The U.S. Court of Appeals for the Eighth Circuit recently affirmed summary judgment in favor of debt collectors over claims of purported violations of the federal Fair Debt Collection Practices Act.

In so ruling, the Eighth Circuit concluded that the assignment of a contract from one debt collector to its successor entity put it into privity with the original collector’s agreement with a medical services provider to satisfy Minnesota’s third-party debt collector’s written contract requirements, and the successor entity could legally take action to collect that debt on behalf of the provider. 

The Eighth Circuit further concluded that the debt collectors did not threaten to take actions they could not legally take or attempt to collect a debt by unfair or unconscionable means in violation of sections 1692e(5) and 1692f(1) of the FDCPA, 15 U.S.C. 1692, et seq., because the Treasury Department regulations governing hospital facilities and organizations did not apply to the debt collectors.

A copy of the opinion in Klein v. Affiliated Group, Inc. is available at:  Link to Opinion.

A consumer obtained services from a healthcare provider, who denied her application for financial assistance to pay for her services. The healthcare provider retained a debt collector (“Debt Collector 1”) to collect the outstanding debt and sent a letter to the consumer in November 2017 informing her that “the below listed account(s) has been turned over to us by our client, who has given you an opportunity to satisfy this obligation” – without mention of the provider’s financial assistance policy.

In January 2018, all of Debt Collector 1’s contracts, assets, employees, obligations, and rights including its written agreement with the medical provider for debt collection services, were assigned or transferred to a successor entity (“Debt Collector 2”) and all accounts were consolidated under Debt Collector 2’s name. In March 2018, Debt Collector 2 sent a similar letter to the consumer seeking to collect the outstanding medical debt and omitting information regarding the provider’s financial assistance program.

At all relevant times, the provider was subject to the Minnesota Attorney General’s requirement to enter into written contracts with any third-party debt collection agency, which required the debt collectors to comply with federal law, and the provider to confirm that patients are provided reasonable opportunity to apply for charitable care or other need-based relief.

The consumer filed suit against Debt Collector 1 and Debt Collector 2 (the “debt collectors”) arguing they violated the FDCPA by (i) failing to have a written contract with the provider as required, (ii) failing to include information about the provider’s financial assistance program in the November 2017 and March 2018 letters, and (iii) false, deceptive, or misleading information in the March 2018 letter.

The trial court granted the debt collectors’ motion for summary judgment, entering judgment in the debt collectors’ favor and against the consumer.  The instant appeal followed.

On appeal, the consumer first argued that the trial court erred by granting summary by improperly relying on disputed facts — specifically, that the records did not evidence a merger between the debt collectors, and thus, no contract existed between the provider and successive entity, Debt Collector 2.

Although both sides argued over facts related to the integration and assignments of contract rights between the debt collector entities, the Eighth Circuit reasoned that the issue of whether there was a formal merger was not material if the assignment of contract rights from Debt Collector 1 to Debt Collector 2 created a contract between the provider and Debt Collector 2 to satisfy the state’s written contract requirement.

Here, in accordance with Minnesota contract law and assignment, the Eighth Circuit determined that because the trial court established that there was a written agreement between the provider and Debt Collector 1, that the assignment placed Debt Collector 2 into privity with the original parties.  Cascades Development of Minnesota, LLC v. National Specialty Insurance, 675 F.3d 1095, 1099 (8th Cir. 2012) (quoting Illinois Farmers Ins. Co. v. Glass Serv. Co., 683 N.W.2d 792, 803 (Minn. 2004)) (emphasis omitted) (an assignment “place[s] the assignee in the shoes of the assignor, and provides the assignee with the same legal rights as the assignor had before assignment.”).  Accordingly, no dispute over a material fact existed on this issue and entry of summary judgment was appropriate.

Next, the consumer argued that the March 2018 letter’s representation that the provider “turned over” her account to Debt Collector 2 violated the FDCPA’s prohibition against false, deceptive, or misleading information (§ 1692e) because her account was either never turned over or at most assigned to Debt Collector 2 when it sent the March 2018 letter. 

This argument also was rejected by the Eighth Circuit based upon its determination that Debt Collector 2 was the valid assignee of the contract between the provider and Debt Collector 1, and thus could legally take action to collect the debt on the provider’s half. 

Even viewing the claims under the lens of the unsophisticated consumer, the purportedly violative language would not be considered false or misleading by a reasonable jury because the November 2017 and March 2018 letters contained identical language and disclosures of the amounts and owners of the debt, and even included the same contact information and administrator’s signature.

