This article was co-authored by Thomas B. Pahl and Matthew J. Wilshire. Thomas B. Pahl is the Acting Director of the Bureau of Consumer Protection at the Federal Trade Commission, and Mathew J. Wilshire is a Senior Attorney in the Division of Financial Practices at the FTC. The views expressed in this article are the personal views of the authors and do not necessarily reflect the views of the FTC or any FTC Commissioner.   

Since its enactment in 1977, there has been great controversy over whether the Fair Debt Collection Practices Act (“FDCPA”)[1] does and should apply to attorneys’ conduct in debt-collection litigation, most of which occurs in state court. Although the statute originally exempted attorneys, Congress rescinded that exemption and courts have since applied the FDCPA to a growing range of activities in litigation. The National Creditors’ Bar Association and the American Bar Association have advocated that Congress pass legislation[2] that would exempt lawyers’ litigation activities from the FDCPA.[3]  Even though we take no position on this proposed legislation, we generally agree that the best approach to protecting consumers from the litigation activities of lawyers is to rely on state court and state bar enforcement of state law along with FTC enforcement of the FTC Act as a backstop.   

The FDCPA’s application to lawyers has expanded over time. When Congress first enacted the FDCPA, it exempted attorneys completely by defining “debt collector” to exclude “any attorney-at-law collecting a debt as an attorney on behalf of and in the name of a client.”[4]  Courts generally construed that definition to immunize attorneys for conduct inside or outside of litigation, including practices non-attorneys generally do today.

Some creditors and other owners of debts responded by placing their accounts with certain unscrupulous law firms instead of with non-attorney debt collectors. These law firms could engage in deceptive and abusive collection practices without risk of liability under the FDCPA. To protect consumers from growing harm attributable to this activity, Congress in 1986 rescinded the attorney exemption. 

Congress apparently revoked the attorney exemption primarily to stop attorneys from engaging in pre-litigation collection conduct that caused harm to consumers. To justify revoking the attorney exemption, for example, Congress cited attorneys using abusive tactics like calling at all hours of the night.[5]  Congress did not cite problems in attorney litigation conduct to support its decision to revoke the exemption.    

Nevertheless, in 1995, the Supreme Court held in Heintz v. Jenkins that the FDCPA as amended covers lawyers’ “litigating activities.” The Court reasoned that after the 1986 amendment nothing in the FDCPA limited its applicability to lawyers, so there was no basis for carving out “litigating activities.”[6]  The Court further reasoned that the ordinary meaning of “debt collection” included filing lawsuits.[7]  It also pointed out that because Congress repealed a blanket lawyer exemption from the original FDCPA, Congress could have easily carved out litigating activities in a refashioned lawyer exemption if it wanted to do so.[8]  Since Heintz, courts have held that the FDCPA applies to attorney conduct in litigation. Moreover, as a former head of the FTC’s Division of Credit Practices recently testified before Congress, courts have done so in cases involving lawyer “technical violations for information they included in a complaint, or for harmless errors, or even errors that benefit the consumer.”[9]

Attorney conduct in all types of civil litigation of course can harm consumers. Indeed, the FTC issued a report in 2010 discussing problems that had arisen from lawyers’ conduct in debt-collection litigation. For example, the report stated, “debt collection actions too often are filed against the wrong consumer, seek the wrong amount, or both, or are otherwise based on erroneous information.”[10]

Consumers may have a difficult time protecting themselves from harm arising from attorney litigation conduct in the absence of legal restrictions. Consumers can choose their creditors, but they cannot choose their debt collectors. Consumer choices in the marketplace therefore are unlikely to deter adequately collection lawyers from engaging in litigation conduct that harms consumers.    

States have traditionally protected consumers from misconduct in litigation by regulating the conduct of attorneys in their courts, including in debt collection litigation. The FTC has recognized that states play this role.  n its 2011 report, the Commission noted that “state law is the main source of . . . substantive and procedural standards” for debt collection lawsuits and that “[e]ach state also applies its own rules of civil procedure and evidence and uses them to determine whether service of process was adequate [and] the pleadings contained appropriate and sufficient information.”[11]  The CFPB likewise has acknowledged that states play this role, recognizing “the traditional role of the States in overseeing the administration and operation of their court systems [in debt collection actions].”[12]

State courts and state bars have ample authority to stop the conduct of lawyers in debt collection litigation that harms consumers.  State courts generally have rules, like Federal Rule of Civil Procedure 11, which prohibit debt-collection attorneys from filing frivolous lawsuits to harass or intimidate defendants.  State court rules also typically prohibit debt-collection attorneys from making false or misleading claims in affidavits, motions, and other documents in litigation.  State bars further have the authority to sanction or otherwise discipline debt collection attorneys who file frivolous lawsuits or make deceptive claims.  State judges and bars know their court systems best, and they have expertise from decades if not centuries of enforcement against lawyers.  State courts and bars should remain primarily responsible for overseeing the conduct of collection attorneys in litigation.   

