CHESAPEAKE, VA. — Spring Oaks Capital, LLC is pleased to announce the closing of a new credit facility, as well as a large capital raise to support the growth of its technology-focused consumer debt investing and collections platform. The $150 million senior secured revolving credit facility provided by funds managed by Värde Partners and UBS O’Connor, coupled with a fourth-round capital raise will support the Company’s portfolio acquisition strategy along with the continued development of industry leading consumer engagement and analytical tools. The new credit facility reduces borrowing costs while increasing flexibility, positioning Spring Oaks to execute upon a robust pipeline of investment opportunities while building a platform with an unmatched compliance focus that empowers consumers on their journey to resolve the burden of financial debt through machine learning, data science, and deep industry expertise.

Tim Stapleford, President & CEO commented, “This is a significant milestone for Spring Oaks as we continue to build our leading portfolio acquisition platform, and we are thrilled to partner with Värde Partners and UBS O’Connor as we embark on the next chapter for our Company. We worked with the team at KBW and achieved this outcome in challenging market conditions, a testament to the company’s success. The new credit facility and capital raise further positions us to be the buyer of choice for sellers, from leading-edge financial technology lenders to global banking institutions seeking a well- capitalized, technology-enabled partner to transition customer relationships.”

About Spring Oaks Capital

Spring Oaks Capital is a national financial technology company, focused on the acquisition of non-performing credit portfolios. The Company subscribes to an employee and consumer-centric operating philosophy that creates high-value jobs, a significant performance lift and highest standards of compliance. Spring Oaks’ business strategy is rooted in innovative data-driven technology to maximize collection results and a contact platform that offers multi-channel options to meet each consumer’s communication preference. Spring Oaks has the management vision and experience to nurture a culture and DNA that is unique in the industry. To learn more about Spring Oaks, please visit www.springoakscapital.com.

The New York Department of Consumer and Worker Protection (DCWP) is proposing to amend its rules relating to debt collectors. The lengthy proposals cover many aspects of the debt collection cycle, including validation, verification, consumer communication, credit reporting, monthly reporting, and recordkeeping. The proposal also includes specific provisions relative to medical debt and time-barred debt.  

The DCWP will hold a public hearing to address the proposed rules at 11 a.m. ET on Wednesday, November 29, 2023. Details regarding the hearing and the rule can be found here.  

Recordkeeping and Monthly Reports 

The proposed amendment requires debt collectors to submit monthly reports with required fields, including reports for complaints (whether filed with DWCP or another entity), disputes, and cease and desist requests. (page 5).  Additionally, it requires debt collectors to keep the following records: 

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• Communications and attempted communications must be searchable and easily identifiable by time and duration, medium of communication, names and contact info of people involved, and include a contemporaneous plain language summary (page 4) 

• The consumer’s preferred communication method. (page 6) 

• Certain disclosures the debt collector made to consumers regarding credit reporting or unverified debt. (page 6) 

• Copies of policies addressing hospital financial assistance programs related to medical debt. (page 7) 

New and Updated Definitions 

The proposed amendment includes updated and newly added definitions for the following terms (pages 7-10): 

• Attempted communication 
• Clear and conspicuous 
• Covered medical entity 
• Electronic communication 
• Electronic record 
• Financial assistance policy 
• Itemization reference date 
• Language access services 
• Limited-content message 
• Original creditor and originating creditor 
• Communication 
• Debt Collector  

An excerpt of the complete definitions section with all the above terms can be found here.

Unconscionable and Deceptive Trade Practices 

The proposal includes significant and numerous updates regarding what is unfair and unconscionable when dealing with New York City consumers. Here is a non-exhaustive list of the proposed new requirements and prohibitions:  

• Debt collectors can place only three calls to a consumer within seven calendar days (page 12) 

• Debt collectors cannot contact consumers via email or text unless the consumer has provided revocable consent in writing or has used that communication method to communicate with a debt collector within the past 30 days. (pages 13-14) 

• Debt collectors cannot provide information to consumer reporting agencies (CRAs) without sending the consumer a notice stating clearly and conspicuously that the debt will be reported. Debt collectors will have five days from the rule’s effective date to send notice to consumers whose information has been previously furnished to a CRA. (page 18) 

• Debt collectors cannot sell, transfer, or place with an attorney for collection an account where the debt collector was previously unable to provide written verification of the debt. (page 19) 

• Validation Notices must include information beyond that required in Reg F and a new disclosure about the consumer’s rights. (page 20-21)

• Verification of a debt must be provided within 45 days of receiving a dispute or request for verification (orally or in writing). If the debt cannot be verified, the debt collector must send the consumer a notice of unverified debt with specific pieces of information included. (pages 23-24) 

• Debt collectors pursuing time-barred debt must comply with certain disclosures and waiting periods (page 26). 

