The CFPB has told two courts, an Illinois federal district court and the Ninth Circuit, that the Fifth Circuit panel decision holding that the Bureau’s funding mechanism is unconstitutional is “neither controlling nor correct” and “mistaken.” 

The CFPB addressed the panel’s decision in Community Financial Services Association v. CFPB in its response to the Notice of Supplemental Authority filed by TransUnion in the CFPB’s enforcement action against TransUnion in the Illinois court and in a letter to the Ninth Circuit responding to the Notice of Supplemental Authority filed by the defendants in CFPB v Nationwide Biweekly Administration.  (TransUnion and the defendants in Nationwide Biweekly are among the defendants in CFPB enforcement actions that are already attempting to use the Fifth Circuit decision as grounds for dismissal.)  We expect the CFPB to seek to overturn the Fifth Circuit decision by either petitioning the Fifth Circuit for a rehearing en banc or proceeding directly to the Supreme Court with a certiorari petition.  Whichever route the CFPB takes, its responses serve as a preview of the arguments it will likely make in challenging the decision.

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Pursuant to the Dodd-Frank Act, the CFPB receives its funding through requests made by the CFPB Director to the Federal Reserve, subject to a cap equal to 12% of the Federal Reserve’s budget, rather than through the Congressional appropriations process. In its decision, the Fifth Circuit panel concluded that the CFPB’s funding mechanism did not satisfy the Appropriations Clause because the CFPB was double-insulated from annual or other time limited appropriations. The panel rejected the CFPB’s argument that the funding mechanism satisfied the Appropriations Clause because it was created pursuant to a law enacted by Congress.  According to the panel, a law alone did not satisfy the Appropriations Clause’s command that “No money shall be drawn from the Treasury, but in Consequence of Appropriations made by law.” (emphasis added).  In the panel’s view, to satisfy the Clause, “an appropriation is required.”

In its enforcement action against TransUnion, the CFPB alleges that TransUnion violated a 2017 consent order with the CFPB.  In its Notice of Supplemental Authority, TransUnion argues that the CFSA decision establishes that the CFPB’s enforcement action must be dismissed because the consent order is invalid as the CFPB “used unappropriated funds to negotiate and prepare it.”  TransUnion also argues that the CFPB “may not expend unappropriated funds prosecuting this suit.” 

In its reply to TransUnion’s notice, the CFPB makes the following key arguments for why the panel’s decision is wrong:

• There is no case law support for the Fifth Circuit’s conclusion that a statutory authorization does not constitute an appropriation made by law or that Congress violates the Appropriations Cause or separation of powers when it authorizes spending by statute, as it did for the Bureau.

• The Bureau’s funding is not more insulated from Congressional oversight because it comes from receipts of the Federal Reserve System.  The source of funds makes no difference to Congress’s ability to oversee how the Bureau spends that money to carry out its duties.  And that point does not differentiate the Bureau from the Federal Reserve Board, which like the Bureau is part of the Federal Reserve System and funded from the same source. Congress is capable of overseeing the Bureau’s spending, including because of provisions in Dodd-Frank that ensure its ability to supervise, such as provisions requiring the Bureau to provide regular audits and reports to Congress.

• The Fifth Circuit’s holding finds no support in the Dodd-Frank provision that states funds transferred to the Bureau “shall not be construed to be Government funds or appropriated monies.”  That provision, like similar provisions that apply to the Farm Credit Administration, Federal Reserve Board, and OCC, determines the degree to which various statutory restrictions apply to the Bureau’s use of funds.  It has nothing to do with the constitutional requirement that Congress authorize the executive to spend money.

• The Bureau’s funding is not meaningfully different from numerous other agencies such as the Federal Reserve Board, OCC, and FDIC that are funded in ways other than annual spending bills.  The decision leaves no way to know what statutory spending authorizations count, in the panel’s view, as an “appropriation” that complies with the Appropriations Clause.

• Even if the court were to agree with the Fifth Circuit panel, it should still reject TransUnion’s request to dismiss the complaint because any defect in the Bureau’s funding authorization would not deprive the Bureau of the power to carry out its statutory responsibility to enforce the law.