Although state courts and bars generally can protect consumers from abuse in their court systems, they may face challenges in addressing certain lawyer misconduct in debt collection litigation.  Many consumers appear pro se in debt collection litigation.  Many of them may not recognize conduct that violates court or bar rules, and, even if they do, they may not report it.  Moreover, at times, state court and bar standards and enforcement have not been robust.  Therefore, we believe the best way to ensure protections for consumers is to supplement state enforcement with a federal “backstop.”

Should the FDCPA be such a backstop?  No.  Applying the FDCPA to collection attorney litigation activities creates risks of substantial conflict and confusion.  Case law interpreting the FDCPA would require that attorneys be “meaningfully involved” in the preparation and review of any pleadings they sign.[13]  This case law indicates that collection attorneys in litigation have a duty to independently investigate complaint allegations in debt collection cases that appears to go beyond what state court and state bar rules require.  Case law also has interpreted the FDCPA to require that debt collectors have substantiation, that is, a “reasonable basis,” for the representations in the complaint.  In addition to this FDCPA case law, the CFPB is developing new federal rules for debt collection that may impose even more extensive and complicated requirements to flesh out meaningful involvement, substantiation, and other FDCPA concepts for representations made in complaints.  Applying these FDCPA standards and state court and state bar standards at the same time to the representations in complaints risks conflict and confusion that will make it harder for collection litigation attorneys to comply with the law.  Not applying the FDCPA to the conduct of attorneys debt collection litigation also would avoid conflict and confusion from overlapping federal and state standards.  We, therefore, do not believe the FDCPA should apply to the collection litigation conduct of attorneys.[14]

Federal Trade Commission enforcement of the FTC Act is a much better backstop than the FDCPA.  First, because the FTC Act is far less prescriptive than the FDCPA, using FTC Act enforcement as a backstop decreases the prospect of conflict and confusion with state standards.  Second, only the FTC enforces the FTC Act, while both the federal government and private individuals enforce the FDCPA.  This decreases the prospect of conflict and confusion with state standards because federal enforcers are more likely than private individuals to consider the broader consequences of filing an action.  Finally, the FTC has a history of reconciling Section 5 with many other federal and state standards for lawyers,[15] including some hard experience with courts rejecting its regulation of lawyers,[16] and so its past is critical to the governmental restraint needed to serve as a backstop.                           

In conclusion, state courts and state bars should continue to be the main actors protecting consumers from the conduct of attorneys in debt collection litigation.  FTC enforcement of the FTC Act, not the application of the FDCPA, should be the backstop for the states.

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[1] 15 U.S.C. § 1692 et seq.

[2] See letter dated November 16, 2017, from Hilaire Bass, President, American Bar Association, to the Honorable Jeb Hensarling, Chairman, and the Honorable Maxine Waters, Ranking Member, Committee on Financial Services, U.S. House of Representatives, supporting H.R. 1849, The Practice of Law Technical Clarification Act of 2017.       

[3] H.R. 1849, 115th Cong. (2017).

[4] Pub. L. 95-109, Sec. 803(6)(F) (1977).

[5] H.R. Rep. 99-405; 1986 U.S.C.C.A.N. 1752, 1755.

[6] Heintz v. Jenkins, 514 U.S. 291, 295 (1995).

[7] Id. at 294.

[8] Id. at 295.

[9]  Anne Fortney, “Legislative Proposals for a More Efficient Federal Financial Regulatory Regime” before House Financial Services Subcommittee on Financial Institutions and Consumer Credit (Sept. 7, 2017), at 17. 

[10] Federal Trade Commission, Repairing a Broken System, at p. 15.

[11] Id. at p. 6.  See also id. at p. 10 (“The FTC believes that service of process problems should be addressed at the state and local level.”).

[12] 78 Fed. Reg. 67848, 67877 (Nov. 12, 2013).

[13] CFPB v. Frederick J. Hanna & Assocs., 114 F. Supp. 3d 1342, 1368 (N.D. Ga. 2015); Bock v. Pressler and Pressler, LLP, 30 F. Supp. 3d 283, 305 (D.N.J. 2014) remanded on other grounds, 658 F. Appx. 63 (3d Cir. 2016).

[14] To avoid circumvention of the FDCPA’s important consumer protection function, it is important to apply the FDCPA to the pre-litigation activities of debt collection attorneys.  Likewise, it is important to apply the FDCPA to non-litigation activities of debt collection attorneys once they have filed a complaint, such as an attorney communicating with a consumer’s neighbors to pressure a consumer to pay a debt following the attorney’s filing of a complaint to recover on that debt from the consumer.        

[15] See generally Thomas B. Pahl and Evan R. Zullow, Update on Federal Regulation of Attorneys under the Financial Services Laws, 67 The Business Lawyer 617 (Feb. 2012). 

[16] See ABA v. FTC, 671 F. Supp. 2d 64, 66 (D.D.C. 2009), vacated, 636 F. 3d 641 (D.C. Cir. 2011). 

As I mentioned in a companion article this afternoon, today the U.S. Court of Federal Claims held a status conference in the matter of Continental Service Group, Inc., et al., Plaintiffs, and Collection Technology, Inc., et al., Plaintiff-Intervenors v. The United States, Defendant, and CBE Group, Inc., et al., Defendant-Intervenors (case nos. 17-449, 17-499, 17-493, 17-517, 17-578, 17-588, 17-633 consolidated).

