WOODLAND HILLS, Calif. — Account Control Technology Holdings, Inc. (ACT Holdings), a national leader in delivering debt recovery and business process outsourcing solutions, welcomes Dave Hall as the Chief Sales and Marketing Officer. Hall officially joined ACT Holdings on October 15, 2018, and will lead marketing and sales for all ACT Holdings companies: Convergent Outsourcing, Inc., Convergent Revenue Cycle Management, Inc., Convergent Healthcare Recoveries, Inc., and Account Control Technology, Inc.

Hall brings over 32 years of business process outsourcing and contact center management experience. He has a wide breadth of knowledge across all market segments, including first party, third party, and customer care in the financial services, healthcare, student loan, telecommunications, automotive, utility and government markets.

“I’m thrilled to have Dave join our Executive team and believe his strong operations background in the ARM industry and results focused attitude will serve ACT Holdings well,” says Mike Meyer, CEO of ACT Holdings. “He will be instrumental in driving growth with new and existing clients and allow us to continue to demonstrate our thought leadership in the markets we service and pursue.”

Before joining ACT Holdings, Hall held the position of Executive Vice President at United Collection Bureau. Previously, for seven years, he was the President of West Asset Management and later EGS Financial Care after Alorica acquired both. He also spent five years as Senior Vice President of Operations at GC Services.

“I am excited to be joining and working alongside a team of talented and dedicated individuals at ACT Holdings. As we work to continue to expand our presence in the ARM industry, my team and I will focus on developing and executing a defined sales and marketing strategy to support our business growth and continue the consultative approach ACT Holdings was built on,” Hall said.

Hall holds a Bachelor of Science degree in organizational business management from Illinois State University and resides in Ohio with his family.

About Account Control Technology Holdings, Inc. (ACT Holdings)

Account Control Technology Holdings, Inc. provides comprehensive business process outsourcing and financial services to diverse industries. Our companies partner with clients to help them run the “business” behind their operations so they can focus on what they do best – whether it’s serving customers, educating students, caring for patients, or keeping communities moving forward. ACT Holdings companies include Convergent Outsourcing, Inc., Convergent Revenue Cycle Management, Inc., Convergent Healthcare Recoveries, Inc. and Account Control Technology, Inc. with locations across the US and offshore. For more information, visit www.accountcontrolholdings.com.

Yesterday, the court denied Weltman, Weinberg & Reis Co., L.P.A.’s (Weltman) request for attorneys’ fees and partially granted its request for costs associated with its defense against the Bureau of Consumer Financial Protection’s (BCFP or Bureau) claims. As previously reported by insideARM, Weltman sought $1.2 million for the attorneys’ fees it incurred while defending itself against the litigation filed by the Bureau as well as the Bureau’s pre-litigation investigation. Weltman also sought $67,379.08 in costs. The court denied Weltman’s request for fees in its entirety, and partially granted Weltman $10,845.65 in costs associated with the litigation.

Attorneys’ Fees

In its reasoning behind its denial of the motion for attorneys’ fees, the court stated that the Bureau’s claims were not meritless. While Weltman ultimately succeeded in the litigation, the court found that an advisory jury did make a determination that Weltman’s communications were false, deceptive, and misleading. The court noted that there was some evidence of this, but the court ultimately did not adopt the jury’s findings because the court did not deem the expert who presented evidence to be credible. The court went on to state:

The fact that the Court did not find [the expert] credible, does not suggest that his testimony was false, or that the [BCFP] did not have a good faith belief in the validity of his testimony.” *3

Of note, the court also mentioned that “there is no accepted specific test for determining when a lawyer is ‘meaningfully involved’ in the process of debt collection.” *3

Ultimately, the court found that the Bureau’s claims had some merit and that there was no evidence to suggest that the Bureau brought the claims in bad faith. 

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Costs

E-Discovery: As for costs, the bulk of the request — about $50,000 — related to e-discovery in the case. Weltman utilized e-discovery software to streamline the discovery process. With e-discovery, documents are exchanged electronically in an effort to save time and paper. The court found that the need for the e-discovery system was not created by the Bureau and that no evidence was presented to infer that e-discovery was more cost effective than copying and delivering the documents. The court also stated that if the benefits of e-discovery are more widely accepted, then Congress should amend the federal statute for taxation of costs in litigation to permit such costs.

The court cited case law that stated e-discovery costs are limited to the costs of actually copying and delivery of the materials. The court said, “[a]lthough the information contained in the system was undoubtedly necessary for use in this case, there is nothing to support a finding that the licensing and hosting costs included, or were limited to, the actual copying of materials necessary to the litigation in the case.” *7

Transcription of Call Recordings: The court granted Weltman’s request for costs associated with the transcription of consumer call recordings. The court was unswayed by the Bureau’s argument that the call recordings were not necessary to the case because they were not used at trial. Instead, the court sided with Weltman saying that the transcripts were limited to the 140 calls specifically requested by the Bureau.

