Well this is a big one. And although it doesn’t relate directly to the TCPA, the cross-over issues here are pretty clear.

So there’s this agency–the FTC– and it has a number of powers at its disposal. But much like the FCC, its enforcement capabilities are limited by certain statutes that give it those powers. Some of them are pretty broad–like Section 5 of the FTC Act–and some of them seem pretty narrow –like Section 13 of that Act. Essentially Section 13 just gave the FTC power to seek injunctive relief–not to recover any money in Court.

The FTC has acted (very slowly and incrementally) to unilaterally expand its powers under Section 13 over the years because its way faster than using its other powers. Essentially it gave itself the right to go to court and quickly recover profits that were obtained by clearly illegal conduct in “exceptional cases.” And over time it used this power with increasing frequency–now bringing dozens of these cases each year.

Well today the Supreme Court–in another 9-0 decision–put an end to these lawsuits. Much like the textualist approach it adopted in Facebook the Supremes explained that the FTC lacks the power to seek monetary recovery under Section 13 because.. the statute doesn’t give it the power to do that:

Several considerations, taken together, convince us that §13(b)’s “permanent injunction” language does not authorize the Commission directly to obtain court-ordered monetary relief. For one thing, the language refers only to injunctions. It says, “in proper cases the Commission may seek, and after proper proof, the court may issue, a permanent injunction.”

And in a statement that echoes Facebook‘s “take it up with Congress” narrative:

Nothing we say today, however, prohibits the Commission from using its authority under §5 and §19 to obtain restitution on behalf of consumers. If the Commission believes that authority too cumbersome or otherwise inadequate, it is, of course, free to ask Congress to grant it further remedial authority.  

On that topics, members of Congress have acted swiftly (perhaps too swiftly?) to convene hearings following the Supreme Court’s ruling today.

Indeed, Energy and Commerce Committee Chairman Frank Pallone, Jr. (D-NJ) and Consumer Protection and Commerce Subcommittee Chair Jan Schakowsky (D-IL) announced today that the Consumer Protection and Commerce Subcommittee will hold a fully remote legislative hearing on Tuesday, April 27, at 1 p.m. (EDT). The hearing is entitled, “The Consumer Protection and Recovery Act: Returning Money to Defrauded Consumers.”

In their words:

“The Federal Trade Commission (FTC) is the nation’s premiere consumer protection agency, but its ability to return money to people who have been scammed is under attack in the Courts. An uncertain impending Supreme Court decision on the FTC’s 13(b) authorities has given scammers new opportunities to take advantage of people, including those who are isolated at home due to the pandemic. Next week, we will hold a hearing to consider legislation that would restore the FTC’s longstanding authorities to provide redress to consumers who’ve been scammed.” 

The hearing will be conducted remotely via Cisco Webex video conferencing. Members of the public may view the hearing via live webcast accessible on the Energy and Commerce Committee’s website.  Information for the hearing, including the Committee Memorandum, the legislation to be discussed, witnesses, testimony, and a live webcast will be posted HERE as they become available.

Contrast this swift action to the lack of Congressional action on the TCPA–called it. 

(BTW-NO ONE on the defense side better be lobbying Congress on the TCPA without chatting with me. I’m leading this effort. Organize folks.)

The Supreme Court’s decision is AMG Capital Management v FTC and it is available: here. 

On April 22, 2021, the CFPB announced that it filed a complaint in federal court to seize a $1.6 million home; the ownership of which it alleges was transferred fraudulently by the operator of a massive and now-defunct debt-collection scheme.

In 2019, the CFPB and New York Attorney General reached a settlement with Douglas MacKinnon, Northern Resolution Group, LLC, Enhanced Acquisitions, LLC, Delray Capital, LLC, and Mark Gray. The CFPB had sued Douglas MacKinnon, Mark Gray, and their companies for harassing, threatening, and deceiving millions of consumers across the nation into paying inflated debts or amounts they did not owe. The companies routinely added $200 to each debt they purchased and attempted to collect, used spoofing technology to make it appear as though they were calling from government agencies, and sent threatening messages to consumers to frighten them into paying. MacKinnon and his companies were permanently banned from the debt collection industry and ordered to pay $60 million in consumer redress and penalties.

The new complaint alleges that Douglas MacKinnon transferred ownership of his home to his wife and daughter for the sum of $1 shortly after learning of the federal and state investigation into his companies. It then asks the court to declare the transfer void and order the seizure and sale of the property to partially repay MacKinnon’s outstanding debt to the federal and state governments for his illegal conduct.