Just before Thanksgiving, the case was taken over by Judge Thomas C. Wheeler. He called for this session in order to gain clarity (if that’s possible), as he works to jump onto this moving train. Today’s conference was a study in who’s on first, with all trying to keep things straight. There were approximately 50 people in attendance; mostly attorneys for the many parties involved.

However, so much has happened in the case over the last few days that it required a separate article to bring readers up to speed first, before addressing today’s conferece. With that completed, now we can get to today.

Here is who was represented in the courtroom:

Plaintiffs: Continental Service Group, Inc. (ConServe), Pioneer Credit Recovery, Inc. (Pioneer), Account Control Technologies (ACT), Progressive Financial, Inc. (Progressive), Van Ru, Collection Technology, Inc. (CTI), and Alltran Education (Alltran; formerly Enterprise Recovery Systems).

Plaintiff Intervenors: Performant Recovery, Inc. (Performant), and Allied Interstate (Allied).

Defendants: Department of Justice – representing The Department of Education (ED), The CBE Group, Inc. (CBE), Premiere Credit of North America, LLC (Premiere), GC Services Limited Partnership (GC), Value Recovery Holdings, LLC (Value), Windham Professionals, Inc. (Windham), Automated Collection Services, and Financial Management Systems, Inc. (FMS).

Throughout the 90-minute proceeding, attorneys for the various firms gave Judge Wheeler their arguments as to why they should get to keep placements, or others shouldn’t get to keep placements, and why one or the other would do irreparable harm to their client. The discussion wove in and out of the two separate, but very intertwined, matters in litigation: the complaint over the February 2016 Award Term Extenstion (ATE), and the complaint over the December 2016 Unrestricted Contract Award (for which we await ED’s corrective action).

Judge Wheeler also noted that getting up to speed on this case has been challenging because of the lack of an administrative record from ED; there is nothing to demonstrate what actions or conclusions they have or have not made to this point. 

Judge Wheeler asked for input from the group as to whether he could issue an order to compel ED to take action within a certain period of time, such as 30 days. 

The attorney representing ED responded that such an order would be unprecedented.

The Judge asked ED’s attorney what the current status of the corrective action is (i.e. is there a projected date when it would be completed). She stated that she didn’t have a date, but could go back and ask. [Editor’s note: Judge Wheeler didn’t seem thrilled by this. As a by-stander, it certainly seemed to me that this is a question ED might have anticipated, and sent her with an answer.]

There is big money at stake. One participant, Value Recovery, which is the only recipient of a new contract award who was not previously on the 2009 contract, claimed that the company has spent over $3 million just to maintain status quo so that he can remain eligible for the contract, once ED finally takes corrective action. Others made similar claims.

The attorney for Pioneer highlighted that they have asked the Court to maintain the stay of contracts until corrective action is completed, as the GAO has said the (December 2016 Unrestricted) awards were made based on erroneous conclusions. 

Finally, the judge asked what motions are outstanding that require his immediate attention. Two were mentioned:

1) The attorney for ED noted that there are five motions to dismiss the cases of Progressive, CTI, VanRu, Alltran and ACT, on the grounds that they are more appropriately Contract Disputes Act (CDA) claims. The cases were consolidated on September 5, 2017 and have yet to be ruled on.

Progressive had the last word, urging Judge Wheeler that they need a TRO in order for motions to be heard in court, as he did not believe these are CBA claims. The judge responded that he wasn’t sure he agreed with that position but he would make a ruling. He said he was inclined to agree with the Government. [Indeed, he did agree, and later in the day denied Progressive’s motion for a TRO, and denied a similar one by CBE.]

2) CBE and Premiere have pending motions to dismiss the ConServe protest.

As the session ended, the attorney for ED noted she had just heard that CBE’s motion filed today in the ATE matter had been denied.

Within hours of the end of the conference, Judge Wheeler issued an Order requiring ED to make its final award decisions and complete the Corrective Action by Thursday, January 11, 2018. He also lifted the stay of proceedings in the case. 

insideARM Perspective

Wow. This judge is impressive. That conference was a whirlwind of claims of what is/isn’t fair to more than a dozen companies. It would have been easy to see how he would need a lot more time to make a decision. 

What’s next? Two things:

1. Judge Wheeler said several times that he was planning a similar conference to address the ATE litigation matter, so we expect to see a date for that soon.
2. Mark your calendar for Thursday, January 11, 2018. It would be a minor (or a major) miracle, if that day marks a conclusion from ED in its corrective action for the December 2016 Unrestricted Contract award debacle… will that bring a new round of lawsuits? Ugh.

 

Today the U.S. Court of Federal Claims held a status conference in the matter of Continental Service Group, Inc., et al., Plaintiffs, and Collection Technology, Inc., et al., Plaintiff-Intervenors v. The United States, Defendant, and CBE Group, Inc., et al., Defendant-Intervenors (case nos. 17-449, 17-499, 17-493, 17-517, 17-578, 17-588, 17-633 consolidated).

