HUTCHINSON, Kan. — National Credit Adjusters, a receivables management company headquartered in Kansas with offices in Arizona and Jamaica, looks back on community involvement during the second half of 2023 with gratitude for each team and their dedication to getting personally involved with service to our communities. From water drives to food drives and more, NCA was able to fulfill its ongoing commitment to giving back thanks to the caring individuals and employees who put each initiative into action. 

August Water Drives

In both the Chandler and Peoria, AZ offices, with the promise of a match by NCA, team members worked together to collect cases of bottled water for the homeless during the hottest months of the year. Average July temperatures in Central Arizona are about 105 degrees at the hottest part of the day. 

In Peoria, employees donated 26 cases of water, for a total of 52 cases after the match, which were all donated to the St. Vincent DePaul food bank. In Chandler, 64 cases (approx. 2,560 bottles) total were donated to Chandler Salvation Army.

“When we delivered the water to the local Salvation Army, the employees said they were running low and currently in need. It was all hands on deck to load the 64 cases, a police officer and the Salvation Army’s general manager came out to help Joe Rodriguez and I transfer the cases to their truck. It was a great feeling to fulfill an immediate need in our community,” said Karl Krum, Director of Operations at the Chandler office.

September United Way Work Day & School Supply Donations

In September, NCA provided a $300 donation to a local Hutchinson area elementary school to provide school shirts to low-income students. In addition, NCA purchased $700 of supplies from teachers’ wish lists at another local elementary school. Team members from the Hutchinson office delivered the donations. 

A crew of Hutchinson staff also volunteered with United Way for a Community Work Day. The group was assigned the project of repainting the house and garage of an elderly, disabled woman. 

October Trunk or Treat & Laps for Learning

In October, the Hutchinson site volunteered and donated candy to Trunk or Treat Hutch. Team members represented NCA well as they handed out candy to thousands of children on Halloween night. 

NCA also participated in the Laps for Learning fundraiser, where students collect donations for their school and show appreciation for the donations by jogging/walking laps around the school’s track. NCA donated $500 each to two local elementary schools. A group of employees also volunteered during the event at one of the schools. 

November Food Drive

During the Thanksgiving season, team members from the Chandler office worked together for the Salvation Army food drive. The team collected and donated a vast assortment of canned goods and boxed dry goods for the food pantry at the Salvation Army Community & Youth Center. 

A Heart for Community

NCA CEO, Tyler Rempel shares, “National Credit Adjusters is proud to be actively involved in the communities where we collectively live and work. It’s a privilege to have so many team members eager to join in and take a personal part in serving the community with a variety of local initiatives. Thank you to our teams across all offices for their hearts and for allowing NCA to come alongside and support these efforts.”

About National Credit Adjusters, LLC

National Credit Adjusters, a privately held company, has specialized in purchasing and servicing delinquent account receivables since 2002. Their primary area of acquisition is consumer installment and online lending. NCA stays current on industry standards through ongoing research, automation, analytics, and process evaluation. National Credit Adjusters focuses on strong performance while adhering to compliance standards through constant quality training and employee development. Whether purchasing, servicing, or selling debt, NCA conducts all business with respect and fairness. For more information, visit ncaks.com.

In November 2023, S.B. 668 was introduced in the Wisconsin Senate. S.B. 668 would make sweeping changes to the state laws governing financial service providers. The bill creates a pathway for the Wisconsin Department of Financial Institutions (DFI) to expand use of the Nationwide Multistate Licensing System and Registry (NMLS) across license types, modernizes money transmission laws, and revises the regulation of consumer lenders, collection agencies, check sellers, payday lenders, community currencies exchanges, sales finance companies, adjustment service companies, and insurance premium companies. The bill was read and referred to the Committee on Shared Revenue, Elections and Consumer Protection and a public hearing was held on December 19, 2023.

The 113 page bill further proposes broad changes to financial services licenses as summarized below. Financial service providers operating in Wisconsin should review the bill and contact their legislative representative or one of the bill sponsors to provide input prior to enactment. Ballard’s licensing team can help providers understand how these proposed changes may impact their business operations or help you file for licenses in the NMLS.

Expanded Use of NMLS

Current law limits the DFI’s use of NMLS to mortgage loan originators, mortgage bankers and mortgage brokers. This bill requires DFI to utilize the NMLS with respect to the licensing and regulation of financial services providers, including requiring applicants and licensees to provide information directly to the NMLS and to comply with application and reporting deadlines established by the NMLS. Specifically, the bill requires use of the NMLS system for consumer lenders, money transmitters, collection agencies, payday lenders, community currencies exchanges (check cashers), sales finance companies (companies that acquire motor vehicle installment sales contracts or consumer leases originated by a motor vehicle dealer), adjustment service companies, and insurance premium companies. The expanded use of NMLS is meant to standardize the license renewal process and renewal period for licensed financial services providers.

