Can New York really completely ban all robocalls?  Well, that is the goal of new legislation introduced into the New York Assembly and Senate last month.   

But what will the legislation actually do?

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The legislation would make it unlawful for any person or entity to send robocalls without prior consent. I know, this sounds familiar.

But the Robocall Prevention Act goes even further than the TCPA.  The legislation will put the responsibility on the telephone companies to implement software that will prevent or limit these calls. The bills refer to this software as “call mitigation technology.” This technology would identify “an incoming call or text message as being, or as probably being, a robocall and, on that basis, block[s] the call or message, divert[s] it to the called person’s answering system, or otherwise prevent[s] it from being completed to the called person,” the bills state.

Wait, “probably being” a robocall? What in the world does that mean? Hmmm. It remains to be seen how this technology will work and who will be the “judge” of what might be a robocall. Free speech issues are everywhere to be found here, especially as the call mitigation technology is content specific in that it will permit calls identified as being made by law enforcement or a public safety entity.

The legislation also increases the enforcement powers of the Attorney General and provides for civil penalties of not more than $2,000 per call and not more than $20,000 for calls placed within 72 hours.    

Setting side these issues, the New York legislation joins a spat of recent state-level robocall levels that are complicating an already fractured regulatory field in this area. Just last month we discussed how Indiana was considering adding two categories of calls that would be exempt from the state’s “Do Not Call” statute. And Virginia recently enacted its own legislative changes to its robocall statute. 

As we in TCPAWorld know, the real question is whether legislation like what is being proposed in New York will really stop the scam artists who are responsible for so many of the robocalls that have spurred on this legislation?  Stay tuned.

Here you may read the text of the Assembly bill and here you may read the text of the Senate bill.

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Editor’s note: This article is provided through a partnership between insideARM and Squire Patton Boggs LLP, which provides a steady stream of timely, insightful and entertaining takes on TCPAWorld.com of the ever-evolving, never-a-dull-moment Telephone Consumer Protection Act. Squire Patton Boggs LLP — and all insideARM articles – are protected by copyright. All rights are reserved.

COLLINSWOOD, N.J. — The Fed Cetera Network, a business development organization under 48 CFR 52.219-9, will now offer members complimentary consulting and filing assistance services to apply for the U.S. Small Business Administration’s Historically Underutilized Business Zone (HUBZone) program. Fed Cetera will answer questions, assemble pertinent information, and submit initial applications on behalf of members. Here’s a link where small businesses can contact Fed Cetera to inquire about joining the network.

Federal agencies have a goal of spending 3% of all contracting dollars with HUBZone-certified small businesses. For example, The U.S. Department of Treasury has met its HUBZone prime spending goals every year since Federal Fiscal Year 2011, while the U.S. Department of Education has never met any prime spending goals for the HUBZone category since this small business contracting data has been publicly available through Federal Fiscal Year 2017, the last year for which data is available.  Check out links to SBA scorecards on these Federal agencies, which can be found on the Resources page of Fed Cetera’s website.  

A HUBZone program applicant must: 

• Be a small business.
• Be at least 51% owned and controlled by U.S. citizens, a Community Development Corporation, an agricultural cooperative, a Native Hawaiian organization, or an Indian tribe.
• Have its principal office located in a HUBZone. (The Resources page of the Fed Cetera website includes a link to the look up tool.)
• Have at least 35 percent of its employees live in any HUBZone.

“We have seen an increased interest in this program, so we are responding to our members’ needs in this important area,” states Leah Wilson Conger, the organization’s co-operator. “We look forward to adding to our already-impressive roster of the most qualified HUBZone-certified small businesses available to Federal agencies and prime contractors with default collection needs.” 

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The Fed Cetera Network is a one-stop shop for Federal contractors, including ED PCA contractors, to easily find pre-qualified potential subcontractors, protégés, and joint venture partners who have the wherewithal to implement Federal subcontracts successfully.  The Fed Cetera Network has helped dozens of small businesses pursue and receive Federal subcontracts over the years, and has helped multiple small businesses find and gain approval for mentorships under the SBA All-Small Mentor-Protégé Program. Fed Cetera hopes to provide even more opportunities to its members by assisting them in the HUBZone certification process.

About Fed Cetera

Fed Cetera is a “business development organization” under 48 CFR 52.219-9 that PCAs contact when subcontracting opportunities are available in order to be fully compliant with Federal regulations requiring outreach to various sources of potential subcontractors. The company maintains a source list of qualified small collection firms, regularly markets to the PCA community, and provides advisory services around business development and compliance to firms operating in the federal market place.

