. 3);
• documents (or exemplars thereof) to support Defendant’s claim [*5] that putative class members consented to the calls (RFPs 15-17);
• documents identifying revenue generated from the calls at issue (for the purpose of determining whether Defendant is vicariously liable based upon ratification of its vendors’ actions) (RFP 22); and
• the names of employees involved in creating the prerecorded messages (Interrog. 6).

Arguably none of this information is needed ahead of certification–although templates of consent records is not so bad.

Notice that interrogatory 6 asked for the names of employees involved in the prerecorded calls. You know what’s coming next–an amendment to personally name those individuals.

If you’re served with an abusive set of class discovery demands make sure you seek out good counsel to preserve ALL of your rights. Asserting well-framed scope, necessity and burden objections–and substantiating those objections with evidence at the right time–is CRITICAL to defeating a TCPA class action.

Always here to chat.

SACRAMENTO, Calif. — A year after implementing one of the most expansive consumer protection laws in the country, the Department of Financial Protection and Innovation (DFPI) announced it has collected close to $1 million in restitution for consumers, fielded hundreds of additional complaints related to the law, and launched more than 100 investigations using its expanded authority under the California Consumer Financial Protection Law (CCFPL).

The Department also created several new divisions to expand oversight and outreach, including the Consumer Financial Protection Division, Office of Financial Technology Innovation, Office of the Ombuds, and a Targeted Outreach Team responsible for working with historically underserved communities that include veterans, senior citizens, students, and immigrants.

“The Department has made substantial progress in its first year to implement the new law, expand protection for consumers, and foster responsible financial innovation,” said Clothilde V. Hewlett, DFPI Commissioner. “We remain committed to accomplishing the goals of Governor Gavin Newsom and are grateful to all stakeholders, including the Legislature, consumer advocates, industry partners, small businesses, community-based organizations, and many others for their continued input and support.”

In 2020, the Legislature passed the CCFPL as AB 1864 (Limón). Identifying gaps in consumer protection due to strict definitions in existing licensing laws, this new law provided the DFPI with the appropriate authority to oversee areas of the financial marketplace previously unregulated by the DFPI, including debt collectors, credit repair and debt relief companies, private postsecondary student loan products, and financial tech services that include early wage access products. The Department has also begun licensing debt collectors.

The first change under the CCFPL was a new name for the Department which was formerly the Department of Business Oversight. Over the past twelve months, the Department has experienced many key successes under the CCFPL. These can be found in a statutory report that has been posted to the DFPI website: https://dfpi.ca.gov/wp-content/uploads/sites/337/2022/03/DFPI-CCFPL-2021-annual-report.pdf.

Key takeaways from CCFPL Report:

Enforcement

During its first year with authority under the CCFPL, the DFPI proactively identified enforcement targets and opened 106 investigations that resulted in 49 public actions under the CCFPL.

The DFPI investigations resulted in 49 public enforcement actions, $975,000 in restitution to consumers, $547,500 in penalties, and included several “first of its kind” actions for the DFPI in debt collection, student debt relief, earned wage access, and private post-secondary education financing.

Regulatory Activities

In 2021, the DFPI issued four invitations for comments to solicit stakeholder feedback on various aspects of implementation of the CCFPL. DFPI received 76 comment letters.

As of the end of 2021, the DFPI had three pending regulation packages pursuant to the CCFPL: 1) complaint procedures, 2) commercial financing UDAAP, and 3) phase one registration categories.

Proposed registration includes debt settlement services, student debt relief services, postsecondary education financing, and wage-based advances.

Research and Market Monitoring

In September 2021, the DFPI created a research team to help the DFPI identify emerging financial activities; scout for unlawful, unfair, deceptive, and abusive practices; and make policy recommendations based on consumer impact.

The research team is evaluating DFPI’s consumer complaint data to identify broader market trends that may pose risks to consumers.

Consumer Complaint Handling

In 2021, the Consumer Services Office (CSO) received 638 complaints regarding products and services subject to the CCFPL.

Complaints submitted under the new law, which covered debt collection activities in the first year, increased each quarter with a dramatic surge in the second half of the year when CCFPL complaints increased nearly 140 percent.

The top categories of complaints included debt collection, cryptocurrency, and “neo banks,” financial technology, or “fintech” service providers, partnering with banks to offer deposit account services. The top complaints appear to have been driven by communications efforts to raise awareness about the DFPI’s expanded authority and mission.

