Yesterday, the Consumer Financial Protection Bureau (CFPB or Bureau) filed a brief in the U.S. District Court for the Northern District of Texas in support of its motion to dissolve the preliminary injunction that has stayed the implementation of its credit card late fee rule. Concurrently, the Bureau also filed a notice of supplemental authority in support of their motion to dismiss or transfer on the grounds that the Fort Worth Chamber of Commerce does not have associational standing to bring the suit. Within hours, the court issued an order requiring further briefing on the issue of associational standing.

In its preliminary injunction brief, the CFPB argues that the Supreme Court’s decision in CFPB v. Community Financial Services Association of America, Ltd. (CFSA), discussed here, constitutes a substantial change in the law that justifies dissolving the preliminary injunction. The Supreme Court’s ruling effectively nullifies the constitutional basis for the preliminary injunction, as it found the CFPB’s funding mechanism to be in compliance with the Appropriations Clause.

The CFPB further contends that the plaintiffs have not established a likelihood of success on their remaining statutory challenges to the rule. The Bureau emphasizes that the public interest does not support continuing to stay a rule that aims to ensure credit card companies comply with congressional limits on late fees, potentially saving consumers more than $10 billion annually.

The CFPB has requested that the court dissolve the preliminary injunction and lift the stay on the late fee rule.

The Bureau’s notice of supplemental authority argues that venue is improper in the Northern District of Texas because the Fort Worth Chamber of Commerce, the primary plaintiff for venue purposes, does not have associational standing to bring the suit. The notice relies on a recent concurring opinion by Justice Thomas in FDA v. Alliance for Hippocratic Medicine, questioning whether associational standing aligns with Article III’s limitations on judicial power, and positing that that associational standing “‘distorts’ the ‘traditional understanding’ that for standing to exist, the court ‘must be able to provide a remedy that can redress the plaintiff’s injury.’” The Bureau argues that the Fort Worth Chamber’s interests in the litigation are not germane to its organizational purpose, which is focused on fostering a thriving business climate in the Fort Worth region. Instead, according to the CFPB, the interests at stake in the litigation are those of large card issuers, none of which are based in or near Fort Worth.

The Bureau contends that allowing the Fort Worth Chamber to bring this suit and secure venue in the court would improperly expand associational standing and stretch the bounds of Article III.

Only hours later, the court issued an order requesting further briefing on the issue of associational standing. The court expressed deep concerns about how associational standing can be used to challenge regulatory actions, particularly noting that the Fort Worth Chamber of Commerce is the only party located in the Fort Worth Division and has only one member affected by the CFPB’s proposed rule. The court highlighted that this member “seemingly joined the Fort Worth Chamber of Commerce to establish venue in this…division.”

The court’s order requires the CFPB to file a formal motion addressing the plaintiffs’ standing by July 29. The plaintiffs are to respond by August 12, and the CFPB’s reply is due by August 19. The court has scheduled a hearing on the matter for August 27.

The ARM industry moves fast. Staying informed and sorting through what’s relevant and what’s just noise can be a challenge, but that’s where insideARM steps in. We not only provide you with information but also narrow it down to only the stories that are most important. Last week included a medical debt legislative update, the CFPB’s Semi-Annual agenda, and a breakdown of the CFPB’s activity over the past month. Keep reading below for highlights from these stories and why we felt we should bring you these stories.

Tuesday’s news concerned a New Jersey medical debt bill. The Bill, which now awaits the NJ’s governor’s signature, will prohibit credit reporting on medical debt, void any debt that is credit reported in violation of this bill, impose a 120-day waiting period before collection action can commence, cap interest on medical debt (including judgments), and prohibit garnishments. Those collecting medical debt should be aware of this, and continue to pay attention to these trends.

On Wednesday, we looked at the CFPB’s upcoming agenda. The CFPB will be looking and potentially acting on the non-bank registry, contract terms and conditions, and rules to restrict overdraft programs. The CFPB is not showing any signs of slowing down and those in the industry should be following these developments as they come.

We finished the week with a breakdown of the CFPB’s activity over the past month including the Supreme Court validating the CFPBs funding; actions against a telemarketer, a lending platform, and a student loan servicer; updates to the Late Fee Rule lawsuit in Texas; Final rules on the Repeat Offender Registry and Data Sharing standards; a proposed rule banning credit reporting medical debt; an interpretive rule that BNPLs are credit card providers; and comments on deceptive fine print, junks fees, and data protection. As we have often said, the CFPB is not subtle. When the Bureau issues documents or  Director Chopra addresses perceived problems in consumer finance, there are large clues as to where regulation is likely and what issues the Bureau is going to attempt to tackle. In a year of nearly unprecedented CFPB activity, now is not the time to ignore these signs.

