In spite of Consumer Financial Protection Bureau (CFPB) Director Richard Cordray’s best efforts, President Trump has officially killed his newly minted Arbitration Rule. 

On July 11, 2017 insideARM reported that the CFPB had issued a final rule banning mandatory arbitration clauses in financial services agreements. The Bureau’s announcement at the time said, 

“Arbitration clauses in contracts for products like bank accounts and credit cards make it nearly impossible for people to take companies to court when things go wrong. These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up. Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed together can take action together.” 

Since that date in July, many have been working to ensure the rule would never take effect. These efforts culminated last week with a tiebreaking 50-51 Senate vote (Vice President Mike Pence broke the tie) to nullify the rule.

As a final hail mary, Cordray sent this letter to Trump on Monday, imploring him to veto the bill on his desk. On Tuesday, Competitive Enterprise Institute senior fellow John Berlau wrote his own letter to President Trump, urging him to sign the resolution. He also upped the ante, urging him to fire Cordray immediately.

An excerpt from the Berlau letter reads,

“Without a trace of irony, Mr. Cordray writes that without the rule, American families will be “left helpless to fight back.” You know this is not the case, as your White House statement points out correctly that the regulation “would neither protect consumers nor serve the public interest,” and that “by repealing this rule, Congress is standing up for everyday consumers and community banks and credit unions.” Indeed, despite fake news stories proclaiming Wall Street the only winner from defeat of this regulation, representatives of community banks and credit unions, such as the Independent Community Bankers of America and the Credit Union National Association, opposed the rule vigorously and urged Congress to kill it.”

insideARM Perspective

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Much has been written about both the merits and evils of arbitration vs. class action lawsuits. Yes, class actions are a way for consumers to fight the big guy. But they provide meaningful compensation primarily to the trial lawyers. Most class action members (consumers) typically see almost no money. Do they change behavior of companies? Maybe. I don’t think the answer is as clear cut as each side would paint it.

At the end of the day, a lot of money and time was spent by the CFPB to create work — and then Congress — that has now been thrown away. Whichever side you are on, as a taxpayer, this is disappointing. 

A line in Cordray’s letter to Trump reminds us of an on-going subplot: “You and I have never met or spoken…”. Trump is Cordray’s boss, yet they have never met – or even spoken. Given the environment, this is not surprising, but it is a bit ridiculous. 

Meanwhile, it seems this was a rare issue that basically 100% of Republicans in Congress could get behind. The CFPB is expected soon to release a final rule about debt collection. In this case, industry participants are hoping for some much needed clarity. But if there is wide discontent with the rule, I wonder whether Congress would rally around debt collectors (most of whom are small businesses) the way they rallied around the banks and other large institutions.

On October 20, 2017, the Second Circuit Court of Appeals denied a petition for rehearing of its decision in Reyes Jr. v. Lincoln Automotive Financial Services, (case no. 16-2104, Second Circuit Court of Appeals.) This is affirmation of the Court’s ruling that the Telephone Consumer Protection Act (TCPA) does not permit a party to unilaterally revoke consent to receive telephone calls, if consent was part of a bilateral contractual provision. 

insideARM previously wrote an article regarding the underlying appeal. You can find the article here. 

In the appeal, plaintiff Alberto Reyes, Jr. (Reyes) argued that defendant Lincoln Automotive Financial Services (Lincoln) violated the TCPA by continuing to call him after he revoked his consent to receive said calls. Reyes’ initial consent to receive calls arose from a provision in a lease agreement he signed with Lincoln. This provision stated that Reyes agreed to receive communication “including but not limited to, contact by manual calling methods, prerecorded or artificial voice messages, text messages, emails and/or automatic telephone dialing systems.” Reyes argued that by sending Lincoln a letter requesting that no contact be made to his cellular phone, he revoked this consent and thus Lincoln violated the TCPA by continuing to call him. 

The Second Circuit acknowledged that though consent can often be revoked (as other circuit courts and the FCC previously determined), consent to another party’s actions that is part of a contract and legally binding, can become irrevocable. Thus, one party cannot alter the terms of the contract without the consent of the other party. The Second Circuit held that the TCPA did not permit Reyes to unilaterally revoke the consent he provided when he signed the lease agreement with Lincoln.

Following this decision, Reyes filed a petition for a rehearing. The Court denied his petition, affirming its decision that the TCPA does not allow one party to revoke consent to receive calls when it was given as part of a binding, bilateral agreement. 

insideARM Perspective

As described in our previous article on this case, the Second Circuit’s decision, including declining to rehear the case, is an important win for the industry. 

Since the explosion of TCPA litigation in the mid-2000s, there has been a dramatic change by lenders, telecom and utility providers, and other vendors to include consent terms in consumer contracts providing express permission to contact the consumer by autodialer, prerecorded messaged, text message, and e-mail. In addition to helping prove express consumer consent, such clauses can now also be used to defend against claims the consumer revoked consent unilaterally. 

It remains to be seen whether the Reyes decision will be adopted by other courts, but there is no question that creditors, providers, and others should carefully examine the decision and review their consumer contracts accordingly. 

