In September 2021, recognizing that information technology (IT) could impact compliance with Federal consumer laws,  the CFPB published a new section to its examination manual titled, “Compliance Management Review – Information Technology (CMR-IT).”

The new section acknowledges that as part of its Compliance Management System (CMS ) assessment, the CFPB may evaluate the technology controls of an institution and its service providers. The CFPB may also evaluate an institution’s IT as it relates to compliance with Federal consumer financial laws.  

The CMR- IT includes specific questions to evaluate:

• The board of directors interaction and oversight of its IT group (pages 5-7).

• How compliance and IT intersect when it comes to policies and procedures (pages 7-9). 

• How employees are trained on IT-related issues, including security, and how IT staff is trained (page 10). 

• Whether IT functions are properly audited and managed, including QA and QC (pages 12-13).

• Processes, procedures, and responses to IT-related consumer complaints (page 14).

• IT service provider functions and oversight (pages 15-16)

The new exam manual can be found here. 

insideARM Perspective:

Any organization subject to the CFPB should be routinely reviewing its CMS, annually at a minimum,  to ensure it meets the CFPB’s expectations.  When drafting or updating a CMS, these examination manuals are extremely helpful.  While there is always going to be some nuance, the CFPB’s examinations manuals give some pretty clear insight into what they CFPB will be reviewing if they come knocking. 

Effective November 7, 2021, debt collectors will need to provide a new disclosure on initial demands sent to New York consumers. The new disclosure allows consumers to request communications in alternative formats. 

On October 8, 2021, New York Governor Kathy Hochel, signed Senate Bill S737A (S737A) into law. Per S737A, by November 7, 2021, debt collectors must “clearly and conspicuously disclose” in the initial communication that the consumer can request communications in an alternative format such as large print, braille, or an audio compact disk. Additionally, the debt collector must include a telephone number the consumer can call for making the request. However, debt collectors who provide reasonable accommodations in compliance with the Americans with Disabilities Act (ADA) will be deemed not to have violated SB737.

A violation of SB737 is a misdemeanor, and the first offense will come with a civil penalty of up to $250.00. All subsequent offenses will come with a civil penalty of up to $500.00. Each violation is considered a separate offense.

insideARM Perspective:

In light of the fact that Reg F goes into effect in less than 50 days, debt collectors may be frustrated by yet another change that requires a compliance review, policy change, and letter update. That said, perhaps the safe harbor for debt collectors who provide reasonable accommodations in compliance with the ADA will lessen the load. Debt collectors collecting in the state of New York should consult with their counsel to determine the best course of action. 

As I’ve said over and
over again, the fact that corporate officers, directors and employees can be
held personally liable for TCPA violations committed by their
employers/companies is the most unfair rule in the American legal system. 

So
every time I see someone escape the TCPA personal liability trap it puts a
smile on my face.

Ariel
Freud should be smiling right now.

Freud
owns and operates several companies that sell extended vehicle warranty plans
to customers.

Now
let me just pause and say certain participants in that particular
vertical have not been the most responsible when it comes to consumer outreach.
Now I know a few of the “good guys” in that space as well, but the rotten
apples are certainly starting to spoil the bunch. So–shape up.

In
any event, Freud was personally sued for the activities of his businesses
respecting outbound calls to consumers. But, in Rucker v. Nat’l Auto.
Fin. Servs. Llc, Civil Action No. 20-16377 (MAS) (TJB), 2021
U.S. Dist. LEXIS 191396 (D.N.J.  September 30, 2021) the Court found the
allegations of the Complaint insufficient to warrant personal liability.

The Rucker court
noted that the Third Circuit had cast some doubt on the availability of
personal liability under the TCPA in the famous City Select case.
Nonetheless the Court elected not to resolve that issue and rested on the
pleading standard: the Plaintiff’s allegations were just too conclusory to
establish personal participation in the alleged wrongdoing.

Here
are the key findings:

• Mere ownership of a company is not sufficient to warrant personal liability;

• General allegations that acts were taken “under the direction” of Freud are insufficient;

• Vague allegations  that Freud “oversaw, directed and authorized” his companies and the calls at issue are conclusory;
  
• General workplace complaints to the effect that “Freud do[es] not care as long as you get as many sales as possible,” are insufficient to show direct participation.

