DEARBORN, Mich. — FocusOne, Inc. is pleased to announce Linda Woodward has recently joined the FocusOne executive management team as Vice President of Strategic Accounts. In this newly created role Linda will collaborate with our existing team in overseeing and enhancing all aspects of client experience, from sales and implementation of new clients to new product and service delivery, as well as ongoing long-term relationship partnering with existing clients. Linda brings with her a wealth of experience within the ARM industry, having spent the last 12 years with DANTOM/RevSpring where she was instrumental in the development and creation of implementation onboarding process, project management office, and business relationship management as well as sales and sales support of nationwide strategic accounts.

Linda joins FocusOne to continue our proven success in providing ARM communication services to various types of business within the ARM industry.  “I’m honored and proud to start a new future with FocusOne and look forward to working with the team to further develop their already extensive product and service suite, as well as the opportunity to provide the level of support and partnership our clients deserve that will foster success. Our clients’ success is our success! I’m fortunate to be joining a highly respected company and team that prides itself on quality service and products that meet their clients’ needs, and where building relationships matter.”  

CEO James Nesbitt said, “Linda’s experience and industry knowledge has already made her a key addition to the Hatteras/FocusOne corporate family. Her appointment is a sign of our commitment to being the leading company in our industry. Our new innovations and the increasing demand from our customers led us to look for an addition to our team who shares our philosophy of innovation and exceptional service, as well as our vision for future growth. There is no one else in the industry with the wide breadth of knowledge of project management, relationship management, and sales experience. She’s well known for the dedication to exceptional client experience and proven results that she now adds to our already proven executive management team. Linda will play key role in providing and implementing high quality solutions for our clients.” 

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About FocusOne, Inc.

FocusOne is a division of Hatteras, Inc., a WBENC certified woman-owned full service design, data, print, mail & electronic communication delivery company headquartered in Dearborn, MI and founded in 1977.  FocusOne has extensive understanding and experience in ARM-related communications and our client service is unparalleled in the industry. More information on FocusOne’s services, solutions, and key leadership can be found at www.focus1data.com.

Contact
FocusOne, Inc.
Linda Woodward, PMP
VP of Strategic Accounts
313-624-3360
lwoodward@focus1data.com
www.focus1data.com

Just about a year ago the Consumer Financial Protection Bureau (CFPB) filed suit against the law firm of Weltman, Weinberg & Reis Co, L.P.A. (WWR) alleging that the firm deceived consumers with misleading calls and letters. The fundamental issue is the fact that there is no formal definition of “meaningful review” of lawsuit documentation – 30 seconds? 5 minutes? 2 hours? This issue is now going to trial.

Background

The CFPB’s lawsuit accuses WWR of falsely representing in millions of collection letters sent to consumers that attorneys were involved in collecting the debt. The Bureau argues that a “letter sent on law firm letterhead, standing alone, represents a level of attorney involvement to the debtor receiving the letter” and that consumers receiving these collection letters “may reasonably believe that an attorney has reviewed his file and has determined that he is a candidate for legal action.”

The Bureau further argues that WWR attorneys do not 1) review account-level documents, 2) make any individual determination that the balance stated is due and owing, 3) form a professional judgment that a demand letter is appropriate for a particular account, or 4) decide to send a demand letter to individual consumers.

WWR asserts that its “lawyers are involved in and oversee every step of the collection process; communicate with their clients to gather information that the lawyers feel, in their professional judgment, is necessary to evaluate a portfolio of debt and verify the accuracy of representations that the client makes; develop a collections strategy, and oversee the use of technology to identify accounts that should be treated differently, thereby satisfying the meaningful involvement standard.”

insideARM reported on the lawsuit in April 2017, and noted that this was the third debt collection law firm targeted for enforcement by the Bureau.

In June of 2014 the CFPB filed suit against the Georgia law firm of Frederick J. Hanna & Associates. That case was ultimately settled with a consent order announced in December of 2015. insideARM subsequently published an article by Joann Needleman that discussed the significance of the Hanna order and predicted continued oversight by the CFPB over the practice of law in the collection arena.

On April 26, 2016 the CFPB announced it had filed a consent order with the New Jersey debt collection law firm, Pressler & Pressler LLP. Pressler & Pressler issued its own press release about the order.

