The New York Division of Financial Services (NY DFS) plans to focus on equitable access to banking and on fostering innovation in consumer financial services. That’s according to Adrienne A. Harris, the current superintendent of NY DFS, who spoke the recently at Fintech Nexus in New York City.

This could have big implications for lenders who seek to broaden their customer base or integrate virtual currency into their businesses.

The influential regulator is the preeminent regulator of virtual currency, and has an extreme breadth of regulation in New York. The agency has often been among the first state agencies to regulate digital banking and virtual currencies. Other state agencies tend to take their cues from the NY DFS, which is why it is so important for companies in financial servies to monitor the agency.

The agency “strive[s] to be a forward-looking, innovative regulator,” Harris said, emphasizing that the agency is focused on policy, process, and people, and that they aim to continue to keep New York “at the center of technological innovation.”

The agency is currently working to triple the size of its staff. According to Harris, this is in order to lead through “greater engagement and new policy.”

Here, according to Harris, is where the NY DFS will be focused:

Equitable Access to Banking

In early May, New York Governor Kathy Hochul signed legislation authorizing a study on underbanked communities, as well as legislation prohibiting banking organizations from issuing unsolicited mail-loan checks. Harris noted that increased equity is critical in banking and credit, and that the agency will be focused on ensuring New York is boosting consumer protections and bringing much-needed resources to consumers, as well.

Fostering a Positive Environment for Innovation

Harris recognizes that the regulatory approach to regulating innovation must be balanced, saying businesses and regulators “can’t approach either regulator or innovation as all good or all bad.” Harris explained that the NY DFS is funded by assessments, and because of that, they hope to provide a service to the industry, encouraging regulated entities to work “hand in hand” with their agency in order to create a better environment for consumers.

Collaborating with the Federal Regulators

Harris noted that federal regulators often turn to NY DFS, especially on the subject of virtual currencies. “There is a concern about a race to the bottom,” Harris explains. The federal regulators are concerned that states who do not implement regulations for virtual currencies and digital banking will attract more business than those that do, making consumers vulnerable to inconsistent or lax regulation. However, Harris said that we haven’t quite seen those fears come to fruition, since New York has some of the most rigorous regulation of virtual currencies, and about 46% of venture capital investments in 2021 in cryptocurrency was in New York.

As virtual currencies and digital banking become more prevalent, and as consumer protection becomes a central focus (particularly if we enter a recession) it will be critical for companies in financial services to pay attention to what is going on in New York.

San Francisco, Calif.  – LiveVox, Inc. (“LiveVox”), a leading cloud-based provider of customer service and digital engagement tools, has announced a new feature, called Human Text Initiator (HTI), as part of their U17 platform update.  HTI takes all the familiar and reliable features that LiveVox brought to outbound dialing with its Human Call Initiator (HCI®) functionality and delivers those same benefits to their SMS and MMS channels, allowing organizations to send out text messages at scale while helping to keep those campaigns in compliance with TCPA regulations and the CFPB’s Reg. F.  The new HTI functionality offers compliance-focused organizations a significant competitive advantage in reaching as many contacts as possible while reducing the risk of potential fines and lawsuits.

As organizations in the accounts receivable management space face a certain level of uncertainty in the market amid the implications of the TCPA regulations and the CFPB’s Reg. F for outbound engagement, HTI can be utilized to substantially mitigate compliance risks, such as those relating to wrong number lawsuits. With single-click, single-text activation for contact center agents as a part of LiveVox’s blended omnichannel, single pane of glass approach, HTI reduces the risk of compliance issues caused by multi-text applications. Use cases for HTI include, but are not limited to:

• Payment reminders
  
• Delinquency alerts
  
• Contact center volume deflection
  
• Letter replacement
  

“With the continued adoption and increased proliferation of smartphone usage in today’s digital environment, we developed HTI to ensure our customers are able to engage with consumers in a personalized, compliance-minded manner, on their channel of choice,” said LiveVox CEO and co-founder Louis Summe. “Just like we did with HCI, HTI allows contact center managers to develop customized SMS campaigns to deliver better digital customer experience and increase self-service capabilities while also remaining compliant in the face of increasing regulation.”

