As federal student loan repayments resume after a three-year pause due to the COVID-19 pandemic, the Consumer Financial Protection Bureau (CFPB) published an Issue Spotlight on student borrowers’ experiences, using consumer complaints to identify emerging problems.

Key concerns include long hold times and abandoned calls. Borrowers often wait on hold for over an hour, and many give up without receiving assistance. Average call wait times have risen from 12 minutes in August 2023 to over 70 minutes in October 2023, resulting in about half of all calls being abandoned in October 2023, more than double August 2023’s rate of 17%.

There are also significant delays in processing income-driven repayment plan applications. As of late October, servicers reported over 1.25 million pending applications, with more than 450,000 pending for over 30 days. Processing times vary, with some servicers taking five times longer than others, putting borrowers at risk of making higher payments than they can afford.

Inaccurate and untimely billing statements are another issue. Errors include premature due dates before the end of the payment pause, inflated monthly payment amounts due to outdated poverty guidelines, and incorrect calculations for new income-driven repayment plans. These mistakes can cause confusion and further strain servicers’ resources as borrowers contact them to resolve these errors.

In the press release that accompanied the release of the Issue Spotlight, CFPB Director Rohit Chopra warned that “if student loan companies are cutting corners or sidestepping the law, it could pose serious risks to individuals and the economy.”

PETALUMA, Calif. — The Cascade365 Family of Companies is excited to announce that Saket Sahoo has been appointed Chief Operating Officer (“COO”) of Cascade Receivables Management, LLC (“CRM”). As COO, Mr. Sahoo will oversee CRM’s operations and information technology teams while leading mission-critical initiatives for CRM and its affiliate companies, such as diversifying and growing revenue, implementing key technologies and efficiencies, and cultivating CRM’s workforce offshore.

Mr. Sahoo’s wealth of experience spans two decades and multiple continents. He previously worked for Global Growth, a private investment firm with portfolio companies in the ARM and RCM sectors. During his time there, Mr. Sahoo led M&A activity and designed and implemented strategic growth strategies, while also contributing at the individual portfolio company level. 

Mr. Sahoo most recently served as COO of Affinity Global and as Vice President of CBV Collection Services, Ltd., both Canadian ARM companies operating under the Global Growth umbrella. Prior to Global Growth, Mr. Sahoo was an EVP at Astra Global and a Director at Arrow Financial Services (a Sallie Mae Company). Mr. Sahoo is also a strategic Partner in Connect BPS, an offshore call center business located in South Africa.

Mr. Sahoo possesses a strong track record of driving growth while fostering innovation and maintaining robust profit margins. Throughout his career, he has consistently remained at the forefront of technological advancements and effectively harnessed them to drive transformative change across industries. He holds a Bachelor of Engineering degree in Electronics from D.Y. Patil University and lives in Toronto Canada.

“I’m excited about both the organic and inorganic growth opportunities ahead of us at Cascade365, with sustainability and innovation being key drivers, as we navigate through challenging economic and regulatory climates”, stated Saket Sahoo.

“I am excited to have Saket on team Cascade365”, said Lee Brockett, CEO of the Cascade365 Family of Companies.  “His unique experience and history of success, as both entrepreneur and institutional operator in three different continents, will help fuel Cascade365’s growth without sacrificing operational integrity or customer experience.”

About The Cascade365 Family of Companies 

Cascade365 is a brand identity representing a family of companies focused on the responsible liquidation of accounts receivable. Headquartered in the San Francisco Bay area, the Cascade365 Family of Companies are recognized leaders in the accounts receivable management, revenue cycle and specialty finance industries. Cascade365’s suite of products and services include AR Purchase and Finance, Master Servicing, Third Party Collections, and Revenue Cycle Optimization. The Cascade365 Family of Companies believes in promoting financial accountability while treating consumers and patients in a fair, dignified, and lawful manner. For more information, please contact Jeffery Howell, Director of National Sales at 707-244-2298 or via email at jhowell@cascade365.com.