In the Ninth Circuit case, a California district court imposed a $7.9 million civil penalty against the defendants for allegedly misleading marketing practices but did not award the nearly $74 million in restitution sought by the CFPB.  (The CFPB is seeking in the appeal to have the district court’s denial of restitution reversed.)  In their Notice of Supplemental Authority filed with the Ninth Circuit, the defendants argue that based on the Fifth Circuit’s decision, the Ninth Circuit should reverse the district court’s civil penalty award and dismiss the CFPB’s enforcement action.  In addition to making several of the same arguments it made to the Illinois court, the CFPB also told the Ninth Circuit that the Fifth Circuit decision should not result in a dismissal because:

“As to remedy, the panel failed to heed its own understanding of Collins [v. Yellen].  The court didn’t consider whether “the Bureau would have acted differently “but for” its statutory funding mechanism.  Here, applying Collins yields a straightforward answer: the case should not be dismissed because there is no evidence the Bureau “would have acted differently” with different funding.”

BLOOMINGTON, Minn. — Absolute Resolutions Corp. (“ARC”), headquartered in Bloomington, MN, announced today that Whitney Carpenter has been promoted to the role of Vice President of Operations.   

“Anyone who knows Whitney would immediately recognize the drive and determination with which she approaches each day. Her demonstrated leadership ability and experience have earned her an expanded role that allows her to have an even greater impact on our organization.” said Chad Lemke, ARC’s Chief Operating Officer. 

Prior to joining ARC in 2020, Whitney served in several leadership positions at some of the largest debt purchasing companies in the country including Encore Capital Group, PRA Group, and JH Capital Group.  

“I couldn’t be more thrilled to expand on my role at ARC,” said Whitney, “The team and culture here is truly one of a kind, and the collaboration between departments is what continues to play a role in ARC’s success. I’m proud to be able to contribute to the organization in a greater leadership capacity.”

In her new role, Whitney is responsible for oversight of ARC’s Internal Operations, Servicer Support and Performance Management. She will continue to partner closely with internal teams and external partners to ensure smooth operations. 

About Absolute Resolutions Corp.

Absolute Resolutions Corp. is a certified professional receivables company with offices in Bloomington, MN and San Diego, CA. 

www.absoluteresolutions.com

In a clear rebuke of a credit repair organization’s tactics, a judge in the Middle District of Florida said the Fair Debt Collection Practices Act (“FDCPA”) cannot be weaponized against a debt collector for declining to participate in a scam. The “scam” in this case was a letter sent to the debt collector by the credit repair organization, Credit Repair Lawyers of America (CRLA). 

In Dukes v. LVNV Funding, Case Number 21-cv-1342 (M.D. FL 2022), a consumer engaged a credit repair organization for 80$ per month to try to “straighten out” her credit so she could apply for a mortgage. On March 5, 2019, she disputed her LVNV account. The letter appeared to bear her signature. At some point in 2019, the consumer engaged CRLA (it is unclear whether CRLA was engaged before or after the March 5th letter). 

Over two years later, on May 28, 2021, CRLA drafted and sent a letter to LVNV stating the consumer no longer disputed the account, so LVNV should remove the dispute mark from her credit report. The letter was signed electronically by an out-of-state attorney.

Believing the letter was a scam, LVNV’s servicer did not remove the dispute upon receipt. Instead, the letter was marked as a scam because: 

• It arrived in an envelope indicating Michigan Consumer Lawyers sent it, but the letterhead on the correspondence indicated it was from CRLA.
• No Power of Attorney indicating CRLA could act on the consumer’s behalf was included.
• It had no wet handwritten signature.
• No payment was included with the rescission of the longstanding dispute.
• It did not include the consumer’s account number. 
• The consumer was not copied on the letter.
• The account had been disputed for years; and
• it was one of a slew of nearly identical letters received.

