We at insideARM know how difficult it is to sift through every piece of news in the ARM industry to make sure you don’t miss anything significant. That is why we do it every week, so you don’t have to! The news from last week included another state passing a data privacy bill, an overview of the CFPB’s activity for the month of April, and the CFPB’s involvement in state legislatures regarding medical debt. Make your job a little easier, and keep reading for a synopsis of the articles you need to see and why.

On Tuesday, we highlighted an article from Maurice Wutscher that discussed the signing of LB 1074 which makes Nebraska the 16th state to enact a data privacy law. The Nebraska Data Privacy Act, which will go into effect on January 1, 2025, applies to persons that process or sell personal data but, notably, does not apply to small businesses. Overall, the law pulls from both the Texas and California data privacy laws and strikes a nice balance between being reasonable for businesses while protecting consumers. With this being the 9th state to enact a data privacy law in the last year, this is a trend that has no sign of slowing down and those in the ARM indsutry should pay attention to this growing trend.

Wednesday’s news was a breakdown by Hudson Cook of every major action taken by the CFPB in the month of April. Director Rohit Chopra featured heavily last month as he spoke about data protection at a White House event, touched on credit cards at CBA Live, and expressed his support for a proposed bill in California that would prohibit the credit reporting of medical debt (more on that below.) The Bureau also filed several amicus briefs (one we wrote about in greater detail here), continued to fight “junk fees,” and, most notably, updated its procedural rules regarding its supervisory role over non-consenting nonbank entities. The CFPB under this administration is a great barometer for the ARM industry to watch. The more active the CFPB, the more prepared you need to be for regulatory updates and legislation.

Thursday, we brought you an in-depth article from Troutman Pepper about the CFPB showing support for bills in both Connecticut and California. Both Connecticut’s Senate Bill 395 and California’s Senate Bill 1061 look to prohibit the furnishing of medical debt to the CRAs for credit reporting purposes. In the Bureau’s letter to Connecticut Senator Matt Lesser, the CFPB mentioned both a 2022 interpretation that allows states to enact laws like this, and a 2023 CFPB rulemaking process that prohibits the use of medical debt in underwriting decisions. It is important to note both that the CFPB is taking more interest in state legislation (see also New York) and that banning credit reporting medical debt seems to be a, if not the, top priority.

Thanks again for joining us for another weekly recap. If you missed the recap for the week of April 29th it can be found here.

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TAMPA, Fla. — OneTouch Direct, a global business process outsourcing and collections company, today introduced OneTouch AIQ, an AI driven omnichannel quality assurance solution. Designed to enhance and streamline oversight, OneTouch AIQ analyzes every facet of customer interactions in real-time, flagging compliance and performance issues while uncovering critical insights. From ensuring brand and product knowledge to safeguarding the clients’ brand reputation, OneTouch AIQ provides actionable recommendations to enhance agent training and elevate customer satisfaction.

“As a company, we take great pride in our commitment to pioneering innovative solutions that address real-world challenges. The introduction of OneTouch AIQ marks a significant milestone in our journey toward offering comprehensive contact center and enterprise solutions to an even wider global audience,” said Chris Reed, COO and co-founder at OTD. “We’re excited to continue leading the way in delivering transformative solutions that empower businesses to thrive in an increasingly interconnected world.”

OneTouch AIQ is the next evolution of customer care, ensuring excellence across 100% of customer contacts, guaranteeing unmatched quality and consistency. A cutting-edge AI driven omnichannel quality assurance solution, OneTouch AIQ elevates the customer experience, streamlines operations, and safeguards each client’s brand reputation – redefining excellence in every interaction.

“OneTouch AIQ will transform the contact center quality assurance process,” said Yvonne Torrijos, Chief Sales Officer. “By harnessing the power of machine learning, this new offering audits 100% of customer interactions on all communications channels ensuring adherence to quality standards and identifying areas for improvement with unparalleled accuracy for both internal teams and partners.”

Key features of the AI-driven quality assurance solution include:

• 100% audited interactions. On all communication channels – in any language – for internal teams or vendors – in real-time, post, or both.
• Data informed decisions. Detect trends and gain actionable insights whether operational, technological, compliance, or coaching opportunities.
• Robust AI driven compliance. Ensure compliance, reduce risk, increase QA productivity. FDCPA and UDAAP compliance built in.
• Empower employees. Discover training opportunities and boost agent performance with targeted video-assisted training.
• Identify exemplary interactions. Reinforce positive behaviors and outcomes; support agents with positive feedback, recognition, and rewards.
• Enhance your existing scorecards. Interactions are audited using your unique evaluation criteria, then modified and updated based on the insights revealed.
• AI tool continually learns and improves over time. Sharpening QA expectations and improving call results.