Lastly, the Eighth Circuit considered the consumer’s claims that the debt collectors violated § 1692e(5) and § 1692f(1) of the FDCPA by attempting to collect her debt without notifying her of North Memorial’s financial assistance policy.

The trial court concluded that because the debt collectors “are not hospital organizations” and “do not operate hospital facilities” that the Treasury Department regulations requiring the provider to include its financial assistance policy in its billing statements did not apply.  The consumer argues that this interpretation of Section 1692e(5) (which prohibits debt collectors from making a “threat to take any action that cannot legally be taken or that is not intended to be taken”) and Section 1692f(1) (outlawing “unfair or unconscionable means” of debt collection, including collecting “any amount” unless “such amount is expressly authorized by the agreement creating the debt or permitted by law”) improperly allows a debt collector to engage in an activity the original hospital creditor could not.

The Eighth Circuit sided with the trial court, concluding that the provider assigned only its ability to collect debt to the debt collectors, and not its medical billing function, and that the FDCPA does not impute the provider’s requirement to comply with the Treasury Department’s medical billing regulations to debt collectors. 

Accordingly, because the debt collectors did not violate the FDCPA, the Eighth Circuit held that the trial court did not err in granting summary judgment and judgment in their favor was affirmed.

In this episode, Stephanie Eidelman, insideARM President & CEO, interviews Dave Pauken, CEO of Convoke. Watch Stephanie’s conversation with Dave, or read it below.

Stephanie Eidelman:

Hello and welcome. I’m Stephanie Eidelman, President and CEO of insideARM, and the iA Institute. I’m here today with Dave Pauken, CEO of Convoke for our latest Executive Q&A. So Dave, welcome. And why don’t we start out with …just define your market for Convoke. Who are your customers?

Dave Pauken:

Thanks, Stephanie. It’s a pleasure to be with you here today. Convoke’s market is credit issuers who loan money to consumers and use third-party debt collectors — and that would include collection agencies, collection attorneys; if they sell debt, debt buyers, or have consumers who end up with debt settlement agencies. That’s our market.

Stephanie Eidelman:

Okay, terrific. Now that we’ve established that, let’s go to the next step. What are the pain points that you solve for your customers?

Dave Pauken:

The pain points we solve for credit issuers who use third-party collectors relate primarily to two areas. When they’re using third parties, they’ve got to get information to validate the debt to these third parties. And that’s often a complex process with numerous artifacts, statements, terms and conditions, and applications that need to be provided to these third parties. On the other side, they have a business and a regulatory requirement to oversee these third parties, their collection performance, how they’re managing compliance with business standards, and how they’re managing compliance with regulatory requirements — all of which involve obtaining information from that third party. So they can measure these performance activities.

Stephanie Eidelman:

Okay. Excellent. So, and gosh, today with the new developments of potentially the Hunstein case and regulation F, obviously this becomes even more important, all that third-party oversight.

Dave Pauken:

It does, it does become important. The regulatory community made it clear, I think around 2012, that credit issuers had responsibility for the activities of these third-party collectors. And so that created a business problem for them. And how were they going to efficiently and effectively do that oversight? And Convoke has solved that problem through some sophisticated data engineering, where we obtain daily evidence of the collection activity. And that evidence manifests itself either in data, there are hundreds of different types of data fields, whether it’s a phone call or a text or a DMDC scrub, a military scrub, a bankruptcy scrub, all of these activities are occurring every day. And the engineering involved to gather this information, standardize it and make it useful. So a credit issuer can make wise decisions on how the business is performing is a very difficult task that we saw.

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Stephanie Eidelman:

I suspect that one of the pain points generally is that all this information probably exists, but it’s in disparate systems, different databases managed by different organizations, and hard to pull together when needed.

Dave Pauken:

That’s a really good point. Take a typical credit issuer that’s got 10 collection agencies. They might have 20 collection attorneys that work for them around the country. So here, they’ve got 30 different businesses that are using 30 different systems and have their own nomenclature and business process internally. And so you can very quickly imagine the challenge involved to perform the business and compliance oversight for those 30 different systems. And Convoke has built a very elegant solution for these third parties to easily upload this information in a secure manner and communicate it back to the credit issuer in a way that they have business intelligence that is actionable, to monitor the performance of these third parties.

Stephanie Eidelman:

Okay. All right. Let’s talk about regulation F. What parts of the new CFPB rule can Convoke help creditors issuers with?

