Almost two years after the 1099C disclosure issue hit the industry, the Eastern District of New York finally finds that a disclosure stating a “settlement may have tax consequences” does not violate the FDCPA. Ceban v. Capital Management Services, L.P., 2018 WL 451637 (Jan. 17, 2018 E.D.N.Y.).

You can read the full decision here.

Factual Background

Julian Ceban, the plaintiff in this matter, received a settlement offer letter from Capital Management Services, L.P.  The letter contained what is known as the 1099C disclosure; specifically, “[t]his settlement may have tax consequences. If you are uncertain of the tax consequences, consult a tax advisor.”  The letter, however, did not have a settlement dollar amount listed. 

Ceban, represented by RC Law Group PLLC, filed a complaint against Capital Management Services on August 2, 2017, alleging that this disclosure violates the FDCPA. Specifically, the complaint alleges that this disclosure violates: section 1692(d) because it is intended to harass, oppress, or abuse the consumer; section 1692(e) because it is false, deceptive, or misleading; and section 1692(f) alleging Capital Management Services used unfair and unconscionable means to collect the debt. 

Capital Management Services filed a motion to dismiss this claim last November. On January 17, 2018, Judge Allyne Ross granted the motion to dismiss. 

The Decision 

Even though the decision found that Ceban had standing to bring the suit under Spokeo, the court dismissed all of the FDCPA claims related to the 1099C disclosure.

Judge Ross dismissed the 1692(d) claim without much analysis, plainly stating that “sending one allegedly misleading notice indicating that a settlement of plaintiff’s debt could have tax consequences” is not comparable to the non-exhaustive list of harassing, oppressive and abusive conduct prohibited by this section of the FDCPA.

As for 1692(e), the decision dismisses this claim, stating that the 1099C disclosure is not false, deceptive, or misleading. The court gave no credence to plaintiff’s argument that not including a settlement amount prevents him from determining whether 1099C reporting would be required. The court stated that the $600 threshold triggers the creditor’s—not the debtor’s—reporting requirement, noting that the debtor’s requirement of reporting debt may be triggered regardless of the amount forgiven.

Additionally, the court dismissed the argument that plaintiff may fall under the many exceptions of 1099C reporting.  Since the statement was conditional (“may”), the court found that “even if plaintiff did not have to report his forgiven debt because an exception applied, the statement… would not be false.”

All in all, the court found that the plaintiff’s interpretation of the disclosure is “bizarre or idiosyncratic” and, citing another case, stated that plaintiff “has unreasonably found meaning in the language that is plainly absent.”

Finally, the court dismissed the 1692(f) claim, stating that the allegations in the complaint were a mere recitation of the 1692(e) violations with the word “misleading” replaced with “unfair and unconscionable.” 

Perspective

It is comforting to see the trend of well-reasoned and favorable decisions out of the Eastern District of New York, arguably one of the most contentious federal courts for the industry. These good decisions only come about when the industry decides to defend off-the-wall claims brought by plaintiffs’ counsel. 

What is promising is the speed at which the court reached this decision; about five months after the case was filed in August 2017. While five months may seem like a long time to lay persons, it is a relatively quick turn-around time in the world of litigation. While not applicable for every claim, this case serves as an example of how quickly the tides can turn if weak and meritless claims are vigorously defended from the get-go.

PITTSBURGH, Pa. — Credit Management Company is proud to announce the promotion of Joel McKiernan to Executive Vice President of Sales. Joel is responsible for sales team leadership, growing revenue, and contributing to our marketing and business strategy.

Joel McKiernan began his career at CMC in 2013 and brought with him over 22 years of experience in the healthcare revenue cycle industry. He has played a critical role in managing and directing our sales force and new market and product development.

Joel has thrived as VP of Sales and has maintained a good rapport with clients over the past 4.5 years. He also added several large clients to our client base. Joel’s ability to maintain and nurture current client relationships while fostering and cultivating new ones has helped earn Joel the new title, Executive Vice President of Sales. 