ROCVILLE, Md. — The iA Institute (iA) announced today that its newly launched commercial credit & collections division will be hosting a series of strategy workshops in 2019. The proven method taught in these workshops has already saved companies millions in credit losses, without limiting sales growth. The first of these one-day sessions will be held on June 17, 2019, in Nashville, TN.

Participants in the Commercial Credit & Collections Strategy Workshop will learn how to implement a credit policy — step-by-step — that can reduce credit losses by 0.25%, 0.5%, or even as much as 1%. A reduction like this can bring hundreds of thousands, if not millions, back to a company’s bottom line.

“In my former role as head of credit & collections for a multi-billion dollar transportation company, this type of workshop would have been invaluable to me. Instead, I had to learn the strategy for myself, through trial and error,” Katie Keich, VP of Commercial Services for The iA Institute.

In this detailed workshop, participants will learn how to:

• Assess creditworthiness during the sales process
• Draft and implement a credit policy that maximizes profitability
• Identify critical warning signs BEFORE extending credit
• Design and adopt a communication and invoicing strategy for new clients that eases them into initial payments and removes impediments to payment
• Implement new strategies to improve your collections practices

After just one day, participants will have all the details and instructions needed to transform their firm’s collections operations and significantly reduce credit losses. Learn more about the workshop here.

iA Commercial Credit & Collections brings best practices, processes, technology and resources to the business-to-business community. We also cultivate a network of peers who can share challenges, questions and solutions. Whether you are in merger and acquisition mode or simply want to push your organization beyond where it is today, iA offers connections and resources to aid in your goals. Subscribe to our free bi-weekly newsletter here.

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About the iA Institute

The iA Institute (iA) is a media company that produces handcrafted news, education, events and connection for the consumer and commercial credit & collections industry. The iA team believes that the value of your investment in our content should be undeniable, so we thoughtfully design everything we do with a focus on the details that make a difference.

iA manages insideARM, the iA Research Service, the Best Places to Work in Collections program, the Consumer Relations Consortium (CRC) & Innovation Council, and events like the Commercial Strategy Workshop, the First Party Summit and Women in Consumer & Commercial Finance. Learn more about iA here.

A motion to compel arbitration and stay proceedings is often a defendant’s best weapon in TCPA litigation. But is this strategy viable when a defendant is not a party or signatory to the arbitration agreement? What if a plaintiff accepts the terms of an arbitration provision after receiving the calls or texts at issue? The answer to both of these questions could be yes depending on the wording of the arbitration agreement and the defendant’s role in making the calls, as demonstrated in Thompson v. Sutherland Global Servs., No. 17 C 3607, 2019 U.S. Dist. LEXIS 57539 (N.D. Ill. April 3, 2019). In Thompson, the Court granted the Defendant’s renewed motion to compel arbitration by finding the Defendant was entitled to enforce AT&T’s arbitration clause because it was an agent of AT&T as demonstrated by AT&T’s clear right of control over its behavior, even though the Defendant was not a signatory to the arbitration agreement. Even more noteworthy, the Court enforced the arbitration clause covering conduct that arose prior to Plaintiff’s acceptance of the arbitration terms.

The facts in Thompson are relatively straightforward. The Plaintiff initially filed suit against AT&T, AT&T’s affiliate Illinois Bell, and Sutherland Global Services, Inc., alleging that Defendants violated the TCPA by making unsolicited prerecorded voice calls to the plaintiff regarding his AT&T Internet service. The Plaintiff then dismissed AT&T and Illinois Bell and continued his suit against Sutherland Global only, the company that contracted with AT&T to call AT&T customers.

The court denied Sutherland Global’s first motion to compel arbitration under the AT&T terms of service, finding the agreement to arbitrate enforceable, but ordering the parties to conduct discovery on the relationship between Sutherland Global and AT&T. In last week’s opinion, however, the court granted Sutherland Global’s renewed motion to compel arbitration, reiterating the enforceability of the arbitration agreement and also finding that the agreement applied as between Plaintiff and Sutherland Global.

While Plaintiff alleged that Sutherland made three calls to him in December 2015, after the Plaintiff registered for AT&T’s Internet service but before he had installed the necessary equipment and accepted the terms of service that included the arbitration provision, the court rejected the Plaintiff’s challenges to the arbitration agreement’s enforceability because the agreement was drafted to apply broadly to AT&T and its “affiliates, agents, employees, predecessors in interests, successors, and assigns” and to cover “[c]laims that arose before this or any prior Agreement.”