Money Transmitters and Check Sellers

The bill repeals provisions of current law governing the licensing and regulation of sellers of checks, and replaces them with provisions governing the licensing and regulation of money transmitters, titled the Model Money Transmission Modernization Law, which seeks to implement the Conference of State Bank Supervisors’ Model Money Transmission Modernization Act. The bill incorporates common exceptions, including exceptions for federally insured financial institutions, government agencies, registered securities broker-dealers, agents of a payee that collect and process payments on behalf of the payee if certain conditions are satisfied, electronic funds transfers of governmental benefits by government contractors, employees and authorized delegates of licensed money transmitters if certain conditions are satisfied, and any other person exempted by DFI, as long as the exempt person does not engage in money transmission outside the scope of the exemption. The bill defines money transmission and payment instrument as follows:

• Money transmission means “selling or issuing payment instruments to a person located in this state; selling or issuing stored value to a person located in this state; or receiving money for transmission from a person located in this state.” Money transmission specifically includes payroll processing services that are not performed by the employer (“receiving money for transmission pursuant to a contract with a person to deliver wages or salaries, make payment of payroll taxes to state and federal agencies, make payments relating to employee benefit plans, or make distributions of other authorized deductions from wages or salaries”).

• Payment instrument means “a written or electronic check, money order, traveler’s check, or other written or electronic instrument for the transmission or payment of money or monetary value, whether or not negotiable.” Payment instrument does not include (i) stored value or any instrument that is redeemable by the issuer only for goods or services provided by the issuer or its affiliate or franchisees of the issuer or its affiliate, except to the extent required by applicable law to be redeemable in cash for its cash value or (ii) any instrument that is not sold to the public and is issued and distributed as part of a loyalty, rewards, or promotional program.

The bill’s money transmitter licensing requirements include, among other things:

• Requiring applicants to submit applications and other information through the NMLS;

• Requiring a person or entity seeking control of a money transmitter to apply for a license and meet other conditions;

• Allowing a licensee to conduct business through an authorized delegate, which is a person designated by a licensed money transmitter to engage in money transmission on behalf of the licensed money transmitter; and

• Requiring certain business practices with regards to money transmission, sending receipts, refunding money in some circumstances, submitting audited financials, and maintaining a surety bond, the required net worth and a minimum amount of investments.

Further, the bill provides DFI with various powers relating to the regulation of money transmitters, including investigatory and enforcement powers, including the authority to examine its books, accounts, or records and those of its authorized delegates, and the authority to take possession of an insolvent licensed money transmitter under specified circumstances.

Consumer Lenders

Under current law, a lender (other than a bank, savings bank, savings and loan association, credit union, or any of its affiliates) generally must obtain a license from DFI to assess a finance charge for a consumer loan that is greater than 18% per year. The bill makes numerous changes related to the licensing and regulation of consumer lenders, including the following:

• Defines consumer loan for purposes of licensed lenders (“a loan made by any person to a customer that is payable in installments or for which a finance charge is or may be imposed, and includes transactions pursuant to an open-end credit plan, as defined in s. 421.301(27), other than a seller credit card, as defined in s. 421.301 (41)”);

• Applies to any person who takes an assignment for sale, in whole or in part, of a consumer loan with a finance charge in excess of 18% per year, without regard to whether the loan was originally made by a financial institution; but does not apply to collection agencies, payment processors, and certain persons involved in investment or financing transactions;

• Specifies the activities that require a person to be licensed as a licensed lender: making a consumer loan that has a finance charge in excess of 18% per year; taking an assignment of a consumer loan in which a customer is assessed a finance charge in excess of 18% per year; or directly collecting payments from or enforcing rights against a customer relating to a consumer loan in which a customer is assessed a finance charge in excess of 18% per year;

• Eliminates provisions related to consumer loan interest rates that apply to certain loans entered into before August 1, 1987 and the requirement that all loans must be consummated at the licensed location; and

• Requires a licensed lender to keep its loan records separate and distinct from the records of any other business of the licensed lender.

Collection Agencies

The bill makes numerous changes to the collection agency license provisions, including, among other things:

• Removes the requirement that an individual collector hold a license separate from the license of the collection agency that employs the collector;

• Excludes licensed mortgage bankers and credit unions from collection agency regulation;

• Requires that a separate license be maintained for each business location;

• Expands the reasons for DFI may suspend or revoke a license to include where the collection agency has violated DFI’s rules related to collection agencies, and the collection agency has made a material misstatement, or knowingly omitted a material fact, in an application for a license or in information furnished to DFI or the NMLS;

• Specifies the timing to deposit funds in trust account within 48 hours and submit funds to creditors on the last day of the month following the close of the month during which the collection was effected;

• Permits the use of unsigned collection notices;

• Amends various provisions related to assessing fees to creditors for returning accounts, record retention, identification of trusts accounts, use of “doing business as” names, compliance with federal and state laws, and contracting requirements.

We will continue to monitor the progress of this bill and blog further if the bill is enacted.

NEW YORK, NY — The Consumer Relations Consortium (CRC) is pleased to announce its 2024 Legal Advisory Board (LAB) members. The LAB is an exclusive membership group of outside counsel with expertise in the accounts receivable industry who have each pledged their time and resources to support the mission of the CRC. The LAB allows a limited number of law firms and is comprised of fourteen total attorneys. Throughout the year, the LAB serves as a legal resource to the CRC membership and assists in fulfilling the mission of promoting forward-thinking approaches to the issues raised by regulatory policy and technology innovation in the accounts receivable industry.