About Credit Management Company

Credit Management Company, headquartered in Pittsburgh, PA, has been providing full service accounts receivable and collection management programs across several industry segments since 1966. Our clients reside in the healthcare, government, education, and consumer industry sectors. All have benefited from either our standard or customized outsourcing programs to improve their bottom line.

Working with some of the most influential players in the industry, we are proud of the partnerships we have cultivated over the years. Each business relationship is approached in a collaborative style, always listening and responding to our clients’ needs and working together to find the best solutions possible. More at www.creditmanagementcompany.com.

This morning CFPB Acting Director Mick Mulvaney submitted what is a routine quarterly budget request to the Chair of the Board of Governors of the Federal Reserve. The amount of the request, however, was not routine. He requested $0.

You can read the letter here in its entirety.

Mulvaney says the reason for the (lack of) request is because he is told projected expenses for the upcoming quarter are $145 million, and that the Bureau currently has $177.1 million in the bank. He proceeds to note, 

“My understanding is that previous Bureau leadership opted to maintain a ‘reserve fund’ to address possible financial contingencies, although I know of no specific statutory authority requiring the establishment or maintenance of such a reserve. 

…Finally, as net earnings of the Federal Reserve System are periodically remitted to the Treasury, this request – or lack thereof – will serve to reduce the federal deficit by the amount that the Bureau might have requested under different leadership. While this approximately $145 million may not make much of a dent in the deficit, the men and women at the Bureau are proud to do their part to be responsible stewards of taxpayer dollars.”

Former CFPB Director Richard Cordray made the following recent requests for funding:

• October 12, 2017: $217,100,000
• July 31, 2017: $84,600,000
• April 17, 2017: $125,600,000
• January 17, 2017: $145,700,000
• October 14, 2016: $246,100,000

The new CFPB management has been busy. Yesterday they announced a “call for evidence to ensure the Bureau is fulfilling its proper and appropriate functions to best protect consumers.” This will entail a comprehensive review of all CFPB departments, with a request for feedback from the public on their effectiveness.

This article previously appeared on the Ontario Systems Blog and is republished here with permission.

A recent CDC publication states 39% of Americans between the ages of 18-64 in 2016 were enrolled in High Deductible Health Plans (HDHP), up from 26% in 2011. This 13% increase means a larger percentage of a provider’s patient accounts now require them to collect the deductible and/or co-insurance amount from the patient. That has been a significant increase to handle in a short five-year timeframe, and when combined with reimbursement reductions, the two have put providers in a position where adding headcount to handle the volumes is not an option.

As a result, managing self-pay has become an even more important task, one in which providers traditionally have not had much focus on over the past 10 years. Applying traditional insurance follow-up methodologies, like working larger accounts first, is inaccurate and can be counterproductive. A solid segmentation strategy, on the other hand, can fill in gaps using key scrub processes supported with quality reporting.  Below are three key disciplines you can review to help improve your self-pay management process, improving patient collections:

1. Develop a solid segmentation strategy: With a sizable increase in self-pay accounts to collect, combined with lower reimbursements, margins are too thin for staff to work every account. A segmentation strategy that identifies who can pay and who should be reviewed for financial assistance is key.  By using outside key data elements, you can ensure accounts are segmented into the right tiers for follow-up. Based on this tiering, a custom contact strategy should be deployed to help patients deal with their self-pay balances. This enables you to focus your limited resources on the most effective accounts and drive others through your financial assistance process.

2. Identify missing insurance: Registration processes are not perfect. Important information can be missed, and sometimes patients omit valid information. Use outside data services to scrub accounts and identify missing insurance information. This can impact 1-3% of your self-pay accounts – A valuable reduction in bad debt expense. Use this process at several points in your revenue cycle to ensure you catch these accounts as soon as possible. By focusing on this discipline, you can file missing insurance faster, and reduce both days in AR and the number of accounts written off to bad debt.