Pretty
good stuff.

My
favorite part of the case, however, is that the court properly refuses to
permit discovery without valid allegations. THAT’S how the process is supposed
to work. First a plausible claim must be stated. Then access
to the cumbersome machinery of civil discovery may be granted. True the
Plaintiff can allege facts on information and belief and then use discovery to
gather evidence supporting his theory–but the allegations must be there first.
Otherwise it is a fishing expedition.

I
rarely applaud a court for a well-reasoned ruling–I mean, that’s sort of their
job–but given how the case law here has developed, I really have to say this is
a great and well reasoned decision.

Keep
this one in mind folks.

CHICAGO, Ill. — Provana, the leading provider
of business and technology platforms for the credit and collections industry,
today announced it has named Mike Keister as Senior Vice President and Chief
Revenue Officer. As CRO, Mike will oversee the company’s sales and business
development strategy and execution, with a focus on customer success.

“Mike has a proven track record of building
sales organizations to support both enterprise and SMB market segments,” said
Sandeep Bhargava, Provana’s Co-Founder and CEO. “His authentic leadership
style, drive for continuous improvement and passion for helping clients derive
full value from their investment make him an excellent fit to lead our team.”

Mike joins Provana from Zapproved, a legal
tech company. With nearly 20 years of sales leadership experience in SaaS
solutions, Mike excels at scaling sales organizations to support rapid growth.
He is passionate about combining this approach with a keen attention to
customer success and delivering on client expectations.

“I’m thrilled to join the company at this
critical time in the ARM industry, when many firms are in need of a partner in
digital transformation and compliance,” said Mike. “With our long history of
supporting clients throughout the entire lifecycle of accounts receivable
management, Provana is uniquely positioned to deliver value that supports the
latest industry standards and staffing challenges.”

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Based on the West Coast in Portland, Oregon,
Mike enjoys hiking, golfing and attending his daughters’ sporting events.

About Provana

Provana is a SaaS platform that gives leaders control over
process-intensive operations. We serve law firms, insurance companies, accounts
receivable agencies and networked enterprises in the US market that are tightly
regulated by the CFPB and other authorities. Provana is built on decades of
experience in machine learning and natural language processing and helps
customers manage sensitive interactions, analyze unstructured data,
process personal information and ensure compliance. Provana is backed by a
NYC-based Fintech PE, most recently raising funds in November 2020. Learn more
at www.provana.com.

Creditors: did that headline grab your attention? Hopefully it did, since this article is speaking directly to you and was meant to bring light
to a significant issue regarding Reg F preparedness. If this issue is not corrected by creditors, debt buyers, and
anyone else placing consumer accounts for collections, it will disturb current
collections practices and prevent accounts from being worked after November 29,
2021.

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Here’s the issue: Once Reg F goes into effect on November 30, 2021, in order for agencies to safely collect debt (and protect their clients), creditors must take certain action and provide specific information regarding the debt. Debt collectors cannot take these actions, do not have this information, and cannot generate it; it can only come from the creditor.  Despite these requirements and the fast-approaching effective date of Reg F, we have heard from too many sources to count that creditors have not committed to taking these actions or providing the required information. 

To be clear: if creditors do not engage with their agencies and do not listen to the agency’s needs, collection efforts may come to a screeching halt on November 29, 2021. 

What information do creditors need to provide?

While several pieces of Reg F require actions from creditors,
the most significant information gap we see right now pertains to the Itemization
Dates needed for an agency to use Reg F’s Model Validation Notice. The Model
Validation Notice must include an Itemization date which can be one of five different
dates. There are no substitutions and no exceptions; it is one of these five dates,
and these five dates only:

1. The Last Statement Date – The date of the last periodic statement, written account statement, or invoice provided to the consumer by the creditor or their service provider. Note: a statement generated by a previous debt collector is insufficient.

2. Charge Off Date – The date the debt was charged off (written off the books as a loss or “uncollectable” debt). Note: It is a fixed date that never changes. It is NOT the same as the placement date which would change every time the debt is placed with a new agency.

3. Last
   Payment Date – The date the last payment was applied to the debt. Note: this can
   be a payment made by a 3^rd party such as an insurance company, repo
   agent, or a previous debt collector.