With HTI, now even organizations in highly regulated industries where TCPA and the CFPB’s Reg. F compliance is always a concern can use text messaging to provide better communication options and achieve significant cost savings. LiveVox customers are rapidly adopting digital messaging strategies to raise their competitive advantage and have already begun to see success with HTI, achieving a 90 percent read rate on texts sent through the system. There have also been increases in customer self-service rates and inbound voice traffic for payments-related issues.

Click here to learn more about HTI for compliance focused outbound SMS.

About LiveVox

LiveVox (Nasdaq: LVOX) is a next generation contact center platform that powers more than 14 billion omnichannel interactions a year. By seamlessly unifying blended omnichannel communications, CRM, AI, and WEM capabilities, the Company’s technology delivers exceptional agent and customer experiences, while helping to mitigate compliance risk. With 20 years of cloud experience and expertise, LiveVox’s CCaaS 2.0 platform is at the forefront of cloud contact center innovation. The Company has more than 650 global employees and is headquartered in San Francisco, with offices in Atlanta; Columbus; Denver; St. Louis; Medellin, Colombia; and Bangalore, India. To stay up to date with everything LiveVox, follow us at @LiveVox or visit livevox.com.

Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Some of the forward-looking statements can be identified by the use of forward-looking words. Statements that are not historical in nature, including those containing the words “anticipate,” “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “projects,” “should,” “could,” “would,” “may,” “will,” “forecast,” “opportunity” and other similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon management estimates and forecasts and reflect the views, assumptions, expectations, and opinions of the Company as of the date of this press release, and may include, without limitation, changes in general economic conditions, including as a result of COVID-19, all of which are accordingly subject to change. Any such estimates, assumptions, expectations, forecasts, views or opinions set forth in this press release constitute the Company’s judgments and should be regarded as indicative, preliminary and for illustrative purposes only. The forward-looking statements contained in this press release are subject to a number of factors, risks and uncertainties, some of which are not currently known to the Company, which may cause the Company’s actual results, performance or financial condition to be materially different from the expectations of future results, performance of financial condition. Important factors, among others, that may affect actual results are described in the Company’s filings with the Securities and Exchange Commission (“SEC”), including our Form 10-K filed with the SEC on March 11, 2022. Although forward-looking statements have been made in good faith and are based on assumptions that the Company believes to be reasonable, there is no assurance that the expected results will be achieved. The Company’s actual results may differ materially from the results discussed in forward-looking statements. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. These forward-looking statements are made only as of the date hereof, and the Company does not undertake any obligations to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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On June 28, the U.S. Chamber of Commerce (Chamber) launched a focused campaign to highlight what it describes as unlawful regulatory overreach by the Consumer Financial Protection Bureau (CFPB or Bureau) and, specifically, new CFPB Director Rohit Chopra. “At every turn,” writes Chamber Executive Vice President and Chief Counsel Daryl Joseffer, the CFPB is pushing an activist agenda “without advance public participation or approval. That is not the system Congress designed, nor one which our laws will tolerate.”

The Chamber’s campaign specifically objects to several alleged unlawful actions, including:

CFPB Policy Fellowship. The Chamber believes that this program circumvents civil-service laws and executive-branch guidance that prohibit preferential hiring and conflicts of interest.

Revisions to CFPB Rules of Practice for Adjudication Proceedings. The Chamber describes this as an impermissible expansion of the director’s powers in ways that undermine due process for defendant companies and violate the separation of powers.

Repeal of Its 2013 Decision Not to Publish a Final Decision or Order Establishing Supervisory Authority Over a Covered Person. This, the Chamber believes, violates the Administrative Procedure Act (APA) because the revised rule did not go through the required notice-and-comment process.

