WILMINGTON, Del. — Phillips & Cohen Associates, Ltd. (PCA), the leading specialist recoveries management business servicing creditors in the US, Canada, UK, Ireland, Australia, New Zealand, Spain, Portugal, and Germany is delighted to have achieved the much sought-after BSI 18477:2010 accreditation for its handling of vulnerable UK consumers.

BSI 18477:2010 is the acknowledged international standard for businesses, recognizing the provision of inclusive services, equally accessible to all consumers regardless of their personal circumstances.  PCA, which has been consistently recognized for its compassionate engagement model during its 24-year history, is proud to have achieved this high standard for dealing sympathetically with these specialized consumer circumstances.

Nick Cherry, Chief Operating Officer added, “As a business, Phillips & Cohen has always prided itself on the ability to engage with consumers at the most sensitive of times and remains committed to operating in a transparent and accessible manner.  We believe in treating people with dignity and respect, and we are therefore delighted to have achieved the BSI accreditation for identifying and responding positively to consumer vulnerability.”

Adam S. Cohen, Co-Chairman/CEO commented, “Based on our unique services, every case which we deal with can involve a degree of consumer vulnerability and it is gratifying to have been independently assessed for the quality of our service provision.  Sadly, the pandemic continues to impact households in all countries and this element of our service is now more critical than ever. 

Cohen added, “We are launching a number of new products and services which build on our market-leading position in the bereavement and vulnerability space and which are focused on improving aspects of the Death Notification, Estate Administration, and beneficiary support processes.  We are excited to bring these to market and look forward to working alongside both new and existing clients to further improve these essential areas of consumer need.”

About Phillips & Cohen Associates, Ltd:

Phillips & Cohen Associates, Ltd. is a specialty receivable management company providing customized services to creditors in a variety of unique market segments.  Phillips & Cohen Associates, Ltd is domestically headquartered in Wilmington, DE, with additional offices in Colorado and Florida as well as international offices in the UK, Canada, Spain, Germany, and Australia.  For more information about Phillips & Cohen Associates visit www.phillips-cohen.com. PCA provides Equal Employment Opportunity for all individuals regardless of race, color, religion, gender, age, national origin, disability, marital status, sexual orientation, veteran status, genetic information, and any other basis protected by federal, state or local laws.

Show Notes:

Congress, the states, and regulators have been scratching their heads for years when it comes to fintechs. Balancing consumer protection around innovation has been the source of contentious debate. Garry Reeder is the CEO of the newly launched American Fintech Council (AFC), an association that is looking to foster responsible innovation in financial technology. Navigating the “in-between spaces” of the traditional banking system and fintechs is one of the priorities of AFC and its members. as well as establishing a more outcomes-based regulatory scheme that takes into consideration a consumer’s experience. Garry also tells us that defining fintechs will be important because there really is no true definition rather a broad focus on the speed and delivery of financial services. Ultimately, if fintechs are going to be regulated, then AFC will be advocating to ensure that the benefits and protections offered to traditional financial institutions be made available to its members as well.

DISCLAIMER – No information contained in this Podcast or on this Website shall constitute financial, investment, legal and/or other professional advice and that no professional relationship of any kind is created between you and podcast host, the guests or Clark Hill PLC. You are urged to speak with your financial, investment, or legal advisors before making any investment or legal decisions.

Talk about the difference between your company’s approach to innovation vs. its approach to incremental improvement.

We see innovation as being a disruptive and transformative process that replaces an existing practice. As part of the decision-making process here at Firstsource, the key outcomes for an innovation project must include product differentiation, a compelling value proposition, and next-gen customer experience. Innovation needs the best minds in the relevant fields of expertise from business, marketing, technology, analytics, compliance, and operations. This is typically a mix of resources from within the business, centralized corporate functions, and external partners. It is critical to get it right (the first time) when we plan large-scale disruptive transformation and hence we adopt divergent thinking to generate creative ideas by exploring many possible solutions. It typically occurs in a spontaneous, free-flowing, “non-linear” manner, such that many ideas are generated in an emergent cognitive fashion.

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When it comes to incremental improvement, we do not expect big sweeping changes, but instead a series of small and impactful changes that deliver long-term value. Incremental improvement happens within all departments of our business when staff focuses efforts on smaller solutions that slowly but surely move the business toward success. These ideas are typically low-cost and low-risk; however, the accumulation of numerous such small improvements over time is often as powerful as making disruptive change.

At Firstsource, we strongly encourage and empower both models to meet our goals.

What do you think is the greatest innovation in history? Why?

The internet. Having lived more than 57% of my life before the internet was widely available, I truly appreciate how it has transformed the way we live today. In what feels like an instant it disrupted conventional commerce, communications, and social interactions, reduced costs, and leveled the playing field for all when it comes to information access. No other invention has touched the lives of almost the entire planet in such a short time as the internet. If the internet were to suddenly disappear – I believe we would struggle mightily.

