CHICAGO, Ill. — More than one in three (37%) collections firms are now using text/SMS messaging — a modest increase from last year when 31% were utilizing this communications channel with consumers. A different story emerges when broken out by large firms (100k or more accounts) and small firms (fewer than 100k accounts).  While more than half (56%) of large firms now utilize text/SMS messaging, only 17% of small firms have adopted the channel.

The findings were revealed today in the fourth annual industry report by TransUnion and Aite-Novarica, “Charting the Course and Steering Towards Success: The Collections Industry in 2022,” The report examines overall collections industry trends, challenges and opportunities and is informed by a survey of 140 third-party debt collection professionals conducted in Q2 and Q3 2022.

The report found that large firms continue to invest in solutions that create efficiencies within their compliance efforts for the Consumer Financial Protection Bureau’s Regulation F requirements. Meanwhile, small firms, likely constrained by budgets, are lagging this trend.

“The slow adoption of texting and SMS messaging was somewhat surprising, given the limitations Reg F placed on outbound calling and American consumers’ clear preference for text as a communications channel,” said Jason Klotch, vice president of third-party collections in TransUnion’s diversified markets business. “In general, the success of companies in this space will be dependent upon their adoption of digital solutions that create efficiencies and cost savings.”

Despite slower momentum in adoption of digital solutions, the industry appears to recognize the importance of utilizing new solutions and approaches. Overall, 34% of companies plan to add text/SMS messaging—among other tools—to their communications channels within the next two years. Again, this looks different when broken out by firm sizes. Larger firms appear poised to accommodate consumers’ preferences for communications channels, as well as their desire for on-demand, self-service capabilities.

Machine-learning on the horizon

Further down the list of priorities are machine-learning technologies. Currently, 31% of large firms are using an in-house or outsourced machine-learning solution, while 45% are considering one or the other. This tool will likely grow in popularity as the supply of data scientists improves, the technology is further developed, and regulation surrounding its use is shored up.

The primary reasons companies want these solutions are the ability to predict the communication channel most likely to get a consumer’s response; evaluate an account’s past activities to prescribe a next course of action; and to answer inbounds and take the consumer as far as possible.

“Right now less than a quarter of the collections industry is using some type of machine-learning solution, which makes sense because it’s a considerable investment,” said Klotch. “However, given this technology’s ability to help firms maximize efficiency and increase revenue, we’ll likely see it become an essential tool in the near future.”

A changing workforce

In line with this focus on new technology and solutions, collections firms indicate resources will shift accordingly. The survey found 55% agree or strongly agree that they plan to invest in agentless contact strategies, such as chatbots and text messaging. Relatedly, 53% agree or strongly agree that consolidation and technology innovation will lead to fewer jobs in the collections industry over the next year.

While the cause is not clear, nearly 80% of respondents agreed or strongly agreed that hiring is much harder than it was two years ago. A small silver lining: slightly less (67%) agreed or strongly agreed that retention is much harder than it was two years ago.

“This report really demonstrates a sea change as the industry evolves to meet regulators’ demands and consumers’ preferences. Larger firms will be able to more broadly leverage emerging technologies that reduce their reliance on direct contact by collections agents, while smaller firms will need to judiciously choose solutions that best augment their strengths for right-party contacts,” concluded Klotch.

About the report

Insights on the challenges, trends, and innovations occurring in the third-party collections industry are informed by a quantitative survey of 140 third-party debt collection professionals conducted late Q2 and early Q3 2022. Survey results are representative of the market at a 95% confidence interval with an 8-point margin of error. Any differences noted between survey respondents, such as breakouts by company size, collection footprint, or changes in year-over-year survey results, are significant at an 85% confidence interval. This is the fourth annual survey of the third-party collections industry conducted by TransUnion and Aite-Novarica Group. The full report is available here.

About Aite-Novarica Group

Aite-Novarica Group 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 as well as 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. Visit us on the web and connect with us on Twitter and LinkedIn.

