Last week I attended the 31st annual Financial Services Conference of the Consumer Federation of America. It was time well spent, offering an opportunity to engage directly with consumer advocates.

The event brought together about 150+ consumer advocates, regulators and industry representatives to explore financial challenges facing consumers, including topics such as the Life Cycle of Student Loan Debt and Criminalizing Debt.

The conference opened with a keynote from Rep. Gregory Meeks (D-NY)

I recently heard Rep. Meeks speak at another event, the Online Lending Policy Summit and wrote about it. Though one speech was pre-election and one was post-election, his message to the two groups was similar.

In last week’s remarks Meeks noted that Rep. Maxine Waters (D-CA) will be the first woman and first African American to chair the full Financial Services Committee in 150 years; he hopes to chair the Subcommittee on Financial Institutions & Consumer Credit. Meeks shared that his district is ethnically diverse, and is directly connected to Wall Street via the subway right across the street from his office. He said that the securities industry generates 20% of the taxes paid in New York — funds which have paid for a lot of important infrastructure projects. He also said he views Wall Street as offering a viable path to wealth for many, so he is not interested in tearing it down, but rather he wants to ensure it is diverse, it deals fairly with consumers, and it creates opportunity for more people to experience it (for instance, by exposing kids to it).

“Align Wall Street with Main Street”

Rep. Meeks expressed this philosophy: “When Wall Street does well, my communicty does well. It cannot do well if it doesn’t do right by consumers.” Further, he added, “Access to financial abuse is not access to financial services. Look at who’s doing right and who’s doing wrong. Fix policy to ensure fair access and treatment.”

He offered three priorities of a Waters-led House Financial Services Committee:

1. Shore up the CFPB and especially its fair lending mandates.
   
   Meeks suggested that good actors should be interested in this. He said he supports Rep. Waters’ “Consumers First Act” which was introduced to reverse the actions by “he who shall not be named” to address the Bureau’s structure, restore the agreement with the Department of Education, establish independence from the White House, and limit the number of political appointees allowed.

2. Preserve and modernize the Community Reinvestment Act (CRA).
   
   [Editor’s note: Enacted by Congress in 1977 (12 U.S.C. 2901) the CRA is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate.]

3. Encourage data control and privacy.
   
   He said consumers should be empowered to control the flow of their data. The United Kingdom leads the way on this. U.S. prudential regulators are behind. Meeks said he will introduce legislation regarding open banking and explore how to make it work. He offered an example of a community bank that became a community center rather than close down. This established trust within the community, built connection, and ultimately made it successful because people wanted to take out loans/do business with this bank that truly knows and supports the community.

Among other topics, there was a lot of discussion about education and student debt

A panel discussion between Celinda Lake, a Democratic party strategist, and Christine Matthews, of Bellwether Research & Consulting; moderated by Richard Dubois, the Executive Director of the National Consumer Law Center, shared voter attitudes about the economy and financial services.

A few things caught my attention:

• They noted that free college for all doesn’t test well with consumers.
• They mentioned that Maryland Governor Larry Hogan (a Republican) started a “SmartBuy” program to help first time home buyers with student debt, and that Ohio is looking at something similar. From the SmartBuy website: To qualify, homebuyers must have an existing student debt with a minimum balance of $1,000. Maryland SmartBuy financing provides up to 15% of the home purchase price for the borrower to pay off their outstanding student debt. Maryland SmartBuy 2.0 offers the same student debt relief of 15% of the home purchase price with a maximum payoff of $40,000. The full student debt must be paid off at the time of the home purchase, and homebuyers must meet all eligibility requirements for the Maryland Mortgage program.
• Nobody knows that the Dodd Frank Act is. Ms. Lake shared that, in her experience, people like give the impression that they are smart; when asked if they are familiar with something they don’t know about, they’ll make up an answer. She said in the case of Dodd Frank, people couldn’t even make something up.
• We need to do better at publicizing the voting record of Congress on financial issues. People are simply uninformed.

Former Secretary of Education Arne Duncan spoke about opportunity

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Duncan said, “Talent is much more evenly spread than opportunity.” He offered the following figures:

The average net worth of white families in America is $243,000. The average net worth of black families is $8,000. “That’s not a financial literacy gap; that’s an opportunity gap.”

If our young people manage to get a good education but are still living paycheck to paycheck, we haven’t broken the cycle of poverty. I’m a big believer in financial literacy, starting in kindergarten. I also encourage firms to hire low income people, because you break the cycle of poverty through job opportunities.

He suggested that what’s often lacking for kids likely to dropout of school is relevance. For instance, kids don’t see the relevance of algebra. He also said there is a huge disconnect between higher education and the business world.

