WASHINGTON, DC — McGlinchey Stafford is pleased to announce that Member Jim Milano has been elected to the National Reverse Mortgage Lenders Association (NRMLA) Board of Directors. Members of the board come from various businesses across the reverse mortgage industry and must be nominated and then elected to serve.

As one of the country’s leading lawyers in reverse mortgage law, Jim regularly reviews and designs proprietary reverse mortgage loan programs and advised clients on compliance with Federal Housing Authority (FHA)’s Home Equity Conversion Mortgage (HECM) (program. He also works with lenders, servicers, and settlement service providers, including appraisal management companies, to resolve federal and state regulatory investigations, including defending and settling civil disciplinary enforcement actions.

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Jim was elected in 2015 as a Fellow of the American College of Consumer Financial Services Lawyers (ACCFSL) and currently serves as a Regent of the organization. In 2019, Jim was elected as a Fellow of the American Bar Foundation. He also serves as Chair of the Governing Committee for the Conference on Consumer Finance Law (CCFL). Jim also serves as Vice Chair of Programs for the Consumer Financial Services Committee of the Business Law Section of the American Bar Association. Previously, Jim served as Outside General Counsel to the NRMLA Board of Directors. 

NRMLA is the national voice of the reverse mortgage industry, serving as an educational resource, policy advocate, and public affairs center for lenders and related professionals. NRMLA was established in 1997 to enhance the professionalism of the reverse mortgage business. Their mission is to educate consumers about reverse mortgages, to train lenders to be sensitive to client’s needs, to enforce their Code of Ethics and Professional Responsibility, and to advise policymakers on reverse mortgage issues.

About McGlinchey

McGlinchey Stafford is a premier midsized business law firm offering services in more than 30 practice areas through a highly integrated national platform. McGlinchey attorneys leverage bold innovation, diverse talent, and leading-edge technology across our powerful network to serve clients at the local, regional, and national level. With 160 attorneys licensed in 34 states, McGlinchey operates from 17 offices nationwide. The firm currently has 24 attorneys and 12 practice areas recognized in Chambers U.S.A. and Chambers FinTech 2023, and 65 attorneys recognized by Best Lawyers, 40 attorneys recognized in various Super Lawyers rankings, 47 practice areas recognized by Best Law Firms. McGlinchey has received the Leadership Council for Legal Diversity (LCLD)’s top honor, the Compass Award, three times. To learn more, visit www.mcglinchey.com.

Earlier this year, a district court for the Middle District of Florida upheld a jury award of $225,000 in punitive damages in a debt collection case finding the defendant’s conduct “reprehensible” based on the physical harm caused to the plaintiff, the defendant’s indifference or reckless disregard of the harm it caused to the plaintiff, the plaintiff’s financial vulnerability, and the defendant’s repeated actions.

In Medley v. DISH Network, the plaintiff signed up for the defendant’s satellite TV service, but later became unable to pay for the subscription. The defendant offered a “pause” program that allowed the plaintiff to suspend service for up to nine months at a cost of $5 per month, which the plaintiff accepted. Ultimately, the plaintiff filed for chapter 7 bankruptcy protection, listed the defendant as an unsecured creditor, and obtained a discharge of her debt. The plaintiff’s lawyer sent two faxes to the defendant providing notice that the plaintiff was represented by counsel. After receiving notice of representation, the defendant sent five billing notifications to the plaintiff and made six telephone calls attempting to collect on the $5 monthly payment.

The plaintiff filed suit against the defendant alleging, among other things, violation of § 559.72(18) of the Florida Consumer Collection Practices Act (FCCPA), which makes it unlawful for a debt collector to communicate with a debtor if the debt collector knows that the debtor is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney’s name and address.

The FCCPA claim was ultimately tried before a jury , which awarded the plaintiff $1,000 in statutory damages, $8,750 in actual damages for emotional distress, and $225,000 in punitive damages.

The defendant filed a motion to reduce the punitive damages award on constitutionality grounds, which the court denied. The most important factor in determining whether a punitive damages award is constitutional is the “reprehensibility” of the defendant’s conduct, which the court found was satisfied, based on the physical harm caused, the defendant’s indifference or reckless disregard of that harm, the plaintiff’s financial vulnerability, and the defendant’s repeated actions.

First, the court found that emotional distress suffered by plaintiff — confusion, worry over her credit, and heart racing — was a form of physical harm that could support punitive damages. Second, the court found that the evidence supported a finding of indifference to or reckless disregard of the health and safety of others. Specifically, the defendant repeatedly contacted the plaintiff despite its knowledge that the plaintiff was represented by counsel and that she had filed for bankruptcy due to her financial troubles. Further, the defendant testified that approximately 50,000 of its customers file bankruptcy each year, meaning that the defendant routinely deals with individuals who are financially vulnerable. Against this backdrop, the court found that the lack of employee training regarding the requirements of the FCCPA or debt collection actions that are precluded under the law and the systemic failure to document attorney representation demonstrated an indifference to the plaintiff and others in her position “who are at a low point in their lives and are most vulnerable.” This same evidence also supported findings that the plaintiff was financially vulnerable and that the defendant had engaged in repeated collection activity.