“Douglas MacKinnon operated a brazen scheme, fraudulently inflating consumers’ debts, and he was equally brazen in trying to fraudulently conceal his own assets,” said CFPB Acting Director Dave Uejio. “Today’s action shows that attempts to defraud the federal government and evade the consequences of breaking the law will not succeed. I thank Attorney General James for her partnership in shutting down this scheme and in bringing MacKinnon to account.”

insideARM Perspective:

This complaint is more proof that Acting Director Uejio means business. The CFPB will continue to seek out and punish bad actors, and those caught committing such actions will not be able to skate on restitution and fines.  Further, this move indicates the CFPB does not consider its job complete once it reaches a settlement and intends to see bad actors pay their penalties. Bad actors do nothing to foster a culture of compliance within the industry. Good actors in the accounts receivable industry should support the CFPB in its efforts to see that real punishments are delivered to those who exploit the industry for personal gain.

SACRAMENTO, Calif. — The Department of Financial Protection and Innovation has filed a Notice of Proposed Rulemaking with the Office of Administrative Law. The Commissioner of the Department of Financial Protection and Innovation, formerly the Commissioner of the Department of Business Oversight (“Commissioner”), is proposing adding the following sections to subchapter 11.3 of title 10 of the California Code of Regulations to adopt the license application and requirements to obtain a debt collection license under the Debt Collection Licensing Act (Cal. Fin. Code, § 100000, et seq.):

Section 1850 – defines terms used in the regulations

Section 1850.6 – requires electronic filing of license application and related information through NMLS

Section 1850.7 – sets forth the license application and information requirements

Section 1850.8 – requires appointment of the Commissioner as agent for service of process

Section 1850.9 – requires fingerprinting through the California Department of Justice

Section 1850.10 – requires investigative background report for non-residents of the United States

Section 1850.11 – provides notices concerning information practices and privacy

Section 1850.12 – sets forth the process to challenge information in NMLS

Section 1850.13 – provides for sharing information with other government agencies

Section 1850.14 – clarifies “financial responsibility” for purposes of denying a license

Section 1850.15 – sets forth grounds for denying a license

Section 1850.16 – requires designated email address to receive communications from Department

Section 1850.30 – provides process for reporting changes to information in the license application

Section 1850.31 – provides process for reporting new officers, directors and other key personnel

Section 1850.32 – provides process to register new branch office or change of existing branch office

Section 1850.50 – requires surety bond of at least $25,000 and sets forth the bond form

Section 1850.60 – provides license is effective until revoked, suspended or surrendered

Section 1850.61 – provides process to surrender license

A copy of the Notice, Initial Statement of Reasons, and proposed Text can be found the Department of Financial Protection and Innovation’s website here.

The 45-day public comment period ends on June 8, 2021.

Comments may be e-mailed to: regulations@dfpi.ca.gov or mailed to: Department of Financial Protection and Innovation, Attn: Sandra Sandoval, 300 S. Spring Street, Suite 15513, Los Angeles, California 90013.

On April 19, 2021, the University of Virginia Health System announced that it would be canceling a pool of judgments and liens dating back to the 1990s.  The move will apply to all liens and judgments filed against households that make less than 400% of the federal poverty level, or about $106,000 for a family of four.

UVA has been suing patients for unpaid hospital bills for decades. Since Virginia law allows for post-judgment remedies, many of these lawsuits resulted in wage garnishments and liens which attached to real property and had to be satisfied before selling the property.  Those families that already paid due to lawsuits or liens will not get their money back.

In September 2019, UVA created a new advisory council to make suggestions and draw up more fair and equitable policies. For the past year and a half, that team has been diving deep into various solutions. The policies were developed following consultation with a local community advisory council empaneled to ensure the local community was represented as part of policy decision-making. In addition, a study of national hospital peers’ billing and collections practices for low-income, underinsured and uninsured patients was also conducted to help inform final policies. These policies build upon previous changes to UVA’s billing and collections policies instituted in January 2020.

“We have been very deliberate in studying this. We did not take it lightly, and we committed to fixing it. I think we’ve absolutely hit a home run here,” said  Douglas E. Lischke, UVA Health’s chief financial officer Lischke, “We feel that it is on par, better than most health systems, and we’re proud of that.”