Yesterday Judge Susan G. Braden, Chief Judge of the U.S. Court of Federal Claims, issued a Response denying several pending motions, including the Government’s May 19, 2017 Motion to Vacate Preliminary Injunction, Alltran Education, Inc.’s (Alltran) June 9, 2017 Motion to Stay Pending Appeal, and Alltran’s July 24, 2017 Motion to Expedite Ruling on Pending Motion for Stay Pending Appeal.

The court also ordered the Government to advise the court whether ED’s proposed corrective action may render pending motions, as well as the underlying appeal, moot, prior to the December 8, 2017 oral argument.

A copy of the Order can be found here.

Background

On June 1, 2017 insideARM wrote about the issuance of the preliminary injunction. In that article, we noted that Judge Braden had referenced “three recent news articles” as part of the rationale for her order. We also two mentioned how unusual the order was; one, because it was issued sua sponte, which means the court took the action on its own motion, rather than at the request of one of the parties. Second, because Judge Braden was effectively taking judicial notice of news items, including an Op/Ed article. Finally, we noted that the order effectively precluded ED from placing any new accounts to PCA’s.

On June 15, 2017 insideARM wrote about two pleadings filed by Alltran: a Notice of Appeal of Judge Braden’s Preliminary Injunction, and a Motion to Stay the Preliminary Injunction (as to Alltran).

On August 24, 2017, insideARM reported that the Consumer Financial Protection Bureau (CFPB) filed an Amicus Curiae Brief in support of the Department of Education (ED) in the multiple consolidated appeals in the United States Court of Appeals for the Federal Circuit in the litigation surrounding the ED RFP awards and protests. A copy of the CFPB Amicus Brief can be found here.

The Court’s Response

The 45 page Response filed yesterday is largely a re-counting of every action that has taken place to date in the case of ED’s Solicitation No. ED-FSA-16-R-0009 for debt collection services. Thirteen pages recount the history of the matter. 29 pages include an Appendix listing the parties in the cases and their attorneys, and the docket history. Two pages offer a discussion of the current Response. 

On the matter of the Government’s May 19, 2017 Motion to Vacate Preliminary Injunction, Judge Braden said,

“On a motion for preliminary injunctive relief, the court must weigh four factors: “(1) immediate and irreparable injury to the movant; (2) the movant’s likelihood of success on the merits; (3) the public interest; and (4) the balance of hardship on all the parties.” U.S. Ass’n of Importers of Textiles & Apparel v. United States, 413 F.3d 1344, 1347–48 (Fed. Cir. 2005). “No one factor, taken individually, is necessarily dispositive . . . . [T]he weakness of the showing regarding one factor may be overborne by the strength of others.” FMC Corp. v. United States, 3 F.3d 424, 427 (Fed. Cir. 1993) (emphasis added). The reasons in the court’s May 2, 2017 Preliminary Injunction have been set forth herein and may be reviewed at ECF No. 87.

Nothing in the Government’s May 19, 2017 Motion To Vacate Preliminary Injunction presented “extraordinary circumstances” to “justif[y] relief” under RCFC 60(b)(6), since the Government previously filed on the same day a “[n]otice of awards and notices of termination” would issued by ED on or before August 25, 2017. ECF No. 122 at 9. This is true even more so today, in light of ED’s proposed corrective action that now appears to be imminent. ECF No. 199 (Oct. 27, 2017).”

On the matter of Alltran’s June 9, 2017 Motion to Stay the May 2, 2017 Preliminary Injunction (and its subsequent Motion To Expedite), Judge Braden said (citations omitted),

As a threshold matter, “[a] stay is not a matter of right, even if irreparable injury might otherwise result. . . . It is instead an exercise of judicial discretion, and the propriety of its issue is dependent upon the circumstances of the particular case. The fact that the issuance of a stay is left to the court’s discretion ‘does not mean that no legal standard governs that discretion . . . [Rather,] its judgment is to be guided by sound legal principles.’” 

In deciding whether to grant a stay pending appeal of a preliminary injunction, the court considers four factors: (1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.

As to the first factor, to date the Government has not filed the Administrative Record in this case…Therefore, the court is not in a position to ascertain whether Alltran, the Government, or any other party would succeed on the merits of the underlying bid protest action.

But, in light of the Government’s representation, as of May 19, 2017, that ED would issue “[n]otice of awards and notices of termination issued” on or before August 25, 2017, neither Alltran’s June 9, 2017 Motion To Stay The Preliminary Injunction nor Alltran’s July 24, 2017 Motion To Expedite Ruling On Pending Motion For Stay Pending Appeal made a “strong showing of the likelihood of success.” In any event, if the most recent representations made to the court by the Government are true, Alltran’s entitlement to relief from the court’s May 2, 2017 Preliminary Injunction likely will be moot by ED’s corrective action.

As to the second and third factors, the Government is, and has been, in a position to eliminate any injury that the May 2, 2017 Preliminary Injunction imposed on ED and some of the parties, either by issuing short-term contracts, bridge contracts, or award-term extension (“ATE”) contracts—each of which ED advised the court is not a viable option—or by completing corrective action by August 25, 2017, as was represented to the court. Indeed, as the Government has advised the appellate court, on May 19, 2017, the court stated it was inclined to lift the preliminary injunction, if assurances could be made that ED would not assign any debt collection work to “dilute” work to which other parties may be entitled if they prevailed in this bid protest or otherwise be subject to corrective action…The Government declined to do so.