Medical Debt 

In addition to specific disclosures regarding medical debt (page 28), requirements regarding what a debt collector should treat as a dispute regarding medical debt (page 25), and how a debt collector must respond (page 25), the proposal states that a debt collector must: 

• Treat all unverified accounts related to a discrete hospitalization or treatment within a six-month period the same. (page 25) 

• Verify that the covered medical entity on whose behalf it is trying to collect met its obligations under federal, state, or local law and the financial assistance policy. (page 25) 

Further, debt collectors are prohibited from collecting if they know or should know that collecting violates the financial assistance policy of a covered medical entity or that the patient has an open application for financial assistance. Debt collectors must conduct reasonable corrective measures upon obtaining information that a financial assistance policy was not disclosed to the patient, and must maintain a monthly log of these corrective measures. (pages 27-28) 

Instructions regarding how to participate or comment on the proposed rules can be found on the first page of this document; all proposed changes can be found on pages 4-29 

InsideARM Perspective 

This is not the DWCP’s first attempt to amend its debt collection rule. When a similar proposal was published in late 2022, the DWCP was not very receptive to industry comments. The 2022 proposal was not finalized, and now we have the 2023 version, complete with arduous, difficult to comply with requirements that will ultimately harm consumers. 

There is a danger that other cities or states might copy this proposal. Therefore, everyone in the ARM industry is encouraged to file a comment with the DWCP, even if your organization does not collect from New York City consumers. Perhaps an abundance of comments will help the DWCP see the significant flaws in the proposal. 

On September 20, the Senate Banking Committee held its first hearing on the use of artificial intelligence (AI) in the financial services space, further revealing a partisan divide regarding the utilities and risks associated with the technology. 

In his opening remarks, Committee Chairman Sherrod Brown cautioned that although AI technology promises new efficiencies and opportunities, it also carries unique risk of harm to consumers and workers in the financial services space, including the potential for discriminatory practices in lending and the reduction of job security and wages. He called for “rigorous testing and evaluation of AI models” before they are put to use by companies and other organizations in the financial services space. 

By contrast, Chairman Brown’s counterpart, Acting Ranking Member Mike Rounds touted the successes that similar technologies have brought to the financial services industry and stated that AI presents more upside than risk, particularly in the space of fraud detection and prevention. He urged Congress to take a “pro-innovative” role in regulating AI and warned that halting or slowing progress in this space will only allow competitors in other countries to develop more advanced technologies. 

The Committee then heard from several witnesses working in the AI and machine learning (ML) space, including both industry professionals and professors. Overall, these witnesses championed the potentials of AI, explaining its potential for “greater efficiency, enhanced insight, expanded access, and lower costs” but cautioned that the utilization of AI and ML is not a “one size fits all” model and will require careful consideration and oversight to minimize the risks it could pose to consumers and the markets.

DENVER, Colo. — Harvest Strategy Group is pleased to announce the expansion of its leadership team with the addition of two industry veterans, Cathy Fellabaum as VP Recovery and Jennifer Young as VP Operations as well as the promotion of Scott Hoffman to VP Client Services.  

Cathy Fellabaum joins Harvest from TRAKAmerica where she has been Vice President of Performance Management for the last 5 years.  Fellabaum has been at TRAKAmerica for 13 years, and has had multiple positions in recovery and operations.  Previously Fellabaum worked as a paralegal, legal assistant for two law firms, and as an automobile warranty administrator for Coconut Point Ford.  Fellabaum has a BS in Legal Studies from Florida Gulf Coast University, and is working on her MBA.  

Jennifer Young joins Harvest from Collection Partner Solutions where she has been Director of Operations.  Previously, Young worked 16 years for the multi-state collection law firm Machol & Johannes, where she had several positions of increasing authority, the last role as Director of Legal Operations. 