What is significant here is that the Court summarily dismissed Plaintiff’s argument that the arbitration agreement could not apply to his claims because the calls arose before Plaintiff accepted the online terms of service containing the arbitration provision. Noting, “[t]his argument fails because the arbitration agreement expressly applies to ‘[c]laims that arose before this or any prior Agreement’ relating to the U-Verse service,” the court found that “[t]he arbitration agreement here covers claims related to the U-Verse service, was contained within the U-Verse terms of service, and Defendant’s calls to Plaintiff related to the U-Verse service.” These facts therefore satisfied the court that Plaintiff’s claim “bears enough relation to the subject matter of the U-Verse terms of service and the accompanying arbitration agreement such that the parties must proceed to arbitration.”

The court also held that Sutherland Global was AT&T’s agent based on the specific facts underlying the parties’ relationship. Though the agreement between AT&T and Sutherland Global identified Sutherland as an independent contractor, AT&T controlled both the customer calls—from the call list and call volume to the call scripts and the music on the calls—and Sutherland’s employment decisions—including “staffing, training, discipline, and equipment decisions.” Thus, even though Sutherland Global was not a signatory to the agreement, the court considered Sutherland an “agent” of AT&T, and therefore a party to the arbitration agreement, and likewise found that Sutherland Global would qualify as a third-party beneficiary given the broad language of the arbitration agreement covering all disputes with AT&T customers.

The lesson here folks:  pay close attention to the wording and scope of arbitration provisions and seek to apply them as broadly as possible if the facts of your case permit.

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Editor’s note: This article is provided through a partnership between insideARM and Squire Patton Boggs LLP, which provides a steady stream of timely, insightful and entertaining takes on TCPAWorld.com of the ever-evolving, never-a-dull-moment Telephone Consumer Protection Act. Squire Patton Boggs LLP — and all insideARM articles – are protected by copyright. All rights are reserved.

SAN DIEGO, Calif. — First Associates is pleased to announce the launch of their nationwide third-party collections company – Activate Financial. Led by collections industry veteran Chris Shuler, Activate Financial is a wholly owned, independent subsidiary of First Associates that was built to create the kind of ethical, innovative and results-focused collections company that the market desperately needs.

“Activate Financial is the world-class, professional collections agency that I have always wanted to build,” said Chris Shuler, President. “Our focus is on continuous improvement, embracing regulatory compliance, operational excellence and investing in state-of-the-art technology to maximize client satisfaction and generate superior results.”

The Activate Financial model is unique in the industry as they offer first-class nearshore solutions that meet all CFPB, TCPA and FDCPA regulations and have PCI-DSS 3.2 SAQ D and SSAE-18 (SOC Type I) certifications. This allows Activate to maintain the highest levels of quality, security and service while also offering significant economic advantage to their clients.

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Activate Financial specializes in the Automotive, Credit Card, Installment and Personal Loan, Student Loan and Healthcare industries, but is standing by to offer support across all asset classes.

To learn more or discuss a collections solution for your company, please call 877.492.8750 or email Sales@ActivateFinancial.com.

About Activate Financial

Activate Financial is a fully licensed, national, third-party collection agency, focused on bad debt recovery and skip tracing services. We work across all time zones to provide custom outsourcing solutions for any company that is seeking effective and professional collections support with a high compliance profile. www.ActivateFinancial.com

Well, they’ve finally gone and done it.

The folks at Leiff Cabraser have been chasing a unicorn for years. Seeking to certify a debt collection class action involving anyone who did not provide their phone number at the time of application for credit. Such a class should never be certified–the predicate for class membership has nothing to do with the merits of the suit–as individualized issues will always swarm the non-existent “common” issues. Nonetheless, their persistence has paid off and a first-of-its-kind ruling is their reward.

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This might be the oddest TCPA certification order to date. Buckle up folks, it is about to get rocky.

In Brown v. DirecTV, LLC, Case No. CV 13-1170 DMG (Ex), 2019 U.S. Dist. LEXIS 54831 (C.D. Cal. March 29, 2019) Plaintiff managed to convince a court to certify a TCPA class of individuals who received debt collection calls from the Defendant on numbers that the call recipient did not provide to the Defendant at time of application. The Court found common issues predominated despite finding—as I discussed earlier today—that a Defendant does not have to collect consent at the time of application in order to have a valid defense. But if a Defendant can obtain consent after the time of application, how in the world did the Court certify this class? Let’s discuss.