Former CFPB Student Loan Ombudsman Seth Frotman spoke about his new venture

You may remember Seth Frotman who made a splash a few months ago by submitting a scathing resignation letter to Acting Director Mick Mulvaney. Well, just about three months later Frotman announced the launch of a new organization called the Student Borrower Protection Center. He was passionate and defiant.

“We [Democrats] should be asking ourselves how we got into this mess… we shouldn’t be complacent in our wins in Congress. There is no depth to which this administration will not take us.”

He challenged the room, “If we are going to do better for the 44 million [the number of Americans with student loan debt], we need to come up with better solutions.”

A few other statements caught my attention:

• We have a system that encourages debt financing without creating a system ready to handle it.
• This is not the sole doing of [Education Secretary] Betsy DeVos. These failures span parties and administrations.
• One million plus borrowers default each year.
• We’ve had a philosophy of getting students into school at all costs, regardless of the debt. How did this happen? We weren’t listening.
• The CFPB under Mick Mulvaney takes Betsy DeVos at her word when she says everything is okay.
• We have a system that treats student loan holders as second class citizens.
• You can’t rely on a system where student loan borrowers depend on an election. Some have been ripped off at every turn and never saw justice. You can’t trust these consumers to any one individual.
• We need to fight where the fights are — in the state halls, not just the courts and Congress. States are on the front lines.

Frotman concluded with four points:

1. We need strong leaders at the top of state banking institutions.
2. We need more cops on the beat doing state-level consumer protection.
3. We need better federal law that empowers new cops on the beat whenever possible, and we need to re-write laws.
4. We need a new brigade of consumer protection advocates.

A panel discussion that followed Frotman’s speech included:

• Toby Merrill, Director of the Harvard Legal Services Center Project on Predatory Student Lending
• Martha Fulford, Senior Counsel for the National Student Legal Defense Network
• Anna Schwartz, General Counsel for Scratch, an app that helps students manage their student loan payments

They were each asked to share their highest priorities related to student debt.

Merrill said, “Unenforceable debt shouldn’t be paid. A big chunk of the $1.5 trillion in student debt is unenforceable; industry and government are the cause. We can’t leave a generation behind.” Her bottom line: We should stop the flow of federal funds to for-profit colleges.

Fulford said her priority would be to fix the program for public service loan forgiveness.

Schwartz said that servicers should act in the best interests of clients; we want to see students have access to financial advice. She added that borrowers pay for servicing but don’t get to choose their servicer… It seems she’d like to see this change.

insideARM Perspective

All of this discussion about managing student loan debt occurs against the backdrop of the Department of Education working to develop its NextGen servicing system. Parts of this procurement are currently under protest.

The controversy surrounding its contracting of private debt collectors also continues in the background (there have been some new developments on that front, but more on that in another article coming soon). No doubt Wayne Johnson, Head of the Federal Student Aid (FSA) Office of Strategy and Transformation, would say that NextGen is being designed to address many of Seth Frotman’s accusations.

2018 wasn’t supposed to end like this.

With the long-awaited ACA Int’l ruling finally handed down—predictably overruling the FCC’s disastrous 2015 TCPA Omnibus Ruling—and with the fate of the TCPA seemingly resting in the confident hands of the FCC’s new Chairman—business-friendly Republican Trump-appointee Ajit Pai— it looked like large-scale TCPA litigation was headed to the dustbin of history. Yes, there would be some death throws—some DNC class actions and some overly-inventive forays into VOIP or delivery restriction cases— but the TCPA as we knew and hated would soon be dead.

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Even when district courts went bananas and–instead of favoring the clean route of primary jurisdiction stays— decided to issue competing ATDS rulings by the barrel full, creating an unfathomable patchwork of decisions that required TCPAland to launch a live scoreboard to keep track of it all as if it were the first weekend of March Madness, even then the writing seemed to be on the wall. The divergent patchwork antics at the district court level only seemed to enhance the urgency and inevitability of an FCC decision that would give final and complete clarity. And with Chairman Pai at the helm the ruling had to–it just had to— put the TCPA genie back in the bottle.

But then Marks was handed down. And for the first time, there was doubt. Real sincere doubt, that the TCPA might not be going away after all. Predictably district courts began following Marks‘ extremely broad ATDS formulation, treating the novel Marks definition– that had never before been accepted or applied by any court– as if it was the only and proper reading of the TCPA. As if it was common sense to ignore key statutory language regarding random and sequential number generation. As if the entire legislative history of the TCPA–teeming with reference to telemarketing run amock and concerns over random-filing dialing– was wholly concerned with targeted precision dialing from a list leveraging technology that did not even exist when the statute was passed.

The FCC responded quickly and issued a Public Notice that cast doubt on the broad formulation of Marks in light of ACA Int’l, and that calmed many rattled nerves. But the days following Marks stretched to weeks and then months without the expected ruling from the FCC narrowing the TCPA. And so the question had to be asked– was the Commission taking the Marks formulation seriously? Had industry presented enough by way of evidence-filled comments to push back on the Ninth Circuit’s formulation?