Both Pressler & Pressler and WWR have insisted they have not violated any laws, and that they have been truthful with consumers. WWR issued this statement in 2017,  

“We fundamentally disagree with the CFPB’s allegations and believe that this lawsuit is the result of our firm’s refusal to be strong-armed into a Consent Order. We are a law firm that is legally allowed, under federal and state law, to provide collection and legal services. We are being truthful with consumers and factually accurate when we use our name and our company’s letterhead for proper debt collection activity. WWR has taken every reasonable step to ensure that it collects on consumer debts in compliance with those statutes and to ensure that every statement made to consumers is accurate and not misleading. I’d also like to emphasize that the CFPB’s two-and-a-half-year investigation into our firm did not uncover a single instance of consumer harm.

WWR cooperated fully with the CFPB since it initiated its Civil Investigative Demand (CID) in September 2014, producing hundreds of thousands of pages of documents and more than 1 million collection phone call recordings, and submitting to two investigational hearings. This was done at significant cost to WWR, but with the goal of proving to federal regulators that its attention to compliance and its by-the-book ethical practice of law is exemplary.

It is not unusual for any large entity in the financial services industry to receive a CID from the CFPB. WWR, which has 65 attorneys and more than 650 employees, represents many of the largest financial institutions in the U.S. in bankruptcy, consumer and commercial collections, litigation, and real estate default matters. WWR has not been the subject of any other formal government actions or disciplinary reviews.

The result of the CFPB’s investigation of our law firm is based on its interpretation of the law, and not on any actual violation of federal or state laws or regulations as they are written today. We will continue to vigorously defend WWR’s honest, ethical and compliant collection practices, and we look forward to our day in court.”

Moving forward

The day in court is finally coming for WWR. Earlier this month, Judge Donald C. Nugent in the U.S. District Court for the Northern District of Ohio denied a Motion for Summary Judgment by WWR and sent the case to trial.

The company had filed its Motion citing 1) statutes of limitation applicable to the claims, 2) its communications with consumers truthfully identified WWR as a law firm as required under the FDCPA and the Ohio Rules of Professional Conduct, and 3) that the Bureau is not entitled to restitution or disgorgement damages based on the deposition testimony of a witness who stated, “I have no idea if it is all ill gotten or partly ill gotten.”

Judge Nugent concluded that no claim in this action will be completely foreclosed on statute of limitations grounds, and whether the communications at issue are misleading is a question of fact that must be determined by a jury. You can read the judge’s order here. The trial is set for May 1, 2018.

Some drama

A court filing last week revealed some drama regarding potential testimony in this case. WWR has indicated it will call former CFPB Director Richard Cordray as a witness in the case because 1) he was the Attorney General of Ohio in 2009 and 2010 when that office retained the firm to collect debts owed to the State of Ohio, and 2) as CFPB Director, he later authorized the filing of the lawsuit against WWR.

The CFPB moved the Court for a pre-trial ruling to exclude Cordray, claiming that evidence he could offer from the 2009-2010 period is not part of the period in question (the lawsuit specifically references letters sent after July 21, 2011), and therefore will confuse the jury, unfairly prejudice the Bureau, and waste time.

The CFPB also argues, “…that the Ohio Attorney General never identified any concerns with WWR’s collection practices or demand letters in 2009 or 2010 when Mr. Weinberg was special counsel likewise should be excluded,” and that “Mr. Cordray’s testimony and other evidence responsive to these lines of questions are protected from disclosure by the attorney-client privilege, the deliberative process privilege, and the attorney work product doctrine.”

You can read the full Motion, including additional arguments by the parties, here.

insideARM Perspective

This case proceeds against the backdrop of the advancing Practice of Law Technical Clarification Act of 2018 (formerly of 2017). H.R. 5082 amends the Fair Debt Collection Practices Act to exclude law firms and licensed attorneys who are engaged in activities related to legal proceedings from the definition of debt collector. Last month the House Financial Services Committee completed markup of the bill and approved it to move on. insideARM wrote about this Act on March 19, 2018, just before it moved out of Committee.