About TransUnion (NYSE: TRU)

TransUnion is a global information and insights company that makes trust possible in the modern economy. We do this by providing an actionable picture of each person so they can be reliably represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things. We call this Information for Good®.

A leading presence in more than 30 countries across five continents, TransUnion provides solutions that help create economic opportunity, great experiences and personal empowerment for hundreds of millions of people.

http://www.transunion.com/business

Good news! At least as of now…

So back in 2021, Jay Edelman was granted leave of court to file a complaint alleging an extremely dangerous argument that text message “chatbot” constitutes a prerecorded voice. Risher v. Adecco, No. 19-CV-05602-RS, 2021 WL 9182421 (N.D. Cal. Sept. 17, 2021)

Why is this extremely dangerous? Well, if they were to succeed then every text message, even if ATDS was not utilized, would be subject to the TCPA.

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This would open the floodgates for a massive number of lawsuits, but so far, the courts have been consistent with shooting this argument down. See Mina v. Red Robin International, Inc., Case No. 20-cv-00612-RM-KLM (August 18, 2022, D. Col.); see also Soliman v. Subway Franchisee Advert. Fund Tr., Ltd., No. 3:19-CV-592 (JAM), 2022 WL 2802347 (D. Conn. July 18, 2022); Eggleston v. Reward Zone USA LLC, 2:20-cv-01027-SVW-KS, 2022 U.S. Dist. LEXIS 20928 (C.D. Cal. January 28, 2022).

The Northern District of California followed suit here in Risher ruling that text messages are not “voices”—meaning that a text message cannot violate the provision of that TCPA prohibiting unsolicited calls made using an “artificial or prerecorded voice.” No. 19-CV-05602-RS, 2022 WL 17082667 (N.D. Cal. Nov. 18, 2022).

Mr. Risher’s argument here was that, yes, these texts did not have a “voice” as in audible spoken words, but the “chatbot” used was meant to “create the impression of an interactive human ‘voice.’”

The Court disagreed with Mr. Risher’s “metaphorical voice” argument here. They held simply that text messages are not considered “voices.” This is consistent with other courts finding that the language of the TCPA should be given its ordinary meaning.

This view of the interpretation is strengthened by the use of the word “prerecorded.” As to record is “to convert sound or visual scenes into permanent form.”

The Court dismissed this claim for relief without leave to amend.

The Northern District was a lot more generous here—going so far as to call the argument “not frivolous”—than the Central District was in Eggleston which was the first in the nation to rule text messages are not prerecorded voices. In Eggleston, this argument was called “beyond the bounds of common sense.”

So at least for now, we have consistency in various jurisdictions, and it stands that text messages do not fall under the provision prohibiting unsolicited calls using an “artificial or prerecorded voice.”

However, heed the Czar’s warning: “They’ll keep filing until they find the right combination of facts in the right court with the right opposing counsel.”

What remains of the Risher class action lawsuit is a single claim for violation of the National DNC Registry provision of the TCPA. Risher is claiming Adecco violated the TCPA by sending text messages inquiring about his interest in a potential employment opportunity. Now, Mr. Risher admittedly submitted his information back to Adecco back in 2008 when he was actually seeking employment. These allegedly illegal messages were sent 11 years after this in 2019. So, it will be interesting to see what ultimately happens here since prior consent may have been given in 2008.

Find the Court’s Order here. 

PALM SPRINGS, Calif. — The fifth annual Women in Consumer Finance (WCF) conference is officially underway. The event sold out a month in advance with over 400 women from across financial services signing up for the three-day experience. It is the largest attendance the conference has drawn to date. Attendees will participate in unique networking opportunities, build authentic connections, and develop business and leadership skills while in Palm Springs.

One of the most prominent event sponsors recently told us: “WCF has become the most impactful conference in our industry, ‘hands down.’ I hear from my team that it is incredibly difficult to pull off what you do. The feedback is so overwhelmingly and resoundingly powerful because they come back connected with people on a personal level. I hear similar feedback from others in the industry, and it shows in how quickly the event sold out.”