About OneTouch Direct

OneTouch Direct is a global business process outsourcing and collections company offering integrated omni-channel customer communications designed to drive exceptional customer interactions and enhance the clients’ brands. Rooted in a passion and deep expertise, OneTouch Direct creates unified brand experiences that break the rules and foster meaningful relationships. Their innovative services, customized solutions, real-time analytics, and management expertise serve a global customer market base spanning North America, Europe, Asia Pacific, Latin America and the Caribbean. Partnering with some of the world’s most recognizable brands, they deliver solutions designed to meet their client’s present and future challenges. For over 20 years, their people-centric, data driven outsourcing solutions power better revenues and profitability across the full customer life cycle. For more information visit https://www.onetouchdirect.com/.

Recently, the Consumer Financial Protection Bureau (CFPB or Bureau) submitted letters to senators in Connecticut and California supporting their proposals to prohibit medical debt reporting.

In Connecticut, Senate Bill 395 aims to prohibit state health care providers from reporting medical debt to consumer reporting agencies (CRAs) for use in a consumer report.

In its letter of support to Connecticut Senator Matt Lesser, the CFPB commends Connecticut’s proactive approach to protect consumers from the harms of medical debt reporting. The CFPB also refers to its 2022 interpretive rule, which explains that states are generally permitted to enact laws that provide consumer protections involving consumer reporting, including the content of information contained in consumer reports or furnished to CRAs.

The Bureau also mentions its rulemaking process announced in September 2023 to prohibit creditors from using or obtaining medical bills and collection information for underwriting decisions. It also aims to prohibit CRAs from providing such information to creditors for use in underwriting.

The CFPB argues that medical debt is less predictive of future consumer credit performance than other tradelines typically found on consumer reports and that unpaid medical bills are often rife with unreliable information. The CFPB also again expressed its position that consumer reporting should not be used as a tool to support collection activity.

In a similar vein, on March 25, 2024 the CFPB submitted a letter of support to California Senator Monique Limón for Senate Bill 1061, which also aims to prohibit the inclusion of medical bills on consumer reports.

WILMINGTON, Del. — Phillips & Cohen Associates, Ltd. (PCA), the global leader in deceased account care management and technology solutions, servicing clients in the United States, Canada, United Kingdom, Ireland, Australia, New Zealand, and Germany is pleased to announce the appointment of Brooke Teal as SVP, Global Compliance and General Counsel.

Teal will take over from Robert Obringer, who will retire after a highly successful tenure as SVP of Compliance and General Counsel and more than two decades of distinguished service.

Teal is an experienced leader, holding several senior positions, including the head of the legal and compliance at a fintech in the collections industry, the lead attorney at a pre-eminent Creditor’s Rights law firm, and as an in-house attorney for two of the top five debt buyers in the nation. Within the industry, Brooke currently serves on the Consumer Relations Consortium Steering Committee and has been actively involved with the Receivables Management Association International’s Legislative Funding Committee.  Teal, also served as the youngest President of the Florida Creditors Bar and was appointed as Secretary of the Florida Small Claims Rules Committee.

Teal commented, “I am excited to join PCA and contribute to its ongoing success. The PCA team places consumers at the heart of the business, investing in technological advancement and continuous improvement to deliver unparalleled customer experience. I look forward to growing the culture of excellence and remaining at the forefront of compliant customer centric operations.”

Howard A. Enders, President and Chief Compliance Officer commented, “We would like to pay tribute to the outstanding contribution Bob has made to PCA Group for almost 25 years. He is a world-class leader who has worked with great passion and energy, and we have been very fortunate to have had his vision, drive, and commitment.  

As we look to the future, we are thrilled to welcome a highly accomplished executive like Brooke, to our team. Brooke’s appointment comes at a time when PCA is focused on strategic growth and expansion. Her experience will be invaluable to the Group, as we continue to expand our global market presence.”

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, 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.

April was another month with no shortage of action from the CFPB. In this month’s article, we share some of our top “bites” of the month so you can stay on top of recent developments.