There is growing demand by customers to communicate when and how they want. In a recent study conducted by Interactions, 43% of customers say that talking to a live agent is their least preferred method of communication. You don’t have to look much further than the growing number of young adults all around us to see how most connect with each other, with brands, and with service providers. While young adults are a good group to study, I know many others (like me) who have similar preferences. Although what drives our preferences may be different, our needs are similar. I’m a busy, working mom. When I’m not working, I want to maximize quality time with my family. If I can pay a bill online or get a question answered through chat or email, while also searching Pinterest for a dinner recipe, waiting out piano lessons or fielding homework questions, I’m not only SOLD, I’m also grateful and loyal.

You can hardly read an article about collections innovation without some reference to the increasing use of digital tools, often combined with some form of Artificial Intelligence (AI). The way that AI can be and is being used across service, collections and recovery varies greatly, but it’s growing in its ability to help the industry customize experiences and maximize results.  

I’ll hit on some of the widely-used and growing methods:

Process-level automation

In some cases, creditors and agencies are easing into AI by hiring companies to write what are essentially high-powered macros across multiple systems to automate processes that don’t require subjective review. In other words, robots are great at things that are consistent and repeatable. Beyond the obvious efficiency, the use of AI in this sense also helps reduce human error and improves service levels. It also frees up human bandwidth for those operational aspects that do require subjective judgment.

Strategy-level channel strategy

To date, companies have largely leaned on industry intelligence, case studies, and good old fashioned intuition to guide the evolution of omni-channel strategies. Where those strategies relied heavily on traditional, verbal communication, it has become clear that clean, fast digital communication drives results, lowers cost and also returns clear information on which to base future business decisions. Furthermore, AI is using data on consumer behavior at the portfolio level (auto, credit card, mortgage, student, etc.) to guide companies on which channel strategy mix makes the most financial sense, and which levers to pull (and when) based on the product, delinquency, balance, etc.

Customer-level interaction strategy

This is where it gets fun. It’s one thing to know, at a portfolio level, the smartest mix of omni-channel solutions based on ROI, but tailoring customer preference at the individual level based on what data reveals can be transformational. In today’s environment, we use models of varying levels of sophistication, combined with segmentation, to determine the channel type, length, and mix. If those tools could be used in combination with what what we learn from data gathered about customer preference, then we would be able to close the loop. For example, if a customer’s behavior indicates they’re more likely to prefer making a self-service payment rather than talking with an agent, then they should be directed first to a self-service application. This achieves a higher probability of a positive customer experience and payment, while also reducing cost.  

insideARM Perspective

The move to more digital forms of collections is happening—and fast. While preference is a key driver, the proliferation of scam callers and the threat of robocall blocking by carriers is putting pressure on traditional ways to successfully reach customers. Those who don’t get on board will find themselves at the end of the line when consumers are determining how to spread their limited funds across the companies asking for their time and payments.

Staying informed and current on what’s happening in the industry is every leader’s responsibility! At the 2018 First Party Summit, June 4-6, in Dallas, we’ll have a more in-depth discussion about very real industry threats and how digital collections and AI can be adopted to mitigate them. These are just a few of the topics we’re covering:

Digital collections strategy

We have an amazing panel of leaders who are experienced industry advocates focused on building and adopting innovative solutions. They’ll share their successes, and their take on what they see on the horizon.

Customer preference/Artificial Intelligence (AI)

Dan Fox is an expert in customer preference and how AI is being leveraged across the industry and will take us deeper into this topic. 

Robocall blocking

Rebekah Johnson, CEO of Numeracle, has been a leading voice and advocate for the industry. She has brought the industry’s voice to the table on proposed ways to address scam callers, and to ensure that calls from creditors and agencies with legitimate business don’t get wrongfully blocked or labeled.

You can register here for First Party Summit.

CAMAS, Wash. – The Intelitech Group, a premier analytics provider and consulting service in the Accounts Receivables Management (ARM) industry, is pleased to announce the hiring of two new experienced ARM industry experts, Tony Hart and Terry Glidden as Associate Partners. Both Hart and Glidden will be focusing on client relations and consulting for UltimateAnalytics™ and other areas as needed.

