WILMINGTON, Del.– Phillips & Cohen Associates, Ltd. (PCA), the global leader in deceased account care management and technology solutions, servicing clients in the United States, Canada, United Kingdom, Ireland, Australia, New Zealand, and Germany is pleased to announce the appointment of Kacey Rask as SVP, Growth and Partnerships.

With over a decade in the Accounts Receivable Management industry, Rask is an experienced leader, holding several senior positions, including VP of Portfolio Servicing at Unifund CCR, LLC, and VP of Sales and Marketing at CenterPoint Legal Solutions. Commencing her career at The National List of Attorneys, Kacey’s versatile expertise and client-focused approach have supported her success. She is consistently recognized for enhancing processes, introducing innovative solutions, and fostering significant revenue growth.  In addition, she has served on various committees and taken part in multiple events contributing to the improvement of the industry’s reputation.

Rask commented, “Embarking on this exciting journey with Phillips & Cohen Associates is not merely joining a team; it’s becoming part of a legacy dedicated to excellence, integrity, and innovation in the Probate and estates space.” 

Adam S. Cohen, Co-Chairman/CEO commented, “We have known Kacey for years and been impressed by her impact on our industry.  With her proven track record of fostering innovation, she will play a pivotal role in accelerating our already exciting growth. Her passion and leadership will be critical as we look to expand our market presence.”

Matthew Saperstein, SVP, Business Development North America, commented, “We are delighted to add another transformative leader like Kacey to our team.  These are exciting times for our organization and Kacey will strengthen our strong business development team and benefit our many new and existing clients.”

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, 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.

After targeting credit card late fees in its proposed rule, the CFPB has set its sights on further attacking credit card pricing through interest rates. The CFPB published a blog late last month stating that credit card interest rate margins are at an all-time high, with an average 14.3% margin in 2023 compared to 9.6% margin in 2013, and have fueled the profitability of revolving balances. The CFPB also issued a data spotlight late last month that found that interest rates charged on credit cards issued by large banks are higher than interest rates charged on credit cards issued by smaller banks and credit unions. 

The report concluded with the statement that “[t]he CFPB is working on a number of fronts to jumpstart competition in the credit card market, including the development of rules to promote consumers’ freedom to switch providers, addressing loopholes that obscure upfront pricing, taking enforcement actions against illegal rewards conduct, and scrutinizing comparison websites for deceptive design and business practices.” In the press release about that report, the CFPB previewed that it was developing a new tool that will give consumers “an unbiased way to compare credit card terms and interest rates.”

On February 29, 2024, the Consumer Bankers Association (“CBA”) published a new blog post, Checking the Math Behind the CFPB’s Comparison of Credit Card Interest Rates Between Large and Small Issuers. The CBA reviewed the math behind the CFPB’s claims that large issuers charge higher annual percentage rates (APRs) than small issuers. The CBA noted that federal credit unions (whose APRs are capped by statute and regulation at 18%) were included in the CFPB’s data comparison and skewed the data. Moreover, credit unions are not subject to the Basel capital and Community Reinvestment Act requirements that apply to large banks and under federal law cannot serve the general public.

When the CBA excluded the credit unions from the CFPB’s data, it obtained very different results:

• The APR difference between large and small issuers range from 2.2% to 5% instead of “8 to 10 points higher” as claimed by the CFPB.
• Only 13 small issuers offered products to customers with subprime credit scores versus 68% percent of large issuers.
• 80% of large issuers offer products nationwide compared to less than half of small issuers.
• 18% more large issuers offer reward programs.

The CBA stated, “[W]hile the Bureau focuses solely on APRs, credit issuers compete on a number of different dimensions: their ability to underwrite consumers; fees; rewards; and broader benefits like airline lounges, and a range of product innovations.” Consumers have many credit card options and choose among the credit cards that are available to them based on their credit score and which card will work best for their planned use. Transactors, who pay their balance in full each billing cycle, typically shop for different card terms than revolvers, who carry a balance from month to month, typically shop for. The CFPB should understand those differences and not take actions to reduce credit card competition that is prevalent in the marketplace.

MIAMI, Fla.  —  Pollack & Rosen P.A. today announced the strategic hire of Attorney Michael A. Gold, LL.M., a seasoned litigator with specialized expertise in financial, securities fraud, and class action defense.

Attorney Gold will lead the expansion of the firm’s litigation defense division, bolstering its capabilities for existing and new clients while providing a substantial complement to Pollack & Rosen’s best-in-class litigation debt collection strategy.