Bite 12: Director Chopra’s White House Remarks on Data Protection

On April 2, 2024, Director Chopra delivered remarks at an event organized by the White House Office of Science and Technology Policy. There he discussed how the CFPB’s Fair Credit Reporting Act (FCRA) enforcement can protect national security. Director Chopra stated that data breaches not only lead to consumer losses in the form of identity theft and misuse of account information but that major breaches have been linked to activity entities based in China. He stated that the President’s Executive Order to Protect Americans’ Sensitive Personal Data asks the CFPB to protect Americans from data brokers that are assuming and selling very sensitive data, including that of U.S. military personnel. Director Chopra said that the CFPB plans to propose rules to ensure that data brokers comply with the FCRA, restricting certain business practices and ensuring higher levels of accountability.

Bite 11: Director Chopra’s Prepared Remarks on Credit Cards

On March 27, 2024, CFPB Director Rohit Chopra delivered remarks at CBA LIVE on the CFPB’s work towards ensuring that consumer financial markets, including the credit card market, are competitive. Director Chopra said that the credit card industry has grown rapidly, fueled by advances in automated underwriting and technology, but that despite this success, the fees and interest on credit cards have never been higher. He claimed that the large discrepancy between the costs of credit cards offered by large institutions and smaller ones is a sign that the marketplace is not competitive, and suggested that this may be due to difficulty in shopping for cards and comparing rates. Director Chopra said that the CFPB is going to issue a rule addressing personal financial data rights to “jumpstart competition across banking” by making it easier for consumers to access their data and switch providers. He said that the CFPB is also working on another initiative to improve the costs of credit cards through its newly finalized rule that limits credit card late fees, which he said the CFPB will continue to defend against court challenges.

Bite 10: CFPB Sends Letters on Medical Debt to State Legislatures

On March 25, 2024, CFPB Director Chopra sent a letter to a California state senator in support of her proposed legislation to prohibit the inclusion of medical bills on credit reports. He stated that medical debt is categorically different from many types of consumer tradelines because consumers frequently incur medical bills in unique circumstances that differ from other forms of credit extension, and CFPB research has found that medical debt is less predictive of future consumer credit performance than other tradelines. Director Chopra also said that unpaid medical bills frequently contain unreliable data, that CFPB complaints indicate that more than 40% of consumers with medical debt have received inaccurate bills, and that nearly 70% of these consumers have been billed for costs that insurance should have covered. According to Director Chopra, the credit reporting system should assess credit risk, and it should not be used to coerce people into paying debts that they may not owe. Director Chopra said that the CFPB has initiated a rulemaking process on medical debt, and that strong state action like the proposed California law provides essential support for federal policymaking. On April 11, 2024, CFPB Assistant Director Brian Shearer sent a similar letter to Connecticut State Senator Matt Lesser in support of a Connecticut State Senate bill that would prohibit healthcare providers from reporting medical debt to consumer reporting agencies for use in a consumer report.

Bite 9: CFPB Drafts Letter to Illinois Committee

On April 9, 2024, Deputy Director Zixta Martinez sent a letter to the Illinois Joint Committee on Administrative Rules, commenting on proposed rules under the state’s Community Reinvestment Act (CRA). The letter supported proposed appraisal-related changes to the state CRA which indicate that it is a violation of the Equal Credit Opportunity Act (ECOA) for a lender to rely on or give force or effect to discriminatory appraisals to deny loan applications when the lender knew or should have known of the discrimination. The letter claimed that these provisions accurately describe ECOA, and noted that the CFPB and Department of Justice have previously taken the same position.

Bite 8: New Mortgage Data Shows Trends in Discount Points

On April 5, 2024, the CFPB’s Office of Mortgage Markets released a data spotlight on its analysis of data collected pursuant to the Home Mortgage Disclosure Act (HMDA). The CFPB used quarterly data to look at characteristics of homeowners that paid discount points over the past few years. According to the CFPB’s data, most recent borrowers, including nearly 90% of cash out refinance borrowers, paid discount points. More borrowers paid discount points as interest rates rose over this period, and borrowers with lower credit scores were more likely to pay discount points. According to the CFPB, discount points may provide advantages to some borrowers, but the financial tradeoffs involved in discount points are complex and may create risks for consumers. The data spotlight claims that lenders may be offering borrowers with low credit scores mortgages with discount points to ensure that these borrowers qualify for a mortgage by lowering their monthly payments, and therefore lowering debt-to-income ratio. The CFPB says it will continue to analyze the data to understand the factors driving the increase in discount points and how borrowers end up paying for them.