As to the fourth factor, the public interest lies in having ED administer student loan debt collection activities in compliance with applicable procurement law and regulations.

Finally, the May 2, 2017 Preliminary Injunction was issued to maintain the status quo, as of March 28, 2017—the date the bid protest in this case was filed when a stay was pending at the GAO—to allow ED to take corrective action in response to the GAO’s March 27, 2017 Decision.

The court’s stated purpose in issuing the May 2, 2017 Preliminary Injunction was “not to micromanage ED’s debt collection efforts, but to protect the interest of all parties and afford the Government an opportunity to reach a global solution of the aforementioned cases.”

Judge Braden then proceded to deny the Motions to Vacate, Stay, and Expedite, and ordered the Government to advise the court whether ED’s proposed corrective action may render pending motions, as well as the underlying appeal, moot, prior to the December 8, 2017 oral argument.

insideARM Perspective

So. This is a lot to say… nothing really has happened. 90% of the Order is a summary of anything and everything that has been filed in the case. At the end, Judge Braden basically denied all of the motions before her. The Injunction stands. No placements. No direction.

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Editor’s Note:  insideARM has written extensively about the ED RFP and the litigation surrounding the RFP. See here for a link to a running history of our ED-related articles..

On October 13, 2017 a federal judge in Arizona refused to dismiss a lawsuit, finding that a judgment debt may not always be a per se permissible purpose for obtaining a credit report under the Fair Credit Reporting Act (FCRA), 15 U.S.C. §1681 et seq. The case is Baron v. Mark A. Kirkorsky, P.C. (Case No. 17-cv-01118, U.S.D.C., District of Arizona).  

A copy of the court’s Order can be found here. 

Background 

A medical training institute assigned its interest of a judgment against plaintiff, Baron, to defendant Mark A. Kirkorsky, PC. The judgment consisted of court costs awarded in a state court action that was dismissed with prejudice in favor of the institute. In defendant’s attempts to collect the judgment, it requested and obtained copies of plaintiff’s consumer report on four separate occasions over an 18-month period. Plaintiff filed a federal action against defendant alleging the firm violated the FCRA because it did not have a permissible purpose to obtain his consumer credit report. 

Defendant brought a motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b). 

The Court’s Order 

The Court highlighted that, pursuant to 15 U.S.C. § 1681b, the FCRA requires a person to have “permissible purpose” for obtaining or using a consumer report. While the statute identifies various activity that would constitute a permissible purpose, the one at issue here involves a recipient’s intention “to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer” (§ 1681b(a)(3)(A)). 

In its Order, the court relied on definitions adopted by the Fair and Accurate Credit Transactions Act of 2003 (“FACTA”) to interpret the above provision. In particular, FACTA redefined the term “credit” to mean “the right granted by a creditor to a debtor to defer payment of a debt or to incur debt and defer its payment or to purchase property or services and defer payment therefor” (§ 1681a(r)(5)).

The court concluded that FACTA’s definition of “credit” limits the scope of when there is a permissible purpose to pull a consumer report. The court states: 

“Debt collection is a permissible reason for obtaining a credit report only insofar as the debt arose from a transaction in which the debtor voluntarily and directly sought credit.” 

Because a judgment was not a voluntary credit transaction, the defendant’s status as a judgment creditor did not give it an automatic permissible purpose to obtain the plaintiff’s credit report. The defendant argued that the matter underling the judgment, an enrollment agreement for the plaintiff to attend the medical institute, was a credit transaction. Regardless of whether that was true (the court found the existence of an enrollment agreement does not per se grant a permissible purpose), the court said there must be a “direct link” between the consumer’s voluntary search for credit and the creditor’s request for credit reports. 

The court denied the defendant’s motion to dismiss. 

insideARM Perspective

A few months ago insideARM published an article on the same topic. In that case the underlying debt was a lease agreement for an apartment; nevertheless, the issue is whether the debt was a “consumer credit transaction.” The judge in that case also denied the defendant’s motion to dismiss. 

There is no question that credit reporting, including furnishing as well as pulling consumer reports, continues to be a high-risk issue. As the above decision points out, the takeaway is to review the permissible reasons for obtaining a consumer’s credit bureau report and maintain policies and procedures to ensure compliance. For those in collections, a conservative approach would be to NOT obtain a credit bureau report unless the underling debt arose from a transaction where the consumer voluntarily and directly” sought credit. This would apply regardless of whether an entity pulls a consumer report via “hard” or “soft” pull – the FCRA makes no distinction between the two. 

This article previously appeared on Ontario Systems’ blog and is republished here with permission.

Your organization’s workflows are likely automated to the point that your agents may not be making many decisions about account treatment – But those they do make have a big impact.

Most agencies determine workflow before accounts are placed and set up in a software platform. And those decisions are often based on successful practices discovered in other lines of business.

