Verizon announced today the introduction of a new Caller ID feature for its landline phone customers to help them recognize unwanted calls. The new feature, called Spam Alerts, will now show “SPAM?” before a caller’s name on the Caller ID display if the calling number matches Verizon’s spam criteria. According to the company, when a customer sees this, they’ll be able to better decide if they should answer the call.

Spam Alerts is automatically available now at no additional charge to all landline customers with Caller ID, whether they’re on copper or fiber.

The company concedes, while Caller ID has always been a way for customers to screen unknown numbers as possible robocalls (and perhaps avoid certain known numbers), just because a number is unknown doesn’t mean it might not be an important call.

Verizon’s Spam Alerts feature utilizes TNS’s Call Guardian and Neustar’s Robocall Mitigation solution to proactively identify illegal robocalls and other fraudulent caller activity with more accuracy.

Verizon says it is the first to offer an integrated landline feature like this to help customers make more informed decisions on whether to answer a call from an unknown number.

The company recently upgraded its Caller Name ID app, which gives Verizon Wireless customers the ability to identify incoming callers and text message senders by name and its Robocall Protection feature warns customers when incoming calls are likely spam, fraud, or a robocall.

More information about more of Verizon’s anti-robocall tools is available at  www.verizon.com/robocalls.

insideARM Perspective

The world of robocall — or simply, a call made with the use of an automated dialer and/or automated voice — labeling is evolving quickly, and is expected to have a material affect on legitimate call originators like ARM companies. To date, so-called analytics companies such as TNS, Neustar, First Orion, Hiya, Nomorobo, and others, have led the way in solution development. These solutions have primarily provided information tools to consumers to help them make decisions about what calls to answer. The next major initiative promises to address the issue at a more fundamental level. The “SHAKEN” protol currently in development will allow an originating service provider (carrier) to attest to the fact that a calling number is owned by the originator. This should make it much harder for illegal actors to spoof others’ numbers.

Industry groups like the Consumer Relations Consortium (CRC) and its Innovation Council have been devoting considerable time to understanding the landscape and developments as they occur. The upcoming meeting of the group in Washington, DC will feature James McEachern — Principal Technologist from The Alliance for Telecommunications Industry Solutions (ATIS), which is developing the SHAKEN protocol — as well as Neustar and other players in the space. 

See this March 28 insideARM article for more background information.

WOODLAND HILLS, Calif. –– Account Control Technology Holdings, Inc. (ACT Holdings), a national leader in debt recovery and business process outsourcing solutions, recently visited St. Jude Children’s Research Hospital in Memphis, Tennessee, to present a donation of $36,000. The generous contribution was a result of employee fundraising efforts from its 18 offices and a company match. 

In October 2017, ACT Holdings alongside its nonprofit arm, Account Control Technology Foundation, Inc. (ACT Foundation), held a companywide fundraising campaign, “ACT for a Cure,” to benefit St. Jude. Each year employees vote on a charity to support. Since 2011, ACT Holdings’ fundraisers have generated a total of more than $600,000 in donations to charities. To raise funds, offices participate in luncheons, casual days, bake sales, contests, raffles, tournaments, and more. 

“I am so proud of our employees and what they do each year to raise money for very important organizations doing excellent work,” said Tracey Carpentier, CEO of ACT Holdings. “In 2017, many of our employees were affected by Hurricanes Harvey and Irma yet, we were able to come together and raise a significant amount of money for St. Jude. I really appreciate our employees and how hard everyone works each and every day.”

ACT Holdings was represented by two employees who visited St. Jude on March 22, 2018 to deliver the donation check in person. Elena (Ellie) Gentry, Office Manager for ACT Bakersfield, California and Tanya Roberson, Marketing Manager for ACT Holdings and the ACT Foundation, were led on a tour of the hospital. 

“It was such an honor to visit St. Jude and see what our fundraising dollars will do,” states Ellie Gentry. “I thought I might cry while there, but I found myself smiling and blowing kisses to the amazing and strong children. St. Jude is a place of hope, and I would love for ACT to support it again.” 

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 Account Control Technology, Inc. and Convergent, Inc. and has 18 offices with more than 4,800 employees. For more information, visit www.accountcontrolholdings.com.

About Account Control Technology Foundation (ACT Foundation)

The Account Control Technology Foundation is a charitable organization established by ACT Holdings founders, Dale and Debbie Van Dellen. The ACT Foundation’s mission is to improve the future of students and the greater community by offering financial literacy and debt management education, mentorship and support to those in need.” For more information visit www.accountcontrolfoundation.org. 

About St. Jude Children’s Research Hospital 

St. Jude Children’s Research Hospital is leading the way the world understands, treats and defeats childhood cancer and other life-threatening diseases. It is the only National Cancer Institute-designated Comprehensive Cancer Center devoted solely to children. Treatments invented at St. Jude have helped push the overall childhood cancer survival rate from 20 percent to 80 percent since the hospital opened more than 50 years ago. St. Jude won’t stop until no child dies from cancer. St. Jude freely shares the discoveries it makes, and every child saved at St. Jude means doctors and scientists worldwide can use that knowledge to save thousands more children. Families never receive a bill from St. Jude for treatment, travel, housing or food – because all a family should worry about is helping their child live. Join the St. Jude mission by visiting stjude.org, liking St. Jude on Facebook (facebook.com/stjude) and following us on Twitter (@stjude).