The CFPB Interpretative Rule Regarding State Attorneys General and the Consumer Financial Protection Act. This rule, the Chamber points out, is inconsistent with federal law and exceeds the Bureau’s authority.

Chopra also proposes outright bans on certain products and states his intention to restructure the industry, ultimately hurting consumers by limiting choice and diminishing competition.

As part of its campaign against the federal agency, the Chamber has submitted several Freedom of Information Act (FOIA) requests to the CFPB, including:

• Communications relating to the May 26 interpretive rule, titled “Authority of States to Enforce the Consumer Financial Protection Act of 2010.”

• All records regarding the legal basis, authority, and validity of the CFPB Policy Fellowship Program announced in 2021.

• Current CFPB procedures manual, operating manual, and similar or other document(s) setting out the CFPB’s rules or guidelines concerning procedures, practices, and internal operations.

• All records regarding Director Chopra’s determination that the board of the Federal Deposit Insurance Corporation could hold a vote without the consent of its chair.

• All records as to changes to the CFPB’s examination procedures published on March 16.

• All records regarding President Biden’s July 9, 2021 executive order on promoting competition in the American economy.

The Chamber believes this collection of documents lays out the questionable and unlawful plans of a governmental agency with little oversight and too much regulatory power.

“Director Chopra is attempting to use the CFPB to radically reshape the American financial services sector,” said Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce. “Rohit Chopra has an outsized view of the CFPB’s role and the Director’s power.”

The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) introduced several programs to support small business, amended provisions to the Fair Credit Reporting Act (FCRA) and established protections for consumers including homeowners and student loan borrowers. Since confirmation as CFPB Director, Rohit Chopra has led a resurgence in regulatory oversight.

To assist our clients in assessing preparedness for a CARES Act exam, Bridgeforce assembled a checklist to gauge readiness. Answer the following questions to determine your exposure to potential risk depending on how you’ve handled customer accounts under CARES.

CARES Act Checklist

After the CARES Act went live in 2020, did you…

Consumer Reporting – Update automated processes, such as consumer reporting, to ensure that customers who received accommodations did not advance in delinquency?

Complaints – Conduct root cause analysis on complaints tied to CARES Act accommodations and requests?

Program Selection – Ensure that all hardship programs were reviewed with the consumer and that the most consumer-friendly program was chosen?

Automation – Use automation to process accommodation requests and resulting account charges?

Controls – Maintain and monitor controls during the pandemic response for new accommodations; and recently, exists from these programs?

Compliance

• Adjust your compliance management system in response to the pandemic and CARES Act implementation?
• Conduct first and second line audits for potential consumer harm and complete necessary remediation (including review of supporting systems)?
• Incorporate state laws into process modifications to ensure adherence at federal and state levels?
• Define how to handle post-forbearance accounts with treatments geared to help borrowers stay in their home?

Consumer Communication and Education

• Ensure that consumers who received an accommodation clearly understand the terms and impact?
• Regularly monitor staff to confirm they are handling calls appropriately?

Policy, Procedures, Training

• Update and incorporate all relevant policies and procedures into training and monitoring?
• Effectively train your consumer-facing staff on how to address consumer inquiries about accommodations?

Ok, so how did you do?

There are many actions you could take if you answered “no” to any of the questions in the checklist. Here’s a non-exhaustive list of actions that should be prioritized to accelerate the closing of adherence gaps. Also, taking these actions will establish evidence of how you implemented CARES Act accommodations, which may need to be shared with regulatory examiners.

Consumer Reporting

• Review consumer reporting dispute volume pre-pandemic and post to evaluate increased volumes and confirm a well-documented action plan exists to address any trends identified through root cause analysis.
• Confirm detailed reviews were completed for all trade lines subject to CARES Act accommodations to evaluate furnishing accuracy.