The line between first-party and third-party collections can be fuzzy, and consumer attorneys regularly claim first-party collections are subject to the Fair Debt Collection Practices Act (FDCPA). Recently, a court in the Northern District of Illinois found in favor of a first-party debt collector and provided some clarity around how to draw the distinction.

In Mladenov v. R1 RCM Inc., 21-cv-1509 (N.D. Ill. Jan 22, 2024) a consumer brought suit against a debt collection agency for letters sent that allegedly did not comply with FDCPA requirements. The debt in question stemmed from medical services rendered by a hospital following a car accident. The agency sent two statements to the consumer informing them of the debt that was owed; the second was sent after the consumer’s attorney asked the agency to cease all communications. Each letter included some language typically found in third-party debt collection letters.  

The consumer paid the debt after the second statement but subsequently filed a lawsuit claiming the debt collector violated the FDCPA. The debt collector defended the suit by claiming the debt was not in default when assigned by its client, and therefore, the FDCPA did not apply. The consumer responded by claiming the cumulative effect of the letters reasonably led him to believe that the collection agency was attempting to collect a defaulted debt. 

The Court agreed with the debt collector and held the FDCPA did not apply to it or the letters it sent. 

In analyzing the issues, the Court pointed out that whether a debt collector is a first-party or third-party collector is a factual determination to be made on a case-by-case basis. The court rejected the consumer’s assertion that the cumulative effect of the letters should be considered. Instead, the court focused on the status of the debt and noted that the contractual agreement between the debtor, creditor, and agency should be used to help establish whether the debt was in default. 

In reaching its conclusion , the court reviewed the agreement between the debt collector and its client and found that pursuant to that contractual language,  the debt collector “acts as an extension of [its client] in servicing and billing patient accounts[,]” and “performs ‘early out’ services through which it resolves ‘balances on unpaid accounts prior to the time that the account is deemed delinquent.’” The debt collector also serves its client by coordinating collections on debt that has defaulted with third-party agencies. Further, at no point did the debt collector or its client treat this debt as in default. Therefore, in the court’s opinion, the contract and undisputed facts showed that the debt collector was only performing precollections for its client and thus was not a “debt collector” under the FDCPA.

Read the full opinion here. 

insideARM Perspective

For those performing first-party collection services for their clients, or thinking about doing so, this case highlights the importance of the contractual language establishing the first-party, early-out, or pre-collect relationship. In this case, the contract between the debt collector and its client was clear: the debt collector was “acting as an extension” of its client. This phrase and the surrounding language in the contract painted a clear picture for the court and allowed the debt collector to end the lawsuit without the need for a trial. Reading between the lines, had this language been omitted from the contract, or been too broad or otherwise unclear, we might have seen a different result.

FAIRFIELD, N.J. – Vertican Technologies, a global leader in the legal collections software industry, proudly announces the launch of its rebranded company website. This milestone tops off their recent corporate identity rebranding which introduced new product logos, streamlining their look, and creating a cohesive visual brand across all their platforms. 

The revamped website reflects Vertican’s enduring legacy and forward-thinking approach in the ever-evolving landscape of the collections industry. With a fresh design and enhanced user experience, the new vertican.com seamlessly integrates access to company news and information empowering clients with robust solutions to navigate the complexities of legal recoveries.

“As we settle into the new year, our rebranded website is a testament to Vertican’s dedication to modernization while providing unparalleled solutions in the receivables technology space,” said Isaac Goldman, Chief Executive Officer. “This is not merely a cosmetic change; it’s a reflection of our commitment to innovation, improving people’s lives, and advancing into the next exciting chapter of our journey.”

Vertican has been serving the legal collections arena for three generations, maintaining continuous ownership and a reputation for visionary innovation. This latest move in their corporate rebranding demonstrates the company’s commitment to scaling ahead in a dynamic business landscape and delivering exceptional products, value, professional services, and client support.