ROCHESTER, N.Y. –– Continental Service Group, Inc., dba ConServe, a leader in the collections industry, proudly announces that it has hired Jim McCarthy as their Chief Risk Officer. Effective immediately, this role will have McCarthy focusing his expertise on providing the strategic leadership, innovation, governance, and management necessary to identify, evaluate, mitigate, and monitor the company’s compliance, operational and strategic risk.

With over 30 years of success in the industry, ConServe has defined itself as an innovator and role-model in the field while effectively redefining collections with The ConServe Advantage®. Ethics and compliance are the cornerstones of the organization’s success and in aligning forces with a former CFPB architect, they are proactively and enthusiastically ensuring the organization’s Enterprise Risk Management policies and strategies are in compliance with all applicable regulations, rating agency standards, and strategic imperatives of the organization.

As a nationally recognized expert on CFPB regulation, McCarthy is a leader in navigating the consumer financial risk environment. In fact, he was the key architect in establishing the CFPB’s complaint process via their company portal. While consulting with ConServe over the past year, McCarthy was so impressed with the company’s commitment to compliance and regulation adherence that it was a natural progression for him to join the organization on a more permanent basis. In his new role as Chief Risk Officer, he brings proficiency and knowledge of the intelligent business application of complex consumer financial rules and regulations and has broad experience in Research, Markets and Regulations (RMR). He states “I am eager to join ConServe in this role so that I can reinforce and strengthen our efforts in Fostering Financial Freedom® for our Clients and their consumers.” He continues: “as a means of helping to improve the human condition, I am excited to oversee the enterprise risk management process to ensure alignment with ConServe’s overarching organizational objectives.”

As the previous owner of his own consulting consumer financial company, McCarthy has a profound understanding of compliance management systems. He has extensive professional experience in the consumer financial environment, is a graduate of Minnesota State University and has earned professional certifications from George Washington University and the Wisconsin Bankers Association Graduate Banking School. As a devoted father of 3, he currently divides his time between his home in California and his new opportunity in New York.

McCarthy’s efforts will reinforce the value and significance of the numerous recognitions that ConServe has received that include appearing on Inc. Magazine’s Inc. 5000 list of the fastest growing privately-owned companies in the nation (7 times), being named a Rochester Top 100 company (14 times), recognized as a Rochester Top Workplace (4 times), receiving the Better Business Bureau’s Torch Award for Ethics, receiving a Rochester Business Ethics Foundation ETHIE award, and being recognized by insideARM as a Best Places to Work in Collections/Best Call Center to Work For as part of an industry excellence program (5 times).

About ConServe

ConServe is a top-performing award-winning provider of accounts receivable management services specializing in customized recovery solutions in higher education, government, consumer and commercial markets. For over 30 years, we have been a consumer-centric organization that operates as an extension of our Client’s valued brand. Anchored with ethics and compliance, we’ve redefined collections with The ConServe Advantage® while partnering with our Clients to give them peace of mind and to help them achieve their goals. Ethics. Technology. Performance.
Put The ConServe Advantage® to work for you: www.conserve-arm.com

The Department of Education (ED) told the U.S. Court of Federal Claims last week that it expects to notify the parties by May 4th as to the course of action it will take in the private debt collection contract matter.

This deadline came as a result of an outcry over the Government’s March 19 notice to the court, which stated,

“It appears likely that a course of action other than continued litigation of the pending protests will be pursued. ED has not completed the analysis yet and has not made a final decision as to a course of action. All options remain on the table.” (emphasis added)

Responding to the plaintiffs’ March 20 reaction to the notice, ED added even greater uncertainty: 

“It is important to state that our intent with our March 19 notice was not to foster delay or to avoid anything in this litigation – indeed, as it stated, we are open to continuing with the litigation. However, once it became clear that this litigation was likely to end in the near future, the Court and the other parties deserved to know that fact. Plaintiffs complain that our confirmation that “[a]ll options remain on the table” is a sign that ED has not done any work on this issue. To the contrary, the fact that a full range of options is under consideration, which necessitates a review of the procurement, the solicitation, and the program, means that a great deal more work is required than if only a corrective action defined by elements of the complaints was under consideration.” (emphasis added)

insideARM last published about this case on March 26, and provided a comprehensive background of events. 

On March 23 the court held a status conference which resulted in the court ordering ED to file a notice by March 28 committing to a date when it will be able to produce the following to plaintiffs:

• Full evaluation records underlying the December 2016 award decision for all current protestors and awardees;
• All documents related to the 2015 Focused Review of all current protestors and the two awardees;
• All documents related to monthly call monitoring reviews for all ATE contractors since 2015;
• All documents (including non-privileged agency communications) related to the appearance of a conflict of interest between Secretary of Education Betsy Devos and Performant;
• All documents (including non-privileged agency communications) related to ED officials attempting to influence the award decision; and
• All documentation of communications between ED evaluators, “points of contact,” and “clients” identified in the past performance evaluation documents.