Dave Pauken:

Yeah, there’s a lot to that rule, right? It’s over a thousand pages, but let’s bring it down into three buckets. One of them is communication caps. The second one would be communication preferences and the third would be the debt validation tear-off. So those would be three areas. Let’s, let’s go through each one of them briefly. On communication caps, we all know there’s a seven-call limit on a seven rolling day, and that’s a hard cap. And then there’s a soft cap on total communication attempts, whether it be text chat, email. So credit issuers want information on compliance with that requirement. And all these third parties are using dialers or other mechanisms to make calls and various software products to be emailing, texting, and chat.

We gather that information and present it to the credit issuer in a way that they can monitor the compliance with those communication caps. Similarly, for communication preferences, there’ll be a time, day, place, other preferences that consumers will have, as well as medium. Do they want email, chat, or phone? All of that will be housed within the collection systems or dialer systems of third-party collectors. And again, that will be uploaded to Convoke so the credit issuers can monitor the compliance with those communication preferences. And then finally, on the debt validation tear-off, those will come into the agencies or the attorneys, and that will kick off a process for either a fraud investigation or a debt validation process. That again needs to be monitored and we’ll have a clock to it. And we’ll provide that information to the credit issuer so they can ensure that the third party is meeting their responsibilities to respond to that tear-off.

Stephanie Eidelman:

How does Convoke get the communication instance data from all of the disparate systems? Is there an API feed, do you have to work with every single agency to accommodate that data standard?

Dave Pauken:

Good question. So over the years, we have developed a process that involves the combination of batch or in certain cases, API uploads, onto Convoke. There are over 350 third parties now on our platform. And daily, they are uploading information out of their dialers or out of their collection systems, or out of their media management systems. The various systems that third party collectors use to conduct their business we’ve identified and work with them on the data and the artifacts that credit issuers want to see to monitor the business performance and compliance with existing regs and soon to be Reg F. And this is extracted each day by these third parties and uploaded securely onto our servers.

Stephanie Eidelman:

Okay. So you’re just taking the place of what they would have had to do direct to the creditor. You’re basically acting as the creditor’s system.

Dave Pauken:

Absolutely absent Convoke, credit issuers who don’t use us and third parties who don’t use us, they have other systems and processes to convey this information. Our thesis is we can do it better, faster, cheaper, and in a systemic standardized way. Often third-party collectors will ask us to work with other credit issuers to get them on Convoke because you can imagine a typical collection agency that’s working for 20 different credit issuers, and there are 20 different processes and procedures that they have to manage to convey information. And if they could just do it in a standardized way through Convoke to communicate with all their credit issuers, it makes their life easier, lowers the error rate, and increases performance for them.

Stephanie Eidelman:

Right. If everybody would only just use the same system, people could probably deal with whatever that system was. Okay. So it sounds like you’re almost a core utility for issuers. I know that issuers generally don’t make a significant technology move without consulting their regulators. What process do you go through to onboard a new client? It must be a long one.

Dave Pauken:

Yeah, it is a long process. And you’re right. We are a core utility to a credit issuer. They’re using us every day. We become one of the main systems that they use to monitor and manage third-party collections. Many creditors use a recovery management system and they’ll also use us, which we’ll refer to as a collection intelligence system that sits alongside that recovery management system. And when they think about adoption, it does involve compliance risk, and the business to make a decision on whether or not to adopt Convoke because, in the end, they do need a system and a platform that meets their business and compliance requirements. And that’s typically the process. It takes a long time, and credit issuers, once they adopt, typically will start in one or two areas initially. Either, say, debt validation, where that’s a pain point for them, or legal collection oversight. And then over the years, adopt other features and functionality that we have to help them manage and monitor their performance. We’re in a unique position where we solve problems that consumers care about, credit issuers care about, third-party collectors care about, and regulators care about.

Stephanie Eidelman:

Isn’t that fun to have a consensus? That doesn’t happen very often. All right, let’s go to something even more fun. Any predictions for the next six or 12 months for our industry?

Dave Pauken:

Sure, I’ll make some predictions. So volumes are depressed generally, but collection dollars have been high for many reasons that we’re all aware of; the additional cash that consumers have because they’re not out spending at the restaurants and movie theaters, and government stimulus. So I think that trend continues for a while. Volumes will stay low, but collections will remain robust. I think that in some form or fashion Regulation F will go through. Perhaps some of the regulators, the CFPB may do some amendments to it, but what I’m hearing is in some form or fashion, it will likely go through. And I think the transformation to digital is an important element. This industry is adopting digital collection strategies, email chat, text portals in a way that previously had not happened. And maybe the pandemic furthered them along.