4. Transaction
   Date – The date the loan originated or the date the good or service giving rise to the debt was provided or made
   available to the consumer.

5. Judgment
   Date – The date of the final court judgment, which determines the amount of the
   debt owed by the consumer.

     In addition to the above dates, creditors need to provide:

1. The name of the creditor to whom the debt was owed on the itemization date.

2. The amount of the debt on the itemization date.

3. The amount of any fees, charges, interest, credits, payments, refunds, or adjustments applied after the itemization date; some of these must be listed in separate buckets; your agency should have already told you which need to be separated. Note: the debt itemization should add up to the current balance on the account.

What if another agency says they do not
need an itemization date, or you can use a different date?

Simply put, any agency which says they do not need one of
the above five dates is wrong.

It is true that the Model Validation Notice is a “safe harbor”
under Reg F, and Reg F does not say “use this or else be subject to the wrath
of the CFPB.” However, the CFPB’s intent in creating the Model Validation
Notice is clear: it was designed to reduce consumer confusion. The CFPB has explicitly
stated that the itemization date is intended to be a date that a consumer will recognize.
Although the CFPB does not regulate creditors, in light of that explicitly stated
purpose, it is not out of the ballpark to assume that failing to provide this
information to debt collectors may be seen as an unfair practice to consumers,
creating other regulatory exposure.

Additionally, we can – and should – expect an avalanche of
litigation around Reg F coming from consumer attorneys. One of the easiest
places for consumer attorneys to generate money is going to be looking for
inaccuracies in the Model Validation Notice. It’s easy. It either matches the model form the CFPB put out or it doesn’t, and letter issues make nice class-action suits. Any agency that
chooses not to comply with the Model Validation Notice is engaging in extremely
risky business. Creditors are not immune from the risks an agency takes by failing to follow the model form; creditors will feel the impact through lawsuits, enforcement actions, or simply brand degradation.

What happens if a creditor can’t or won’t provide this information
to its agencies?

Without this information from creditors, agencies cannot use
Reg F’s Model Validation Notice. This will leave them two choices: (1) continue
to collect without complying, creating regulatory exposure, branding problems for the creditor, and an
abundance of lawsuits filed against both agencies and creditors (and hefty
legal bills for both); or (2) stop collecting on November 30^th when Reg
F goes into effect.

What does a Creditor need to do to ensure its accounts
will continue to be collected on and after November 30, 2021?

To limit or eliminate significant downtime in collections, creditors
must immediately do the following:

1. Refer back to the emails and other information sent to you by your agencies. See what your agency has told you they need from you to comply with Reg F. Call and ask questions if you have any.

2. Look at your systems, see which itemization date(s) it can provide, confirm your system can convey the accurate balance on that date, and any interest, fees, credits, or adjustments that occurred after that date.
   

3. Talk to your agency about the itemization dates your system can provide and discuss which date will be best with your agency.
   

4. Look at the other information or actions your agency has told you they need you to provide and start providing it.
   

5. If you have questions or something isn’t clear, engage with your agencies and create an expeditious plan of action to give your agencies what they need so they can continue to collect your accounts. 

Reg F is the biggest change to the ARM industry in over 40 years. The industry has fifty days left to get ready. If those involved prioritize, focus, work with each other, and make decisions, compliance is achievable and downtime can be avoided. 

WEST SENECA, N.Y — Mark Lesinski, Director of Business Development for Landmark Strategy Group, recently participated in
the Chautauqua Gran Fondo BIke Rally,  an annual cycling
event in Mayville, NY. The event brings together cycling enthusiasts of all
levels for a recreational, scenic ride around the community and raises funds
for local charities in the community. Upon registration, cyclists choose from a
20-mile, 40-mile, or 60-mile route. This year,  event registration fees are going to 3 community
organizations: Crèche, Bemus Point / Stow Ferry, and Mayville Library. 

Landmark in the Community

Landmark Strategy Group is based in West Seneca, NY, a community
near Lake Erie. A scenic drive south along the lake’s edge is the route to
Mayville, NY, situated just east of Lake Erie on Lake Chautauqua. As an
enterprise committed to responsible business practices, the Landmark team is
continuously seeking out ways to support the needs of the greater Western New
York region. Mr. Lesinski has been a volunteer with Buffalo
City Mission for several years and
frequently participates in various community events and races geared toward
serving the community. 

