Archives for December 2023

On November 29, the U.S. District Court for the Eastern District of New York granted summary judgment in favor of a debt collector (defendant) under the FDCPA, holding that the defendant’s collection letter was not misleading.

According to the court’s order, the plaintiff and the defendant established a payment agreement over the phone, during which the representative mentioned to the plaintiff that the interest rate on the loan would be lowered to 5.99 percent, and that failure to make any of the 11 monthly payments could render the agreement void. Shortly after, the plaintiff received a letter from the defendant that conveyed essentially the same information. 

The defendant also provided the plaintiff with billing statements, including a statement indicating $11.14 in accumulated interest during the initial month in the payment plan. Additionally, the defendant sent the plaintiff a collection letter that outlined the monthly payment and total balance due. The collection letter contained a warning that interest, late charges, and other charges that may vary from day to day could result in a greater balance than the amount plaintiff owed as of the date of the letter. The plaintiff argued that the warning was contradictory to the concept of “fixed” payment plan, and thus was deceptive and misleading in violation of Section 1692e.  

The court noted that it had previously dismissed an FDCPA case against the same defendant using similar language in the context of a debt settlement. In that case, the defendant provided both a disclaimer and the settlement offer, and the court held that including both in the same communication “does not automatically render the letter misleading … [d]efendant accurately and unambiguously conveyed the agreed-upon monthly payment, total balance, and APR.” The court also reasoned that holding debt collectors liable for violating the FDCPA in such instances might discourage them from proposing debt settlement plans to consumers. 

ROCK HILL, S.C. — Frost Echols, LLC welcomes Jesse “Jay” Tillman, III as an attorney in our Rock Hill, SC office. Jay has an impressive background as a commissioned officer in the U.S. Navy flying EA-6B Prowlers in Operation Desert Shield and post-Desert Storm operations. Most recently, Jay was a Deputy Commissioner for the North Carolina Industrial Commission where he was originally appointed in August of 2015 and reappointed in 2021. Jay is admitted to practice in both North Carolina and South Carolina, the U.S. District Courts of North Carolina, the U.S. Fourth Circuit Court of Appeals, and the U.S. Supreme Court.

Jay has tried numerous jury and bench trials in the various courts of North Carolina. Over his sixteen years of civil litigation, Jay concentrated his practice in the areas of personal injury, construction, real estate, commercial law, products liability, landlord/tenant law, and insurance defense. He holds a Bachelor of Arts in English and History from the University of North Carolina at Chapel Hill and obtained his law degree from the Campbell  University School of Law. 

Jay’s practice at Frost Echols, LLC will concentrate on litigation for our credit/collection industry clients and other commercial clients. He is joining the firm’s litigation team to aggressively and efficiently defend cases in the Carolinas and across the country.

Jay Tillman’s Contact Information: jay.tillman@frostechols.com

“We are thrilled to have Jay join our firm. His litigation and trial experience will serve all of our clients well. The firm is constantly looking for ways to improve our services. Bringing in an attorney with Jay’s experience allows us to continue an aggressive litigation strategy along with our complimentary compliance attorneys who work to see the issues that lead to litigation are mitigated. Mike and I are proud of the team we have built, and Jay is an exceptional addition.”  – Chad Echols, Partner, Frost Echols, LLC

On November 20, a judge for the Southern District of New York granted a motion to dismiss a Fair Debt Collection Practices Act (FDCPA) class-action holding that a simple lack of a date on a model validation notice did not amount to a violation of the statute because it was not confusing to the least sophisticated consumer.

In Loeffler v. Fleming, the model validation notice at issue included an itemization table, which informed the plaintiff that: “As of April 20, 2020, you owe $9,971.23… Total amount of the debt now: $9,971.23.” The plaintiff alleged that such a letter without a date made the notice seem “illegitimate” and failed to provide a date of reference that could be used when reading “today” and “now” in the itemization table. His alleged damages were the time and money spent to determine the proper response which was money that could have been used to pay down the debt.

The court disagreed and dismissed the matter finding that one undated notice could not be considered “harassing, oppressive, or abusive.” Also, despite the lack of a date, the notice could not be considered a misrepresentation. “Here, the [l]etter stated the dollar amount of debt owed as of ‘now,’ and gave plaintiff until December 20, 2022, to dispute the debt,” Judge Briccetti wrote. “Therefore, the only reasonable interpretation of the [l]etter was that it was sent a relatively brief period prior to December 20, 2022, and the amount of plaintiff’s debt has remained unchanged since April 20, 2020.”

Finally, the judge ruled that even the least sophisticated consumer would not be confused by the letter which was plain on its face. The only argument which did not go in the defendant’s favor was its argument for a safe harbor which the judge ruled was inapplicable to the FDCPA. No matter, the case was fully dismissed in the defendant’s favor.