In addition to forgiving liens and judgments of patients meeting the required criteria, UVA will establish an Ombudsperson’s office to help patients navigate payment options and ensure a fair, impartial assessment of individual cases. UVA Health has also developed a policy for catastrophic care to ensure public access to emergency services.

insideARM Perspective:

Despite the industries efforts to provide guidance regarding best practices in collecting medical debt in the face of increased accounts entering the medical collections cycle, in just the last two weeks, we’ve seen a new law related to healthcare collections passed in New Mexico, and now this announcement from the UVA Healthcare.  Thus, it seems like the focus on healthcare collections isn’t going anywhere any time soon.  With the current laser focus on medical collections, we can surely expect additional legislation and perhaps similar announcements from other healthcare facilities.

SYRACUSE, N.Y. — Capital Collection Management (CCM), a full-service accounts receivable partner offering compassionate, compliant, and innovative revenue recovery solutions, is proud to announce that industry veteran Tammy Vandenbroek has joined the team as Vice President of Institutional Relationships. 

With over 30 years of experience in the accounts receivable management industry, 12 of which were spent managing collections in higher education, Vandenbroek brings a wealth of knowledge to the CCM team. In this role, she will be responsible for CCM’s growth and expansion into new markets: building and managing industry partnerships, bringing CCM’s full suite of solutions to the medical, financial, academic, and government sectors, and driving revenue across the business.

“CCM takes an empathetic, consultative, and compliance-driven approach to revenue recovery, but what truly differentiates us from other agencies is our people,” said Jacob Corlyon, Co-Founder and CEO of CCM. “Tammy’s passion for building relationships and her ability to provide long-term payment solutions make her a welcome addition to the team. We’re lucky to have someone as experienced and well-respected in the industry as she is joining us.”

In addition to accelerating CCM’s growth, Vandenbroek will be instrumental in launching new services and solutions to clients.

“Having built my career in this space, I understand the unique challenges that credit unions, healthcare facilities, government, and higher education institutions face and the need for an accounts receivable partner who offers great service,” said Vandenbroek. “CCM is unlike any other agency I’ve come across in my career and I couldn’t be happier to join a company who is disrupting the perception of collections by helping companies and their customers strengthen their finances.”

Vandenbroek previously served as an Executive Vice President at Reliant Capital Solutions and was with ConServe for more than a decade.  

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She is an ACA-certified collector and supports the ACA Women in Consumer & Commercial Finance Conference. She is active in community nonprofit organizations including Habitat for Humanity and Amani House. Vandenbroek earned her bachelor’s degree from the University of Toledo.  

About Capital Collection Management  

Capital Collection Management (CCM) provides modern, technology-driven revenue recovery solutions, debt purchasing, and litigation services for enterprises that need engagement with empathy, experience with compliance, and excellence in revenue recovery. Leveraging state-of-the-art analytics and machine learning combined with a service-focused approach, CCM helps organizations from a variety of industries protect their brands and improve their bottom lines. To learn more, visit www.capitalcollect.com and follow us on LinkedIn.  

BLOOMINGTON, Minn.– Absolute Resolutions Corp., headquartered in Bloomington, MN, announced today that in honor of financial literacy month they have made a financial contribution to the Minnesota Council on Economic Education (MCEE).

MCEE was founded in 1961 when a group of local leaders met to discuss economics in Minnesota schools. They recognized that the most powerful way to promote economics is to train and prepare teachers so they can promote financial literacy in the thousands of students they impact over the course of their careers. Since its inception, the MCEE has trained over 32,000 teachers by providing workshops and other resources to deliver meaningful economics and personal finance lessons.

“At ARC we know the importance that a solid foundation in financial literacy provides not only for young students but also to under-served communities.” Said Chris Winkler, ARC’s Chief Executive officer.

In 2005 MCEE added community programs that have now equipped over 100 organizations to provide high-quality personal finance and economic lessons for vulnerable Minnesota communities and populations. They have various centers located throughout the state to support both the teacher and community education programs.

“We are proud to donate and support MCEE. The resources they provide to support teachers, students, and communities is truly invaluable” finished Winkler.

About Absolute Resolutions Corp.