Visit the rebranded website at vertican.com and experience how the Vertican suite of products has provided the legal collections industry with the most powerful, evolutionary, and revolutionary technology for more than four decades.

About Vertican Technologies

For more than 40 years, Vertican Technologies has been the receivables industry leader providing best-in-class technology, making operations more efficient, compliant, and profitable. As the pioneer in developing data standards, Vertican continues to advocate for universal data standards which will increase productivity and reduce errors in the legal collection industry. Vertican’s team of subject matter experts and innovators build comprehensive software packages that automate and streamline the collections cycle. Solutions include: vExchange®, Q-LawE, Collection-Master, vMedia, and legacy YGC Data Standard licensing. Visit www.vertican.com to learn more.

In a blog post published January 29, 2024 titled “The CFPB’s enforcement work in 2023 and what lies ahead,” the CFPB discussed its 2023 enforcement activity and highlighted its plans to expand its enforcement capacity in 2024.

The CFPB indicated that in 2023, it filed 29 enforcement actions and resolved through final orders 6 previously-filed lawsuits.  Orders in these matters required the respondents to pay approximately $3.07 billion in consumer redress and approximately $498 million in civil money penalties.  The CFPB’s blog post includes brief descriptions of key 2023 enforcement actions.  (Our blog posts about several of these matters can be found here, here, here, here, and here.)

The CFPB also highlighted its plans to significantly expand its enforcement capacity in 2024.  The additional staff members that the CFPB plans to hire include enforcement attorneys as well as non-attorneys such as analysts, paralegals, e-litigation support specialists, and economists.  The new staff members will be located in the CFPB’s Washington, D.C. headquarters and in its San Francisco, New York, Chicago, and Atlanta regional offices.  The CFPB also promoted an information session that it held yesterday for potential applicants to learn more about the Office of Enforcement’s work and job opportunities.

Effective skip tracing
strategies have evolved alongside changing regulatory requirements and
technological advances. Today, debt collectors can access robust data sources in
real-time to power automated prioritization and collection strategies.

For example, an alert indicating
a consumer opened a new account or is using a new phone number could send them
to the top of your queue. You can then contact via phone or text message with a
link to your self-service portal to request that they start a payment plan.

Verifying and continuously
monitoring consumers’ contact information is important when building automated systems
for collections.  The same capabilities can also increase your
right-party contact (RPC) rates with live agents, emails, and physical letters,
which is important, especially when resources are constrained.

What skip tracing solutions can help?

A comprehensive skip tracing strategy
goes beyond increasing right-party contact rates. While having the most
up-to-date contact information is important, you also need tools that can help
you prioritize accounts.

We recommend:

• Phone Number ID^™ — Scrub and score phone numbers
  based on the likelihood that the number belongs to the account holder at the
  beginning of the debt cycle.
• TrueTrace^™ — Find new phone numbers with scores based
  on quality.
• Email append — Validate and scrub email addresses; find the
  latest ones to attach to accounts.
• Collection Triggers^℠ — Passively
  monitor accounts for new contact information and changes that indicate a
  consumer is now able to make a payment.

Let’s take a closer look at each.

Phone Number ID™

This robust contact-management
process can help you maintain RPC rates and meet compliance requirements. Phone Number ID verifies consumers’ phone
information in real-time, including:

• Subscriber name
• Carrier
• Line type
• Activation date
• Whether the number was moved from a landline

With connections to over 5,000
carrier exchanges, there’s a 97-percent hit rate. If the carriers don’t have a
name associated with that number, Experian will attempt to identify the owner
using its proprietary databases before sending you a complete profile.

Use Phone Number ID to monitor
your accounts and serve as a quality scrub. You can choose which categories to
monitor and receive daily updates if there’s a change.

Phone Number ID also delivers a
match score (0 to 99) based on the likelihood the phone number belongs to the
correct owner.  This score can help you
optimize your outbound communication and stay compliant.

For example, even if you have
the right phone number, at best you might achieve a RPC 15 to 20 percent of the
time. A high score might tell you that it’s worth continuing to reach out until
the consumer answers.