Scott Hoffman has been promoted to VP Client Services where he will manage the team that support Harvest’s expanding client base.  Hoffman has been with Harvest for nine years through several roles of increasing responsibility including Performance Manager and VP Recovery and previously worked for Resurgent Capital Services.  

“The growth of Harvest is due to our talented and dedicated team who have a tremendous depth of industry experience.  I am excited about the addition of these people and I am confident they will further expand our capabilities in delivering industry-leading services to our growing base of top industry consumer lenders,” said Pete Klipa, COO at Harvest. 

About Harvest Strategy Group

Harvest Strategy Group, Inc. (Harvest) is a recognized leader in national accounts receivable management services, delivering best-in-class results for the nation’s largest banks, finance companies and credit unions. Harvest’s mission is to execute custom recovery programs on behalf of its clients to maximize revenue, while protecting their brand with proven regulatory compliance and vendor oversight processes. Harvest’s leading recovery performance is fueled by ProScoreTM, its proprietary portfolio scoring and segmentation model. For more information, visit www.harveststrategygroup.com or call (303) 531-0631.

On October 11, the Consumer Financial Protection Bureau (CFPB or Bureau) published a special edition of its Supervisory Highlights report. This report serves as a “victory lap” for the Bureau, which highlights the relief it has obtained for consumers since the release of its March 2023 Special Fees Edition, discussed here. According to the Bureau, its supervisory efforts have led to institutions refunding over $140 million to consumers, including $120 million in overdraft and non-sufficient funds (NSF) fees.

Simultaneously, the Federal Trade Commission (FTC) announced a proposed rule to prohibit “hidden and bogus” fees. The proposed rule is in response to a proceeding last year where the FTC sought public input on such fees.

These initiatives were announced by CFPB Director Rohit Chopra and FTC Chair Lina Khan at a White House event where they received the express approval of President Biden.

On the state level, last week California Governor Gavin Newsom signed into law Senate Bill 478 (SB 478). Effective on July 1, 2024, this law will prohibit hidden fees in California.

In all, these events show that the coordinated federal-state emphasis on attacking so-called “junk fees” is continuing.

CFPB’s Supervisory Highlights:

The CFPB highlighted the below issues as the most significant ones identified by examiners during their supervisory activities, and notably, many of them are repeat issues the CFPB has written about in prior editions of Supervisory Highlights.

Overdraft, NSF, and Statement Fees:

Examiners found that some financial institutions charged consumers re-presentment NSF fees without giving the consumer an opportunity to prevent another fee after the first failed attempt.

• A re-presentment occurs when, after declining a transaction because of insufficient funds and assessing a fee, the merchant presents the same transaction to the consumer’s account-holding institution for payment again.

• The CFPB noted that beyond issuing refunds, most institutions reported plans to stop charging NSF fees going forward.

Examiners continued to cite institutions that charged consumers Authorize-Positive Settle-Negative (APSN) overdraft fees.

• APSN overdraft fees occur when financial institutions assess overdraft fees for debit card transactions where the consumer had a sufficient available balance at the time the transaction was authorized, but an insufficient balance when the transaction settled, i.e., another transaction settled during that time frame.

• According to the CFPB, institutions reported they planned to stop charging APSN overdraft fees.

Examiners found that some institutions charged fees for the printing and delivery of paper statements, including additional fees when a statement was returned undelivered.

• According to the CFPB, some institutions did not print or attempt to deliver paper statements but still assessed paper statement fees and returned mail fees each month.

Auto Loans:

Examiners founds that some auto servicers failed to ensure consumers received refunds for add-on products, such as vehicle service contracts, guaranteed asset protection (GAP), or credit-life insurance, following early loan termination or repossession.

Examiners also found that some servicers miscalculated add-on product refund amounts after early loan termination. For example, these servicers either inaccurately communicated higher deficiency balances or provided smaller refunds than warranted.

Remittance Rule:

Examiners found that some remittance providers failed to disclose fees, which resulted in a reduced wire transfer amount.

Examiners also found that certain providers failed to refund fees when the recipients did not receive the transfers on time.