What’s the most innovative decision your company has made? Tell the story behind it.

In 2017, we were rambling along and breaking our heads over the traditional form of collections. We seemed to be constantly editing strategies, competing in a tough mature industry, struggling with talent attraction & retention, navigating compliance and regulations. There had to be a different way. We were fortuitous to be given an opportunity to build a disruptive white-labeled digital collections product from scratch. It got our creative juices in overdrive and the next 16 weeks were amongst the most memorable in our careers. We utilized the methodology described above and were able to launch a non-invasive, fully automated, and intuitive collections product that we believed would define the future of our industry. Every key metric from customer experience, negotiations, compliance, data reconciliation, and special circumstance management was mapped against process failures. This product allows us to do away with outbound calling altogether, which is a major milestone for the collections experience!

Firstsource is one of two lead sponsors of iA Strategy & Tech, a digital conference produced by insideARM for creditors, lenders, collection agencies and other stakeholders in the collection ecosystem. Attend iAST July 13-15, 2021 from your desk to learn the latest trends in collections strategy, get a bird’s-eye view of the industry through data, learn about new and sophisticated ways to minimize losses, and vet the latest in strategy-enhancing industry tech. Plus, connect with the smartest executives in strategy. 

What current industry problem do you think will require the most innovative solutions?

Digital Engagement, defined as the percentage of customers who prefer to be contacted electronically over traditional means. This is measured in eyeballs, clicks, and page visits. As creditors and servicers move along in the digital journey, we will tackle evolving customer preferences and a need for personalization. Today, depending on the nature of credit, size of balances, and credit scores, we see digital engagement vary widely across products between 30-85%. The most innovative solutions will require modern machine learning and AB testing while balancing empathy and urgency in our digital outreach. The data around this is nascent and the ML tools in use today barely keep up with a good manual collections strategy. Further innovations in AI/ML that better predict customer preferences will help us achieve the desired state configuration of the future.

Finish this sentence in the context of the industry: What if…

What if customers’ preferred payment choices were cryptocurrencies?

With greater adoption and as more businesses begin to accept these under-regulated decentralized payment mechanisms, there could be a point in the future where cryptocurrency becomes a part of the mainstream. If there is a value proposition for the common person in transacting via this method, that date will come sooner rather than later. How do we as an industry respond?  The flimsy regulations, uncertain jurisdictions, and tax liabilities currently in force for this sector will pose a challenge.

As with everything this industry has faced; despite all the limitations, challenges, negative perceptions, and draconian regulations, I am sure we will find a way.

The iA Innovation Council is a collaborative working group of product, tech, strategy, and operations thought leaders at the forefront of analytics, communications, payments, and compliance technology. Group members meet in person (and lately, virtually) several times each year to engage in substantive dialogue and whiteboard sessions with the creative thinkers behind the latest innovations for the industry, the regulators who audit and establish guardrails for new technology, and educators, entrepreneurs and innovators from outside the industry who inspire different thinking. 

2021 members include:

COLORADO SPRINGS, Colo. — Reliant Financial Services LLC (RFS) recently announced that Ben Moulton has joined the company’s executive team as Vice President of Sales and Business Development. Moulton brings with him a distinguished background in senior-level sales and customer success roles, including 18 years of experience with a leading accounts receivables management technology company. 

“I’m excited about the timing of joining the company,” Moulton said. “We have specific goals around growth that I’m excited to help contribute towards. I also look forward to forging long-lasting relationships with my teammates and our customers.”  Our owners truly care about doing what is right in every aspect of our business. I’m very grateful and humbled to join their team.

Moulton’s receivables management experience includes working with large companies in the healthcare and financial services industries. He’s also managed customer relationships with a national strategic customer base developed through long-term consultative engagements.

“As a results-driven leader in sales and business development, RFS is thrilled to welcome Ben to the team,” said Reliant CEO Tracey Cannella. “His background and passion for partnerships and relationships will be an asset to the growth of RFS as well as its client partners.” 

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About Reliant Financial Services

Reliant Financial Services LLC is a full-service, exclusively healthcare accounts receivable management company that provides cost-effective methods of early-out, self-pay accounts and insurance recovery services. RFS specializes in insurance eligibility programs, charity processing, patient billing and follow-up, business office outsourcing and other customized patient financial services products. Our commitment to excellence is realized through partnership with our clients, an ongoing investment in cutting-edge technology and in the underlying mission to serve the financial needs of the patient.

There has been an explosion of data science* and machine learning** tech designed for ARM / collections companies and those companies are definitely paying attention. According to a 2020 trends survey from Interactions, over half of ARM participants think of themselves as “innovative” or “disruptive.” What most companies mean by this is that they have invested (or would like to invest) in the tools that define “innovative” and “disruptive” in 2021: data science, machine learning, and AI.