Marks would soon be an afterthought for TCPA addicts, however. A far graver threat to TCPA calm suddenly appeared on the horizon–and one that no one saw coming. Last month, the Supreme Court granted cert. review in PDR to answer the most basic of all questions–does the FCC even have the authority to issue binding rulings respecting the scope of the TCPA under the Hobbs Act? The FCC’s ability to issue binding guidance on TCPA issues has been absolute TCPA bedrock since 2010. Four (4!) circuit courts of appeal have directly held that the FCC’s TCPA orders are binding under the Hobbs Act. None had ever held otherwise. Yet the SCOTUS saw fit to grant cert. on this issue no one disputed–and one that everyone now must doubt.

So even if the FCC did act to gut the TCPA after Marks, would it even be binding???

And with Kavanaugh now embedded on the Supreme Court might even Chevron deference be in jeopardy? Might we go from a legal environment where the FCC’s TCPA rulings are entitled to absolute deference to one in which courts can completely disregard the FCC’s rulings and decide for themselves whether or not to even credit the Comission’s TCPA determinations?

With these earthquakes of uncertainty shaking TCPAland to its core, the last thing we needed was more legislative emphasis on the TCPA. And that’s exactly what we’ve received.

Congress long-ago proposed amendments to the TCPA to broaden the scope to include dialers that call from a list, but those were Democratic initiatives unlikely to become law. A few weeks back however–right in the midst of TCPAland’s worst convulsions since 2015– a bi-partisan group of Senators elected to push “all in” on the TCPA. By proposing the TRACED Act, Senators on both sides of the aisle confirmed that the TCPA– with all of its gripping uncertainty and churning chaos– would remain the crown jewel of the U.S. government’s response to the robocall epidemic. Indeed, the legislation encouraged other federal agencies–including the CFPB and the Department of Homeland Security–to work with the FCC and FTC to enforce the TCPA like never before.

And that’s where we find ourselves.

A statute so vaguely worded that it almost certainly violates the First Amendment has been (or soon will be) elevated to the status of being the only federal statute over which any federal agency with an enforcement arm may jointly pursue regulatory enforcement activities simultaneously. (Indeed, if TRACED passes, the TCPA will be the single most broadly enforced federal statute in existence.)

Meanwhile the FCC –that was supposed to put an end to the chaos in the courts— has now had its authority called into question by SCOTUS and faces a bi-partisan bill directing it to increase–rather than de-fang– its TCPA enforcement efforts.

And all the while, TCPA suits skyrocket as the judicial-expansion of the statute by the Ninth Circuit takes root in courthouses across the country.

Sounds like the perfect storm. I hope you have really good TCPA counsel.

If not, I know a guy.

—

Editor’s note: This article is provided through a partnership between insideARM and Womble Bond Dickinson. WBD powers our TCPA case law chart and provides a steady stream of their timely, insightful and entertaining take on this ever-evolving, never-a-dull-moment topic. WBD – and all insideARM articles – are protected by copyright. All rights are reserved.

Yesterday, Encore Capital Group, Inc. (Encore) entered into a $6 million settlement agreement with several state Attorneys General. The matter involved Encore, its subsidiaries Midland Funding, LLC and Midland Credit Management, Inc., and 42 states (see list below) and the District of Columbia. In addition to the $6 million, Midland must also internally set aside $25,000 per state for restitution to consumers. According to a press release by the Illinois Attorney General, this investigation revolved around the alleged practice of “robosigning” affidavits used in collection litigation.

The settlement agreement sets forth certain requirements for Midland. A large portion of the agreement discusses requirements that largely parrot the text of the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA).

In relation to collection litigation, the agreement requires Midland to, among other things, ensure it has account-level documentation prior to commencing lawsuits against consumers and that such documentation is available to its retained law firms without restriction. Midland must also ensure that any affidavit filed is hand-signed and based on the affiant’s personal knowledge from reviewing account records. Midland cannot pay incentives to its employees or third-party providers based on volume of executed affidavits.

In relation to general collection activity, the agreement requires Midland to follow certain procedures to verify that the consumer listed on the account owes the debt, ensure the account or consumer in question is not in some special status (i.e., bankruptcy, deceased, or an active duty service member), limit to whom it can resell a debt, conduct background checks on new employees, appropriately staff teams that resolve disputes and address consumer questions, maintain a mandatory training program for its employees, and conduct call monitoring. The agreement also discusses procedures for time-barred debt.