Just before Thanksgiving, the case was taken over by Judge Thomas C. Wheeler. He called for this session in order to gain clarity (if that’s possible), as he works to jump onto this moving train. Today’s conference was a study in who’s on first, with all trying to keep things straight. There were approximately 50 people in attendance; mostly attorneys for the many parties involved.

But… before we write about that, we need to fill you in on lots of activity that has taken place in just the last three days. 

It’s important to know that there are actually two separate, but intertwining cases here.

1. One is the complaint over the December 2016 Unrestricted Contract which was awarded to 7 companies
2. The other is the complaint over an Award Term Extension (ATE) that was previously issued to 5 companies on February 21, 2016

Many say that the ATE complaint would be moot if only ED would complete its corrective action for the December 2016 Unrestricted Contract, which has been ongoing now for seven months. This March 2017 insideARM article provides an excellent detailed account of the background of these two cases.

Another important piece of background is that in May 2017, Chief Judge Braden (who was hearing the case prior to Judge Wheeler) issued a temporary injunction (then soon extended it indefinitely) preventing any accounts from being placed with anyone, in order to preserve the status quo of the situation while things could be sorted out. We’ve written on multiple occasions about how this (now) extended injunction has harmed parties on all sides of the equation, including borrowers.

Just this weekend there were new developments in the ATE litigation

Today, the Department of Education (ED) began a process to recall “in-repayment” accounts from multiple contractors, including CBE and Progressive. [Note: An earlier version of this article said it had begun last Friday, December 8. The attorney for ED said as much at today’s conference called by Judge Wheeler. This was indeed a point of confusion for some/many who were present.]

[Editor’s note: In-repayment accounts are those which are “performing” (or actively paying). A provision in the original 2009 Private Collection Contract says that once the contract expires, contractors have a 2-year period during which to continue to service in-repayment accounts. That two-year period actually ended in April 2017.]

Progressive filed a Motion, also on Friday, seeking a TRO preventing that recall. The complaint states,

Despite the discussion at oral argument and ruling from the bench, the written Order issued by the States Court of Appeals for the Federal Circuit (CAFC) failed to distinguish between the recall of Progressive’s “in-repayment” accounts, and the potential dilution of the protesters’ awards and transfer of work to other contracting vehicles. Progressive does not believe the CAFC’s Order applies to the issue of recall of Progressive’s “in-repayment” accounts. Progressive believes, however, based on previous conversations with ED and the long history of Progressive’s pending protest, that ED will interpret the CAFC’s Order as granting carte blanche authority to immediately recall Progressive’s “in-repayment” accounts, which would irreparably harm Progressive by effectively mooting its entire protest against the recall of those accounts.

Accordingly, Progressive has filed an Emergency Motion to Clarify/Amend The Court’s December 8, 2017 Order to confirm that the CAFC’s Order does not apply to that part of the injunction prohibiting the recall of Progressive’s “in-repayment” accounts prior to resolution of its protest. Exhibit B, Emergency Motion to Clarify/Amend The Court’s December 8, 2017 Order.

Then, over the weekend, ED sent 325,000 accounts to Alltran and Pioneer, as well as hundreds of thousands of accounts to firms on the small company contract.

Alltran and Pioneer did not receive new awards in the contested 2016 Unrestricted Contract, but did receive an ATE.

The CBE Group, Inc. (CBE) filed a Motion yesterday seeking clarification of a written order issued by the U.S. Court of Federal Claims on December 8 (last Friday), which granted “Appellants’ requests insofar as the preliminary injunction enjoined “transferring work to be performed under the contract at issue in this case to other contracting vehicles to circumvent or moot this bid protest.” CBE claimed,

The Federal Circuit was right to lift the injunction in place over the small business contractors. The Federal Circuit created a new injunction, however, which causes discrete and substantial harm to CBE. This altered injunction creates an improper windfall for Alltran and Pioneer, two companies whose contracts ED ended early in 2015, recalling each of their accounts based upon adverse audit findings. …Both Alltran and Pioneer were disappointed offerors in this procurement. Every other offeror, whether it submitted a winning proposal or not, must wait for ED to complete its corrective action. Allowing two disappointed offerors who have not collected defaulted loans for ED for over two-and-half years to jump to the head of the line based upon awards that did not exist when this protest began or before the injunction was in place, works a fundamental injustice.

Today, December 12, 2017, CBE filed an emergency motion for TRO to enjoin ED from proceeding with the intended recall and redistributing them to other collection agencies. CBE says in this complaint, 

ED seems dead set on proving what it can do, without any regard for undue harm inflicted on long-suffering awardees like CBE and in direct contradiction to the best interests of defaulted student borrowers, the public fisc and ED itself.

ED first announced its recall during today’s status hearing. ED (and its Department of Justice attorneys) unquestionably knew that Progressive had filed an emergency motion for TRO to stop the recall of its accounts over the weekend and that CBE had filed a Motion for Reconsideration, Clarification and Amendment of the Federal Circuit’s December 8 Order modifying the preliminary injunction in this case. ED’s race to push the button and initiate a process that has only negative impacts for every party involved, including itself, is the very definition of arbitrary, capricious and unreasonable conduct.