But here’s the thing many of these organizations may not understand: no company can realize the promise in those tools unless they have a solid foundation in basic data hygiene

The Path to Innovative Starts with Basic

What do I mean? Let’s rewind *an undisclosed number of years* to your high school psychology or undergraduate Psych 101 class. Remember Maslow’s Hierarchy of Needs? Maslow’s Hierarchy arranges needs in a pyramid that goes from basic at the bottom to self-actualized at the top. The main point here is that no one can expect to fulfill a top need – like realizing one’s full creative potential – if they’re lacking in basic needs from that bottom tier – like food, water and shelter.

You can’t have a real-time, cloud-based machine learning algorithm that predicts and delivers “right time, right message, right channel,” if you don’t first meet your basic needs of gathering, storing and cleaning your data

Just as you can’t achieve “self-actualization” in your personal life if your basic needs aren’t met, you can’t realistically aspire to a the data science equivalent of “self-actualization” – a real-time, cloud-based machine learning algorithm that predicts and delivers the “right time, right message, right channel” to optimize your collections netback – if you don’t first meet your basic needs of gathering, storing and cleaning your data. Monica Rogati makes this point more generally with her “Data Science Hierarchy of Needs,” a concept that heavily influenced this piece.

Data science is a discipline and a critical foundation for the successful deployment of machine learning and AI. (You can read more about this idea in a recent Harvard Business Review article and in a recent post on Medium.) Before ARM companies can get to that sexy AI ideal, they need to understand what these basic data needs and practices are, how far they are from meeting this critical standard, and what they need to do to get there.

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Where Most ARM Companies Are Now

Fortunately, the increased focus on compliance over the past decade in the ARM industry has forced players to improve documentation, logging, and storage of every interaction we have with our customers. As a result, most of us can feel comfortable moving up from the “collect” level into the “move/store” level. If you have multiple clients and/or lenders demanding increased transparency across your portfolio, you have probably also begun to invest in this storage and communication level. You have reporting in place to produce your monthly forecasts and meet client demands. You know which accounts are being called, emailed, texted, or lettered, how often, and exactly how much you can spend on these channels to turn a profit this month, this quarter, and maybe this year. You might even have controls in place to ensure this data is consistent and trustworthy over time. A “call” today is logged and stored the same as a “call” yesterday or a “call” a year ago.

This brings us to the precipice of the “explore/transform” level, and where I estimate the majority of ARM participants fall today. With that background and assumption, here are the 4 mistakes you’re probably making on your data science journey…and how to fix them.

Mistake #1: The Wrong Tool for the Job

The foundation for your data science endeavors must itself sit on a bedrock of well-defined use cases and a shared strategic vision for the direction of your organization. If your data science team (in-house or external consulting resources) doesn’t understand the vision, how an algorithm will be used to drive business strategy, and what the definition of success looks like, the effort is bound to fail. Worse yet, if you don’t understand the pain points in your organization, and where machine learning can add tangible value, then you’re embarking on a confusing, frustrating, and probably expensive journey. Return first to the simplest questions. What problems do you need to solve for your organization today, next quarter and a year from now? What problems can you solve for your client partners that they don’t know they need solved? Do you know whether and where you have the data you need to answer these questions? Assuming yes, are any of those problems really best served by a real-time, repeatable algorithm? Or are those problems best served with ad-hoc questions and analysis by a handful of analysts armed with basic SQL and Business Intelligence tools? (Power BI, Tableau) If your most pressing questions are in the vein of

• Which clients are your most profitable?
• How can you win more business from these clients?
• How do you win client scorecards?
• How do your RPC rates vary by: portfolio, phone provider, time of day?
• What device are customers using to access your website?
• What payment method results in the highest net collections?
• What payment plan offer generates the best payer rate?
• Which skip vendor returns the most actionable data?
• What is the most-asked question by your customers on the phone?

then you’re best served by investing first in data governance, controls, and an analyst workforce, not a machine learning model. Work towards making these analyses repeatable and distributable by building a foundation of reporting that answers these common questions. This will free your analysts to tackle the next set of problems and allow your strategic leaders to start making data-driven decisions. Only then can you progress to higher levels of data science.

Mistake #2: Tech Myopia

The fact is, no “hard” problem we in collections face today hasn’t already been solved by one of the tech giants. Google, Amazon, Facebook, and Apple have already figured out authentication, data privacy and security, combining siloed cross-channel data, channel optimization, frictionless payments, and all while delivering excellent customer experience. Their influence is felt now in the explosion of ARM tech we now see. We don’t need to re-invent these wheels for the collections space, we just need to re-frame our pain points more generally and approach them from the perspective that they’ve already been solved. The answer exists – it may just be in a different industry vertical than ours. Too often we close ranks and seek “previous experience in financial services” or “x+ years revenue cycle management expertise” in our job postings. Instead hire an analyst who isn’t afraid to look to other industries for inspiration and mentorship.

