On December 31, 2021, New York Governor Hochul signed into law S5724-A which
reduces the annual rate of interest on judgments arising out of a consumer debt
where the defendant is a natural person from 9% to 2%.  The laws take
effect 120 days from the Governor’s signature, which is April 30, 2022.

For purposes of the rate limitation, the new law defines
“consumer debt” as “any obligation or alleged obligation of any natural person
to pay money arising out of a transaction in which the money, property,
insurance or services which are the subject of the transaction are primarily
for personal, family or household purposes, whether or not such obligation has
been reduced to judgment, including, but not limited to, a consumer credit
transaction, as defined in subdivision (f) of section one hundred five of this
chapter.”

The definition of “consumer credit transaction” in Section
105(f) is “a transaction wherein credit is extended to an individual and the
money, property, or service which is the subject of the transaction is
primarily for personal, family or household purposes.”

Most notably, the reduced rate will apply not only to judgments
entered on or after the new law’s effective date but will also apply to any
portion of a judgment entered before the effective date that is unpaid as of
the effective date.

The U.S. Court of Appeals for the 11th Circuit has scheduled the oral argument for the rehearing en banc in Hunstein vs. Preferred Collection & Management Services, Inc. for February 22, 2022 (en banc means the full panel of 11th Circuit Judges will hear the matter).  The order setting oral argument follows the November 23, 2021 Order in which the Court instructed counsel to focus their briefs on one issue: Does Mr. Hunstein have Article III standing to bring this lawsuit?

A Brief History:

In 2019, the Middle District of Florida dismissed Mr. Hunstein’s case for the failure to state a claim. On Appeal, the Eleventh Circuit held that transmitting data to a mail vendor is an unauthorized third-party disclosure.  In May 2021, the debt collector defendant, Preferred Collection & Management Services, Inc (Preferred), filed a petition for rehearing en banc. In late May and June 2021, parties with an interest in the outcome, including the Consumer Relations Consortium, filed amicus briefs to ensure all the legal issues surrounding the case were presented to the Eleventh Circuit. 

Later in June 2021, the Supreme Court issued its order in TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2204 (2021), which held “no concrete harm, no standing”.  Preferred immediately filed a notice of supplemental authority arguing that the Transunion opinion supported Preferred’s request for rehearing en banc.  In October 2021, the three-judge panel which issued the April 2021 Hunstein opinion issued a substitute opinion to take the place of its original opinion.  

Although the substitute opinion reached the same result, one of the three judges broke from the other two and included a scathing dissent. On November 17, 2021 the Eleventh Circuit Court of Appeals sua sponte vacated its opinion in Hunstein and set the matter for rehearing en banc (sua sponte means on its own, without prompting). 

insideARM Perspective

This case seems to have touched just about every aspect of the ARM industry. It’s has provided a boon to consumer attorneys, while offering no real additional protection for consumers. Whether a ruling on the standing issue will change any of the issues remains to be seen. At the very least, the case is moving along and maybe that means there is some relief on the horizon… or maybe not.  We’ll continue to provide updates as we have them. 

Despite the national
and global events that took center stage in 2021, the upward trend in data
privacy legislation at the state level continued and with the addition of the
amendments to the Safeguards Rule, 2022 brings new compliance challenges for
many businesses and financial institutions.

According
to the National Conference of State Legislatures, “[a]t least
38 states introduced more than 160 consumer privacy-related bills in 2021
(compared to 30 states in 2020 and
25 in 2019).”

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Many
of these bills were limited in scope, relating to, for example, biometric,
genetic and geolocation data, data brokers, internet service providers, and
more.

Comprehensive Consumer Data Privacy
Legislation – By the Numbers

The
following chart shows 23 states that introduced a total of 34 comprehensive
consumer data privacy bills in 2021.  This is legislation that restricts
the use of personal information and conveys certain rights to consumers,
similar to what is found in the California Consumer Privacy Act (CCPA) and the
EU’s General Data Protection Regulation.