On commonality, the Court properly identifies the Dukes standard requiring the putative class members’ claims “must depend upon a common contention” that is “of such nature that is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” Brown at *10. So far so good. The Court then summarizes the Plaintiff’s class as “seek[ing] to identify putative class members who also did not consent to be called at their cellular phone number, but who nevertheless received a prerecorded call from Defendant’s debt collectors on their cellular phone to collect an alleged debt.” Brown at *11. Wait. Full stop. Back up.

The class definition in Brown was “All persons residing within the United States who, on or after four years prior to the filing of this action, received a non-emergency telephone call(s) from DIRECTV and/or its third-party debt collectors regarding a debt allegedly owed to DIRECTV, to a cellular telephone through the use of an artificial or prerecorded voice and who did not provide the cellular phone number called on any initial application for DIRECTV service.” Again, the factual predicate for class membership is that the number was not provided on the initial application. So although the court correctly recognizes that “one way” consent can be provided is via supplying the number on the initial application that is not the only way.

So how does the absence of a number on the application assure commonality between the class members on the issue of consent?

If the class were defined conversely—i.e. a class of all individuals who didprovide consent on the initial application then commonality would exist. Whether or not that consent was valid would be common to the class. But determining a class to have a common position on the issue of consent based upon a non-occurrence only makes sense if that occurrence is necessary to prove or defeat a claim. But that’s not the case here. Nonetheless the Court finds: “Plaintiff and the putative Class and Subclass members share the common contention that they all received similar prerecorded calls without their prior express consent.” Huh?

As much as I want to sit here with my arms folded and defiant, let’s be bold and venture on because more delights await.

As to predominance the Court first determines that the class definition is pleaded using objective criteria and is not a failsafe. Here I agree. Whether or not a class member provided a number to the Defendant is objectively-defined criteria—albeit one that is not dispositive of any key issue in the case—so the class is not defined using merits-based criteria and, hence, is not a failsafe. Ok.

Moving to whether individualized issues of consent predominate, the Court begins by observing that a debt collector does not need to collect consent at the time of initial application as Plaintiff had argued. Great. That is undoubtedly correct and non-controversial.

Jumping over the necessary impact of that ruling on the merits of the certification motion, however, the Court delves into the Defendant’s written consent disclosures—acknowledging that they vary over time. While such variances alone have been held to defeat certification in multiple cases, the Brown court found a way around it. Reviewing the consent “disclosures the Court found that whether a putative Class or Subclass member consented to calls based on the operative version of the Agreement can be determined by looking through Defendant’s record of that customer’s account to determine the last version of the Agreement the customer accepted.” Sounds like a pain but—maybe.

But really, the focus on consent disclosures misses the point. In a debt collection TCPA class action what matters most is the impossibility of determining the source of each phone number, i.e. did the number come from the called party or not and under circumstances that do or do not allow consent to be presumed. In Brown the court never addresses that mostcritical issue and focuses exclusively on the written disclosures—which are just suspenders when the collector is already wearing the world’s biggest belt— completely ignoring the myriad additional ways a consumer may have consented to receive calls.

While there are other aspects of the case that deserve mention—the court leaping the hurdle of class member arbitration, the certification of a ‘wrong number’ subclass that defies ascertainability and the short shrift given to the individualized issues created by the vicarious liability angle asserted in the case—the determination that common issues of consent (there are none) predominate over individualized issues of consent in a multi-source debt collection class action is simply remarkable.

Indeed, to my (encyclopedic?) knowledge of TCPA certification decisions, Brown is a first of its kind certification. Never before has a multi-source TCPA debt collection class action of this sort been certified. On the contrary, there are at least a dozen cases holding that certification of a suit of this sort is not possible. And the Brown court’s own analysis—recognizing that consent can be obtained after the time of application—seems to emphasize exactly why: consent for each and every call may have arisen in myriad ways at any time before each challenged call was made.

Nonetheless, at a moment like this all you can do is tip your hat. Congrats Daniel. You’ve finally won one of these. (But don’t expect it will ever happen again.)

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Editor’s note: This article is provided through a partnership between insideARM and Squire Patton Boggs LLP, which provides a steady stream of timely, insightful and entertaining takes on TCPAWorld.com of the ever-evolving, never-a-dull-moment Telephone Consumer Protection Act. Squire Patton Boggs LLP — and all insideARM articles – are protected by copyright. All rights are reserved.