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The consumer, represented by CRLA, filed a suit alleging LVNV violated the FDCPA by failing to remove the dispute upon receipt of the letter. LVNV deposed the consumer, and she testified (1) she disputed the amount of the account, not that the account was hers; and (2) she authorized CRLA to send the letter to remove the dispute so she could move forward on her mortgage application.

LVNV moved for summary judgment on the basis that it did not violate the FDCPA because the consumer still disputed the account. The consumer responded by stating she disputed the amount, not the account. The court found there is no difference between disputing the amount and the account and granted LVNV’s motion for summary judgment. 

In ruling in LVNV’s favor, the court did not mince words, stating, “in spite of [the consumer]’s attempt to misrepresent the status of her debt [LVNV] has accurately reported it.” The court further admonished the consumer and CRLA stating, “[the consumer] does not have the right to manipulate her credit reports with false representations to improve her access to credit.”   

Read the full Order here. 

insideARM Perspective

There are a few things that stand out in this win. First, LVNV’s servicer clearly articulated why they considered the letter to be a scam. The result could have been different without evidence showing that LVNV had a reasonable basis to determine the letter was a scam. Cases like this, which turn on a debt collector’s ability to articulate and show why they took a specific action, are a good reminder that it’s never a bad time to review basic procedures (like note-taking procedures) to ensure standards are met. 

Second, LVNV took the consumer’s deposition, and the consumer’s testimony allowed the court to find in LVNV’s favor because the consumer admitted she still disputed the account. Over the past year or so, due to the high visibility of the Hunstein case, debt collectors have spent considerable time discussing motions to dismiss and standing. This case, as well as this one from a few months ago, are good reminders that sometimes a case needs to be litigated through the discovery phase to win. Yes, litigation costs time and money, but the results can be worth it in the proper case. Though motions for summary judgment typically take a fair amount of attorney time, they can be worth it. 

RAMSEY, Minn. — Phin Solutions, LLC an information services company in the Accounts Receivable Management industry, announced today that Robert “Bob” Schofield has joined the Phin Solutions team as their Senior Vice President of Business Development.

Prior to joining Phin, Bob has held numerous executive roles throughout the industry in companies including Northland Group Inc, Fourscore Resource Capital LLC and Unifund LLC. Most recently Bob worked for LTD Financial as their SVP of Business Development. 

“I am excited to have Bob as a part of the Phin Solutions team. He is a problem solver, hard worker and a wealth of knowledge in our industry. I have known Bob for 15 years and I am eager to be working alongside him.” CEO Todd Hinrichs shared. 

When asked about his new position, Bob said, “I am excited for this opportunity to generate new revenue streams for Phin Solutions. I have followed Phin Solutions for years and they have a great product that I am excited to help grow and share with the industry.”

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About Phin Solutions, LLC 

Phin Solutions LLC, is a national information services company specializing in Bankruptcy and Deceased Notification services, Bankruptcy proof of claim filing services and active duty military verification services. Phin Solutions offers several services and solutions to help organizations identify and manage their bankrupt and deceased accounts within their portfolios. Whether in-house behind your firewall using our Vigilant-CMS℠ software or from our secure data center, we provide clients a secure environment while delivering complete and timely Bankruptcy and Deceased information. Phin Solutions also sets up and provides clients access to the Bankruptcy courts EBN service. This greatly reduces the cost of information while reducing the paper handling within organizations. In addition to Bankruptcy and Deceased notification services Phin Solutions also offers skip tracing services to provide a complete one stop solution for our clients.

For more information visit the company website at www.phinsolutions.com or call 763-633-7007.

DULUTH, GA – Crown Asset Management, LLC hosted a successful Servicer Summit on September 20-21, 2022. The CAM team wants to express appreciation to its agency and law firm partners for making this event a success through their attendance and participation. The two-day event took place in Duluth, GA at the CAM office and the TPC Sugarloaf Country Club. 

Open House

The Summit kicked off with an “Open House” event, including a tour of the CAM office and time set aside for CAM Team members in all departments to meet directly with servicers and provide training and Q&A on some key processes. It was beneficial, productive, and enjoyable to have face-to-face interactions and opportunities for conversation outside of conference calls, video calls, and emails! 