FTC Proposed Rule:

The proposed rule by the FTC would “prohibit unfair or deceptive practices relating to fees for goods or services, specifically, misrepresenting the total costs of goods and services by omitting mandatory fees from advertised prices and misrepresenting the nature and purpose of fees.” Specifically, the proposed rule aims to ban “hidden fees,” or fees imposed shortly before the purchase is made that significantly increase the total amount. The proposed rule also seeks to ban “bogus fees” by requiring businesses to disclose upfront the amount and purpose of the fees and whether they are refundable.

Under the proposed rule, the FTC will be able to seek reimbursement for harmed consumers and levy monetary penalties against companies that do not comply with its provisions.

The proposed rule will be published in the Federal Register and interested parties will have 60 days to submit comments.

White House Support:

The CFPB and FTC are receiving the Biden administration’s full support. Last year, as part of his Executive Order on Promoting Competition, President Biden called on federal agencies to crack down on fees and provide consumers with disclosures of the full price up front. More recently in his State of the Union address in February, discussed here, President Biden called out fees in a variety of transactions involving banks, ticket vendors, airlines and online sellers.

The press release announcing the October 11 White House event stated:

“Junk fees cost American families tens of billions of dollars each year and inhibit competition, hurting consumers, workers, small businesses, and entrepreneurs. Research shows that fees charged at the back-end of the buying process make it harder to comparison shop for the best deal and lead to consumers paying upward of twenty percent more. Junk fees also make it hard for honest businesses to compete, stifle innovation, and hurt small businesses.”

California SB 478:

Fees are not just a priority for the federal government. As of July 1, 2024, California will prohibit advertising, displaying, or offering a price for a good or service that doesn’t disclose all mandatory fees or charges other than taxes or fees imposed by the government. Companies that don’t comply with the new law could face steep penalties.

This legislation is significant, as California has the fifth largest economy in the world and the nation’s largest population.

Troutman Pepper’s Take:

It’s obvious that the “war on fees” continues to rage with the federal regulatory agencies, and that the Biden administration views it as a beneficial political issue to pursue. Interestingly, the FTC proposed rule and the California statute are focused on disclosure of fees, while the CFPB’s actions are more of a frontal assault on the existence of fees themselves, which the CFPB believes are inherently unfair or abusive. It is also unclear how impactful the FTC and California measures would be in connection with credit transactions, since both of them only address disclosure of “mandatory” fees, and many of the fees that occur in consumer lending are not mandatory, but rather are either optional (like payment convenience fees) or are triggered by some occurrence after the credit transaction is entered into (like a late fee or NSF fee). But regardless of what the FTC and California measures may mean, the CFPB has shown itself to be hostile to fees of any kind, in any context.

Companies that report consumer accounts to the credit reporting agencies are experiencing an unprecedented increase in so-called “Fair Credit Dispute” lawsuits. These hybrid consumer claims typically assert violations of the Fair Debt Collection Practices Act (“FDCPA”) and/or the Fair Credit Reporting Act (“FCRA”) arising from a similar factual pattern (discussed below). Due to the sheer volume of new cases filed nationwide, this surge of Fair Credit Dispute litigation is being compared to the thousands of cases the credit and collection industry faced recently with both Telephone Consumer Protection Act lawsuits and Hunstein lawsuits.

Consumer Form Letter Commences Dispute

Most of the recent Fair Credit Dispute cases follow a similar factual pattern: The consumer mails a form dispute letter to the furnisher (typically a creditor or debt collector). While these form letters vary, most assert that the consumer disputes all debts. The letters may also state that the consumer does not seek written verification of the debt. Further, some dispute letters indicate that the consumer may only be contacted during a brief time frame each week and only by certain means of communication, such as email or text. Some experts in our industry note that these recent consumer dispute letters are similar to form letters sent by many credit repair organizations.

Furnisher Investigates Consumer Dispute

After receipt of the consumer dispute, the furnisher (typically a creditor or debt collector) commences an investigation and reports the code “XB” to the credit reporting agencies (the credit bureaus) on the disputed account. “XB” denotes that the consumer disputed the account information “directly” to the furnisher and that the furnisher is “conducting its investigation.”* The furnisher then investigates the dispute and mails the consumer a written response advising on the outcome of its investigation.

Upon conclusion of the investigation, the furnisher then reports the code “XH” to the credit reporting agencies which denotes that the consumer’s account was “previously in dispute” and that the furnisher “completed its investigation.”