Bite 7: CFPB Issues Report on Video Game Marketplaces

The CFPB issued a report on April 4, 2024, that examined the growth of financial transactions in online video games and virtual worlds, which the CFPB says increasingly resemble traditional financial products. The CFPB claims video games enable players to store and transfer valuable assets, including in-game currencies and virtual items such as cosmetic “skins” or collectibles. The report also identified several trends and purported risks associated with gaming, including claims that gaming companies provide little customer support when consumers experience financial harm from scams, phishing attempts, and account thefts. The report claims that gaming companies are also assembling gamers’ personal and behavioral details, such as financial data, purchasing history and spending thresholds, along with physical location data that can generate an accurate portrait of a player’s daily routines. The CFPB claims that existing consumer protection laws apply to banking and payment systems that facilitate the storage and exchange of valuable assets, and that the CFPB will monitor markets where financial products and services are offered, including video games and virtual worlds.

Bite 6: CFPB Issues Spring 2024 Supervisory Highlights

On April 8, 2024, the CFPB issued a new edition of its Supervisory Highlights for Spring 2024, focusing on examinations in connection with credit reporting and furnishing from April through December 2023. According to the CFPB, examiners have found deficiencies in credit reporting companies’ compliance with the accuracy and identity theft requirements of the FCRA and Regulation V. These include automatically declining the implementation of identity theft blocks, failure to notify affected consumers when a block is declined or rescinded, and failure to follow reasonable procedures to assure maximum possible accuracy. The CFPB also claims that it has found deficiencies in furnishers’ compliance with the accuracy and dispute investigation requirements of the FCRA and Reg. V, including violations of the FCRA duty to promptly update or correct information about fraudulent accounts, to conduct reasonable investigations of direct disputes, and to provide notice of account delinquency. The CFPB also claims that consumer reporting companies and furnishers failed to comply with a rule implemented in June of 2022 to help survivors mitigate the financial consequences of human trafficking, and noted that the involved consumer reporting companies and furnishers are taking corrective actions.

Bite 5: CFPB Issues New Circular to Money Transfer Providers

On March 27, 2024, the CFPB issued a circular to warn remittance transfer providers that false advertising about the cost or speed of sending a remittance transfer can violate federal law. According to the CFPB, companies that operate in this industry are charging “junk fees” on international money transfers that are not properly disclosed in advertisements and are also making false claims about the speed of transfers. The Circular addressed three practices that may violate the CFPA or the Remittance Rule that it has observed through its market monitoring and through consumer complaints. The first is alleged false marketing of “no fee” or “free” services when consumers are actually charged fees. The second is advertising promotional pricing while not disclosing whether the offer is limited or temporary. Third, the CFPB alleges companies are engaged in deceptive advertising by claiming that transfers will arrive within a certain time frame, when they actually take longer.

Bite 4: CFPB Updates Supervision Designation Procedure

On April 16, 2024, the CFPB issued an update to its procedural rules for designating nonbank covered persons for supervision. The new procedural rules clarify that (1) a consent agreement does not constitute an admission by the respondent; (2) that when a respondent voluntarily consents to supervisory authority, they are not subject to the public release process; and (3) that orders issued because a respondent failed to file a response or defaulted are subject to public release. Under the prior procedural rule, the term for certain consent agreements was limited to a two-year period of supervision. Under the new procedural rule, the duration of the supervision will be on a case-by-case basis. The CFPB noted that it still expects most of the consent agreements to create a two-year supervision period. The new rule codifies that the initiating official may withdraw a notice of reasonable cause and also request supplemental briefing, along with other changes to the CFPB’s internal structure. The procedural rule is effective upon publication in the federal register and the CFPB indicated it is exempt from notice and comment requirements. However, the CFPB is accepting comments on the rule.

Bite 3: CFPB Files Amicus Brief in Credit Reporting Case

On March 29, 2024, the CFPB, along with the FTC, filed a friend of the court brief in a case before the U.S. Court of Appeals for the Eleventh Circuit. In this case, the company in question has taken the position that the FCRA requirement to investigate disputed information does not apply to personal identifying information, like name, address, and Social Security number. The plaintiff in the case claims she filed three disputes with a company asking it to correct several errors in her personal identifying information, and that the company responded each time by telling her to contact the source of the inaccurate information without identifying who that source was. The plaintiff sued and the trial court rejected the company’s argument that the FCRA does not apply to this information, but waived liability because it said that the law was unclear. The company appealed, and the agencies’ amicus brief supports the court’s holding that the company was required to investigate these disputes.