Encore issued a press release stating that this settlement will cause no material impact to the business as the funds have been set aside back in 2015. According to the press release, many of the operational requirements contained in the agreement are already in practice. Ashish Masih, Encore’s President and CEO, states that discussions related to this agreement began many years ago while the company was having parallel discussions with the Bureau of Consumer Financial Protection. “While we believe our practices were in accordance with relevant laws, we chose to agree to a settlement, so we can all move ahead,” says Masih.

States involved: Alaska, Alabama, Arizona, Arkansas, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Hawaii, Idaho, Indiana, Iowa, Kentucky, Louisiana, Maine, Michigan, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, Wisconsin and Wyoming.

insideARM Perspective

The settlement agreement here is worth a read, especially for debt buyers and entities engaged in collection litigation. Other than the section that is dedicated to an almost word-for-word transcription of the FDCPA and FCRA, the agreement lays out in specific details practices that the Attorneys General expect. It never hurts to check a company’s policies and procedures against the requirements outlined in the agreement to make sure that there are no gaps. Considering that this agreement was entered into by a majority of state Attorneys General, it is likely that these procedures are universal.

CARROLLTON, Texas — SWC Group launched a 4th quarter charity clothing drive within their Carrollton and Corpus Christi offices. Employees were broken into teams to collect socks, shoes and gloves for the Boys and Girls clubs of Dallas and Corpus Christi. The two teams that collected the most articles of new clothing were awarded with a catered lunch by CEO, Jeff Hurt.

“We decided to support the Boys & Girls Clubs of Greater Dallas and Corpus Christi because of their ongoing commitment to nurture and guide area youth. We believe that all youth should have access to proper clothing and support,” says Jeff Hurt, CEO.

“I am thankful for the support that our employees continue to provide for charity,” says Hurt. “Their sustained support of local charities throughout each year makes us proud.”

About SWC Group

SWC Group is one of the nation’s leading provider of accounts receivable management and consumer service solutions.  They bring over 40 years of proven experience in the government, tolling, utility, telecommunications, cable, property management, and education industries. SWC Group annually manages billions of dollars in receivable accounts, proudly serving organizations of all sizes from Fortune 500 private firms to small public agencies.

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Debt collectors are no strangers to Fair Debt Collection Practices Act (FDCPA) claims regarding how creditors are identified in debt collection letters. Each court decision that comes out on the issue provides some clarity. The District of New Jersey (D.N.J.) provided some of this clarity in Gross v. Lyons, Doughty & Veldhuis, P.C., No. 18-cv-7963 (D.N.J. Dec. 3, 2018), where it granted dismissal of a claim alleging that including chain of title makes a letter unclear.

Factual and Procedural Background

Lyons, Doughty & Veldhuis, P.C. (LDV) send a collection letter to plaintiff that included the following caption:

Re: Capital One Bank (USA), N.A., Assignee of HSBC BANK NEVADA N.A. RCS DIRECT MARKETING/ORCHARD BANK.

The body of the letter stated, “Please be advised that this office represents Capital One Bank (USA), N.A., assignee of HSBC BANK NEVADA N.A. RCS DIRECT MARKETING/ORCHARD BANK in connection with our account.” After the signature line, the letter contains a mini-Miranda disclosure stating that LDV is a debt collector.

Plaintiff filed a putative class action against LDV alleging that the letter did not clearly identify the creditor in a manner understandable to the least sophisticated consumer. Plaintiff points to two items to support the claim: the letter includes more than one entity affiliated with the debt and the letter includes the term “assignee.” LDV filed a motion to dismiss the case.

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The Decision

The court noted that the specific factual scenario is a matter of first impression in D.N.J., so it looked outside of its district to see how other courts ruled on similar claims.

The court first looked at a Seventh Circuit decision that asserted a similar claim. In Janetos v. Fulton Friedman & Gullace, LLP, 825 F.3d 317 (7th Cir. 2016), the letter included a similar caption, “Re: Asset Acceptance, LLC Assignee of AMERISTAR,” and stated that “the account has been transferred from Asset Acceptance, LLC to [the law firm].” The Seventh Circuit found that this letter did not clearly identify the creditor since it did not describe the relationship between the debt collector and the named assignee, leaving the consumer to guess who the creditor was.

While the two letters contain a similar caption, the court found the Janetos case to be distinguishable. Specifically, the letter in question satisfies the gap noted in Janetos because it clearly lists the relationship between LDV and the assignee by stating that LDV “represents Capital One Bank” and that the firm is a debt collector.

The court also notes two other non-dispositive factors that support LDV’s position. First, the creditor’s name appears in two different places: in the caption and in the body. Second, that the creditor’s name is distinguished from the chain of title through capitalization. The court stated:

While this specification is not itself dispositive, such clear declarations support a finding that the content is fair notice, readable, and obviously relating to an outstanding debt owed to the creditor . . . and whose recovery is sought by a debt collector. Put simply, the letter complies with 1692g(a)(2) in that it provides the consumer a written notice clearly indicating the name of the creditor to whom the debt is owed.