With extensive experience in both state and federal courts, Attorney Gold has a proven track record in handling complex litigation matters, including commercial and construction disputes, healthcare compliance, antitrust issues, and intellectual property. He brings particular depth in defending FDCPA and FCCPA counterclaims and class action lawsuits to the firm.

“Attorney Gold’s addition aligns with our commitment to providing clients with the highest caliber litigation defense,” said Joseph Rosen, President of Pollack & Rosen. “His proven ability to navigate complex legal challenges and deliver successful outcomes in the courtroom makes him an invaluable asset.”

Attorney Gold possesses extensive courtroom experience, honed through years of meticulous witness preparation, conducting effective depositions, and delivering persuasive arguments that have secured favorable outcomes for his clients. While he maintains an active trial practice, his reputation as a litigation defense expert has established him as a sought-after speaker. Attorney Gold regularly conducts seminars for debt buyers and their counsel, equipping them with the necessary litigation strategies to navigate complex cases.

Attorney Gold holds a Master of Laws in Securities and Financial Regulation from Georgetown University Law Center (with distinction) and a Juris Doctorate from St. Thomas University School of Law (with honors).

About Pollack & Rosen P.A.

Headquartered in Miami since 1995, Pollack & Rosen P.A. is well positioned as an experienced and compliant partner dedicated to providing clients across the financial industry with exceptional receivables management expertise, along with superior litigation strategies for its clients. The firm’s expanded litigation defense division, led by Attorney Gold, offers clients robust protection against a broad spectrum of disputes, empowering them to confidently navigate complex legal landscapes.

Attorney Gold can be reached directly at (305) 448-0006 ext. 231 or via email at mgold@pollackrosen.com.

As discussed here, on March 5, 2024 the Consumer Financial Protection Bureau (CFPB or Bureau) finalized its credit card late fee rule (Final Rule). The Final Rule sets a safe harbor amount for late fees at $8 and eliminates the annual inflation adjustments to that safe harbor amount, for larger card issuers. The timing of the Final Rule’s announcement, just days before the State of Union address, did not go unnoticed. President Biden highlighted this development in his speech, emphasizing his administration’s commitment to eliminating so-called hidden fees.

However, the administration’s efforts do not stop at late fees. They are assembling a Strike Force to combat unfair and illegal pricing. Led by the Department of Justice and the Federal Trade Commission, the Strike Force aims to “root out” illegal corporate behavior that raises prices through anti-competitive, unfair, deceptive, or fraudulent business practices.

The industry, however, is not standing idle. The announcement of the Final Rule on credit card late fees sparked immediate reaction. A collective of trade groups, including the U.S. Chamber of Commerce, Fort Worth Chamber of Commerce, Longview Chamber of Commerce, the American Bankers Association, the Consumer Bankers Association, and Texas Association of Business (collectively, the trade groups) filed a complaint in the U.S. District Court for the Northern District of Texas challenging the Final Rule.

The trade groups argue that in enacting the Final Rule “the CFPB violated the Appropriations Clause, exceeded its statutory authority, and offered deficient analysis and reasoning, all in order to achieve a pre-ordained outcome that will ultimately harm those consumers the CFPB is charged with protecting.” The trade groups further argue that the Final Rule’s effective date violates the Truth in Lending Act (TILA).

The complaint includes five counts. In the first count, the trade groups argue that the Final Rule should be invalidated because the CFPB’s funding mechanism violates the Appropriations Clause of the U.S. Constitution, a claim that is currently pending before the U.S. Supreme Court in Community Financial Services Association v CFPB (CFSA case). Oral arguments in the CFSA case, discussed here, were heard in October. A decision is expected in the coming months.

In the subsequent counts, the trade groups argue that the Final Rule violates the Administrative Procedure Act (APA) because the CFPB: (i) violated the express requirements of the Credit Card Accountability Responsibility and Disclosure (CARD) Act by repealing the old safe harbor and establishing a new safe-harbor amount based on only a fraction of the costs incurred by issuers from late payments, and not allowing issuers to charge fees that sufficiently account for deterrence; (ii) did not rationally analyze or explain its decisions, nor base those decisions on substantial evidence, including by using inappropriate, incomplete, and non-public data to estimate card issuers’ costs and using deeply flawed analysis to dismiss concerns about the decreased deterrent effect of reducing late fees to $8; (iii) relied heavily upon the Federal Reserve’s Y-14M data that was not made available to the public for comment; and (iv) violated TILA by having its new credit card disclosures take effect prior to the October 1 date required by the statute.