Mistake #3: Garbage In, Garbage Out

The “garbage in, garbage out” adage has never been truer than in applications of data science and machine learning. While it may be tempting to attempt to leap from where you are in the lower levels of your data science pyramid up to the pinnacle of machine learning, it’s simply not sustainable. You (or your newly hired analyst team) must put the work in to clean, prep, segment, and aggregate your data appropriately before attempting to deploy machine learning. Through this process of understanding your data you’ll likely uncover pockets of value just waiting to be discovered, as well as opportunities for cleansing and curating. I can almost guarantee you have data duplication and inconsistency across the various processes you have that touch phone numbers, for example.

The reality is that almost every machine learning solution, from pure coding to the “drag-and-drop” model building interfaces that many vendors sell, requires clean, curated data that fit together sensibly.

You may have heard terms like “data lake” and “unstructured data” and dreamed of dumping your existing disparate data sources into a vendor’s black box from which emerged a beautiful and accurate “ML” algorithm, but that simply isn’t the reality. The reality is that almost every machine learning solution, from pure coding to the “drag-and-drop” model building interfaces that many vendors sell, requires clean, curated data that fit together sensibly. Additionally, unless you opt for a truly black box solution, the output of machine learning solutions should almost always be evaluated by individuals with the proper subject matter expertise. A reliable machine learning solution is the product of having a team of analysts that can both build and understand your business’ datasets, not a way to bypass those steps altogether. Finally, a machine learning solution in production cannot exist without reliable data pipelines to feed the algorithm – even the most sophisticated model cannot add business value without a reliable source of data. A “hacked together” solution may work, but is doomed to eventual failure. Invest in the foundational levels of the pyramid – your analysts and your data professionals (DBAs, data engineers) – before you look to machine learning.

This is the computer science portion of data science and you cannot skip this step, nor should you want to.

Mistake #4: “Drive-Through” Analysis

Perhaps the most insidious mistake on this list is when companies convince themselves that these problems can be magically solved by an elite group of specialists within your organization (or by external consultants). In fact, even the most eminently qualified statistics PhDs will still have to spend considerable time and effort understanding basic aspects of the data, including where it lives, how it was generated, and how it fits together.

The job of making sense of the data cannot fall only to a “drive through” statistician or to a team of isolated analysts. You must drive a collaborative culture between your subject matter experts (at a minimum collections representatives, client relations, database administrators) and those tasked with building a model. Building models in a vacuum will cause dissatisfaction among all parties. The data science team will make incorrect assumptions about how the data was created and be forced to do a significant amount of re-work while the subject matter experts will be forced to use a model in which they don’t feel invested. Collaboration is king

Building a Data-First Culture

How can you avoid these mistakes? Surprise! The key to a sustainable approach to your data science journey is building a data-first culture and analyst workforce with domain expertise within your organization. I cannot stress enough the value that an analyst (or 5!) can bring to an organization. Hire a smart, curious analyst with a thick skin to poke at your data. Give them a pile of information, access to the subject matter/domain experts to help them make sense of what the data means and how it was created, permission to ask the “stupid” questions, time and space to make mistakes, and watch the magic happen. Even better, hire an analyst with no prior collections experience. Give your analysts a seed question, then let them form and test their hypotheses using outside ideas. Best yet, ask your analysts to validate or disprove your long held heuristic measures. Have them pit competing ideas against each other in A/B experiment tests, find the winner, then find the next problem. You may be surprised. Ultimately, your goal should be to empower your analysts to work together with your strategy and subject matter experts to build an understanding of what is happening in the organization, formulate and test new solutions and hypotheses to known problems, and fold the winning strategies into your business processes. Now all of a sudden, you’ve reached the “learn/optimize” level 5 of the pyramid.

How to Get to the Top of the Pyramid? Start at the Bottom.

After deploying your new army of analysts to find hidden waste, uncover pockets of value, and use these insights to hone your collections strategy through a robust experiment framework you should have some resources left over to pursue the pinnacle of the pyramid – unsupervised deep learning – if you choose. You may also decide that your organization isn’t yet ready or willing to move to this level whether for data quality, compliance risk, or engineering overhead/cost reasons. Returning to Maslow and Rogati, that top-of-the-pyramid data ideal isn’t a required step. It is aspirational. But if you want to get there, you have to solve your analyst problem first.

I hope you find this article helps you “Think Differently” about your organization’s needs and approach to integrating data science.

*I use the term “data science” to mean uncovering the value to your organization in your pile of data. Typically, this field sits at the intersection of business domain knowledge, computer science (coding), and statistics. Data science only truly exists when all three work together.