On Friday, the Eleventh Circuit issued a ruling in Holzman v. Malcolm S. Gerald & Associates, Inc., No. 16-16511 (11th Cir. Apr. 5, 2019) highlighting an issue in collecting time-barred (commonly known as “out of stat”) debt: how can a debt collector communicate a settlement offer without implying a threat of litigation?

Unfortunately, the answer seems to be that it is impossible to do so without including a full disclosure identifying the legal status of the debt (e.g. that the debt collector cannot sue due to the age of the debt).

In this case, LVNV Funding, LLC purchased the consumer’s out of stat account and placed it with a debt collection agency. The agency sent a letter to the consumer stating that:

Malcolm S. Gerald and Associates wants to help you resolve your delinquent account with LVNV FUNDING LLC. We would like to offer you a balance reduction to 30% of the balance due listed above. We will be able to accept $260.85 as a reduced payment in full on your account. To take advantage of this offer, the reduced amount listed must be received in our office no later than 05/31/2015. We are not obligated to renew this offer.

The consumer filed a Fair Debt Collection Practices Act (FDCPA) claim alleging that this letter is deceptive and misleading because it implies that the consumer can be sued on the account even though the account’s age prohibits the debt collector and creditor from doing so. The district court dismissed the lawsuit, finding that the letter contained no threat of litigation. The Eleventh Circuit disagreed—and overruled the district court’s decision—finding that an implicit threat of litigation without the proper out of stat disclosure can also violate the FDCPA.

The Eleventh Circuit’s decision focuses primarily on the use of the word “resolve” in the letter, but also takes into account the letter’s wording as a whole. In its own words, the Eleventh Circuit found:

[B]y urging the debtor to “take advantage” of the offer, the letter might have caused an unsophisticated consumer to mistakenly believe that the debt was legally enforceable and that he had something to gain by accepting the offer, or to lose by declining it. In fact, the letter reinforces this impression by announcing a deadline, thus creating some urgency for the debtor to accept the offered terms by making payment. In this regard, the letter states that payment “must be received in our office no later than 5/31/2015” and that Defendants are “not obligated to renew” the offer. As Plaintiff points out, an unsophisticated reader might conclude from this language that he is being presented with an ultimatum, and that failure to make payment within the required time frame would result in negative consequences, such as legal action.

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insideARM Perspective

Currently, the rules regarding what, if any, disclosure is required for time-barred debts is a patchwork quilt across the country. Some states have verbatim disclosure requirements; some states are silent. In some of those silent states, the courts rule that some sort of disclosure is required (just like in this case). In other words, the requirements are all over the place, making this an excellent area for uniformity.

This Consumer Financial Protection Bureau (CFPB) seems to be headed in this exact direction. The CFPB is currently seeking comments on its desire to conduct a survey on debt collection letters. The letters in the survey contain one variable: the out of stat disclosure. This, along with the Bureau’s inclusion of out of stat disclosures in its outline of proposed rulemaking from back in 2016, indicates that a uniform, federal out of stat disclosure is on the horizon.  

Court decisions like the one above suggest that some sort of a disclosure is required when offering to settle a time-barred account since there is no choice of words that can accurately convey the concept of settling an account for less than the full balance without tripping the “threat of litigation” wire. Which disclosure should a debt collector use? Until the CFPB chimes in, it will depend on the jurisdiction. One thing seems certain: not including a disclosure, even in states that don’t explicitly require one, is problematic.

LOS ANGELES, Calif. — The City of Los Angeles Office of Finance officially went live on March 4th with their new NextGen Collections Financial Ecosystem cloud platform, “CSS IMPACT! HD™ 2.0”. CSS, Inc., the developer of “IMPACT! HD™ 2.0”, is the leading provider of Cloud Financial Ecosystem platforms for enterprises and government.

Shahid Chaudhry (pictured right), Chief Tax Compliance Officer for the City of Los Angeles, spearheaded the city’s NextGen Financial Ecosystem Collections platform project and stated, “The implementation of IMPACT HD™ 2.0 has provided the city an unprecedented level of control over all of our procedures. We are now able to streamline and systematically automate many of our business processes. With IMPACT HD™ 2.0 we anticipate a significant uplift in productivity and efficiency as well as clear visibility into our current processes so we can continuously improve upon them in order to better serve our citizens”

“The City of Los Angeles is ranked as one of the top most innovative cities in the country and continues its legacy as a technology leader by adopting revolutionary cloud solutions. CSS is truly honored to have been entrusted with the City’s NextGen Tax and Legal Collections processing system project and to have been able to switch from their old system with complete success to the IMPACT! HD™ 2.0 Platform in only 6 months. We are truly excited with this partnership and look forward for a long and successful relationship with the City of Los Angeles,” said Sergio Seplovich (pictured left), Projects Director at CSS, Inc.