We learn from the CBE filing today (and other insideARM sources) that ED has placed 930,000 new defaulted loan accounts with small business and ATE contractors who – because of the May Injunction – have not been working accounts for months. Per the CBE pleadings, Alltran and Pioneer together received 325,000 of those accounts. All parties are now scrambling to ramp up to effectively service these accounts. 

CBE says,

Setting aside the unnecessary upheaval for thousands of borrowers across the country, the specially-trained employees who do this work will have no work to do. CBE will have no work for its dedicated ED-trained workforce and if corrective action is not imminent, will be forced to lay off workers who earn good wages, especially in Iowa, where CBE, employees work. Thus, as set forth in Mr. Benson’s Declaration, CBE will suffer a direct harm of approximately $7.1 million in 2017 and 2018 for lost revenue and carrying costs.

insideARM Perspective

Also worth noting is the timing of these placements just before Christmas. After months of not hearing about their defaulted student loans, borrowers may well be getting reminders just in time for the holidays. Timing notwithstanding, it is a positive outcome that servicing of these loans will begin again. Borrowers who have recently defaulted have been in a bit of a no-man’s land, so this was an important development.

And, notwithstanding the ramp-up challenge, account flow is also a positive outcome for (some of) the private collection agencies, who can put people back to work. However based on discussion at yesterday’s conference with the judge, some (those who aren’t in a position to receive these accounts) will feel that this was a pre-mature action.

See this second article today covering the conference at the Federal Court of Claims, ostensibly on the matter of the fight over the December Unrestricted Contract award (but a lot of it was about the drama above).

STOCKTON, Calif. — CB Merchant Services (CBMS), a Stockton, California based collection agency, recently awarded grants  totaling $102,000 to 36 community organizations. In addition, CBMS donated $2,000 to support a competitive essay scholarship opportunity, administered by the CAC Educational Scholarship Foundation (cacesf.org), which is open to all graduating high school seniors in California. These scholarship funds may be used to attend any accredited public or private college, university or trade school. Applicants must submit a completed scholarship application and essay on “The Importance of Establishing and Maintaining Good Financial Credit During Your College Years”.

About CB Merchant Services

Established in 1917, CBMS is celebrating its 100 year anniversary providing professional accounts receivable management, billing, collection and eviction services. Visit www.cbmerchantservices.com

The following is a profile of just one of the thousands of revenue cycle leaders at healthcare providers across the U.S. I’d like to thank Peter Troia for generously offering his time to provide his insights. If you are a revenue cycle professional at a healthcare organization and would like to participate in a profile like this, please contact me. I would love to hear from you.

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What’s your name, organization & position? 

Peter Troia, Collections Manager, Aurora Health Care

How’d you land in your role at Aurora Health Care?

When I left the banking business and joined Aurora Health Care (a system now comprised of 15 hospitals and over 150 clinics), it was in the midst of some growing pains. At the time Aurora utilized two systems; one for medical billing, and one for physician billing. We were in the process of migrating to one Medical Health Record and billing platform: EPIC. I came to Aurora with significant collections experience, but zero healthcare experience. I really have to thank my boss, Julie Kallies, for taking a chance on me.

We had an in-house collections shop but the staff were being utilized for handling overflow customer service calls and were not trained in the art of collections. We had a lot of work to do in re-training staff on the new systems and how to better serve the patient by collecting balances to avoid collection activity. Luckily, my team came with tremendous healthcare experience, and everyone was supportive and receptive to change.

Was there something obvious about the revenue cycle you felt you could improve?

Having come from the financial services industry, I brought some elements of that collections culture to Aurora, but adapting the approaches to the healthcare environment. In financial collections, we take a top-down approach to negotiations. And we aren’t asking “yes” or “no” questions. We have a probing conversation so that we can determine the best payment option for the individual. So what I brought to the organization was an agency collections strategy, and a philosophy around collections that you don’t often see in a healthcare setting. I believe that you can be respectful and friendly, preservative of a positive patient experience, but still run collections as a top-down effort that steers toward a resolution.

My staff helped me adapt my approach to respect the nuances of healthcare. In retrospect, it was crucial to our success that we collaborated to find a middle ground that was in line with the Aurora brand. To build “our idea” as a healthcare collections team has been far more rewarding than building “my idea.” As a leader, it’s what I enjoy most about what I do.

Has your approach to collections worked as well as you expected?

Yes, absolutely. We’ve seen double-digit increases in our collections in each of the years that I’ve been with Aurora Health Care (since 2013). I attribute that to pairing a positive patient experience with a sense of urgency about paying your bill. Two things need to land with healthcare consumers: urgency and options. A typical healthcare collection method is geared toward avoiding patient complaints. But by pairing urgency and options you can prevent complaints and still steer toward a resolution. If you’re not pushing to resolve the situation, that’s not a collections effort.

What’s your special sauce?

There is actually a methodology to educating consumers, listening actively to them, and then partnering with them. Of course, you want them paying the largest amount possible in the shortest amount of time, but foremost, you want to establish a relationship. I don’t mind making an adjustment in our repayment guidelines for a consumer until they gain their footing. We can bend, but we can’t break and just accept “I’ll call you when I have some money.” 