On the other hand, a low score
might indicate it’s a bad number. You might try it once or twice, but then send
it to skip tracing and move on if you don’t make contact. Additionally, you
might want to avoid texting numbers that were recently moved or have a low
score to reduce the risk of Telephone Consumer Protection Act (TCPA) violations.

READ: A Digital Debt Collection Future: Maximizing Collections and Staying Compliant

TrueTrace^™ and
TrueTrace Live^™

TrueTrace and TrueTrace Live are
Experian’s most powerful locating solutions and a follow-up solution to Phone
Number ID. We’ve seen TrueTrace achieve a 10-percent lift in RPC rates compared
to competing products.

The improvement comes from
Experian’s proprietary matching process and access to multiple high-quality
data sources that are frequently updated:

• Experian’s consumer credit file
• Clarity Services alternative and payday lending
  bureau
• Experian® RentBureau® property management data
• Directory assistance data
• Public data sources

You can use TrueTrace to filter the results based on the
quality of the phone number and the phone type. For example, some collectors
use TrueTrace specifically to find high-quality mobile numbers — competing
products might deliver every number regardless of its quality or type.

Email append

Email append is similar to skip
tracing for phone numbers. We can validate email addresses that collectors have
in their accounts to determine if the address:

• Is deliverable
• Has easily correctable typos
• Is a work email address

You can then scrub your accounts to filter out email
addresses that you shouldn’t use. Experian also has access to approximately two
billion email addresses that are regularly evaluated for permissions. We can
help you find and append new emails to accounts to improve digital outreach
strategies.

READ: What To Know When Adding Email to Collections

Collection Triggers℠

Collection Triggers is a flexible monitoring tool
that can alert you to predictive changes in consumers’ credit profiles and enables
a data-driven approach to prioritization.

For example, the daily report
could highlight consumers who applied for, or opened, new credit accounts or
consumers who settled or brought other accounts current. These changes can
indicate a consumer’s finances are on the rebound, allowing you to prioritize those
who are more likely and able to make a payment.

You can choose from nearly 100
triggers to monitor, including changes to a consumer’s phone number, address,
and employer.

While consumers rarely update
their contact information with Experian directly, we receive new information through
furnished trades and inquiries. Passively monitoring for these changes allows
you to avoid having to repeatedly skip trace older accounts and minimize lost
time.

TIP SHEET: Strengthening Your Debt Collection Strategy

Why partner with Experian?

Experian has worked with
collection agencies and debt buyers for years to understand their challenges
and develop effective solutions. We’ve gone from skip tracing solutions that
relied on physically mailing collectors updated reports to monitoring and
verifying information on millions of consumers in real time.

Today, we see debt collectors
and agencies leverage Phone Number ID, TrueTrace, Email append and Collection
Triggers to create effective and compliant skip tracing strategies. These
affordable tools are easy to integrate with existing collection systems. And
the results allow organizations to optimize and scale operations without expanding
their workforce.

Learn more
about Experian’s Skip Tracing Solutions.

On February 6, the FTC announced two orders (here and here) that will ban a group of student loan debt relief “scammers” (defendants) from the debt relief industry. As previously covered by InfoBytes, defendants allegedly misled consumers by charging them for services that are free through the Department of Education, claiming consumers needed to pay fees or make payments to access federal student loan forgiveness. As a consequence, the FTC filed a temporary restraining order resulting in an asset freeze, among other things.  

As a result of the FTC’s action, and subject to court approval, defendants are banned from operating in the debt relief industry, as well as prohibited from making false statements about financial products or services and from using deceptive tactics to gather consumers’ financial information. Moreover, the proposed orders include a monetary judgment of $7.4 million, with a significant portion suspended due to financial constraints. Defendants must surrender personal and business assets, and if any of them materially misrepresent their finances, the entire monetary judgment will become immediately payable.  