Consumer Commences Fair Credit Dispute Lawsuit

After the furnisher concludes its investigation, the consumer typically commences a so-called Fair Credit Dispute lawsuit against the furnisher, asserting violations of the FDCPA and often the FCRA due to the furnisher’s “failure” to report the account as disputed upon conclusion of the dispute investigation. Specifically, the consumer will allege that the furnisher should have reported the code “XC” to the credit reporting agencies when concluding the investigation, instead of “XH”. The “XC” code denotes that the investigation of the consumer’s dispute is “complete,” but that the consumer “disagrees” with the results.

The Plaintiffs in these matters will contend that they advised the furnisher of an “ongoing dispute” and thus the furnisher should have used the XC code to denote the ongoing dispute. Further these Plaintiffs allege that the XH code is misleading because it indicates the “previous dispute” and the furnisher’s “completed investigation” but is silent as to whether the consumer continues to dispute after the completion of the investigation.

Courts Uniformly Reject Consumer Claims of “Ongoing Dispute”

As noted in a previous edition of InsideARM, Courts have examined and rejected these Fair Credit Dispute claims.ii In Wood v. Security Credit Services (Case No: 2020-CV- 02369, N.D. Ill. 2023) the Court examined the very fact pattern described above in the context of an FDCPA case and dismissed the consumer’s claim completely, writing:

“. . . when a debt collector investigates a dispute and communicates the results to the consumer, the dispute is resolved unless the consumer indicates that it disagrees with the results.”

This result above was similar to the ruling of the in Foster v. AFNI No. 2:18-CV-12340 (E.D. MI March 31, 2020) where the Court reviewed a similar fact pattern, granted summary judgment in favor of the debt collector, completely dismissed the claims of the consumer and wrote:

“After receiving the letter from Defendant indicating that it concluded that debt was valid, Plaintiff did not communicate any disagreement with the investigation. Instead, she filed this lawsuit. On this record, Defendant could not have had knowledge that Plaintiff disputed the outcome of its investigation.

Plaintiff argues that Defendant should have understood her original dispute of the debt to mean that she also disputed the outcome of the investigation and also disputed any resolution that involved her owing the debt. But she did not communicate this to Defendant at any point. . . .”

Three Strategies for Avoiding “Fair Credit Dispute” Liability

The prevalence of these Fair Credit Dispute lawsuits nationwide cannot be understated. The author of this article is presently involved in defending furnishers against these consumer FDCPA and FCRA claims in jurisdictions including Alabama, District of Columbia, Florida, Georgia, New York, Pennsylvania, Tennessee and Texas. Below are three strategies every furnisher should consider to avoid liability in these lawsuits:

1. Investigate all Direct Disputes

The recent Fair Credit Dispute cases all begin with the consumer sending a form letter to the furnisher. Furnishers must have a written policy with procedures detailing how direct disputes are investigated and be aware of form letter disputes used by consumers. Often these form consumer disputes may include contradictory language such as “I dispute but don’t send me verification”.

Further, we expect that the consumer dispute form letters will continue to evolve to challenge even the recent Court rulings cited herein. Furnishers must continue to monitor these form consumer disputes for variations and new attempts to create liability.

2. Consider all Defenses

The Fair Credit Dispute claims are scripted and formulaic. Thus, these claims are susceptible to defenses including challenges to standing (because the consumer suffered no harm) and materiality.

Additionally, the written form disputes that the consumers use in these recent cases are often sent months after the debt collector sends the consumer a validation notice. At least one Federal Appellate Court has held that a consumer’s failure to articulate a dispute in response to the validation notice precludes subsequent challenges to the validity of the debt. Richmond v. Higgins 435 F.3d 825 (8th Cir. 2006).

3. Avoid Settlement if No Liability

Many companies have chosen to settle these recent Fair Credit Dispute cases for less than the anticipated cost of litigation defense. Unfortunately, settling these cases only results in more litigation, similar to the issues caused by settlements during the peak of the TCPA and Hunstein lawsuits. The plain language of the FCRA, the FDCPA and case law all support the furnishers in these cases as set forth above. Thus, we encourage furnishers to fight these cases where counsel advises that the facts and law warrant a vigorous defense.

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*  The codes XB, XH and XC — which are discussed in this article — are components of the Metro 2 Format, which was developed by the Consumer Data Industry Association for furnishers to report debts to the national credit reporting agencies.