Concurrently with the complaint, the trade groups filed a motion for preliminary injunction requesting that the court enjoin the Bureau from implementing the Final Rule against their members until the conclusion of the case.

Troutman Pepper’s Take:

The federal “war on fees” has become highly politicized and multifaceted, targeting the financial services industry specifically but also encompassing many other industries as well. The inevitable has happened, with the dispute spilling over into the courts, which may be the final arbiter on the legality and limits of the federal initiatives. As for the financial services industry in particular, it appears that litigation is becoming an integral part of the rulemaking process going forward.

PITTSBURGH, Pa. — From the era of flip phones to the advanced age of AI, Solutions for Account Management (SAM) proudly marks its 20th anniversary, a testament to its enduring commitment to innovation, integrity, and the spirit of compassion within the debt management industry. Founded in 2004 with a heartfelt mission to honor Brenda Meli’s father, Sam, the company was born out of a vision to revolutionize the Accounts Receivable Management (ARM) industry with a unique ‘business concierge’ approach.

“Our story is one of struggle, sacrifice, and immense accomplishments,” says Brenda Meli, Co-founder and CEO. “It all began with a dream to pay tribute to my father’s legacy and to transform the ARM industry. What makes our journey special is the collective spirit and dedication of the SAM Squad, our remarkable team. We wouldn’t have come this far or accomplished so much without them.”

A Vision Turned Reality

SAM’s inception story is one of destiny and determination. Brenda’s first client, Lauren, was not just a client but a pivotal part of SAM’s evolution. In 2014, she joined forces with Brenda, transforming SAM into a woman-owned powerhouse that has since emerged as a leading debt sale broker. Together, they have championed the concept of corporate matchmaking, helping countless businesses navigate the complexities of debt management with unparalleled expertise and personalized care.

Two Decades of Pioneering Success

Over the years, SAM has introduced groundbreaking solutions, such as their proprietary DebtSales360 platform, setting new industry standards for managing and selling debt portfolios. The company’s relentless pursuit of excellence has not only earned it the status of an RMAi Certified Debt Sale Broker but has also redefined what it means to deliver client-centric solutions in the debt management space.

“As we look back on these 20 years, we’re filled with gratitude for every client, partner, and team member who’s been part of our journey,” Lauren McIlroy, Co-founder and COO, reflects. “Our story is made of every challenge we’ve faced and every success we’ve celebrated. And as we look to the future, we’re excited for the endless possibilities that lie ahead.”

In the spirit of celebrating two decades of success, SAM continues its commitment to community engagement by supporting meaningful initiatives with organizations like Autism Speaks, Maddie’s Message, and Special Olympics. These partnerships highlight SAM’s dedication to not just business excellence but also to making a positive impact in the lives of individuals and communities.

As SAM commemorates this monumental anniversary, it stands as a beacon of innovation, compassion, and excellence in the debt management industry. Here’s to 20 years of making a difference and many more to come. 

Recently, three Republican members of the U.S. House of Representatives’ Financial Services Committee, Patrick McHenry, Mike Flood, and French Hill, sent a joint letter to the Consumer Financial Protection Bureau (CFPB or Bureau) urging the agency to reopen the comment period and reconsider its November 2023 proposed rule regarding digital consumer payment applications. 

As discussed here, the Bureau is seeking to amend existing regulations by adding a new section to define larger participants that offer digital wallets, payment applications, and other services to fall within the CFPB’s supervisory scope. The Congressmen urge the CFPB to open the comment period on the proposed rule for an additional 60 days arguing that “[a]s it currently stands, this rule would introduce more regulatory uncertainty into the payment industry, particularly with respect to third-party service providers and digital asset companies.”

Specifically, under the proposed rule the CFPB seeks to supervise large nonbanks that provide peer-to-peer (P2P) payments, funds transfers, or wallet functionalities through a digital payment application. The proposed rule would subject companies that offer one or more of the covered activities to the CFPB’s supervisory authority, which would allow the CFPB to conduct examinations and assess compliance with all federal consumer financial protection laws and regulations enforced by the CFPB, not merely the ones relating to digital payments.