On January 22, 2034, NYDFS issued an industry letter titled “Guidance on Assessment of the Character and Fitness of Directors, Senior Officers, and Managers” for banks and other financial institutions (Covered Institutions) to notify them of NYDFS’s expectations. The final guidance came after a review process conducted over the past year where twenty comments indicated the need for Covered Institutions to build “robust character and fitness” policies. NYDFS asked that these Covered Institutions develop and maintain a framework to vet senior officials’ character and fitness during onboarding and on a regular basis.

According to the guidance, each Covered Institution is expected to “define sensitive issues, warning signs, and other indicators” that would be cause for concern. The depth and nature of each Covered Institution’s assessment is tailored to each institution, and the guidance does not demand a defined period for the review, but NYDFS supplied a list of suggested questions for Covered Institutions to use as best practices for vetting key individuals. (These questions are not mandated, however.) NYDFS noted that Covered Institutions are expected to review materials related to the character and fitness assessment of key persons. The guidance’s appendix lists suggested questions, including whether the key person has reviewed and understood pertinent policies and whether the interviewee has ever been charged or convicted of a crime or has previously been sanctioned or censured by a securities regulator. 

SACRAMENTO, Calif. — The Receivables Management Association International celebrated its 27th Annual Conference in Las Vegas, February 5-8, 2024. RMAI was pleased to host this popular conference which attracted more than 1,400 attendees this year. RMAI took the opportunity to present its annual awards, recognizing leaders in the receivables management industry.

Bud Reitzel Award

The RMAI Board of Directors awarded the Bud Reitzel Lifetime Commitment Award, the industry’s highest recognition, to Vincent Iacono, President/CEO of TRAKAmerica.

RMAI created the Reitzel Award to recognize an individual for outstanding leadership and dedication in the receivables management industry who has demonstrated, over many years of service, the ideals that Bud modeled and believed in.

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Vinnie Iacono is a dynamic and proven executive with over 20 years of leadership in the credit and collections space. He uses his deep relationships in the recovery space to drive new business growth and deepen relationships with existing TRAKAmerica clients.  Prior to joining TRAKAmerica, Vinnie was the ALS Executive of the Recovery and Risk Operations division for Bank of America. He has been described as a leader and mentor within his company, and an engaged leader with collaborative partnerships throughout the industry.  He is involved with trade organizations and works to foster the next generation of leaders.

“Vinnie has had a powerful and positive impact on so many throughout his career,” said RMAI Board President Anne Thomas.  “He is an icon in the industry who has fostered collaborations to achieve tremendous results.”

President’s Award

RMAI awarded the President’s Award to David Reid, General Counsel for the Receivables Management Association International (RMAI). In this capacity, David manages the legal, state legislative, regulatory, and advocacy activities of the association. David also serves as staff liaison to the RMAI Certification Council and its Standards and Remediation Committees. David is a graduate of Canisius University and Albany Law School. He is admitted to the California, New Jersey, and New York bars.

In 2017, RMAI created the President’s Award which recognizes an individual for outstanding contributions and services to the association and membership. The award goes to someone serving on an RMAI Committee who is selected because of their contribution to committee goals and their innovative ideas helping further the success of RMAI.

Integrity Award

RMAI awarded the Integrity Award to Don Maurice, a partner at national financial services law firm Maurice Wutscher, LLP. For nearly 30 years, Don has counseled the financial services industry in defense and compliance matters. He has litigated in bench and jury trials in both individual and class actions, appearing before federal Circuit Courts of Appeals and as amicus counsel before the U.S. Supreme Court. Don is peer-rated AV Preeminent by Martindale-Hubbell, the worldwide guide to lawyers. His prior firm was named a “Go-to Law Firm for the Top 500 Companies” and a “Go-to Financial Law Firm” by Corporate Counsel.

The Integrity Award is RMAI’s award which recognizes an individual from an RMAI member company for demonstrated integrity in action, either professionally or personally. The recipient of this award is an individual who has demonstrated integrity through specific actions which have contributed positively to the receivables management industry or the individual’s community.