(internal citations and quotations omitted.)

After reviewing Janetos, the court then turned to a case out of the District of Delaware, which is in the same circuit as D.N.J. LDV was also the defendant in the Delaware case and the letter was almost identical to the one in question here. The District of Delaware found the letter to not be deceptive as to the identity of the creditor.

Ultimately, the court ruled that the letter was sufficiently clear as to the identify of the creditor and granted LDV’s motion to dismiss.

insideARM Perspective

Several decisions on the creditor identification issue have been released over the past year.

For example, in October, the Eastern District of Wisconsin found that the FDCPA does not require specific labels in the letter for the creditor and that including a reference to the entity more familiar to the consumer is acceptable. In that case, the debt collector identified Comenity Bank as the “Original Creditor” and PayPal Credit as the debt collector’s client.

In another example from April, the District of Oregon likewise found that there is no specific label required by the FDCPA after the plaintiff argued that the letter should have listed the entity as the “current creditor” rather than the “original creditor.”

The current case adds to the trend of courts making reasonable findings on the issue of creditor identification. A chain of title, like the one included in this case, is helpful in case one of the names clicks with the consumer. Explaining the relationship between the debt collector and the assignee helps the consumer to understand why they are receiving the letter and what it pertains to. For branded accounts, such as the PayPal example above or for retail cards obtained at a store but underwritten by a bank, it makes sense that using the entity name that the consumer is familiar with is helpful in identifying the account.

Ultimately, the creditor needs to be identified in a manner that is best understood by consumers. These types of decisions help shut down “bizarre or idiosyncratic interpretations of collection notices” that ultimately harm consumers by making collection notices more confusing.

On November 29, 2018, the Ombudsman’s Office of the Bureau of Consumer Financial Protection (Bureau or BCFP) released its annual report for fiscal year 2018. The Ombudsman’s office serves as a liaison between the Bureau and consumers and the industry. The report discusses several issues, some of which are directly related to the ARM industry.

In its outreach initiatives, the Ombudsman proactively engaged with stakeholders — both industry and consumer groups — by appearing at conferences and hosting teleconferences to inform the audiences of their office’s research and work. In “inreach,” meaning connecting with internal Bureau stakeholders, the Ombudsman introduced itself and its resources to the Bureau’s new leadership.

The Ombudsman took away several recommendations, according to this report, from the Ombudsman Forum for industry and trade representatives held in June 2018. The report noted that:

• The industry has concerns about the way that data is classified in the complaint database and the Bureau’s use of that data in its press releases and reports. Specifically, industry representatives noted that the database should distinguish between consumer inquiries and complaints and that this distinction should be noted in the materials and reports created by the Bureau.
• The industry has concerns about being able to manage risk. Specifically, it is difficult to manage risk when there is little or no guidance on how to operate in a compliant manner, when decisions are subjective, and when the Bureau applies rules retroactively. It is also difficult to create training material for compliance staff when there are iterative updates to some rules.
• The industry recommends that the Bureau work with industry representatives on consumer education materials.

The Ombudsman noted and forwarded to the Bureau concerns from stakeholders on the Request for Information (RFI) process. Earlier this year, the Bureau released 12 RFIs over a few months. Stakeholders told the Ombudsman that there was insufficient time to respond to that many requests. Stakeholders also mentioned that they were unsure how the Bureau would use the data.

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insideARM Perspective

This report shows the Ombudsman’s Office listened to some of the major concerns of the industry in relation to the Bureau: the need for clarifying rules (but not regulation by enforcement” and issues with the way the Bureau presents consumer complaint data in press releases and reports. What is missing is how the Ombudsman plans to work with the Bureau to address these concerns. Additionally, there are other concerns for the debt collection industry related to communicating with consumers that should be addressed. The Consumer Relations Consortium presented a comprehensive solution to the Bureau on electronic communications, which would largely alleviate the problem.

Holland & Knight and the National Bar Association Consumer Law Section (NBA-CLS) on Nov. 16, 2018, hosted the Exploring the New Normal in Consumer Protection Enforcement Summit, a half-day seminar that focused on identifying priorities in consumer protection law, effective strategies in law enforcement investigations, risk areas for companies and the key issues presented in compliance management.

The following are highlights from the event:

Serena Viswanathan, Deputy Director, Bureau of Consumer Protection, Federal Trade Commission (FTC)

Serena Viswanathan, who has served at the Federal Trade Commission for nearly 20 years, shared her insights into the FTC’s consumer protection priorities and her advice about how businesses can best navigate FTC investigations. She shared a number of key themes and consumer protection, enforcement and other FTC priorities.