Meet the 2024 LAB Members:

John Bedard – Bedard Law Group 

John is an AV-rated attorney and nationally recognized authority on the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. He serves as counsel to several professional trade associations, including the Georgia Collectors Association. John’s practice involves the defense of FDCPA claims, compliance audits, and creating solutions for ARM industry participants such as BLG 360, BLG Insight, and his newest offering, BLG Call Count. 

As a member of the 2022 LAB,  John co-authored comments to the Federal Trade Commission regarding its proposed rule to crack down on commercial surveillance. As a member of the 2023 LAB, John co-authored comments to the California Department of Financial Protection and Innovation (DFPI) regarding proposed updates to its complaints and inquiries regulation, to the New York City Department of Consumer and Worker Protection regarding its proposed update to debt collection rules.  The California DFPI adopted the language suggested by John and his co-author in their comment.

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Jedd Bellman – Orrick (Formerly Buckley)

Jedd assists banks, mortgage companies, auto lenders, debt collectors, money services businesses, and fintechs on a variety of licensing, regulatory, and enforcement matters, bringing a wealth of consumer financial services experience gleaned from more than a decade in government service. Prior to joining Buckley, Jedd was the Assistant Commissioner for Non-Depository Supervision in the Office of the Maryland Commissioner of Financial Regulation, where he coordinated the licensing and supervision of approximately 23,000 individuals and business entities, covering the mortgage, student loan, consumer finance, sales finance, debt services, credit reporting, and money services industries. He also managed the office’s regulatory investigations and enforcement actions, including playing a leadership role in every significant multistate enforcement matter handled by state regulators during his tenure. As part of the 2023 LAB, Jedd co-authored comments to the CFPB regarding its policy statement on abusive acts and practices.

Aryeh (Ari) Derman– Clark Hill

Ari supports and assists in the development and expansion of the regulatory and compliance group’s growing consulting and advisory services, targeting financial institutions and technology companies (fin-techs) looking to enter into the financial services sector. He leads and coordinates current and prospective examinations from state and federal financial regulators. He has extensive experience and knowledge of numerous consumer protection laws, including, but not limited to the FDCPA, FCRA, TCPA, GLBA, and HIPAA. He is a subject matter professional in compliance, risk management, and corporate governance. As part of the 2023 LAB, Ari co-authored comments to the CFPB regarding its policy statement on abusive acts and practices.

Jonathan P. Floyd – Troutman Pepper

Jonathan’s practice includes counseling to help businesses navigate and litigate the myriad consumer and financial services laws, with a particular emphasis on federal consumer protection statutes, such as the Fair Debt Collection Practices Act (FDCPA), Telephone Consumer Protection Act (TCPA), and Fair Credit Reporting Act (FCRA). He provides ongoing analysis and commentary on developments in the consumer financial services industry, with a focus on credit card lenders, through the Consumer Financial Services Law Monitor blog. As part of the 2023 LAB, Stefanie co-authored comments to the CFPB regarding its proposed “shame list.“

Stefanie Jackman– Troutman Pepper

Helping her clients navigate trying and complex issues, Stefanie Jackman is a zealous and untiring advocate. Stefanie brings her experience and knowledge to bear when assisting clients with compliance counseling and assessments relating to consumer products and services, guiding them through state and federal government inquiries and investigations, and defending them in individual and class action lawsuits. Her clients are represented in almost all sectors of the financial services industry, including banks and nonbank lenders and servicers, student loans, debt collectors and buyers, third-party service providers, healthcare and medical revenue cycle service providers, credit and prepaid card companies, direct and indirect auto lenders, and fintechs. She regularly advises her clients on issues arising under an array of federal and state consumer financial laws (UDAP/UDAAP statutes, the FDCPA, FCRA, TCPA, EFTA, SCRA, and TILA). 

As a member of the 2022 LAB, Stefanie co-authored comments to the California Department of Financial Institution’s proposed data retention regulations. As part of the 2023 LAB, Stefanie co-authored comments to the CFPB regarding its proposed “shame list.” Much of her thought leadership and analysis of relevant legal issues can be found on her Firm’s practice blog, the Consumer Financial Services Law Monitor. 

Aylix Jensen –Moss & Barnett

Aylix practices in the areas of compliance and litigation relating to the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA), the Telephone Consumer Protection Act (TCPA), and additional federal and state laws and regulations. She provides insight and analysis regarding current legal issues on her blog, The Safe Harbor. 

Jessica Klander – Bassford Remele

Jessica defends businesses and professionals against liability and malpractice claims in the consumer law defense, professional liability, and general liability arenas. Also experienced in complex litigation, employment law, non-compete disputes, and class action lawsuits, she regularly represents clients in both state and federal courts across the United States. She defends creditors and credit professionals against federal consumer statute and liability claims, performs compliance audits and trainings, and consults with creditors and credit professionals on commonsense compliance with the FDCPA, FCRA, TCPA, TILA, and applicable state laws. As a member of the LAB, Jessica co-authored the CRC’s Amicus Brief in the Hunstein matter in 2021.