For example:

• Is sending a third letter after the first and second effective? Is it never effective? What are the conditions affecting results?
• With what account segments does that extra work become meaningful?
• Are different kinds of work more effective? Do letters get better results than phone calls to a certain group of accounts?

In other words: Which treatments are the right ones to apply to a given set of accounts? How do you find out?

Identifying proper tactics for more efficient operations first relies on analytical skills, and your use of reports, dashboards, and other tools to discover what’s working well and what isn’t. And if you’ve used many different account workflows, and automated them, chances are you have a lot of data to work with.

By treating your data like a trusted advisor and asking it questions, you will very likely discover there is not a single “best practice” when it comes to treating accounts. Some portions of your portfolio will answer your questions differently. For example, you might find a third letter might be twice as effective with one client’s accounts as it is with your average portfolio. Or for accounts over 180 days old, a renewed phone calling campaign might be more effective than a third letter. Perhaps accounts of a certain balance warrant a late stage score and skiptrace effort.

But if you’ve only used a single workflow in the past, this data might be hard to come by. In that case, it may be more effective to ask what little data you have to point you toward your most effective agents within each segment of your portfolio.

If you are not sure where to start, try these 3 tactics:

1. A/B Testing. Find two batches of accounts that look particularly similar – in lines of business, demographics, score, age, etc. – and separate them, so they can be logged and analyzed apart from one another. If you haven’t done so already, create these batches with an alpha sort on a client assignment. Then, discuss possible treatment among your managers and agents for these kinds of accounts, design workflows for each, and test them. Try sending a letter both before a phone call, or on contact. Try more frequent phone calls with one group than the other. Try changes in caller ID for those calls. Try setting a schedule on one group that calls for three weeks, then stops for three weeks, then comes back for three weeks. When the trial is over, compare the results. How is each batch performing and liquidating? Are the results different than expected? Why?
2. Give ownership to your best agents. Take one of these segments, and distribute the accounts among your agents. Set automation to ensure compliance and minimum SLAs are met. Establish workflow ceiling and floor rules, and let your agents work within these guidelines, determining the best course of action. Then, review their tactics, and tie them to results. Your best agents will be able to identify weaknesses in the workflow you’ve designed, and inform its refinement. The most effective tactics uncovered can then be set in workflow automation for all agents to follow.
3. Focus on segmentation. Many agencies fail to place a special focus on clearly delineating treatment for particular groups of accounts, doing so broadly, or not at all. Different account segments very likely deserve different account treatment, perhaps even by different agents. One group of agents might be particularly adept at handling 365 day and older medical accounts, for example, while another might be better on student loans. Segmenting your account inventory makes this process far more efficient. Segmentation can be applied on a much more granular scale than simple business class – retail, medical, student loan, auto deficiency etc. There are very likely unique account segments within each of these lines of business, and they may overlap between each. Scoring is one way to segment across business class. Your own analytics will show you other criteria as well, including previous payers, consumers with a higher than normal number of accounts, geographic regions, age of accounts, and more.

Your system and your agents can tell you a lot. Become acquainted with both, learn how to better apply the skills with which your people are adept, and identify accounts that pay. Becoming close with all these important criteria can lead to big gains for any receivables operation. Enlisting your agents not only provides operational insight, but staffing know-how. That knowledge will ultimately allow you to marry your account analytics to your staff analytics and get the best accounts to each agent.

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Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2017 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

On September 28, 2017, a federal judge in Indiana adopted the Supreme Court’s analysis that a purchaser of debt is not a debt collector under the Federal Debt Collection Practices Act (FDCPA), 1692 et seq. by denying in part plaintiff’s amended motion for summary judgment in a putative class action case. The case is Mitchell v. LVNV Funding, LLC, et al. (Case No. 12-cv-523, U.S.D.C., Northern District of Indiana).  

The court issued an Opinion and Order, a copy of which can be found here. 

Background 

Capital Management Services, LP was contracted by Resurgent Capital Services, LP (“Resurgent”) to collect on the alleged debt incurred by plaintiff. LVNV Funding LLC (“LVNV”) is a purchaser of debts, owner of plaintiff’s debt and was listed as the Current Creditor on the collection letter at issue in this matter. Alegis Group LLC (“Alegis”) is the sole general partner of Resurgent.  

In the amended complaint, plaintiff made two primary arguments: 

1. Defendants violated the FDCPA as Capital Management sent a collection letter, attempting to collect on a time-barred debt, without the proper written disclosures; and
2. All defendants, including LVNV, were liable under the FDCPA for the actions of Capital Management because it was acting as an agent when it sent the letter to collect the debt. 

Plaintiff brought an amended motion for summary judgment pursuant to Fed. R. Civ. P. 56.  In response, defendants brought their own cross motion for summary judgment. 

Editor’s note: Summary judgment is warranted when the “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). 

The Court’s Order 

With regard to plaintiff’s first argument, the court ruled in favor of plaintiff and adopted the Seventh Circuit’s analysis that it is a violation of the FDCPA if when collecting on a time-barred debt a debt collector did not 1) inform a consumer that a collector cannot sue to collect the debt, and 2) alert the consumer that a partial payment may restart the applicable statute of limitations. insideARM.com recently wrote about the growing trend of courts adopting the Seventh Circuit’s analysis here.  