Do you think the newer approaches to patient finance (offering low- or no-interest extended payment plans) will help soothe the raging self-pay crisis?

I get concerned about all the outsourcing to external patient finance vendors I see in the business. I think you maintain better control if you can manage that internally. It’s another way to collect on the balance but it’s also another vendor to partner with and to manage. You’re trusting them with your brand so the partnering aspect is crucial.  

What about technology? Do you see it as a friend to healthcare collections?

From where I sit, I can tell you that our agencies are certainly getting more data elements on patient behavior from us. And that helps. Our in-house team attempts to collect for a period of time while the patient is receiving monthly statements. This enables us to have those crucial conversations and answer any questions they might have on their bills. For the patients we aren’t able to make contact or obtain payment we have an agency strategy of both first and second placements. The more data I can send my partnering agencies, the better job they can do recovering those balances.

Another way I think technology will change our business is that I expect a lot more of these online chat portals, social media outreach and other non-traditional means of collections to take off. It already exists in a lot of industries, but we’ve taken a conservative approach so far while allowing other industries to test these waters and inevitably the lawsuits that come with this type of change. These suits will surely be followed by a backlash of regulations that could prevent us from even using these great tools to their full potential. It will be interesting to see this play out.

Speaking of avoiding the ire of regulators and lawsuits, how are you monitoring your agencies on compliance issues?

 

We’re the largest healthcare system in the state of Wisconsin, so naturally, many agencies want to engage with us. They’re not all a good fit, because we’re extremely hands on. We take very seriously our continued responsibility on these accounts. We consider our first- and second-placement agencies our partners, and we work very hard to make sure they are well supported and understand how we want those accounts handled.

We have a contract in place and a document of work standards explaining how we expect our accounts to be worked. We also do agency audits every year with each agency. One of the audits is on site, and it’s intense. It’s everything from evaluating security cameras, access points, server room, employee background checks, financials and more—at all sites. We also have quality assurance specialists who monitor all of our agencies monthly by reviewing calls and performing monthly call calibrations. Together we partner with our agencies in training and coaching for best practices and results.

Don’t get me wrong; we don’t just make demands; this is definitely a partnership. We work with our agencies’ leadership teams to develop a training and collections strategy that mirrors what we’re doing internally. It’s a pretty unique approach. One of our trainers is out of the office right now, doing side-by-side coaching with an agency. She’s been there three days. We make a big investment in time and focus on extending our brand experience through our agency partners. This can take the form of role plays, call scripting, and other coaching methodologies. This is really a different approach to healthcare collections, and I’m proud of what we’ve added to Aurora’s collection efforts.

Can you boil down some solid gold advice for other healthcare rev cycle pros?

Two big things:

• Have clear work standards for your vendors. We’re going to see increasing regulations in healthcare collections, The antidote, in my opinion, is to form real partnerships and protect providers’ brands by ensuring accounts are worked thoroughly and given the attention they deserve.

  What does this mean? I think it means you have to have clear work standards to share with your agency vendors. And this isn’t just a document you create and your vendor files away. This has to be a practical, living document of expectations and checkpoints. They should be working like every day is audit day. Be diligent, thorough and above and beyond what the regulators expect.

• Look for backbone. Frivolous lawsuits are a real thing. Make sure you work with vendors who know how to handle unfounded complaints. Ask them about their litigation and settlement approach. You want to know their philosophy and how these types of complaints are handled but also how they prevent them from happening. You want to know this is an arena they are familiar with and can handle without a history of rolling over on unfounded claims.

If you could thank just one person in the industry, who would it be?   

Joe Antonacci, who has been a mentor and a trusted friend to me since some of my first outbound dials as a rookie collector.

Is there a TV show or movie that you can’t live without?  

The Rocky Balboa movies. “It’s not how hard you hit, it’s about how hard you can get hit and keep moving forward.”  

What do you think needs to change most urgently in the revenue cycle field?  

Healthcare debt is the most complicated debt to understand and explain to the everyday patient who receives the bill. Any significant strides towards making this easier to understand would be a big boon for all involved.        

insideARM maintains a free TCPA resources page to provide a destination for timely and topical information on the Telephone Consumer Protection Act of 1991 (“TCPA”) that is relevant to the ARM community. This page is generously supported by Neustar. 

The cornerstone of the page is a chart of significant TCPA cases. Click on the link in the chart for the complete text of the decision. Where insideARM has already published a story on the case, a link is provided. Case information is provided by the Bedard Law Group.

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The following are case highlights from the last 90 days that should be interesting to members of the ARM community.

Kukia R. Farrish v. Navy Federal Credit Union

The gist: Plaintiff failed to oppose defendant’s motion to dismiss and also failed to state a claim in her amended complaint, so her amended complaint was dismissed with prejudice. After the dismissal, plaintiff sent another letter, which was construed by the court as a motion to alter or amend the judgment. Having provided no reason for the court to alter or amend, the plaintiff’s motion was denied.