As a member of the 2023 LAB Jessica co-authored comments to the CFPB about its personal financial data rights proposal, comments to the California Department of Financial Protection and Innovation (DFPI) regarding proposed updates to its complaints and inquiries regulation, comments to the CFPB regarding its policy statement on abusive acts and practices, and comments to the New York City Department of Consumer and Worker Protection regarding its proposed update to debt collection rules. The California DFPI adopted the language suggested by Jessica and her co-author in their comment.

Issa Moe– Moss & Barnett

Issa is an attorney, focusing principally on litigation and finance matters. Issa most recently served as General Counsel and Vice President, Legal for ACA International. Issa also has experience defending clients in complex civil litigation matters in state and federal courts, including the defense of class action lawsuits. He has extensive experience defending claims under the Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act (FCRA), Telephone Consumer Protection Act (TCPA), and similar state statutes.

Joann Needleman – Clark Hill

Joann leads the firm’s financial services regulatory and compliance practice and advises banks, financial institutions, and financial services entities on regulatory compliance matters. She prepares and represents these same financial institutions during state and federal supervisory examinations and regulatory investigations before agencies such as the Consumer Financial Protection Bureau (CFPB), Federal Trade Commission (FTC) and the Office of the Comptroller of Currency (OCC) as well as state financial services regulators and attorneys general. A former member of the Consumer Financial Protection Bureau’s (CFPB) Consumer Advisory Board, Joann provides her clients with useful strategies and common-sense solutions in order to prepare for areas of regulatory scrutiny. Joann is the host of the podcast “Credit Ecosystem to Go: Curbside Thought Leadership for Financial Services.” Listen to recent episodes here.

As a member of the 2022 LAB, Joann co-authored comments to the New York Department of Financial Services regarding proposed amendments to its debt collection rules, the California Department of Financial Protection and Innovation  (DFPI) regarding its proposed consumer complaint and inquiry regulations, and the DFPI’s proposed data retention regulations. In 2023, The California DFPI adopted several of the comments suggested by Joanna and her co-authors in their comment. As part of the 2023 LAB, Joann co-authored a comment to the CFPB about its personal financial data rights proposal, and comments to the CFPB regarding its proposed “shame list.“

Justin Penn – Hinshaw & Culbertson

Justin defends the interests of companies and individuals in the financial services industry in jurisdictions across the country. Justin is the co-chair of the firm’s Consumer Financial Services Practice Group. His extensive experience includes handling state and federal consumer statute litigation, including claims involving the Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act (FCRA), Fair and Accurate Credit Transactions Act (FACTA), False Claims Act (FCA), Telephone Consumer Protection Act (TCPA); and the Truth in Lending Act (TILA). He also advises corporations and professionals in professional liability and employment-related litigation. As part of the 2023 LAB, Justin co-authored comments to the CFPB regarding its policy statement on abusive acts and practices.

John Rossman – Rossman Attorney Group, PLLC

In his national practice dedicated to the financial services industry, John has shaped the law in numerous landmark cases that preserved and expanded the rights of financial services companies, including national banks, automobile lenders, fintech companies, collection agencies, debt buyers, mortgage lenders, creditors, and fellow lawyers. He advises and counsels financial services industry clients on regulatory compliance, defends them in claims and litigation, and advises them on best practices to prevent legal action. John also helps creditors navigate the Bankruptcy Code and courts and represents them to secure payments and collateral, make determinations for future services, and minimize preference liability. As a member of the 2022 LAB, John co-authored comments to the New York Department of Financial Services regarding proposed amendments to its debt collection rules, and comments to the Federal Trade Commission regarding its proposed rule to crack down on commercial surveillance. As a member of the 2023 LAB, John co-authored a comment to the New York Department of Financial Services regarding its proposed updates to its debt collection regulations and comments to the CFPB regarding its proposed “shame list.“.

David Schultz – Hinshaw and Culbertson

David defends Fortune 500 companies, debt buyers, debt collection agencies, lawyers, lending institutions, and others in consumer litigation, and counsels organizations throughout the consumer financial services industry on risk management. He has been lead counsel in more than 250 class-action lawsuits involving claims brought under various state and federal consumer laws, including the Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), Telephone Consumer Protection Act (TCPA), the Illinois Biometric Information Privacy Act (BIPA), and the Chicago Residential Landlord and Tenant Ordinance (CRLTO).  He also represents individuals and businesses in dozens of regulatory matters, including before the CFPB, FTC, Illinois Department of Financial and Professional Regulation (IDFPR), Illinois Attorney General, as well as other state and city regulators and Attorneys General.

Jim Schultz –  Sessions, Israel & Shartle

Jim’s primary role is to co-manage the firm’s consumer defense practice group, defending creditors, debt buyers and debt collectors in cases brought under various federal and state consumer protection laws, such as the Fair Debt Collection Practices Act, the Fair Credit Reporting Act and the Telephone Consumer Protection Act. As part of the firm’s national reach, Jim is admitted to state and federal courts across the country, working to create consistent and uniform application of the ever-evolving consumer protection statutes so that his clients know the rules. Jim also works with these clients to stay current on regulatory and litigation trends to stay on the leading edge of compliance. As a member of the 2022 LAB, Jim co-authored comments to the New York Department of Financial Services regarding proposed amendments to its debt collection rules; when the New York City Department of Consumer and Worker Protection released its 2023  proposed update to debt collection rules, Jim co-authored the 2023 comments.