As to the plaintiff’s second argument, plaintiff argued that all defendants are responsible for the violation in the letter because they are all debt collectors under the FDCPA, including LVNV. 

The court ruled in favor of defendants, and adopted the Supreme Court’s recent decision in Henson v. Santander Consumer USA, Inc., 137 S. Ct. 1718 (2017). In Henson, the Supreme Court ruled that a “company collecting purchased defaulted debt for its own account” is not a debt collector. The parties agreed that LVNV was the owner of plaintiff’s debt and sought to use Resurgent to collect on the debt for its own account, not the account for another. As such, the court stated, LVNV is not a debt collector under the FDCPA.  (An additional case to be decided in favor of the debt purchaser after the ruling in Henson is Chernyakhovskaya v. Resurgent Capital Services, LP. Read the opinion here.) 

insideARM Perspective 

insideARM has posted several articles regarding the Henson decision, including this one, as well as an announcement from the Receivables Management Association (RMA) urging caution when interpreting the decision. 

Deciding to not follow the FDCPA as a result of the Henson decision undoubtedly comes with many risks. But there is no reason why those owning accounts and placing them for collection with another should not evaluate whether to use the court’s analysis above to avoid FDCPA liability. 

We suspect additional decisions will be forthcoming that apply the Henson decision to “passive” debt buyers, i.e. those who purchase debt but themselves do not collect on it. insideARM will continue to monitor any developments.

PITTSBURGH, Pa. – Credit Management Company, a collection agency providing business partners with optimum accounts receivable management, debt recovery, and customer care programs, hosted a “pink day” at its company headquarters in Pittsburgh, Pennsylvania on Friday, October 27, 2017.

In an effort to raise awareness and join the fight to find a cure for breast cancer, Credit Management Company announced that it would be selling pink Breast Cancer Awareness wristbands for $1 each. All proceeds were sent to the National Breast Cancer Foundation.

This is the first year that Credit Management Company has participated in raising money for the foundation, and now plans to make it an annual event.

“Our agents have such good hearts and are always eager to contribute.  I was blown away by the number of people who contributed to the cause, and I think that everyone really liked dressing up for our ‘pink day’.  We are all looking forward to next year’s event,” said Brady Dolan, Sales Support Manager at Credit Management Company.

About Credit Management Company

Credit Management Company (CMC) is well known for delivering exceptional outcomes for healthcare clients. Our clients range in size and service offerings, but all experience the same exceptional results when partnering with us. We have been serving the healthcare market for over 50 years and healthcare clients make up 91% of our overall portfolio – healthcare knowledge in our call center is second to none. CMC also provides debt recovery and collections for the government, higher education, financial services and commercial sectors. 

About National Breast Cancer Foundation, Inc. ® 

Recognized as one of the leading breast cancer organizations in the world, National Breast Cancer Foundation (NBCF) is Helping Women Now® by providing early detection, education and support services to those affected by breast cancer. A recipient of Charity Navigator’s highest 4-star rating for twelve years, NBCF provides support through their National Mammography Program, Patient Navigation, Beyond The Shock®, breast health education and research programs. For more information, please visit NBCF.org.

The following is a profile of just one of the thousands of revenue cycle leaders across the U.S. I’d like to thank Al Zezulinski 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? 

Al Zezulinski Founder & Chairman, Patient Account Management Systems, Trustee, Hospital of the University of Pennsylvania.

How did you land in the collections business?

I was at NCO Financial for many years. We were one of the largest debt collectors in the United States. When I first got there, my role was to pull together some acquisitions in the healthcare space. Later, I went on to work as a consulting accountant in the healthcare industry. I started working with distressed hospitals in the 90s. One thing I noticed was that in distressed situations, the first place hospitals lay off are in the non-patient-facing areas like business offices and housekeeping. I’d sometimes get in there and the business office would be a mess: the receivables had not been worked, etc. I remember one hospital where I found several millions of dollars’ worth of checks that had not been deposited because there was no one to post them! It was amazing.

At some point, I worked with the founder of NCO to sell the company to JP Morgan Chase in 2006. I stayed on with Chase until 2012. That year, I had an opportunity to speak at a conference in Brazil where I met Tatiana Pomar. She was working for a credit and collections agency in Brazil. She had just won an award for innovations in skip tracing using social media. This caught my attention. My office in São Paulo was across the hallway from hers, so I would stop in and got to know more about what she was doing. Her approach was to encourage what I’ll call “consumer-directed account management,” using social media.

Is “consumer-directed account management” fundamentally different from traditional collections?

Yes! A collection agency is typically a licensed entity that makes outbound phone calls and sends letters attempting to communicate with the right party to resolve a debt. Because of the changes that have occurred in communication, including consumer awareness, the rise of consumerism and just the way we behave socially, people don’t answer the phone anymore. They don’t open snail mail. The big problem we have in traditional collections is getting the right party on the phone.