Complaints

• Review any complaints tied to the CARES Act, which should by now be a unique category in your reporting and identify whether or not a violation of consumer financial laws or entity policies and procedures have occurred.
• Confirm any remediations, tied to the above complaints, were completed satisfactorily.

Program Selection

• Leverage reporting to identify customer percentages that are participating in each accommodation/hardship program as a pulse check that the results you find make sense based on your portfolio risk segments.
• Review QA listening forms and confirm there has been language added to listen for accommodation program selection effectiveness.
• Prepare now for the expected wave of post-forbearance loan reviews and treatments for mortgage and student loans.

Automation

• Evaluate where automation was introduced and confirm that appropriate testing was performed, and controls executed to ensure that the new automation operated as intended.
• If you automated your process to allow customers to self-initiate an accommodation, understand what non-automated decision points you have, if any, to graduate the loan into the performing loan bucket.

Controls

• Prioritize manual CARES Act related processes to determine areas of risk and define new or existing controls that care for these risks.
• Document controls in process maps and procedures to show the link between the process, the regulation, and the control.

Compliance

• Create/refine CARES Act regulatory applicability matrix at the state and federal level to clearly demonstrate adherence.
• Review previous updates to the Board of Directors that discuss specific action plans for CARES Act adherence and/or initiatives to confirm progress and status to resolution.

Consumer Communication and Education

• Review all forms of relevant customer communication (letters, emails, agent scripts) for clear, direct language around the details of customer accommodations.
• Increase targeted call listening activities to monitor effectiveness and thoroughness of presenting hardship programs to customers and handling post-accommodation account changes.

Policy, Procedures, Training

• Update all relevant procedures to include any process additions or changes related to CARES Act.
• Conduct training on CARES Act accommodations and test agents to ensure comprehension. Perform follow up training as needed based on monitoring activities.

CFPB rulemaking was the subject of a new blog post by Director Chopra published last week titled “Rethinking the approach to regulations.”

Director Chopra first discussed the CFPB’s efforts “to move away from highly complicated rules that have long been a staple of consumer financial regulation and towards simpler and clearer rules.”  He indicated that the CFPB “is dramatically increasing the amount of guidance it is providing to the marketplace, in accordance with the same principles.”

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Commenting that “[u]nnecessary complexity places new entrants and small firms at a disadvantage compared to their larger competitors,” he indicated that the CFPB plans to issue guidance that sets forth “simple bright-lines.”  According to Director Chopra, this approach will “prevent strategic or intentional ‘misunderstanding’ or plausible deniability that some companies use to ignore the law.”  He asserted that complexity “gives companies the ability to claim there is a loophole with creative lawyering.”

With respect to what he called “traditional rulemaking,” Director Chopra identified as priorities the Section 1033 rulemaking on consumer access to financial information, the Section 1071 rulemaking on data collection and reporting requirements in connection with credit applications made by women- or minority-owned small businesses, and rulemakings regarding quality control standards for automated valuation models and property assessed clean energy financing.

Most notably, he indicated that the CFPB “is reviewing other authorities authorized by Congress that have gone unused.”  Specifically, he identified the CFPB’s  authority to register certain nonbanks and stated that the CFPB is assessing whether to use that authority “to identify potential scammers and others that repeatedly violate the law.”  (Pursuant to Dodd-Frank Section 1022, the CFPB is authorized to “prescribe rules regarding registration requirements applicable to a covered person, other than an insured depository institution, insured credit union, or related person.”)  In regulatory agendas issued under former Director Cordray, the CFPB had indicated that it was considering whether rules to require registration of certain nonbanks would facilitate supervision.

Director Chopra also discussed the need to for the CFPB to take “a fresh look” at certain long-standing rules.  In addition to the CARD Act (Regulation Z) rules establishing safe harbors for credit card late charges, he indicated that the CFPB is reviewing the FTC rules implementing the FCRA (Regulation V) “in an effort to identify potential enhancements and changes in business practices,” and the Regulation Z qualified mortgage rules “to explore ways to spur streamlined modification and refinancing in the mortgage market, as well as assessing aspects of the ‘seasoning’ provisions.”