Editor’s Note: As stated in Weltman’s motion, the Bureau dismissed half of its claims on the eve of trial, so the argument that costs should only be reimbursed if they are associated with items presented at trial falls a little flat.

Transcription of Pre-Complaint Hearing: The court likewise granted Weltman request for costs associated with the transcription of the pre-complaint hearing of Eileen Bitterman. The Bureau argued that investigation expenses are not chargeable as costs and that they were not necessary for litigation. However, the court pointed out that it was foreseeable that Weltman would need to rely on the information from the hearing in its defense since the Bureau relied on the hearing at other phases of the litigation, such as its motion for summary judgment.

In the end, the court granted Weltman $10,845.65 in costs.

insideARM Perspective

$1.2 million spent by Weltman in its successful defense against the Bureau’s claims, yet it only recovers a little less that $11,000. The result might be hard to stomach, but what is more disheartening is that this case is exemplary of what collection agencies and firms deal with on a daily basis in FDCPA litigation. Due to the strict liability nature of the FDCPA and the statute’s one-sided allowance for recovery of fees and costs, the consumer bar has created a cottage industry out of suing debt collectors. Sometimes the claims hold some water, but frequently the claims are far fetched or so hyper-technical that it makes one wonder if a consumer — even the least sophisticated one — would notice the difference. As shown in the Weltman case, the debt collector is out a substantial amount of money even if they did not violate the FDCPA. It doesn’t matter whether the debt collector chooses to defend itself or enter into a settlement agreement/consent order — the debt collector loses even if it wins.

The most interesting point in this decision is this: there is no specific test for determining whether an attorney is meaningfully involved. Debt collectors are to follow the law, but how are they to do so if the court doesn’t even know the rule that debt collectors are supposed to follow? Debt collectors are left trying to shoot compliance arrows in the dark, hoping that they hit the target. This is in direct conflict with Acting Director Mick Mulvaney’s stance that “regulation by enforcement is dead.” While the investigation into Weltman began prior to Mulvaney ascending to the Bureau’s top role, the court’s final ruling in favor of Weltman and this request for fees was issued well into Mulvaney’s tenure.

In a recent case, Grajny v. Credit Control, LLC, No. 18-CV-2719 (N.D. Ill. Oct. 9, 2018), the Northern District of Illinois reviewed the standard of review that applies to communications with the plaintiff’s attorney. Following Seventh Circuit precedent, the court repeated that communications directly with a debtor’s attorney fall under the “competent attorney” standard — not the “unsophisctated consumer” standard.

Factual and Procedural Background

At some point, plaintiff incurred a debt that was discharged in bankruptcy. After the debt was discharged, Credit Control, LLC sent a collection letter directly to the consumer’s attorney, Alicja Sroka. Credit Control addressed the letter to plaintiff “[care of] Alicja Srok[a] Law Srok[a].” Ms. Sroka was also the attorney that represented plaintiff in the bankruptcy action that discharged this debt.

Plaintiff filed a lawsuit alleging that Credit Control violated the Fair Debt Collection Practices Act (FDCPA) by attempting to collect a debt using false representations or deceptive means since the debt was already discharged at the time the collection efforts were made. Credit Control filed a motion to dismiss.

The Decision

When reviewing the motion to dismiss, the court needed to examine whether the complaint stated a claim upon which relief can be granted. Citing Seventh Circuit precedent, the court stated that in this jurisdiction, communications directly with the consumer’s attorney are reviewed under the “competent attorney” standard. Here, the relevant collection letter was sent directly to the attorney that represented the plaintiff in the bankruptcy action, who would have or should have known that the debt was discharged. The court found that a competent attorney in this circumstance would not be deceived or mislead by the letter.

One of the cases cited by the court in reaching its decision was Bravo v. Midland Credit Mgmt., Inc., 812 F.3d 559 (7th Cir. 2016), a case previously reported by insideARM. In Bravo, the underlying debt was settled between the parties. Here, plaintiff attempts to argue that Bravo shouldn’t apply since the debt here was discharged in bankruptcy, not settled pursuant to an agreement between the debt collector and consumer. The court was unswayed by this, finding that “[t]he way a debt is resolved…is irrelevant; instead, the issue is whether a competent attorney would be deceived by Defendant’s collection letter.”