Bryan C. Shartle –  Sessions, Israel & Shartle

Bryan is one of the two managing partners of Sessions, Israel, & Shartle and assists in the management of the firm’s 10 offices. He specializes in representing collection agencies, debt buyers, student loan servicers, banks, credit issuers, financial institutions, and telemarketers. He assists clients with compliance, regulatory, bankruptcy, and licensing issues, has represented clients in CFPB readiness assessments and enforcement actions, and is familiar with many of the employment issues affecting the collection industry. Bryan has extensive experience in consumer litigation, including claims under the FDCPA, the TCPA, the FCRA, and the myriad of state consumer laws. He has been the lead attorney in several landmark decisions involving the collection industry and has special expertise in complex litigation and consumer class actions.

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About the Consumer Relations Consortium

The Consumer Relations Consortium (CRC) is an organization comprised of more than 60 national companies representing the diverse ecosystem of debt collection including creditors, data/technology providers and compliance-oriented debt collectors that are larger market participants. Established in 2013, CRC is evolving the debt collection paradigm by engaging stakeholders—including consumer advocates, Federal and State regulators, academic and industry thought leaders, creditors and debt collectors—and challenging them to move beyond talking points and focus on fashioning real-world solutions that actually improve the consumer experience. CRC’s collaborative and candid approach is unique in the market.  CRC is managed by The iA Institute.

Learn more at www.crconsortium.org.

The CFPB did not rest in December 2023. In this article, we’ll share some of our top CFPB “bites” of the month so you can stay on top of recent developments. 

Bite 10: CFPB Issues Fair Debt Collection Practices Act Report

On November 16, 2023, the CFPB issued its annual FDCPA report. The report noted 8,500 complaints submitted in 2022 by servicemembers, older adults, and other consumers relating to medical debt collections. Additionally, it outlined CFPB and state agency efforts to stop inaccurate medical bill collection. The report also included updates on the debt collection market more broadly, summarized agency debt collection efforts, CFPB outreach, and related consumer education initiatives, and referenced consumer resources such as sample letters for use with debt collectors.

Bite 9: CFPB Comment Letter Focused on Earned Wage Access

On December 1, 2023, the CFPB announced that as a part of its efforts to monitor state law and regulatory developments, it had submitted input into a proposal by the California Department of Financial Protection and Innovation (DFPI) regarding earned wage access, also known as income-based advances. The CFPB appears to now take the position that these advances have long been part of what the CFPB calls the country’s “consumer lending market.” According to this new development from the CFPB, state agencies provide critical oversight of companies that provide these types of consumer financial products. The CFPB now claims that the DFPI’s proposed approach to treating these programs as loans, is like the approach under the federal Truth in Lending Act and Regulation Z. In its letter to the DFPI, the CFPB noted that it believes that it is appropriate for states to ensure that these products are treated similarly to other income-based advance products with respect to supervision for compliance with applicable law, including ensuring that costs are accurately reflected in what the CFPB called the “cost of credit” and fully disclosed. The CFPB said that it plans to offer guidance on these products to clarify the application of federal law, noting that its previous advisory opinion on this topic had a “very narrow scope” that “should not be misrepresented.”

Bite 8: CFPB Starts Piloting New Construction Loan Disclosures

On November 21, 2023, the CFPB announced that it approved an application to test new Know Before You Owe Disclosures for construction loans. According to the CFPB, the standard disclosures pose challenges for those loan types. Many first-time homebuyers in rural areas build their homes, and therefore these challenges may impact rural areas more acutely. The CFPB reviewed the application earlier this year and solicited feedback. After reviewing public comments, the CFPB agreed to approve the template for use. Lenders may apply to the CFPB for approval to test these alternative disclosures for construction loans.

Bite 7: CFPB Shuts Down Medical Debt Collector

On December 15, 2023, the CFPB announced an action against a medical debt collector, alleging that the collector illegally attempted to collect unverified medical debts after consumers disputed their validity. The CFPB claims the collector violated the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. The FDCPA requires debt collectors to stop collecting disputed debts without substantiating documentation, and the FCRA requires furnishers to conduct a reasonable investigation and notify consumer reporting agencies when a consumer disputes a debt. The CFPB shut down the collector, and banned it from participating in collection activities, debt buying, debt selling, and consumer reporting. The collector must also instruct consumer reporting agencies to delete all collection accounts for all consumers and pay a $95,000 penalty to the CFPB’s civil penalty fund.

Bite 6: CFPB Acts Against a Bank for “Fee Harvesting”

On December 7, 2023, the CFPB announced an action against a bank that allegedly mislead consumers and failed to provide proper disclosures when it enrolled them in overdraft programs over the telephone. The CFPB alleged that the bank failed to describe overdraft service in writing before getting a consumer to opt-in to overdraft coverage, violating the Electronic Funds Transfer Act. The CFPB also claims that bank employees omitted key cost information when enrolling customers over the phone. The CFPB’s order requires the bank to refund $5 million to affected consumers and pay a $1.2 million penalty to the CFPB’s civil penalty fund.