The court also rejected the defendant’s argument concerning the disparity between the actual damages award of $8,750 and the award of $225,000 in punitive damages. The defendant argued that 26:1 ratio was excessive and should be at most 4:1. The court rejected this argument noting that the analysis cannot be reduced to a “simple mathematical formula.” Specifically, the court explained that the purpose behind punitive damages is retribution and deterrence, and that the wealth of the defendant must be considered. Given the large size and customer base of the defendant, the court found that the $225,000 award was consistent with those purposes “without being grossly excessive.”

CHICAGO, Ill. — While nearly all (98%) third-party collections companies use letters to reach consumers, just 40% have adopted text or SMS messaging to consumers—compared to 37% that were using text in 2022. However, last year, 34% indicated they would start using text messaging within the coming two years, suggesting economic headwinds have stalled companies’ planned investments in communications technologies. 

The findings were revealed today in the fifth annual industry report by TransUnion (NYSE: TRU) and Datos Insights, “Seizing the Opportunity in Uncertain Times: The Third-Party Collections Industry in 2023.” The report examines overall collections industry trends, challenges and opportunities and is informed by a survey of third-party debt collection professionals.

“One of the most promising opportunities we see for companies is to invest in omnichannel communications,” said Jason Klotch, vice president of third-party collections in TransUnion’s diversified markets business. “Reaching consumers where they are most likely to respond is the key to effective and efficient operations that also better enable regulatory compliance.”

The report found that the willingness and ability of third-party collections companies to invest in new communications channels is largely determined by the size of the firm. Larger firms, with higher budgets and more sophisticated operations, are more likely to adopt new technologies.

In line with communications investments, the report found 60% of companies are somewhere on the path to adopting tools that leverage artificial intelligence (AI) and machine learning (ML) technologies. That includes 11% of companies that already use third-party solutions, 40% that are considering buying or developing AI and ML solutions and 8% that are in the process of deploying these technologies.

Companies’ applications of AI and ML span internal and external functions. Some use cases will help assess a customer’s willingness to pay. Other applications include enhancing customer experiences by identifying the right time and channel through which the consumer prefers to be contacted.

The challenge for growth

Broader macroeconomic trends have kept consumers generally resilient, tamping down the need for third-party collections activity. Companies recognize the need to gain accounts and expand into new areas of business in order to grow.

The report found that 58% are between moderately and extremely concerned about growing their businesses. Moreover, 64% agree or strongly agree that third-party debt collection firms must diversify their business (e.g., collect different types of debt, expand into other geographic regions) if they are to succeed, thrive, or survive in the long term.

Some of this growth may come from breaking into new verticals, like auto lending or medical debt collection. Another approach is to offer Business Process Outsourcing (BPO) services in which a third-party collections firm helps with processes similar to debt collection, like claims and billing, for businesses within a vertical it already serves.

Both types of expansion were represented in the top two options for growth strategies. Within the next 12 months, 17% of third-party collections companies plan to expand into the FinTech/unsecured consumer lending market, while 12% plan to offer BPO services. Generally, 45% of companies have plans to enter into other types of businesses in the next 12 months.

About the research

Insights on the challenges, trends and innovations occurring in the third-party collections industry are informed by a quantitative survey of 212 third-party debt collection professionals conducted in Q2 2023. A detailed look at the composition of survey respondents is provided in the appendix. Survey results are representative of the market at a 95% confidence interval with a 6.7-point margin of error. 

About Datos Insights

Datos Insights is an advisory firm providing mission-critical insights on technology, regulations, strategy and operations to hundreds of banks, insurers, payments providers, and investment firms, as well as the technology and service providers that support them. Comprising former senior technology, strategy and operations executives, in addition to experienced researchers and consultants, our experts provide actionable advice to our client base, leveraging deep insights developed via our extensive network of clients and other industry contacts.

About TransUnion (NYSE: TRU) 

TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good® — and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world.http://www.transunion.com/business

The New York City Department of Consumer and Worker Protection (DCWP) continued its years-long attempt to update its Rules Related to Debt Collection (Rule). According to the Consumer Relations Consortium (CRC), the proposed update will create unnecessary consumer confusion, unreasonably burden debt collectors with little to no countervailing benefit to consumers, and create other negative unintended consequences. 

The DWCP originally proposed updates to the Rules in November 2022 (CRC comment here); however, that proposal was tabled in March 2023. The DWCP released an updated version of the proposed Rules in September 2023 (Proposal). 

To highlight the unintended consequences of the Proposal, on November 29, 2023, the CRC submitted a comment prepared by Legal Advisory Board members, Jessica Klander of Bassford Remele, John Bedard of Bedard Law Group, and Jim Schultz of Sessions, Israel, and Shartle.

In its comment, the CRC raised the following concerns about the Proposal: 

1. The proposed validation notice requirements are inconsistent with federal disclosure requirements and will confuse consumers (pages 2-6). The proposed update to § 5-77(f)(2) contemplates a significant overhaul of the information required to be included in validation notices sent to NYC consumers in a way that interferes with and potentially contradicts federal law. To cure these defects, the CRC made several suggestions to the DCWP, including allowing the validation notice to be sent electronically, removing contradictory and vague language, and updating the Proposal to conform with Reg F.  