Some of the key provisions that are commonly tracked include consumer rights, exemptions and exclusions from coverage, contractual and security standards, and whether there is a private right of action.  The following chart shows the prevalence of those provisions in the 2021 legislation.

A detailed spreadsheet showing the provisions that were included in specific bills can be found here.

New State Privacy Laws – Virginia and Colorado.

The Virginia Consumer Data Protection Act was signed into law on March 2, 2021, and not long after, on July 6, the Colorado Privacy Act became law.  They become effective Jan. 1, 2023, and July 1, 2023, respectively.

Although there are some differences worth attention, these laws are strikingly similar and include:

• Right to access
• Right to correct
• Right to delete
• Right to obtain
• Right to opt-out of processing
• Right to appeal a refused request
• Opt-in requirement for processing sensitive data
• Requirements for contracts between controllers and processors
• Risk assessments for processing certain data
• Entity-level Gramm-Leach-Bliley Act exemption
• No private right of action

There are limitations that apply to consumers’ rights as well as exceptions to complying with their requests, and these laws are generally perceived as industry friendly.

Gramm-Leach Bliley Act Safeguards Rule

The Federal Trade Commission issued a final rule that amends the Safeguards Rule (the “Rule”), effective Jan. 10, 2022. 

The Rule places requirements on “financial institutions” regarding information security programs and the use of customer information and is applicable to debt collectors and certain debt buyers, among others. The amended rule notably expands the “financial institution” definition and many businesses will now find themselves subject to it.

The amendments include:

1. Detailed requirements for an information security program;
2. New requirements for accountability, such as designation of a single “Qualified Individual”;
3. An exemption from written risk assessments, incident response plans and annual reporting for certain small businesses;
4. An expansion of the definition of “financial institution”; and
5. New definitions and examples.

The existing rule requires covered entities to perform a risk assessment and then develop and implement safeguards to address identified risks. The amended rule adds that risk assessments 1) must include specific criteria and 2) that the risk assessment must be in writing. As for safeguards, the amended rule will require the safeguards “address access controls, data inventory and classification, encryption, secure development practices, authentication, information disposal procedures, change management, testing, and incident response.”

While employee training and vendor oversight is part of the existing rule, the amended rule takes these to the next level. Covered entities are now required to have “mechanisms designed to ensure that such training and oversight are effective.”

Full compliance is required by Jan. 10, 2022. 

What’s in store for 2022?

• Federal legislation continues to be in play, but there are no frontrunners among the various bills introduced thus far.
• Numerous states have legislation that did not pass this year but will carry over to 2022, and some of the bills are a significant departure from what currently exists and would not be considered “industry friendly.”
• In the absence of a federal law that preempts state privacy laws, it is likely some of those state measures will be enacted.
• The newly established California Privacy Protection Agency will engage in rulemaking related to the California Privacy Rights Act of 2020, which amends the CCPA.

ST. LOUIS, Mo. — Credit Control, LLC (“Credit Control”) is proud to announce that Phil Thomas
has joined the company as Vice President – Sales. He joins an established team
of industry experts specializing in consultative sales & business
development and will be a key part of the Credit Control team’s focus on expanding its national presence as industry leaders in the collections and recovery industry.

Phil comes to the role with over 25 years of
experience including 16 years of senior sales positions at some of the most
well-known agencies within the industry and 10 years as the Recovery Vendor
Manager at AT&T overseeing their agency network.

“Credit Control was recommended to me by
multiple creditors, clients, agency owners, and CEOs. The company’s reputation
for performance & innovation was well-known and working at a values-driven
company matched my long-term goals,” said Mr. Thomas. “As I learned more about
Credit Control, my decision to join their team was an easy choice.”

“We are thrilled to welcome Phil to the
Credit Control Sales Team,” stated Rick Saffer, President & CEO.
“His experience & reputation within the industry is a great match for
our company and his long-term relationships will have an immediate impact on our
continued growth.”