As ordered, on March 28, ED committed to produce the majority of these documents by April 13, which was last Friday (with some of the audio files being delivered by this Wednesday, April 18). insideARM presumes the Department met this deadline. All parties now await the May 4 milestone. 

insideARM Perspective

Nobody knows what the outcome will be on May 4. As ED has stated, the full range of options are on the table.

• It seems possible – but unlikely – that no action will be taken (which means continuing with the currently awarded unrestricted contract to two firms). This would put the decision in the hands of the Court of Federal Claims.
• ED could extend the unrestricted award to additional firms, satisfying some, but maintaining the possibility of ongoing litigation by others.
• ED could start over with the unrestricted bid process, possibly establishing new, more transparent, criteria. It’s unclear whether this would result once again in a similar situation to the one we have today.
• ED could cancel the private debt collection program and move collections under the purview of the servicers… who would then likely outsource to the private debt collectors, since they do not have the expertise in this specialized area.
• ED could cancel the private debt collection program altogether — small and unrestricted contractors — and transfer the work to Treasury (who would then likely outsource the work to private debt collectors, since they do not have the expertise in this specialized area) under the purview of the Debt Collection Improvement Act of 1996.

Perhaps there are other options as well. We can only wait and see. Meanwhile, many jobs still remain in the balance, as do accounts in default. At the moment, there are no winners.

 

This week the Consumer Financial Protection Bureau (CFPB) issued a Request for Information (RFI) regarding Consumer Complaints and Inquiries. This is the final RFI in the series that was announced in January to collect input on its enforcement, supervision, rulemaking, market monitoring, and education activities.

You can download the complete RFI here. The 90-day comment period is expected to close approximately July 16, 2018.

According to the RFI,

“The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires the Bureau to establish a unit to “facilitate the centralized collection of, monitoring of, and response to consumer complaints regarding consumer financial products or services” and directs the Bureau to establish reasonable procedures to provide timely responses to consumer complaints and consumer inquiries. The Bureau defines consumer complaints as “submissions that express dissatisfaction with, or communicate suspicion of wrongful conduct by, an identifiable entity related to a consumer’s personal experience with a financial product or service.” To date, the Bureau has not published its definition of consumer inquiries; however, as an operational matter for the purposes of establishing reasonable procedures for providing timely responses to consumer inquiries and for the purposes of this request for information, the Bureau defines consumer inquiries as consumer requests for information—typically proffered by telephone—to its Office of Consumer Response about consumer financial products or services, the status of a complaint, an action taken by the Bureau, and often combinations thereof.”

The following specific topics are suggested, but commenters are free to answer only some of them – or offer others.

Specific statutorily-permissible suggestions regarding how the Bureau currently allows consumers to submit complaints and inquiries, including:

1. Should the Bureau require consumers to classify their submission affirmatively as a consumer complaint or inquiry prior to submission?
2. How should the Bureau explain the difference between a consumer complaint and a consumer inquiry to consumers at the point of submission?
3. Should the Bureau develop a process for companies to reclassify consumers’ submissions? If so, what criteria should the Bureau establish to help companies differentiate consumer complaints from consumer inquiries

Specific statutorily-permissible suggestions regarding the Bureau’s consumer complaint processes, including:

1. The Bureau currently receives complaints via six channels: website, referral from Federal and State entities/agencies, telephone, mail, fax, and email. Should the Bureau add or discontinue any channels for accepting complaints?
2. Consistent with the Dodd-Frank Act’s definition of “consumer,” the Bureau currently allows consumers to authorize someone else (e.g., lawyer, advocate, power of attorney) to submit complaints on their behalf. Should the Bureau expand, limit, or maintain the ability of authorized third parties to submit complaints?

Specific statutorily-permissible suggestions regarding the Bureau’s consumer inquiry processes, including:

1. The Bureau currently accepts consumer inquiries via telephone and mail. Should the Bureau add or discontinue any channels for accepting inquiries?
2. Should the Bureau develop web chat systems to support consumers’ submission of inquiries?
3. Should the Bureau develop a process for companies to provide timely responses to consumer inquiries sent to them by the Bureau? If so, how should the Bureau balance its objective of providing timely and understandable information to consumers14 with its objective of reducing unwarranted regulatory burden on companies
4. Should the Bureau publish data about consumer inquiries? If so, what types of data or analyses about consumer inquiries should be shared with the public?

The RFI notes that the Bureau previously issued an RFI seeking input regarding its public reporting practices of complaint information, and that, as relevant, all comments received in connection with that request will be considereed in connection with this request — so commenters need not submit duplicate information.