Stephanie Eidelman, CEO of The iA Institute and Co-founder & Chair of Women in Consumer Finance, added, “This is cherished feedback because it comes from a (male) champion who isn’t even eligible to attend the event. It means that our attendees really do benefit in the way we hope they will, and they carry that value – and that message – back to their organizations.”

Women in Consumer Fiance will be back in Palm Springs for 2023. The event will take place from December 4-6 and is expected to sell out again. 

About Women in Consumer Finance

Women in Consumer Finance is a community of women dedicated to building others up and sharing experiences that impact us all. The connections and bonds that are created through WCF are unique and hard to come by in day-to-day working scenarios. We provide inspiration, a guiding hand, and a support system women can leverage to recharge their careers and deliver value to their employers. 

WCF is not about compliance, best practices, or even finance. It’s about women, our common professional challenges, and how to tell our own career story – no matter where we are on our professional journey. Learn more about getting involved with Women in Consumer Finance here.

2022 Conference Sponsors

By partnering with WCF for 2022, conference sponsors demonstrated a commitment to inclusivity and advancing women’s careers. Representatives from each organization are attending the event.

On November 21, 2022, the Federal Communications Commission (FCC) issued a Declaratory Ruling and Order finding that companies must obtain consent before sending a “ringless voicemail” to a consumer’s phone because it constitutes a “call” made using an artificial or prerecorded voice and is subject to the provisions of the Telephone Consumer Protection Act (TCPA). “Ringless voicemails” are messages sent directly to voicemail inboxes without first triggering a call ringtone. The FCC found the calls should be regulated under the artificial or prerecorded voice prong of the statute, mooting any inquiry as to whether the “ringless voicemails” are sent with an automatic telephone dialing system.

Chairwoman Jessica Rosenworcel explained the reasoning behind the decision in her statement, “It [] doesn’t seem right that a call can make its way to your voicemail inbox without you having any way to stop it. On top of that, ringless voicemail can lead to the same kind of fraud that flourishes with scam robocalls. That’s why today the [FCC] is making it crystal clear that ringless voicemail is subject to the [TCPA] and our rules prohibiting callers from sending this kind of junk without consumers first giving their permission to be contacted this way.”

The Declaratory Ruling and Order is in response to a petition from All About the Message, LLC to declare that ringless voicemail is not subject to the TCPA and, therefore, does not require consumer consent. The company argued its ringless voicemail message is not a “call” because its proprietary software creates a landline-to-landline session directly to the telephone company’s voicemail server without charge to the subscriber or appearing as a received call on a bill. When the FCC sought comment on the petition, it received over 8,000 comments and replies, almost all in opposition.

The FCC concluded, “Congress intended the TCPA to protect consumers from the nuisance and invasion of privacy caused by such artificial or prerecorded voice messages. To complete a ‘ringless robocall,’ the originator of the call must direct the call to the voicemail associated with the wireless phone number. … [W]e find that the inclusion of additional information along with the wireless telephone number to route the call does not remove a consumer’s rights under the TCPA because ‘the effect on the recipient is identical.’ To do so would elevate form over function and is inconsistent with both the text and purpose of the TCPA.”

Earlier this year, the Federal Trade Commission (FTC) issued a notice of proposed rulemaking to crack down on harmful commercial surveillance and lax data security. The proposed rule included a broad definition of “commercial surveillance,” which, if left unchanged, would prevent debt collection industry participants from providing consumers with the information they request and require to engage in financial transactions. On November 21, 2022, the Consumer Relations Consortium (CRC) submitted comments to the FTC explaining that other laws and regulations cover these objectives for the financial services industry.

Legal Advisory Board (LAB) members John Rossman of Moss & Barnett, Abigal Pressler of Ballard Spahr

https://www.ballardspahr.com/

, and John Bedard of Bedard Law Group prepared the CRC’s comments.

The CRC began its comment by recommending that the FTC focus on enforcing existing laws instead of creating new regulations. Specifically, the CRC pointed to the Gramm Leach Bliley Act (GLBA), which requires financial institutions to explain information-sharing practices to consumers and safeguard sensitive data, and the Safeguards Rule, amended in 2021, which requires debt collectors to implement and maintain an information security program. 