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About the City of Los Angeles – Office of Finance

The City of Los Angeles is vast. It sprawls across roughly 470 square miles with 80+ neighborhoods connected by approximately 6,500 miles of streets. More importantly, it is home to over 4 million Angelenos and over 500,000 businesses with even larger dreams, goals and aspirations. The Office of Finance carries an important responsibility to ensure these four million entrepreneurs, visionaries, and leaders have the necessary services and city infrastructure to thrive. As LA’s primary revenue generator, The Office of Finance engages in the pursuit of excellence in financial management for the City, its residents, and its businesses.

About CSS, Inc.

CSS is a leading provider of end-to-end cloud Financial Ecosystem platforms. CSS’s financial cloud platform removes the prohibitive costs of acquiring new technology and workforces to overcome fundamental day to day processes. Leading Tech-Municipalities, like the City of San Francisco, have been leveraging intuitive agile forward technology to engender turn-key automation with CSS’s Cloud Financial Ecosystem platform, enabling them to cost-effectively leverage cutting-edge financial Fintech technology with the added benefit of a streamlined workforce. This, in turn, enables veteran City operations staff to focus daily financial processes, revenue management efficiencies & customer service.

For more information, download our brochure at http://brochure.cssimpact.com or visit us http://www.cssimpact.com or call 877.277.4621.

In a status conference on March 21, 2019, the Court of Federal Claims (COFC) set a hearing date of April 16th to address a preliminary injunction that would prevent the Department of Education (ED, FSA or The Department) from recalling all remaining accounts from four large private collection agencies (PCAs) that still hold Award Term Extensions (ATEs). The recall of these accounts would, for practical purposes, be a nail in the coffin for these firms because it would mean the loss of their Authority to Operate (ATO), which can take up to a year to get — even if they ultimately win their case.

The companies in question are FMS, ConServe, GC Services, and Account Control Technology.

If you’re just now trying to jump on this moving train of a story, you can get the condensed background here, and then here.

On March 25th, I described the Administrative Record (AR) that ED had produced (as ordered by the Court) to justify its re-cancellation of Solicitation No. ED-FSA-16-R-0009 for Large Business Debt Collection Services. The purpose of the status conference on March 21 — two days after the AR was produced — was to discuss its implications and how to move forward.

FSA’s conclusion was that the existing small business Private Collection Agency (PCA) contractors have sufficient capacity to do the job; the large contractors that would be selected through the Solicitation in question were not needed.

Just about everyone disagreed with this conclusion, but it took a few weeks for the parties to get access to the 26 exhibits attached to the AR (those were not made public; just the 12-page narrative was) which provided the detailed data ED used. ED claimed they contained private borrower information and needed to be redacted, which was taking a lot of time.

So, the PCAs told the Court that they intend to file a motion for preliminary injunction to stop ED from recalling their remaining accounts when their contracts expire on April 21. Their argument is that the AR is 11 ½ pages, 7 ½ of which chronicle the history of the case. Only four pages provide any of the required insight into their decision to cancel, with all associated data in the non-accessible exhibits. What is accessible now describes a “high-touch” strategy (described in this article), which — among other things — is illegal.

Mr. Johnson, representing lead plaintiff FMS, laid out the argument (headers and parenthetical comments have been added for organization and clarity):

High-touch plan violates state law

“…Now, imagine getting three calls a day about the same loan or debt, and the first issue with all of this in the decision…is that apparently unknown to them, there are state laws that prohibit calls with such regularity. Massachusetts, for example, has a very clear statute that says… a debt collector can only make two calls per a seven-day period to a customer’s residence or cellular phone. There are other states that have similar limitations. So this premise of what they’re doing at least in the debt collection portion of these is illegal.”

Bundling servicing and default is illegal

“…There are a number of other problems. They have got the bundling, which we’ve talked about before. There’s no justification that we can find where they should be bundling servicing and default. They have now, by the way, Your Honor, taken what I would call a limited corrective action in that they’ve eliminated from the first (NextGen) RFP everything but IP requirements, but their other RFPs have still got the bundling problem.”