Thanks again for choosing insideARM for your collection industry news! We have weekly recaps as far back as March of this year and you can find the recap for the week of July 8th here.

Interested in an interactive discussion of ARM news, problems facing the industry, or issues you are seeing? Research Assistant by insideARM hosts a weekly peer call each Monday. Click here to learn more about this meeting, other Research Assistant resources, and how you can try it all for free!

June was another big month for the CFPB with rules, proposals, lawsuits, and a Supreme Court case. In this month’s article, we share some of our top “bites” of the month to keep you in the loop.

Bite 13: CFPB Director Addresses House Financial Services Committee

On June 13, 2024, Director Chopra addressed the House Financial Services Committee. Director Chopra claimed that there was a pressing need for Congress and the CFPB to protect “personal data and financial privacy in an increasingly digital marketplace.” Director Chopra noted that the CFPB has worked to develop data sharing standards and privacy protections. He urged Congress to act to protect financial data. Director Chopra also sought “opportunities to advance legislation to accelerate open and decentralized banking in our country that can also protect personal data.” Director Chopra highlighted that the CFPB has finalized a key part of the framework for Section 1033 and that he anticipates finalizing the rule in the fall. Director Chopra also noted that the CFPB is proposing a rule under the Fair Credit Reporting Act to restrict data brokers’ use of certain sensitive data.

Bite 12: CFPB Launches Inquiry Into “Junk Fees” in Mortgage Closing Costs

On May 30, 2024, the CFPB announced that it launched an inquiry into so called “junk fees” in mortgage closings, which the CFPB claims increase closing costs. The inquiry includes a Request for Information Regarding Fees Imposed in Residential Mortgage Transactions. The request seeks input about how mortgage closing costs may be inflated and constraining the mortgage lending market. The CFPB asked which fees are subject to competition, how fees are set, who profits from the fees, how fees are changing, and how they affect consumers. Comments are due on or before August 2, 2024. The announcement came 10 days after Director Chopra addressed the Mortgage Bankers Association, focusing on credit reports and credit scores on May 20, 2024.

Bite 11: CFPB Issues Circular on Deception in Fine Print

On June 4, 2024, the CFPB issued a new Circular on Deception in Contract Fine Print. The Circular addressed whether including unlawful or unenforceable terms in consumer financial contracts violate the Consumer Financial Protection Act’s prohibition on deception. The Circular responded that such terms may violate the CFPA’s prohibition on deception, when applicable law renders such terms unlawful or unenforceable. The CFPB gave examples of contract terms purporting to waive rights that cannot be waived, including the use of qualifiers such as “subject to applicable law” or “except where unenforceable.” According to the CFPB, such qualifiers are unlikely to cure a provision’s misleading or material nature. The CFPB is expected to finalize a proposed rule later this summer which will require certain supervised nonbank companies to register certain contractual terms with the CFPB.

Bite 10: CFPB Releases 1071 Compliance Deadlines

On May 17, 2024, the CFPB issued a notice that it plans to issue an interim final rule to extend the compliance deadlines for its small-business data collection rule. The compliance deadlines were previously stayed pending the outcome of the CFSA v. CFPB Supreme Court case. The interim final rule will extend compliance so that Tier 1 institutions have a new compliance date of July 18, 2025, Tier 2 institutions have a new compliance date of January 16, 2026, and Tier 3 institutions have a new compliance date of October 18, 2026.

Bite 9: CFPB Issues Interpretive Rule on Buy Now, Pay Later

On May 22, 2024, the CFPB issued what it calls an “interpretive rule” addressing “buy now, pay later” transactions. These are typically closed-end credit transactions that involve financing a purchase with 4 scheduled payments or less, and no finance charge. The CFPB issued an interpretive rule claiming to confirm that Buy Now, Pay Later companies are “credit card providers” under the Truth in Lending Act and Regulation Z. The CFPB claims BNPL providers are subject to many of the key legal requirements that apply to credit cards including giving consumers the right to dispute charges and demand refunds after returning a product. According to the CFPB, BNPL providers must investigate disputes and pause payment requirements during the investigation. They are also now required to credit refunds when consumers return products or cancel services. Likewise, the CFPB says they must provide consumers with periodic billing statements. The CFPB is accepting public comments on the interpretive rule until August 1, 2024.

Bite 8: CFPB Proposes Rule to Ban Medical Bills from Credit Reports

On June 11, 2024, the CFPB proposed a rule that stop creditors from obtaining and using information about medical debt in underwriting and prohibit credit reporting companies from including medical debt on credit reports sent to creditors. The proposal also seeks comment about practices related to medical devices used as collateral. The proposal comes a year after the three nationwide credit reporting agencies voluntarily removed medical bills from credit reports, and two major credit scoring companies decreased the impact of medical bills on consumer scores. Comments must be received on or before August 12, 2024.