**I use the term “machine learning” to mean using computer power to identify patterns in data that are too complicated to be uncovered by human eyes. The output of machine learning is often a “model” or “algorithm” – an equation or system of equations that allow you to classify or predict an outcome based on the information you have available. There are a few methods to accomplish machine learning, but that isn’t prerequisite knowledge for this article.

 Bonus Reading:

“4 Ways to Democratize Data Science in Your Organization,” from the Harvard Business Review

“Data Scientists and ML Engineers Are Luxury Employees,” from Towards Data Science

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iA Innovation Council is a collaborative working group of product, tech, strategy, and operations thought leaders at the forefront of analytics, communications, payments, and compliance technology. Group members meet in person (and lately, virtually) several times each year to engage in substantive dialogue and whiteboard sessions with the creative thinkers behind the latest innovations for the industry, the regulators who audit and establish guardrails for new technology, and educators, entrepreneurs and innovators from outside the industry who inspire different thinking. 

2021 members include:

Yesterday, we told you about a lawsuit that had been filed challenging the constitutionality of Nevada’s new medical debt collection law (SB 248) which goes into effect July 1, 2021.  The lawsuit asks the District Court of Nevada to declare SB 248 is unenforceable and grant preliminary and permanent injunctive relief. Yesterday afternoon the federal court set some deadlines related to the filing. 

Noting that the lawsuit and motions raise “very substantive issues,” the court has allowed the state of Nevada until July 9, 2021, to respond to the motion for preliminary injunction requested by the plaintiffs, who will have until July 16, 2021to reply. The Court will hear arguments regarding the motion for preliminary injunction and emergency motion for temporary restraining order filed by the plaintiffs on July 27, 2021. 

insideARM Perspective:

Since the federal court won’t hear arguments about SB248 until late July, accounts receivable entities should be prepared to comply with the law this coming Thursday, July 1, 2021.   We will continue to keep you updated as this lawsuit makes its way through the court.  

Earlier this month, the State of Nevada passed a law to regulate medical debt collection (SB 248).  The hastily passed new law, which goes into effect July 1, 2021, is, as we say in the south, clear as mud. Of course, some might say using the word “clear” in the same sentence as SB 248 is too generous, and they wouldn’t be wrong.

On June 25, 2021, due to the lack of clarity in SB 248, a group comprised of collection agencies, law firms, and industry associations (plaintiffs) filed a lawsuit against Sandy O’Laughlin in her capacity as Nevada State Commissioner. The lawsuit asks the District Court of Nevada to declare SB 248 is unenforceable and grant preliminary and permanent injunctive relief to stop the enforcement of SB 248 because (a) it violates the U.S. Constitution, and (b) its provisions are preempted by federal law.  More specifically, in addition to several constitutional arguments, the plaintiffs allege that SB 248 is (a) impermissible and unconstitutionally vague; (b) preempted by the Fair Debt Collection Practices Act (FDCPA); (c) preempted by the Fair Credit Reporting Act (FCRA). 

To illustrate that the law is impermissibly vague, the plaintiffs allege that SB 248:

• Fails to define numerous key terms, including the phrase “action to collect a medical debt” while at the same time prohibiting such “actions.”
• Is silent as to what a debt collector may or may not do when a certified letter required by the law is returned undeliverable or is refused by the intended recipient.
• Allows a consumer to make a voluntary payment under certain circumstances but fails to address whether a voluntary payment can be accepted from a third person acting on behalf of the medical debtor, such as an insurance company.
• Requires the debt collector to make certain disclosures when accepting a voluntary payment, but fails to state whether the requirement applies to mailed-in payments when a debt collector does not have the opportunity to make these disclosures.
• Conflicts with its own language since it simultaneously requires a debt collector to identify the medical provider “for which the medical debt is owed” yet also requires debt collectors to state the debt “is not demanded or due.”
• Fails to address whether the law applies to attorneys.
• Does not state whether it applies on a forward basis or retroactively.
• Conflicts with other existing Nevada law provisions, including provisions requiring a debt collection agency to send certain disclosures to medical debtors within five days of the initial communication.

In support of their assertion that SB 248 is preempted by the FDCPA, the plaintiffs allege that SB 248 is inconsistent with the FDCPA because it:

• contradicts with the FDCPA’s required Mini-Miranda disclosures, both in the initial communication and in subsequent communications.
• Interferes with the FDCPA’s required validation notice.
• interferes with a debt collector’s Express federal rights to engage in debt collection and communicate with debtors after sending the validation notice.
• prevents a debt collector from providing verification of a debt, thus hurting Nevada consumers.
• Places debt collectors at risk of forced misrepresentation under the FDCPA.

In support of their assertion that SB 248 is preempted by the FCRA, the plaintiffs allege that SB 248 is inconsistent with the FCRA in the following respects:

• Its prohibitions on credit reporting differ from the FCRA’s detailed and comprehensive statutory scheme.
• Its restrictions and prohibitions actually violate the FCRA, which expressly preempts any state law “with respect to any subject matter” concerning credit reporting.
• It interferes with and undermines the purpose of the FCRA by preventing accurate information from being furnished timely.