Hart has over 24 years of ARM industry experience. He started in the industry in 1994 as a Systems Consultant for Ontario Systems leading some of the largest installations of the FACS® product. He later became the Director of Support Services and oversaw the support and maintenance of services for all Ontario Systems products including the FACS, Artiva® and the Guaranteed Contacts® systems.  Hart also managed the national contact center for Lifetouch National School Studios. In 2014 he assisted agencies in driving improved collection results through business intelligence provided by Acumen!, The Intelitech Group’s legacy business analytics suite.

Glidden has worked in the ARM industry for nearly 20 years, over 15 of which he spent working at Ontario Systems providing product and operations services.  Additionally, he worked closely with agencies on inventory prioritization, data analysis, and strategy improvements.  At The Intelitech Group, Glidden will continue his work with agencies, focusing on driving results with data and analysis. 

“We are excited to welcome Tony and Terry to our team,” said Bryan Houston, Managing Partner at The Intelitech Group. “They bring proven industry experience and will play key roles with the growth of our company. It is rare to find individuals with the combination of experience and knowledge they both possess, and we are confident those we serve will benefit from their contributions.”

About The Intelitech Group

The Intelitech Group™, a premier analytics provider for the collections industry, provides consulting and technology solutions to help agencies work smarter to achieve optimal results. Leveraging industry expertise and market intelligence with latest technology innovations, The Intelitech Group brings extensive knowledge, insights and practical tools to help agencies delve deep into all facets of the organization to measure, analyze and implement results-oriented solutions. For additional information, visit www.intelitechgroup.com.

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Tom Pahl has had the opportunity to make the regulatory rounds in recent years, uniquely preparing him for this moment. On Monday he returns to the Consumer Financial Protection Bureau (CFPB) as Policy Associate Director for Research, Markets & Regulations (RMR). He will report directly to Acting Director Mick Mulvaney. 

A longtime regulator, Pahl served at the Federal Trade Commission (FTC) in a number of different roles from 1998-2013, when he was recruited to the CFPB to work on a debt collection rule.

Following the release of the Outline of Proposals Under Consideration in advance of the Small Business Review Panel (SBREFA) for Debt Collector and Debt Buyer Rulemaking, he left the CFPB in August 2016 and worked briefly as a partner at Arnall Golden Gregory LLP.

In February 2017 Acting Federal Trade Commission Chairman Maureen Ohlhausen, a Trump appointee and advocate of “regulatory humility,” named Pahl Acting Director FTC Bureau of Consumer Protection. Earlier this year, President Trump announced that he had nominated Ohlhausen to be a judge on the United States Court of Federal Claims, which meant that Pahl would likely be replaced by someone chosen by an incoming FTC Chairman.

Following his first departure from the CFPB, we had the opportunity to learn about Pahl’s positions on matters related to the ARM industry. insideARM and The Hill previously published these articles which he authored:

Why States Should Have Primary Oversight of Attorney’s Activities in Debt-Collection Litigation 12/14/17

The tortoise, not the hare, will win the deregulation race 2/2/17

Collector contact caps and the application of “regulatory humility” 1/30/17

Trump’s wise choice for the FTC 1/26/17

How Washington will decide the consumer watchdog’s fate 1/26/17

The CFPB and the FTC should divide up debt collection enforcement 1/9/17

The CFPB is a sleeping giant on data security. Let’s not wake it 12/28/16

Consumer financial protection will remain alive under Trump 12/16/16

The CFPB Should Not Single-Out Collectors for Non-English Disclosure Requirements 12/13/16

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Notably, about collector contact caps, Pahl said in January 2017,

“Collector contact caps are a prime candidate for the application of regulatory humility. …courts have decided Section 806(5) cases for nearly 40 years on the issue of if collector telephone calling behavior has been made with the intent to annoy, harass, or abuse. Courts in these cases have not been able to articulate a bright line standard for calling behavior.”

Unlike Pahl’s previous CFPB job as a career staffer, this latest job is a political post. In most federal agencies the top person, a political appointee, has a handful of positions available to bring in his or her own senior team. The Federal Trade Commission, for example, has nine such slots. The CFPB had none. Acting Director Mulvaney has created such positions and has hired individuals for those roles, including Kirsten Sutton as Chief of Staff, Brian Johnson as Senior Advisor, and most recently, Pahl.

Acting Director Mulvaney has said he views debt collection rulemaking as a priority. Given Pahl’s many years of deep experience in this arena, we could expect him to be up to speed extremely quickly and help to make this priority a reality.