On January 17, 2018 CFPB Acting Director Mick Mulvaney announced that he was issuing a “call for evidence” to ensure the Bureau is fulfilling its proper and appropriate functions to best protect consumers. Since then a series of requests has been released about activities including:

1. Civil Investigative Demands (comment period closes April 26 — extended from March 27)
2. Administrative Adjudication (comment period closes May 7 — extended from April 6)
3. Enforcement (comment period closes May 14 — extended from April 13)
4. Supervision (comment period closes May 21)
5. External Engagements (comment period closes May 29)
6. Public Reporting Practices of Consumer Complaint Information (comment period closes June 4)
7. Bureau Ruleamaking Process (comment period closes June 7)
8. Adopted Regulations and New Rulemaking (comment period closes June 19)
9. Inherited Regulations (comment period closes June 25)
10. Guidance and Implementation Support (comment period closes July 2)
11. Consumer Financial Education Programs (comment period closes July 9)

insideARM Perspective

It is notable that the CFPB makes a distinction between complaints and inquiries as it relates to its own process. The ARM industry has long argued that all communications from consumers regarding debt collection are “complaints,” when many of them are actually inquiries — such as clarifications or questions about process — rather than an accusation of wrongdoing or potential law violation.

Debt collectors have also complained that they often do not receive enough information from the CFPB complaint portal to investigate each matter. For instance, the name and/or account number provided by the consumer does not match any individual in their system. Or a phone number provided does not match any phone number they have a record of having dialed.

This is an important time for the ARM industry, from creditors to collection agencies, debt buyers, attorneys and service/technology providers. There has probably not been such an opportunity in decades for your voice to be heard and to make an impact. insideARM suggests one thing overall — get involved.

 

 

SACRAMENTO, Calif. — The Massachusetts Supreme Judicial Court handed down a ruling earlier this week holding that passive debt buyers are not required to obtain a Massachusetts license when “all aspects of the debt collection process are contracted out to and conducted by” a licensed third-party collection agency.

The decision in Dorrian v. LVNV Funding, LLC reversed a lower court ruling finding that an unlicensed passive debt buyer had violated a Massachusetts consumer protection law under these circumstances. Receivables Management Association International (RMA) filed an amicus brief supporting LVNV’s appeal seeking reversal of the lower court’s decision. In its brief, RMA International noted its long-standing work with the Massachusetts Division of Banks and Attorney General concerning the regulation of debt buyers.

Specifically, RMA highlighted to the regulators on many occasions the uniqueness and challenges associated with the split regulatory authority in Massachusetts law under which the Attorney General’s office regulates passive debt buyers as “creditors” (which do not require a license to collect debt) and the Division of Banks regulation of active debt buyers as “debt collectors” who must be licensed.

RMA’s brief noted that for more than 10 years, the Division of Banks has issued guidance stating passive debt buyers are not required to be licensed and that its guidance was reasonable in light of Massachusetts’ split regulatory authority.  RMA urged the court to reverse the trial court’s decision because it “seeks to punish passive debt buyers for following the long-standing Division guidance and practice, not for any actual wrongdoing,” because all of LVNV’s collection activity had been carried out by a third-party licensed agency and none of the agency’s activities were alleged to be wrongful.

The Massachusetts Supreme Judicial Court agreed finding that the “division’s interpretation helps resolve the ambiguity in the plain language of the statute, drawing a line between debt buyers and collectors based on whether they are involved in any collection activities with consumers.  The division’s interpretation also reflects and respects the core concern of the statute, which is to prevent abusive debt collection practices.”

The Dorrian decision is available here. RMAs amicus brief can be accessed here.

About Receivables Management Association International

Receivables Management Association International (RMA) is the nonprofit trade association that represents more than 500 companies that purchase or support the purchase of performing and nonperforming receivables on the secondary market. The Receivables Management Certification Program and Code of Ethics set the global standard within the receivables industry due to its rigorous uniform industry standards of best practice which focus on the protection of the consumer. RMA provides its members with extensive networking, educational, and business development opportunities in asset classes that span numerous industries. The association continually sets the standard in the receivables management industry through its highly effective grassroots advocacy, conferences, committees, task forces, publications, webinars, and breaking news alerts. Founded in 1997 as the Debt Buyers Association, RMA is headquartered in Sacramento, California.

Mick Mulvaney, Acting Director of the Consumer Financial Protection Bureau, testified today before the House Financial Services Committee. Rather than highlight the prepared remarks, the following are statements, questions and responses from many of the Committee members and the Acting Director, which I think provide a detailed picture of the hearing, and Mulvaney’s approach to his job. 

In his opening statement Chairman Rep. Jeb Hensarling remarked that former Director Richard Cordray acted unlawfully while Acting Director Mick Mulvaney is acting lawfully, and expressed appreciation that he is requesting assistance from Congress to reform the CFPB.

Numerous Democrats, including ranking Democrat Rep. Maxine Waters went on record to say that their presence at the hearing should not be taken as an acceptance of Mulvaney as the lawful Acting Director, but rather a response to the need to engage in an oversight capacity.

Rep. Waters also noted that Mulvaney has stopped implementation of a sensible payday rule, has ceased investigation into World Acceptance Corporation, and has initiated zero enforcement actions since he took over leadership of the Bureau.