Finally, plaintiffs alleged SB248 constitutes a prior restraint on constitutionally protected free speech and violates the equal protection clause of the United States Constitution.

insideARM Perspective:

The thoughts we shared on SB 248 have not changed since we published them in this article on June 9, 2021. The law is extremely ambiguous (to put it kindly) and has very little guidance regarding what a collection agency can or cannot do. 

However, what is clear from the law is that the Nevada legislature intended to help medical debtors. Unfortunately, the failure to define basic elements of the law and failure to address SB 248’s interaction with long-standing federal law will cause significant harms to consumers, including the following:

• By failing to define “action to collect a medical debt,” it prohibits collection agencies from responding to non-payment-related inquiries from medical debtors. Thus, consumers will not receive timely responses to legitimate questions.
• By failing to address and outright conflicting with the FDCPA, it deprives medical debtors of notice of their federal debt collection rights. Thus, based upon receipt of the 60-day notice letter required by SB 248, consumers may choose to voluntarily pay a debt without knowing they had any federal rights at all.
• It will harm medical debtors who attempt to pay via mail during the 60-day notice period. SB 248 does not allow collection agencies to deposit voluntary payments without providing certain disclosures. Therefore, collection agencies must either (a) return payments to consumers asking them to incur a second mailing cost if they truly wish to pay; or (b) delay depositing payments until disclosures are provided, delaying the withdrawal from the consumer’s account.
• The credit reporting disclosure requirements will cause undue stress to consumers if the collection agency will not be reporting the debt. Specifically, the verbiage of section 7.5 requires collection agencies to imply that the debt will be reported after 60 days, which may not be accurate, causing harm to consumers.
• Failing to clarify the effective date will cause inconsistencies in debt collection, confusing consumers.

Hopefully, the Nevada District Court will be able to see the numerous flaws with SB 248.  We will keep you posted as this litigation progresses.  

The Supreme Court has made its opinion clear: “No concrete harm, no standing.”  On June 25, 2021, in an opinion that is sure to influence litigation in the credit reporting and debt collection spheres, the Supreme Court held that a plaintiff who cannot show a statutory violation harmed them lacks standing to bring a lawsuit under Article III of the U.S. Constitution.

What is Article III Standing?

To establish standing to bring a suit in federal court, a plaintiff must show (i) that he suffered an injury-in-fact that is concrete, particularized, and actual or imminent; (ii) that the defendant likely caused the injury; and (iii) that the injury would likely be redressed by judicial relief.  Put another way, Under Article III, federal courts do not adjudicate hypothetical or abstract disputes.

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The Facts:

In 2011, Sergio Ramirez, accompanied by his wife and father-in-law, sought to buy a car. When he was ready to complete his purchase, the dealership ran his credit report. The report produced by TransUnion contained this alert “OFAC ADVISOR ALERT- INPUT NAME MATCHES NAME ON THE OFAC DATABASE.” The dealership then told Mr. Ramirez that it would not sell him the car because his name was on a “terrorist list”; Mr. Ramirez’s wife then purchased the car in her name.

The next day Mr. Ramirez called TransUnion and requested a copy of his credit file.  The same day TransUnion sent him a mailing that included his credit file and the statutorily required summary of rights prepared by the CFPB. This mailing did not mention the OFAC alert in Mr. Ramirez’s file. The next day, TransUnion send Mr. Ramirez a second mailing which alerted him that his name was considered a potential match to names on the OFAC list but did not include an additional copy of the summary of rights. Concerned about these mailings, Mr. Ramirez contacted a lawyer and ultimately canceled a planned trip to Mexico.  TransUnion eventually removed the alert from Mr. Ramirez’s file.

The Case Background:

In 2012, Mr. Ramirez sued TransUnion for alleged violations of the Fair Credit Reporting Act (FCRA). Specifically, he alleged that (a) TransUnion failed to follow reasonable procedures to ensure the accuracy of the information in his credit file; (b) failed to provide him with all the information in his credit file upon his request; and (c) violated its obligation to provide him with a summary of his rights with each written disclosure. Mr. Ramirez also sought to certify a class of all people in the U.S. to whom TransUnion sent a mailing from January 1, 2011 to July 26, 2011 that was similar to the second mailing Mr. Ramirez received.

TransUnion opposed certification, but before the trial stipulated that the class contained 8,185 members, however of those, only 1,853 class members had their credit reports sent to a third party during that period. The District Court ruled that all 8,185 class members had Article III standing. After a trial, the jury returned a verdict for Mr. Ramirez, which also awarded each class member statutory and punitive damages. TransUnion appealed, and the 9^th Circuit Court of Appeals affirmed the District Court’s decision.