The court granted the motion to dismiss without prejudice, allowing the plaintiff to repleade the FDCPA claim.

insideARM Perspective

In an ideal world, this type of situation is avoided by procedures that check whether the account was discharged in bankruptcy. Unfortunately, scrubs are not perfect one hundred percent of  the time so it is foreseeable that a situation like the one above could occur. We don’t know exactly what happened in this case since the decision focuses solely on the standard of review, but what’s interesting is that a small change in facts could completely change the outcome. This case is an example where, in these circumstances, no harm befell the consumer since the letter went directly to the attorney that represented the consumer in the bankruptcy action that discharged the debt. Undoubtedly, had the letter gone to the consumer the motion to dismiss would have been denied. Who knows what the outcome would be if the letter had gone to another attorney representing the consumer, but not the one that represented the consumer in the underlying bankruptcy. 

Well yesterday was the deadline for supplemental comments on the FCC’s big TCPA Public Notice. So today I begin the process of reading and digesting these things and reporting to all of you I have just reviewed these in the order I happened to open them. No editorial discretion exercised here. Have fun. I did. More to come tomorrow.

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Louisiana Credit Union League Comment

Well we’re off to a hot start with the Louisiana Credit Union League discussing a case called “March v. Crunch San Diego, LLC” throughout its comment. Eesh.  But the LCUL comment is otherwise thoughtful and discuses the interaction between Marks and cell phones thusly: “If it is possible (as we believe it is) that a cellular phone in regular use with a stored contact list can be conceivably determined to be problematic for a business to use to make reasonable business communications as in the case of credit unions with its members, this matter cries for regulatory clarity and an application of a reasonableness standard that can cover not just this generation of technological communications – but innovations yet to come in this arena.” Comment can be found here: Louisiana Credit Union League – FCC Comment

Noble Systems Corporation

Now we’re talking. Noble comes out swinging noting that Marks “essentially adopted the plaintiff’s proposed construction verbatim…[with] the resulting holding of the court [] inconsistent with itself (as there are two differing statements of the holding in the decision), overly broad, and ambiguous as to its scope and application.”  The comment then points out that “Because random and sequential number generators unequivocally stored numbers that were to be dialed, it makes sense to read the statutory language as proposed by the defendant, consistent with its plain meaning.”  From which Noble concludes that the statutory language is not ambiguous: “Rather, the statutory language
appears deliberately and carefully crafted to cover two known modes of operation for dialing numbers using random or sequential number generators.” Nice point.

Noble further drives home the FCC’s lack of authority to edit an unambiguous statutory definition: “The Commission should be cognizant that the statutory language is not ambiguous, and is deliberately crafted to cover the known contemporaneous dialer technology at the time the TCPA was passed. The Commission does not have any basis from deviating from the plain meaning of the ATDS statutory definition in the TCPA in forming its rules.”

In the remainder of Noble’s robust comment, it makes the following points with thorough analysis and copious factual support:

• If a digital circuit produces a number, the number must be stored
  in memory in some manner. Without storing the number, the number does not exist. (Does this sound like Sarte to anyone else?)
• Congress knew about the status of technology in 1991, which plainly included numerous dialing systems that indeed randomly or sequentially created numbers to be dialed;
• The Marks definition does not define the phrase “automatic” so the formulation is essentially meaningless–“The scope of the term “automatically” is subject to interpretation, and is likely to result in extensive litigation to define its metes and bounds. The scope of how proximate human intervention is required to accomplish call origination would have to be defined in excruciating detail to provide guidance to call originators.”
• The word “dialing” needs to be defined because “modern VoIP and wireless phones typically utilize a form of “en-bloc” signaling from the phone device to the switch, where all the telephone digits are sent in one message…”The switch receiving the call request with the digits cannot differentiate between the user having manually selected all the digits versus the user pressing a speed dial (or redial) function.”  (Nice point!)
• And in a brilliant–and much needed–analysis of the FCC’s purported ability to expand the TCPA to keep up with evolving technologies, Noble points out: “There is no basis whatsoever to conclude that Congress intended, nor that the TCPA authorizes, the Commission to adapt or extend the statutory language of an ATDS in anticipation of the development of new technologies. The only authority granted to the Commission was to exempt new technologies. “

Really magnificent stuff guys. *Begins a slow clap.* I encourage all of you in TCPAland to join in the applause and also review the full comment found here: Noble Systems Corp. – FCC Comment

Ohio Credit Union League

Neat and tidy comment from the PCUL asks the FCC to clarify that the TCPA really only applies to telemarketing calls. Also raises recent First Amendment challenges as a reason to consider trimming back the scope of the statute. Urges that the statutory definition should be faithfully applies (including random or sequential number generation.) Concludes with request for “present” as opposed to “potential” capacity.