So that creates some new challenges. Collecting money digitally is different than collecting it over the phone. And so I think there’ll be some adaption that has to occur across the industry for collectors learning these new ways to collect and then for credit issuers overseeing and monitoring that. So they can optimize the performance of their third parties and compliance. Our role in that will be attaining all of the evidence and actions of these digital collection means and presenting it to a third party or to a credit issuer so it’s useful for them. That will be our role in this transition.

Stephanie Eidelman:

Got it. Well, fabulous. I think we’ve reached the end of our stay so folks can move onto their next thing during the day. So thanks so much, Dave. And just before we sign off, if people want to learn more about Convoke, where can they do that?

Dave Pauken:

They can come to www.convokesystems.com and there’s full contact information and we’ll get back to you.

Stephanie Eidelman:

Terrific, thanks. It was a pleasure and I look forward to talking to you the next time.

Dave Pauken:

Thank you, Stephanie.

So I put these thoughts together for my friends at the MBA over the weekend but there’s no reason not to share them more broadly–always happy to discuss.

Let’s state it as simply as possible.

Spokeo says an injury is only “concrete” if it actually exists. That is, only if there is an injury in fact.

Injuries can be tangible or intangible–and even the risk of injury is a form of injury–but no matter what a mere statutory violation without any injury cannot afford standing.

The violation of some statutes will automatically cause an injury-intangible or otherwise. This occurs where there is no “gap” between the protection afforded by the statute and the underlying harm the statute seeks to protect.

Where there is a gap–such as where a violation of a statute’s provisions do not necessarily cause harm–allegations of actual harm are required. This is true regardless of whether the purported harm is tangible, intangible, or just a risk of harm.

In the setting of an intangible harm there is a second issue as well: is the harm the sort that Congress even has the right to “elevate” to a right of action to begin with (i.e. was it historically protected such that an intrusion on the intangible harm raises a case or controversy). If not, then there is no actionable intangible harm and there can be no claim and Congress just wasted its time. If so, then an injured party may make use of the private right of action to redress the intangible harm he/she suffered– but only if he/she actually suffered that harm.

The Hunstein decision erred by failing to consider whether or not actual harm occurred as a result of the statute. It found that a violation of 1692 can–sometimes–cause intangible harm. And then it stopped.

Not cool.

The proper second step of the analysis was to query whether the intangible harm the 1692 sought to prevent actually occurred as a result of the specific statutory violation at issue in Plaintiff’s case. This second step is necessary because not every violation of 1692 will cause harm–a fact the Hunstein panel remarkably admitted later in the ruling. But because not every violation of 1692 will cause intangible harm, allegations of actual harm are needed.

In a sentence: the Hunstein panel erred by applying a different test to “intangible harm” than to tangible harm and assumed that the violation of a statute that protects intangible harm always affords standing. But that is not, at all, what Spokeo says.

Interestingly, its not even what Eleventh Circuit law says. In Nicklaw v. Citimortgage, Inc., 839 F. 3d 998, 1002 (11th Cir. 2016) the Court recognized that even in the context of purported intangible harm “the relevant question is whether [a plaintiff] was harmed when this statutory right was violated.” This is true even where a statute can–at times–protect from intangible harm.

And assessing whether or not an intangible harm actually occurred turns on context and the facts of each case. This is a qualitative assessment, as yet more Eleventh Circuit Spokeo case law teaches us.

In Salcedo v. Hanna, 936 F. 3d 1162 (11th Cir. 2019), for instance, the Eleventh Circuit observed that the privacy rights historically protected by Congress differed qualitatively from the injury Plaintiff claimed to have suffered. See Salcedo at 1172 (“inconsequential annoyance are categorically distinct from those kinds of real but intangible harms. The chirp, buzz, or blink of a cell phone receiving a single text message is more akin to walking down a busy sidewalk and having a flyer briefly waived in one’s face. Annoying, perhaps, but not a basis for invoking the jurisdiction of the federal courts. All told, we conclude that Salcedo’s allegations do not state a concrete harm that meets the injury-in-fact requirement of Article III.”)

The circumstances in Hunstein are similar.

Yes, public disclosures of private facts has long been barred by privacy law. But private disclosures of private facts are not—unless the facts are untrue. Plus public disclosures must be “highly offensive.” In Hunstein the Plaintiff’s data was shared only with a mail vendor and only for one purpose– to send him some mail. So there was no public disclosure of private facts and the private facts disclosed were accurate. Plus the disclosure was made to an interested party to facilitate a lawful activity. There is zero corollary common law protections for this sort of “disclosure” and zero real world harm resulted.