3. Detailed self-pay reporting: It is critical to have reporting in place that reviews your tiers’ performance along with other KPIs so you can update your strategy accordingly. Accurate knowledge of demographic changes and the ability to trend this data while comparing performance week over week, month over month, and year over year is key.  Make these reports actionable to monitor your self-pay process and adapt to changes quickly.

Self-pay management is an important part of the revenue cycle, but to many providers it is a relatively new process they have tackled. Developing a segmentation strategy, identifying missing insurance, and reviewing actionable detailed reporting are the key disciplines you need to improve your self-pay management process. By performing these functions, you will improve cash recoveries and days in AR.

This statement was released yesterday afternoon by the Consumer Financial Protection Bureau (CFPB),

The Consumer Financial Protection Bureau today announced that it is issuing a call for evidence to ensure the Bureau is fulfilling its proper and appropriate functions to best protect consumers. In coming weeks, the Bureau will be publishing in the Federal Register a series of Requests for Information (RFIs) seeking comment on enforcement, supervision, rulemaking, market monitoring, and education activities. These RFIs will provide an opportunity for the public to submit feedback and suggest ways to improve outcomes for both consumers and covered entities.

“In this New Year, and under new leadership, it is natural for the Bureau to critically examine its policies and practices to ensure they align with the Bureau’s statutory mandate. Moving forward, the Bureau will consistently seek out constructive feedback and welcome ideas for improvement,” said Bureau Acting Director Mick Mulvaney. “Much can be done to facilitate greater consumer choice and efficient markets, while vigorously enforcing consumer financial law in a way that guarantees due process. I look forward to receiving public comments in response to this call for evidence and encourage all interested parties to participate.” 

The first RFI issued by the Bureau will seek public comment on Civil Investigative Demands (CIDs), which are issued during an enforcement investigation. Comments received in response to this RFI will help the Bureau evaluate existing CID processes and procedures, and to determine whether any changes are warranted.

Interestingly, the announcement is titled, “Acting Director Mulvaney Announces Call for Evidence Regarding Consumer Financial Protection Bureau Functions.” (emphasis added)

This comes on the heels of yesterday’s statement by the Bureau that it intends to reconsider the rule entitled, “Payday, Vehicle Title, and Certain High-Cost Installment Loans,” which was scheduled to take effect (at least in part) yesterday. 

After less than 8 weeks in office, Acting Director Mulvaney has already picked up the pace of rollbacks and changes to CFPB policy. Other examples include:

• Announced new staff additions — several of them on loan from Mulvaney’s other place of work, the Office of Management and Budget.
• Abandoned the planned consumer debt collection disclosure survey.
• Announced that the Bureau does not intend to assess penalties for errors in data collected in 2018, and plans to reconsider aspects of the Mortgage Data Rule.
• Hired new Chief of Staff, the former Staff Director of the House Financial Services Committee under Rep. Jeb Hensarling (R-TX). Hensarling famously opposes the concept of the CFPB.
• Updated the stated mission of the Bureau.

insideARM Perspective

Following years of feeling that consumer advocates had the primary ear of the CFPB, industry appears to have an opportunity to be heard in the coming months. Larger debt collectors will no doubt have input as it relates to the CID process, identified as the first topic on the list.

If I could make a suggestion to Acting Director Mulvaney and his staff… I suspect that if you asked your Ombudsman, Wendy Kamenshine, she could tell you a lot about what a variety of stakeholders have to say. The Office has held several Forums, including at least two I can recall for industry representatives. A great deal of detailed, candid feedback was shared at those in-person events by a wide variety of organizations. The notes ought to be very insightful.

Today the Practice of Law Technical Clarification Act of 2017, along with a list of other proposed legislation, will be considered by the Committee on Financial Services. 

The law is proposed as an amendment to the Fair Debt Collection Practices Act (FDCPA) to exclude law firms and licensed attorneys who are engaged in activities related to legal proceedings from the definition of a debt collector, to amend the Consumer Financial Protection Act of 2010 to prevent the Bureau of Consumer Financial Protection from exercising supervisory or enforcement authority with respect to attorneys when undertaking certain actions related to legal proceedings, and for other purposes. 