Nice stuff Paul and Miriah.  Full comment here: Ohio Credit Union League – FCC Comment

PACE 

The Professional Association for Customer Engagement has been a long-time TCPA reform advocate. Their comment is suitably and predictably well presented.

PACE starts by reminding the FCC that Congress made a policy choice when choosing to restrict dialers that use random or sequential number generation because they tend to tie up emergency lines and hospitals.

PACE then does a very nice job of mapping the history of the FCC’s 1992 and 1995 orders respecting the Commission’s earliest articulation of what random and sequential number generation means. (I presume you folks pulled that from TCPAland’s Key FCC Orders analysis?)

PACE next borrows copiously from the outstanding ruling in Pinkus to explain why Marks just flat misread the TCPA’s ATDS definition. How embarassing.

PACE also blisters the logic that Congress ratified the FCC’s 2015 Omnibus because Congress cannot, by silence, bless an interpretation contrary to the plain meaning of an Act. Citing Ashton v. Pierce, 716 F.2d 56, 63 (D.C. Cir. 1983) (Nice find!)

It concludes with a searing one liner: “A system is not an ATDS simply because it can automatically call telephone numbers from a list—a function not covered by the statute.”

Well done MM&S.  The comment can be found here:  Professional Assoc. for Customer Engagement (PACE) – FCC Comment

Wisconsin Credit Union League 

Here’s a nice little comment with a polite Midwestern feel.

The WCUL asserts: “We respect and support the rights of consumers to be free from unwanted “robocalls,” but unfortunately, the TCPA has been interpreted in ways that unduly impede credit unions’ ability to reach members for legitimate business purposes.”  It also suggests that random and sequential number generation is the hallmark of an ATDS: “That term should mean only equipment that has the present capability to generate random or sequential numbers and to dial those numbers without human intervention.” The comment is short and to the point, but well worded and–I suspect–it will be well received given the more aggressive tone of other comments.

The comment can be found here:  Wisconsin Credit Union League – FCC Comment

Allstate

First, shout out to our long time followers–hi guys!

Allstate’s Comment takes a nice pro-consumer bend, reminding the FCC of the importance of immediate communications in times of natural disasters like Hurricane Florence and Michael. As the Comment puts it: “Contacting our customers through systems that have stored information and which can connect them immediately to our teams is essential to our mission of protecting them from life’s uncertainties.” Well said.

As with other Commenters, Allstate urges the FCC to: “adopt a standard that considers the actual use of the equipment and focuses on its ability to randomly generate and dial numbers and not merely call numbers from electronic databases.

The Comment also seeks clarity on “capacity” linking back to the smartphone issue: “using the Marks decision as a guideline of what constitutes an ATDS, every smartphone could qualify under the definition. Such a broad definition could continue to expose Allstate and its agents to frivolous and potentially crippling litigation aimed at not helping consumers but rather benefiting plaintiffs’ attorneys seeking to exploit large companies under the guise of consumer protection. The law should not be a “gotcha.””

Another brief comment, but very punchy and impactful. Good work Maria and team! The comment can be found here: Allstate – FCC Comment

Encore Capital Group

Here’s a nice one to end on for the day. Encore begins by noting that its never done this before but it realizes now how important this stuff is: “To date, Encore has purposely abstained from directly commenting on the definition of an automatic telephone dialing system (“ATDS”), but we feel compelled to comment at this pivotal juncture given the importance of this issue to the one out of five American consumers our company works with.”

The Encore comment is fearless in attacking Marks. It states: “The Ninth Circuit literally re-wrote the statute so as to separate from the same clause the requirements “to store numbers to be called” and “using a random or sequential number generator.””  And it draws a stark conclusion: “[Marks] subject[s] to the Act’s coverage any conventional smartphone that can store and then dial numbers. This means that, for the 77% of Americans who own smartphones, each is “a TCPA-violator-in-waiting, if not a violator-in-fact.””

Encore goes on to characterize the Marks formulation as “convoluted,” a “drastic[] alter[ation]” of the statute, an “outlier,” and “directly contradict[ing]” ACA Int’l.  And then it asserts: “Markstook the liberty of creating its own novel reading (if not blatant re-writing) of the statute and came up with the same result that the ACA ruling vacated.”

Way to jump in with both feet!

Encore then engages in an impassioned defense of predictive dialers and explains why they do not meet the statutory ATDS definition. It concludes with a reminder that TCPA litigation is out of control and industry needs some help from the FCC. The Comment concludes with a fitting call for the FCC to “end the madness”:

“For the past decade, businesses have been operating in a state of limbo, unsure how to define an ATDS and staring down the barrel of potentially door-shutting litigation. Between the pervasive confusion over the definition of an ATDS and the abusive litigation environment, it has been a veritable minefield for legitimate callers to reach their customers. Now is the time for the FCC to put an end to the madness.”