This is less than a “chirp” or a “buzz.” This is the tree you didn’t know fell in a forest you never heard about.

Its the classic “zip code” case. And ya’ll Spokeo nerds know what I’m saying.

As was the case in Hanna, therefore, just because some disclosures by a debt collector may call to mind the historical protections of common law (such as where a debt collector supplies false information to a vendor or truly publicizes, in an offensive manner, truthful information) that doesn’t mean that all Plaintiffs can sue for a violation of 1692. Hunstein’s injury was qualitatively different.

So he suffered no intangible injury-in-fact.

So he lacks Article III standing.

But that’s the easy part.

Now the interesting question…can he sue on his federal claim in state court?

Show Notes:

On this episode of CreditEcoToGo, former CFPB Deputy Director, Tom Pahl, stops by to talk about Regulation F. Tom has been the point person on debt collection policy while serving at both the FTC and the CFPB. The final debt collection rule was a decade in the making and Tom talks about the challenges faced by the Bureau and the evolution of the process which resulted in the final rule. Tom does not believe the rule will be rescinded or repealed but certainly changes could be made once a new director is installed at the CFPB. The final rule is not the end of the process. Tom encourages the industry to continually engage with the Bureau to ensure that the regulations fulfill its promise of protecting consumers while at the same time ensuring that the industry can comply.

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.

LITTLE CANADA, Minn. — Following the 11^th Circuit’s decision in Hunstein v. Preferred Collection and Management Services, Inc., a group of accounts receivable management (ARM) vendors quickly convened and formed a Print & Mail Coalition (the “Coalition”) to ensure alignment and a unified response to this significant industry ruling. This is the first time that these individual firms have joined together, acting not as individual firms or competitors, but as a powerful, collective force to promote a positive result for the overall ARM industry. The Coalition is currently working together to analyze the case, digest its potential impact, and determine effective strategies to help all clients adapt their business practices, as needed. 

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The Coalition supports the defendant’s request for a rehearing. To that end, the Coalition, with the assistance of well-known industry defense and compliance attorneys, intend to offer a strong legal response. The collective response will be documented in an amicus brief that will be presented to the court in support of a request for a rehearing. The group meets regularly to make certain its reasoning is accurate, effective, and aligned with the arguments of the defendant, the relevant trade associations, and the industry at large. Importantly, the Coalition is advocating for the print and mail industry and the clients it serves.

The Coalition is in direct communication with ACA International (ACA), the Receivables Management Association International (RMAI), and The iA Institute’s Consumer Relations Consortium (CRC). The goal is to ensure that Coalition efforts and positions are operationally and legally consistent with those held by these industry associations and their collective memberships.

The individual Coalition firms have been supporting their clients’ business objectives for years. While the firms often compete for business, they are united in supporting this critical effort as one voice. Although this case presents challenges, the Coalition expects to meet those challenges alongside their clients and as a partner to their success. The Coalition believes the ARM industry plays a critical role in the American economy and will remain unified and committed to legal and operational solutions that simultaneously promote business efficiencies and consumer protection. 

SACRAMENTO, Calif. — The California Department of Financial Protection and Innovation (DFPI) today announced the formal creation of its inaugural debt collection advisory committee, a seven-member board that will provide critical feedback to the Department as it stands up its debt collection licensing program. The diverse group includes a consumer advocate and representatives from the debt collection, debt-buying, third-party collection, and collection law industries.

The committee members represent a cross-section of interested candidates; five are industry representatives, one is a consumer advocate, and one is a law and economics professor who studies the industry.

• Elizabeth Gonzalez, Public Law Center
• Scott Hyman, Severson & Werson
• Mark Naiman, Absolute Resolutions Corporation
• Cindy Yaklin, States Recovery Systems Inc.
• Tamar Yudenfreund, Midland Credit Management
• Ohad Samet, TrueAccord Corporation
• Prasad Krishnamurthy, UC Berkeley School of Law

“I look forward to working with this group representing diverse stakeholders in the debt collection industry,” said DFPI Commissioner Manuel P. Alvarez. “The committee’s perspectives and advice will be critical in helping the Department effectively oversee debt collectors and protect consumers.”

The committee members were appointed by Commissioner Alvarez for two-year terms pursuant to Financial Code Section 100025 adopted by passage the Debt Collection Licensing Act (DCLA). The committee is slated to host its inaugural meeting on July 28, 2021 and is expected to meet twice per year or as needed. To learn more, visit: https://dfpi.ca.gov/dfpi-debt-collection-advisory-committee.