The comment period on the proposed rule closed on January 8, but the Congressmen argue it should be reopened for various reasons:

• The proposed rule does not adequately justify the need to expand the Bureau’s regulatory scope into the payments industry. For example, the proposed rule fails to provide any evidence of non-compliance with federal consumer financial laws or explain how it would be addressed by this new regulation. As such, the Congressmembers urge the CFPB to provide sufficient justification demonstrating the need for the proposed rule, including a more detailed analysis of the scope of the proposed rule and its impact. “Absent such justification, the CFPB should forgo finalizing the rule.”

• As written, it is unclear whether the proposed rule covers third party service providers and, if so, to what extent. “Service provider” is broadly defined under the Dodd-Frank Act and so relying on the statutory definition leaves many unanswered questions regarding how the CFPB intends to conduct oversight of third-party service providers to covered entities offering consumer payment applications.

• It is unclear when the rule would apply to specific entities. On one hand, the proposed rule explicitly states that fiat-to-crypto and crypto-to-crypto transactions conducted on an exchange would not be covered. However, it remains unclear if this exclusion would exempt digital asset exchanges entirely, or only in instances where they offer services limited to the conversion of fiat-to-crypto and crypto-to-crypto transactions. Likewise, the proposed rule’s language pertaining to digital asset wallet providers raises questions as to which entities would be included under CFPB’s purview.

Notably, the day after the Republican Congressmen submitted their letter to the Bureau, three Democratic U.S. Senators issued a letter supporting the proposed rule.

The CFPB recently published a notice in the Federal Register indicating that it is seeking approval from the Office of Management and Budget (OMB) for the collection of additional auto finance data pursuant to its authority under the Dodd-Frank Act .

In February 2023, the CFPB announced that it had issued market monitoring orders to nine large auto lenders requesting information about their auto lending portfolios.  The CFPB published a sample order on its website.

The requests within the order asked for detailed loan level data regarding originations and servicing from January 1, 2018 through December 31, 2022.  For example, the originations section asked for 23 different categories of data (plus sub-categories) regarding vehicle pricing and loan terms and another 23 categories of data regarding the dealer, lender, and borrower(s).  The servicing section included, among other requests, a request for 28 different data categories regarding repossessions and voluntary surrenders.

In the notice of its new request to OMB, the CFPB refers to the February 2023 orders as the “initial Auto Finance Data Pilot” project  (Pilot).  It states that the data from the Pilot both confirmed the benefit of additional data collection to fully carry out the CFPB’s mission, to fulfill the CFPB’s mandate to monitor the auto finance market for risks to consumers, and to inform the way the CFPB would propose to collect data in the future.  

The CFPB is now proposing to collect data in the following two processes:

• An annual collection of a set of data from lenders that originate greater than 20,000 auto loans in the previous calendar year.  The data collection would mirror the data collected in the Pilot.

• An annual collection of a set of data from lenders that originate greater than 500 auto loans and fewer than 20,000 auto loans in the previous calendar year.  The data collected would be information on the number of vehicles repossessed and the number of loan modifications. 

As we noted when the CFPB issued the initial market monitoring orders last year, the CFPB has been focused on rising auto prices and a corresponding increase in loan amounts, monthly payment amounts, and delinquencies, especially in the subprime and deep subprime market segments. 

These types of data collections typically result in the issuance of a report that is a precursor to new guidance or rulemaking.  It is likely that the CFPB will receive objections to the new data collection from industry. 

Early this morning, and just in time for Thursday’s State of the Union Address, the Consumer Financial Protection Bureau (CFPB) issued a press release announcing its much-anticipated Credit Card Late Fee Rule (Rule). Claiming to “close a loophole,” the Rule reduces a typical fee of $32.00 to $8.00 and ends automatic inflation adjustment for issuers with 1 million or more open accounts. 

According to the CFPB, credit card companies have increased fees despite moving to cheaper, digital processes. In a published statement released contemporaneously with the announcement of the Rule, CFPB Director Rohit Chopra stated the CFPB’s research shows late fee revenue generated by the credit card industry is more than five times the companies’ associated costs.  

The Final Rule, which changes very little (if anything) from the original proposal, institutes the following:

• Lowers the immunity provision dollar amount for late fees to $8. The CFPB says its analysis shows a late fee of $8 is sufficient for larger card issuers to cover collection costs incurred due to late payments.

• Ends abuse of the automatic annual inflation adjustment. The CFPB claims that issuers hiked their late fees in lockstep each year without evidence of increased costs. The CFPB will monitor market conditions and adjust the $8 late fee immunity threshold as necessary.