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Tatiana and I are essentially updating the way we connect with consumers. We’ve brought these ideas to the United States, and the interest has been very high. Potential clients are quick to see the relevance of our approach. We went live with our first client just this summer — a very large debt buyer and bank based here in the US. They gave us 2 million accounts to put under management, and we’re about to sign our second client, who is poised to give us 700,000 accounts per month. So by the year’s end, we’re projected to have around 5 million accounts under management.

We’re using social media to give consumers the tools and opportunity to resolve their debt on an easy-to-use website that offers a wide range of options. Importantly, the relationship begins long before the debt has gone bad.

This sounds like a game changer.

We’re putting account resolution into the hands of consumers, and taking it out of the hands of the credit grantors, the banks, and the agencies that work for them. We’ve seen that people want to pay their bills. They just need to face it in their own way. Calling them when they don’t answer the phone doesn’t work. Making more phone calls just means more calls go unanswered.

Are you focused on the healthcare space?

We did start in healthcare because I came out of healthcare. At NCO, I had certainly worked on other kinds of accounts. As head of NCO Portfolio Management, we were the second- or third-largest consumer credit buyer in the US. We bought millions of accounts each year: utility accounts, healthcare accounts from large healthcare and physician groups and hospitals, plus credit card accounts, auto loans and so on.

The context of the patient-provider relationship seemed a perfect place to pilot this approach, especially given the rise of self-pay balances. I think the self-pay crisis is only getting bigger and worse. The average balance size is bigger. More and more consumers have HDHPs, and they aren’t responsive to traditional methods of collection. So it struck me: Why not put this in their hands, and let them manage their own self-pay balances. We can educate them, and give them the tools to come to us, and handle their outstanding balances on their own terms. We created a platform called PAM—which stands for Patient Account Management.

The same platform, branded Zeroing, is centered on credit cards, auto loans, student loans and utilities.

What’s the special sauce of this approach to collections?

Our approach is true to life. Reality is that people lose their jobs. Family income changes. Expenses don’t go down that fast. When someone can’t go to work because they’ve just been diagnosed with cancer, the impact on family income is profound. These are all lifecycle events that consumers need to manage through. Badgering them for money doesn’t help. It makes things worse.

I’m also on the board of a large Philadelphia hospital. I’ve seen that when a patient comes into the healthcare environment, we’re caring, we’re friendly, we call and check on them. They’re treated beautifully. They’re cared for. They’re respected. But then they owe us money, it’s as if they cross over a threshold and the relationship becomes increasingly hostile. That doesn’t make sense. In the healthcare community, if we live by the Hippocratic Oath’s central premise, “Do No Harm,” then we should do no harm in a patient’s financial life either, because it’s all one ecosystem. Financial pressures affect health.

In the healthcare space, in addition to caring for patients, there is also tremendous bottom line pressure. Offering a digital platform increases liquidity and lowers costs because it’s all digital. Also, something else happens that’s a byproduct, but in many ways is even more important to the bottom line: We can improve patient loyalty. In an era of increased competition, that has an impact.

What are the compliance implications of using social media to connect with consumers?

The largest data security and compliance risk is human beings. In our model, there is no human being. No one is writing down or making notes. We take the human element out. Our servers run on Amazon Web Services. It’s got more security than most military installations. It’s easy to maintain compliance the privacy guidelines. In terms of rules governing outreach, there are three kinds of patients we deal with. There are patients who are pre-registered to receive hospital services but they have not yet incurred the associated costs. At the beginning of the clinical relationship, we’re already involved. We’re gathering consent, and information, and modes of communication. Our goal is to build an ongoing, sustainable relationship with the consumer.

The second kind of patient has been in the hospital and has been discharged. Once the insurance company has been billed, we reach out. Again, we were there at the pre-admissions moment, gathering contact information and consent to use it. So once the bill comes back from insurance, we take the opportunity to explain the balance due after insurance has paid its portion.  

As far as demographics go, about 15% of patients are Medicaid, or are indigent. They won’t have a deductible to pay at all. Another 25% will pay as soon as they know their self-pay balance. The remaining segment will need a payment plan. We suggest a payment plan based on the criteria and guidelines that our clients give us, and generate 5-8 viable payment plan choices. If none of those fit their lifestyle and family budget, the consumer can suggest one that will, and we try to get approval from our client. It’s all done digitally. The client might counteroffer, or they may just accept the consumer’s suggested payment plan.

How successful have you been with unresponsive consumers?

The third kind of patient has been discharged from the hospital, but has not responded to our outreach. Sometimes we have contact information and an email address and/or cell phone number, and permission to use it. If we have an email address and a cell phone number, we use those for ID purposes through our analytic platform. We can use Facebook, Google and other tools to ID upwards of 85% identification rate. We can find your name, tied to an IP address on a specific device. And we can put a banner ad in front of you that says something like: “If you’re concerned about past-due hospital debts, and how they can impact your ability to buy a new car or obtain housing, click here….”  When they click through, we can show them their specific hospital debt, and get them to enroll into the program and deal with their debt.