2. The new validation period calculation will create consumer confusion because it does not align with Regulation F (pages 6-7). Section § 5-77(f)(4) of the Proposal potentially creates two different validation periods under federal and New York City law. To avoid this outcome, which may confuse consumers, the CRC provided suggestions for the DCWP to bring its Proposal in line with Reg F. 

3. Verification requirements under the proposed Rule cannot be reconciled with regulation F and will confuse consumers (pages 7-8). Section 5-77(f)(6) of the Proposal sets forth how a NYC consumer can dispute a debt; however, the language used directly contradicts the Fair Debt Collection Practices Act (FDCPA). Though the FDCPA requires disputes to be in writing within a specified period of time, the DCWP Proposal would allow for oral disputes at any time in which the debt collector owns or has the right to collect the debt. The Proposal also seems to conflate a dispute with a request for verification. As phrased, the Proposal would require a debt collector to provide verification to a consumer, even where the consumer may not want to receive additional documents from the collector. Among other suggestions, the CRC suggested the DCWP remove the contradiction with the FDCPA and clarify the distinction between a dispute and a request for verification. 

4. The contact frequency rules are unclear and should be clarified to apply “per person, per account” to avoid inconsistency with federal law (pages 8-10). Section 5-77(b)(1)(iv) is unclear regarding whether the proposed 3-in-7 rule applies on a “per consumer” or “per account” basis or both. This section of the Proposal uses the phrases “a debt” and “a consumer” interchangeably. This section also  prohibits communications after a collector has already “interacted” with a consumer but fails to define what constitutes an “interaction.” The CRC suggested the DCWP clarify these ambiguities and bring this requirement in line with Reg F.  

5. The Proposal harms consumers by eliminating their ability to choose a communication preference (pages 10-13). Section 5-77(b)(i)(5) of the Proposal would require a debt collector to obtain direct consent from the consumer in writing to email or send a text message to a NYC consumer. The CRC explained that this requirement contravenes consumer preference, imposes an undue and unreasonable burden on collection agencies, and effectively eliminates the ability to communicate in a way many consumers prefer. The CRC provided multiple illustrations and examples in support of its position and suggested the DCWP remove the direct consent requirement from the Proposal.  

6. The proposed rules regarding medical debt are unnecessarily onerous, overbroad, and place unreasonable burdens on debt collectors (pages 13-26). As drafted, the Proposal applies to all medical debts – whether medically necessary or elective. In addition to being too being broad and unclear, the medical debt sections of the Proposal require collectors to determine and assess the legal obligations of a provider and the financial aid status of a consumer, provide a notice of certain patient disputes to its clients within one day, and verify information uniquely within the provider’s possession. To cure the issues in these sections, the CRC recommended the DCWP limit the application of the Rule to medically necessary healthcare services, strike or modify vague language, and remove the one-day notice requirement. 
    
7. The proposed credit reporting notice imposes tremendous costs on the debt collection industry with little countervailing benefit to consumers (pages 16- 22). Section §5-77(e) requires debt collectors to notify consumers that the debt will be reported to a consumer reporting agency before reporting the debt to any credit reporting agency. Reg F has a similar requirement; however, the DCWP version would require debt collectors to unconditionally re-disclose to consumers certain information about the debt and provide new disclosures not previously required. The CRC noted that the cost of requiring all debt collectors to send a new written notice to all consumers far outweighs the benefit of providing duplicate (and inconsistent) disclosures to consumers and suggested that the DCWP strike or modify this provision.  

8. The Proposal’s use of clarifying language creates unintended negative consequences (pages 22-26). In addition to other confusing clarifying language, the Proposal uses the phrase “New York City” to modify the term “consumer” in several places, yet does not define the new term “New York City consumer” and does not explain how that term means something different than the defined term, “consumer.” Both terms are used throughout, but not interchangeably, causing confusion. To cure these issues, the CRC suggested that the DCWP edit these terms for clarity. 

The CRC’s full comment can be found here.  

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.  

About the Legal Advisory Board 

The Legal Advisory Board (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 is limited to ten law firms and is comprised of fourteen total attorneys. Throughout the year, the LAB serves as a legal resource to the CRC membership. It 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. 

WILMINGTON, Del — Phillips & Cohen Associates, Ltd. (PCA), the global leader in deceased account care servicing and estate technology solutions, servicing clients in the United States, Canada, United Kingdom, Ireland, Australia, New Zealand, Spain, and Germany is pleased to announce the promotion of Saima Hassan to Chief of Staff to the CEO.

Saima, who has been with the business since 2022, is a highly experienced senior leader with a breadth of business leadership, strategic & operational management, and legal advisory experience.  She has a proven track record of building strategic and synergistic alliances while delivering enhanced performance.

Adam S. Cohen, Co-Chairman/CEO commented, “Our business thrives thanks to compassionate, dedicated people, strong leadership, and an unwavering commitment to our unique consumer engagement methods. As we continue our strategic, global expansion of products and services, we expect even more from our amazing group of business leaders. This promotion is recognition of the results Saima has delivered in her time with us and going forward she’ll play a crucial role in the stewardship of the executive management team.”