“Giving
back to our local community is a core tenet of our business. It’s always
especially rewarding to get involved in something that promotes health through
community-building and fitness, while simultaneously generating funds for our
local nonprofits in need. We love to get out and get moving on the weekends and
we were glad to lend our support to these causes,” shared Mr. Lesinski. 

Organizations That Will
Benefit From The Bike Rally

Crèche – A Volunteer
Women’s Group

Crèche is a volunteer organization of women dedicated to
providing basic needs for the youth of the Jamestown, NY area. The group hosts
various events and fundraisers for children in need and also donates hand-sewn
creations to facilities such as local hospitals.
In June 2021, for example, the Crèche Sewing Committee donated 120 blankets to the UPMC
Chautauqua Maternity Department. The group
also collects donations for its maternity closet and baby showers to provide
for expectant mothers in need of assistance. 

Bemus Point – Stow Ferry

Bemus Point
– Stow Ferry is a historically
significant, culturally enriching, and still useful hallmark of Chautauqua
Lake. Ferry rides have been in operation since 1811 and are continued by a
nonprofit volunteer group. While the original ferry is now obsolete and out of
use, the current steel hull ferry has been in use since 1929 and can
accommodate the transport of people, cars, and motorcycles across the lake.
Many structural repairs were completed in 2018-2019 and the ferry is now back in
operation after a 3-year hiatus. Families, visitors, and classrooms frequently
visit the ferry, as it has become a local attraction enjoyed by the
community. 

Mayville Library

The Mayville
Library is a small community library that
opened in 1906. Its current building has been in use as the library location
since 1961. The library is now part of the Chautauqua-Cattaraugus Library
System and supports the community with traditional public library services and materials,
job seeker assistance, ancestry research, and digital learning resources. 

The Landmark team had a wonderful time enjoying a beautiful
Saturday morning and supporting the community. After everything we’ve all
endured throughout the past year, in particular with the Covid-19 pandemic,
it’s great to have the opportunity to gather, support local restaurants, and
invest in organizations that will continue to directly enhance the lives of
community members. We look forward to riding again next year. 

For more information about the annual Chautauqua Gran Fondo
cycling/fundraising event, please visit chqgf.com.  

To learn more about Landmark Strategy Group, please visit the
company’s new website on thelandmarkcorp.com or connect with Landmark on LinkedIn. 

About Chautauqua Gran
Fondo Bike Rally

The Chautauqua Gran Fondo is a cycling event in Mayville, NY dedicated to raising
funds and awareness for nonprofit organizations in the community. The event
takes place around Lake Chautauqua and is not a race but a scenic Saturday
ride. 3 route options are provided for a range of experience levels from
cycling enthusiasts to social riders. Registration fees are directed toward
select nonprofit organizations which are announced in advance of the event.
Donations are also accepted. The event has been going strong for 7 consecutive
years as of 2021.

About Landmark Strategy Group, LLC and Mark Lesinski

Landmark Strategy Group, LLC is a nationally licensed and bonded receivables management
firm located in West Seneca, NY that specializes in passively purchasing
non-performing receivables portfolios. Mark Lesinski and the rest of the
executive team have a combined total of 60+ years of experience in the ARM
industry and have developed efficient and compliant processes that deliver a
quick valuation, streamlined purchase, and exceptional customer service after
the sale. 

On September 22, 2021,
the Internal Revenue Service (IRS) issued a press release announcing it awarded new
contracts to three private-sector collection agencies to collect overdue tax
debts. The previous contracts with third-party debt collectors expired
Wednesday, September 22, 2021, and the newly announced contracts began the
following day, September 23, 2021.

Background

In December 2015 Congress passed a law that
allowed contractors to collect outstanding inactive tax receivables on the
government’s behalf. On September 26, 2016, the IRS announced plans to begin private collection of certain
overdue federal tax debts and selected four contractors to implement the new
program.  The four companies selected by the IRS in 2016 were CBE Group
(Cedar Falls, Iowa), ConServe (Fairport, N.Y.), Performant (Livermore, Calif.),
and Pioneer (Horseheads, N.Y.). As a condition of receiving a contract, the agencies selected must respect taxpayer rights including, among other things, abiding by the consumer protection provisions of the Fair Debt Collection Practices Act..