On December 14, 2017 insideARM published an article on this topic by Thomas B. Pahl (Acting Director of the Bureau of Consumer Protection at the Federal Trade Commission) and Mathew J. Wilshire (a Senior Attorney in the Division of Financial Practices at the FTC), supporting the concept in the proposed legislations. Note: the views represented were their own and not necessarily the position of the FTC. 

Originally proposed as H.R. 1849 by Rep. Dave Trott (R-MI) on April 20, 2017, the House Subcommittee on Financial Institutions and Consumer Credit held a hearing entitled “Legislative Proposals for a More Efficient Federal Financial Regulatory Regime,” in part to consider this bill. Vicente Gonzalez (D-TX) and Rep. Alexander Mooney (R-WVa) have subsequently signed on as co-sponsors. The bill is now known as H.R. 4550; the name has not changed from the original.

Testimony at that hearing included remarks by Anne P. Fortney, partner emerita with the law firm of Hudson Cook, LLP. In addition to her former practice as partner with Hudson Cook, Fortney served as Associate Director for Credit Practices at the Federal Trade Commission, as in-house counsel at a retail creditor, and as a practitioner counseling clients on compliance with consumer protection laws. insideARM summarized her relevant testimony to H.R. 1849 here.

NARCA, the National Creditors Bar Association, has published a release in support of the bill (see it here), as has the American Bar Association (see it here).

Yesterday, three law professors co-authored an editorial published in a Texas newspaper opposing the bill, saying it is likely to lead to: 

• More lawsuits as attorneys rush to litigation to immunize their conduct in an already overburdened court-system.
• Less informal resolution of consumer debt as lawsuits become preferred method of collection.
• More use of unfair litigation tactics, all now covered by the FDCPA, including:
• Lawsuits against consumers in distant courts.
• Lawsuits to collect zombie debt.
• Lawsuits to collect amounts not owed.
• More judgments obtained through unfair means with long-lasting and devastating consequences to consumers.

insideARM Perspective

The insideARM Perspective on the September 2017 hearing noted that the CFPB has been especially aggressive in taking action against collection law firms. This began in 2014 with their investigation of Frederick J. Hanna & Associates P.C. That ended after 18 months with a consent order against the firm. insideARM wrote extensively about this case. You can read the final chapter here, including comments from the Hanna firm and also NARCA, the National Creditors Bar Association.

On April 26, 2016 the CFPB announced the filing of a consent order with the New Jersey debt collection law firm, Pressler & Pressler LLP. You can read the insideARM coverage of that story here. On April 17, 2017 the CFPB filed suit against the law firm of Weltman, Weinberg & Reis Co, L.P.A. (WWR). Read our story here. Both Pressler & Pressler and WWR argued that they did not violate any federal or state laws, and suggested that the CFPB is making rules through enforcement activity. 

In 2015 insideARM published an extensive discussion by attorney Don Maurice of the Heintz v. Jenkins Supreme Court decision, which is about this same topic.

Now that there is new leadership at the CFPB it will be interesting to see whether this focus on debt collection law firms recedes. As for Congress, that’s another matter. The bill (now H.R. 4550) is in the very early stages; there is a long way to go.

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Correction note: An earlier version of this story listed Mike Bishop (R-MI) as the author of H.R. 1849. insideARM regrets the error.

The Consumer Financial Protection Bureau (CFPB) made the following announcement yesterday regarding its Payday Rule:

“January 16, 2018 is the effective date of the Bureau of Consumer Financial Protection’s final rule entitled “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (“Payday Rule”).  The Bureau intends to engage in a rulemaking process so that the Bureau may reconsider the Payday Rule.  