On her promotion, Saima commented, “The PCA business exemplifies its commitment to compassionate consumer engagement by harnessing a strong and dynamic technology base. I am delighted to join the executive team to drive forward innovation and execute the long-term vision and strategies of the global business.”

Matthew Phillips, Co-Chairman/CEO, added “We are delighted to add another transformative leader to our proven executive group. Working with our existing team, Saima will provide vital strategic insight and guidance to execute our global corporate and operational business strategy.”  

About Phillips & Cohen Associates, Ltd. 

Phillips & Cohen Associates, Ltd. is a specialty receivable management company providing customized services to creditors in a variety of unique market segments.  Phillips & Cohen Associates, Ltd is domestically headquartered in Wilmington, DE, with additional offices in Colorado and Florida as well as international offices in the UK, Canada, Spain, Germany, and Australia.  For more information about Phillips & Cohen Associates visit www.phillips-cohen.com. PCA provides Equal Employment Opportunity for all individuals regardless of race, color, religion, gender, age, national origin, disability, marital status, sexual orientation, veteran status, genetic information, and any other basis protected by federal, state, or local laws.

A case pending in the Fourth Circuit Court of Appeals could upend the enforceability of dispute provisions found in a majority of consumer credit card agreements used by nearly every issuer in the United States today.  The Plaintiff in the Bailey matter asserts that both the arbitration agreement and the class action waiver provisions in her typical credit card contract are not binding agreements because the creditor could modify the terms. The Federal District Court denied the creditor’s motion to arbitrate the case which prompted an interlocutory appeal to the Fourth Circuit Court of Appeals.   

In Bailey, the Plaintiff sued her creditor in Maryland Federal District Court asserting that the creditor should have maintained a Maryland Consumer Lending License.  The creditor filed a motion to compel arbitration in the case and a motion strike Plaintiff’s putative class action allegations, citing the following provision in the credit card agreement with Plaintiff:

“By accepting this Agreement, you agree to this Jury Trial Waiver and Arbitration Clause (“Clause”). This Clause is in question and answer form to make it easier to understand. Even so, this Clause is part of this Agreement and is legally binding. Under this Clause, you waive the right to have any Dispute heard by a judge and jury and you waive the right to participate in a class, representative or private attorney general action regarding any Dispute.”

The Plaintiff’s credit card agreement further provided as follows: 

“The rates, fees and terms of this Agreement (including its Jury Trial Waiver and Arbitration Clause), may change and we may add or delete any term. When required by law, we will provide advance written notice of any changes and any right to reject the changes.“

The District Court in Bailey summarized the positions of the parties as follows: 

“Plaintiff argues that the Cardholder Agreement’s arbitration provision lacks the consideration necessary to constitute a binding agreement because it is subject to a change-in-terms provision allowing for unilateral modification without advance notice. Defendant argues that the change-in-terms provision does not apply to the arbitration provision because it is located outside the four corners of the arbitration provision.”

In denying the Defendant’s request to arbitrate the dispute, the Court in Bailey further wrote:

“According to the Supreme Court of Maryland’s decision in Cheek v. United Healthcare of Mid-Atlantic, Inc., a change-in-terms provision allowing the defendant to modify unilaterally an arbitration provision “[‘]with or without notice’ creates no real promise, and therefore, insufficient consideration to support an enforceable agreement to arbitrate[,]” because it empowers the defendant to revoke the arbitration agreement at any time. Id. at 662. Notice of unilateral changes alone, however, does not constitute adequate consideration without additional limitations.” See Bailey v. Mercury Financial

Two Recent Cases Reject Unilateral Attempts to Add Arbitration Clauses in Contrast to Bailey

The District Court’s holding in Bailey that the creditor has the ability to unilaterally change an arbitration clause in a consumer credit card agreement stands in stark contrast to the recent rulings by two other appellate courts striking down attempts by creditors to add an arbitration clause. In Pruett, the Wisconsin Court of Appeals struck down a creditor’s attempt to compel arbitration in the matter premised on an arbitration clause added to the Plaintiff’s credit card agreement after inception, writing:

“As to the first question, we conclude, for the reasons that follow, that WCU’s contractual authority to “change the terms of this Agreement” did not authorize it to unilaterally add the Arbitration Clause absent evidence that the Arbitration Clause was the type of change contemplated by the parties at the time of the original Agreement. No evidence has been presented that the Arbitration Clause involved terms that were previously in the Agreement or were contemplated by the parties at its inception. Therefore, WCU did not have the contractual authority under the change-of-terms provision to unilaterally add the Arbitration Clause, and the Arbitration Clause is not a part of WCU’s contract with Pruett.”  Pruett v. WESTCONSIN CREDIT UNION, Wisconsin Court of Appeals, 3rd Dist. (October 24, 2023)”

Further, the Indiana Supreme Court recently concluded that an arbitration provision added to a consumer credit card contract after inception of the agreement was unenforceable, writing: 