Activities & Dinner

Next, the attendees and hosts headed over to TPC Sugarloaf where they chose from a golf “Tee Party” or an artist-led “Sip ‘n Paint” class. The relaxing activities offered an opportunity to connect in a casual environment, which was wrapped up with cocktails and dinner together as a large group

Keynote Address & Presentations

On Day 2, CAM was excited and honored to have Georgia’s Attorney General, Chris Carr, as the keynote speaker. This was followed by members of the CAM team (Bob Deter, VP of Business Development, and Leah Ri, Financial Planning & Analysis Manager) discussing market trends and observations in consumer debt. The overall discussion included retrospective observations of the impact of COVID-19 on the industry, as well as observations of current/recent market conditions, delinquency/charge-off volumes, and future pricing. Next on the agenda was a presentation from CAM’s Audit & Compliance team, led by VP of Audit & Compliance, Deb Tucker. The team presented attendees with an overview of critical audit & compliance observations, expectations, metrics, and trends.  

Collaborative Breakout Sessions

Finally, everyone broke out into various focus groups to share best practices. The Agency Roundtable was moderated by Relationship Manager, Lisa Rozzelle.   Topics included motivating collectors, dealing with staffing, work-from-home challenges, and more. The law firm breakout covered the nuances of litigating fintech accounts. CAM’s Law Firms of the Year 2021 (Gordon, Aylworth & Tami, P.C. and Blitt & Gaines, P.C.) presented a “fintech mock trial” to illustrate points and prompt collaborative discussion.  VP of Operations, Bekah Luebcke, moderated this session.

Pulling it all together

Day 2 ended with a panel discussion with the VPs and Directors from CAM’s management team. Moderated by Relationship Manager, Lana Taylor, the panel discussion was an opportunity for the management team to address questions from the attendees, discuss their roles within the organization, and illustrate how their business units are contributing to CAM’s continued success.

CAM thanks everyone who attended and took part in making the Servicer Summit a wonderful success and looks forward to continued partnerships and future meetings! 

About Crown Asset Management

Founded in 2004, Crown Asset Management, LLC, is a professional receivables management firm that outsources purchased accounts to a nationwide, proprietary network of collection agencies and law firms. Utilizing a cutting-edge predictive analytical model during pre-purchase portfolio due diligence, our team focuses on achieving appropriate financial returns while ensuring the best possible experience for consumers. We are an RMAI Certified Receivables Business headquartered in Duluth, GA.

Pursuant to its authority under Section 1022(b)(1) of the Dodd-Frank Act, the Consumer Financial Protection Bureau (CFPB) issued an advisory opinion to consumer reporting agencies (CRAs), highlighting their obligation to screen for and eliminate obviously false data from consumers’ credit reports. Specifically, CRAs were instructed to implement policies, procedures, and systems to screen for and remove “logically inconsistent” information.

In its advisory opinion, the CFPB emphasized the negative effects that inaccurate reporting can have on consumers: “[I]naccurate, derogatory information in consumer reports can lead to higher interest rates, ineligibility for promotional offers, or otherwise less favorable credit terms for affected consumers. This in turn may cost consumers hundreds or thousands of dollars in additional interest. Even worse, inaccurate, derogatory information in consumer reports could lead lenders to deny a consumer credit entirely, making it difficult or impossible for that consumer to obtain a mortgage, auto loan, student loan, or other credit.”

The advisory opinion also provided examples of some of the types of logical inconsistencies that the CFPB contends “reasonable procedures to assure maximum possible accuracy” would screen for and eliminate:

– Inconsistent Account Information of Statuses, which may include:

• An account whose status is paid in full, and thus has no balance due but nevertheless reflects a balance due;

• An account that reflects an “Original Loan Amount” that increases over time, an impossibility by definition;

• Derogatory information being reported on an account, although that derogatory information predates an earlier report that did not include the derogatory information;

– Illogical reporting of a Date of First Delinquency in connection with an account, which may include:

• A Date of First Delinquency reported for an account whose records reflect no delinquency, such as through activity reflecting a current account (complete history of timely payments, $0 amount overdue) or through a current account status code;

• A Date of First Delinquency that post-dates a charge-off date; and

• A Date of First Delinquency, or date of last payment, that predates the account open date (for non-collection accounts).