Calling under an inaccurate name is illegal

“…They have got this “one brand concept” that they are trying to put forward, and remember… the one brand concept is a concept that basically says anybody who’s making contact with a borrower make it in the name of one brand, probably FSA or ED or whatever the brand is that they pick. The problem with that is… that you can’t contact a debtor and say you are somebody else. You must say who you are, and that’s in the Fair Debt Collection Practices Act.

…The entire premise of that plan is inconsistent with the 8 million defaulted loans (anticipated by this summer) that must be provided to somebody to collect. Their own record says, ‘The Fair Debt Collection Practices Act requires debt collectors to identify themselves by corporate affiliation. Therefore, any deviation from this requirement would require an exception before implementation.’ So in the record, behind the memo, they’ve explained that they can’t do what they’re saying… They would have to change statutes to do it.”

Calculation of small business PCA capacity lacks rigor

“…They try to claim that even if they can’t get these procurements off the ground in the next four or five years, they have adequate coverage for defaulted student loans debt collection through their small business contractors (more detail is provided in this article)… In May 2018 when they tried to cancel (this Solicitation) the first time,…they put forth data that the small businesses had capacity. There was a spreadsheet that we put on the screen in front of the Court where the small businesses had identified a number of accounts that they could take on, and the agency just accepted that. They’ve done actually the same thing here in this matter.”

Calculation showing collection rate by “smalls” is as good as or better than “larges” is grossly misleading

“…They created a chart to display a metric which they say is very important, and that’s the net collection rate. The chart shows that in 2018, when the smalls were running the work, they had a net collection rate of 2.3 percent, which the chart shows also is better than the net collection rate two years earlier when the majority of the work was being done by the larges. …The problem is the paragraph right before that chart…[which] reveals that they are including Treasury Offset Program dollars in the collections… the reason this is important is because the AR confirms that the PCAs play no role whatsoever in Treasury offset collections…[and] those numbers are huge. Compared to the collections of the PCAs in recent years, Treasury offset is dwarfing what the PCAs are collecting.

…If you remove the Treasury offset numbers from the chart…the net collection rate reverses, and it shows that…there is a 40 percent difference in favor of the larges.”

Finally, Johnson argues that if his client’s ATE contract terminates and accounts are recalled, it will be “forever irreparably damaged because it will no longer be able to compete at the same level that it was able to compete when we filed this matter.”

Mr. Canni, representing ConServe, added a these points:

• The most efficient approach for ED would be to issue a fourth RFP under NextGen where they procure default recovery services independently and then later, once they’ve stood up the full platform, integrate the default recovery services into NextGen.
• The cancellation memo makes clear that defaults are expected to continue at a staggering rate, and a recent report by the Brookings Institute even states that nearly 40 percent of all borrowers may be in default by 2023.
• Even the smalls themselves qualify their capabilities and say they can’t handle the volume without subcontracts. In fact, five of the eleven intend or are using at least 15 subcontractors, including large businesses.
• So if the smalls need to subcontract to larges to handle the volume, doesn’t it seem unreasonable that the Department wouldn’t want to continue working with the larges now?
• By taking the total inventory, which affects the net collection rate, they were able to reduce the problematic inventories by doing a recall of 1.7 million accounts from the smalls in September 2018. By doing that, they would have inflated the recovery rate.
• The Hill published an article on March 20, 2019 that pointed out the ED is leaving billions of dollars in lost recoveries by not working with the larges. (The article was written by James Bergeron, president of the National Council of Higher Education Resources (NCHER), a higher education finance trade association whose members include lenders, servicers, guaranty agencies, collection agencies, financial literacy providers and schools.)

In response, the Court asked ED to explain its plan. Mr. Pehlke said ED would not be granting a voluntary stay and that the ATE contracts would indeed be ending on April 21. He also argued that The Department has resolved the bundling issue by removing servicing from the current NextGen RFP. (The PCAs argued vehemently that they’ve delayed — but have not resolved — the issue.)