“Here, IUCU explicitly notified Land that the failure to opt out of the arbitration Addendum within 30 days of receiving notice would bind her to the Addendum. But the “mere fact that an offeror states that silence will constitute acceptance does not deprive the offeree of his privilege to remain silent without accepting.” Id. § 69 cmt. c. Instead, IUCU must show that Land “in remaining silent and inactive intend[ed] to accept the offer.” See id. § 69(1)(b). Under the Restatement, the “case for acceptance is strongest” when the offeree’s “reliance is definite and substantial” or when the offeree’s “intent to accept is objectively manifested though not communicated to the offeror.” Id. § 69 cmt. c. Even assuming Land was aware of the offer to arbitrate (which she disputes), there’s no evidence of her “definite and substantial” reliance on the proposed arbitration Addendum. See id. In fact, by filing a class-action complaint with the trial court, Land’s actions point in the opposite direction.”  Land v. IU Credit Union, No. 23S-CP-115 (Ind. Oct. 24, 2023)

These three recent cases demonstrate that the “change of terms” provisions in consumer credit card contracts remain open to widely varying interpretations by the Courts, especially when read in connection with arbitration provisions and class action waivers.   

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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.

NEW YORK, N.Y. — January Technologies, Inc. (“January”) announced that it has raised $12 million in Series B financing, preempted and led by existing investor IA Ventures. Existing investors Brewer Lane Ventures, Third Prime, and Reciprocal Ventures, along with new investors such as Upper90, Shrug Capital, and numerous strategic angel investors, joined IA Ventures in the current round. The current round follows January’s $10 million Series A fundraise in 2022.

January is a fintech company humanizing debt collection, helping borrowers regain financial stability while driving creditors to modernize collections. January’s debt resolution platform rehabilitates relationships with borrowers, drives net recoveries, and reduces risk. January works with leading banks, credit unions, debt buyers, and fintech lenders. Ultimately, January is building the single platform for creditors to address all of their collection and recovery needs.

January has exhibited meaningful growth and established itself as a leader in the debt collection industry. Since their Series A, January has helped hundreds of thousands of Americans resolve their debt and has helped millions more move forward on their paths to financial freedom.

During the same period, they quadrupled their revenues as well as their client count. January’s client portfolio includes some of the nation’s largest lenders — ranging from top-20 card issuers and banks, to publicly-traded fintechs, top-10 credit unions, and debt buyers. As they’ve signed new clients and expanded relationships with existing ones since their Series A, they’ve experienced a 5x increase in monthly accounts.

The status quo in the debt collection industry creates worse outcomes for both consumers and creditors. This industry has historically been rife with harassment, trauma, and legal implications for creditors and borrowers. 70 million Americans are directly impacted by debt collection annually. More than one in four borrowers experience threatening tactics from collectors. Unsurprisingly, debt collection ranks as one of the top three most complained about sectors in consumer finance. 

Data is at the root of so many of the challenges that affect consumers and creditors. Poor data integrity — from outdated technology systems — introduces risk and inefficiency for creditors, while provoking poor experiences for borrowers. All of this leads to poor recoveries, inadequate compliance (e.g. lawsuits), harmed brands (e.g. complaints), and ineffective oversight for creditors. Creditors risk regulatory fines, their margins, and reputations when using traditional collection practices.

As consumers increasingly struggle to pay their bills, delinquencies continue to rise, reinforcing the need for a humane solution in this space. Over the past two years, delinquencies have risen by 35% and savings rates have dropped by 54%.

January envisions a world where financial recovery is a possibility for all, where the common experience of being behind on ones’ payments doesn’t lead to shame, harassment, and undue pressure. January is shaping a future in which individuals who fall behind on payments are no longer treated like criminals, because debt isn’t going away. In a field long avoided by innovation due to its reputation, January is boldly stepping forward to redefine the narrative around debt.

“IA is excited to triple-down and lead January’s Series B, bringing a customer-centric collections experience to every borrower in the country and funding the business to profitability. January has proven that industry-leading recovery rates and happy borrowers is not only possible, but reliable at scale, across millions of borrowers served. 

We’ve worked with January for six years since leading their seed round, and have seen them outperform every expectation of the most demanding financial services brands in the country. People expect their banks to offer complete transparency, intuitive mobile and web access, and empathetic customer support available 24/7 across digital channels, and debt collection should be an extension of that experience. Legacy collections agencies treat borrowers like criminals, and January has shown that treating borrowers like customers works better. The platform is poised to scale to every creditor in the US and beyond and fix this historically broken relationship.” – Jesse Beyroutey, Managing Partner, IA Ventures.

Higher quality, real time, and extensive data fuels more personalized borrower engagement and outreach, streamlines internal operations, and allows for codified rules and regulations — resulting in efficient, compassionate, and compliant collections practices.

January’s third-party collection service is 150x more efficient than traditional methods and is the #1 source of debt recovery for 90% of their clients. January receives industry-leading ratings and reviews from borrowers — earning 4.8/5 Stars on Google Reviews, redefining industry standards.

“January’s continued investment in our relationship has paid dividends operationally, in driving greater recoveries, and in creating a more positive borrower experience.” – Randolph Brooks Federal Credit Union.