The Supreme Court’s Ruling:

In a 5-4 decision, in an opinion written by Justice Kavanaugh, the Supreme Court of the United States succinctly held, “No concrete harm, no standing.” In reaching this decision, the court relied heavily on Spokeo v. Robins, 578 U.S. 330 (2016), which indicated that to determine if a plaintiff has Article III standing, courts should assess whether the alleged injury to the plaintiff has a close relationship to a harm traditionally recognized as providing a basis for a lawsuit in American Courts. Per the court, although Spokeo does not require an exact duplicate in American history and tradition, “it is not an open-ended invitation for federal courts to loosen Article III based on contemporary, evolving beliefs about what kinds of suits should be heard in federal court.” 

As it analyzed the standing issue, the court noted that there is an important difference between the plaintiff’s statutory cause of action to sue a defendant over a violation of federal law and a plaintiff’s suffering a concrete harm because of a violation of federal law. Per the court, “under Article III, an injury in law is not an injury-in-fact.” The court theorized,

“If the law of Article III did not require plaintiffs to demonstrate a concrete harm Congress could authorize virtually any citizen to bring a statutory damages suit against virtually any defendant violated virtually any federal law.”

In light of these legal principles, according to the Court, only the 1,853 members who had their credit reports submitted to third parties suffered concrete harm that qualifies as an injury-in-fact sufficient to have standing. Specifically, the court reasoned that those class members suffered a harm with a close relationship to the tort of defamation, which requires publication (i.e., distributing the report to a third party).

The court noted there is a difference between the credit files a consumer reporting agency maintains internally and those distributed to third parties. Thus, since publication is an essential part of a historically recognized action for defamation, the other 6,332 potential class members lacked standing since TransUnion did not distribute their credit reports to third parties. Comparing these facts to a situation where someone wrote a defamatory letter and stored it in a desk drawer, the court found that “the mere existence of inaccurate information in a database is insufficient to confer Article III standing.”

The 6,332 members argued that the existence of the misleading information was a concrete injury because it exposed them to a material risk that the information would be disseminated in the future. The court noted there was no evidence that any of the 6,332 knew there were OFAC alerts in their credit files and held, “the mere risk of future harm, standing alone, cannot qualify as a concrete harm.” Further, since none of the 6,332 class members demonstrated that alleged formatting errors in the mailings sent by TransUnion, the court found they lacked standing for that issue as well. Specifically, the Court stated that “[w]ithout any evidence of harm caused by the format of the mailings, they are bare procedural violations divorced from any concrete harm.”

Four Justices dissented in an opinion authored by Justice Thomas. The dissent disagreed with the majority, opining that the majority’s analysis actually ignores the Spokeo holding since every violation of a right granted by the law causes some damage. Further, the dissent pointed out that TransUnion had been sued for the same issue with the OFAC reports in 2005 and failed to fix the problem. Thus, in the dissenting Justices’ opinion, since the FCRA imposes a duty to use reasonable procedures to assure maximum accuracy in credit reports, and TransUnion knew since at least 2005 its procedures were lacking, all 8,135 class members had standing.

The case has now been remanded back to the 9^th Circuit Court of Appeals.

insideARM Perspective:

Although this case certainly clarified that a plaintiff needs to show an actual harm and not just the potential for harm, it’s important to note that this opinion applies to standing in federal court. While this opinion has the potential to make waves in the accounts receivable industry, it may not decrease the overall volume of cases filed by consumer attorneys. Suits formerly filed in the federal court may make their way to state courts instead.

That said, entities on the receiving end of FCRA and Fair Debt Collection Practices Act (FDCPA) suits often question whether the consumer has actually suffered an injury. It remains to be seen whether this case will serve as a basis for a flurry of motions to dismiss in pending FCRA and FDCPA actions and how this may shake out in state courts. Accounts receivable entities should watch how this space develops, but like with everything in the accounts receivable sphere, whether an opinion is ‘good’ or ‘bad’ often depends on the passage of time and the cases which follow.

On June 25, 2021, in the case of TransUnion v. Ramirez, 594 U.S. ____ (2021), the Supreme Court of the United States issued an opinion that held, “No concrete harm, no standing.” Central to the issue in the Ramirez case was an analysis regarding the effect of publishing certain materials to third parties, which may directly influence the 11th Circuit Court of Appeals decision to rehear the Hunstein matter.

As everyone in the Accounts receivable industry is likely aware by now, on April 23, 2021, in the matter of  Hunstein vs. Preferred Collection & Management Services, Inc, 994 F.3d 1341 (11th Cir. 2021), the 11^th Circuit Court of Appeals held that transmitting data to a mail house to generate and send demand letters to consumers violates the prohibition on third-party disclosure set forth in 15 USCA § 1692c(b). The defendant has since filed a petition for rehearing en banc, and over 20 groups filed amicus briefs supporting the petition.