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This article is provided only as a general discussion of legal principles and ideas. Every situation is unique and must be reviewed by a licensed attorney to determine the appropriate application of the law to any particular fact scenario. If you have a legal question, consult with an attorney. The reader of this publication will not rely upon anything herein as legal advice and will not substitute anything contained herein for obtaining legal advice from an attorney. No attorney-client relationship is formed by the publication or reading of this document. Rossman Attorney Group, PLLC assumes no liability for typographical or other errors contained herein or for changes in the law affecting anything discussed herein.

LOCKPORT, N.Y. — Spire Recovery Solutions, a respected and compliant collection agency headquartered in Lockport, NY, continued its community outreach efforts with another involved quarter focusing on veterans support and the local school district. 

In July, Spire donated to Taps, a national nonprofit organization providing compassionate care and comprehensive resources for all those grieving the death of a military or veteran loved one. In August, the Spire Recovery Solutions team supported The Freedom 13, an organization working closely with veterans and their families to honor every American Hero that made the ultimate sacrifice. In September, Spire kicked off the new school year by supporting the local Wrestling team at the Royalton-Hartland School District. 

“At Spire Recovery Solutions, we believe that success is not solely measured by financial achievements but also by the positive impact we have on the communities we serve,” said Joseph Torriere, President of Spire Recovery Solutions. “My brother and I began this organization both as veterans of the U.S. Military. Our commitment to community outreach is at the heart of our mission and veterans support will always be at the forefront of our minds.” 

TAPS

The Tragedy Assistance Program for Survivors or, TAPS, plays a vital role in our society by providing compassionate care and comprehensive resources for individuals grieving the loss of a military loved one. TAPS recognizes the unique and often challenging journey that bereaved military families and veterans endure. TAPS not only offers solace and support during these difficult times but also fosters a sense of community where individuals can connect with others who understand their pain. 

Through their services, they ensure that those who have sacrificed for our nation, and their families, are not left to navigate the grieving process alone. In 2022, TAPS connected with 8,849 newly bereaved loved ones, adding to the nearly 100,000 military survivors currently receiving support from the organization. TAPS answered over 25,623 calls, resolved over 6,397 casework challenges, secured over $3.9 million dollars in retroactive benefits for survivors and connected military survivors with over $215 million dollars in education benefits. 

The Freedom 13

The Freedom 13 is a unique nonprofit organization working to secure recreational retreats in each state, offering a place that veterans and their families can use, free of charge, to reconnect, bond, or strengthen old relationships and make new ones with families in similar situations. Each village will be unique and have additional assistance programs like PTSD counseling, job training, search, and placement, and service dog help and placement. 

The Freedom 13 began as an organization to remember a team of 13 U.S. military heroes who lost their lives on the front lines. Jared’s parents began the nonprofit to start the Recreational Villages Project and continue to honor the legacy of Jared, Nicole, David, Darin, Ryan, Hunter, Dylan, Kareem, Rylee, Daegan, Johanny, Maxton, and Humberto. 

Royalton-Hartland School District

Community involvement goes beyond business success; it’s about making a positive impact where we live and work. Supporting Spire’s local schools and youth sports programs helps foster a sense of unity and camaraderie within its community. It provides opportunities for young athletes to learn valuable life skills such as discipline, teamwork, and perseverance, which are integral to their personal and academic growth. By investing in initiatives like the wrestling team, Spire not only promotes physical fitness and sportsmanship but also nurtures the next generation of community leaders. 

In addition, with many of its employees’ families attending these schools, Spire thought it was important to continue to support our employees in every way possible. The team is one cohesive family in and out of the office. 

Learn More Online

To learn more about Spire Recovery Solutions, or read about the various other organizations it has supported in the past, please visit their website. Through collective efforts, Spire believes we can build stronger, more compassionate communities for the present and future generations.

About Spire Recovery Solutions

Spire Recovery Solutions, LLC was founded by U.S. Veterans Joseph Torriere and Jacob Torriere. Spire is a professional, nationally licensed full-service debt collection agency that assists creditors in the recovery of outstanding balances while providing consumers with exceptional customer service. Spire Recovery Solutions uses customized processes and state-of-the-art technology to provide transparency and compliance that clients and consumers trust and rely on while working together toward account resolution.