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The New Contracts

The following
companies were awarded the new IRS collection contracts.

• CBE Group, Inc. (Waterloo, IA)
• Coast Professional, Inc. (Albion, NY)
• ConServe (Fairport, N.Y.)

While CBE Group and ConServe have been
collecting IRS debts since 2016, Coast Professional, Inc is new to the mix. 

The full press release
can be found here.

 insideARM Perspective:

This is the third-go around at such a program. in March 2019, insideARM reported that the contract awarded in 2016 appeared to be successful. Earlier attempts were in 1996 and 2006. Both programs were canceled amidst claims that they cost taxpayers more than they collected. However, these claims were disputed, even by the Government Accounting Office (GAO). See this 2010 article about problems with the decision to end the 2006 program. It’s promising that the IRS has chosen to award new contracts and continue the program. 

No, that headline is not a typo. In two cases, in what could easily be confused for a live-action version of Gary Larson’s comic “The Far Side,” the consumers, represented by the law firm of Edelman, Combs, Latturner & Goodwin LLC argued they did not have the requisite standing to have their cases heard in federal court. In response, the debt collectors argued the consumers had met the requirements for standing in federal court. The two cases are Keller v. Northstar Location Svcs, Case Number 21-cv-3389 (N.D.
Ill 2021), Thomas v. Unifin, Inc. Case Number 21-cv-3037 (N.D. Ill 2021).

Background:

2021
has certainly been an active year for impactful case law. In April 2021, the 11^th
Circuit published its decision in Hunstein,
inviting a flurry of copycat cases nationwide. In June of 2021, the Supreme
Court published its decision in Transunion,
causing an increase in defendants seeking dismissals based on consumers’
lack of standing to bring actions in federal court. While these two cases dealt with two different issues, as the
year has progressed, they have become increasingly intertwined in
deciding where and whether a consumer can bring a claim for an alleged ‘Hunstein’
violation.

So
far, we’ve seen the legal concepts addressed Hunstein and Transunion
come together where a defendant debt collector has asked a court to find Hunstein
plaintiffs lack standing because they have not alleged a concrete injury in
fact (see the original Transunion
article for a run-down of injury in fact). For example, in July, the Eastern
District of New York dismissed six Hunstein copycat cases and questioned Hunstein’s
viability after the Transunion decision.

In
an interesting recent twist, debt collectors in Keller and Thomas (defended
by two different law firms) argued that the Hunstein copycat plaintiffs
indeed had met the standing requirements for federal court. It was the consumers who
argued they lacked standing! In each case, on August 20, 2021, Judge Sharon
Coleman in the Northern District of Illinois found in favor of the debt collectors
holding the consumers had standing in federal court. 

Why
would a debt collector ask the court to find a consumer has standing in federal court?

First,
it’s essential to recognize that standing to bring a case in federal court derives
from Article III of the U.S. Constitution; the same standing limitations do not
bind state courts. Also, a dismissal for lack of standing is a procedural
function; it is not a ruling on the case’s merits. Therefore, just because a
plaintiff does not have standing to bring a case in federal court does not preclude
that same plaintiff from filing the same lawsuit in state court. As noted
recently in
this article authored by Manny Newburger of Barron & Newburger, PC., there are various reasons a defendant might want to have a
case heard in federal court over state court. In such instances, where federal court
is a better venue for a defendant, that defendant may choose, and may even have
to fight, to have that case heard in federal court.

The
cases:

In
Keller and Thomas, the consumers filed Hunstein copycat lawsuits in the state
court of Illinois. In each case, the defendants used a civil procedure mechanism
called removal to shift the cases from state court to federal court. After removal
to federal court, the consumers asked the court to shift the case back down to
state court alleging the consumers lacked standing in federal court. To keep the cases in
federal court, the defendant debt collectors argued the opposite: that the consumers met the requirements for standing in federal
court.