Although most provisions of the Payday Rule do not require compliance until August 19, 2019, the effective date marks codification of the Payday Rule in the Code of Federal Regulations.  Today’s effective date also establishes April 16, 2018, as the deadline to submit an application for preliminary approval to become a registered information system (“RIS”) under the Payday Rule. However, the Bureau may waive this deadline pursuant to 12 C.F.R. 1041.11(c)(3)(iii). Recognizing that this preliminary application deadline might cause some entities to engage in work in preparing an application to become a RIS, the Bureau will entertain waiver requests from any potential applicant.”

This is the latest example of the deregulatory direction being taken by Acting Director Mulvaney, who was appointed by President Trump last November. Other examples include:

• Announced new staff additions — several of them on loan from Mulvaney’s other place of work, the Office of Management and Budget.
• Abandoned the planned consumer debt collection disclosure survey.
• Announced that the Bureau does not intend to assess penalties for errors in data collected in 2018, and plans to reconsider aspects of the Mortgage Data Rule.
• Hired new Chief of Staff, the former Staff Director of the House Financial Services Committee under Rep. Jeb Hensarling (R-TX). Hensarling famously opposes the concept of the CFPB.
• Updated the stated mission of the Bureau.

At the other end of Pennsylvania Avenue, late last year a group of House Members initiated legislation that would use the Congressional Review Act to kill the Payday rule.

The Competitive Enterprise Institute, a conservative think tank, issued this statement in support of that legislation:

“Millions of Americans will have few other options to cover urgent expenses like rent, a car payment, or a medical emergency if regulators succeed in shutting off access to small dollar loans,” said Daniel Press, CEI policy analyst and author of the report, How the Consumer Financial Protection Bureau’s Payday Loan Rule Hurts the Working Poor. “Congress has an opportunity now to help consumers by stopping the pay day loan rule from going into effect.”

Consumer advocates are furious that Congress and the CFPB might be able to undo their years of work to create the Payday Rule. In an editorial published by The Herald Sun (North Carolina), Jennifer Copeland, executive director of the N.C. Council of Churches and Larry Hall, secretary of the N.C. Department of Military and Veterans Affairs, explain their support for the rule:

“The (Payday) rule was finalized only after a coalition of over 750 civil rights, consumer, labor, faith, veterans, seniors and community organizations from all 50 states energized a years-long effort to push the Consumer Bureau for these protections from predatory payday and car title lending. The North Carolina Coalition for Responsible Lending was active in that fight, supporting a strong rule from the Consumer Bureau that would not undermine strong state consumer protections, like North Carolina’s 30 percent interest rate cap for consumer loans.

…This legislation, introduced by Rep. Dennis Ross (R-Fla.) and co-sponsored by Rep. Alcee Hastings (D-Fla.), Tom Graves (R-Ga.), Henry Cuellar (D-Texas), Steve Stivers (R-Ohio), and Collin Peterson (D-Minn.), would kill the first ever national payday rule that requires payday and car-title lenders to make a loan only after they have determined that the borrower can afford to pay it back. It is a commonsense measure designed to protect people from being trapped for months and sometimes years in triple-digit payday and car title loans. Congress should leave it alone.”

 

 

insideARM maintains a free FDCPA resources page to provide the ARM community a destination for timely and topical information on the Fair Debt Collection Practices Act (“FDCPA”). This page is generously supported by TransUnion. 

The centerpiece of the page is a chart of significant FDCPA cases. Case information and analysis is provided by Joann Needleman, a Clark Hill attorney and leader of the firm’s Consumer Financial Services Regulatory & Compliance Group. Where insideARM has published a story on the case, a link is provided.

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Here’s a rundown of just a few of the FDCPA cases in the spotlight as 2017 wound to a close.

Ronald Chenault v. Credit Corp Solutions, Inc.

The gist: In the state-level court case that preceded this one, the debt collector lost for failure to produce sufficient documentary evidence to show that consumer owed the debt in question. FDCPA action followed, but the court found that the filing of a lawsuit absent the means to prove the debt was valid is neither harassing nor deceptive.

Barbara Winslow, on behalf of herself and all others similarly situated, v. Forster & Garbus, LLP, Ronald Forster, Esq. And Mark Garbus, Esq.