Absolute Resolutions Corp. is a certified professional receivables company headquartered in Bloomington, MN with offices in San Diego, CA and Scottsdale, AZ.

www.absoluteresolutions.com

About Minnesota Council on Economic Education

MCEE provides workshops, training, and resources to support teachers in delivering relevant and meaningful lessons in economics and personal finance in the classroom.

www.mcee.umn.edu/mcee

Last month, insideARM reported that in the case of Hunstein v. Preferred Collection & Mgmt. Servs., No. 8:19-cv-983 (M.D. Fla. Oct. 29, 2019), the 11^th Circuit Court of Appeals heard oral arguments regarding whether the practice of using a mail house to send demand letters to consumers violated the Fair Debt Collection Practices Act (FDCPA). Today, the Court has given us their answer, holding that transmitting data to a mail house to generate and send demand letters to consumers does indeed violate the prohibition on third-party disclosure set forth in 15 USCA § 1692c(b). 

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The Background:

In Hunstein, the consumer argued that sending a data file with consumer information to a mail house to prepare and mail a collection letter is an action “in connection with” the collection of a debt, and thus an unauthorized third-party disclosure in violation of 15 USCA §1692c(b). The District Court disagreed and dismissed the case with prejudice.

The consumer appealed to the 11^th Circuit, and on March 10, 2021, the 11^th Circuit heard oral arguments.   The debt collector, Preferred Collection and Management Services, Inc. (Preferred), argued primarily that because the transmittal did not include a demand for payment, the transmission merely “related to” the collection of a debt and was not an unauthorized third-party disclosure. In support of this position, Preferred cited several cases stating that the Court should adopt a factor-based analysis to determine whether the transmission was “in connection with” or merely “related to” the collection of a debt.

Today’s ruling from the 11^th Circuit:

In reaching its holding, the Court focused on the plain meaning of the word “connection” and then on the statutory language. Regarding the word “connection” the Court noted that the dictionary definition of “connection” means “relationship or association” and “in connection with” is a “vague, loose connective” and means “with reference to [or] concerning.” the Court reasoned, “It seems to us inescapable that Preferred’s communication to Compumail at least ‘concerned’ was ‘with reference to’ and bore a ‘relationship or association’ to its collection of Hunstein’s debt,” and held that the transmission of data was, therefore “in connection with the collection of a debt” as the phrase is commonly understood,

Next, the Court turned to the language of 15 USCA §1692c(b), which states “a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.”   In rejecting Preferred’s argument regarding the application of a demand for payment factor, the Court reasoned that under such an interpretation, “Communication with four of the six excepted parties- a consumer reporting agency, the creditor, the attorney of the creditor, and the attorney of the debt collector, would never include a demand for payment” (emphasis in original). Therefore, the Court found that “the phrase ‘in connection with the collection of any debt’ in §1692c(b) must mean something more than a mere demand for payment.  Otherwise, Congress’s enumerated exceptions would be redundant.”

Further, the Court distinguished each of the cases cited by Preferred in support of its factor-based analysis since the statute at issue in each of those cases was 15 USCA § 1692e, and not 15 USCA §1692c(b).   The Court noted that since §1692e operates differently than §1692c(b), the District Court should not have relied on the cases cited by Preferred when it dismissed the Hunstein matter with prejudice in 2019.

The Court recognized that its ruling might have widespread implications across the debt collection landscape. However, it did not allow that possibility to sway its opinion, stating,

“It’s not lost on us that our interpretation of § 1692c(b) runs the risk of upsetting the status quo in the debt-collection industry. We presume that, in the ordinary course of business, debt collectors share information about consumers not only with dunning vendors like Compumail, but also with other third-party entities. Our reading of § 1692c(b) may well require debt collectors (at least in the short term) to in-source many of the services that they had previously outsourced, potentially at great cost. We recognize, as well, that those costs may not purchase much in the way of ‘real’ consumer privacy, as we doubt that the Compumails of the world routinely read, care about, or abuse the information that debt collectors transmit to them. Even so, our obligation is to interpret the law as written, whether or not we think the resulting consequences are particularly sensible or desirable. Needless to say, if Congress thinks that we’ve misread § 1692c(b)—or even that we’ve properly read it but that it should be amended—it can say so.”

Finally, the Court found that the consumer had standing to bring the action because a violation of 1692c(b) gives rise to a concrete injury in fact under Article III.  The dismissal entered in October 2019 has been reversed, and the case has been remanded to the district court for further proceedings.

The full opinion can be found here.

insideARM Perspective:

What does this opinion mean? Should everyone panic?  No.  The opinion just came out today; in the coming days, there will be many brilliant legal minds focused on what comes next and whether there is any way to obtain some relief from this opinion. That said, accounts receivable entities are cautioned to read this opinion in its entirety and consult with legal counsel regarding their next steps.