Mr. Mulvaney noted that as a former member of the Committee, he feels that listening to people read their written testimony is a waste of time so he will not do so, and instead looks forward to answering questions.

Rep. Hensarling proceeded to say that among his concerns about the CFPB is that it is meant to protect consumer rights to a competitive transparent market, yet the Director alone could declare any group exempt from CFPB jurisdiction, such as all banks that start with a “C” – an example of total lack of checks and balances. Mulvaney agreed. Another concern is the funding mechanism. He asked,

Who determines the budget of the CFPB? Mulvaney answered, “I do.”

How do you get your money? Mulvaney answered, “I send a letter to the Federal Reserve Board and they send a check.”

I assume you have to pay payroll – 60% of the budget. You alone have the right to spend the $280M balance? If you chose, could you buy naming rights to a ballpark? Mulvaney answered, “Yes, we already do spend $40M in “advertising” (he used air quotes) so yes.”

Could you spend $250M to ensure that every man woman and child has a CFPB t-shirt? Mulvaney answered, “Yes.”

Rep. Waters then told Mulvaney she is concerned about his actions related to removing power from the Office of Fair Lending and Equal Opportunity. Why have you taken these actions? The Acting Director responded, “I separated the functions of supervision & enforcement and education – I actually elevated education by moving it to the Office of the Director.”

Rep. Luetkemeyer shared his concern that former Director Cordray engaged in regulation by enforcement, and asked what changes Mulvaney would like to see in that area. He responded that “financial service providers should be allowed to know what the law is before they are accused of breaking it.”

Luetkemeyer proceeded to ask Mulvaney how he plans to accomplish the goal of ensuring all consumers have access to markets for consumer financial products and services.

Mulvaney replied that he has been surprised by the amount of qualitative cost-benefit analysis that has been done, and declared “We are going to do a better job of quantitative analysis of the impact on markets of services not being available.”

Luetkemeyer also asked about the status of the Small Dollar Rule. The Acting Director replied that they haven’t stopped the Small Dollar Rule; they have merely given notice that we intend to revisit it, which is exactly what the APA requires.

Rep. Carolyn Maloney (D-NY) called attention to the fact that zero enforcement actions have been initiated since the beginning of Mulvaney’s tenure. She challenged, “Are you saying that every financial service provider has suddenly snapped into compliance?” Mulvaney responded that “nothing could be further from the truth. We are actively litigating 25 cases and have only dismissed one case.”

He began to explain that there are three workstream buckets. He got to the first, investigations, when Maloney cut him off. She then said that under Cordray, $12B had been returned to consumers. She asked Mulvaney how much he has returned. The answer was $92.6M. She asked whether he initiated that or whether it was in the pipeline when he arrived. He said he approved it. Maloney cut him off as he tried to continue.

Rep. Huizenga (R-MI) said, “The last guy filibustered and tried to run out the clock, so we appreciate you being here and actually answering questions. How many enforcement actions were taken during Director Cordray’s first 6 months?” Mulvaney responded, “Zero.” He continued,

“We are still going after bad actors. We always know there will be bad actors, but our concerns about the last Director were that they would make up violations – and these CIDs would go out demanding information about activities that were perfectly legal but they just didn’t like, then they would fine people to try to curb everyone else’s actions through those fines and those threats.”

Rep. Nydia Velazquez (D-NY), like other Democrats, expressed concerned about Mulvaney’s dual role at OMB and CFPB. She said, “I’d like a yes or no answer to the following:”

Have you ever conducted work for CFPB in the Oval office? Mulvaney: “No.”

Have you ever conducted work for OMB at the office of CFPB? Mulvaney: “I may have taken a call.”

Do you receive two paychecks? Mulvaney: “No.”

Do you have separate emails? Mulvaney: “Yes.”

Have you conducted business through one email for the other? Mulvaney: “No.”

Have you ever charged a CFPB/OMB expense to the other’s account? Mulvaney: “No.”

Do you have an executive assistant at either place to do work for the other? Mulvaney: “No… which greatly frustrates both of them.” Velazquez responded, “That’s why you shouldn’t be there.”

She then moved on to say, “The CFPB exists to prevent Americans from losing hard-earned dollars to abusive lending. What lessons have you learned from the financial crisis and how do you apply those at the CFPB?” Mulvaney: “The Crisis was system failure of major proportion. There were a variety of things that happened at the same time. Was abusive lending in the housing market part of it? Absolutely. Can we do a better job of enforcing the laws? Absolutely? Do I look forward to doing that at the Bureau? Absolutely.” Velazquez concluded by saying, “That’s very encouraging. Let’s wait for the numbers to show that.”

Rep. Sean Duffy (R-WI) noted the agitation coming from the other side of the aisle. He said, “I understand it. Democrats don’t have much power or control over the CFPB, and neither do we. So if you are in power, you applaud the Director and if you are not there is a lot of frustration. I would argue that government policy supported making loans to people who couldn’t afford them. And by the way we haven’t changed those policies.”