Consumer Protection Priorities

• Viswanathan, in her personal capacity, stated that while the FTC has five new commissioners and a new director of the Bureau of Consumer Protection, she does not anticipate a substantial shift in enforcement priorities. In fact, she expects to see strong enforcement of the law going forward.
• Many suspected that, upon the arrival of the new commissioners, there would be frequent disagreements about enforcement decisions falling largely along political lines. This has not been the case.
• Indeed, most of the FTC’s cases have been voted upon unanimously, and Viswanathan has seen no pulling of the punches when it comes to enforcement.
• The FTC’s consumer protection enforcement priorities continue to be the following:

1. financial technology products
2. deceptive health or safety claims
3. influencer marketing
4. gag clauses regarding negative consumer reviews
5. data security and privacy
6. fraud

New Enforcement Practices

• Viswanathan noted that there are two enforcement practices that will likely change going forward:

1. the FTC will aggressively enforce court orders
2. the FTC will seek stronger remedies

• This means that the FTC will consider seeking monetary relief where it has not considered seeking it in the past.
• This also means that the FTC will more readily require consumer notification where it may prevent consumer harm.

Effective Advocacy Strategies

• Although businesses are not likely to see lax enforcement anytime soon, Viswanathan did offer insight into effective advocacy strategies that businesses and their attorneys can use to navigate FTC investigations. Businesses should do the following:
  • Take responsibility for their failings. Corrective action and remediation is critical.
  • Focus on providing the FTC with a factual basis for not taking action. That factual basis will usually consist of effective policies and procedures, which are consistently followed, and will thus make future violations of the law unlikely.
  • Give the FTC enough time to understand what happened before providing the FTC with substantial amounts of information about compliance changes that the business plans to implement or is in the process of implementing.

Tom Pahl, Policy Associate Director for Research, Markets & Regulations, Bureau of Consumer Financial Protection (BCFP)

Tom Pahl, who served at the Federal Trade Commission for more than 20 years and at the Bureau of Consumer Financial Protection for nearly five years, shared his insights into the BCFP’s priorities, how businesses can best navigate BCFP investigations, and how business can avoid those investigations in the first place.

Enforcement Priorities

• Pahl, in his personal capacity, stated that the BCFP is in a state of transformation with the primary aim of ensuring that all of its actions are consistent with the Dodd-Frank Wall Street Reform and Consumer Protection Act, as written.
• Although Pahl expects that Acting Director Mick Mulvaney’s BCFP will target the same activity and will conduct the same number of investigations, the products of those investigations will be reviewed for strict compliance with the Dodd-Frank Wall Street Reform and Consumer Protection Act and its implementing regulations.
• The BCFP is now interested in determining whether there are ways in which it can reduce any undue burden on business through regulatory and enforcement reform.

Regulatory Reforms

• Pahl confirmed that the following regulatory reformations are at the top of the BCFP’s priority list:

1. reconsidering the rulemaking process
2. reconsidering the payday lending rule
3. reconsidering the Home Mortgage Disclosure Act rule
4. evaluating rules to determine whether they should be revised
5. revising rules to make them less burdensome
6. engaging in congressionally mandated rulemaking pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Economic Growth, Regulatory Relief, and Consumer Protection Act
7. engaging in debt collection rulemaking

New Practices

• In addition to these regulatory reforms, the BCFP is instituting two related practices. They are now focused on the following:
  • Providing written – rather than oral – guidance regarding how businesses should go about complying with the law so as to ensure that all BCFP guidance is consistent and available to the public.
  • Taking enforcement action where there exists, and it can prove, substantial consumer harm.

Compliance Management Systems

• Pahl went on to underscore the importance of compliance management systems. Maintaining an effective compliance management system, Pahl noted, not only makes a business less likely to come to the BCFP’s attention, but also helps the business secure a favorable outcome if it does. If a business has a robust compliance management system it is less likely that the BCFP will 1) bring a case against the business, 2) require that the business remain under court order, or 3) seek a far-reaching remedy.
• Pahl also shared his advice about how businesses should go about crafting compliance systems. He recommended that businesses should start early and involve internal compliance officials as well as outside counsel with experience with the regulatory agencies. Once a business has created a compliance system it must put it in writing, distribute it to all of the employees tasked with putting it into practice and train those employees how to do so. Finally, the business must ensure that those employees consistently follow the compliance program as written and raise any issues they encounter along the way to the business.

Effective Advocacy Strategies

• If a business’ compliance management system fails and the BCFP opens an investigation, there are, according to Pahl, advocacy strategies that businesses should employ in order to best navigate the investigation. Businesses should do the following:
  • Reduce their positions to writing, in white papers or other memoranda, as early and as often as possible. This will help businesses to create an investigatory record and allow the BCFP to circulate the white papers throughout the agency.
  • Take full advantage of in-person meetings, including the initial meet and confer, if only to ensure that the Civil Investigative Demand is not overbroad and will not cause an undue burden.
  • Do their best to resolve all of their issues at the staff level, raising only their most serious concerns with senior officials.