In footnote 6 of the Ramirez opinion, the Supreme Court rejected the plaintiff’s theory that TransUnion “published” information internally to employees within TransUnion and to vendors that printed and sent the mailings that the class members received. Within this footnote, the Court specifically held that American courts “have [not] necessarily recognized disclosures to printing vendors as actionable publications.” It concluded by stating, “In short, the plaintiffs’ internal publication theory circumvents a fundamental requirement of an ordinary defamation claim—publication—and does not bear a sufficiently “close relationship” to the traditional defamation tort to qualify for Article III standing.”

On Friday, June 25, 2021, based on the Supreme Court’s language in Footnote 6 of Ramirez, the debt collector in Hunstein, Preferred Collection and Management Services, Inc. (Preferred), filed a notice of supplemental authority with the 11^th Circuit Court of Appeals. Within the Notice of Supplemental Authority, Preferred stated that in footnote 6, the Supreme Court implicitly recognized that providing information to a letter vendor is not a “publication” and does not cause an injury-in-fact sufficient to provide standing. Preferred further noted, “the opinion of the Supreme Court is controlling and further compels the necessity to grant a rehearing or a rehearing en banc…. Just as the class members in Ramirez did not suffer an injury-in-fact from the processing of internal communications, nor has [Hunstein].”

insideARM perspective:

Footnote 6 of the Ramirez opinion echoes the opinion of many in the accounts receivable industry. On its face, it seems to contradict the opinion of the 11^th Circuit Court of Appeals in Hunstein. Hopefully, the 11^th Circuit will take notice of footnote 6, and the Ramirez decision will help undo the disaster commonly referred to as Hunstein.  We will continue to keep you informed as this progresses.

ST. LOUIS, Mo. — Credit Control, LLC (“Credit Control”) is proud to announce its first-place ranking in the “2021 Best Places to Work in Collections”. This is the company’s second time participating in the program with back-to-back selections and the first time being ranked #1 overall in the large company category.  

The Best Places to Work in Collection Program, now in its 14th year, is administered by Best  Companies Group, which conducts over 60 local, national, and industry “Best Places” programs each year. This year, only 56 companies met the standard to participate in this survey which identifies,  recognizes, and honors the best places of employment in the Collections industry. 

The program includes a rigorous two-part blind survey process that evaluates each nominated company’s workplace policies, practices, philosophy, systems, and demographics. The second part consists of an employee survey to measure an employee’s satisfaction and overall experience with the company. Best Companies Group managed the overall registration, survey, and analysis process and determined the final rankings. The survey process included direct, unfiltered employee input and included all Credit Control locations across the country. 

Rick Saffer – President and CEO of Credit Control, made the decision to participate based on the independent review process ran by the Best Companies Group. He commented, “Since 2011, we have performed our own internal employee surveys with very positive results. This program gave us the opportunity to participate in an independent survey, and we are humbled by the results. Our leadership team strives to build a culture that is diverse, cohesive, and founded on trust and teamwork. It is extremely rewarding to see this hard work be recognized with a positive response  from our employees.” 

For more information on the Best Places to Work in Collections program, visit this link.

For more information on Credit Control, LLC and how it serves its clients, please click here. 

About Credit Control, LLC

Headquartered in St. Louis, MO, Credit Control, LLC is a recognized leader in recovery solutions. Since 1989, Credit Control has served a wide variety of blue-chip clients through its four nationwide locations and a team of over 600 employees. The company is founded on its core values of providing strong customer service and exceptional recovery results for its clients; developing an employee culture that is built on trust, accountability, and clear communication; and creating solutions that utilize the latest technology.  

Credit Control’s recovery approach blends traditional collections with omnichannel communications in a fully compliant & customer-centric culture. Credit Control maintains ISO/IEC 27001 certification,  audited SSAE-18 SOC 1 Type 2 and SOC 2 Type 1 reports, Level 2 PCI-DSS compliance, and secured systems. The company has received numerous awards for performance, compliance, and innovation from many of the largest creditors in the world. 

As an Equal Opportunity Employer, Credit Control is committed to fostering, cultivating, and preserving a culture of diversity, equity, and inclusion. Credit Control’s mission is to become the preferred supplier to industry leaders by providing the highest level of quality, compliance, and innovation while delivering top-tier performance in a positive employee work environment. 

Company Contacts 

Paul Farinacci, Executive Vice President & Chief Marketing Officer  Direct: 818-720-6502 Email: pfarinacci@credit-control.com 

Marc Ross, Vice President of Marketing, Direct: 305-389-6235 Email: mross@credit-control.com 

Credit Control, LLC – Corporate Headquarters, 5757 Phantom Dr, Suite 330, Hazelwood, MO 63042  

Other Offices Include: Las Vegas, NV & Tampa, FL (2)