Bite 5: CFPB and 11 States Enter Order Against Student Lender

On November 20, 2023, the CFPB announced that it joined with 11 states to bring an enforcement action against a student lender that promoted a “job guarantee” and “six-figure salaries.” According to the CFPB, the company deceptively claimed its income share transactions were not loans because repayment was not mandatory. However, the CFPB claims that the company’s terms did require repayment. The CFPB also claimed that the company did not disclose required terms to consumers, such as the amount financed and the annual percentage rate. The CFPB further claims the company pushed consumers into converting their income share agreements to revised “settlement agreements” that required payments even if they had not found a job. The company also allegedly filed debt collection lawsuits in a distant jurisdiction that it did not disclose in its agreements. The company must refund $4.2 million to consumers, cancel all outstanding transactions, permanently cease operations, and pay a civil penalty to the victims relief fund.

Bite 4: CFPB Orders Large Bank to Pay $12 Million Penalty

On November 28, 2023, the CFPB announced that it has ordered a large bank to pay a $12 million penalty for violations of the Home Mortgage Disclosure Act. According to the CFPB’s allegations, hundreds of loan officers at the bank failed to ask mortgage applicants certain demographic questions as required under federal law, and then falsely reported that the applicants had chosen not to respond. The loan officers allegedly reported that 100% of applicants chose not to provide their demographic data over at least a three-month period. The CFPB also alleged that the bank failed to adequately oversee accurate data collection and ignored the known problem for years. The CFPB claims that this bank is a “repeat offender” based on other fines and penalties imposed since 2017.

Bite 3: CFPB Fines Online Lender $15 Million

On November 15, 2023, the CFPB announced that it fined an online lender $15 Million, claiming that the company is a “repeat offender.” The CFPB claimed the lender withdrew funds from customers’ bank accounts without permission, made deceptive statements, and cancelled loan extensions. The CFPB previously fined the lender $3.2 million in 2019 and ordered it to cease its alleged illegal activities. According to the CFPB’s allegations, the lender withdrew funds from consumer accounts without express informed consent, violating the 2019 order, and in some circumstances used bank account information it had purchased from online lead generators, overwriting the bank account information that borrowers had authorized. The company also allegedly granted loan extensions but then cancelled them, and instead debited consumer accounts for the full loan payment. In addition to the penalty, the CFPB banned the lender from making certain consumer loans. The CFPB is requiring the company to refund money to consumers, and to tie executive compensation to the company’s compliance with federal consumer financial protection laws.

Bite 2: CFPB and OCC Announce Action Against Large Bank

On December 19, 2023, the CFPB and OCC announced an action against a large bank. The CFPB says the bank kept consumers from accessing their unemployment benefits. The bank allegedly froze tens of thousands of accounts without providing the customers with a reliable and quick way to regain access and failed to provide provisional account credits while investigating potentially unauthorized transfers. These alleged actions happened during the pandemic, while the bank had contracts with at least 19 states to deliver unemployment benefits. The consumers whose accounts were frozen lost access to their benefits until they were able to verify their identities to unfreeze their accounts, but the bank allegedly did not have a system in place for the identity verification. According to federal law, when accountholders report unauthorized transfers, banks must provide provisional account credits if their investigations take more than 10 days, and the CFPB and OCC said that this bank failed to provide those credits. The bank must pay $5.7 million to consumers, a $15 million penalty to the civil penalty fund, and change its practices regarding limiting account access and issuing provisional credits. The OCC has separately fined the bank an additional $15 million.

Bite 1: CFPB Orders Auto Finance Company to Pay $60 Million

On November 20, 2023, the CFPB announcedthat it ordered one of the nation’s largest indirect auto companies to pay $48 million in redress to harmed consumers and a $12 million penalty to the civil penalty fund. The order follows allegations that the company prevented borrowers from cancelling products sold with the vehicle, failed to provide proper refunds, and reported incorrect information to credit bureaus. The product included GAP waivers, credit life and health insurance, and extended service contracts, which cost between $700-$2,500 per transaction. According to the CFPB, thousands of consumers complained to the auto finance company that their dealers had lied to them about whether these products were mandatory, included them on contracts without the borrowers’ knowledge, or rushed through paperwork to hide buried terms. The CFPB says that despite these complaints, the company made it difficult to cancel these products and failed to fully refund those consumers who were able to cancel. The CFPB alleged that the company directed consumers to a cancellation hotline that would not accept a cancellation request, delayed refunds by applying the amounts to principal payments, withheld refunds, and furnished false data about delinquent payments to consumer reporting companies. In addition to the monetary penalties, the CFPB ordered the company to cease such practices.