After mentioning that overlaying additional and untested privacy rules will have unintended consequences, the CRC responded to the following questions posed by the FTC:

• The FTC asked whether it should pursue a rulemaking and, if so, what kinds of data should be subject to a potential rule. The CRC responded that since the financial services market is already heavily regulated, consumer privacy is adequately protected and a new rule is not necessary. Should the FTC move forward, however, to avoid conflict with existing laws, any new rule should only apply to data the existing laws do not otherwise cover.

• In response to the FTC’s question about which commercial incentives and business models lead to lax data security measures or harmful commercial surveillance practices, the CRC suggested that clear and consistent guidance premised upon well-defined laws leads to stronger standards. As such, the FTC should focus on issuing clear guidance for businesses regarding data not currently subject to regulation. The applicability of new standards should consider the size and nature of data being gathered and stored.  

The full comment can be found here. 

As the industry continues to digest the Fifth Circuit’s opinion in Community Financial Services Association of America, Ltd. v. Consumer Financial Protection Bureau, which held the Bureau’s funding mechanism to be unconstitutional, new litigation illustrates the challenges that the decision creates to the CFPB’s ability to conduct oversight and enforcement.

In a motion filed in the U.S. District Court for the District of New Jersey, third-party witnesses Christopher Gonzales and Apex Advising LLC seek to quash CFPB subpoenas in the Bureau’s enforcement action against software company Credit Repair Cloud.  The respondent witnesses assert that the holding in Community Financial Services Association “is not limited to the Bureau’s rule-making power, [but] extends to any action taken by the agency, including its enforcement and adjudicative powers”—and that therefore, the third-party subpoenas are invalid.  (Defendants in several other CFPB enforcement actions are currently seeking dismissal of the actions based on Community Financial Services Association.)

Only one district court in the Third Circuit has addressed the Bureau’s constitutionality: the 2017 Navient case, in which the court rejected the defendant’s attacks on both the funding mechanism and the leadership structure of the agency. Gonzales and Apex now urge the court to set aside that precedent, arguing that the Supreme Court’s 2020 Seila Law decision effectively overturned Navient, although Seila Law did not touch on the funding question.  If the district court entertains the respondents’ reasoning, it would represent a potential adoption of the Fifth Circuit’s Community Financial Services Association holding in another circuit.

It remains to be seen whether the district court will reach the constitutional question or rule on other grounds, given that respondents also put forth arguments based on the undue burden of answering the subpoena.  The Court has indicated it intends to issue a ruling on the papers as soon as mid-December.  We will continue to monitor this and other developments surrounding challenges to CFPB’s authority closely.

It is with great sadness that the Haag Family and State Collection Service share the loss of Thomas D. Haag, Chairman and CEO. He passed away in perfect peace at home on Wednesday, November 23, surrounded by his family.

In his nearly six-decade career, Tom followed his father’s advice and built a company based upon integrity, respect and compassion. Tom made sure his employees always felt like family and saw the company grow to over 600 family members. He was especially proud to have the company voted a Best Places to Work year after year and was honored to be recognized as the Wisconsin Family Business of the Year. 

Tom was a pioneer in the receivable management industry, and one of the most respected ACA International Presidents with too many accolades to count. But one thing for sure, his imprint will last for generations to come. He served for three decades with some of the best industry leaders in a benchmarking group, who became some of his closest friends.

Tom was most proud to be able to say that the family business his father started in 1949 had been passed on to the third generation when his son, Tim, took over as President in 2018 and with son-in-law Jim as Chief Security Officer.

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His wife Tina worked alongside Tom in the business but most importantly was his soulmate for over 26 years. They were appropriately referred to as TNT and Grandpa Tina. Most importantly they cherished their families and friendships, opening their home to many.

The Haag family remains deeply grateful for the outpouring of generosity and care shown earlier this year in support of “Team Tom” when colleagues and friends from around the country raised $37,000 for Tom’s favorite charity “Cars Curing Kids.”