After
hearing arguments, Judge Coleman rejected the consumers’ arguments that the
line of Seventh Circuit cases regarding standing required the cases to be sent
back to state court. Instead, she
found in favor of the debt collectors, holding that the consumers met the federal Court standing requirements, even where the consumers did not seek actual damages. In reaching this conclusion, Judge Coleman relied
on the Hunstein opinion itself, which found that disclosing information
to a third-party letter vendor constituted an injury in fact because it closely
mirrored the common law tort of invasion of privacy and public disclosure of private
facts. As such, Judge Coleman held that each case would remain in federal court
since the consumers had standing to bring the actions in that venue.

insideARM
Perspective:

Reading
these cases felt a little bit like being in the Upside Down. The arguments
looked the same, they read the same, but everything was a little off; the plaintiffs’
counsel made arguments we typically see from defense counsel and vice versa. Arguing
in favor of standing in federal court was likely a strategic decision by
defense counsel to have the case heard in a venue that might be more suited to
hear the case. After all, state courts are typically not known for having an intricate understanding
of the FDCPA.

Again,
it’s important to remember that standing is procedural; it does not impact the case’s
merits. Arguing that a consumer has standing to bring an action in federal court based on the
allegations of the complaint does not mean that defense counsel agreed or admitted
that there is any merit to the consumers’ allegations. It simply means the defendants
wanted to have the case heard in federal court and advocated for that position.

Another
interesting takeaway from these cases is we now have district court opinions on
both sides of the argument.  As such, debt
collectors who find themselves on the receiving end of the Hunstein copycat
cases can have real discussions with their counsel about whether state court or
federal court is the correct venue to defend.  

—-

Get the critical, at-a-glance details on this
case and a rundown of all the other new decisions that matter for the
collections industry – delivered right to your inbox every Monday. Learn
more.  

EAST
AURORA, N.Y. — Coast Professional, Inc. (Coast) has hired Brent Henderson as
the company’s Vice President (VP) of Human Resources (HR). A key contributor to
achieving major growth across the organization and a member of the Operating
Board, Coast’s VP of HR develops recruitment initiatives, creates employee
retention plans, and ensures adherence to all state laws and regulations.

With
over 25 years of experience, Henderson spent the last few years as the Director
of HR at a 250-person industrial construction and fabrication contractor. While
there, he oversaw all HR functions including compliance with strategic industry
processes, compensation and benefits, talent acquisition and development, and
succession planning. During his career, Henderson has led key initiatives that
secured tax credits of over $1 million, reduced turnover by 30% (over the
course of one year), and contributed to a 275% revenue increase over the course
of two years.

Working
primarily from Coast’s East Aurora, NY office, Henderson will be responsible
for establishing department accountabilities, including talent acquisition,
staffing, compensation and benefits, and employee engagement. In addition to developing
and executing workforce planning initiatives, he will collaborate with Coast’s
management team to develop and enforce company policies and industry
compliance.

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“Brent
fully understands the importance of leading a team of HR professionals, which
is evident in his decades of experience working in various industries,” said
Micah Pulliam, President and Chief Financial Officer. “He has exemplary
leadership skills and a proven record of implementing successful recruiting
processes. We are excited to welcome Brent and his experience to the Coast
team.”

Henderson
is a certified Professional in Human Resources (PHR) as awarded by the Human
Resource Certification Institute (HRCI), as well as a Certified Professional in
Human Resources (SHRM-CP) as awarded by the Society for Human Resource Management.
He received his Master of Business Administration from the State University of
New York at Buffalo.

About Coast
Professional, Inc.:

Coast
Professional, Inc. is an accounts receivable management and call center
company, dedicated to the respectful and ethical communication with consumers.
Coast provides professional services to hundreds of campus-based colleges,
universities, and government clients. Coast is a seven-time honoree on the Inc. 5000 list for America’s Fastest-Growing
Private Companies provided by Inc.
Magazine and in 2020, was recognized for the sixth time as one of the “Best
Places to Work In Collections” by insideARM.com
and Best Companies Group. Since 1976, Coast has worked closely with clients to
increase recoveries by assisting consumers in resolving their financial
obligations. Coast’s success is exemplified by exceptional recoveries, superior
service, and dedication to the highest levels of compliance. More information
about Coast can be found at www.coastprofessional.com