The U.S. Court of Appeals for the Third Circuit recently affirmed the dismissal of a class action complaint alleging that a collection letter’s itemization of a debt as including “$0.00” in interest and fees — when the debt could not accrue interest or fees — violated the federal Fair Debt Collection Practices Act.

In so ruling, the Third Circuit concluded that the inclusion of line items listing $0.00 in the form letter’s interest and fees columns did not mislead the consumer to believe that he may owe interest or fees in the future in violation of the FDCPA’s prohibition on deceptive (§ 1692e) and unfair or unconscionable (§ 1692f) means of collecting consumer debts, even under the court’s hypothetical “least sophisticated consumer” standard.

Of note, the federal Consumer Financial Protection Bureau filed an amicus brief in support of the debt collector and the creditor in this appeal. The Third Circuit noted that the CFPB’s recently finalized Regulation F to the FDCPA “seemingly condone[s] itemizing interest and fees as [the debt collector] did. … Under the pending rules, debt collectors must include in certain notices a table showing the interest, fees, payments, and credits that have been applied—even if none have actually been applied—to a consumer’s debt since the itemization date. … And ‘a debt collector may indicate that the value of a required field is ‘0,’ ‘none,’ or may state that no interest, fees, payments, or credits have been assessed or applied to the debt.’”

A copy of the opinion in Hopkins v. Collecto Inc. is available at:  Link to Opinion.

A consumer received a letter from a debt collector which sought to collect past due amounts on behalf of a creditor who acquired the debt. 

The letter included a table itemizing the debt into four columns providing (i) the principal balance of the debt ($1,088.34), (ii) interest ($0.00), (iii) “Fees Coll. Costs” ($0.00), and (iv) total balance ($1,088.34).  The letter concluded that the consumer owed $1,088.34 on the debt and offered to “resolve this debt in full” if he paid a reduced amount of $761.84.

The consumer filed a putative class action complaint against the debt collector and creditor (collectively, the “debt collectors”) alleging that the letter’s inclusion of the table with itemized columns for interest and fees violated sections 1692e and 1692f of the FDCPA, 15 U.S.C. § 1692, et seq. 

Specifically, the consumer claimed that because the debt was static and purportedly could not accrue interest or fees, that assigning a “$0.00” value to those columns falsely implied that interest and fees could accrue and increase the total debt over time.

Upon consideration of the debt collectors’ motion to dismiss, the trial court dismissed the consumer’s complaint with prejudice, reasoning that the letter neither “leave[s] the least sophisticated consumer in doubt of the nature and legal status of the underlying debt” nor “impede[s] the consumer’s ability to respond to or dispute collection.”  The consumer appealed.

On appeal, the lone issue before the Third Circuit was whether the letter’s inclusion of a table denoting “$0.00” in interest and collection fees falsely implied that interest and collection fees were materially likely to accrue in violation of FDCPA’s prohibitions on deceptive (§ 1692e) and unfair or unconscionable (§ 1692f) means of collecting consumer debts.

Initially, the Third Circuit noted that other federal appellate courts recently addressed similar claims. 

In Degroot v. Client Services, Inc., 977 F.3d 656 (7th Cir. 2020), the Seventh Circuit held that a collection letter that listed a debt as including $0.00 in interest and fees “mere[ly] rais[ed] . . . an open question about future assessment of other charges,” and did not mislead the unsophisticated consumer.  Id. at 660–61. 

Likewise, in Salinas v. R.A. Rogers, Inc., 952 F.3d 680 (5th Cir. 2020), the Fifth Circuit concluded that a dunning letter’s inclusion of $0.00 due in interest and fees and the statement that “in the event there is interest or other charges accruing on your account, the amount due may be greater than the amount shown above after the date of this notice” did not violate the FDCPA “from the perspective of an unsophisticated or least sophisticated consumer” Id. at 683–84 & n.3.

Here, the consumer attempted to distinguish these cases, arguing that the Third Circuit’s “least sophisticated debtor” standard is more forgiving than the “unsophisticated debtor” standard under which these cases were decided. 

The Third Circuit disagreed, noting that its framework is “functionally equivalent to the unsophisticated debtor standard on which claims like [the consumer’s] have foundered.  Jensen v. Pressler & Pressler, 791 F.3d 413, 419 & n.3 (3d Cir. 2015) (noting that it is “sometimes referred to as the ‘least sophisticated consumer’ or ‘unsophisticated debtor’ standard”). 