Tom is survived by his wife Tina Hanson, daughter Erin Warner (Jim), son Tim Haag (Kristen), and brother Doug Haag (Judi), grandchildren Jamie and Chase Warner, who Tom was immensely proud of, especially when they both became UW Madison Badgers! 

A Celebration of Tom’s Life will be held on June 10 at his garage, affectionately known as “The ToyBox”.

At the family’s request, memorials can be made to:

The Stoughton Food Pantry
Stoughton City Hall
Attn: The City of Stoughton Food Pantry
207 S. Forrest Street, Stoughton WI 53589
https://stoughtonfoodpantry.org/donate

River Food Pantry
https://www.riverfoodpantry.org/ 

Tom may have been a man of few words, but he touched the lives of so many people. He leaves his legacy for all of us to build upon. Integrity. Respect. Compassion.

On November 16, 2023,  the Consumer Financial Protection Bureau (CFPB) released a new Supervisory Highlights report, focusing on the auto servicing industry, consumer reporting, mortgage servicing, and COVID-19 relief funds. The report highlights the CFPB’s continued focus on so-called junk fees and inaccurate credit reporting.

Among other findings from the report, the CFPB says that:

Examiners identified unfair and deceptive acts or practices across many aspects of auto servicing, including violations related to add-on product charges, loan modifications, double billing, use of devices that interfered with driving, collection tactics, and payment allocation.

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• Examiners identified instances where consumers paid off their loans early, but servicers failed to ensure consumers received refunds for unearned fees related to add-on products, such as GAP protection, that no longer offered any benefit to the customer.

• Examiners found that servicers engaged in deceptive acts or practices by representing to consumers that their modifications were preliminarily approved pending a “good faith” payment, when in fact, they denied most of the modification requests.

• When consumers enter into auto finance agreements, lenders sometimes require consumers to have technologies that interfere with driving (sometimes called starter interrupt devices) installed in their vehicles. These devices, when activated by servicers, either beep or prevent a vehicle from starting. Examiners found that, in certain instances, servicers engaged in unfair acts or practices by activating these devices in consumers’ vehicles when consumers were not past due on payment.

Examiners found deficiencies in national credit reporting agencies’ compliance with Fair Credit Reporting Act (FCRA) dispute investigation requirements and furnisher compliance with FCRA and Regulation V accuracy and dispute investigation requirements.

• CFPB examiners found that one or more of the nationwide consumer reporting companies failed to report to the CFPB the outcome of their reviews of complaints about inaccuracies on consumers’ credit reports.

• Examiners continued to find that furnishers, specifically auto loan furnishers, are violating FCRA by inaccurately reporting information despite actual knowledge of errors.

• In reviews of third-party debt collection furnishers, examiners found that furnishers failed to send updated or corrected information to credit reporting agencies after making a determination that information the furnishers had reported was not complete or accurate.

In its continued focus on so-called junk fees, CFPB examiners found that mortgage servicers violated federal law by charging sizable phone payment fees — even though consumers were not made aware of these pay-by-phone fees.

• During calls with borrowers, customer service representatives did not disclose the existence or cost of fees for paying over the phone, yet the borrowers were charged fees anyway.

• Following these findings, the CFPB required the servicers to reimburse all borrowers who paid phone payment fees when those fees were not properly disclosed.

CFPB examiners conducted assessments to evaluate how financial institutions handled pandemic relief benefits deposited into consumer accounts.

• They identified instances of institutions using protected unemployment insurance or economic impact payments funds to set off a negative balance in the account into which the benefits were deposited (a.k.a. same account setoff) or to set off a balance owed to the financial institution on a separate account (a.k.a. cross-account setoff) when such practices were prohibited by applicable state or territorial protections. They further identified instances of institutions garnishing protected economic impact payments funds in violation of the Consolidated Appropriations Act of 2021.

  In response to these findings, the CFPB directed the institutions to issue refunds and make process changes to ensure they comply with applicable state and territorial protections regarding garnishments and setoff practices.