Finally, he indicated that in addition to using its new “circulars” to encourage consistent enforcement among government agencies, the CFPB would be “increas[ing] its interpretation of existing law to the marketplace” and referenced the CFPB’s advisory opinion program launched in 2020.

We are somewhat dubious about the CFPB taking on this massive project for several reasons.  First, to the extent the new approach to rulemaking is intended to apply to CFPB regulations and the regulations that the CFPB inherited from other agencies, Director Chopra has demonstrated a reticence to use new rulemaking as a tool, as opposed to enforcement, supervision, and the issuance of statements.  That is because rulemaking is very labor intensive and time-consuming and often leads to lawsuits challenging it, with the payday loan rule serving as a good example. 

Second, what Director Chopra has announced is very ambitious.  It would amount to a complete overhaul of all CFPB regulations and inherited regulations to convert them from complex, detailed, and prescriptive regulations to short, simple, non-prescriptive regulations with “bright-line” tests.  We doubt that the CFPB has nearly the bandwidth or time to undertake such a massive project, one which seems almost certain to engender opposition from the industry.  When regulators impose steep penalties for even-technical violations of regulations, regulated entities will want and need prescriptive rules rather than general principles.

We will be watching to see to what extent Director Chopra’s comments are reflected in the CFPB’s Spring 2022 rulemaking agenda which we expect to be released soon.  

The U.S. Court of Appeals for the Sixth Circuit recently ruled that a debt collector violated the federal Fair Debt Collection Practices Act when it sued a debtor’s wife to recover her husband’s legal fees under Ohio’s Necessaries Statute.

In so ruling, the Sixth Circuit held that: (a) the debt collection lawsuit brought first against the debtor’s wife violated Ohio Supreme Court precedent, and therefore was objectively baseless; and (b) bringing a claim against a party under circumstances where the state supreme court has explicitly held the party cannot be held liable is a violation of the FDCPA.

A copy of the opinion in Snyder v. Finley & Co., L.P.A. is available at:  Link to Opinion.

Prior to the litigation giving rise to the appeal, the defendant debt collector (Debt Collector) filed a debt collection action against the plaintiff spouse (Spouse) and her husband (Debtor) seeking to recover unpaid attorney’s fees owed by Debtor.

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Debt Collector asserted a “spousal obligation to support” claim against Spouse pursuant to Ohio’s Necessaries Statute which permits the collection of certain debts from one spouse that were incurred by the other.

Spouse filed a lawsuit alleging violations of the FDCPA, arguing that Creditor’s lawsuit against her for legal fees incurred by Debtor was “objectively baseless.”  The parties filed cross-motions for summary judgment and the trial court resolved the motions in favor of Debt Collector.  The Spouse appealed.

As you may recall, under the FDCPA, “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.”  15 U.S.C. §1692e.  A violation of the FDCPA occurs when the debt collector’s action or representation is materially misleading or false. Wallace v. Wash. Mut. Bank, F.A., 683 F.3d 323, 326–27 (6th Cir. 2012), and has the purpose of inducing payment by the debtor. Grden v. Leikin Ingber & Winters PC, 643 F.3d 169, 173 (6th Cir. 2011).

The Sixth Circuit noted that advancing a debt collection claim that is ultimately unsuccessful does not, in and of itself, rise to an FDCPA violation. Heintz v. Jenkins, 514 U.S. 291, 296 (1995). However, a litigation filing containing a material misstatement of state law that is “false, deceptive, or misleading” at the time it is made can constitute an FDCPA violation. Van Hoven v. Buckles & Buckles, P.L.C., 947 F.3d 889, 893-94 (6th Cir. 2020) (quoting 15 U.S.C. § 1692e).