Finding the rationale of the Fifth Circuit in Salinas and Seventh Circuit in Degroot persuasive, the Third Circuit similarly concluded that the letter did not violate the FDCPA by itemizing $0.00 in interest and fees on his static debt.

The Third Circuit further concluded that affirmation of dismissal was appropriate even if confined to “least-sophisticated-debtor” case law which assumes that even naïve consumers possess a “quotient of reasonableness” consistent with “a basic level of understanding and willingness to read with care.”   Wilson v. Quadramed Corp., 225 F.3d 350, 354–55 (3d Cir. 2000) (citation omitted).  

First, the Court noted that the Second Circuit rejected similar claims under a “least sophisticated consumer” standard in Taylor v. Financial Recovery Services, Inc., 886 F.3d 212 (2d Cir. 2018), holding that letters seeking to collect static debts that “stated their respective balances due without discussing interest or fees” were not misleading to “the least sophisticated consumer.” 

Moreover, the Third Circuit reasoned that its “FDCPA case law does not support attributing to the least sophisticated debtor simultaneous naïveté and heightened discernment” as the consumer attempted here by acknowledging that the letter was a “mass-produced, computer-generated form letter[],” yet purportedly failing to understand that listing $0.00 in each of the form letter’s interest and fees columns was an “inapplicable vestige[] of a template letter.” 

Because the consumer failed to state an FDCPA claim under the court’s “least sophisticated debtor” standard, dismissal of the class action complaint was affirmed.

In case you missed it, earlier this month, the CFPB reached settlements with two entities it accused of wrongdoing.  On April 6, 2021, the CFPB issued a press release detailing the Consent Order it reached with Yorba Capital Management, LLC (Yorba) and its sole owner Daniel Portilla, Jr. (Portilla), and on April 13, 2021, the CFPB issued a press release  detailing the Complaint filed and Stipulated Final Judgment and Order it reached with SettleIt, Inc (SettleIt)

The Yorba/Portilla Consent Order

Here, the CFPB alleged that Yorba and Portilla mailed notices to consumers in an attempt to collect a debt that falsely represented that consumers would be sued and that there would be further legal action if the consumers did not pay the debt shown on the notices. Although the accounts had never been sent to an attorney for litigation, they were titled “Litigation Notice” and even included a spot for case numbers.

Further, the letters stated, “You are hereby notified that a recommendation to file a lawsuit to collect this debt may be the next step resulting in a judgment entered against you,” and “to avoid any further legal action, you need to contact our office within 10 days of this notice; otherwise, we will assume you do not intend to pay this debt and litigation will be commenced immediately.”  The notices also informed consumers that “[a] judgment is a serious legal matter and several methods to collect a judgment are available to us” and listed ways in which Yorba could collect on a judgment if it were to obtain one.  Some consumers called in response to the notice; however, the CFPB alleged that Yorba’s representatives would provide little (if any) information about the alleged debt. Instead, consumers were verbally threatened with lawsuits or arrests.

According to the CFPB, Despite including this language in the letters, Yorba and Portilla did not retain lawyers and never filed lawsuits against consumers. Thus the CFPB alleged that the letters misled and falsely threatened legal action against consumers in violation of the CFPA, 15 USC §§ 5531(a) and 5536(a)(1)(B), and the FDCPA, 15 USC §§ 1692e(5) and 1692e(10).   The CFPB further noted that “false representations in the letter were material. Statements about the imminence of a lawsuit and the implication that legal action has already been taken are important to consumers and are likely to affect their conduct as to whether they pay the alleged debt.”

The Consent Order permanently bans both Yorba and Portilla from the debt collection business, includes a judgment of $860,000 (which is suspended due to an inability to pay), and a civil penalty payable to the CFPB of $2,200.00

The SettleIt Stipulated Judgment

In this action, the CFPB filed a complaint against SettleIt, an online debt settlement company.  According to the CFPB, SettleIt, presents itself as an independent debt-settlement company that helps consumers negotiate with creditors like CashCall and LoanMe. But SettleIt is affiliated with CashCall and LoanMe; the same individual owns SettleIt and CashCall, and LoanMe is tied to SettleIt through loans and agreements.