 

The Federal Communications Commission (FCC) announced that T-Mobile has agreed to pay a $40 million penalty to resolve claims that it failed to fix problems completing phone calls in rural areas and used false ring tones to give the impression that calls were actually getting through, when they were not.

According to the Consent Decree, FCC rules prohibit service providers from injecting false ring tones on any telephone calls. These false ring tones cause people to believe the phone is ringing at the called party’s premesis when it is not. A caller may then hang up, thinking no one is available. False ring tones also create a misleading impression that a caller’s service provider is not responsible if the call fails. False ring tones are a problem on calls to rural areas and are a symptom of the problems of impaired quality and completion of calls to rural areas.

insideARM Perspective

Many have written about this consent decree today, including reaction from FCC commissioners and industry. See this Reuters article or this NPR article, for instance.

An interesting twist that I have not seen in other articles, however, is the connection (no pun intended) between this matter of completing rural phone calls — or otherwise letting callers know when their calls cannot be completed — and the matter of completing so-called “robocalls” to all called parties (not just those in rural areas). While the matters appear unrelated, they collectively shine a light on a new challenge for carriers to manage both old and new technology, and to achieve the appropriate level of transparency for legitimate (and potentially illegitimate) callers.

insideARM recently published an article on this topic by Karl Koster titled, “Are Your Calls Being Blocked? If They Are, How Would You Know?” In it, he argues,

“We should know exactly how our calls are being treated. If carriers do not agree to provide accurate per-call blocking information, the only solution is to petition the FCC to regulate the carriers on this matter. Certainly, any safe harbor the FCC is considering should be predicated on carriers providing a per-call blocking indication. Let’s stop the “fake busies” now.”

So we now have protests about both “fake rings” and “fake busies.” A coalition of industry groups, carriers, regulators, consumer advocates, and analytics companies (software providers that help carriers and consumers to determine which calls to block or label) has been meeting regularly to address the issues related to completing wanted and unwanted calls. As the recent policy forum jointly hosted by the FTC and the FCC demonstrated, the problems are a long way from being solved. 

 

GENESEO, N.Y. – Coast Professional, Inc. (Coast) presented a check for $10,550.00 to Tia’s Hope at the company’s Geneseo, NY office on 04/12/2018. Coast’s donation is a result of the company’s dress down for charity program in which employees donate $20 or more for the option to wear jeans and business casual attire for the month. The donations include the employee contributions from Coast’s New York offices and the company match of up to $500 per office per month.

The employees of Coast selected Tia’s Hope to be the recipient of the charity dress down program for the months of January, February, and March as a result of the impact that this organization has in the local area. The employees vote bimonthly for the charity that will receive the donations raised through the program for the upcoming period.

The proceeds from the donation will benefit Tia’s Hope. The organization’s mission is to bring Tia’s Hope to hospitals nationwide, creating “Memory Moments” that include holiday parties, patient and family outings to sporting events, concerts and local attractions, as well as financial support. Tia’s Hope created over 5,500 “Memory Moments” through 2017. Tia’s Hope is committed to expanding the cause through new and existing partnerships with hospitals across the country, and through adding new experiences such as sporting events or charity walks to the patients of partnering hospitals.

“Coast’s dress down program was created to further establish a commitment to philanthropy throughout our organization,” stated Everett Stagg, CFO and Co-Chairman of the Board of Directors. He continued, “Coast is honored that our staff have chosen Tia’s Hope to receive the funds that they raised through their combined contributions. Tia’s Hope creates impactful assistance to those in need in our local community and Coast is proud to be able to deliver donations to this outstanding organization.”

Pictured, from left to right: Michele Malczewski, VP of Human Resources; Cheri King, HR Compliance Specialist; Jennifer Koch, Volunteer at Golisano Children’s Hospital; Alecia Wright, Executive Director of Tia’s Hope; Scott McGlynn, Marketing & Content Manager; and Jonathan Prince, Chief Operating Officer.