“For a long time, we toiled away with the belief that treating consumers in a more compassionate manner would achieve better outcomes for consumers and creditors alike. The desire to create a better system drove our team, while we lacked statistical significance to substantiate our conviction. As our approach has touched millions of consumers’ lives, we hear weekly from borrowers expressing profound gratitude for resolving their financial challenges in a manner that upholds their dignity. The latest round empowers us to scale a new standard of compassionate collections to tens of millions more. Together with leading financial institutions, we’re not just dreaming of a more empathetic financial ecosystem. We’re actively building it.” – Jake Cahan, Founder and CEO, January.

From their product, to their client base, to their team, January has scaled significantly since their Series A fundraise, and the team is excited about what’s to come in 2024. Since their Series A fundraise in 2022, January has created a compassionate, effective debt resolution experience for millions of borrowers, signed leading financial institutions in the banking, credit union, fintech lending (including BNPL space), and doubled the size of their team. With this new funding round, January is focused on scaling their core product line to the largest financial institutions in the country and launching a solution to address creditors’ needs around delinquent accounts before reaching the point of charge-off. 

January will continue to level up the standard in debt collection, demonstrating that empathy and innovation can indeed reshape an entire industry.

About January

January is setting a new standard for humanized debt collection. January helps borrowers get out of debt, while helping creditors improve their collections, preserve relationships with borrowers, and ensure compliance. January’s digital-first, empathetic approach to collections and recoveries increases performance, decreases risk, and creates better borrower experiences. By establishing a platform built on trust and transparency, creditors and borrowers both look to January for a better collection and recovery experience. As consumers increasingly struggle to pay their bills, delinquencies will continue to rise, reinforcing the need for a humane solution in this space.

January partners with leading banks, fintechs, credit unions, and debt buyers to optimize their existing debt collection strategies — enabling them to increase collections efficiency, improve recoveries, and create happier borrowers. January is 150x more efficient than traditional collections agencies and is the top performing agency for over 90% of their clients, all the while achieving industry-leading reviews from borrowers on Google Reviews and Better Business Bureau. Learn more at https://www.january.com/

The CFPB had a busy November. 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: Director Chopra’s Statement on Proposed Rule on Lifetime Bans

On October 24, 2023, CFPB Director Chopra, in his role as a member of the FDIC Board of Directors, released a statement on the new FDIC proposed rule that will implement new legislation to revise the current employment bans under the Federal Deposit Insurance Act (“FDIA”). The FDIA prohibits banks from employing people convicted of certain criminal offenses, and the new proposed rule will revise this prohibition by excluding certain offenses and reducing bans for individuals who were 21 years old or younger at the time of their offense. Director Chopra said that recruiting and retaining qualified employees is one of the biggest challenges facing banks today, and this proposal will create opportunities for more individuals to access employment opportunities and for banks to recruit qualified individuals. The CFPB director pointed out that while low-level employees can lose the ability to ever work in the industry after committing a crime, high-level executives repeatedly preside over financial crimes at banking institutions and must only pay a fine to continue their careers. He said that this proposed rule will help to correct that imbalance.

Bite 9: Director Chopra’s Statement on “Shadow Banking”

On November 3, 2023, CFPB Director Chopra issued a statement on the Financial Stability Oversight Council’s effort to promote market discipline in the “shadow banking” sector, after the FSOC voted to issue final versions of a new analytic framework for financial stability risks and updated guidance on the Council’s nonbank financial company determinations process. He stated that Congress created the Council under Section 113 of Dodd-Frank to designate systemically important nonbank financial institutions that could pose a threat to financial stability. However, the FSOC currently has zero “shadow banks” designated as systemically important, which has led market participants to believe that this designation authority is a dead letter. The FSOC removed procedural restrictions that were placed in 2019, and Chopra says this move “establishes a more appropriate and durable process for using the designation authority.” Director Chopra said that the CFPB will now turn to implementing the guidance by evaluating whether any shadow bank meets the statutory threshold for enhanced oversight, and will build on the work that FSOC Committees, such as the Hedge Fund Working Group and Nonbank Mortgage Task Force, have already conducted in the context of sector-wide reviews.

Bite 8: Statement on Community Reinvestment Act

On October 24, 2023, CFPB Director Chopra, in his role as a member of the FDIC Board of Directors, released a statement on the final rule that will implement the Community Reinvestment Act. He stated that the final rule is the product of compromise between the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Federal Reserve Board of Governors, and it should help increase investment and lending in historically excluded communities, including rural communities. Now that the rules have been completed, he said the next step would be to address the “convenience and needs” factor in bank merger applications covered by the Bank Merger Act. Director Chopra stated that reforms are needed for existing merger application review protocols, and the agencies should carefully evaluate whether the community would be better served by the combined entity in the future than it was in the past by the banks individually. He also called on state legislatures to accelerate efforts to ensure certain nonbank entities have Community Reinvestment Act-like requirements, particularly in sectors where there is significant public subsidies or support for their business activities.