The CFPB claimed that SettleIt abused consumers’ trust by charging fees to negotiate settlements that favor those companies and steered distressed consumers into taking out expensive loans with CashCall and LoanMe while hiding the fact that SettleIt took its debt-settlement fees from these loan proceeds. According to the CFPB, SettleIt kept consumers in the dark about its relationships with CashCall and LoanMe, and despite its ties with CashCall and LoanMe, even included language in call scripts saying “we are not owned or operated by any of your creditors.”

Although SettleIt did not admit or deny the allegations, the Bureau and SettleIt filed a proposed Final Judgment and Order requiring SettleIt to return at least $646,000 in fees to consumers, pay a $750,000 civil penalty, and stop settling debts for creditors with which it shares an ownership interest.

“SettleIt’s strategy of steering consumers into sweetheart deals with its confederates was illegal,” said CFPB Director David Uejio. “The CFPB will not tolerate companies that purport to represent consumers, but instead abuse their trust in a self-dealing scheme. This case provides a clear example of what Congress intended to prohibit when it created the CFPB and gave it authority to prevent abusive practices.”

insideARM Perspective:

In light of Director Ueijo’s previous statements that protecting consumers is his top priority, the Consent Order in Yorba and Stipulated Judgment in SettleIt, are not all that surprising.  However, what is a bit surprising is that the CFPB continues to uncover schemes that are relatively egregious violations of law and maybe even of common sense. One has to wonder whether the letters in Yorba or the call scripts in SettleIt were the subjects of a compliance review.  The allegations in these cases do not appear to be in the proverbial gray area. It’s hard to imagine that any compliance professional would approve the letter in Yorba, with all of its misstatements and threats, or the call scripting in SettleIt, which appears to be patently false on its face.  Assuming neither entity intended to violate the law, perhaps these results could have been avoided if they sought a compliance review of these communications before interacting with consumers.  These cases should serve as another reminder that compliance should be an integral part of any Accounts Receivable Entity’s process in developing consumer-facing communications.

Implementations can be thrown off track by blind spots that add costs and time, and result in a lack of confidence in the overall solution. At Bridgeforce, we routinely help clients identify blind spots and take steps to ensure a smooth implementation. Here is our list of the top 10 critical blind spots to watch for — all of which can be managed and avoided if you take action early.

10 Blind Spots to Watch for When Implementing Digital Technology

1. ‘Out of the Box’ Descriptions

The vendor’s generic screen text and customer journeys are written for all clients. You’ll need to customize it for your organization with unique messaging and copy, customer journey flows, branding and opt-in/opt-out experiences.

Blind spot risk: Customization and development adds to your timeline and costs.

Steps to Take

Secure Involvement: Engage resources from compliance, customer experience and marketing teams when vendors are providing demos so that each team can ask the appropriate questions to ensure that they get what they need from this solution.

Identify SME Engagement: Before vendor selection is complete, require that each business partner assess the work effort and resource needs to make required changes. Then, you can determine the impact on the project timeline and budget. This sets expectations and informs effort and subsequent timelines.

2. Not Using Vendor’s Service Providers

Think twice before taking a pass on your vendor’s selected providers. There are four major integrations that must be considered: payments, SMS, emails, and letters. Generally, using the vendor’s partners will be an easier onboarding experience with less required customization.

Blind spot risk: Difficulty with onboarding and customization adds to your timeline and costs.

Steps to Take

Interrogate During Vendor Demos: Discuss available integrations during vendor demos so that you can make an informed assessment. This way, you can weigh trade-offs of using vendor partners against internal/enterprise solutions. The output of this key decision has a direct impact on your timeline and budget prior to project kickoff.

3. Lack of Source System Knowledge

You’ll need SMEs who have in-depth knowledge of all the affected source systems in order to properly map data for placement files and return files.

Blind spot risk: Depending on how many systems you use, lacking source system familiarity could add weeks and months to your deployment timeline.

Steps to Take

Plan Ahead: Determine early which data will be passed to the vendor in the placement file each day. Ensure that you know how the data that is returned to the source systems will be mapped. Then, begin sourcing those items.

4. Counting on the Vendor for Operationalization

Operationalizing the digital solution falls entirely on you because a software company defines a completed installation only as “deployment of the software.” Vendors aren’t focused on your operations – but you should be.

Blind spot risk: If you’re too late recognizing the need to operationalize, you will slow progress, extend your timeframe, and may face additional costs if the vendor has to pause activity.

Steps to Take

Build Operationalization into Your Timeline: Ensure that your implementation plan considers time for strategy design and coding; messaging content creation and deployment; reporting design; procedure updates; integration with control self-assessments; and analytics. Vendors may provide some light support in configuring the application parameters, but anything else beyond that is not their core business model.