Peter Lundstedt v. IC System, LLC

The gist: Plaintiff’s complaint centered on defendant placing calls to his home telephone number 29 times over 24 days in an attempt to collect a $160 debt to Verizon. The complaint alleged violations of plaintiff’s rights under multiple statutes and common law. Defendant moved for judgment on the pleadings. Court found a valid claim for relief under the FDCPA for harassing or annoying calls, but found no valid claim for relief under the TCPA.

Trenish v. BorrowersFirst

The gist: Plaintiff, a bankruptcy trustee, filed suit on behalf of the estate he represented, alleging violations under the TCPA for numerous calls made by BorrowersFirst attempting to collect a debt. Defendant moved for the court to compel arbitration because the loan contract in question requires plaintiff to arbitrate these claims. Plaintiff alleged that a bankruptcy, withdrawal of consent to call, and a default on the loan severed the contract in question, but the court disagreed, and required arbitration in the matter.

Selby v. Ocwen Loan Servicing

The gist: Judge Bencivengo was again asked by a defendant to dismiss TCPA claims on the grounds that the Court lacked Article III standing to hear the dispute because the plaintiff had not suffered any “actual” or “concrete” harm  as a result of the errant phone calls. As she has done twice before in the last year, Judge Bencivengo obliged.

Viggiano v. Kohl’s Dep’t Stores, Inc.

The gist: Kohl’s moved to dismiss a TCPA case where it was abundantly clear that the plaintiff was nothing more than a sassy Opt-Out Evader. However, none of the facts needed to prove the opt-out evasion were pleaded on the face of the complaint. Ultimately, the Court found that Kohl’s Terms and Conditions provided a “reasonable means” of opting out to consumers, and that plaintiff failed to use the ordained method. The Court held that Kohl’s gets to dictate the revocation method so long as it is not “difficult or impossible to effectuate revocations.”

Ginwright v. Exeter Fin. Corp. 

The gist: Plaintiff sued for TCPA violations contending that he had revoked his consent to be called by repeatedly responding “no” when asked orally to consent by the Defendant’s agents, and also by asking not to be called on numerous occasions. Defendant moved for summary judgment, which was ultimately denied despite very potent evidence that Plaintiff’s claims of revocation were entirely concocted.

 

The Federal Trade Commission has reached a settlement with three defendants who allegedly posed as lawyers and falsely threatened to sue people or have them arrested for failing to pay on debts they did not owe are banned from the debt collection business under a settlement with the Federal Trade Commission. 

The settlement resolves an FTC complaint filed in July 2017, alleging that the defendants told consumers they were attorneys or calling from a law firm and that a lawsuit or criminal action had been filed or soon would be filed against them. insideARM wrote about the case at that time. The FTC also alleged that, to coerce some people into paying the phantom debts, the defendants threatened them with prison time or claimed police would come to their house to arrest them. The court halted the operation and froze its assets pending litigation.

Under the settlement order, Hardco Holding Group LLC, S&H Financial Group Inc. and Daryl M. Hall (all doing business as Alliance Law Group) are banned from participating in debt collection activities, buying or selling consumer or commercial debt, and trading in consumer information related to a debt. They are also prohibited from making misrepresentations about any product or service, profiting from consumers’ personal information obtained from any debt collection activities, and failing to dispose of consumers’ information properly.

The order imposes a $702,059 judgment that will be partially suspended upon the surrender of certain assets. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition. Litigation continues against the remaining defendant, Dequan M. Sicard.

The Commission vote approving the proposed stipulated order was 2-0. The U.S. District Court for the Middle District of Florida, Orlando Division entered the order on December 5, 2017.

The FTC’s announcement noted that stipulated final orders have the force of law when approved and signed by the District Court judge.

insideARM Perspective

This is good news. And, FTC… please refrain from calling scammers debt collectors. They are crooks who have chosen to use debt collection as a cover. I suppose you could have said, “FTC Bans Three Lawyers from Practicing Law.” Just as these defendants weren’t lawyers, they also weren’t debt collectors. But nonetheless, thank you for being on the case to hold scammers to account.

This article originally appeared on the Consumer Financial Services Legal Update. It is republished with permission from the author.

She may be the only judge in the country still actively dismissing TCPA claims for lack of Article III standing following Spokeo, but Judge Cathy Ann Bencivengo demonstrated last month that she is not going to change her views on the subject anytime soon.

In Selby v. Ocwen Loan Servicing, Case No.: 3:17-CV-973-CAB-BLM, 2017 U.S. Dist. LEXIS 189995 (S.D. Cal. Nov. 16, 2017), Judge Bencivengo was again asked by a Defendant to dismiss TCPA claims on the grounds that the Court lacked Article III standing to hear the dispute because the Plaintiff had not suffered any “actual” or “concrete” harm  as a result of the errant phone calls. As she has done twice before in the last year, Judge Bencivengo obliged.

The alleged facts of Selby are not particularly great for a Spokeo challenge. Plaintiff alleged receipt of 1,008 automated calls to her cell phone, all of which were placed without her consent. She specifically alleged that these calls “caused Plaintiff frustration and distress, ‘disrupted [her] daily activities and the peaceful enjoyment of [her] personal and professional life, including the ability to use [her] phone,’ and caused her to miss ‘important communications from friends and family.’” Selby at *4. Take it from me, those allegations of harm are better than 90 percent of the allegations contained within TCPA complaints floating out there these days.