Bite 7: CFPB Issues Report on Record-High Credit Card Costs

On October 25, 2023, the CFPB issued a report on credit card costs claiming the card industry charged a record-high $130 billion in interest and fees in 2022. The biennial report to Congress claims that in 2022 credit card companies charged consumers more than $105 billion in interest and more than $25 billion in fees. Total credit card debt rose above $1 trillion for the first time since the CFPB started collecting this data. The CFPB said this report highlights areas of concern, including more consumers carrying balances month to month, with many falling deeper into debt over time, while credit card company profits remained significantly above pre-pandemic levels. Additionally, the report found that annual percentage rates continue to rise above the cost of offering credit, with the average APR margin 15.4% points above the prime rate, even though charge-off rates fell during the pandemic. Late fees continued to be the most significant fee assessed to consumers, in both dollar amounts and in frequency, and more cardholders are carrying balances month to month. The report also found that consumers have shifted toward the use of digital portals, such as websites and mobile apps, to manage their cards and make payments.

Bite 6: CFPB Issues Report from Education Loan Ombudsman

On October 20, 2023, the CFPB issued a report from the Education Loan Ombudsman, analyzing over 9,000 complaints about student loans over the past year. According to the report, about 75% of the complaints about student loans during this period related to the servicing and collection of federal student loan debt, an increase over previous years. The complaints outlined problems with customer service, errors related to basic loan administration, and problems accessing loan cancellation programs. The other 25% of the complaints were related to private student loan debt, including those related to loan cancellation, misleading origination tactics, and coercive debt collection practices. The overall increase in complaints is attributed to ongoing systemic changes in the federal student loan system, the end to the payments pause, and increased financial uncertainty among borrowers. These issues coincided with servicers being responsible for the transfer of millions of accounts, new payment policies, and a requirement to address long-standing servicing failures.

Bite 5: CFPB Analyzes State Community Reinvestment Laws

On November 2, 2023, the CFPB announced that it had published a new analysis on state Community Reinvestment Act laws, which highlighted how states ensure financial institutions’ lending, services, and investment activities meet the credit needs of their communities. The report analyzed the laws of eight states and the District of Columbia and found that many of these states adopted laws similar to the federal Community Reinvestment Act. The CFPB also found that state enactments of Community Reinvestment Acts can be more wide-ranging than the federal law; the federal Community Reinvestment Act law applies strictly to banks, but state laws can apply to a wide range of financial institutions, like nonbank mortgage companies. The key findings of the report showed that some states independently examine their covered institutions, while others review federal examinations; that enforcement mechanisms include limitations on mergers, acquisitions, branching activities, and licensing; at least one state requires additional lending data above federal requirements; and that the state laws have been amended in response to changing markets.

Bite 4: CFPB Proposes New Rule on Digital Wallets and Payment Apps

On November 7, 2023, the CFPB announced that it was proposing a new rule on digital wallets and payment apps that will subject larger providers to examinations like banks. The CFPB announced a Notice of Proposed Rulemaking, which it said is designed to define a market for general-use digital consumer payment applications. The proposed market would cover providers of funds transfer apps and digital wallets for consumer use, and larger participants of this market would be subject to the CFPB’s supervisory authority under the CFPA. The CFPB indicated that the proposed rule would ensure that these nonbank financial companies, specifically larger companies handling more than 5 million transactions per year, adhere to the same rules as large banks, credit unions, and other financial institutions already supervised by the CFPB. According to the CFPB, Big Tech and other companies operating in consumer finance markets blur the traditional lines that have separated banking and payments from commercial activities, and this can put consumers at risk, especially when traditional banking safeguards like deposit insurance don’t apply. The CFPB also noted that it has opened the Office of Competition and Innovation to ensure a level playing field for new firms to compete with Big Tech in the consumer finance space. Comments on the proposal are due by January 8, 2024, or 30 days after publication of the proposed rule in the Federal Register, whichever is later.

Bite 3: CFPB Proposes Rule on Personal Financial Data Rights

On October 19, 2023, the CFPB announced that it was proposing a new rule that will give consumers more control over data about their financial lives and new protections against companies misusing their data. This proposed rule implements Section 1033 of the Consumer Financial Protection Act, which charged the CFPB with implementing personal financial data sharing standards and protections. According to the CFPB, this rule will ensure that consumers can access their data without paying “junk fees,” will give people a legal right to grant third parties access to information about their financial accounts, and will enable consumers to more easily walk away from bad service by facilitating portability of their data to competing products and services. It will also prohibit companies who receive consumer data from using it for anything but the specific purpose requested by the consumer. Under the proposal, the requirements would be implemented in phases, with larger providers being subject to them first. In addition, community banks and credit unions that have no digital interface at all with their customers would be exempt from the rule’s requirements. In prepared remarks, CFPB Director Chopra said that this rule will help decentralize the financial services market, give consumers more control, and allow smaller institutions and startups to compete fairly with major market players.

Bite 2: The Small Business Lending Rule Stayed Nationwide

On October 27, 2023, the U.S. District Court for the Southern District of Texas issued a nationwide injunction prohibiting the CFPB from implementing or enforcing its Small Business Lending Rule, which was written to implement Section 1071 of the Dodd-Frank Act. The Small Business Lending Rule requires banks, credit unions, and small business lenders to collect and report information on the small businesses who apply for loans, including applications from minority businesses. Opponents of the rule have claimed the rule is burdensome and will significantly increase borrowing costs. The district court had previously issued an injunction against the rule only for the named plaintiffs in a case challenging the rule based on doubts about the Bureau’s constitutionality, a question which initially arose in the same circuit that issued this injunction. After other covered institutions filed motions to intervene in the case, the district court decided to expand the scope of its previous injunction to all covered entities nationwide.