This case shows that plaintiffs’ law firms will go to incredible and creative lengths to find and file claims under the FDCPA. However, just because the claim is creative, meritless cases will still be dismissed from federal court if the allegations of the complaint are absurd. Such cases should just be met with a well drafted motion to dismiss. This was one of them and it paid off for the defendant.

COPLEY, OH —DebtNext Software announces LJ Ross Associates and the CBE Group as accredited partners of the newly established dPlat Partner Accreditation Program.  This program has been developed to provide creditors with complete peace of mind when selecting collection partners to integrate with their DebtNext platform (dPlat).

To achieve accreditation, potential partners must undergo a comprehensive evaluation by the DebtNext compliance team in the areas of Integration, Authentication, Remittance Management, and SOC 2 Compliance.  LJ Ross Associates and the CBE Group have showcased excellence across all these crucial aspects, and DebtNext is extremely proud to have them as official partners.

DebtNext Software was founded in 2003 and offers the most robust recovery management platform in the market today. The DebtNext Platform (dPlat) is comprised of a comprehensive set of solutions designed to optimize every aspect of recovery operations

To obtain more information on the dPlat Partner Accreditation Program, reach out to DebtNext Software (sales@debtnext.com). 

Editor’s Note: This article, authored by John L. Culhane, Jr. & Kristen E. Larson of Ballard Spahr, previously appeared on Ballard Spahr’s Consumer Finance Monitor and is re-published here with permission. 

NEW YORK, N.Y. — Skit.ai, the leading
provider of conversational Voice AI solutions, announced today its partnership
with MCA Collection Agency, a Missouri-based third-party collection agency
primarily focused on healthcare collections. By adopting Skit.ai’s industry-leading
solution to automate outbound collection calls, MCA plans to address staffing
shortages and maximize account penetration.

Skit.ai’s
conversational Voice AI solution enables collection agencies across the U.S. to
automate phone interactions with consumers, including right-party contact (RPC)
verification and promise-to-pay (PTP) capture. The solution is fully compliant
with federal and state regulations, enabling lenders and collection agencies to
accelerate revenue recovery and grow their operations.

MCA’s leadership
had been previously using a voicemail drop telephony solution to reach out to
consumers and remind them of due payments. The agency’s CEO discovered
Skit.ai’s technology at an industry event, during which she listened to the
voicebot in action and was impressed with the solution’s ability to handle
intelligent, two-way conversations with consumers.

“When it comes to
collections, most consumers don’t want to have to interact with another person.
We wanted to make the process easier. Skit.ai’s solution allows consumers to
choose; they can interact with the voicebot, ask to speak to one of our agents or
visit our website to make a payment,” said Julie
Repa, CEO of MCA Collection Agency.

Repa was
particularly impressed with the ease of the deployment process and
integrations. Using a flat file transfer, Skit.ai safely transferred campaign
data from the agency’s CRM system to an SFTP (Safe File Transfer Protocol)
folder to launch the campaign with the Voice AI solution. As of now, the agency
has been initiating thousands of calls per day using Skit.ai’s Voice AI
solution, handling an impressive volume of calls in a cost-effective manner.

For smaller
collection agencies, account penetration and staffing can be particularly
challenging and expensive. That is why adopting the right technology can be
pivotal for business growth.

“Skit.ai’s key role in the digital
transformation journey of MCA Collection Agency shows that any business, no
matter how small, can tap into Voice AI to automate and streamline the recovery
process,” said Sourabh Gupta, Founder
and CEO of Skit.ai. “We look forward to seeing MCA thrive thanks to our
technology.”

Mail us at info@skit.ai
to learn more about how Skit.ai can help you accelerate revenue recovery with
higher efficiency and at an infinite scale irrespective of the size of your
collection agency. 

About MCA Collection Agency:

MCA is a third-party debt collection agency
based in St. Louis, Missouri. A family-owned and run company, MCA has been in
business since 1950, maintaining an impeccable track record of service and
business ethics. MCA is a member of the American Collectors Association and the
Missouri Collectors Association, along with the Better Business Bureau, Fenton
Chamber of Commerce, and the NFIB. Visit https://mcacollectionagency.com/

About Skit.ai:

Skit.ai is the
accounts receivables industry’s leading conversational Voice AI company,
enabling collection agencies to streamline and accelerate revenue recovery.
Skit.ai’s compliant, configurable, and easy-to-deploy solution enables
enterprises to automate nearly one million weekly consumer conversations.
Skit.ai has been awarded several awards and recognitions, including Stevie Gold
Winner 2023 for Most Innovative Company by The International Business Awards,
Disruptive Technology of the Year 2022 by CCW, and Gold Globee CEO Awards 2022.
Skit.ai is headquartered in New York City, NY. Visit https://skit.ai/

WASHINGTON, DC — McGlinchey Stafford is pleased to announce that Member Jim Milano has been elected to the National Reverse Mortgage Lenders Association (NRMLA) Board of Directors. Members of the board come from various businesses across the reverse mortgage industry and must be nominated and then elected to serve.