– Illogical reporting of information relating to consumers, which may include:

• Impossible information about consumers — for example, a tradeline that includes a relevant date for an account that is in the future or for an individual account that either predates that consumer’s listed date of birth or that is impossibly far in the past;

• Information that is plainly inconsistent with other reported information, such that one piece of information must be inaccurate — for example, if every other tradeline is reporting ongoing payment activity, while one tradeline contains a “deceased” indicator; and

– Illegitimate credit transactions for a minor.

According to the CFPB, complaints about incorrect information on consumer reports have represented the largest share of credit or consumer reporting complaints submitted to the CFPB each year for at least the last six years. The advisory opinion emphasized that “a consumer reporting agency that does not implement reasonable internal controls to prevent the inclusion of facially false data, including logically inconsistent information, in consumer reports it prepares is not using reasonable procedures to assure maximum possible accuracy under section 607(b) of the Fair Credit Reporting Act.”

PITTSBURGH, Pa. — Solutions for Account Management, Inc. (SAM) is excited to announce that Susan Namm CCCO, CCEP, CRVPM III has joined SAM as our Compliance Director. Susan brings more than 30 years of experience to SAM in compliance management, vendor management, auditing, and collection agency licensing.

Susan has a proven track record of success in the financial services industry and is an advocate for vendor oversight. She holds high standards for ethics and accountability and believes in a collaborative and transparent approach to management. Susan also has a keen aptitude for process improvement, data analysis, call monitoring, and compliance. As Compliance Director, she uses her strong interpersonal communications skills to establish positive, collaborative relationships with vendors, clients, customers, and internal teams. Susan also holds certifications as a Certified Compliance and Ethics Professional and Certified Regulatory Vendor Program Manager III Advanced.

Welcome to the SAM Squad, Susan!

The U.S. Court of Appeals for the Third Circuit recently held in Clemens v. ExecuPharm Inc. that the risk of future harm from a data breach can be enough for Article III standing, taking into consideration whether the breach was intentional, whether the data was misused, and the nature of the data accessed.

As a condition of employment, a consumer was required to provide her employer “with sensitive personal and financial information, including her address, social security number, bank and financial account numbers, insurance and tax information, her passport, and information relating to her husband and child.”  The employment agreement stated that the employer “would ‘take appropriate measures to protect the confidentiality and security’ of this information.”

Sometime after the consumer left that employment, a hacking group used a phishing attack to steal her information, as well as that of other current and former employees. Ultimately, the hackers posted the data on the Dark Web, which “is most widely used as an underground black market where individuals sell illegal products like . . . sensitive stolen data that can be used to commit identity theft or fraud.”

The consumer filed suit against the employer alleging she was injured by the risk of identity theft and her investment of time and money to mitigate potential harm through measures such as fraud alerts and credit monitoring. Specifically, her claims were for negligence, negligence per se, breach of implied contract, breach of contract, breach of fiduciary duty, and breach of confidence.

The trial court dismissed the suit based on lack of Article III standing, holding that “allegations of an increased risk of identity theft resulting from a security breach are insufficient for standing,” and that the “risk of future harm was not imminent, but ‘speculative,’ because she had not yet experienced actual identity theft or fraud.”

On appeal, the U.S. Court of Appeals for the Third Circuit explained that for Article III standing, a plaintiff must demonstrate, among other things, “that he or she suffered an injury in fact that is concrete, particularized, and actual or imminent.”  Regarding data breaches, the Court noted that factors to be considered are whether the breach was intentional, whether the data was misused, and the nature of the data accessed.