Bite 7: CFPB Establishes Final Rule for Data Sharing Standard Setting Body Under Open Banking Standards

On June 5, 2024, the CFPB announced a final rule, establishing a process for recognizing data sharing standards. The final rule formalizes the qualifications to become a recognized industry standard setting body under the CFPB’s forthcoming Personal Financial Data Rights Rule. The rule also includes a guide for how standard setters can apply for recognition and how the CFPB plans to evaluate applications. The standard setters must apply for recognition from the CFPB and display openness, transparency, balanced decision-making, consensus, plus provide for due process and appeals. The rule also provides a way for the CFPB to revoke recognition of standard setters and creates a maximum recognition duration of five years.

Bite 6: CFPB Issues a Final Rule Creating a Repeat Offender Registry

On June 3, 2024, the CFPB issued a final rule that requires covered nonbanks to report orders and judgments to the CFPB. A covered order is a final, written public order (including consent orders) effective on or after January 1, 2017, obtained by a federal, state, or local agency and issued by an agency or court with public provisions requiring or limiting certain actions based on alleged violations of covered laws. Covered laws are enumerated in the rule, and include federal consumer financial laws, other laws enforced by the CFPB (e.g., Military Lending Act), and certain federal and state unfair, deceptive, or abusive acts or practices (UDAP or UDAAP) laws. Some larger entities will be required to provide an attestation from a senior executive that confirms compliance with the relevant orders. The CFPB’s press release also touted the Bureau’s Repeat Offender Unit. The Final Rule is effective on September 16, 2024, and has a phased initial registration period by nonbank type that begins as early as October 16, 2024.

Bite 5: Lawsuit Over CFPB’s Credit Card Late Fee Rule is Again Transferred

On May 29, 2024, it was reported that the lawsuit over the CFPB’s Credit Card Late Fee Rule was again transferred. Back in March, several banking and trade groups filed a lawsuit in the U.S. District Court for the Northern District of Texas challenging the CFPB’s credit card late fee rule. The banking and trade groups asserted that the new rule capping credit card late fees punishes customers who pay on time. The lawsuit was transferred from the Northern District of Texas to the District Court for the District of Columbia and then back to the Northern District of Texas. After the Supreme Court released its decision in the CFSA case, Judge Pittman moved to transfer the lawsuit for a second time to the District of Columbia. Plaintiffs challenged Judge Pittman’s transfer order. The 5th Circuit issued an order staying the District Court’s transfer order until June 18th.

Bite 4: CFPB Sues Student Loan Servicer

On May 31, 2024, the CFPB sued a student loan servicer alleging violations of the CFPA, FCRA, and Regulation V. The CFPB claimed the student loan servicer collected on student loans that had been discharged in bankruptcy and sent false information to consumer reporting agencies. The lawsuit alleged that the student loan servicer failed to maintain policies and procedures to identify when loans were discharged in bankruptcy, that the servicer illegally collected on and furnished inaccurate information about discharged loans, and the servicer improperly told borrowers that they still owe payments on discharged loans. In early May 2024, the CFPB filed a different complaint and proposed stipulated judgment against the student loan servicer. The lawsuit seeks an injunction, consumer redress, and a civil penalty, and other relief.

Bite 3: CFPB Files Lawsuit Against Peer-to-Peer Lending Platform

On May 17, 2024, the CFPB announced that it had filed a lawsuit against a peer-to-peer lending platform, alleging the platform used patterns the CFPB calls “dark patterns,” to collect fees. The peer-to-peer lender facilitates small-dollar, short-term loans that the CFPB claims misrepresent the actual cost of the loans, claiming the company illegally charges certain “tip” and “donation” fees, and engages in deceptive practices when servicing and collecting on the loans. The complaint alleges violations of the Consumer Financial Protection Act and the Fair Credit Reporting Act. The CFPB claims the company threatened consumers that it would furnish negative information to credit reporting companies even though the company did not actually engage in credit reporting. According to the CFPB, the company has been the subject of state investigations for similar allegations. The complaint seeks damages in the form of a permanent injunction against the company; monetary relief including restitution; disgorgement; and a civil money penalty.