Phil will be based out of our corporate
headquarters in St. Louis, MO, and can be reached directly at 503-704-2179 or
via email, pthomas@credit-control.com.

About Credit
Control, LLC

Headquartered in St. Louis, MO, Credit Control, LLC is a recognized leader in
collections and recovery solutions. Since 1989, Credit Control has
served a wide variety of blue-chip clients through its four nationwide
locations and a team of over 600 employees. The company is founded on its core
values of providing strong customer service and exceptional recovery results
for our clients; developing an employee culture that is built on trust,
accountability, and clear communication; and creating solutions that utilize
the latest technology.

Credit Control’s recovery approach blends traditional collections
with omni-channel communications in a fully compliant & customer-centric
culture. The company maintains ISO/IEC 27001 certification,
audited SSAE-18 SOC 1 Type 2 and SOC 2 Type 1 reports, Level 2
PCI-DSS compliance, and secured systems. The company has received numerous
awards for performance, compliance, and innovation from many of the largest
creditors in the world and has been recognized as back-to-back winners of
InsideARM’s Best Places to Work in Collections.

As an Equal Opportunity Employer, Credit Control is committed
to fostering, cultivating, and preserving a culture of diversity, equity, and
inclusion. Credit Control’s mission is to become the preferred supplier to
industry leaders by providing the highest level of quality, compliance, and
innovation while delivering top tier performance in a positive employee work
environment.

MADISON, Wis. —  In the spirit of
the season, State Collection Service (State) continued its annual holiday
tradition of Adopt-a-Family by donating $7,100 to assist families in their
communities.

In past years, State’s team has collected
gifts to donate but with most team members currently working remote, State
shifted to an online fundraiser. The generosity of State’s team members was
matched by the company to enable donations to be made to:

House of Mercy – Beloit, WI
DAIS – Madison, WI
Hope House – Milwaukee, WI
St. Peter’s Catholic Church – Geneva, IL
Feeding America – Remote Staff

“I am proud of the generosity of our team and
grateful we are able to help families in need, especially after such a
difficult year,” said Tim Haag, State’s president. “Our team strives to make a
difference in the lives of our clients and their patients every day. This is
another example of our team’s compassionate spirit and desire to help others in
our communities.”

About State

State improves the financial picture for
healthcare providers by delivering increased financial results while ensuring a
positive patient experience. Rooted in a tradition of ethics, integrity and innovation
since 1949, State uses data analytics to drive performance and speech analytics
with ongoing training to ensure patient satisfaction. A family-owned company
now in its third generation of leadership, State assists healthcare
organizations with services spanning the complete revenue cycle including
Pre-Service Financial Clearance, Early Out Self-Pay Resolution, Insurance
Follow-Up and Bad Debt Collection. To learn more visit: www.statecollectionservice.com.

On January 10, 2022, the Consumer Financial Protection Bureau (CFPB) issued a press release announcing it sued United Debt Holding (UDH), JTM Capital Management (JTM), United Holding Group (UHG), along with their owners Craig Manseth, Jacob Adamo, and Darren Turco. The CFPB alleges UDH, JTM, UHG, and their owners knowingly used third-party collectors who engaged in unlawful and deceptive practices. Through a statement, UHG and its owners have denied the allegations.

According to the CFPB: Manseth, Adamo, and Turco founded UHG in May 2017. Before that, Manseth owned UDH, Turco worked at UDH as a manager, and Adamo owned JTM. After UHG was formed, it managed UDH and JTM’s business. All three companies are debt purchasers and sellers. 

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The CFPB’s Allegations:

The complaint alleges that UHG, UDH, JTM, and their owners continued to place collection accounts with vendors despite knowing that their vendors were deceiving consumers. The entities and their owners knew about these violations because their compliance teams received (1) phone call recordings where collection agents threatened suit and made false statements about credit reporting; and (2) hundreds of complaints that alleged vendors were threatening arrest, jail, or lawsuits if consumers did not pay their debts imminently. Despite the knowledge that collection vendors retained by JTM were violating federal law, UDH increased the amount of business it sent to JTM. By 2017, UDH was using JTM almost exclusively for debt placements despite objections by UDH’s compliance manager. As a result, some of the third-party companies continued making false threats and misleading statements for years.