You can almost feel the angst in this comment. But for an industry that has, indeed, been oppressed and picked apart by frivolous litigation over the last decade, Encore’s aggressive Comment must feel good to read. Nice to see someone is truly fighting to stem the tide here beside just little ole me.  Here’s looking at you Sheryl and Tamar!

Encore’s Comment can be found here: Encore Capital Group – FCC Comment

That’s enough for today. More to come tomorrow.

—

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.

UNIVERSITY PARK, Fla. —  National Creditors Bar Association elected a new President-elect and six Board of Directors Members on October 12, 2018. They were sworn in at the NCBA 2018 Fall Conference in Nashville, Tennessee.

President-elect

Mark Groves is a Member and Managing Attorney of the Collections Department of Glasser and Glasser, P.L.C., which practices statewide in Virginia, North Carolina, Maryland and Washington, D.C. Mark has served as a member of the Virginia Supreme Court’s Advisory Committee for Electronic Filing. He has previously served as a panelist at the Federal Trade Commission’s roundtable on Legal Debt Collection in Washington, D.C. and has presented on a variety of topics related to fair, ethical and professional debt collection. Mark previously served as Treasurer and was a member of the NCBA Board of Directors prior to his election as President-elect. He has served on many NCBA committees, including Government & Regulatory Affairs, SCBA Forum, Budget & Finance, Professional Standards & Grievance, Strategic Planning, PACCA and Membership. Mark is the 2017 recipient of the NCBA President’s Award for his service to the association.

Newly Elected Board of Directors Members

Adam Cleveland is with the firm Adam L. Cleveland, P.C. in Peachtree Corners, Georgia. He has spent over ten years practicing in the area of creditors rights. In 2015 he served on the Georgia Garnishment Law Task Force, which produced what ultimately became Georgis’s new garnishment law in 2016. He also co-founded and serves as an officer of the Georgia Creditors Council. He has served on several NCBA committees including SCBA Forum, Young Professionals/Millennials (which he is co-Chair), PACCA and Government & Regulatory Affairs.

Crystal Duplay is with the Law Offices of Timothy M. Sullivan in Cleveland, Ohio. She has been practicing law since 2009 and is admitted to practice in both Ohio and Wisconsin. Her core strengths include litigation, Fair Debt Collection Practices Act (FDCPA) matters, research, regulatory compliance, negotiations, analysis, diplomacy, communications and problem solving.  She is a member of the Cleveland Metropolitan Bar Association. She has served on several NCBA committees including SCBA Forum, Conferences, and Education.

David Rothman is Director of Inventory Management with the firm Rubin & Rothman, LLC, a New York, New Jersey, Connecticut and Massachusetts creditors rights law firm in Islandia, New York. David is a second-generation creditors rights attorney and has been around the industry his entire life. He is active in the NCBA Membership and Awards & Scholarships Committees, the latter for which he serves as co-Chair.

Re-Elected Board of Directors Members

June Coleman is a shareholder at Carlson & Messer LLP in Los Angeles, California. Her areas of emphasis are the FDCPA, the FCRA, the TCPA, commercial litigation, and creditor rights. She has served on or led a number of NCBA committees including the Education Committee, Education – Defense Sub-Committee, Defense Bar Steering Committee, Bylaws Committee, and Amicus Brief Sub-Committee for which she is co-Chair.

Nicole Strickler is with Messer Strickler, Ltd in Chicago, Illinois. She concentrates her practice in the defense of corporations in civil matters but particularly focuses in the defense of consumer litigation throughout the country. This includes representing clients in both individual and class actions involving state and federal consumer laws. As a member of NCBA, Nicole has taken an active role including serving on a number of committees including Education, Nominating/Elections, and Defense Bar, for which she is Chair. She is a frequent speaker at industry conferences.

Alison Walters is with Kelley Kronenberg in Tampa, Florida, where she practices in the areas of commercial litigation, creditors rights, bankruptcy, and insurance subrogation. She is a member of the Hillsborough County Bar Association, The Tampa Bay Bankruptcy Bar Association, Business Law section of the Florida Bar, National Association of Subrogation Professionals and the Hillsborough Association of Women Lawyers. Additionally she is a Past President of the Florida Creditors Bar Association. She has served on or led numerous NCBA committees, including Education, Membership, Conferences, SCBA Task Force, and Strategic Planning, for which she is Chair.