Extra Bite- FTC’s CARS Rule

On December 12, 2023, the Federal Trade Commission announced that it finalized a new rule, the Combating Auto Retail Scams (CARS) Rule, which is a modified form of its proposed Motor Vehicle Dealer Trade Regulation Rule, also known as the Vehicle Shopping Rule. Under the new rule, certain motor vehicle dealers will be prohibited from making any misrepresentations about key information, like price and cost, must provide the “offering price,” which is the price that any consumer can pay for the vehicle, must tell consumers that optional products are not required, and give information about total payments when discussing monthly payments. The rule also prohibits motor vehicle dealers from charging for any add-on product that does not actually provide value to the consumer, and requires dealers to get a consumer’s express, informed consent (a defined term) for any charges that they pay as part of the vehicle purchase. The CARS Rule also includes extensive recordkeeping requirements and additional protections for servicemembers. Absent an injunction, the new Rule will be effective July 30, 2024.

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.

The CFPB recently issued a rule to adjust maximum penalty amounts under various statutes that it administers. Included among the adjustments are the amounts for the three tiers of civil money penalties that the CFPB may impose for violations of consumer financial protection laws under the Dodd-Frank Act. Specifically, the Dodd-Frank Act initially provided for the following tiers of civil money penalties:

• For any violation of a law, rule, or final order or condition imposed in writing by the CFPB, a civil money penalty of up to $5,000 for each day during which such violation or failure to pay continues.

• For any person that recklessly engages in a violation of a federal consumer financial law, a civil penalty of up to $25,000 for each day during which such violation continues.

• For any person that knowingly violates a federal consumer financial law, a civil penalty of up to $1,000,000 for each day during which such violation continues.

Based on prior adjustments, the amounts for 2023 were $6,813, $34,065, and $1,362,567, respectively. For 2024, the amounts increase to $7,034, $35,169 and $1,406,728, respectively.

COPLEY, OH —DebtNext Software announces Allied Account Services, Inc. as its newest partner of the dPlat Partner Accreditation Program.  This program has been developed to provide creditors with complete peace of mind when selecting collection partners to integrate with their DebtNext platform (dPlat).

To achieve accreditation, potential partners must undergo a comprehensive evaluation by the DebtNext compliance team in the areas of Integration, Authentication, Remittance Management, and SOC  Compliance.  Allied Account Services, Inc. showcased excellence across all these crucial aspects, and DebtNext is extremely proud to have them as official partners.

DebtNext Software was founded in 2003 and offers the most robust recovery management platform in the market today. The DebtNext Platform (dPlat) is comprised of a comprehensive set of solutions designed to optimize every aspect of recovery operations

To obtain more information on the dPlat Partner Accreditation Program, reach out to DebtNext Software (sales@debtnext.com). 

In a change of course, the Utah court of appeals has reversed the dismissal of a plaintiffs’ suit against a debt collector based on its alleged failure to register as a collection agency prior to filing collection suits. While the Utah Collection Agency Act (UCAA) was repealed by the Utah legislature last year, discussed here, cases asserting this theory of liability remain pending before state and federal courts in the state. Late last year, in Meneses v. Salander Enterprises LLC, discussed here, the court of appeals held that a violation of the UCAA was not a deceptive or unconscionable act. The court distinguished this case from Meneses by finding that the defendant made affirmative representations in the lawsuits at issue that precluded dismissal at this stage.

In Pace v. Link Debt Recovery, LLC (Link), Link initiated two separate debt collection lawsuits in 2020. In the complaints, Link asserted it was “operating pursuant to the laws of the state of Utah.” Link prevailed on both collection suits, but the debtors later filed the instant case alleging that Link was not properly registered and bonded as a debt collector and thus its collection activity was unlawful under the Fair Debt Collection Practices Act (FDCPA) and Utah Consumer Sales Practices Act (UCSPA). Link filed a motion to dismiss asserting that it was properly registered under the UCAA in 2020 and, even if it was not, its collection activities did not violate the statutes. The district court granted the motion to dismiss and the plaintiffs appealed.

As to its first argument, Link acknowledged that it was not separately registered and bonded as a debt collector, but in 2019 it had changed its corporate status from an “LLC” to a “dba,” and that the entity under which the “dba” did business was properly registered and bonded. However, the plaintiffs pointed out that in 2020 Link changed its corporate status back to an LLC so at the time it filed both collection lawsuits, Link was an independent LLC that was not registered and bonded as a debt collector. However, Link countered that in 2021, notably just weeks after the filing of the plaintiffs’ suit, it filed a Statement of Correction with the state indicating that the 2020 document converting Link back to an LLC had been “filed in error.” Link asserted that this correction operated to retroactively void the earlier-filed conversion document, and that Link had therefore been a dba of a registered entity at all relevant times. The district court concluded, that based on the correction, Link was a dba at the time it filed the suits at issue and therefore Link was properly registered and bonded as required by the UCAA. The court of appeals reversed finding that from the timing of the filings and the fact there did not appear to be any facial inaccuracy in the “corrected” document, there was a question of fact as to whether Link filed the correction not to remedy an inaccuracy but, instead, to sidestep any potential liability in this lawsuit.