Bite 2: CFPB Takes Action Against Student Loan Debt Relief Telemarketer

On May 20, 2024, the CFPB announced a settlement with a telemarketing company that offers student debt relief services. The CFPB alleged that: the company misrepresented that it was affiliated with the U.S. Department of Education; fees paid to the company would go towards the consumer’s debt balance; and the company would help customers consolidate their loans, reduce their monthly payments, or achieve loan forgiveness. The CFPB also alleged that the company charged initial and monthly fees regardless of whether the company was able to receive debt relief results on the customer’s behalf. The CFPB alleged that the company engaged in deception under the Consumer Financial Protection Act and the Telemarketing Sales Rule. The consent order requires the company to permanently cease operations, void all consumer agreements, and pay a $400,000 penalty to the CFPB’s victims relief fund.

Bite 1: CFPB Prevails at Supreme Court 7-2

On May 16, 2024, the U.S. Supreme Court, by a vote of 7-2, rebuffed a challenge to the constitutionality of the CFPB’s funding structure, reversing a Fifth Circuit decision holding the CFPB’s funding was unconstitutional. The Supreme Court held that Congress’ statutory authorization allowing the Bureau to draw money from the “earnings” of the Federal Reserve System to carry out the Bureau’s duties satisfies the Appropriations Clause. The Court stressed that “an appropriation is simply a law that authorizes expenditures from a specified source of public money for designated purposes” and that the CFPB’s funding scheme “fits comfortably” within that framework, consistent with historical practice.

That same day, the CFPB Director issued prepared remarks on the decision, claiming that the Supreme Court rejected a “radical theory” that would have rattled financial markets. He also said that the ruling makes clear that “the CFPB is here to stay.” The Chair of the House Financial Services Committee, Patrick McHenry issued a statement vowing to revisit the CFPB’s authority through reform legislation. Several CFPB investigations and enforcement actions were stayed pending resolution of this case, and the CFPB appears to be ready to move those matters forward.

Still hungry? Please join Hudson Cook for their next CFPB Bites of the Month.  If you missed any of our prior Bites, including the webinar that covered the above topics, request a replay on the Hudson Cook website here.

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This article is provided for informational purposes and is not intended nor should it be taken as legal advice.  The views and opinions expressed in this article are those of the authors in their individual capacity and do not reflect the official policy or position of the partners of Hudson Cook, LLP or clients they represent. 

The CFPB soon plans to issue a final rule that would require certain supervised nonbank entities to register with it and provide information about their use of certain terms and conditions in standard-form contracts for consumer financial products or services that seek to waive or limit consumer rights or legal protections (“Covered Terms”).

In January 2023, the Bureau issued a proposed rule that would establish a publicly accessible registry that would identify registrants. In addition, under the proposed rule the CFPB would also publish information about registrants and the Covered Terms they use, except where prohibited by applicable law.

On June 4, 2024, the CFPB issued a Consumer Financial Protection Circular 2024-03 (“Circular”) warning that the use of unlawful or unenforceable terms and conditions in contracts for consumer financial products or services may violate the prohibition on deceptive acts or practices in the Consumer Financial Protection Act.

Many followers of the Bureau’s activities thought that the Bureau would abandon the Registry once it published the Circular. No dice!

We have previously blogged about the Circular and explained how almost every consumer financial services contract in use (including government forms used by FHA, VA, the Department of Education for federal student loans, Fannie Mae and Freddie Mac Uniform Mortgage instruments) will need to be revised in order to comply with the Circular.

The Registry will make matters much worse for supervised non-banks. We expect a legal challenge to this rule shortly after it is finalized.

The CFPB also listed several other final rules it expects to issue:

Overdraft Programs

The CFPB said that in January 2025, it plans to issue a final rule governing overdraft programs at large financial institutions. “While the nature of overdraft services, including how accounts can be overdrawn and how financial institutions determine whether to advance funds to pay the overdrawn amount, has significantly changed since 1969, the special rules remain largely unchanged,” it said. The Bureau issued a proposed rule on Jan. 17, 2024. The final rule could be affected by the presidential election. Many Democrats have voiced their support for the rule, while Republicans have opposed it. If a Republican wins the 2024 presidential election, and if the Republicans control both houses of Congress, the final rule may never see the light of day. 

Personal Financial Data Rights

The CFPB said it plans to issue a final rule in October governing the types of information that covered entities must make available to consumers upon request. The CFPB noted that Section 1033 of the Consumer Financial Protection Act directs the CFPB to issue the rule. The agency issued a proposed rule in October, 2023.

PACE Financing

The Bureau said it will issue in May, 2025, a final rule related to Property Assessed Clean Energy (PACE) financing. The rule, required by the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”), would implement statutory requirements that subject PACE financing to the Truth in Lending Act’s ability-to-repay requirements. The CFPB proposed the rule in May, 2023.

NSF Fees

The Bureau also expects to issue a final rule governing nonsufficient fund fees, even though it noted that some financial institutions have stopped charging such fees. It issued a proposed rule in January that preliminarily identified the assessment of NSF fees in certain circumstances to be an abusive act or practice. The Bureau is expected to issue a final rule in October.