“This debt collection ring and its operators created the conditions for rampant abuse,” said CFPB Director Rohit  Chopra. “Companies cannot profit and evade liability simply by creating a maze of shape-shifting entities and enabling third parties to take advantage of consumers.”

UHG’s Response:

In response to the suit, UHG issued a statement denying all allegations and pointing out that neither JTM nor UDH is currently in business. According to UHG, the CFPB’s complaint is devoid of facts, and The CFPB did not substantiate its claims despite repeated requests. Per UHG, no accounts purchased or placed by UHG are described in the CFPB’s complaint. Instead, the complaint’s allegations focus on collection activity by another debt buyer, which purchased accounts from UDH in 2015. 

“The Bureau’s actions to file a lawsuit against UHG based on
consumer complaints that predate UHG is surprising,” says Craig Manseth, the
owner of former debt-buying firm UDH and an investor in UHG. “UHG operates a
first-class compliance program that redresses all issues when we become aware
o  them. It’s telling that the CFPB did not allege that consumers were harmed.”
UHG anticipates filing a motion to dismiss.

The full complaint filed by the CFPB can be found here.

UHG’s complete statement in response to the suit can be found here.  

insideARM Perspective:

The broader issue here, beyond whether the CFPB’s or UHG’s version of the facts is correct, is that the CFPB will not allow the entities it supervises to place blame on a vendor. It’s clear from the complaint that the CFPB expects debt collectors to audit their vendors for compliance and terminate those that do not meet compliance standards. Further, it seems the CFPB considers audit findings by a compliance team to be evidence that the company has knowledge of vendor issues. This position is consistent with previous CFPB enforcement actions. 

It’s also worth mentioning that the CFPB included in its complaint and press release an allegation that UDH continued to place accounts with JTM “despite objections by UDH’s compliance manager.” This statement is another reminder that the CFPB expects ARM entities to listen to its compliance team’s input. While perhaps not revenue generators,  compliance personnel are not simply window dressing or personnel on staff to check a box on various audits. 

To make sure they are protected from allegations like this from the CFPB, ARM entities should review their Compliance Management System to ensure (1) vendor audits occur regularly; (2) findings are reported to operations; (3) negative findings are addressed through remediation, reduction in business and/or termination of the vendor; and (4) that this process is captured in a written procedure. Regardless of who prevails in this he said/she said, it is clear that a do-nothing approach to audit findings is not sufficient for the CFPB.

COPLEY, OH —  DebtNext Software is pleased to welcome Kristin Dougherty as its new National Sales Director. In her new role, Kristin will be responsible for continuing to grow DebtNext Software’s client base across multiple industry verticals.

“We’re very excited and fortunate to have Kristin joining our team to lead our sales efforts as we continue to expand the value our Platform brings to our client base. The last two years have represented incredible growth for us in some very trying times and we’re looking forward to Kristin and her team-building off that and taking us to the next level” said Paul Goske, President of DebtNext Software. “Kristin brings a unique voice to our team given her reputation and professional experience along with the fact that she is a former client.”

DebtNext Software, a leading hosted recovery management software provider to the credit, banking, utility, telecom and collections industry for almost 20 years, is located in Copley, Ohio. Kristin will be working from Colorado with the entire team in their Northeast Ohio headquarters. She will be working closely with Thom Majka as he transitions to an advisory role to the company, focused on continuing to strengthen industry partnerships and client services offerings for DebtNext’s existing client base.