The DCLA was enacted in 2020 by passage of SB 908. The DCLA protects California consumers and provides the DFPI with licensing and examination authority over debt collectors, which includes debt buyers, operating in California.

The DFPI will begin accepting applications for debt collector licenses later this year. Under the new law, the Commissioner must review all companies applying for a debt collector license. Grounds justifying license denial include “any act involving dishonesty, fraud, or deceit, if the crime or act is substantially related” to the debt collection business and violations of any similar regulatory schemes. Furthermore, the Commissioner may revoke a license if the Commissioner determines that “any fact or condition exists that, if it had existed at the time that the licensee applied for the license, would have been grounds for denying the application.”

As of January 1, 2021, the DFPI is operating under the authority of the new California Consumer Financial Protection Law (CCFPL). The department has expanded supervision and enforcement powers to better protect California consumers, promote responsible innovation, reduce regulatory uncertainty for emerging financial products, and increase education and outreach to vulnerable groups.

In addition to regulating debt collectors, the DFPI licenses and regulates financial products and services, including state-chartered banks and credit unions, student loan servicers, commodities and investment advisers, money transmitters, the offer and sale of securities and franchises, broker-dealers, non-bank installment lenders, payday lenders, mortgage lenders and servicers, escrow companies, PACE administrators, rent-to-own contractors, credit repair companies, consumer credit reporting agencies, debt-relief companies, and more.

The CFPB has issued an interim final rule that requires “debt collectors” as defined under the FDCPA who seek to evict tenants for non-payment of rent to provide written notice to tenants of their rights under the Centers for Disease Control and Prevention (CDC) Order that establishes an eviction moratorium.  The interim rule also prohibits FDCPA debt collectors from misrepresenting tenants’ eligibility for protection from eviction under the moratorium.  The rule becomes effective on May 3, 2021 and comments on the rule must be submitted by May 7, 2021.

In its discussion of the rule, the CFPB states that the rule is based on its interpretation of FDCPA sections 807 and 808.  Those sections, respectively, prohibit a debt collector from using false, deceptive, or misleading representations or means to collect a debt and from using unfair or unconscionable means to collect a debt.

Disclosure requirement.  The CDC Order generally prohibits a landlord, owner of a residential property, or other person with a legal right to pursue eviction (including an agent or attorney acting on behalf of a landlord or owner) from evicting tenants for non-payment of rent in any jurisdiction in which the Order applies during the effective period of the Order.  The CDC Order has been extended three times, most recently through June 30, 2021.  To be eligible for the moratorium, a tenant must submit a written declaration attesting to certain eligibility criteria generally establishing that, because of the tenant’s financial situation, the tenant is unable to afford full rental payments and would likely become homeless or have to move into a shared living setting if evicted.

The rule prohibits a FDCPA debt collector from filing an eviction action for non-payment of rent against a consumer to whom the CDC Order may reasonably apply without disclosing that the consumer may be eligible for temporary protection from eviction under the CDC Order.  The disclosure must be clear and conspicuous and in writing and must be provided on the date the FDCPA debt collector provides the consumer with an eviction notice or, if no eviction notice is required by law, on the date the eviction notice is filed.  A FDCPA debt collector can provide the notice even if the consumer might not be covered by the CDC Order.  The commentary to the rule includes sample disclosure language that a FDCPA debt collector can use to comply with the rule’s requirement.  A violation of the disclosure requirement is deemed a violation of FDCPA Section 808.

The CFPB notes in its discussion of the rule that a large number of states and localities have adopted their own eviction moratoria.  It states that in light of this, the Bureau has not made a finding in the interim rule that it is unfair or deceptive under the FDCPA for a debt collector in a jurisdiction in which such a moratorium applies to file an eviction action against a consumer without disclosing that moratorium to the consumer.  However, the Bureau also states that nevertheless, a FDCPA debt collector’s failure to disclose such information to a consumer could violate the FDCPA’s prohibition on deception or unfairness (or both), particularly if the state or local law offers greater protection than the CDC Order.  The CFPB indicates that providing a disclosure using the alternate sample language in the rule “likely cures any deception or unfairness under FDCPA sections 807 or 808 that would arise from the failure to disclose a more protective [state or local law].”  It also indicates that nothing in the rule’s disclosure requirement affects a debt collector’s obligation to provide any moratorium-related disclosure required by state r local law.