The CFPB also provided details about proposed rules it may issue:

FCRA

The Bureau may issue a proposal to regulate the activities of data brokers as covered by the Fair Credit Reporting Act. (The Bureau previously issued a proposed rule that would eliminate the medical debt exemption in Regulation V, prohibit credit bureaus from including medical debt in reports provided to creditors, and prevent lenders from both taking medical devices as collateral and from repossessing them in the event of default).

Financial Data Collection

The CFPB, Federal Reserve Board, Office of the Comptroller of the Currency, Securities and Exchange Commission, Federal Deposit Insurance Corp., Federal Housing Finance Agency and National Credit Union Administration are coordinating efforts on a proposed rule establishing data standards for the collection of information reported to each agency by financial entities under their jurisdiction and the data collected from the agencies on behalf of the Financial Stability Oversight Council, as required by the Financial Data Transparency

Other Contract Terms

The Bureau is considering whether to issue a proposed rule regarding the inclusion or enforcement of certain provisions in contracts for consumer financial products or services. Before Dodd-Frank, the Federal Reserve Board (the Board) adopted and enforced Regulation AA, which made it unlawful for banks to include or enforce in their contracts (a) confessions of judgment; (b) waivers of exemptions, or limitations on exemptions, protecting real or personal property from execution (unless the property was subject to a security interest executed in connection with the obligation); assignments of wages (unless revocable at will, part of a payroll deduction or preauthorized payment plan, or applicable to wages already earned); and provisions granting a nonpossessory security interest in household goods (other than a purchase-money security interest).  With the establishment of the CFPB, Dodd-Frank removed the Federal Reserve Board’s authority for issuing Regulation AA and the Board subsequently revoked the rule (although the financial institution regulatory agencies indicated that they would still deem the inclusion of these provisions to be an unfair practice).

Both houses of the New Jersey Legislature recently passed Assembly Bill No. 3861 (AB 3861), known as the Louisa Carman Medical Debt Relief Act. The legislation’s stated aims are to prevent undue financial hardship and protect patients from aggressive debt collection practices. Medical debt in general and how and whether it can be included in consumer reports has been a hot topic at the state and federal level. We have written on recent developments regarding medical debt here, here, here, and here.

Key provisions of AB 3861 include:

Prohibition on Reporting Medical Debt:

• Medical creditors and debt collectors are prohibited from reporting a patient’s medical debt to consumer reporting agencies (CRAs) for health care services performed on and after the effective date of the bill.
• CRAs cannot include a patient’s paid medical debt or medical debt of less than $500 in consumer reports.

Restrictions on Collection Actions:

• Medical creditors and debt collectors must wait 120 days after the first bill is sent before engaging in collection actions, and they must offer a reasonable payment plan to the patient.
• Collection actions cannot be initiated against patients who comply with the terms of a reasonable payment plan.

Interest Rate Cap:

• The bill caps the interest rate on medical debt at 3% per annum, including any judgments on medical debt.

Garnishment Provisions:

• The bill prohibits the garnishment of wages for patients with annual incomes less than 600% of the federal poverty level to collect medical debt.

Insurance Appeals:

• Medical creditors and debt collectors cannot communicate with patients or initiate lawsuits regarding unpaid charges if an internal or external review of a health insurance decision is pending.

Remedies:

• Any portion of a medical debt reported to a CRAs in violation of the bill’s provisions is considered void.

With the bill having cleared both legislative houses, it now awaits Governor Murphy’s signature.

insideARM is here to help you keep up with the fast-paced ARM industry. This often requires keeping a finger on the pulse of the regulatory bodies, providing advice for more efficient collections, and reporting on state-level legislation. Last week was a perfect example of this as we brought you the most recent focus from the CFPB, guidance for an effective settlement program, and a recent amendment to data breach notification laws in Pennsylvania. Keep reading for the highlights from these stories and why our editorial team thinks they are important!

Our Tuesday news was a breakdown of the CFPB’s Supervisory Highlights for the summer. The Bureau touched on three concerning areas for the ARM industry: student loan servicing, disclosure violations, and harassment. Student loans have been on the CFPB’s radar for some time, and this document takes exception to potential UDAAP violations when it comes to the servicing of those loans. As for debt collectors, the supervisory highlights touched on validation violaitons, misleading consumers about their rights, and harassing consumers with call volume and aggressive language. As with everything the CFPB publishes, it should be read as if it is a glimpse into the future. The things the Bureau expresses concern about often become rules, regulations, and enforcement actions. So, the industry should take note and prepare accordingly.