The gist: Law firm filed suit pursuant to a student loan account and identified a securitized trust as the original creditor rather than Bank of America, the lender. The court found the statement as to the trust’s “original creditor” status violated the FDCPA.

Elizabeth K. Atwood, aka Elizabeth King v. Cohen & Slamowitz LLP, Mitchell Selip, Mitchell G. Slamowitz, David A. Cohen

The gist: Law firm brought suit against the consumer, but never took judgment. The case was assigned to a second law firm for post-judgment execution proceedings. The second law firm was not aware that no judgment had been entered, and nonetheless garnished a bank account. Order to show cause (OTSC) was served on the first law firm, which responded and appeared in court. The consumer alleged that the first law firm’s response and appearance was a violation under the FDCPA. The court disagreed, and opined that a response to an OTSC is not debt collection activity.

Kraus v. Professional Bureau of Collections of Maryland

The gist: Court found that debt collection activity met safe harbor provisions set forth in Avila, even though dunning letter did not clarify whether or not interest was still accruing. This opinion is important because the court took great exception to the Avila decision and abuse by the plaintiffs’ bar. See insideARM articles on this case here and here.

Watson v. ARC Management Group, LLC

The gist: Collection agency was not licensed under state law when it reported a debt to a credit bureau. However, it subsequently obtained the necessary license and the court found that because the agency had cured its default, there was no FDCPA violation.

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Anne Humphreys v. Budget Rent-A-Car System Inc. & Viking Collection Service

The gist: Court found that communications regarding damages to a vehicle sent to a consumer’s attorney did not qualify as debt collection activity, and thus did not violate the FDCPA.

Saroza v. Lyons, Doughty & Veldhuis, P.C.

The gist: Plaintiff alleged that a letter in question unlawfully increased the balance due, since costs had yet to be awarded by the state court. The court found that the consumer’s contract with the creditor required the consumer to pay all of the creditor’s court costs. In granting the law firm’s Motion for Summary Judgment, the Court concluded that the letter was not “false” because it accurately included the amount of court filing fees and service fees that had been paid to the Clerk. The Court further observed that the consumer was on notice that he would be responsible for these costs, as a state court lawsuit that was served on the consumer included a request for the amount of the debt, plus court costs.

Christina Altieri, on behalf of herself and all others similarly situated v. Overton, Russell, Doerr, and Donovan, LLP

The gist: This is yet another “reverse Avila” claim ripping up the New York district courts. Judge McAvoy of the Northern District of New York dismissed a reverse Avila claim which alleged that the Avila disclosure was required on a letter due to pre-judgment interest that may accrue on the account as prescribed N.Y. C.P.L.R. § 5001. Read the insideARM article on the case here.

Kyle Spuhler and Nichole Spuhler, on behalf of themselves and all others similarly situated, v. State Collection Services, Inc.

The gist: Collection letter failed to disclose that interest was accruing. Following Avila and Miller in the 7th Cir., the court found that letter failed to contain Safe Harbor language, thus the FDCPA claim was a triable issue of fact.

Deborah Covarrubias v. Zee Law Group et al.

The gist: Law firm recorded a judgment lien on property of debtor’s parents. Property had an open line of credit, so when the bank learned of lien, it froze the line of credit. After a bench trial, the court found that law firm’s actions constituted a threat to sell plaintiff’s home and its actions were liable under the FDCPA. The appeals court confirmed. The facts of this case are unclear and not well stated in this (unpublished) opinion. See an article about this case here.

Paul Laak v. Quick Collect, Inc. and Jesse Conway

The gist: A collection agency had been attempting to collect a debt from a consumer since 2001. At that time, its communications complied with the rules for 1692g notices. Years later, the same collection agency sent the account to an attorney who started garnishment proceedings. The attorney did not include the 1692g disclosure with garnishment. Court held that the debt collection process began with the agency and did not commence anew with the attorney. A second validation notice accompanying the garnishment papers in 2016 would not have served the purposes §1692g(a).