Rep. Brad Sherman (D-CA) shared, “We in Congress don’t like your dual role. We assume President Trump is in the process of identifying a full time successor who will be a handmaiden to the financial services industry. I’d say what consumers and businesses want is not a lurch to the left and then a lurch to the right but steady guidance. What will you do to ensure more guidance is released and regulations are published?”

Mulvaney responded, “What we’ve done is to focus more on formal rulemaking; it’s harder, but it’s the right way to regulate. There was agreement about the appropriate use of guidance – in the case where there is a rule, and maybe you always meant to say such and such in the rule but didn’t, so a guidance document could clarify.”

Rep. Gregory Meeks (D-NY) noted that in his career, Mr. Mulvaney has never supported consumers and is not doing so now. The Acting Director replied, “I could stop all 100 of the enforcement actions on the books but I have not. We are still enforcing the law. We are doing it differently than others might do it but that’s a result of the fact that elections have consequences. But we are still enforcing the law.

Rep. Keith Rothfus (R-PA) raised an issue that the ARM industry will appreciate: Under UDAAP, it is unclear what “Abusive” is, and asked Mulvaney what he means by his former comments that it is important for market participants to have a clear understanding of the rules.

Mulvaney responded: “Yes, thank you. Help me with a definition of “abusive.” For the lawyers in the room, the statute is full of subjective terms like “materially” and “unreasonably.” A definition could provide clarity for everyone and would provide certainty and due process.” It was also noted that there is a long case history defining what “unfair” or “deceptive” mean.

Concerned about public reporting of consumer complaint information. Data could be misleading and misused. I do share your concerns about data security, and about the privacy of that data. And the unverified nature of the data, so we are taking a look at that.

Rep. Bruce Poliquin (R-ME) cut to the chase, “What’s the one thing you would ask us to do to fix the mess you’ve inherited?” Mulvaney: “Put me on appropriations.”

Rep. Bobby Scott (D-VA) asked about the Catalyst group which is meant to support the development of regulations for fintech initiatives, and what Mulvaney’s plans are in this area, since it was not covered in the semi-annual Report. Mulvaney suggested it is quite important to him, and referenced that he was the co-founder of the Congressional blockchain caucus. He noted that it’s a balancing act to allow new industries to develop without the burden of regulation while still protecting consumers.

Rep. Randy Hultgren (R-IL) gave Mulvaney the chance to explain the three Enforcement buckets that he didn’t have the opportunity to outline in response to Rep. Maloney.

1. Investigate
2. Sue or settle
3. Litigation

He reinforced that under his leadership, he has not stopped enforcement; it’s just that nothing has moved out of “sue or settle” into “litigation.”

Rep. Mia Love (R-UT) highlighted the political nature of the CFPB due to its funding and (lack of) oversight structure. She said there should be a “down the middle” approach, like the other financial regulators, otherwise you don’t have the same credibility. You either love us or hate us is the wrong approach.

Rep. Al Green (D-TX) told Mulvaney he appreciates his candor, and that allows him to be candid as well. He said, “I’ve had to sit in the back of the bus, drink from colored water fountain, etc. so am first hand familiar with discrimination.” He then raised the concept of testing – the practice of sending multiple people of varying race/gender into an institution, such as a bank, to see whether they are treated the same way. He said that banks at large are against testing, and that this committee has fought the practice. He asked Mulvaney whether he supports bank testing? Mulvaney said, “I am told we do it now, I support it, and will continue to support it.”

Over the course of the approximately three-hour testimony, I did not hear one mention of debt collection, in spite of the fact that Acting Director Mulvaney has announced this is at the top of his priority list.

Baiting calls involving a customer’s representative asking whether the customer can dispute the account over the phone or whether the dispute must be in writing are nothing new to agencies. The Eastern District of New York (E.D.N.Y.) reviewed the issue of whether information discussed during such calls violates the FDCPA. In Sandoval v. I.C. Systems, 17-CV-3755, 2018 WL 1582218 (E.D.N.Y. Mar. 29, 2018), the court found no violation. 

You can download the decision here.

Factual and Procedural Background

I.C. Systems credit reported plaintiff’s delinquent account to one of the credit bureaus. Plaintiff, wanting help with his credit, sought the assistance of a credit counselor known as Mrs. Reyes.  

Mrs. Reyes, with plaintiff present, initiated a call to I.C. Systems to discuss the account. Plaintiff verified his information and provided I.C. Systems authorization to speak with Mrs. Reyes about his account. At the time of the call, the account was already recalled by the creditor. As Mrs. Reyes discussed what she perceived to be incorrect information on plaintiff’s credit report, she asked the I.C. Systems representative whether the plaintiff can dispute the account over the phone or whether it must be disputed in writing. Due to the account being recalled, the I.C. Systems representative said the account could not be disputed, but it would be removed from plaintiff’s credit report within 30-60 days.

Plaintiff filed a lawsuit against I.C. Systems alleging that it violated the FDCPA by providing false, deceptive, or misleading representations during the call. I.C. Systems filed a motion to dismiss. The underlying issue to be decided by the court was whether the FDCPA extends to communications between a debt collector and a consumer’s representative that were not initiated by the debt collector.