Bite 2: CFPB Files Amicus Brief in Servicemember Case

On April 11, 2024, the CFPB and DOJ filed a joint brief in the U.S. Court of Appeals for the Fourth Circuit in support of servicemembers’ claims that a large bank charged them too much interest on credit card debt during active service. The Servicemembers Civil Relief Act (SCRA) gives servicemembers the right to reduced interest during active-duty military service, and includes a provision that provides that anyone who has suffered a violation may be a representative party or a member of a class, notwithstanding any previous agreement to the contrary. In this case, four servicemembers sued their bank for interest violations, and the bank responded by saying that the arbitration provisions in the credit card agreements require the plaintiffs to arbitrate their cases instead of bringing them to court. The District Court agreed with the plaintiffs, and the bank appealed that ruling. The DOJ and CFPB stated in their amicus brief that the District Court was correct.

Bite 1: Online Payment Company Wins in Court Against CFPB

On April 1, 2024, media outlets reported that U.S. District Judge Richard J. Leon agreed with an online payment company that sued the CFPB in 2019 over the “prepaid rule” saying that the CFPB had no rational justification for enforcing certain fee disclosure requirements against digital wallets. The “prepaid rule” went into effect 5 years ago and requires that issuers of prepaid cards provide disclosures before a cardholder receives the card. When the rule was promulgated, the online payments company told the CFPB that online digital wallets do not work in the same way as reloadable debit cards and that the disclosure rules are misleading and confusing when applied to its products. The company said that the CFPB dismissed its arguments, and it then petitioned the D.C. Circuit to rule that the prepaid rule’s application to the company’s products was unconstitutional. The Judge said that the CFPB was “arrogant” in its application of the rule to digital wallets based on speculation that these wallets may someday be subject to fees like those imposed on prepaid cards, instead of basing its decision on a cost-benefit analysis or evidence of actual consumer harm.

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

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

Nebraska Gov. Jim Pillen on April 17 signed into law LB 1074, the Nebraska Data Privacy Act, making Nebraska the 16th state to enact a comprehensive consumer data privacy law following California, Virginia, Colorado, Utah, Connecticut, Iowa, Indiana, Tennessee, Montana, Texas, Oregon, Delaware, New Jersey, New Hampshire, and Kentucky. The law will go into effect Jan. 1, 2025.

Applicability

The Act applies to a person that:

1. Conducts business in Nebraska or produces a product or service consumed by residents of Nebraska;
2. Processes or engages in the sale of personal data; and
3. Is not a small business as determined under the federal Small Business Act, except to the extent that section 18 of the Act applies, requiring consent prior to the sale of sensitive data.

Exemptions

Exemptions include, but are not limited to:

1. Financial institutions, their affiliates, or data subject to Title V of the Gramm-Leach-Bliley Act;
2. Covered entities or business associates governed by the privacy, security, and breach notification rules issued by the U.S. Department of Health and Human Services;
3. Protected health information under the Health Insurance Portability and Accountability Act;
4. The collection, maintenance, disclosure, sale, communication, or use of any personal information to the extent that such activity is regulated by and authorized under the Fair Credit Reporting Act;
5. Data processed or maintained in the course of an individual applying to, employed by, or acting as an agent or independent contractor of a controller, processor, or third party.

Consumer Rights

Consumers have the right to:

1. Confirm whether a controller is processing their personal data;
2. Correct inaccuracies in their personal data, taking into account the nature of the personal data and the purposes of the processing of the consumer’s personal data;
3. Delete personal data provided by or obtained about the consumer;
4. Obtain a portable copy of their personal data if the data is available in a digital format and the processing is completed by automated means;
5. Opt-out of the processing of the personal data for purposes of:
6. Targeted advertising;
7. The sale of personal data; or
8. Profiling in furtherance of a decision that produces a legal or similarly significant effect concerning the consumer.

Sensitive Data

A controller may not process sensitive data of a consumer without obtaining the consumer’s consent, or, in the case of processing the sensitive data collected from a known child, process the data [except] in accordance with the federal Children’s Online Privacy Protection Act.