Wednesday, we highlighted an article about the keys to an effective repayment program strategy. Coming to an agreement with a consumer on a repayment plan can be broken down into two essential elements: the available settlement offers and the conversation with the collector. While it may seem like a good idea to have a wide variety of options for the consumer to choose from, it is more important to provide the right offer. This article provided steps to improve and refine processes, which should be a top priority for any company working with consumers on past due accounts.

We finished the week with an amendment to Pennsylvania’s data breach notification law. Senate Bill 824 was signed into law at the end of June and goes into effect on September 26, 2024. The amendment changes notification requirements, lowers the threshold that triggers a notification from 1,000 affect individuals to more than 500, and requires the entity to provide a credit report and a year of credit monitoring services to affected individuals. It is often said that there are two types of companies: those who have been hacked, and those who will be hacked. While companies should take all reasonable steps to prevent a data breach, it is essential to pay attention to both new laws and changes so your organization can ensure it has the best possible plan in place.

Our editorial team truly appreciates you for joining us for another weekly recap. On vacation for the 4th? You can find a recap for the week of July 1st here!

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Pennsylvania Gov. Josh Shapiro recently approved Senate Bill 824, which amends Pennsylvania’s data breach notification law, 73 Pa. Stat. Ann. § 2301, et seq.

The amendments will go into effect Sept. 26, 2024.

Among other things, the amendments:

–  Require concurrent notification to the Attorney General if notification must be given to more than 500 individuals

–  Require the notice to the Attorney General include:

• The organization name and location
• The date of the breach
• A summary of the incident
• An estimated number of individuals affected
• An estimated number of individuals in Pennsylvania affected

–  Reduce the threshold for reporting an incident to consumer reporting agencies from more than 1,000 affected individuals to more than 500

–  Require entities that are required to report the incident to consumer reporting agencies to assume the costs of providing the affected individuals with:

• Access to one credit report if an individual is not eligible for a free report
• Access to credit monitoring services for one year

Repayment programs are crucial in collections, but many fail. Here are the essential elements for a successful repayment program strategy and tips to enhance collections conversations to ensure the right program is chosen and completed.

For those of us in the collections industry, we are familiar with various terms referring to a customer’s commitment to pay. Whether it’s “plan,” “program,” “treatment,” or “arrangement,” we’re essentially discussing the same thing. For consistency in this article, we’ll refer to them as “programs.”

Repayment programs take center stage in every collector’s conversation with a customer. When meaningfully applied, these programs offer relief to the customer and certainty for the lender, yet many end up broken. So, what causes this breakdown? It boils down to two critical components: the suite of available program offerings, and the effectiveness of the conversation with the customer.

Both elements are equally important. Effective collections repayment program strategies start with a reasonable suite of available program offerings. While collections continues to shift to digital engagement, it’s vital to recognize the second critical component, the ongoing necessity for agent conversations, particularly for the most complex situations or financial hardships.

A Successful Collections Repayment Program Strategy has Multiple Payment Plan Options

Collectors and borrowers need options at their disposal to establish an effective program. If your program suite consists of a simple “payment plan” option, it’s a fair assumption that your program break rate and recidivism rate is high. Just like trying to escape a maze by only turning left is difficult and restricting (if not impossible); so too is trying to establish a reasonable and “keepable” program when there is only one option available.

“A program suite with one option is like trying to escape a maze by only turning left.”

An effective and comprehensive program suite must address both short- and long-term hardships (i.e., <60 days or >60 days, respectively). It must also include programs suitable for customers with varying levels of willingness or ability to pay. And lastly, it must consider the current stage of delinquency of the account. An example of a program suite that accomplishes these key requirements is shown in the diagram below.

Avoid creating a complex, over-engineered program suite. Having too many options is as bad as having too few and may make it difficult to ultimately choose the appropriate program. Instead, aim to develop a program suite offering 3-5 options with easily evaluated, objective eligibility criteria. This approach will empower collectors to put customers in the best position to cure their delinquent account, and more importantly, remain current.

Three Key Conversation Components in Your Repayment Program

A successful collections conversation relies on three key components: (1) understanding the customer’s reason for delinquency and financial outlook by asking open-ended questions, (2) selecting the right program for right customer, and (3) confirming the program plan. If done well, they lead to selection and completion of a successful program. However, if the components lack detailed information, authenticity and empathy, they will likely fail. Customers prefer interacting with collectors who are genuine and empathetic, rather than sounding robotic and scripted, or giving the impression that they don’t care.

Empathy is Critical for Keeping Customers Around

In a study conducted by Lexop, a striking 32% of respondents blamed their negative past-due experiences on unsympathetic and rude agents. Shockingly, 71% of them considered switching to the competition as a result. Clearly, being empathetic in your communication is absolutely critical.