Our hit rate in Brazil with this approach was insane in 2015. The largest bank in Brazil gave us a million accounts, and gave our local competitor the same number of accounts with similar characteristics. Our competitor put their million accounts into a traditional collections environment, and of course we used our collections environment. Four months later, we had collected 400% more cash than our competitor, at about 1/20th of the cost.

We’re not relying on consumers to come find us. We’re using technology to find consumers and making it easy for them to engage with us. We reach out, educate and motivate consumers through the entire arc of the patient lifecycle. We do it in English and Spanish!

How have physicians and hospital systems responded to what you’re offering?

Hospital collections is a traditional, call-center-bound business. I put it to the hospital C-suite this way: “Everything you give to an agency, give it to us at the same time. When we get a consumer to agree to pay our way, we’ll send you an update, and you can recall it from your agency. No need to change the way you’re working today.” It’s hard to argue with that approach because of course, hospitals have a fiduciary responsibility to look at the economics of all its vendors, but there is also the status quo to contend with. Change will be gradual, but there is no doubt that it’s coming. It’s unstoppable.

The following is a profile of just one of the thousands of revenue cycle leaders across the U.S. I’d like to thank Al Zezulinski 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? 

Al Zezulinski Founder & Chairman, Patient Account Management Systems, Trustee, Hospital of the University of Pennsylvania.

How did you land in the collections business?

I was at NCO Financial for many years. We were one of the largest debt collectors in the United States. When I first got there, my role was to pull together some acquisitions in the healthcare space. Later, I went on to work as a consulting accountant in the healthcare industry. I started working with distressed hospitals in the 90s. One thing I noticed was that in distressed situations, the first place hospitals lay off are in the non-patient-facing areas like business offices and housekeeping. I’d sometimes get in there and the business office would be a mess: the receivables had not been worked, etc. I remember one hospital where I found several millions of dollars’ worth of checks that had not been deposited because there was no one to post them! It was amazing.

At some point, I worked with the founder of NCO to sell the company to JP Morgan Chase in 2006. I stayed on with Chase until 2012. That year, I had an opportunity to speak at a conference in Brazil where I met Tatiana Pomar. She was working for a credit and collections agency in Brazil. She had just won an award for innovations in skip tracing using social media. This caught my attention. My office in São Paulo was across the hallway from hers, so I would stop in and got to know more about what she was doing. Her approach was to encourage what I’ll call “consumer-directed account management,” using social media.

Is “consumer-directed account management” fundamentally different from traditional collections?

Yes! A collection agency is typically a licensed entity that makes outbound phone calls and sends letters attempting to communicate with the right party to resolve a debt. Because of the changes that have occurred in communication, including consumer awareness, the rise of consumerism and just the way we behave socially, people don’t answer the phone anymore. They don’t open snail mail. The big problem we have in traditional collections is getting the right party on the phone.

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Tatiana and I are essentially updating the way we connect with consumers. We’ve brought these ideas to the United States, and the interest has been very high. Potential clients are quick to see the relevance of our approach. We went live with our first client just this summer — a very large debt buyer and bank based here in the US. They gave us 2 million accounts to put under management, and we’re about to sign our second client, who is poised to give us 700,000 accounts per month. So by the year’s end, we’re projected to have around 5 million accounts under management.

We’re using social media to give consumers the tools and opportunity to resolve their debt on an easy-to-use website that offers a wide range of options. Importantly, the relationship begins long before the debt has gone bad.

This sounds like a game changer.

We’re putting account resolution into the hands of consumers, and taking it out of the hands of the credit grantors, the banks, and the agencies that work for them. We’ve seen that people want to pay their bills. They just need to face it in their own way. Calling them when they don’t answer the phone doesn’t work. Making more phone calls just means more calls go unanswered.

Are you focused on the healthcare space?

We did start in healthcare because I came out of healthcare. At NCO, I had certainly worked on other kinds of accounts. As head of NCO Portfolio Management, we were the second- or third-largest consumer credit buyer in the US. We bought millions of accounts each year: utility accounts, healthcare accounts from large healthcare and physician groups and hospitals, plus credit card accounts, auto loans and so on.

The context of the patient-provider relationship seemed a perfect place to pilot this approach, especially given the rise of self-pay balances. I think the self-pay crisis is only getting bigger and worse. The average balance size is bigger. More and more consumers have HDHPs, and they aren’t responsive to traditional methods of collection. So it struck me: Why not put this in their hands, and let them manage their own self-pay balances. We can educate them, and give them the tools to come to us, and handle their outstanding balances on their own terms. We created a platform called PAM—which stands for Patient Account Management.

The same platform, branded Zeroing, is centered on credit cards, auto loans, student loans and utilities.

What’s the special sauce of this approach to collections?

Our approach is true to life. Reality is that people lose their jobs. Family income changes. Expenses don’t go down that fast. When someone can’t go to work because they’ve just been diagnosed with cancer, the impact on family income is profound. These are all lifecycle events that consumers need to manage through. Badgering them for money doesn’t help. It makes things worse.