“Sensitive data” means a category of personal data that includes:

1. Personal data revealing racial or ethnic origin, religious beliefs, mental or physical health diagnosis, sexual orientation, or citizenship or immigration status;
2. Genetic or biometric data that is processed for the purpose of uniquely identifying an individual;
3. Personal data collected from a known child; or
4. Precise geolocation data.

Contract Requirements

A contract between a controller and a processor must include:

1. Clear instructions for processing data;
2. The nature and purpose of processing;
3. The type of data subject to processing;
4. The duration of processing;
5. The rights and obligations of both parties; and
6. A requirement that the processor shall:
7. Ensure that each person processing personal data is subject to a duty of confidentiality with respect to the data;
8. At the controller’s direction, delete or return all personal data to the controller as requested after the provision of the service is completed, unless retention of the personal data is required by law;
9. Make available to the controller, on reasonable request, all information in the processor’s possession necessary to demonstrate the processor’s compliance with the requirements of the Data Privacy Act;
10. Allow, and cooperate with, reasonable assessments by the controller or the controller’s designated assessor; and
11. Engage any subcontractor pursuant to a written contract that requires the subcontractor to meet the requirements of the processor with respect to the personal data.

Data Protection Assessments

A controller must conduct and document a data protection assessment of each of the following processing activities involving personal data:

1. The processing of personal data for purposes of targeted advertising;
2. The sale of personal data;
3. The processing of personal data for purposes of certain profiling;
4. The processing of sensitive data; and
5. Any processing activity that involves personal data that presents a heightened risk of harm to any consumer.

Enforcement

The Attorney General has exclusive authority to enforce violations. For any violation that is not cured within 30 days of notice, the Attorney General may seek civil penalties not to exceed $7,500 for each violation.

Maurice Wutscher’s Impression

The Nebraska Data Privacy Act is another example of sensible legislation that balances the rights of consumers with the impact on businesses. Though the applicability threshold incorporating a small business exemption is modeled after the Texas Data Privacy and Security Act, in many other respects the Act follows the pattern of most post-California comprehensive data privacy laws. For a chart comparing the state comprehensive data privacy acts, and more information and insight from Maurice Wutscher on data privacy and security laws and legislation, click here.

Keeping up with all the goings on in the ARM Industry can feel like a full-time job. That’s why we at insideARM try to bring you the biggest news that we think you should know about each week. Last week’s news included the FTC’s intentions to work with state attorneys general, the CFPB’s General Counsel and his comments on medical debt, and an 11th Circuit case that focuses on credit reporting disputes, reasonable investigations, and the FCRA. Read on for a breakdown of these pieces and why we felt you needed to hear about them.

Tuesday, we focused on news from Ballard Spahr regarding the FTC’s three-part report to Congress on its collaboration with state attorneys general. Part I of the report focused on current collaborative efforts between the FTC and AGs, Part II involved a discussion of best practices for better collaboration between the two, and Part III provided Congress with legislative recommendations so that the FTC and AGs can collaborate more effectively. This is important because the report is all in the name of protecting consumers and, often, when groups discuss consumer protection with Congress, that can mean future regulations or an expansion of authority. That appears to be the aim here as the FTC outlined what they’ve done, what can be improved, and how Congress can help them achieve that, namely allowing the FTC to pursue actions against “unfair or deceptive acts or practices.”

On Wednesday, we highlighted a Troutman Pepper article about the General Counsel of the CFPB giving a speech at an NCLC spring training event. The speech focused on medical debt, landlord-tenant collections, and the credit reporting of both. While medical debt has long been a focus of the CFPB, the discussion around consumer complaints about landlords using “tenant screening” could evidence a new side focus for the Bureau. This speech is especially noteworthy given where it took place. As we have previously discussed, the NCLC is an organization looking to influence legislatures regarding debt collection and further the stereotype that debt collectors are the bad guys. All those in the ARM industry, and particularly those collecting medical adn land-lord tenant debt should be paying attention. 

Last, we brought you an article on Thursday about an interesting 11th Circuit decision that may shake up how furnishers handle consumer credit reporting disputes. In a case where the consumers and furnisher disagreed on the legal validity of a debt the 11th Circuit Court of Appeals brought some clarity to how a credit reporting dispute (and subsequent FCRA suit) will play out. The Court held that, though a legal inaccuracy can rise to the level of an FCRA violation, a violation only occurs when a legal inaccuracy is “objectively and readily verifiable.” This is an important development for the 11th Circuit as furnishers can now be confident in credit reporting debts where the question of the debt’s validity hinges on unsettled law. While this does place some burden on furnishers to be well-versed in the laws of their state/circuit, it also makes their decision easier in credit reporting and performing reasonable investigations for disputes on certain accounts.