The Sixth Circuit distinguished between what constitutes a non-winning debt collection claim that violates the FDCPA and one that does not. “A lawyer does not ‘misrepresent’ the law by advancing a reasonable legal position later proved wrong.” Id. at 896. However, if the “legal contention was objectively baseless at the time it was made,” it is “legally indefensible and groundless in law” and violates the FDCPA. Id.

The Sixth Circuit noted that Ohio’s Necessaries Statute provides that a “married person must support the person’s self and spouse,” and if one is “unable to do so, the spouse of the married person must assist in the support so far as the spouse is able.” Ohio Rev. Code § 3103.03(A).

The parties and the trial court focused on whether attorneys’ fees constituted “necessaries” under the statute. The trial court found that Debt Collector’s claim was “at the very least, arguable” as the Supreme Court of Ohio has held that certain attorneys’ fees’ are recoverable against a spouse. See Wolf v. Friedman, 253 N.E.2d 761, 765-67 (Ohio 1969); Blum v. Blum, 223 N.E.2d 819, 820-21 (Ohio 1967).

However, the Sixth Circuit held that the issue of whether attorneys’ fees are included under the Ohio Necessaries Statute as irrelevant, as Debt Collector’s lawsuit failed to comply with the statute’s threshold procedural requirements.

In an earlier case, the Ohio Supreme Court held that “each married person retains primary responsibility for supporting himself or herself from his or her own income or property,” and a “nondebtor spouse becomes liable only if the debtor spouse does not have the assets to pay for his or her necessaries.” Embassy Healthcare v. Bell, 122 N.E.3d 117, 121 (Ohio 2018). Thus, the Sixth Circuit noted, Embassy Healthcare requires a creditor to first exhaust its debt collection efforts against the debtor before it can attempt to collect from the spouse.

Specifically, the Ohio Supreme Court held in Embassy Healthcare that “[a] creditor must…first seek satisfaction of its claim from the assets of the spouse who incurred the debt. [The Ohio Necessaries Statute] does not impose joint liability on a married person for the debts of his or her spouse.” Id.

The Sixth Circuit found the ruling in Embassy Healthcare established that the debt collection lawsuit brought first against Spouse was objectively baseless. The Court further held that bringing a claim against a party under circumstances where the state supreme court has explicitly held the party cannot be held liable is a violation of the FDCPA.

Thus, the Sixth Circuit reversed the trial court’s judgment, and remanded with instructions to enter judgment in favor of Spouse.

Continuing its 2022 cadence of issuing press releases nearly every day, on June 29, 2022, the CFPB announced it issued an advisory opinion regarding  “pay-to-pay” or “convenience fees.” The opinion, which explicitly references fees for online and phone payments, confirms that the Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from charging these types of fees to consumers unless they are expressly authorized by agreement or permitted by law.

The opinion includes the following additional guidance: 

• Silence in the law is not the same as “permitted by law.” Therefore “permitted by law” in the CFPB’s view means language which would explicitly allow the fee to be charged.

• Section 808(1) of the FDCPA applies even if the fees are part of a separate agreement that might be otherwise valid under state law. Therefore, even if the debt collector and consumer enter into a separate agreement to pay the fees, these types of fees still violate the FDCPA.

• “Any amount” as defined in the FDCPA applies to any sum collected in connection with the debt. It is not limited to interest, fees, charges, or expenses. Therefore, “any amount” applies to these types of fees.

• Collecting convenience fees through a third-party payment processor violates the FDCPA if the debt collector receives a kickback. 

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In the section relevant to payment processors, the CFPB cautioned that “[d]ebt collectors violate the FDCPA when using payment processors who charge unauthorized fees at a minimum if the debt collector receives a kickback from the payment processor.” (emphasis added). This language implies that other conduct between a payment processor and a debt collector might violate the FDCPA, but no additional details were provided. 

The full advisory opinion can be found here. 

insideARM Perspective:

This CFPB has developed a pattern of finding the nuance in the FDCPA and contorting it to achieve its objectives. See, for example, this announcement where the CFPB claimed oversight of additional entities or its announcement that the Equal Credit Opportunity Act applies to debt collection.