Anastasia Belichenko v. Gem Recovery Systems

The gist: Although the debt collector in this case failed to respond, the court declined to issue a default judgment. The court found that statements, “we will use any collection activity necessary to collect this debt due to our client” and “our policy is to report delinquent account information to TransUnion and Experian Credit Bureaus which may impair your credit rating and your ability to obtain credit in the future” used in the letter in question did not otherwise overshadow the validation notice.

Beverly Heffington v. Gordon, Aylworth And Tami, P.C.

The gist: The consumer filed a claim that a letter (not a first communication) received from a law firm did not indicate interest was accruing. To complicate matters, the law firm that sent the initial letter changed its name. Despite the consumer’s allegations, the court found that the law firm did not obscure its name change to be deceptive, that it clearly communicated its name change, and that its letter referenced the same debt as an earlier-sent letter under the firm’s old name. Court found that §1692g(a) of the FDCPA does not apply to the letter in question, because it was not an initial communication, and that “even if it did apply, the language of the 2016 Letter comports with the statute’s notice requirements.” The consumer failed to show a genuine issue as to any material fact, so law firm was awarded summary judgment as a matter of law on the §1692g claim.

Last week in the case of Leandra English v. Donald J. Trump et al. Judge Timothy Kelly denied a second request to remove President Trump’s pick to lead the Consumer Financial Protection Bureau (CFPB) until a permanent replacement can be nominated and confirmed. On Friday, English made her next move by filing an appeal with the U.S. District Court for the District of Columbia. She also requested that the decision be expedited.

Read insideARM’s coverage of the circumstances of the first denial (English’s request for a temporary restraining order) here.

Read insideARM’s coverage of the second denial (English’s request for an injunction) here.

You can download a copy of the Notice of Appeal here.

The Notice itself is brief (case references removed for readability),

Notice is hereby given that Plaintiff Leandra English appeals to the United States Court of Appeals for the District of Columbia Circuit from the order of this Court denying her motion for a preliminary injunction, entered on January 10, 2018. 

In addition, the plaintiff is entitled to—and hereby requests—expedited appellate review.  

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This case presents precisely the sort of extraordinary circumstances that justify expedited consideration. The plaintiff is entitled by law to serve as Acting Director of the Consumer Financial Protection Bureau (CFPB). Defendant Donald J. Trump, however, has unlawfully purported to appoint Defendant John M. Mulvaney to that position. As a result, the plaintiff is suffering a continuing and manifestly irreparable injury: the usurpation of her position at the fore of a federal agency in a role that will disappear as soon as the President nominates and the Senate confirms a new Director. Moreover, there is an urgent public need for clarity as to the Acting Director position at the CFPB. The CFPB is the primary federal regulator of many consumer financial products and services, issuing rules and taking enforcement actions affecting a large portion of the economy. The dispute between the plaintiff, the President, and Mr. Mulvaney has generated substantial attention in the media, which has repeatedly noted the existence of public confusion over the CFPB’s leadership. Until the full judicial process has run its course, the Bureau’s employees, the companies it regulates, and millions of American consumers will continue to suffer under a cloud of disruptive legal uncertainty.

In light of these circumstances, the plaintiff respectfully requests that the Court of Appeals accord expedited treatment to this case.

insideARM Perspective

In my perspective last week I contemplated whether English would appeal, and said this,

Maybe. It seems to me, though, that as a practical matter, the time required for an appeal will approach (or even exceed) the period of Mulvaney’s acting directorship, which by law is capped at 210 days. (You may recall that oral arguments in the case of PHH Corp. v. Consumer Financial Protection Bureau took place on May 24, 2017; we still await a decision. And, another case still pending in the D.C. Court of Appeals, ACA International, et al. v. the Federal Communications Commission (FCC) and United States of America, saw oral arguments in October 2016; still no decision there either.)

Hence, her request for expedited treatment.