A landlord would generally not be directly subject to the rule because a landlord is typically not a “debt collector” covered by the FDCPA.  However, it is possible the rule could influence how a state regulator or court might apply a state debt collection law that applies more broadly to creditors and incorporates FDCPA prohibitions.  

False representations.  The rule prohibits a debt collector covered by the FDCPA from falsely representing or implying that a consumer is ineligible for protection from eviction under the CDC Order.  A violation of this prohibition is deemed a violation of FDCPA Section 807.

Here’s a bit of good news in an otherwise chaotic week for the accounts receivable industry: On April 13, 2021, in the case of Anderson v. I.C. System, Inc., 3:20-cv-00263 (W.D. Wis. April 13, 2021), a district court granted summary judgment in a debt collector’s favor on a bona fide error defense. Before you say, ‘this is just a district court case, why should I care in light of all of the other things-which-will-not-be-named going on this week?’… a positive case is a positive case, and this particular case covers a situation likely familiar to any entity which is credit reporting.

In the Anderson case, I.C. System received a letter from a consumer’s attorney, which referred to Charles D. Anderson and Carol Ann Hamblin and provided their social security numbers and address. According to the Court, the letter was ‘vague,’ as it did not list the actual accounts in dispute. Instead, the letter stated it was to serve as “written notice that the above referenced individual(s) is in fact and in law represented by this office for all debts that he or she may have” and “the above referenced individual(s) dispute the debt which you are attempting to collect.”  The letter did not include any additional information.

Using the information provided in the letter, I.C. System found two accounts for Ms. Hamblin; however, none of the 600 accounts tied to a “Charles Anderson” matched the address or social security number provided in the letter. Unfortunately, one of those 600 accounts did belong to the correct Mr. Anderson. Mr. Anderson filed a lawsuit claiming I.C. System violated the FDCPA when it failed to report the dispute. I.C. System defended the lawsuit by claiming the failure to report the dispute resulted from a bona fide error.

To be successful on a bona fide error defense, a defendant must establish three elements: (1) the presumed FDCPA violation was not intentional; (2) the presumed FDCPA violation resulted from a bona fide error; and (3) the defendant maintained proper procedures reasonably adapted to avoid any such error.  The Court found that I.C. System met each of these requirements.   

I.C. systems met the first requirement because it looked for an account for  Mr. Anderson but could not locate one using the information provided in the letter; thus, the mistake was not intentional.  I.C. Systems met the second and third requirements by providing evidence regarding its written policy and procedures, including auditing procedures and testimony from employees regarding how they carry out the policy and procedures. This evidence included a step in I.C. Systems policies where if an employee is unable to locate an account, they send a “can’t find” letter. No such letter was sent in this case because I.C. System did locate two accounts for Ms. Hamblin.

In ruling in favor of I.C. System on the bona fide error defense, the Court reasoned the dispute letter “was ambiguous about whether both Hamblin and Anderson were disputing debts and about how many debts were in dispute.”  The Court further noted that “it was reasonable for I.C. System to conclude from the letter’s ambiguous language that Anderson did not have a debt with I.C. Systems to dispute,”  since the information in the letter did not match the information tied to the “Charles Anderson” accounts in I.C. System’s records. Further, the Court found that I.C. System provided sufficient evidence to show it had reasonable procedures in place to ensure that disputed debts were matched correctly with consumer accounts, flagged as disputed, and reported as disputed to credit reporting agencies.

Mr. Anderson argued that I.C. System’s policy was insufficient because it did not cover this exact scenario. However, the Court rejected this theory holding the “FDCPA does not require debt collectors to take every conceivable precaution to avoid errors; rather it only requires reasonable precaution.” (internal quotations omitted). The Court also noted that “Anderson’s counsel could “easily have prevented the problem in several ways: by including more identifying information in his letter disputing the debt, such as Anderson’s previous addresses; by specifically identifying the debt that Anderson disputed; by sending separate letters for Anderson and Hamblin; or by stating clearly in the letter that both Anderson and Hamlin had debts they disputed. The FDCPA does not require I.C. System to anticipate every potential omission or ambiguity in a debt dispute letter.”

The Court’s Order on I.C. System’s motion for summary judgment can be found here.

insideARM Perspective:

We cannot stress this enough: if your business is credit reporting, you really, really, really, should have policies and procedures in place to cover both FDCPA and FCRA compliance. Bona fide error defenses can be tricky to prove; to be successful, a defendant has to show the Court that they had reasonable procedures in place, and despite those procedures, an error occurred.   There is no bright-line rule indicating what is or is not a “reasonable procedure.”  Notably, in this case, I.C. System went above and beyond the bare bones of their procedure providing staff testimony and auditing procedures; since the Court specifically mentioned these pieces of evidence in its Order, it’s fair to say that the evidence had an impact on the Court’s determination.