Bite 1: CFPB Takes Action Against Large Bank for Discrimination

On November 8, 2023, the CFPB announced that it has ordered a large bank to pay $25.9 million in fines and consumer redress for allegedly intentionally and illegally discriminating against credit card applicants the bank identified as Armenian American. From at least 2015 through 2021, the bank allegedly targeted applicants with surnames that employees associated with Armenian national origin as well as applicants in or around Glendale, California because the bank allegedly stereotyped this group as being likely to commit crime and fraud. Allegedly, the bank specifically targeted surnames ending in “-ian” and “-yan,” and Glendale is home to approximately 15% of the Armenian American population in the United States. According to the CFPB, supervisors at the bank conspired to hide the discrimination by instructing employees not to discuss the discriminatory practices in writing or on recorded phone lines, and employees lied about the basis of denial, providing false reasons to denied applicants. One employee was allegedly instructed to blame denials based on surname as being declined for “suspected credit abuse”- which blames the consumer for the denial. The CFPB also alleges that the actions the bank took towards people it believed were Armenian American included denying these consumers outright, requiring additional information, or placing a block on the account. The bank is accused of violating the Equal Credit Opportunity Act and will pay $1.4 million to affected consumers and a $24.5 million fine to the victims relief fund.

Extra Bite 1: FTC Amends the Safeguards Rule

On October 27, 2023, the FTC announced that it has approved a new amendment to the Safeguards Rule, requiring non-bank institutions to report certain data breaches and other security events to the agency. Under the existing rule, non-bank institutions, which include mortgage brokers, motor vehicle dealers, payday lenders, finance companies and others must develop, implement, and maintain comprehensive security programs to keep their customers’ information safe. The amendment to the rule requires these financial institutions to notify the FTC as soon as possible, and no later than 30 days after discovery, of a security breach involving the information of at least 500 consumers. The notice must include information about the event, including the number of consumers affected or potentially affected. The Commission voted 3-0 to publish notice of the amendment, which becomes effective 180 days after publication of the rule in the Federal Register (or, May 13, 2024).

Extra Bite 2: FTC Refunds $100 Million to Consumers

On November 3, 2023, the FTC refunded $100 Million to consumers saying that consumers were trapped in subscriptions by dark patterns and junk fees. The FTC is refunding nearly $100 million to consumers who it says lost money to their internet phone service provider after the provider allegedly imposed junk fees and used dark patterns to make it difficult for consumers to cancel their subscriptions. The FTC says the provider allowed numerous ways to sign up for the service, but made cancellation much more difficult. Customers could only cancel after speaking to a live agent, and the FTC alleges that the provider made it difficult to find the phone number on the company website, didn’t consistently transfer customers to that number from the normal customer service number, reduced the hours during which the line was available, and failed to provide promised callbacks. Allegedly, in some cases, the provider continued to illegally charge customers for phone services even after the customers spoke to an agent directly and requested cancellation. The provider also allegedly charged surprise termination fees that were not clearly disclosed when the customers signed up for the service. The provider has agreed to a court order that requires the provider to change its practices and turn over $100 million to the FTC that will be used for consumer refunds.

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.

ST. PAUL, Minn– IC System is proud to announce that DebtNext has made our company the inaugural member of its dPlat Partner Accreditation Program. As the first accredited company under the new program, IC System is a trusted partner for creditors looking to select a collection agency and integrate their past-due inventory using DebtNext’s comprehensive recovery management platform. 

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.

IC System has maintained an ongoing relationship with DebtNext for 14 years. Their platform has enabled us to provide over 20 clients with seamlessly integrated recovery management services. Becoming accredited with DebtNext gives IC System a competitive edge over other debt collection agencies that have not yet undergone the rigorous review standards to become accredited. 

“DebtNext Accreditation is beneficial to have because it is a prestigious endorsement, affirming our commitment to excellence and adherence to industry standards in a formal audit,” said Karen Jonas, IC System’s SVP of Field Sales. “IC System has demonstrated that we meet the accreditation criteria, and this will help clients vet out their next collection agency. This will reduce expenses for future clients to ensure IC System surpasses the compliance and standards of the industry.” 

The accreditation program was developed from a concept proposed by DebtNext’s Thom Majka, Director of Client Success, to provide creditors with peace of mind when selecting a collection partner to integrate with a trusted middleware company. 

To receive the accreditation, IC System underwent a detailed review focusing on the areas of Integration, Authentication, Remittance Management, and SOC 2 Compliance.

The Partner Accreditation Program builds trust among creditors with accredited agencies when it comes to recommendations, compliance assurance, and data security. “It’s about excellence with integration on our platform and a way for us to formalize the evaluation and recommendation process,” said Frank Ellenberger, Director of Strategic Initiatives. “This has more substance than a referral.” 

About IC System

IC System is one of the largest receivables management companies in the United States. Founded in 1938, IC System is a privately held accounts receivable management firm in its third generation of family ownership. IC System provides customized, tailor-made debt recovery solutions for utilities, small business, healthcare, dental, government, and telecommunications industries nationwide. Follow IC System on Twitter or LinkedIn.