Use the following three conversation components to identify, establish and execute successful payment programs that don’t break.

1. Use Open-Ended, Probing Questions to Keep the Customer Talking

An engaged customer who responds with more than mere “Yes,” “No,” or single-word answers will help to identify the most appropriate program. It sounds simple, but many collectors overlook this approach. Agents must remember that it’s a “discussion,” not just a checklist to tick off. If the customer isn’t engaged, they may agree to payment programs that are not affordable for them.

Making it Real:

An example of what an unsuccessful collector might say to open the dialogue: “Can you make a payment today?”

An example of what a successful collector would say to open the dialogue: “I’m here to help in any way possible. Can you tell me a little about why you have fallen behind on your account? Then we can see about finding a program that works for you.”

2. Match the Right Program with the Customer’s Responses

Once the collector understands the customer’s situation (e.g., length of hardship, severity), they need to apply that information against their program matrix or hierarchy. If the program suite has been established as outlined earlier, it should be clear which option aligns best with the customer’s circumstances.

Not all delinquency situations fit into a neat and tidy box. So, collectors should be ready to review exceptional cases and know how to escalate a situation for further consideration.

Making it Real:

• Account is an auto loan
• Account is 35 days past due
• Customer missed 2 weeks of work due to an injury
• Customer is back to work and can maintain monthly payments but can’t pay 2 at once.
• Most appropriate program = 1 month extension + 1 scheduled payment (to remain current)

3. Recap and Confirm the Agreed Upon Program

While it sounds like a simple step, failing to complete this stage can have significant consequences. Customers should leave the conversation having just reiterated and confirmed their understanding of the commitment they are making. Many short-term programs will be simple, while longer-term or permanent programs (e.g., modification or settlement),) can involve multiple components. So, a customer’s understanding of their post-call responsibilities is crucial for program success.

The most successful programs are those that are repeated and reinforced in writing. If feasible, send a confirmation to the customer (preferably digitally), to eliminate any doubts or confusion regarding obligations.

From a collector’s perspective, documenting the program is equally vital. Since customers may interact with different agents in the future, thorough notes and appropriate system status codes on an account ensure that future collectors are well-informed, and the customers’ experience is seamless.

Making it Real:

• Collector talking points for recapping an extension:
• Confirm the customer’s email address
• A form will be emailed outlining the plan (if possible, signature)
• No fees are required to process the extension
• Work with customer to schedule the first payment in the program
• Send an email to the customer to outline the program, what they need to do, due dates for payments going forward, provide any auto-pay options and advise on self-service channels for future payments
• Ask the customer to confirm dates and payment amounts at the end of the conversation to ensure understanding

Finding success in repayment programs can fall on the communication skills of your agents. So, a significant portion of the Performance Suite emphasizes authentic and empathetic conversations, taught through interactive activities and role-playing exercises. This approach enables participants to practice effective communication habits outlined in this article.

On July 2, the Consumer Financial Protection Bureau (CFPB or Bureau) published the summer edition of its Supervisory Highlights, focusing on examinations of auto and student loan servicing companies and debt collectors that were completed between April 1, 2023 and December 31, 2023. The report also highlights consumer complaints about medical payment products and identifies concerns with financial institutions freezing deposit accounts.

Student and Auto Loan Servicing:

• Auto Loan Servicing: Examiners detailed instances of alleged unfair, deceptive, or abusive acts or practices (UDAAP) where certain auto loan servicers failed to provide adequate notification to borrowers enrolled in autopay that they must make their final payments manually. According to the CFPB, this led to late fees being charged when the final payments were not made on time, purportedly violating the “unfair” prong of UDAAP.

  In response, these servicers agreed to revise their procedures to ensure that they either include the final payment in autopay withdrawals or adequately notify consumers enrolled in autopay if and when a payment is required to be submitted manually.

• Student Loan Servicing: Examiners found instances of alleged UDAAP violations, such as excessive barriers to assistance, long hold times, and understaffed call centers. Additionally, certain servicers purportedly provided inaccurate information about the forms required for forbearance programs and failed to notify consumers about preauthorized electronic funds transfers that exceeded previous amounts.

  In response, servicers agreed to develop and implement plans to reduce hold times and drop rates, improved employee training, and, in certain instances, provided remediation to consumers who were adversely impacted by inadequate customer support.

Debt Collectors:

• Disclosure Violations: CFPB examiners detailed certain instances of alleged Fair Debt Collection Practices Act (FDCPA) violations where some debt collectors, including those handling student loans, failed to provide validation notices within five days of initial communication with borrowers. Some collectors also allegedly violated the prohibition on the use of false or misleading representations, such as misleading borrowers about their right to dispute the debts.