Decision

The court declined to extend the FDCPA to fit this situation and granted I.C. System’s motion to dismiss. 

In its reasoning, the court distinguished between communications between a debt collector and a consumer versus those between a debt collector and a consumer’s representative. The court cited several of its, and the 2^nd Circuit’s, prior decisions where the courts refused to extend the FDCPA to communications between a debt collector and the consumer’s attorney because the attorney acts as the intermediary between the debt collector and the consumer. While the court recognized that Mrs. Reyes is not an attorney, it did point out that Mrs. Reyes, in her capacity as a credit counselor, acted as an intermediary between the debt collector and the consumer. Finding this to be similar to attorney representation, the court refused to extend the FDCPA to the conversation between Mrs. Reyes and I.C. Systems.

The court also pointed out that the call at issue was not initiated by I.C. Systems. Citing several cases from courts within the 2nd Circuit, the court reiterated that the FDCPA does not extend to communications initiated by someone other than the debt collector.

Analysis 

Agencies have received many calls similar to the call in question in this case. Many believe such calls to be a baiting tactic used to try to trick the debt collector into a technical FDCPA violation. 

Even though the court did not allude to baiting in the incident above, this decision helps to alleviate some of the baiting concerns of agencies. One thing many, if not all, of the alleged baiting calls have in common is that the calls are initiated by someone other than the debt collector. Many of these calls have the consumer on the line to authorize a third party representative to speak with the debt collector, and then the consumer goes silent while the conversation continues.  Many of these calls include someone asking, on behalf of the consumer, whether the account can be disputed over the phone or if the dispute needs to be in writing. There is now a strongly worded defense against such tactics.

Many Emergency departments in the US contract with a third party whose job it is to employ and manage physicians, handle the billing, as well as manage the full revenue cycle from beginning to end—including medical collections. The big players in the physician staffing space, after several years of mergers & acquisitions, are currently Schumaker, EmCare, TeamHealth and CEP America.

The problem

From a consumer perspective, the rub has been that the doctors supplied by these firms are independent contractors who bill out-of-network fees at the highest billing codes, and consumers are left with a balance bill that can be catastrophic. In other words, consumers can seek care at an in-network hospital and still be charged an out-of-network fee. Even when patients live in states with comprehensive balance billing legislation, they can still be surprised with a balance bill. This is because 40% of consumers are covered by employer-sponsored, self-funded insurance plans that are governed by ERISA, and not state law. So, these consumers remain responsible for the gap between what the health insurance company chooses to reimburse and what the doctor chooses to charge.

Detractors of physician staffing companies allege that their doctors purposefully stay out of network so they can balance bill, which is more profitable than signing on with an insurer and being in-network and settling for the fees that the insurer would force them to take.

From another angle, hospitals in general are not great at collecting revenue from Emergency Department patients. As a volume industry, emergency medicine relies on many lower-dollar collections to create a total profit. Hospitals, on the other hand, rely on big-ticket procedures by cardiac surgeons, orthopedists, neurosurgeons and the like. It stands to reason that a hospital is more likely to work harder to collect $20,000 for a single elective spinal procedure than to collect $400 for a single emergency department visit from a patient who may never pay.

In rural settings emergency departments are even more challenged to optimize their revenue cycles. Enter a large corporate ED staffing company with economy of scale. The hospital now doesn’t have to worry about the high volume of small-dollar collections, and no longer has to take the loss on no-pays. They no longer have to pay benefits to their physicians, and they no longer have to pay the ED physicians’ salaries.

The question is whether, in the long-run, the physician staffing companies, their billing practices and their attendant bad PR are so detrimental to the patient experience that any benefits of contracting a physician staffing company are down the drain. This would be the case if  patients don’t return to the facility for future care, or don’t pay their bills as the result of a poorly handled, opaque and confusing balance billing issue.

EmCare’s cautionary tale

Envision’s EmCare has an especially problematic reputation for leaving patients with large, unexpected medical charges. Last year, a New York Times reporter wrote a scathing but well-documented article: “The Company Behind Many Surprise Emergency Room Bills.” That article pointed to a Yale study that analyzed data on millions of emergency room visits and and found “notable changes in patient care and billing patterns after EmCare entered a hospital.”

The Yale study noted that while EmCare is not the only physician staffing company with troubling metrics, “hospitals’ out-of-network billing rates increased by between 81 and 90 percentage points” after contracting with EmCare. The Yale researchers also determined that “after EmCare enters a hospital, patients are 43 percent more likely to have physician services coded using the most high intensity, high paying codes.” EmCare disputed these findings as inaccurate and based on incomplete and misleading data.

Both the Yale and NYT reports prompted a congressional investigation by US Senator Clare McCaskill, which insideARM covered last year. Most significantly, EmCare’s parent company is the main defendant in a class action suit filed by a growing list of institutional investors (including many pension funds). The plaintiffs in the case of Bettis v. Envision Healthcare Corporation et. al., have accused EmCare and its officers of insider trading, of knowing its business model was not sustainable and that its growth was not the result of providing efficiencies of scale, but instead, that EmCare relied on unethical balance billing, and engaged in other violations of SEC regulations. All told, EmCare and a growing list of co-defendants are facing eight counts of securities misconduct. Plaintiffs have demanded a jury trial.