 

UPDATED 9:20am 1/12/2018: The following details about the award was published in a press release today by Performant Corporation:

According to the Department of Education, the total contract award amount for the base period and option period is not to exceed $400,000,000. The base period of performance for this contract is January 11, 2018 through January 10, 2023. The contract also includes a single, three (3) year Optional Ordering Period which is January 11, 2023 through January 10, 2026; a one year (1) Optional In-payment Retention Period, which is January 11, 2026 through January 10, 2027; and two 6 month Optional In-payment Retention Periods, which is January 11, 2027 through July 10, 2027 and July 11, 2027 through January 10, 2028.

One of the few publicly-traded companies in the ARM industry, Performant Corporation (PFMT) stock is up significantly since yesterday’s announcement.

Meanwhile, last night The Washington Post published an article that re-opened the matter of alleged ties between Education Secretary Betsy DeVos and Performant through a loan made to the firm several years ago by LMF WF Portfolio, a limited liability corporation in which DeVos was once an investor. insideARM wrote about this when it was first reported in January 2017, and also published a response from the company.

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This afternoon, as ordered last month by Judge Thomas Wheeler, the Department of Education (ED) completed the long-awaited corrective action for the Private Debt Collection Unrestricted Contract Award. According to several sources, letters have been sent to all offerors. ED has submitted the following to the U.S. Court of Claims:

On January 11, 2018, the Department of Education completed its corrective action. The Department evaluated revised proposals, prepared and documented a new source selection decision, and awarded contracts to Performant Recovery, Inc. and Windham Professionals, Inc., the two offerors whose proposals were determined to be the most advantageous to the Government. (emphasis added)

Also on January 11, 2018, the Department of Education issued notices of termination for the convenience of the Government of seven contracts issued on December 9, 2016 (The CBE Group, Inc., Financial Management Systems Investment Corporation, GC Services Limited Partnership, Premiere Credit of North America, LLC, Value Recovery Holdings, LLC, Windham Professionals, Inc., and Transworld Systems, Inc.).

Finally, the Department of Education is proceeding to send out the appropriate notifications to the unsuccessful offerors.

So what’s left:

• The two firms that are operating under Award Term Extensions (ATEs) on April 28, 2017 — Alltran (formerly Enterprise Recovery Systems, Inc.) and Pioneer Credit Recovery.   
• The small business contractors: Action Financial Services, Bass & Associates, Central Research, Coast Professional, Credit Adjustments, FH Cann & Associates, Immediate Credit Recovery, National Credit Services, Inc., National Recoveries, Professional Bureau of Collections of Maryland, and Reliant Capital Solutions
• The two companies receiving the unrestricted contract award today, Performant Recovery and Windham Professionals.

You can download a copy of the notice to the court here.

insideARM Perspective

Wow. This is indeed surprising. Many of us thought that the corrective action would lead to more unrestricted contract awards, not fewer.

Well, the good news is that a decision has been made and accounts should now be able to flow without restriction. That’s good for borrowers, for the firms receiving the work, and likely for ED, which can now possibly move on with overseeing the servicing rather than focusing on the deciding of who will service.

Of course, those that had originally received the unrestricted award on December 9, 2016 but have now lost it are not going to be happy (no doubt the understatement of the year). These firms have invested heavily to remain prepared to service accounts; and they have invested heavily in the legal battle to protect their contract award.

And, there are those that invested heavily to (unsuccessfully) protest the December 9, 2016 award. Also not happy.

Will there be another round of lawsuits? Time will tell.

What will happen now will be a re-ramping up among the firms left standing to accept what will seem like a firehose of accounts. This process began among the small business contractors and those with the ATEs just before the holidays, as ED placed 930,000 accounts after a months-long temporary restraining order imposed by the original judge overseeing the protests.

Today’s decision lends additional certainty for the companies that came out of the melee with a contract, so actual planning for the future can begin. What we may also see is those who have a contract hiring those who don’t in order to manage the volume.

A new chapter begins.

Visit this page to see the complete coverage on insideARM of the Department of Education Private Collection Contract.