  In response, the debt collectors were required to update their written communications with borrowers to provide the validation information and enhance employee training.

• Harassment and Inconvenient Communication: Examiners detailed instances of debt collectors purportedly using aggressive or verbally abusive language, communicating at inconvenient times or places, making over 100 calls despite requests to stop, and failing to cease communication through specific mediums as requested by consumers.

  In response, debt collectors were required to enhance their training and oversight efforts to prevent harassment.

Medical Payment Products:

• Consumer Complaints: CFPB examiners identified complaints about how dentists and other healthcare providers promoted, offered, and sold medical credit cards to consumers. According to the report, consumers complained about healthcare providers misrepresenting the specifics of “deferred interest” promotions and pressuring patients to open a credit card while receiving treatment.

  The CFPB stated that it expects supervised entities to have effective processes for managing the risks of service provider relationships, including relationships with medical payment product providers.

Practices Preventing Access to Funds or Account Information:

• Account Freezes: Examiners detailed certain alleged UDAAP violations where institutions failed to notify consumers when their accounts were frozen due to suspected fraud or other suspicious activity and did not provide clear guidance on how to unfreeze those accounts. In particular, according to the report, customer service representatives were often unavailable to assist consumers with frozen accounts.

  In response, the institutions agreed to enhance their processes to provide automatic notice of account freezes and to describe in the notices the process by which consumers can unfreeze their accounts. Institutions also changed their processes to allow consumers to communicate directly with customer service representatives and challenge account freezes over the telephone.

• Compliance with § 1034(c): The CFPB assessed industry compliance with § 1034(c) of the Consumer Financial Protection Act, which prohibits large banks and credit unions from creating unreasonable barriers for customers seeking basic account information.

  The CFPB acknowledged that some institutions have eliminated fees for obtaining account information, such as printed check images and statements, and now offer free balance inquiries at third-party ATMs.

Troutman’s Take:

Overall, the CFPB’s observations appear consistent with the types of issues we have seen the CFPB flag in prior Supervisory Highlights, interpretative guidance, and advisory circulars, and that we are seeing in a supervision and examination context. In addition, industry members should note the recent uptick of concerns expressed by the CFPB in two areas in particular — customer service levels and medical debt financing products.

ST. PAUL, Minn. — In a bold move to refocus efforts on the grassroots level, the American Association of Healthcare Administrative Management (AAHAM) has redirected its 19th annual Legislative Day from Washington, D.C. to local districts and states. This year’s theme, “Bringing the Message Home,” emphasizes the critical role healthcare providers play in our communities and the importance of addressing healthcare issues at the local level.

“Instead of heading to Washington, D.C. this year, we decided to bring our message directly to the districts and states where our members and their patients live and work,” said Lisa Laudeman, President of AAHAM. “Healthcare providers are the backbone of our healthcare system, and by focusing on local advocacy, we can make a more immediate and meaningful impact on the communities we serve.”

Historically, AAHAM’s Legislative Day has been an opportunity for members to converge on Capitol Hill, meeting with lawmakers to discuss key issues facing the healthcare industry. However, with the current atmosphere in Washington characterized by partisan bickering, constant polling, and election year gimmicks, AAHAM opted to take a different approach this year.

“Washington is mired in political gridlock, making it increasingly difficult to advance meaningful healthcare reforms,” continued Kristina Gursky, AAHAM’s Government Relations Chair. “By focusing our efforts locally, we aim to foster stronger relationships with state and district representatives who are more directly connected to their constituents’ needs. This shift allows us to address specific community concerns more effectively.”

During this year’s event, AAHAM members organized and participated in meetings with local legislators, healthcare providers, and patient advocacy groups. The discussions centered on improving patient care, streamlining administrative processes, and ensuring sustainable healthcare funding at the local level.

“We are incredibly proud of the engagement and dedication our members have shown in advocating for their communities,” said Amy Mitchell, AAHAM’s Second Vice President. “By celebrating our 19th annual event with a local focus, we underscore our commitment to making healthcare better for all patients, right where they live.”

AAHAM’s decision to bring Legislative Day home has been met with enthusiastic support from members and community leaders alike. The organization remains steadfast in its mission to improve healthcare administrative management and to advocate for policies that enhance the efficiency and effectiveness of healthcare delivery.

For more information about AAHAM and its local advocacy initiatives, please visit www.aaham.org. 

About AAHAM

The American Association of Healthcare Administrative Management (AAHAM) is the premier professional organization in healthcare administrative management. AAHAM provides education, certification, networking, and advocacy for healthcare revenue cycle professionals. The organization represents a broad range of healthcare providers, including hospitals, physician practices, and billing companies, working to enhance the financial health of the healthcare industry.