Office of Financial Technology and Innovation

In 2021, the Office of Financial Technology and Innovation (OFTI) met with dozens of companies, venture capitalists, lawyers, industry advocacy groups, federal and state financial regulators, consumer advocacy groups, and academics to better understand stakeholder perspectives on what constitutes responsible innovation in financial services.

OFTI participated in more than a dozen public events to publicize OFTI’s activities and extend the invitation to meet. The Office held weekly office hours, open to all who registered.

Communications and Outreach

In 2021, the DFPI held three roundtables with community groups, dozens of external stakeholder meetings, presented on the topic at several events and conferences, and participated in dozens of media interviews to raise awareness about the Department’s expanded authority and work.

A communications vendor selected to run a statewide communications campaign conducted four multilingual focus group discussions and launched its campaign March 2022 with radio, print, digital, social media, and outdoor advertisements.

The Targeted Outreach Team participated in 141 events in 2021 with an estimated total attendance of more than 9,700 and distributed more than 96,400 pieces of promotional and educational materials.

About the DFPI

The DFPI licenses and regulates state-chartered banks and credit unions, commodities and investment advisers, money transmitters, the offer and sale of securities and franchises, broker-dealers, nonbank installment lenders, payday lenders, mortgage lenders and servicers, escrow companies, Property Assessed Clean Energy (PACE) program administrators, debt collectors, credit repair and consumer credit reporting agencies, debt-relief companies, certain rent-to-own providers, and more.

For more information about the DFPI, visit their website at https://dfpi.ca.gov/.

On February 28, 2022, the Court of Appeals for the Seventh Circuit affirmed a district court’s decision to enter summary judgment for a debt collector for alleged violations of the FDCPA and FCRA. Woods v. LVNV Funding, LLC and Resurgent Capital Services, L.P., No. 21-1981 (7th Cir. 2022). Focusing strictly on the FCRA claim, the plaintiff in Woods asserted that the debt collector violated section 1681s-2(b)(1)(A) by failing to conduct a reasonable investigation into his fraud claims.

In this case, once the debt collector received the account and began attempting to collect the debt, it started receiving disputes from the plaintiff. The debt collector responded to the disputes by requesting additional information and documentation regarding the alleged identity theft. Rather than providing information or documentation in support of the dispute to the debt collector, the plaintiff contacted the creditor, who subsequently determined that the debt belonged to the plaintiff.

The plaintiff filed a report with the local police department, alleging that he was the victim of identity theft, and submitting the correspondence from the creditor. The local police spoke with the plaintiff and prepared a report based on the information provided from the plaintiff. The police report included a statement that the creditor “had completed an investigation and . . . determined that it was in fact him.”

After having no success with the police department, the plaintiff filed a formal dispute with the CRAs and included a copy of the police report. The CRAs forwarded the ACDV to the debt collector, who reviewed the information provided and verified to the CRAs that the debt belonged to the plaintiff. Subsequently, the debt collector sent the plaintiff another letter inviting him to provide additional documentation to help resolve the case and attached a blank identity-theft affidavit. The plaintiff did not respond to the debt collector’s requests for information or documentation.

In determining whether the debt collector conducted a reasonable investigation following the receipt of the ACDV, the Seventh Circuit considered the content of the police report attached to the ACDV. Specifically, the Seventh Circuit focused on the officer’s commentary in the police report which indicated that the creditor had investigated the matter and determined that the debt belonged to the plaintiff. The Court noted that the debt collector was “well within its rights to rely on this representation to some degree” given that the ACDV made it seem that the creditor had already resolved the alleged fraud claim and affirmed the district court’s decision finding no FCRA violation.

As for the debt collector’s investigation, the Seventh Circuit stated that it was reasonable for the debt collector to send another request for documentation to the plaintiff because the ACDV made it seem that the vendor had already resolved the fraud claim against the plaintiff. However, the Seventh Circuit seems to suggest that under a different set of facts, continuous requests for documentation may be problematic. In fact, in closing, the Seventh Circuit states that its opinion does not offer furnishers “a license to offload their investigative obligations to consumers by spamming them with requests for additional information.” Thus, while communicating with the alleged victim about an FCRA identity theft dispute is considered reasonable, and even required, in most circumstances, the takeaway from this decision is that the level of involvement from the alleged victim must be determined on a case-by-case basis.