Next, the appellate court turned to whether Link’s representation that it was “a duly organized and existing business operating pursuant to the laws of the State of Utah” sufficiently stated a claim under the FDCPA and UCSPA. The court acknowledged in Meneses, it held that the plaintiffs had not sufficiently alleged a violation when the debt collector’s only asserted unlawful act was “its failure to comply with the UCAA’s registration requirement,” but in that same case the court suggested that the plaintiffs might have stated a valid cause of action if the debt collector had “represent[ed] that it was a debt collector operating in full compliance with the laws of Utah.” Based on that, the court found it was premature to dismiss the case at this stage. “Link’s statement might well have been entirely benign, intended to communicate simply that it was a Utah business entity created pursuant to the laws of that jurisdiction. But the [plaintiffs’] contrary interpretation of that statement is not unreasonable, especially given our instruction in Meneses that similar representations might be actionable … and given the reality that all reasonable inferences must be drawn in the [plaintiffs’] favor at this point.” However, the court did caution that in order to succeed on the merits the plaintiffs will bear the burden of demonstrating that, when Link alleged that it was “a duly organized and existing business operating pursuant to the laws of the State of Utah,” it was intentionally or knowingly misrepresenting that it was in compliance with the UCAA.

On January 2, New York Governor Kathy Hochul unveiled her 2024 consumer protection agenda, which includes plans to regulate the “buy now, pay later” (BNPL) industry. Specifically, Governor Hochul plans to propose legislation to require BNPL providers to be licensed in the state and to authorize the New York State Department of Financial Services to propose and issue regulations for the industry. According to Governor Hochul, “New Yorkers are increasingly turning to [BNPL] loans as a low-cost alternative to traditional credit products to pay for everyday and big-ticket purchases. This legislation and regulations will establish strong industry protections around disclosure requirements, dispute resolution and credit reporting standards, late fee limits, consumer data privacy, and guidelines to curtail dark patterns and debt accumulation and overextension.”

BNPL loans, also known as “point-of-sale installment loans” or “pay-in-4” loans, have seen a rapid increase in recent years. In a typical BNPL transaction, the lender pays the merchant for the good or service and takes on the responsibility of collecting payments from the borrower. To compensate for the credit risk, merchants pay a “merchant discount” to the lender. The lender then collects the full purchase price through installment payments from the borrower. If the borrower does not pay on time, the lender may, at times, charge late fees and refuse to make additional BNPL loans to the borrower until the borrower brings the account current.

While BNPL loans can provide consumers with a convenient and relatively low-cost financing alternative, Governor Hochul is not alone in suggesting that these loans can also carry potential risks for both banks and consumers. As discussed here, just last month, the Office of the Comptroller of the Currency (OCC) issued guidance advising banks engaged in BNPL lending to operate within a risk management system that is commensurate with the associated risks and designed to capture the unique characteristics of BNPL loans. Specifically, the OCC advised that banks should establish policies and procedures for BNPL lending that address loan terms, underwriting criteria, methodologies to assess repayment capacity, fees, charge-offs, and credit loss allowance considerations.

On December 5, the U.S. District Court of New Jersey dismissed an FDCPA suit brought against a debt collector. According to the opinion, plaintiff originally filed suit because they received a letter from defendant regarding an outstanding cell phone bill. The letter provided instructions on what to do if the recipient suspected identity theft. Additionally, the letter contained a summary of plaintiff’s account and a QR code that linked to defendant’s website for online payment. Plaintiff contended that the dual approach of offering assistance while simultaneously pursuing collection of a debt was false and misleading. A District Court judge, however, disagreed and dismissed the case, at which point the plaintiff filed an amended complaint.

The amended complaint alleges that the debt collector breached the FDCPA by using false, deceptive or misleading representations regarding the rights of the plaintiff and the obligations of the debt collector with respect to communications concerning identity theft. Specifically, plaintiff argued defendant was in violation of § 1681m(g) of the FDCPA, which obligates a debt collector to take certain steps upon being notified of identity theft, but the court disagreed, finding that the collector’s specific steps taken were in accordance with the Act.

The court emphasized that plaintiff did not introduce any new factual claims in the amended complaint, and merely clarified how the facts already outlined in the initial complaint breached the FDCPA. The judge ruled that the letter not only allows plaintiff to inform defendant about potential identity theft, but also may serve to bring potential identity theft to plaintiff’s attention. The ruling stated that there is no obligation to extensively explain recommended procedures in the case of an identity theft occurrence, and only an “idiosyncratic reading” of the letter would lead to the conclusion that the letter misrepresents defendant’s obligations.

On December 12, the U.S. Court of Appeals for the Third Circuit affirmed a U.S. District Court’s order denying a consumer’s motion for reconsideration of the grant of summary judgment against the consumer. After the consumer successfully defended herself in a debt collection action in municipal court, she sued the debt collection agency that had brought suit against her in federal court alleging that the agency violated the FDCPA by utilizing false or deceptive means in collecting debts that she did not owe in violation of 15 U.S.C. § 1692e and unfair or unconscionable means in the collection of any debt in violation of 15 U.S.C. § 1692f.  

The district court granted judgment to the debt collection company and denied the individual’s motion for reconsideration. The appellate court found that the consumer failed to produce evidence that proved the debt collection agency made any false or deceptive representations or acted unfairly or unconscionably in bringing the debt collection action against the consumer. Although the agency failed to meet its burden of proof in the municipal action, the court noted that “losing a debt collection lawsuit does not in itself mean a defendant violated the FDCPA.”