• CFPB examiners identified violations regarding failure to timely provide homeowners with CARES Act forbearances. Examiners also found that servicers unfairly charged some individuals fees, while they were in CARES Act forbearances.

Beyond the series of findings described above, this edition of Supervisory Highlights was notable for the announcement that the CFPB had created a “Repeat Offender Unit” within supervision, the focus of which will be to “enhance the detection of repeat offenses, develop a process for rapid review and response designed to address the root cause of violations, and recommend corrective actions designed to stop recidivist behavior. This will include closer scrutiny of corporate compliance with orders to ensure that requirements are being met and any issues are addressed in a timely manner.” We presume that the “orders” referred to in this description are consent orders, and we note that in the past, monitoring for compliance with consent orders has occurred predominantly within the CFPB’s enforcement division. This announcement may signal that the CFPB intends to use supervisory exams to monitor for consent order compliance to a greater degree in the future.

ROCHESTER, N.Y. –Continental Service Group, Inc., d/b/a ConServe’s charitable giving program, ConServe Cares, allows both the employees and the organization as a whole to support a wide range of community investment efforts, thereby engaging and inspiring employees while also reinforcing ConServe’s outstanding corporate citizenship.  The October ConServe Cares program has been allocated to The Salvation Army of Rochester.

“The needs of our neighbors are present year-round, but most prevalently during the Christmas season.  We’re grateful for community partners, like ConServe, who donate so generously knowing that donations stay right here in our area,” said Maureen Hill, Community Relations for The Salvation Army of Rochester.  “This donation will help provide shelter, food, and many emergency services to those struggling in Monroe County.”

“Our team of caring and committed employees take great pride in supporting a diverse group of local and national agencies that help to make life a little easier for those that may be struggling due to national disasters, households in crisis, lack of shelter, hunger relief, and financial hardships,” said George Huyler, Vice President of Human Resources at ConServe.

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About ConServe

ConServe is a top-performing accounts receivable management service provider specializing in customized recovery solutions for their Clients.  Anchored in ethics and compliance, and steadfast in their pursuit of excellence, they are a consumer-centric organization that operates as an extension of their Clients’ valued brands.  For over 37 years, they have partnered with their Clients to provide unmatched customer service while simultaneously helping them achieve their accounts receivable management goals.  Visit us online at: www.conserve-arm.com

About The Salvation Army  

The Salvation Army is part of the universal Christian church, whose mission is to support those in need in His name without discrimination. The Salvation Army serves the community with social services that range from providing emergency food and shelter, relief from disasters, rehabilitation from drug and alcohol addiction, support after abuse and trafficking, and opportunities for underprivileged children. The Salvation Army has been in Rochester, NY since 1884. Last year, more than 26,000 bags of groceries and over 30,000 nights of lodging were provided for those in the most need in our community.  Visit them online at:  RochesterNY.SalvationArmy.org

If you own or run a company, and you’re considering selling out or buying another company, I strongly encourage you to watch this video. 

Mergers and acquisitions are happening in the U.S. accounts receivable management (ARM) industry, although the marketplace following the midterm elections is vastly different than it was before and during the global pandemic. Variable economic conditions, political uncertainties, increased regulatory actions, and rising capital costs are having a profound effect on the frequency and outcome of many business sales over recent years.  

At Kaulkin Ginsberg, we are very proud to have clients like Chad Silverstein, former owner of Choice Recovery based in Columbus, Ohio. Over a twenty-five-year career, Chad and his team built a successful ARM company uniquely focused on servicing smaller healthcare providers. 

Chad
and I recently recorded our candid discussion about the sale of his business.

This is a must-see video for owners who are thinking about selling their business or buying another ARM company.  

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We cover critical topics including:

1. What motivates a young owner to sell a successful business?
2. The challenges of selling a private company.
3. What distinguished Choice Recovery from its competitors, including a unique way to help unemployed consumers who are heavy in debt find employment.
4. Why Chad decided to hire Kaulkin Ginsberg to handle the sale.
5. What would Chad tell an owner who is thinking about selling his/her business?