About DebtNext Software

DebtNext Software has been delivering robust solutions for their clients’ recovery management needs since its founding in 2003. Their industry-leading Platform, dPlat, is currently used by some of the nation’s largest utility, telecommunications, financial services, and accounts receivable management firms to fully illuminate their recovery management processes. 2021 enhancements to dPlat have allowed clients to address regulatory and compliance needs that have resulted from the CFPB’s Regulation F initiative and utilize advanced technology combined with a breadth of industry knowledge to build function-rich solutions to drive recovery optimization and the management of third-party collection vendors. Visit www.debtnext.com for more information.

About Kristin Dougherty

2022 will mark Ms. Dougherty’s third decade in the financial services industry. Ms. Dougherty joined Axiom Acquisition Ventures in 2018, to grow their specialized account acquisitions from Fin-tech, banks and consumer loan companies. In 2013, she began an entrepreneurial venture creating and selling athletic and equestrian apparel under her brand equipparel ®. Before that, returning to Unifund in August 2011 as its Vice President of Sales & Marketing, managing its National Portfolio Sales, Government Services and Portfolio Enhancement Products. Ms. Dougherty was the Senior Vice President of Sales for Collect America, (later became SquareTwo Financial), as well as their Government Affairs Liaison in Denver Colorado until 2009 and held several executive positions throughout nine years in her first tenure at Unifund in Cincinnati, Ohio starting in 1991.

In addition, Kristin was elected to the board of DBA International (Now Receivables Management Association International) by its membership in February 2002, serving the largest organization of debt buyers. During her term on the Board as a Director, Conference Chair, Treasurer, Vice President and President, Ms. Dougherty planned and organized the curriculum for seven of the Association’s conferences, assisted with the transition to a new association management company, successfully chaired the Executive Director Search committee, participated in Capitol Hill lobbying visits in Washington D.C. to communicate the interests of DBAI and its membership to members of Congress and their staff and administered the revisions to the Association’s code of ethics and by-laws. She has also represented DBAI at Joint Association Summit (JAS) meetings -the group of industry association leaders.

Editor’s Note: This article/podcast, authored by Barbara S. Mishkin of Ballard Spahr, previously appeared on Ballard Spahr’s Consumer Finance Monitor and is re-published here with permission.

Bloomington, Minn. — Absolute Resolutions Corp., headquartered in Bloomington, MN, announced today that they will be making charitable contributions on behalf of its employees.

“One of the cornerstones of our company culture is to give back. In an effort to help our communities we have decided to make financial contributions to the Multiple Sclerosis Foundation, Emerge Mother’s Academy and Colorado Gives.” stated Chris Winkler, CEO. 

The first organization that ARC will be donating to is the Multiple Sclerosis Foundation. This is a nationwide nonprofit that focuses on providing services to those with MS and their families. Their mission is to help maintain a high quality of life with an emphasis on health and safety. Through the services provided and promoting a general understanding of those diagnosed with the illness, they hope to improve the lives of those living with MS. 

Another organization that ARC is contributing to is Emerge Mother’s Academy, a local nonprofit that believes in empowering women to make positive choices for themselves and their families. They take a holistic approach to social services, providing comprehensive resources to single mothers so that they can thrive. Services provided include parenting classes and mentoring, work preparation and financial literacy, social work and counseling, and more. 

Finally, in light of the recent wildfire in the Boulder area, ARC has decided to donate to Colorado Gives. The funds being raised will go towards the Community Foundation serving Boulder County and the American Red Cross. The goal of these organizations is to help those who lost homes or were otherwise impacted in the community to recover and heal.

About Absolute Resolutions Corp.

Absolute Resolutions Corp. is a certified professional receivables company headquartered in Bloomington, MN. 

www.absoluteresolutions.com

About the Multiple Sclerosis Foundation
The Multiple Sclerosis Foundation is a nonprofit organization focused on providing free services that address the critical needs of people with MS and their families.
https://msfocus.org/

About Emerge Women’s Academy
Equipping single mothers throughout the Twin Cities.
https://emergetwincities.org/

About Colorado Gives
ColoradoGives.org is a year-round, online giving tool featuring the missions, programs, and finances of almost 3,000 Colorado nonprofits.
https://www.coloradogives.org/COfires