About Tia’s Hope

TIA’S HOPE was founded in honor of Tia Palermo. Tia was first diagnosed with non-Hodgkin’s Lymphoma in 2001 and bravely battled the disease for over 11 years. She spent many holidays at City of Hope and greatly admired what they accomplished with respect to cutting-edge treatments and patient care. Tia always felt that there should be something special for the children who had to spend part of their youth in a hospital. She took great joy in sharing special experiences, or “Memory Moments” as she called them, and with that in mind, TIA’S HOPE was established by Tia’s loving family to honor her wish that children have more of these unique and positive memories. More information can be found at http://tiashope.org/

About Coast Professional, Inc.

Coast Professional, Inc. is an accounts receivable management company, dedicated to the respectful and ethical collection of higher education and government debt. Coast provides professional collection services to over 200 campus based colleges, universities, and government clients. Coast is a five time honoree on the Inc. 5000 list for American’s Fastest-Growing Private Companies provided by Inc. Magazine and in 2016, was recognized for the third consecutive year as one of the “Best Places to Work In Collections” by insideARM.com and Best Companies Group. Since 1976, Coast has worked closely with clients to increase recoveries by assisting consumers in resolving their financial obligations. Coast’s success is exemplified by exceptional recoveries, superior service, and dedication to the highest levels of compliance. More information about Coast can be found at www.coastprofessional.com

The Financial Hope Collaborative at Creighton University in Omaha, Nebraska is conducting a first-of-its-kind study to determine the health effects of financial education on single working mothers. It’s called the Finances First Study.

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Participants — single working mothers ages 19-55 — are randomized to receive either a year-long financial education program, or no financial education program. Those who do not receive financial education will be offered a slot to participate the following year if they desire.

Whether or not they receive financial education, all participants undergo two clinic visits at Creighton University, monthly phone follow-up, and a monetary stipend for time and travel.

Those randomized to the financial education program also receive nine weeks of education, including dinner and childcare, one year of one-on-one financial coaching, and ongoing continuing education.

The Financial Hope Collaborative was started when United Way of the Midlands created the Financial Stability Partnership in 2006. According to the group’s website, the Financial Success Program began in 2009 and has an 86% retention rate—one of the highest retention rates in the country for a financial education program.

“Once they know they have choices, that things can get better, they have hope. And once people have hope, they can change their behavior. And that’s what we are seeing with this program. People are changing their financial behaviors.”

The program’s curriculum helps LMI families address immediate financial issues and develop decision making skills in areas, such as tracking expenses, saving for emergencies, and repairing credit reports.

Executive Director Julie Kalkowski has said that The Financial Hope Collaborative and its Financial Success Program have been instrumental in helping many low to moderate income (LMI) families in the Omaha metropolitan area find financial stability.

Kalkowski says about this new study,

“If the Finances First study can show improved health outcomes for single mothers, we can broaden the healthcare discussion in America to recognize the role financial stress plays in public health outcomes. For the study this year, we will educate an additional 120 single mothers beyond our normal enrollment. Thus, our annual budget and program needs have increased significantly.“

Those interested can click here to donate to the Finances First study.

insideARM Perspective

Thanks to Consumer Relations Consortium (CRC) member General Service Bureau and its CEO Therese Yakel, Julie Kalkowski joined our CRC-regulator-consumer advocate roundtable session in November 2017. This is where we first heard about the Finances First Study, and several of us from the CRC have since donated to the program.

Our group was truly moved by Julie’s concept, and the way it incorporates health outcomes. The message that it is possible to achieve better health through better financial management is so powerful. And, in turn, better health is likely to contribute to less debt because of lower healthcare expenses. It’s such a positive cycle.

Kalkowski recently joined the Consumer Advisory Board of the Consumer Financial Protection Bureau. This is an additional reason the CRC appreciated the opportunity to help her debunk myths about the debt collection process, and understand how to help consumers recognize the difference between a scam and a legitimate collector. An important part of avoiding the stress of lingering debt can be early communication with creditors and debt collectors in order to resolve the situation before it leads to credit reporting or law suits.