Mark Eichorn, Assistant Director, Division of Privacy and Identity Protection, Bureau of Consumer Protection, Federal Trade Commission (FTC)

Mark Eichorn, who has served at the Federal Trade Commission for 20 years, shared his insights, in his personal capacity, about the prospects for new data security and privacy legislation as well as FTC coordination with other engaged government officials at the state, federal and international levels.

Domestic Enforcement Cooperation

• Eichorn began by stating that he is not optimistic that Congress will enact uniform federal legislation providing certainty to businesses as to their data security and privacy responsibilities. Indeed, just this month the FTC reiterated its longstanding call for federal data security and privacy legislation, but, thus far, that call has fallen on deaf ears.
• While there may not be a single standard for some time, Eichorn noted that, in the meantime, the FTC will continue to closely coordinate with state regulators, including state attorneys general, to ensure that state and federal enforcement actions do not often overlap and that, when they do, those enforcement actions remain consistent. The FTC not only coordinates with the states, which often have concurrent jurisdiction over privacy issues, it also coordinates with other federal agencies, including the U.S. Securities and Exchange Commission (SEC) and the BCFP, each of which may have an interest in investigating or taking action in response to a particular breach or business practice impacting consumer privacy.

Foreign Enforcement Cooperation

Eichorn noted that, although the level of cooperation between the FTC and other domestic regulators may be higher than that between the FTC and foreign regulators, international cooperation on data security investigations is substantial and growing. The FTC cannot share information with foreign regulators if their laws forbid activity permitted in the United States, but international cooperation is commonplace and allows regulators to increase internal efficiency and reduce unnecessary burdens on businesses being investigated by several regulators at once.

About Our Teams

If you have questions about any of the topics discussed during the seminar, Holland & Knight’s Consumer Protection Defense and Compliance and Global Cybersecurity and Privacy Policy and Regulation teams can provide additional information. Both teams are comprised of individuals with extensive experience handling FTC, BCFP, state attorneys general and other regulatory investigations and can provide advice not just on how to navigate those investigations once they begin but also on how to avoid them in the first place.  

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Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

PHOENIX, Ariz. & ST. GEORGE, Utah — BillingTree®, the payment problem solvers™, today announced an integration with TCN, the leading provider of cloud contact center technology for enterprises, contact centers, BPOs and collection agencies worldwide. The two-way partnership provides BillingTree customers with access to new dialing and calling services and TCN customers with access to the BillingTree merchant services and Payrazr® platform. Through this partnership, companies can now deploy, scale and adapt payment processing services to the needs and priorities of their businesses.

BillingTree’s integration to TCN’s IVR and TCN cloud contact center platform provides TCN customers with access to BillingTree’s IVR payment gateway as another effective, secure and streamlined payment option to collect and receive payments on time and in full. Additionally, through TCN’s omnichannel texting feature, AgentSMS, contact center agents can send customers payment reminders and direct links to facilitate payments, connecting them directly with BillingTree Payrazr mobile payment solutions.

“We are proud to partner with leading technology and payment processing providers, such as BillingTree, to offer our customers convenient and seamless ways to process payments across any channel,” said Terrel Bird, co-founder and CEO of TCN. “This partnership is just another example of how TCN strives to help companies become and remain personalized, perceptive, proactive and progressive to better engage with our customer base.”  

“Flexible and on demand consumer enabled communications with payment acceptance is strategically significant to the success of client engagement and revenue management activities. This partnership comes at a time when interest in voice enabled experiences such as Alexa, Siri and Cortana are at an all-time high,” said Russ Palay, director of product at BillingTree. “Given the complementary technology of TCN and BillingTree, this integration makes perfect sense, helping call center organizations and contact center agents save time and better serve their customers.”

To learn more about TCN and BillingTree’s new integrated partnership, visit https://www.tcnp3.com/call-center-solutions/ivr/ or to request a demo or more information visit https://start.mybillingtree.com/acton/media/15831/tcn

About TCN

TCN is a leading provider of cloud contact center technology for enterprises, contact centers, BPOs, and collection agencies worldwide. Founded in 1999, TCN combines a deep understanding of the needs of call center users with a highly affordable delivery model, ensuring immediate access to robust call center technology, such as predictive dialer, IVR, call recording, and business analytics required to optimize operations and adhere to TCPA regulations. Its “always-on” cloud-based delivery model provides customers with immediate access to the latest version of the TCN solution, as well as the ability to quickly and easily scale and adjust to evolving business needs. TCN serves various Fortune 500 companies and enterprises in multiple industries including newspaper, collection, education, healthcare, automotive, political, customer service, and marketing. For more information, visit: http://www.tcn.com/ or follow on Twitter @tcn.