I’m also on the board of a large Philadelphia hospital. I’ve seen that when a patient comes into the healthcare environment, we’re caring, we’re friendly, we call and check on them. They’re treated beautifully. They’re cared for. They’re respected. But then they owe us money, it’s as if they cross over a threshold and the relationship becomes increasingly hostile. That doesn’t make sense. In the healthcare community, if we live by the Hippocratic Oath’s central premise, “Do No Harm,” then we should do no harm in a patient’s financial life either, because it’s all one ecosystem. Financial pressures affect health.

In the healthcare space, in addition to caring for patients, there is also tremendous bottom line pressure. Offering a digital platform increases liquidity and lowers costs because it’s all digital. Also, something else happens that’s a byproduct, but in many ways is even more important to the bottom line: We can improve patient loyalty. In an era of increased competition, that has an impact.

What are the compliance implications of using social media to connect with consumers?

The largest data security and compliance risk is human beings. In our model, there is no human being. No one is writing down or making notes. We take the human element out. Our servers run on Amazon Web Services. It’s got more security than most military installations. It’s easy to maintain compliance the privacy guidelines. In terms of rules governing outreach, there are three kinds of patients we deal with. There are patients who are pre-registered to receive hospital services but they have not yet incurred the associated costs. At the beginning of the clinical relationship, we’re already involved. We’re gathering consent, and information, and modes of communication. Our goal is to build an ongoing, sustainable relationship with the consumer.

The second kind of patient has been in the hospital and has been discharged. Once the insurance company has been billed, we reach out. Again, we were there at the pre-admissions moment, gathering contact information and consent to use it. So once the bill comes back from insurance, we take the opportunity to explain the balance due after insurance has paid its portion.  

As far as demographics go, about 15% of patients are Medicaid, or are indigent. They won’t have a deductible to pay at all. Another 25% will pay as soon as they know their self-pay balance. The remaining segment will need a payment plan. We suggest a payment plan based on the criteria and guidelines that our clients give us, and generate 5-8 viable payment plan choices. If none of those fit their lifestyle and family budget, the consumer can suggest one that will, and we try to get approval from our client. It’s all done digitally. The client might counteroffer, or they may just accept the consumer’s suggested payment plan.

How successful have you been with unresponsive consumers?

The third kind of patient has been discharged from the hospital, but has not responded to our outreach. Sometimes we have contact information and an email address and/or cell phone number, and permission to use it. If we have an email address and a cell phone number, we use those for ID purposes through our analytic platform. We can use Facebook, Google and other tools to ID upwards of 85% identification rate. We can find your name, tied to an IP address on a specific device. And we can put a banner ad in front of you that says something like: “If you’re concerned about past-due hospital debts, and how they can impact your ability to buy a new car or obtain housing, click here….”  When they click through, we can show them their specific hospital debt, and get them to enroll into the program and deal with their debt.

Our hit rate in Brazil with this approach was insane in 2015. The largest bank in Brazil gave us a million accounts, and gave our local competitor the same number of accounts with similar characteristics. Our competitor put their million accounts into a traditional collections environment, and of course we used our collections environment. Four months later, we had collected 400% more cash than our competitor, at about 1/20th of the cost.

We’re not relying on consumers to come find us. We’re using technology to find consumers and making it easy for them to engage with us. We reach out, educate and motivate consumers through the entire arc of the patient lifecycle. We do it in English and Spanish!

How have physicians and hospital systems responded to what you’re offering?

Hospital collections is a traditional, call-center-bound business. I put it to the hospital C-suite this way: “Everything you give to an agency, give it to us at the same time. When we get a consumer to agree to pay our way, we’ll send you an update, and you can recall it from your agency. No need to change the way you’re working today.” It’s hard to argue with that approach because of course, hospitals have a fiduciary responsibility to look at the economics of all its vendors, but there is also the status quo to contend with. Change will be gradual, but there is no doubt that it’s coming. It’s unstoppable.

VANCOUVER, Wash. — InterProse, a software company specializing in Software as a Service for the debt recovery market, implemented a rebrand strategy October 1, 2017 to consolidate messaging among all external communication channels. Changes included a logo refresh, full website revision, and the renaming of WebAR, the primary software solution InterProse provides its customers.

For the remainder of the year, “WebAR” will be referred to as “WebAR ACE”. Starting January 1, 2018, “ACE” will replace all references to WebAR.

“InterProse prides itself on its culture of ‘relentless innovation’, and we have been continually evolving WebAR for a decade. We realized that WebAR was not just an accounts receivable application, but had become an advanced collections environment with capabilities to easily adapt to 21^st century challenges and opportunities. We decided to update the product name and transform our website and logo to communicate to a broader market of prospective customers.” – Matthew Hill, President & CEO

The InterProse website redesign was done to streamline visitor access to product benefits and features and establish InterProse as a premium content provider within the debt recovery market. New market education takes in the form of eGuides, eBooks and blog posts (subscribe here), all tied into multiple social media channels: LinkedIn, Twitter, and Facebook.

About InterProse

InterProse is software company serving the debt recovery market with a web-based, open-platform software solution to facilitate debt recovery efforts. Specializing in efficiency through process automations and capable of integrating various third-party technologies to keep pace with modern advancements, InterProse continually upgrades the platform at no charge to its customers and strives to be the most flexible, modern solution available for its target markets of third party debt collections and original credit grantors.