The starting point of this advisory opinion is nothing new: debt collectors have (or should have) known for a long while that they cannot charge fees that are not authorized by contract or allowed under the law. So what is the ultimate objective here? What new guidance is the CFPB really trying to convey? Why did they spend time on this advisory opinion rather than one related to the Hunstein debacle?

Is the CFPB trying to shut down all fees associated with payments, even pass-through fees (i.e., the debt collector does not profit)? Is this what was hinted at in the bizarrely phrased reference to kickbacks? If kickbacks indicate the fees violate the FDCPA, why didn’t the CFPB just say that? Why include the “at a minimum” language? 

Here again is the sentence regarding payment processors in its entirety: “Debt collectors violate the FDCPA when using payment processors who charge unauthorized fees at a minimum if the debt collector receives a kickback from the payment processor.” (emphasis added)  Is this just a poorly worded, grammatically bizarre sentence? Or is the CFPB trying to say that some other aspect of the payment processor/debt collection relationship might violate the FDCPA?

I don’t know the answers to the above, but since the CFPB does nothing by mistake, this advisory opinion seems to be the beginning of something rather than the end. As such, ARM entities should watch for future guidance, or more likely future action, from the CFPB. That said, something tangible ARM entities can do now is review their payment processing contracts to ensure nothing can be construed as a kickback. Even if you and your vendor know something isn’t a kickback, it may be worth a review to make sure none of your agreements have any language the CFPB can misinterpret. 

Hello everyone, Baroness here 🙂

A good ruling in the Kentucky District Court recently.

Here are the facts you need to know:

• On or about March 7, 2014, Plaintiff David Barnett applied for and received a FNBO credit card account.

• When applying for the account, Barnett provided his cellular number as way for FNBO to contact him.

• At some point, Barnett stopped making his minimum monthly payments.

As a result, FNBO began to contact him via telephone to discuss his missed payments.

Over a 7-month period, FNBO contacted Barnett via phone call, text message or prerecorded message 574 times—an average of 3.2 times a day (excluding Sundays)

Barnett alleged he instructed them to stop calling him.

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Of course, and as expected, Barnett filed a Complaint, alleging, amongst others, violation of the TCPA. FNBO moved for summary judgment arguing it did not use an Automatic Telephone Dialing System (ATDS) to make the calls.

The Court granted in part and denied in part. The Court granted FNBO’s motion as to all calls, except the 111 prerecorded calls and text messages, because…the court says they were not made using an ATDS as required under the TCPA and pursuant Facebook. Barnett filed a Motion for Reconsideration.

As a refresh, motions to reconsider may be treated as motions to alter/amend judgment under Federal Rule of Civil Procedure 59(e), which allows a party to file a motion to alter or amend a judgment within 28 days of its entry.

Specifically, in the Sixth Circuit, a district court has discretion to set aside a judgment under Rule 59(e) based on at least one of the following: (1) a clear error of law, (2) newly discovered evidence, (3) an intervening change in controlling law, or (4) a need to prevent manifest injustice.

The clear error of law standard is apparently really high. To show a clear error of law, a party must “establish not only that errors were made, but that these errors were so egregious that an appellate court would not affirm the judgment.”

Here, Barnett alleges the court failed to consider FNBO’s use of the TWX system in conjunction with the LiveVox system. Barnett contends that TWX AND LiveVox together make up an ATDS because LiveVox can and does store numbers randomly or sequentially generated by TWX daily. Does this argument look familiar?

The Court rejected this argument for two reasons. First, LiveVox is NOT an ATDS simply because it stores a randomly or sequentially generated listed of numbers from TWX on a daily basis. LiveVox, itself cannot store or produce numbers to be called using a random or sequential number generator.

Second, LiveVox is NOT an ATDS simply because it has a cooperative link to TWX. TWX and LiveVox are two separate systems that perform distinct tasks.