Here, the unauthorized access was clearly intentional and, by being made available on the Dark Web, was misused. The data “was also the type of data that could be used to perpetrate identity theft or fraud. . . Together, these factors show that [the consumer] has alleged a ‘substantial risk that the harm will occur’ sufficient to establish an ‘imminent’ injury.”

The Court noted that “although the substantial risk of identity theft is a risk of future harm and this is a suit for damages, which may under other circumstances pose a problem for concreteness, [the consumer] has alleged several additional concrete harms that she has already experienced as a result of that risk . . . Thus, her injury is also “concrete.”

Based on this reasoning, the Court vacated the trial court’s judgment and remanded the case for consideration on the merits.

MIAMI, Fla. — The law firm of Pollack & Rosen, P.A., announced today that Robert Russo has joined the firm as Sr. Vice President Corporate Development to further expand its growing portfolio of regional and national clients.

Having been associated with many well-known law firms, agencies and debt purchasers, Bob brings over 35 years of receivables management experience to the organization.

As a familiar industry figure, Bob assumes direct responsibility for corporate development to support the firm’s client strategy and marketing efforts and will leverage his past successes by building and implementing an advanced platform designed to bring about a level of sophistication that will underscore the firm’s current capabilities, while highlighting a full complement of services offered by the organization.

President Joseph Rosen said “having known Bob for decades, we are excited that he has joined the firm. I am confident that he will bring a wealth of experience and industry knowledge to the table, which will benefit the firm and the clients we serve.”

Bob will play a key role in the organization by building a comprehensive business development organization, which will bring about competitive and profitable solutions for clients across the credit spectrum.”

Russo said “I am excited to have an opportunity to work with Joe and his team of professionals and to participate at a senior level, which will help the firm meet its strategic objectives. 

This is a successful organization that has been providing best-in-class services for the credit industry for years and I believe I will be able to leverage my relationships and experience to help contribute to the firm’s continued growth and aggressive expansion plans.”

About Pollack & Rosen, P.A.

Headquartered in Miami, since 1995 the firm is well positioned as an experienced and compliant partner dedicated to providing credit originators across the financial industry with exceptional Receivables Management expertise, along with superior Litigation Strategies for its clients.

Bob can be reached directly at (860) 388-6708, (203) 508-8663 or via email at robertr@pollackrosen.com.

ROCHESTER, N.Y. — Continental Service Group, Inc., d/b/a ConServe, through the company’s ConServe Cares program, provides employees with the opportunity to “give back” to their local communities by donating to a diverse group of organizations throughout the year.  The funds raised by the employees’ generosity is supplemented by the organization’s “Matching Gift Program.”  This ongoing initiative symbolizes ConServe’s commitment to its corporate mission of helping to improve the human condition.

In the month of September, the ConServe team donated to Junior Achievement of Update New York.  “Our ConServe Cares program demonstrates our steadfast pledge of doing the right thing, at the right time, the right way,” said George Huyler, Vice President of Human Resources.  “Providing funding and support to youth educational programs is an important way of bringing about positive change in our community and aligns with ConServe’s commitment to lifelong learning.”

 “Junior Achievement believes that in order to keep our community growing, it is critical for youth to develop financial capabilities, job and career readiness, and an entrepreneurial mindset,” says Patricia Leva, President and CEO of Junior Achievement of Central Upstate New York.  “Through their work, ConServe employees also uniquely understand the importance of a financial education and the life-long impact it can have on individuals, families and the community. We are grateful to the ConServe team for their continued generosity, which will help JA bring these lessons and experiences to local students.”

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 Junior Achievement  

Junior Achievement is the world’s largest organization dedicated to giving young people the knowledge and skills they need to own their economic success, plan for their future, and make smart academic and economic choices. JA programs are delivered by corporate and community volunteers, and provide relevant, hands-on experiences that give students from kindergarten through high school knowledge and skills in financial literacy, work readiness, and entrepreneurship. Junior Achievement of Central Upstate New York (JACUNY) delivers programming to students in a 25-county region throughout Central and Upstate New York State.  Visit them online at:  https://cuny.ja.org/