As one of the country’s leading lawyers in reverse mortgage law, Jim regularly reviews and designs proprietary reverse mortgage loan programs and advised clients on compliance with Federal Housing Authority (FHA)’s Home Equity Conversion Mortgage (HECM) (program. He also works with lenders, servicers, and settlement service providers, including appraisal management companies, to resolve federal and state regulatory investigations, including defending and settling civil disciplinary enforcement actions.

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Jim was elected in 2015 as a Fellow of the American College of Consumer Financial Services Lawyers (ACCFSL) and currently serves as a Regent of the organization. In 2019, Jim was elected as a Fellow of the American Bar Foundation. He also serves as Chair of the Governing Committee for the Conference on Consumer Finance Law (CCFL). Jim also serves as Vice Chair of Programs for the Consumer Financial Services Committee of the Business Law Section of the American Bar Association. Previously, Jim served as Outside General Counsel to the NRMLA Board of Directors. 

NRMLA is the national voice of the reverse mortgage industry, serving as an educational resource, policy advocate, and public affairs center for lenders and related professionals. NRMLA was established in 1997 to enhance the professionalism of the reverse mortgage business. Their mission is to educate consumers about reverse mortgages, to train lenders to be sensitive to client’s needs, to enforce their Code of Ethics and Professional Responsibility, and to advise policymakers on reverse mortgage issues.

About McGlinchey

McGlinchey Stafford is a premier midsized business law firm offering services in more than 30 practice areas through a highly integrated national platform. McGlinchey attorneys leverage bold innovation, diverse talent, and leading-edge technology across our powerful network to serve clients at the local, regional, and national level. With 160 attorneys licensed in 34 states, McGlinchey operates from 17 offices nationwide. The firm currently has 24 attorneys and 12 practice areas recognized in Chambers U.S.A. and Chambers FinTech 2023, and 65 attorneys recognized by Best Lawyers, 40 attorneys recognized in various Super Lawyers rankings, 47 practice areas recognized by Best Law Firms. McGlinchey has received the Leadership Council for Legal Diversity (LCLD)’s top honor, the Compass Award, three times. To learn more, visit www.mcglinchey.com.

Earlier this year, a district court for the Middle District of Florida upheld a jury award of $225,000 in punitive damages in a debt collection case finding the defendant’s conduct “reprehensible” based on the physical harm caused to the plaintiff, the defendant’s indifference or reckless disregard of the harm it caused to the plaintiff, the plaintiff’s financial vulnerability, and the defendant’s repeated actions.

In Medley v. DISH Network, the plaintiff signed up for the defendant’s satellite TV service, but later became unable to pay for the subscription. The defendant offered a “pause” program that allowed the plaintiff to suspend service for up to nine months at a cost of $5 per month, which the plaintiff accepted. Ultimately, the plaintiff filed for chapter 7 bankruptcy protection, listed the defendant as an unsecured creditor, and obtained a discharge of her debt. The plaintiff’s lawyer sent two faxes to the defendant providing notice that the plaintiff was represented by counsel. After receiving notice of representation, the defendant sent five billing notifications to the plaintiff and made six telephone calls attempting to collect on the $5 monthly payment.

The plaintiff filed suit against the defendant alleging, among other things, violation of § 559.72(18) of the Florida Consumer Collection Practices Act (FCCPA), which makes it unlawful for a debt collector to communicate with a debtor if the debt collector knows that the debtor is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney’s name and address.

The FCCPA claim was ultimately tried before a jury , which awarded the plaintiff $1,000 in statutory damages, $8,750 in actual damages for emotional distress, and $225,000 in punitive damages.

The defendant filed a motion to reduce the punitive damages award on constitutionality grounds, which the court denied. The most important factor in determining whether a punitive damages award is constitutional is the “reprehensibility” of the defendant’s conduct, which the court found was satisfied, based on the physical harm caused, the defendant’s indifference or reckless disregard of that harm, the plaintiff’s financial vulnerability, and the defendant’s repeated actions.