The EmCare situation is still developing, and certainly its competitors are also under the microscope, bracing against press coverage that has been critical of the way they code procedures and balance bill, as well as their potentially detrimental effect on their  hospital partners’ brands. Even so, it’s unlikely that physician staffing companies, or the bills they have generated, are going anywhere. Somewhere out there are the collections agencies that have been, or will be, subcontracted to either collect the debts of these companies, or buy their uncollected debts outright. When these debts are in the process of recovery, will the brand of the original medical provider be protected? Will the patient experience of receiving a surprise balance bill without context, from a third-party, make the bill even harder to resolve?

insideARM perspective

Transparency in the revenue cycle can go a long way, especially in the collection of medical balance bills. It’s understandable that if people are seen for 10 minutes for strep throat in a local, in-network emergency department, they paid their co-pay or co-insurance, met their deductible and are then called on a balance bill by a Schumacher or a TeamHealth, there will be a trust problem to overcome between consumer and collections agent right at the outset.  

First, there is already the confusion and souring of the clinical experience from being balance billed. Second, if the emergency department staffing company is basically a secret operator during the clinical experience, and patients have no idea they’re being treated by an out-of-network employee of a third-party entity, this adds another layer of confusion that could be perceived by a consumer as deceptive. This too can unnecessarily complicate the collection of payment, erode a healthcare provider’s brand, and destroy the patient experience even if the actual clinical visit was great. It may even reduce the likelihood that a debt will ever be recovered.

More transparency would empower consumers with more information about the roles different entities play in their care. This could enable the momentum of a positive clinical encounter to extend into the financial aspects of the patient experience.

According to PWC’s Top Health Industry Issues of 2018, “Forty-nine percent of provider executives said revamping the patient experience is one of their organization’s top three priorities over the next five years. Many already have or are building the role of chief patient experience officer.” Hospital CFOs aren’t focused on improving the patient experience throughout the revenue cycle for nothing. Their data is showing them that informed, engaged and happy patients enjoy better clinical outcomes, comply with care instructions, and are more motivated to engage productively all the way through the revenue cycle. The standard operating procedures of physician staffing companies as they exist today will surely need to evolve if preserving a hospital’s brand promise and improving the patient experience are true strategic priorities tied to providers’ bottom lines.

The New Jersey Attorney General recently announced that the state’s Governor will nominate Paul R. Rodriguez to serve as the Director of the New Jersey Division of Consumer Affairs. The Attorney General said that this appointment will help to “fill the void left by the Trump Administration’s pullback of the Consumer Financial Protection Bureau (CFPB), and fulfill one of Governor Murphy’s promises to create a state-level CFPB in New Jersey.”

The Division of Consumer Affairs is responsible for protecting consumers’ rights, regulating the securities industry, and overseeing 47 professional boards.

Rodriguez is currently Acting Counsel to New York City Mayor Bill de Blasio. Previously, he was an associate at Simpson Thacher & Bartlett LLP in New York City where he worked on financial transactions, securities regulation and intellectual property.

The Division of Consumer Affairs is responsible for enforcing laws designed to ensure the fairness and integrity in New Jersey’s commercial and investment marketplaces, and for assisting consumers with complaints or questions about particular professionals, businesses, vendors, or service providers. The Division includes the Office of Consumer Protection and the Bureau of Securities.

The Office of Consumer Protection (OCP) is the primary investigative section for consumer complaints. The main responsibility of the OCP is to enforce the Consumer Fraud Act and its regulations.

Rodriguez will begin serving as Acting Director of the Division of Consumer Affairs on June 1. Governor Murphy will formally nominate Rodriguez to the position, which is subject to the advice and consent of the State Senate.

insideARM Perspective

New Jersey does not currently require collection agencies to be licensed. A search for “debt collection” on the Attorney General website produces this educational handbook for consumers, explaining their rights. Notably, in addition to what you’d expect to see (standard rights afforded by the FDCPA), the following good advice is prominent:

DO NOT HIDE OR AVOID THE DEBT COLLECTOR. If a collector contacts you about a debt, you should talk to him or her at least once to see if you can resolve the matter. Even if you do not believe that you owe the debt, or know that you cannot repay the debt immediately, or think that the collector is contacting you by mistake – do not ignore the debt collector.

NOTE: Sending such a letter to a debt collector to whom you owe money does not rid you of the debt, but it should stop the contact. The creditor or the debt collector still can sue you to collect the debt.

In a related move, last fall the Pennsylvania Attorney General created a Consumer Financial Protection Unit, and named Nicholas Smyth to lead it. Smyth, a seasoned consumer protection attorney, was one of the first hires at the (federal) CFPB.

Acting CFPB Director Mick Mulvaney has set expectations that the Bureau is currently working on a debt collection rule. Those tasked with consumer protection at the state level are likely watching closely to see what this rule will cover; and are likely prepared to step into the space if they don’t like what they see.