About NCBA

National Creditors Bar Association is a nationwide bar association of over 550 creditors rights law firms and in‐house counsel of creditors.  National Creditors Bar Association members are committed to being professional, responsible and ethical in their practice of creditors rights law.

ELMHURST, Ill. — At its recent Annual Conference, the Medical-Dental-Hospital Business Associates (MDHBA) elected its 2018-2019 Officers and Board of Directors and presented awards. The meeting was held October 11-12, 2018, at The Chase Park Plaza Royal Sonesta in St. Louis, Missouri.

Officers and Directors Elected

Officers who were elected include: President Kathy Shambre, president, Debt Recovery Solutions of Ohio, Mansfield, Ohio; President-Elect Matt Inscore, customer relations Manager, CSO Financial, Inc., Roseburg, Oregon; and Secretary/Treasurer Ashley Statley, client services manager, BC Services, Inc., Longmont, Colorado.

John Esa, director of strategic marketing, General Credit Services, Inc., Medford Oregon, was elected to a two-year term on the MDHBA Board of Directors. Jon Nixon, CPBE, executive vice president, CMRE Financial Services, Inc., Brea, California, continues on the Board with one year remaining in his current term.

Gina Battershaw, director of operations & outside sales, Credit Bureau Services Inc., Norfolk, Nebraska, will serve as Immediate Past President.

Awards 

The Robert T. Hellrung Award was presented twice in 2018. The recipients are Connie Matrisch, CHC, president & CEO, Pro Com Services of Illinois, Inc., Springfield, Illinois, and Ashley Statley, client services manager, BC Services, Inc., Longmont, Colorado. The Hellrung award recognizes individuals for their contributions to the medical economics profession and to MDHBA.

Jon Nixon, CPBE, executive vice president, CMRE Financial Services, Inc., Brea, California received the President’s Award. The President’s Award is presented annually by the current MDHBA president to recognize an individual or individuals who did the most to advance MDHBA’s interests during his or her tenure as president.

MDHBA’s next Annual Conference will take place Oct. 10-11, 2019, in San Diego, California.

About MDHBA

Medical-Dental-Hospital Business Associates is the healthcare ARM community for accreditation and networking. Formed in 1939, MDHBA and its members set a tone of collaboration and continuous improvement within the demanding and competitive world of healthcare financial services. MDHBA provides a nationwide forum for idea exchange, continuing education and certification. For more information, contact: MDHBA, 350 Poplar Ave., Elmhurst, IL 60126. Telephone 630.359.4723; Fax 630.359.4274; E-mail info@mdhba.org; www.mdhba.org

GENESEO, N.Y. — Coast Professional, Inc. (Coast) is pleased to announce the promotion of Ms. Michele Malczewski to Chief Human Resources Officer (CHRO). This promotion recognizes Ms. Malczewski’s successful six year career at Coast, as well as her value as a leader to the organization. Ms. Malczewski receives this promotion from her previous position of Vice President of Human Resources.

As Chief Human Resources Officer, Michele is responsible for the management of the company’s Human Resource Department, benefits, recruiting, and compensation. Michele leads a team of eight human resource professionals who provide support to more than 475 employees. Through their combined efforts, the Human Resources department has provided necessary support of the company’s significant growth periods, furthered the company’s human resource initiatives, and fostered stronger employee relations.

Ms. Malczewski joined Coast in 2012 and has advanced her career from Director of Human Resources to her current role of CHRO. Michele is responsible the HR functions for multiple government contracts and over 200 college and university clients. In the past year, Michele has been instrumental in the onboarding a new government client, has established a recruiting department, managed the hiring of more than 110 new staff members and the interview process of more than 5,100 applicants, and finished the transition of a new payroll processor/employee database.

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Yesterday the Bureau of Consumer Financial Protection (BCFP or Bureau) posted advice to consumers regarding how to tell the difference between a legitimate debt collector and a scammer. This is important, and I support all efforts to make this distinction. The problem is, the advice and the law don’t exactly match up.

Another insideARM article published today highlights two recent court cases that address the beginning of a interation between a debt collector and a consumer and describes the gauntlet created by the Fair Debt Collection Practices Act (FDCPA) prohibition against communicating with a third party about a person’s debt. (I suggest readers check out that one first, for background, then follow the link at the end back to this one.)

While much of the Bureau’s advice is good, it makes no mention of the collector’s responsiblity to confirm they are speaking with the “right party” before providing any information. This is misleading and, in my opinion, it causes confusion for consumers and an untenable situation for creditors and their legitimate collectors. The following are among the listed warning signs of debt collection scams:

Withholds information from you

A debt collector must tell you information such as the name of the creditor, the amount owed, and that if you dispute the debt the debt collector will have to obtain verification of the debt. If the debt collector does not provide this information during the initial contact with you, they are required to send you a written notice within five days of that initial contact.