Nonetheless, the Court had little problem dismissing for lack of harm. The Court found first that the facts were “indistinguishable” from Judge Bencivengo’s earlier decision in Romero v. Department Stores National Bank, 199 F. Supp. 3d 1256 (S.D. Cal. 2016).

Although Romero has been largely criticized by other district courts over the course of the last year, Judge Bencivengo considered that decision dispositive of the issues before her. As the Court put it: “assuming the truth of all of Plaintiff’s factual allegations, including that Ocwen used an ATDS to call Plaintiff’s cellular telephone 1008 times in connection with its efforts to collect on the Mortgage debt, that Plaintiff either never consented or had revoked her consent to receive these calls, and that these calls caused Plaintiff frustration and distress, the Court’s reasoning in Romero is equally applicable here and also warrants dismissal of the TCPA claims in the SAC for lack of standing.” Id. at *7.

The Court also found intervening Ninth Circuit authority to be inapposite. The Court narrowly construed Van Patten v. Vertical Fitness Group, LLC, 847 F.3d 1037, 1043 (9th Cir. 2017) as applying only to telemarketing calls, which is actually an extremely helpful—and accurate—observation for TCPA defense lawyers practicing in the Ninth Circuit.

Building on the finding that the TCPA was designed to prevent telemarketing calls, Selby concludes that the type of harm suffered by the Defendant was not the type that Congress intended to prevent when the TCPA was enacted. As such, the Court granted the Defendant’s motion and dismissed the case.

Accordingly, Judge Bencivengo’s latest ruling not only demonstrates her conviction that TCPA cases do not cause actionable concrete harm, it also sets forth a blueprint for unravelling the myth that the TCPA was designed to prevent non-telemarketing calls. It was not, as the FCC’s own rulings have made clear. If that unravelling continues, debt-collection calls may become non-actionable in federal court after all, and Selby may end up being the case that started it all.

CHERRY HILL, N.J. — New Jersey-based debt collection agency MRS BPO, LLC, one of the country’s premiere accounts receivable management firms, continued its tradition of partnering with the American Cancer Society. MRS raised $15,000 through multiple fundraising events which included employee sponsorships and many donations. These events have become a favorite tradition at MRS.

“We were thrilled to achieve our fundraising goal as our magnificent committee of over thirty employees started our fundraising events in the early summer months up through the finale in October.   We were thankful to our many employees for their generous gift of time, and effort in accomplishing such a monumental objective. This commitment, dedication and energy was fully demonstrated by several team members at MRS, and contributed greatly to this year’s successful Breast Cancer Awareness, fundraising events,” said Regina Weir, Chief Personnel Officer at MRS.  “The donations will provide funds needed for research to hopefully one day find a cure to end Breast Cancer.”

“We are honored to see the diligence and compassion of our employees rewarded through this substantial donation to the American Cancer Society, in honor of Breast Cancer Awareness,” said Jeff and Saul Freedman, Co-CEOs of MRS.  “Our tremendous staff put in many hours of their time to help raise money and we are incredibly proud of their selflessness and generosity.”

About MRS BPO, LLC

MRS BPO, LLC is a full service accounts receivable management firm based in Cherry Hill, New Jersey. The company’s unique combination of experience, technology, and compliance management processes allows them to provide industry-leading debt recovery solutions while enhancing their client’s brand and reputation. For more information on MRS BPO, LLC, visit them online at http://www.mrsbpo.com.

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Well, this may be our last insideARM article about former Consumer Financial Protection Bureau (CFPB) Director Richard Cordray. With a few tweets and a live announcement from a local Ohio restaurant, he officially launched his run yesterday for Ohio Governor, ending – literally – years of speculation. Here is some of the fun:

…and the more official:

As we’ve written about extensively, after a great deal of rumor and speculation, Cordray finally announced in November that he would leave the CFPB before the end of his term (which would have been July 2018). That announcement kicked off a firestorm of controversy over who would lead the bureau in the interim, while President Trump nominates a new leader and the Senate moves through the process of confirmation. While Trump’s interim pick, White House Budget Director Mick Mulvaney, takes initial actions, like this one to freeze the bureau’s data collection activities, this one to hold… and then release payments to fraud victims, and this one to 1) reverse an enforcement action that was already won (the company just hadn’t yet paid the fine), and 2) suggest that the bureau might be backing off its prior – very broad – approach to Civil Investigative Demands (CIDs).

Time will tell… perhaps quickly… what Richard Cordray’s consumer protection legacy will be. We will see whether a Republican Administration and Congress will be willing and able to dismantle the agency to the extent one no longer recognizes the former Director’s influence.

I’ll add this one thing:

Hey folks, don’t throw the debt collection baby out with the bathwater. This industry really needs a clear set of rules that allows collectors to communicate with consumers in accordance with their preferences! #nobodyopensthemailanymore, #nobodyanswersthephoneanymore

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