• Requires credit issuers to show their math. The Rule will allow larger card issuers to charge fees above the $8 late fee threshold so long as they can prove the higher fee is necessary to cover their actual collection cost. 

The Rule does not change the credit card issuer’s ability to raise interest rates, reduce credit lines, and take other actions to deter consumers from paying late. 

After listing the main tenets of the Rule, the tone of the press release shifted. Per the CFPB, the rule is part of its continued efforts to address problems and foster competition in the $1 trillion credit card market. In support of those efforts, the CFPB raised its findings on APR margins charged by the largest issuers, data that the CFPB says shows small banks and credit unions offer significantly lower rates, the CFPB’s recent guidance to rein in “rigged comparison-shopping results” for credit cards and other products, and recent enforcement actions.

The Final Rule can be found here. History and comments are linked here.

insideARM Perspective

The 338-page Rule was released less than two hours before this article was published. Therefore, the above covers the main points cited by the CFPB in its press release. In the coming days, we at insideARM, along with our news partners, will publish more details and insight regarding the Rule’s substance and its official comments. In other words, this is a developing story and we will bring you more details and analysis as it becomes available, and once we’ve all had a chance to meaningfully review the Rule and its implications.

That said, noticeably absent from the press release and Director Chopra’s prepared remarks is any mention of the Rule’s downstream effects. The press release and the prepared remarks frame the issue as a simple one; to summarize, “credit card issuers charge too much for late fees, let’s make them charge less = a win for everyone.” Rarely is it ever that simple.

As reported in insideARM last year, when the proposed rule was first released, both the Consumer Bankers Association, the American Bankers Association, and Auriemma Roundtables* cautioned that if finalized as-is (which is exactly what has happened), the Rule would ultimately limit consumers’ access to financial products and would effectively penalize those who pay on time.  In a complex financial ecosystem, actions have consequences, rules have both intended and unintended effects. This rule wasn’t created in a vacuum and won’t exist in one.  

Read the Consumer Bankers Association Statement here.

Read the American Bankers Association Statement here. 

A summary of the Auriemma Roundtables Comment can be found here.

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*Note: Auriemma Roundtables owns insideARM (acquisition press release here)

The Federal Reserve just released its fourth quarter 2023 credit card charge-off and delinquency data with both reaching a 12-year high.

The charge-off rate increased from the third quarter’s 3.48% to 3.96%, for the first time surpassing the pre-pandemic level of 3.65%. The delinquency rate increased from 2.83% to 2.97%. The delinquency rate is often an early indicator of the future charge-off rate. The Q4 trend suggests a continued increase in charge-off volume should be expected, although the rate of that increase may be leveling off as the increase slowed.

Another observation is that for seven years before the pandemic the delinquency rate stayed in a narrow 2.0 – 2.5% band.  This band was at a lower rate than several previous decades of data. Now for three quarters, the delinquency rate has been above this pre-pandemic seven-year band.

The Federal Reserve’s charts for the data referenced follow. The charts are easily downloadable in several formats.

Charge-off Rate on Credit Card Loans

Deliquency Rate on Credit Card Loans

On February 12, the FTC provided the CFPB with an annual summary of its 2023 enforcement, research and policy development, and educational-related initiatives on ECOA, as Dodd-Frank allows the Commission to enforce ECOA and any CFPB rules applicable to entities within the FTC’s jurisdiction. The letter emphasized the commitment of each agency to enforce laws protecting civil rights, fair competition, consumer protection, and equal opportunity in the development and use of automated systems and artificial intelligence. 

Additionally, the letter stated the FTC continued its involvement in initiatives such as military outreach and participation in interagency task forces on fair lending. Its initiatives focused on consumer and business education regarding issues related to Regulation B and guiding fair lending practices. The Commission also highlighted 

1. an enforcement action against a group of auto dealerships alleging ECOA and its implementing Regulation B violations in connection with the sale of add-on products; 
2. refund checks sent as a result of the settlement of two enforcement actions against auto dealerships in which it was alleged that the dealerships violated ECOA and Regulation B by discrimination against Black and Latino consumers by charging them higher financing costs; and 
3. an amicus brief submitted to an appeals court in support of the CFPB’s appeal to the U.S. Court of Appeals for the Seventh Circuit of the lower court’s decision regarding the applicability of ECOA to individuals other than “applicants.”