This is the first item on the list. As a consumer, I would assume this means that the collector would start by giving me the creditor’s name, amount owed, etc. No mention is made of the fact that they can give this information only after they have confirmed they are speaking with the right person. And no mention is made about what this “confirmation” will involve.

Asks you for sensitive personal financial information

Such as your bank account, routing numbers, or Social Security numbers. You should never provide anyone with your personal financial information unless you are sure they’re legitimate. Scammers can use your information to commit identity theft.

And, here’s what that confirmation involves. While this is excellent advice in today’s world, it’s exactly what creditor clients require their collection agencies to ask for in order to confirm they are speaking with the right party (not bank account, but other sensitive information).

Ask for a callback number

If you’re uncomfortable providing any information, you can request the caller’s name, company name, street address, and a callback number. You can use this information to verify that they are not a scammer before providing any personal information. Also, if you call back and the business doesn’t answer as the name they provided to you or it’s a nonfunctioning number, it could be a scam.

Again, great advice, but until a collector can verify they are speaking to the right party, they can only provide this information if asked. This makes them seem evasive, which is exactly the kind of behavior that may cause a consumer to feel uncomfortable.

So, what often happens is that the call ends with no information being exchanged. When collectors cannot reach consumers in any meaningful way, additional adverse consequences may result. Many accounts which would otherwise be resolved are instead escalated, resulting in unnecessary credit reporting, garnishments, repossessions, and litigation against consumers.

How can this catch-22 situation be resolved?

I have a few suggestions. 

Clearly authorize and enable debt collectors to initiate communication through digital channels

A rule that clearly authorizes and enables debt collectors to initiate communication through digital channels would make it possible to employ the dozens of more advanced ways to authenticate the consumer; these very same channels are already in wide use by banks and other financial institutions – those businesses that require the very tightest security and privacy measures. Enabling use of these channels would greatly benefit the consumer from the very beginning of the collection cycle by making communication far less awkward and frightening, more immediate, more likely to be addressed and not ignored – and thus less likely that an account would escalate unnecessarily.

Contact which is initiated digitally rather than via phone call would also give the consumer the opportunity to independently check out the organization that is contacting them before they engage in a live discussion. In fact, it might even remove the interaction from the phone entirely, if that’s what the consumer chooses. 

Affirmatively provide that, for purposes of FDCPA compliance, disclosure of the debt collector’s true identity does not constitute an unauthorized disclosure of the debt.

Do this by clarifying in §1692c. Communication in connection with debt collection, section (b) Communication with third parties by that “Mere disclosure of the true identity of the collector does not constitute a communication.” This would provide a measure of transparency to the consumer, it would reduce the amount of friction at the beginning of an interaction, it would allow a consumer to check out the caller before engaging, and it would establish a modicum of trust between collector and consumer. 

Finally, I will digress for a moment. In the event that another of my suggestions — the handshake communication — catches on, this addition to the FDCPA would create a sorely needed closed loop of information between creditor, collector and consumer. The handshake communication is like the letter (regardless of the channel of delivery) sent by a mortgage lender when the loan is sold; “We’ve sold your mortgage. This is who we’ve sold it to. This is who you’ll be making your payments to.” If such a communication were sent by a creditor when placing a consumer’s account with a third party agency, the consumer would be able to recognize the name of the agency contacting them, and would be expecting the outreach. I get that there may be current limitations to the ability to send such a communication. But, isn’t it the right thing to do?

The good news is that the Bureau has the authority to act on these recommendations, and in fact remains on track to release a Notice of Proposed Rulemaking in March 2019 addressing issues such as communication practices and consumer disclosures. 

Two court cases in 2018 address the awkward dance endured at the beginning of each initial phone call between a consumer and a debt collector.

When speaking with consumers, debt collectors walk on a sword’s edge to comply with two sections of the Fair Debt Collection Practices Act (FDCPA). Section 1692c (b) prohibits a debt collector from communicating with third parties about the debt with the exception of several limited carve-out situations such as having the consumer’s prior consent. Section 1692e (11) requires a debt collector to disclose that he is attempting to collect a debt and that any information obtained will be used for that purpose while speaking with the consumer.

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At first glance, these two sections of the FDCPA seem straight-forward. If the debt collector is talking to the consumer, he must disclose the purpose of the call. If the debt collector is talking to a third party, then he must refrain from disclosing the purpose of the call or any other information about the debt unless one of the limited carve-outs is satisfied.

A closer look at the practical implications of these two sections reveals a gray area triggered by the initiation of a telephone conversation.