“To hold that LiveVox is an ATDS due to its tie with TWX would virtually subject a non-ATDS system/program to the TCPA because of its mere association with another separate system/program.”

Accordingly, the Court held Barnett failed to meet the clear error rule and denied its Motion for reconsideration.

Notice how the Court in Barnett did not include both LiveVox and TWX within the definition of “equipment”—but under Panzarella, decided just a few days later–both systems would be looked at together to determine if an ATDS was in use. Of course, under Panzarella merely using an ATDS is not enough—the Defendant would also have to be using the core functionalities of an ATDS to be liable under the TCPA. Its a distinction that potentially makes a big difference—and we’ll be talking all about it in our new Deserve to Win podcast episode out June 28, 2022.

The CFPB expects that you, as furnishers, have written documentation to explain how you’ve populated various Metro 2® fields from your systems of record. Here are a few areas to tackle as part of your journey to data furnishing accuracy and control.

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Three Things You Should Be Doing for Accuracy and Control

1. Conduct a deep review of the Metro 2® furnishing file that is submitted to the Nationwide Credit Reporting Agencies (NCRAs)

2. Develop a detailed Metro 2® data mapping and conversion document to examine system of record code that produces the Metro 2® file

3. Review upstream operational processes to identify trigger events and data that impact contents of the Metro 2® file

As part of #1 and #2 above, we have uncovered four important areas that would likely be flagged by regulators. While these steps can be time-consuming and highly detailed, what they reveal can help you ensure data accuracy prior to submission to NCRAs.

Do You Understand How Your Metro 2® File Is Created?

Do you have clear knowledge—or documentation—of how your systems of record map to your Metro 2® files prior to sending them to NCRAs, including those generated by your third-party processors? If you don’t, you can wind up with inaccurate furnishing, an increase in complaints and disputes, and ultimately regulators knocking on your door.

Recording how your Metro 2® file is created with a detailed, audit-ready data mapping and conversion document is a key component to meeting the evolving regulatory expectations for consumer reporting accuracy.

Top 4 Areas You Can Fix to Improve Accuracy

The following examples are typical opportunities for system and/or operational enhancements that you can make to ensure the data going to the CRAs is accurate.

1. System Limitations for Compliant Reporting

• Inability to generate certain Metro 2® file segments

• Limited capture / storage of information (6 months vs. 7 years)

• Reporting of delinquent accounts for greater than 7 years

• Consolidation of data elements into one field requiring manual parsing (Surname, First Name, Middle Name)

• Missing logic required to report Metro 2® fields (e.g., reporting spaces instead of the Generation Code)

• Not flagging required Metro 2® fields as mandatory (e.g., Social Security Number)

2. Logic Potentially Results in Inaccurate Reporting

• Inaccurately counting days past due for account status assignment

• Lacking logic to report “Last Good Payment” date after a payment reversal due to NSF

• Mass overwriting of dates (e.g., Date of Account Information)

• Missing best practice controls (e.g., if account is current and in bankruptcy, Date of First Delinquency should not be blank)

• Reporting the most recent Actual Payment Amount value rather than totaling all payments receiving during the reporting period

3. Inconsistency Among Correlated Fields

• Failure to update all relevant downstream data elements when manually overriding Metro 2® fields (e.g., Account Status)

• Inaccurate or incomplete reporting when an account is closed (e.g., Date Closed is not populated, Current Balance is greater than $0)

• Inconsistent date progression (e.g., Date of Account Information is a date later than the timestamp of the file)

• Inappropriate representation of Metro 2® fields related to Account Status (e.g., Payment Rating is not populated when required, Payment History profile does not reflect the prior month’s Account Status)

4. Missing and Inaccurate Field Values

• Invalid assignment of Portfolio Type and/or Account Type values

• Inaccurate values furnished for Special Comment Code, ECOA, Consumer Information Indicator, and Compliance Condition Code fields