The Court, anticipating the filing of a motion for preliminary injunction, set the following briefing schedule:

• Motions filed by March 29
• Government response by April 10
• Plaintiff response by April 15
• Preliminary injunction hearing on April 16

And here’s how that teleconference concluded:

THE COURT: I have to say… just listening to the discourse today, Mr. Canni’s (attorney for ConServe) proposal seems eminently reasonable to me, and I really would like the Government (ED) to go back and think about it some more and see if that could work. This, once again, seems like a monumental mess to the Court, and I’m just not — I have to tell you, I’m not impressed with the procurement capability of the Department of Education, and it seems to me we’re going to end up a lot like we have in the past. So if you see a way to straighten this out and to make it more reasonable for everyone, I’m all ears, but as for today, we’ll get the order out setting the schedule. That’s all I can do today.

MR PEHLKE (for ED): I would only ask, Your Honor, that the Department of Education has been moving forward with NextGen and making awards without protests on other aspects. It’s only this aspect and these Plaintiffs where the difficulties are arising.

THE COURT: I know, but I just — I just — and I — you can’t see me today, but I’m shaking my head.

The Texas House of Representatives saw two bills introduced in March pertaining to consumer privacy and data protection, following the trend of similar laws in jurisdictions such as California and Washington.

Texas Consumer Privacy Act

One of the bills is H.B. No. 4518, cited as the Texas Consumer Privacy Act (Texas CPA), introduced by Rep. Trey Martinez Fischer. This bill is very similar to California’s Consumer Privacy Act (CCPA).

The Texas CPA would apply to companies that do business and collect consumer data in Texas, and:

• Have a gross annual revenue that exceeds $25 million (this number to be adjusted by the Texas Attorney General every other year as needed); or
• Buy, sell, or receive the personal information of 50,000 or more consumers, households, or devices for commercial purposes; or
• Derive 50% or more of their annual revenue from selling consumer personal information.

Any business that is controlled by an entity that meets the above requirements is also subject to the proposed legislation.

Like the CCPA, this bill allows for the state’s Attorney General to adopt rules to implement, administer, and enforce the requirements. Some highlighted consumer rights in this proposed legislation include:

• A right to disclosure from the business of the personal information collected. Businesses must respond to such request with the source of the collected information, the business or commercial purpose of the collection or selling of this information, and with what third parties this information has been shared.
• A right to deletion of the consumer’s personal information collected by the business, with some exceptions.
• A right to disclosure of the type of personal information sold by the business and to whom it was sold.
• A right to opt out of the sale of personal information.
• A requirement for the business to provide a disclosure of the type of and purpose for personal information that is collected prior to collection.

If passed, the Texas CPA would go into effect on September 1, 2020. Civil penalties for violations would be $2,500 per violation or, if the violations are intentional, $7,500 per violation.

Texas Privacy Protection Act

The other bill is H.B. No. 4390, cited as the Texas Privacy Protection Act (TPPA), introduced by Rep. Giovanni Capriglione. While the Texas CPA provides consumers control over the collection and use of their data, the TPPA is concerned with processing and retention of personal identifying information.

The two laws differ in many ways, but contain some similarities, including:

• Types of businesses governed by the bill are almost identical.
• The state Attorney General is in charge of drafting and implementing rules for both proposed laws.
• Both contain a requirement to disclose the type of personal information collected/processed and how the information is used prior to collection of such information.

Some highlights of TPPA requirements include that it:

• Applies only to information that is collected electronically (over the internet, other digital network, or computing device used by an end user).
• Requires explicit consent for processing the personal identifying information from the individual whose information is being collected.
• Only allows a business to process personal identifying information if the business is required to do so by law.
• Requires the development and implementation of a data security program and accountability program to ensure compliance with the bill’s requirements.
• Requires that the business stop processing personal identifying information when the individual closes their account and delete such information within 30 days of account closure, unless a longer retention period is required by law.

If passed, this bill would take effect on September 1, 2019 and carry a civil penalty of $10,000 per violation, not to exceed a total amount of $1 million.

insideARM Perspective

After the General Data Protection Regulation (GDPR) came into effect in the European Union, many were wondering when such consumer privacy laws would travel across the pond to the United States. Califronia led the way with its CCPA, and–as predicted–the wave of consumer privacy laws across the states continues. 

As seen in the many public forums on the CCPA held by California’s Attorney General’s Office over the past several months, there is a lot of uncertainty about how to implement this new law. Since the CCPA and Texas CPA contain many similar requirements, will the Texas CPA see similar issues if it is passed? Will the two states’ attorneys general implement similar interpretations/requirements? What will happen if an all-encompassing federal consumer privacy law goes into effect? These questions will become relevant–and crucial–if this wave continues. The best way forward is to encourage uniformity of state laws as they are in their infancy in order to prevent a patchwork quilt of requirements across the United States.