Consumer Verification Process

To determine whether the debt collector needs to disclose the purpose of the call, he must first determine whether he is speaking with the right person. The FDCPA provides no guidance on how to do this, so debt collectors and their creditor clients have had to create their own policies and procedures. While these procedures may vary by company and whether the call is inbound or outbound, there is a common thread: generally debt collectors ask the consumer to verify some piece of personal information, such as the last four digits of the consumer’s social security number or the consumer’s birth date, to ensure they have the right person on the phone.

Prendergast and Ali Illustrating the Complexity

Prendergast v. First Choice Assets, LLC, No. 17-cv-316 (N.D. Ill. May 14, 2018) concerns this exact situation. This case revolves around two phone calls placed by a debt collection agency while attempting to collect a debt on behalf of its debt buyer client. In both calls, a debt collector asked the consumer to verify the last four digits of her social security number to confirm the right person was on the line; both times, the consumer refused and the conversation ended. During the second phone conversation, the consumer acknowledged she was Yenma (the plaintiff’s first name), but would not verify the last four digits of her social security number. According to the court, the called party’s acknowledgment of his or her first name is enough to trigger the requirement to disclose the call’s purpose if it is an outbound call placed to a number that the debt collector received with the account.

This same court recently came to a somewhat different conclusion in Ali v. Portfolio Recovery Associates, LLC et al., No. 15-CV-6178 (N.D. Ill. Sept. 30, 2018). In Ali, Portfolio Recovery Associates, LLC (PRA), through its counsel, served a collections lawsuit on a person who had the same first name, middle initial, and last name as the consumer liable for the account, only to later find that this was not the same person. The court would not grant summary judgment in favor of PRA for the bona fide error defense in Ali because, despite all of its policies and procedures, PRA served the wrong “Syed H. Ali.”

Ali is distinguishable from Prendergast in some ways. First, Ali did not involve a phone call. Second, the address used for service in Ali was not an address that originally came to PRA with the account. However, the skip tracing process used by PRA to obtain the address was two-pronged: it got the address both through an internal legal resource as well as through Experian.

Synthesizing these two cases highlights the complexity. Would the dual-verification of contact information in Ali be sufficient for the Prendergast court to find that verification of only the first name confirms right party contact? What if the Ali situation — same name, wrong person — occured in the Prendergast phone call? How should debt collectors proceed?

Considerations

Some questions for consideration:

• At what point can a debt collector be satisfied that they are indeed speaking to the right party, thus allowing them to disclose the purpose of the call without fear of third party disclosure?
• How many pieces of personal information, if any, other than a full name must a consumer verify to confirm their identity?
• In today’s world of identity theft and data breaches, are standard forms of information such as social security number or birth date even relevant proof of identity anymore?
• If the consumer refuses to provide any information to allow the debt collector to verify that they are speaking to the right party, is the debt collector in violation of the FDCPA if he does not disclose the purpose of the call even if refraining from doing so was with the intent to protect the consumer’s privacy?

In today’s environment, the last bullet point occurs regularly. Consumers are continually instructed by regulators, consumer advocates, and the media not to disclose their personal information if they do not know who they are speaking with. While everyone, including the ARM industry, agrees that measures to protect consumers against identity theft are important, this leaves debt collectors between a rock and a hard place due to the requirements of the FDCPA. Further, the situation makes collectors appear evasive, and often even encourages complaints to be filed, because consumers suspect fraud.

While a debt collector must disclose their agency’s name if asked by the person on the line prior to verifying the called party is the right party, that may not mean much. Consumers are familiar with the names of the entities where they took out a loan or opened a line of credit, but they are generally not familiar with the names of debt collection agencies. The issue gets more complex with purchased debt because there is an added degree of separation between the original creditor and the debt collector that is collecting on behalf of a debt buyer.

This all leads to an awkward authentication dance between the debt collector, who is trying to verify that they are speaking to the correct person, and the consumer, who is weary and suspicious of being asked for personal information from a person they don’t know. In these situations, both parties are trying to protect the consumer’s personal information. Unfortunately, these reasonable intentions often  lead to a stalemate that has the potential to harm the consumer.

If debt collectors cannot communicate and resolve accounts with consumers, it increases the likelihood that creditors, with no other means of recovering delinquent accounts, will file lawsuits against consumers. Collections lawsuits have an high default rate — meaning that consumers do not respond to complaints or appear in court — which causes judgments to be entered against consumers. Judgments impact consumers’ credit scores and follow consumers for many years to come.

There has to be a better way for all parties involved — consumers and their advocates, debt collectors, and regulators — to resolve this authentication issue.

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Editor’s note: We suggest you now read this article, also published today, for more about this topic, and some potential solutions.

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