Thank you for reading our weekly recap. For the recap from the week of April 22nd, click here.

For discussion of all these topics and more with other industry professionals, take part in our weekly Peer Group meeting by joining Research Assistant!

TREVOSE, Pa. — NCB Management Services, Inc. (NCB), a national leader and recognized brand in the Accounts Receivable Management (ARM) and Debt Buying Industry, is pleased to announce the appointment of Jonathan Thompson as NCB’s Chief Legal Officer. Mr. Thompson has held key leadership positions at reputable organizations, where he successfully navigated complex legal challenges and provided strategic guidance to drive business growth. 

Jonathan brings a wealth of legal expertise and a proven track record of success to NCB Management Services, Inc., further strengthening the company’s legal team and further positioning NCB for continued growth. In this role, he will report directly to Ralph Liberio, President and Chief Executive Officer, and he will be responsible for overseeing all legal matters of the organization, including corporate governance, regulatory compliance, litigation, and risk management.

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With more than 25 years of extensive experience in the financial services industry, Jonathan will play a crucial role in guiding NCB through its next phase of growth and ensuring legal compliance in an increasingly complex business and regulatory landscape.

Mr. Thompson stated, “I am honored and excited to work with such a respected and experienced team. I am eager and looking forward to helping grow the business to new heights, work with the talented team at NCB, and exceed expectations for customers, shareholders, employees, and regulators.”

Ralph Liberio, President & Chief Executive Officer of NCB Management Services, Inc, and its group of subsidiary companies, expressed his enthusiasm about Jonathan joining the Executive Leadership Team. Mr. Liberio said, “We are delighted to welcome Jonathan to our team. With his deep knowledge of the legal and regulatory landscape and strategic mindset, we are confident that Jonathan will be instrumental in driving our legal strategy forward and protecting the best interests of our organization.”

About NCB Management Services, Inc.

NCB Management Services, Inc. is a customer-centric, regulatory compliant organization that is a well-respected Debt Buyer of Unsecured Consumer Credit Products and an admired, well-recognized Accounts Receivable Management (ARM) industry leader. NCB is a leading provider of accounts receivable management solutions. With a strong commitment to compliance, ethics, and customer-centric approach and service, NCB offers comprehensive and customizable solutions to help businesses optimize their revenue cycle and improve financial performance, while meeting the needs of their customers. Through a combination of advanced technology, industry expertise, and exceptional customer care, NCB has developed a reputation as consistently being a valued business partner and performer in a wide variety of applications. Providing superior customer interaction and achieving maximum results, while protecting NCB’s and our client’s valued reputations, are among our highest priorities.

In a recent decision, the 11th Circuit drew a line in the sand regarding consumer disputes on credit reporting and the standard for investigating legal disputes.  The line set down is whether the legal dispute is “objectively and readily verifiable.” This line might be wavy at times and blurred at others, but it is a line that may provide some clarity for furnishers.

The Legal Dispute at Issue

Holden v. Holiday Inn Club Vacations Inc., 22-11014, 22-11734 (11th Cir. Apr 24, 2024) involves two cases with similar facts. Each involves a consumer (“Consumers”) entering into a timeshare agreement with Holiday Inn Club Vacations Inc. (“Creditor”). Each agreement included a default provision that stated, in the event of default, “the parties hereto shall be relieved from all obligations hereunder.”

The Defaults, Disputes, and District Court Decisions

In both cases, the Consumers defaulted on their agreement, and the Creditor reported the debts to a Credit Reporting Agency (“CRA”). The Consumers disputed, arguing that the debts should not be credit reported because the agreement was canceled according to the default provision in the contract. After an investigation of the disputes, the Creditor disagreed that the debts were canceled and certified that the information in the credit reporting was accurate. The Consumers filed suits under the Fair Credit Reporting Act (“FCRA”), claiming that the Creditor supplied inaccurate information to the CRA and failed to conduct an appropriate investigation. The District Courts sided with the Creditors, dismissing the suits.