Create Workflow in Advance: Predetermine your processes and workflows (for example, is the goal of digital collections to drive more self-service or to improve interaction that ultimately connects to an agent?). The end-to-end internal operational experience and external customer experience is unique to each organization – and yours is no exception.

5. Timeline Based on Vendor’s Standard Deployment

The vendor will assume that several key dependencies have been finalized by your organization, such as strategy design. This can create an unrealistic, often ambitious timeline.

Blind spot risk: Setting false expectations across the organization. If the timeline is unrealistic, the necessary adjustments that you’ll need to make will lengthen time to completion and could negatively influence staff perceptions.

Steps to Take

Determine Current State Readiness: Standard deployment schedules are achievable if your organization is ready. To ensure readiness, complete an initial working session and assessment. Consider elements such as outreach strategies, customer experience, reporting, roles and responsibilities, and compliance requirements.

6. Undervaluing the Need for End-User System Expertise

Once implemented, a technical solution requires technical expertise by the end-user. Alternative support from your vendor can be costly and in short supply. Don’t overlook the importance of having in-house expertise to make ongoing changes and evolve your strategy.

Blind spot risk: Lack of ability to make changes in-house may result in increased costs for outside support.

Steps to Take

Create Power Users: Identify power users within your organization who are familiar with the new technology. Arm them with a clear roadmap to onboard and transfer knowledge of the system from the vendor to secure a more successful post-implementation experience. By leveraging this intelligence, you can make changes as you go to better reach your customers through their preferred channels and increase the likelihood of getting paid.

7. User Acceptance Testing (UAT) is Not Provided by the Vendor

The plans or scripts for UAT are carefully coordinated and require attention to detail. UAT includes creation of test cases, conditioning test data, running test cycles in test bed, and ensuring controls so as not to adversely impact “real customers” in production. UAT will likely fall under your responsibilities because the vendor’s obligation starts and ends with the technical install.

Blind spot risk: Being unprepared for UAT will throw off your timeline. Additionally, the risk of quickly implementing the UAT plan could cause reputational or regulatory damage if customers are negatively affected.

Steps to Take

Tap Experience: Identify experienced implementation resources well before the testing milestone. This implementation team must have knowledge of both the vendor’s solution and your internal operating systems in order to create and oversee effective test plans and scripts.

8. Internal Efforts can Become Overwhelming

Your organization will be responsible for many deliverables to the vendor for implementation – a fact that is often overlooked during vendor pitches and demos.

Blind spot risk: Failure to provide deliverables according to the schedule can affect the integrity of the implementation and alter the timeline.

Steps to Take

Ensure Commitment: Make sure that the deployment timeframes provided by vendors are clear. Your organization should plan to dedicate resources that represent the following functional areas and roles: IT, Operations, Strategies & Analytics, Customer Experience, Compliance, Ops Risk, and Program Management.

9. Vendor’s Scope Doesn’t Include Additional Development and Reporting

Standard reporting packages offered by vendors tend to be high-level and designed as “out of the box” solutions for all clients. If your organization wants to see account-level detail, however, it will be your responsibility to put in the time and effort to uncover this level of information.

Blind spot risk: Missing reports and data that were expected as part of implementation can leave an organization scrambling and result in a lack of confidence in the vendor solution and ultimately, your decision-making capability.

Steps to Take

Review Data: It is very important that your organization has the right data, has confidence in the quality of that data, and can distribute information in appropriate reports. Confirming the MIS/Reports needed for deployment requires review by your organization to understand ‘what’ data is available and ‘how’ to extract the information for internal consumption.

10. Extra Time is Required to Establish New Short Codes for SMS

The application process with cellphone carriers to obtain short codes can take between 6-12 weeks to set up.

Blind spot risk: Without these short codes, communications though SMS will be delayed – affecting overall digitalization launch.

Steps to Take

Start Early: If your organization requires a new short code, make sure to request it prior to your project kickoff. This will eliminate unexpected delays in your implementation plan.

Upgrading Collections Technology Can Be Tricky

Determining digital readiness, selecting the right-fit vendor and managing a seamless implementation all bring unique challenges to upgrading collections technology. See our webinar series that covers all these areas for more details on how to manage a tech upgrade and vendor selection with confidence. If you’d like more information and are interested in being ably supported in your journey, contact us today. We’ll set up time to learn more about your project and get you started.