The statute of limitations in collections cases is crucial but complex. This statement applies equally to lawsuits filed to collect debts and to suits brought by consumers who allege a violation of the Fair Debt Collection Practices Act (FDCPA). Recently, a court in the Southern District of Georgia held that the triggering date for the statute of limitations in an FDCPA action against a debt collector was the date a consumer was served with the debt collector’s underlying debt collection suit, not the date the suit was filed.  

In Daiss v. Robert S.D. Pace, Civil Action 4:22-cv-236 (S.D. Ga. Aug 24, 2023), a consumer raised FDCPA claims alleging the debt collector attempted to collect a debt through false and deceptive means. Specifically, the consumer alleged that the debt collector’s filing of a debt collection suit was in and of itself an FDCPA violation. The debt collection action was filed with the court on August 16, 2021, and the consumer was served on August 20, 2021. The consumer’s FDCPA action was filed on August 19, 2022. 

The debt collector argued that the consumer’s FDCPA suit was time-barred because it was filed more than one year after the debt collection action was filed and was thus outside the applicable 1-year statute of limitations. The consumer responded that the statute of limitations did not start to run until he was served with the complaint. Since he was served on August 20, 2021, and filed his FDCPA action on August 19, 2022, he claimed his FDCPA suit was timely.

The court acknowledged that there is no consensus regarding when the statute of limitations begins to run in cases where the alleged violation is the filing of a debt collection lawsuit. Some courts have held that the limitations period commences when the underlying complaint is filed, while others have taken the view that it starts at the time of service of process. The court noted that though the 11th Circuit has not decided when the violation occurs when the claim arises out of a collection suit, it has held that the statute of limitations for FDCPA matters begins to run at “the debt collector’s ‘last opportunity to comply’ with the FDCPA.”

Thus, the court sided with the consumer and held that “when a plaintiff’s FDCPA claims arise out of a collection suit, the ‘violation occurs’ for purposes of Section 1692k(d) when the plaintiff is served because that is the debt collector’s last opportunity to comply with the statute.”

insideARM Perspective: 

This case highlights the importance of staying up to date not only on any changes to state laws regarding statute of limitations but also on the state and circuit court interpretations of those statutes. Further, This case also serves as a reminder to the collection community: In jurisdictions that follow this line of thinking, FDCPA violations stemming from filing a debt collection lawsuit can only be prevented until the consumer is served with that lawsuit. 

A New York federal district court has denied a motion to dismiss the lawsuit filed in January 2022 by the CFPB against three companies that purchase portfolios of defaulted debts (Corporate Defendants) and three individuals who are owners and/or officers of the Corporate Defendants (Individual Defendants). 

The lawsuit alleges that the Corporate Defendants contracted with debt collectors to collect consumer debts on their behalf either directly or through other debt collectors or sold consumer debts to debt collectors, some of whom were contractually required to make ongoing payments to the Corporate Defendants.  The CFPB alleges that both debt collectors who collected debts on the Corporate Defendants’ behalf and debt collectors to whom the Corporate Defendants sold debts used deceptive collection tactics, including false threats of lawsuits, arrest, and jail, and false statements about credit reporting.  

The CFPB also alleges that the Corporate Defendants received complaints from consumers about the debt collectors’ unlawful practices but took no meaningful action to prevent or preclude it.  The CFPB’s claims against the Corporate and Individual Defendants consist of claims for Consumer Financial Protection Act (CFPA) and Fair Debt Collection Practices Act (FDCPA) violations based on vicarious liability for the debt collectors’ CFPA and FDCPA violations and claims for substantially assisting CFPA and FDCPA violations by the debt collectors.

In denying the motion to dismiss filed by the Corporate and Individual Defendants, the rulings made by the court include the following:

• The defendants can be “covered persons” or “related persons” under the CFPA even if only the third-party debt collectors actually collected the debts. Under the CFPA, a “covered person” includes “any person that engages in offering or providing a consumer financial product or service.”  A “consumer financial product or service” includes “collecting debt related to any consumer financial product or service.”  A “related person” includes “any director, officer or employee charged with managerial responsibility” for a covered person.

• CFPA liability can be based on vicarious liability and is not precluded by the existence of “substantial assistance” liability in the CFPA.  Therefore, the CFPB can proceed under both a vicarious liability and a substantial assistance liability theory.  The Corporate Defendants can be vicariously liable for unlawful acts taken by the debt collectors with actual authority to act on their behalf.