About BillingTree

BillingTree® is the leading provider of integrated payments solutions to the Healthcare, ARM, Property Management, B2B, and Financial Services industry verticals. Through its technology-enabled suite of products and services, BillingTree enables organizations to increase efficiency and decrease the costs of payment processing while adhering to compliance regulations. Leveraging more than a decade of market experience, BillingTree is dedicated to growing payments with technology through an integrated omni-channel offering, suite of proprietary products and value-added services, and a company-wide focus on delivering extraordinary customer service.

Seth Frotman, the Bureau of Consumer Financial Protection’s (BCFP or Bureau) former student loan ombudsman, launched the Student Borrower Protection Center (SBCP). The organization describes itself as follows on its website:

The Student Borrower Protection Center is a nonprofit organization solely focused on alleviating the burden of student debt for millions of Americans. The SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students.

The launch of this organization comes at the heels of U.S. Secretary of Education Betsy DeVos’s speech earlier this week warning of the student debt crisis and the issues with the Federal Student Aid program.

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Frotman resigned from his position at the Bureau in August 2018 through a resignation letter addressed to the Bureau’s Acting Director Mick Mulvaney, carbon copied to several members of congress. In the letter, Frotman accused the current Bureau leadership  of failing student loan borrowers by undercutting enforcement of the law, undermining the Bureau’s independence, and shielding bad actors from scrutiny. One of the accusations was that the Bureau intentionally suppressed the release of a report prepared by Bureau staff showing that “the nation’s largest banks were ripping off students on campuses across the country by saddling them with legally dubious account fees.”

Frotman’s resignation letter caused a group of Democratic senators to send a letter to Mulvaney expressing their concern about and demanding answers for the accusations made by Frotman. Rep. Maxine Waters, who is expected to be named the new ranking member of the House Financial Services Committee following this month’s midterm election, urged the Committee to investigate Frotman’s allegations.

On November 27, 2018, Senator Elizabeth Warren (D-MA) issued a letter to her fellow senators strongly urging them to vote against the nomination of Kathy Kraninger as the next Director of the Bureau of Consumer Financial Protection (BCFP or Bureau). The letter comes on the eve of the Kraninger vote, which is expected to occur in the very near future. Congress.gov also states that the floor debate on Kraninger is to occur today (or, if not today, sometime in the near future). 

In the seven-page long letter (eleven pages with citations), Sen. Warren issues a warning to the Senators that Kraninger would continue the work of Acting Director Mick Mulvaney — evidenced by her prior endorsement of Mulvaney’s work — and would “defang the consumer watchdog.” Sen. Warren accuses Mulvaney of:

• Drastically slowing and, in some cases, stopping the Bureau’s enforcement of consumer protection laws.
• Turning the Bureau into a “partisan, biased regulator, benefitting his campaign donors and political cronies at the expense of consumers.”
• Making it easier for corporations to cheat consumers by “decimating the BCFP’s resources and enforcement tools.”
• Dismantling civil rights protections while promoting a political appointee “with a history of racially provocative statements.”

Sen. Warren also states that Kraninger’s own record at the Office of Management and Budget (OMB) “demonstrates that she is unfit to lead the [BCFP].” This portion of the letter points to Kraninger’s lack of experience with consumer finance and protection issues, issues with border protection and separation of children from their parents when crossing the border, and issues related to OMB’s responses to hurricanes in 2017.

During today’s Senate floor proceeding, Sen. Warren reitterated many of the concerns addressed in her letter. During the floor proceeding, Sen. Warren stated that American families “deserve a fighter” leading the Bureau and that Kraninger “is not that person.”

Update 5:44 PM EST: In a 50-49 vote today, the Senate voted affirmatively on the cloture motion introduced by Senator Mitch McConnell (R-KY) on November 15. An affirmative cloture vote places several procedural requirements on the Senate, designed to bring a visible end the  debate on the issue and makes the vote imminent. Cloture procedures allow 30 additional hours of debate. 

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insideARM Perspective

Sen. Warren’s disapproval of Kraninger’s nomination is nothing new. Back in July, Sen. Warren released a reported entitled Record of Failure; Kathy Kraninger’s Disastrous Tenure at the Office of Management and Budget. Following Kraninger’s confirmation hearing, Sen. Warren submitted ten pages worth of questions for the record to Kraninger.

With a Republican majority, however, Sen. Warren’s plea may not have much impact. Despite Sen. Warren’s advocacy against Kraninger, the Senate Banking, Housing, and Urban Affairs Committee voted squarely along party lines to approve Kraninger’s nomination. If the full Senate likewise votes along party lines, Kraninger will be the next Director of the Bureau.