About RMAI

Receivables Management Association International (RMAI) is a nonprofit trade association representing more than 600 companies that purchase or support the purchase of performing and nonperforming receivables on the secondary market. The RMAI Receivables Management Certification Program and Code of Ethics set the global standard within the receivables industry due to the rigorous uniform standards of best practice which focus on protecting consumers. More information about RMAI is available at www.rmaintl.org.

RMAI’s 2024 Annual Conferencebrings together stakeholders in the receivables management industry—welcoming attendees and exhibitors, presenting highly-respected educational programming, and numerous networking opportunities with key participants, including debt buying companies, collection law firms, collection agencies, brokers, vendors, major creditors, and international members.

The debt purchaser in In re McIntosh argued that because it was enforcing a debt that was not listed correctly on the debtor’s bankruptcy schedules, it was entitled to assume the debt had not been discharged. The U.S. Bankruptcy Court for the Southern District of Florida disagreed and entered an award of sanctions in the total amount of $64,686.93 — including $10,000 for emotional distress and over $21,000 in punitive damages.

As background, in 2002, the debtor and her then-spouse jointly filed a “no asset” Chapter 7 bankruptcy petition. She listed 45 unsecured creditors in her schedules of assets and liabilities, including the $7,400 credit card debt at issue. However, testimony later showed that the entity listed as holding the debt, Direct Merchants Bank, was not the actual creditor but rather a registered trademark owned by Metris Companies. Metris Companies was not listed in the debtor’s schedules. Because this was a “no asset” case, meaning there was no non-exempt property available for distribution to creditors, under Federal Rule of Bankruptcy Procedure 2002(e) no deadline to file proofs of claim was ever set.

Five months after the debtor received her discharge, Metris Companies assigned the credit card debt to Florida Credit Research, which sued the debtor in state court and received a judgment in its favor. Nineteen years later, the debt buyer filed a motion for proceedings supplementary to execution in state court to collect on the judgment. Prior to filing its motion, the debt buyer did not conduct a search for bankruptcy filings. A few days after filing its motion, the debt buyer served a writ of garnishment on three of the debtor’s accounts for the credit card debt, which by then had grown to $24,839.19.

After being contacted by the debtor and put on notice of her decades-old bankruptcy, the debt buyer nonetheless filed a motion for final judgment in garnishment in state court. In its motion, it asserted that because neither it nor the entity from which it acquired the debt was listed as a creditor in the bankruptcy, the debt was an “unscheduled debt” that was not discharged.

The debtor then moved to reopen her bankruptcy case and filed a motion for sanctions against the debt buyer. The same day a hearing was set on the debtor’s motion, the debt buyer filed a voluntary dissolution of its writ of garnishment. Yet, at the hearing on the motion for sanctions, the debt buyer argued that because it was enforcing a debt that it did not see listed on any bankruptcy schedules, it could safely assume the debt was an unscheduled debt that was not discharged, and if the debtor contended otherwise, it was her burden to prove so.

The court found this argument contrary to the plain text of the Bankruptcy Code. Despite the common misperception that unscheduled debts are not discharged in bankruptcy, that is only true in “asset” cases, where Bankruptcy Code § 523(a)(3)(A) excepts from discharge unscheduled debts in order to permit creditors to timely file a proof of claim.

In a “no asset” case, however, proofs of claim are not filed, so it is irrelevant whether a creditor’s claim is scheduled or the creditor has notice or knowledge of the bankruptcy. In other words, even though the debtor had not correctly listed the credit card debt on her bankruptcy schedules, it was still discharged as a matter of law.

The court held that “there [was] simply no fair ground of doubt that this debt was discharged,” and characterized the debt buyer’s conduct as “egregious and reprehensible,” showing “a reckless or callous disregard for the law or rights of others.”

Takeaway

Any entity seeking to collect a debt should first perform a PACER search for bankruptcy filings, and should be aware that a debt does not need to be scheduled correctly (or at all) in a no-asset chapter 7 bankruptcy case in order to be discharged.