While it may be true that compliance doesn’t necessarily generate revenue for accounts receivable entities, compliance sure can save an organization from being on the wrong side of a lawsuit.  This case may have had a completely different outcome if I.C. system did not have a compliance group that was able to: (a) show it had procedures in place; (b) provide evidence that its staff followed those procedures, and (c) provide evidence showing that it audited the procedure to ensure compliance.

New Jersey — Maxwell and Graves Solutions, LLC (M&G), a consulting firm with expertise in collections and servicing in the financial lending space, announced the addition of industry veteran Jeremy Nixon as a Senior Consultant.   

Jeremy brings with him 15 years of experience in operations leadership positions, analyzing and managing performance across multiple portfolios, industries, and verticals. Through his experience leading in the debt collection agency industry, he has worked with government agencies, publicly-traded companies in the telecommunication and financial services space as well as startups.

During his time with CBE Companies, Jeremy’s area of expertise included revenue and profit growth, call center and strategy design, expense control, process improvement, operations leadership, financial planning, and performance reporting. Michael Cassidy, Managing Partner of M&G, said “We’re excited Jeremy chose to join our team at M&G. His depth of experience leading on the collection agency side of the business will complement our team’s experience and strengthen the broad offering to our clients. We thrive to offer our clients specific solutions instead of generic recommendations, Jeremy’s unique perspective further strengthens our ability to deliver this to clients.”

About Maxwell & Graves Solutions, LLC

M&G Solutions is an industry-leading consulting firm with expertise delivering world-class operational performance and execution in the financial lending space. M&G Solutions combines years of first-hand experience working for Fortune 500 and other innovative companies within financial service, BPO, and Fintech industries to help our clients identify, deliver and sustain the necessary enhancements to drive their business. To learn more, visit www.maxgraves.com and follow us on LinkedIn.

ROCHESTER, N.Y. — Today ConServe announced it will award sponsored Continuing Professional Education (CPE) credits through its ConServe University^® quarterly Webinar Series. CPE is a requirement for most CPAs and financial leaders to maintain their professional competence and provide quality professional services.

These new sponsored credits are a natural extension of the company’s long-standing commitment to training excellence, as ConServe has earned – for the seventh consecutive year – a spot on Training magazine’s 2021 Training Top 100 (f/k/a Training Top 125). This annual list ranks excellence in employer-sponsored training and development programs. 

Michelle Hartmann, Vice President of Sales said, “In addition to providing innovative, customized recovery solutions, our Client training programs provide a fantastic forum to share knowledge and solutions in an efficient and effective manner.  We have invested in the right technology to continue to interact with our Clients and provide valuable tools, resources and complimentary effective training, including industry updates, professional development and networking with other collection experts.”

The idea for awarding CPE credits for their training programs was brought to them by their Clients, and ConServe delivered by taking appropriate action through the National Association of State Boards of Accountancy (NASBA). State boards of accountancy have final authority on the acceptance of individual courses for CPE credit*.

About ConServe:

ConServe is a top-performing accounts receivable management service provider specializing in customized recovery solutions for their Clients.  Anchored in ethics and compliance, and steadfast in their pursuit of excellence.  As an insideARM^® 2020 Best Places to Work in Collections recipient, ConServe is proud to also earn in 2021 the Better Business Bureau of Upstate New York’s BBB Torch Award for Ethics and Training magazine’s, 2021 Training Top 100.  These annual rankings demonstrate ConServe’s commitment to being the “Best”, excellence training practices and overall commitment to ethical business practices.  Visit them online:  www.conserve-arm.com

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About NASBA – National Registry of SPE Sponsors”

Since 1908, NASBA has served as a forum for the nation’s 55 State Boards of Accountancy, which administer the Uniform CPA Examination, license more than 650,000 Certified Public Accountants and regulate the practice of public accountancy in the United States.  Visit them online:  https://nasba.org/ 

About Training magazine:

Training magazine is the leading business publication for learning and development and HR professionals. It has been the ultimate resource for innovative learning and development—in print, in person, and online—over the last 50-plus years.  Training magazine and Training magazine Events are produced by Lakewood Media Group. For more information about the 2021 Virtual Training Conference, please visit: www.trainingconference.com.  Visit them online at:  https://trainingmag.com/

*ConServe is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.NASBARegistry.org.