First, the court found that emotional distress suffered by plaintiff — confusion, worry over her credit, and heart racing — was a form of physical harm that could support punitive damages. Second, the court found that the evidence supported a finding of indifference to or reckless disregard of the health and safety of others. Specifically, the defendant repeatedly contacted the plaintiff despite its knowledge that the plaintiff was represented by counsel and that she had filed for bankruptcy due to her financial troubles. Further, the defendant testified that approximately 50,000 of its customers file bankruptcy each year, meaning that the defendant routinely deals with individuals who are financially vulnerable. Against this backdrop, the court found that the lack of employee training regarding the requirements of the FCCPA or debt collection actions that are precluded under the law and the systemic failure to document attorney representation demonstrated an indifference to the plaintiff and others in her position “who are at a low point in their lives and are most vulnerable.” This same evidence also supported findings that the plaintiff was financially vulnerable and that the defendant had engaged in repeated collection activity.

The court also rejected the defendant’s argument concerning the disparity between the actual damages award of $8,750 and the award of $225,000 in punitive damages. The defendant argued that 26:1 ratio was excessive and should be at most 4:1. The court rejected this argument noting that the analysis cannot be reduced to a “simple mathematical formula.” Specifically, the court explained that the purpose behind punitive damages is retribution and deterrence, and that the wealth of the defendant must be considered. Given the large size and customer base of the defendant, the court found that the $225,000 award was consistent with those purposes “without being grossly excessive.”

CHICAGO, Ill. — While nearly all (98%) third-party collections companies use letters to reach consumers, just 40% have adopted text or SMS messaging to consumers—compared to 37% that were using text in 2022. However, last year, 34% indicated they would start using text messaging within the coming two years, suggesting economic headwinds have stalled companies’ planned investments in communications technologies. 

The findings were revealed today in the fifth annual industry report by TransUnion (NYSE: TRU) and Datos Insights, “Seizing the Opportunity in Uncertain Times: The Third-Party Collections Industry in 2023.” The report examines overall collections industry trends, challenges and opportunities and is informed by a survey of third-party debt collection professionals.

“One of the most promising opportunities we see for companies is to invest in omnichannel communications,” said Jason Klotch, vice president of third-party collections in TransUnion’s diversified markets business. “Reaching consumers where they are most likely to respond is the key to effective and efficient operations that also better enable regulatory compliance.”

The report found that the willingness and ability of third-party collections companies to invest in new communications channels is largely determined by the size of the firm. Larger firms, with higher budgets and more sophisticated operations, are more likely to adopt new technologies.

In line with communications investments, the report found 60% of companies are somewhere on the path to adopting tools that leverage artificial intelligence (AI) and machine learning (ML) technologies. That includes 11% of companies that already use third-party solutions, 40% that are considering buying or developing AI and ML solutions and 8% that are in the process of deploying these technologies.

Companies’ applications of AI and ML span internal and external functions. Some use cases will help assess a customer’s willingness to pay. Other applications include enhancing customer experiences by identifying the right time and channel through which the consumer prefers to be contacted.

The challenge for growth

Broader macroeconomic trends have kept consumers generally resilient, tamping down the need for third-party collections activity. Companies recognize the need to gain accounts and expand into new areas of business in order to grow.

The report found that 58% are between moderately and extremely concerned about growing their businesses. Moreover, 64% agree or strongly agree that third-party debt collection firms must diversify their business (e.g., collect different types of debt, expand into other geographic regions) if they are to succeed, thrive, or survive in the long term.

Some of this growth may come from breaking into new verticals, like auto lending or medical debt collection. Another approach is to offer Business Process Outsourcing (BPO) services in which a third-party collections firm helps with processes similar to debt collection, like claims and billing, for businesses within a vertical it already serves.

Both types of expansion were represented in the top two options for growth strategies. Within the next 12 months, 17% of third-party collections companies plan to expand into the FinTech/unsecured consumer lending market, while 12% plan to offer BPO services. Generally, 45% of companies have plans to enter into other types of businesses in the next 12 months.

About the research

Insights on the challenges, trends and innovations occurring in the third-party collections industry are informed by a quantitative survey of 212 third-party debt collection professionals conducted in Q2 2023. A detailed look at the composition of survey respondents is provided in the appendix. Survey results are representative of the market at a 95% confidence interval with a 6.7-point margin of error. 

About Datos Insights

Datos Insights is an advisory firm providing mission-critical insights on technology, regulations, strategy and operations to hundreds of banks, insurers, payments providers, and investment firms, as well as the technology and service providers that support them. Comprising former senior technology, strategy and operations executives, in addition to experienced researchers and consultants, our experts provide actionable advice to our client base, leveraging deep insights developed via our extensive network of clients and other industry contacts.

About TransUnion (NYSE: TRU) 

TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good® — and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world.http://www.transunion.com/business