The Appeals

On appeal, the 11th Circuit focused on “whether the alleged inaccuracy was objectively and readily verifiable.” In affirming the lower courts’ decisions, they reasoned that there was no FCRA violation as the credit reporting was not verifiably inaccurate because the contractual issue (whether the contract was canceled after the default) was not a matter of settled law. This was evident by the fact that both sides presented compelling case law supporting their arguments.

The Consumer Financial Protection Bureau (“CFPB”) filed an amicus brief in this matter in support of the Consumers and argued that the District Court decisions should be reversed in part because creditors are “qualified and obligated to assess issues such as whether debts are actually due and/or are collectible.” The 11th Circuit did not disagree, because that is exactly what happened in this case: the Creditor received the dispute and verified the debt. The Consumers “just disagree with [the Creditor’s] assessment that the debt was due and collectible.”

In closing, the Court stated that they are not saying that only factual or transcription errors are FCRA violations but, rather, that legal errors must be “objectively and readily verifiable.” They used bankruptcy discharge as an example of when a legal error (continuing to report a debt discharged in bankruptcy) would rise to an actionable FCRA inaccuracy.

Read the full opinion here. 

insideARM Perspective

The 11th Circuit decision may seem like a big win for the ARM Industry and credit reporting but, this case also adds responsibility to furnishers. This decision should give furnishers (at least those operating in Florida, Georgia, and Alabama) confidence to stand behind their credit reporting decisions when they know the consumer’s dispute is frivolous or unfounded. However, furnishers will also need to be wary of credit reporting any debt where settled law is not in their favor. In light of this case, furnishers should put even more emphasis on working closely with their legal counsel and compliance to ensure a full understanding of what areas are considered settled law and what situations could put them in danger of FCRA violations.

In a recent speech at the National Consumer Law Center/National Association of Consumer Advocates Spring Training, Seth Frotman, General Counsel of the Consumer Financial Protection Bureau (CFPB or Bureau), focused on medical billing and collections and tenant screening and debt, emphasizing the CFPB’s enforcement of the Fair Debt Collection Practices Act (FDCPA) and Fair Credit Reporting Act (FCRA) in these areas.

Medical Collections and Consumer Reporting

According to Frotman, as healthcare costs rise families are being burdened with medical bills that they should not or do not owe. The CFPB has purportedly received over 15,000 complaints about debt collectors pursuing unpaid medical bills in the past two years. Frotman emphasized that debt collectors are strictly liable under the FDCPA for any misrepresentations they make about whether and how much a consumer owes. Additionally, a debt collector violates the FDCPA if they collect an amount that is no longer correct, such as when an insurance company or patient has made a payment on the bill.

The CFPB is also focused on the issue of medical bills appearing on credit reports. The Bureau has initiated a rulemaking process, discussed here, to remove medical bills from credit reports used by creditors as a matter of federal law.

Rental Collections and Consumer Reporting

Frotman also discussed the collection and reporting of unpaid rent. According to Frotman, as corporate landlords have increased their rental holdings, demand has substantially increased for “tenant screening” products that perform digital, algorithmic scoring of prospective tenants. The CFPB has purportedly received complaints from renters about inaccuracies and errors on tenant screening reports that have a long impact on their housing opportunities.

As discussed here, the CFPB recently issued an advisory opinion on background screening emphasizing that consumer reporting agencies, including those offering tenant screening products, must under the FCRA maintain reasonable procedures to avoid producing reports with false or misleading information.

The CFPB has also seen debt collection activity related to rental debt increase substantially over the last several years. The CFPB is monitoring debt collection and consumer reporting complaints involving rental-related activity. The CFPB has emphasized that the FDCPA applies to the collection of residential rental debt by debt collectors, including by attorneys. Thus, law firms can be held liable under the FDCPA if they approve eviction actions without performing a meaningful review of each case. Additionally, according to Frotman, debt collectors acting on behalf of landlords may violate the FDCPA by collecting amounts that are inflated by fees that are not owed as a matter of state law. He gave the example that landlords may improperly charge tenants for basic repairs and routine upkeep that should be the landlord’s financial responsibility under the warranty of habitability in most states. These amounts may then improperly end up in debt collection actions subject to the FDCPA or on credit reports.

Frotman concluded his remarks by encouraging the attendees to tell the Bureau about their cases in this area. “The CFPB has an active amicus brief program. And we rely on monitoring of active litigation to bring to our attention emerging issues and areas of concern.”