• The Individual Defendants can be liable for the debt collectors’ unfair or deceptive acts or practices if they had actual knowledge of the unlawful conduct and the authority to control it.

• Federal Rule of Civil Procedure 9(b), which requires a party alleging fraud or mistake to state with particularity the circumstances constituting fraud or mistake, does not apply to the CFPB’s substantial assistance claims.  A claim of deceptive acts or practices under the CFPA does not require proof of the same essential elements as common-law fraud and the knowledge or recklessness standard required for substantial assistance liability under the CFPA does not transform a substantial assistance claim into the sort of fraud-based claim that would trigger Rule 9(b).

• The CFPB’s allegations that the Corporate and Individual Defendants placed debts for collection with or sold debts to the debt collectors who engaged in CFPA violations, helped those debt collectors succeed in violating the CFPA by taking steps to conceal the violations, and profited from their business relationships with the debt collectors is sufficient to allege that the Corporate and Individual Defendants substantially assisted the underlying CFPA violations.

• FDCPA claims brought by the CFPB are governed by the CFPA’s three-year statute of limitations and not the FDCPA’s one–year statute of limitations.

• A company that is a “debt collector” under the FDCPA can be vicariously liable for FDCPA violations committed by other debt collectors in connection with collecting debts on the company’s behalf.  A company that purchases portfolios of defaulted consumer debt and derives the majority of its revenues from debt collection can be a debt collector under the FDCPA because the principal purpose of its business is the collection of debts.

When it was filed, we observed that the CFPB’s claims in this enforcement action seemed particularly aggressive because rather than taking action against the debt collectors used by the Corporate Defendants or the debt buyers to whom they sold debts, the CFPB was seeking to hold the Corporate and Individual Defendants directly and separately responsible for the violations committed by these third parties.  While the CFPB will ultimately have to produce evidence to support its theories of liability and prove its claims to win on the merits of its lawsuit, the denial of the motion to dismiss means that the Corporate and Individual Defendants will be required to invest additional time and resources to defend the lawsuit.  As such, the takeaway for debt sellers (including first-party creditors) is that they should consider taking steps to reduce the risk of similar claims of vicarious liability or substantial assistance.  Such steps include performing appropriate due diligence when selecting debt collectors or debt buyers, monitoring debt collectors and debt buyers for compliance with applicable consumer protection laws and regulations, and promptly taking appropriate action when compliance issues arise to ensure full remediation of any issues.

CLEVELAND, Ohio — Revenue Group welcomes Chris Taylor as its new Chief Information Officer. Chris spent the last eighteen years as the Director of Operations and Technology followed by the Controller and CIO at National Enterprise Systems (NES). Starting in IT, he progressed to become a dual professional in Financial Services and Information Technology, taking a special interest in debt collections. 

Over the course of his career, Chris has gained experience across all collection portfolios including student loans, credit cards, retail cards, mortgages, lines of credit, DDA, and medical accounts. Being that technology is an integral part of the overall collections operation, Chris was managing the technology component while also directly involved in all aspects of operations including implementation, compliance, dialer management, analytics, reporting, and more. 

Chris received his Bachelor’s in Information Science from the University of Pittsburgh and his MBA in Executive Management from Ohio University. During his time at NES, he became a member of Ontario Systems Hall of Fame and received Manager of the Year in 2007 and 2008, recognized for Outstanding Contribution. 

Speaking on Chris joining Revenue Group, COO Eric Boone said, “Our success as a company is built on the talent and dedication of our team. We’re thrilled to welcome Chris Taylor aboard, as his expertise and passion will undoubtedly contribute to our continued growth and innovation.”

As CIO, Chris will oversee the people, processes and technologies at Revenue Group while driving a technology strategy that brings innovation and performance to drive growth for their clients. 

About Revenue Group

Revenue Group is a leading revenue cycle management company with over 29 years of experience serving clients in a wide variety of industries. We merge industry-leading technology with premier customer service to help our clients generate revenue while ensuring a positive experience for their customers. Recognizing that every client is unique, Revenue Group offers tailored strategies and services to align with the client’s specific business model, customer demographic, and goals to deliver proven results.