 

“Not all storms disrupt your life, some merely clear your path.” — Anonymous

—

On April 6, 2018, the Massachusetts Supreme Judicial Court (“SJC”) released one of its most controversial decisions affecting debt buyers who purchase defaulted consumer accounts owed by Massachusetts residents. In Dorrian v. LVNV Funding, LLC, the SJC reversed the Superior Court by holding that passive debt buyers are not debt collectors and, therefore, need not be licensed by
the Massachusetts Division of Banks (“DOB”) to place defaulted debts with licensed collection agencies or Massachusetts attorneys for collection purposes. Prior to its decision, litigation against passive debt buyers caused a 13.7 billion dollar industry angst and cost it and its insurers millions of dollars in settlements and attorney fees. The dispute postured the Division of Banks against the Massachusetts judiciary, and consumer lawyers against the debt buying industry, over whether a passive debt buying business must be licensed as a debt collector in the Commonwealth of Massachusetts.

Background

By definition, a passive debt buyer is a business that purchases delinquent debts for investment purposes. Its principal purpose is not the collection of debt. Passive debt buyers do not directly collect debt. Rather, they hire licensed debt collectors or attorneys to collect the purchased debts. Over the last twenty years, the Division of Banks, the authority that issues debt
collection licenses in the Commonwealth, has consistently opined that a passive debt buyer need not be licensed as a debt collector as long as a licensed collection agency or an attorney admitted to practice law in Massachusetts collects the debt. These same words are posted on the consumer page of the Mass.gov website, even though several trial courts and an appellate court had held otherwise. Dorrian (and a consolidated case, Newton v. LVNV Funding, LLC) are two of several class action cases presided over by Superior Court Justice Janet Sanders, charging passive debt buyers with collecting defaulted accounts from Massachusetts residents without a license even though these buyers of bad debt are not collecting anything.

G.L. c. 93, section 24A provides as follows:

(a) No person shall directly or indirectly engage in the commonwealth in the business of a debt collector, or engage in the commonwealth in soliciting the right to collect or receive payment for another of an account, bill or other indebtedness, or advertise for or solicit in print the right to collect or receive payment for another of an account, bill or other indebtedness, without first obtaining from the commissioner a license to carry on the business, nor unless the person or the person for whom he or it may be acting as agent has on file with the state treasurer a good and sufficient bond. (emphasis added)

A debt collector is defined in G.L. c. section 24 as “any person who uses an instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of a debt, or who regularly collects or attempts to collect, directly or indirectly, a debt owed or due or asserted to be owed or due another…” (emphasis added).

The Division of Banks posits that “a debt buyer who purchases debt in default but is not directly engaged in the collection of these purchased debts is not required to obtain a debt collector license provided that all collection activity performed on behalf of such debt buyer is done by a properly licensed debt collector in the Commonwealth or an attorney licensed to practice law in the Commonwealth.” Massachusetts Div of Banks adv op. (October 13, 2006).

G.L. c. 93, section 24A provides that a license is required if the debt collector is collecting the debt of another. Debt buyers own the debt. Clearly, they are not “collecting the debt of another.” So, the applicability of section 24A turns on the meaning of “indirectly.” The definition of debt collector refers to someone who “regularly collects or attempts to collect a debt, directly or indirectly, a debt owed….or due to another.” The word “indirectly” refers to collecting a debt due to another. How does that apply to a debt buyer who owns the debt? How can a debt buyer be a debt collector if it owns the debt that is being collected by a lawyer or collection agency and not by the debt buyer? The superior court in Dorrian failed to address this critical issue. Rather, it focused on the term “indirectly.” In her decision, Judge Sanders plainly said that the Division of Banks is wrong. She criticized the DOB for creating a passive debt buyer category, not referred to in either G.L c., 24 or 24A. To accept this interpretation, she said, “would…render meaningless the word ‘indirectly’ which the legislature…deliberately included” in both sections. Dorrian v. LVNV Funding, LLC, Superior Court Civil Action No. 14-2684 BLS2 at 14 (March 30, 2017).

Judge Sanders may not have addressed in Dorrian whether a debt buyer is a debt collector if the debt that is being collected is its own. She did, however, discuss this issue in Gomes, et al v. Midland Funding, LLC, Superior Court Civil Action No. 2011-01469-BLS2 (September 19, 2012). Rather than address the plain meaning of “a debt owed…or due to another,” she referred to the Fair Debt Collection Practices Act, 15 U.S.C. 1692(a), a statute on which the Massachusetts Debt Collection Practices Act (“MDCPA”) is modeled, and cites federal cases stating that “purchasers of defaulted debts are no less a debt collector simply because the activity at issue is the collection of debt that it now owns.” Id. At the time, the federal judiciary was split on this position.
Nevertheless, she misinterpreted the language of G.L. c 93, sections 24 and 24A. Instead, she focused on cases supporting the plaintiffs’ position.

The Supreme Court – Henson v. Santander USA

Whether or not debt buyers, passive or otherwise, are debt collectors was settled by the U.S. Supreme Court in Henson v. Santander Consumer USA, Inc., 137 S.Ct. 1718 (June 12, 2017), a case that was released after the Superior Court’s Dorrian decision. The Henson Court unanimously held that a debt collector is defined as one “who regularly collects or attempts to collect, directly or indirectly, a debt owed or due or asserted to be owed or due another.” This definition does not include debt buyers because debt buyers do not collect debts “owed or due another.” Id. The phrase “directly or indirectly” only applies to the second part of the definition and it modifies the term “debt” which includes only those “debts” that are “owed or due another.” According to Henson, the only manner by which a debt purchaser can qualify as a debt collector is if the debt purchaser “uses an instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of a debt.” G.L. c. 93, section 24 (emphasis added); cf. FDCPA, 15 U.S.C. section 1692a(6) The collection of a debt requires affirmative conduct, not mere passive receipt. The principal purpose of a passive debt buyer’s business is not the collection of debt. Rather, it is the acquisition of debt. That debt may be resold, used as collateral for financing, placed with debt collectors for collection, or used for any other legal purpose.

What did the SJC do?

The SJC approved the DOB’s “reasonable and expert interpretation in this complex regulatory environment.” The division’s interpretation resolved any ambiguity in the statute’s language, “drawing a line between debt buyers and collectors based on whether they are involved in any collection activities with consumers.” Citing Henson extensively, and adopting its rationale, the SJC agreed that a company that attempts to collect debts owed to it is not covered by the debt collector definition because the company is not collecting or attempting to collect debts owed to another. As a result of the SJC’s decision, debt buyer businesses purchasing defaulted accounts owed by Massachusetts residents no longer will be interrupted by licensing concerns. If, however, the SJC had ruled that debt buyers are debt collectors, and therefore are required to have debt collection licenses prior to referring its accounts to collection agencies and lawyers, debt buyers would have been in an untenable position. An entire industry would have been disabled. Potentially, the largest debt buyers would have had to refund hundreds of millions of dollars to consumers who, in the first instance, justly owed the debts. By the SJC’s decision, the consumer lending industry, so critical to the Massachusetts economy, has avoided catastrophy. Justice has been served to allay the perfect storm into which debt buyers unwittingly sailed.

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* Mr. Schreiber is a business and trial lawyer concentrating his practice in creditors’ rights. He is the founding member of Schreiber/Cohen, LLC, a law firm celebrating its 32nd anniversary this year, with offices located throughout New England. Mr. Schreiber is admitted to practice law in MA, NH, CT, NY, VT, PA, DC, and IN.

SARASOTA, Fla. — This month, NARCA is pleased to announce that National Creditors Bar Association is now the official name of the national bar association.  The change to National Creditors Bar Association was overwhelmingly passed recently in a vote by the membership.  This is an historic day in the 25^th Anniversary year of the bar association.

“NARCA” is a vestige of the National Association of Retail Collections Attorneys, which the Association officially ceased to use as its official name two and a half years ago. The acronym persisted until this year, but was limiting and no longer adequately described the expanding bar association as it broadened its membership beyond retail collection to include all 19 areas of creditors rights-related legal representation.

National Creditors Bar Association, as opposed to “NARCA,” does not limit the type of creditors-rights attorneys in its membership. It encompasses all areas of creditors’ rights. It will enhance the Association’s ability to support creditors rights attorneys with more diverse practices. It also requires no further explanation; National Creditors Bar Association is definitive. The name is stronger and easily understood by all.

With the new name comes a new logo and domain name for the organization:

About National Creditors Bar Association 

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. More at www.creditorsbar.org.

Contact Information:

Jim Podewitz
Director of Communications
The National Creditors Bar Association
Direct: 202-861-0706
Email: jim@creditorsbar.org
www.creditorsbar.org