On September 18, 2017 insideARM reported that Chief Judge Susan Braden had issued an order directing the Department of Education (ED) to file a status report on the RFT for Private Collection Agency Services (PCA) by October 5. As reported last week, that date came and went with no report filed. On October 11, Judge Braden set a new deadline of today, October 20.

This time, ED made it… sort of.

Late yesterday afternoon ED filed a status report that basically says, “we are working on it.” You can read the report (essentially one page) here. It is largely a cut-and-paste from previous updates.

The report recaps that since its September 14, 2017 status report ED had been in the process of finalizing evaluation reports based on new evaluation criteria, and then expected the Source Selection Authority to “perform an integrated assessment to identify the proposal(s) deemed to be most advantageous to the Government, followed by a determination of each apparently successful offeror. Once a new source selection determination has been made, ED will announce any new award or awards, and/or the termination of previously-awarded contracts, as appropriate.”

The new information is that the evaluation reports have indeed been finalized, and the Source Selection Authority is in the process of conducting its assessment.

No estimated date for a next step is provided.

insideARM Perspective

This is a little like seeing a junior high school argument play out in slow motion, in writing, with a lot left unsaid. ED concluded its update with this:

“As stated in our August 4, 2017, August 24, 2017 and September 14, 2017 status reports, this corrective action is a top priority of Federal Student Aid, and ED is working diligently to complete the corrective action.”

The prior update included “Defendant respectfully requests that it be allowed to file a status report on…” This latest update includes no such respectful request.

One can only imagine Judge Braden’s response. Where to now? Will she set another new date? Order ED to show up in court and provide more specifics?

One also can only imagine the pressure that must be felt by the team at ED. They’ve got to get this round right.

Meanwhile, because of the judge’s May 31, 2017 injunction, accounts entering default continue to sit.

Editor’s Note: See here for a link to an insideARM page that provides a history of our ED-related articles. The page is automatically updated as new stories are written.

SARASOTA, Fla. — Last week the National Creditors Bar Association elected a new Secretary, Treasurer and Six Board of Directors Members last week at the NARCA 2017 Fall Conference in Washington, DC. Yale Levy was also sworn in as President of The National Creditors Bar Association after serving the past year as President-elect. 

President 

Yale Levy is owner of Levy & Associates, LLC in Columbus, OH, where he represents clients in creditor rights matters. He served on the The National Creditors Bar Association Board of Directors prior to his election to President. As a NARCA member, he has been actively involved in a number of committees, including co-chairing the 2016 Spring Conference Committee and the Professional Standards and Grievance Committee. In 2016, he was invited by the CFPB and SBA to serve as a Small Entity Representative on the Debt Collection SBREFA Panel. 

Newly Elected Board Officers 

Burton “Chip” Stacy, Jr. is with the firm Hood & Stacy, P.A. in Bentonville, Arkansas. He is licensed to practice law in the states of Arkansas, Missouri and Oklahoma and the Federal courts for the Eastern and Western Districts of Arkansas, Eastern, Northern and Western Districts of Oklahoma and the Western District of Missouri. Mr. Stacy is a co-chair of NARCA’s Government and Regulatory Affairs Committee. He is a member of the Receivables Management Association, the National List of Attorneys, the American Bar Association, the American Bankruptcy Institute and American Lawyers Quarterly. Areas of practice include: Collection, Foreclosure, Commercial Litigation and Bankruptcy. 

Michele Gagnon is with the firm Lyons Doughty & Veldhuis, P.C. in Mt. Laurel, New Jersey. She is a Co-Chair of the NARCA Membership Committee and recently served three terms on the The National Creditors Bar Association Board of Directors. She chairs the SCBA Forum and chaired the Fall 2015 Collection Conference Committee and is a member of the Professional Standards and Grievance Committee, which she previously served as its Chair. Michele has also served as chair of the Nominating/Elections Committee and is a member of the Budget Committee. In addition to her more than 20 years of consumer debt collection experience, she has presented at NARCA conferences and was the president of the Maryland/DC Creditors Bar Association. 

Newly Elected Board of Directors Members 

Thomas (Tom) L. Canary, Jr. is a Senior Attorney with the firm Reimer Law Co., in Solon, Ohio. Tom concentrates his practice in the areas of bankruptcy, replevin and creditors’ rights. He admitted to practice law in the states of Kentucky, Indiana West Virginia and Ohio, the federal district courts in all those states as well as the Sixth Circuit Court of Appeals. Mr. Canary was the recipient of NARCA’s President’s Award in 2009. Tom previously served as Secretary to the Board of Directors. He is the current author and editor of Kentucky Collections published by Thompson-Reuters. Tom is a frequent writer and lecturer on bankruptcy and creditor’s rights. 

Marvin Dang is with the firm Law Offices of Marvin S.C. Dang, LLLC in Honolulu, Hawaii. He is the former NARCA Parliamentarian and has served NARCA in a number of committees and task forces including the Charter Task Force and SCBA Forum. He also serves as a leader with the American Bar Association as Chair-elect of the 63,000 member Senior Lawyers Division for 2017-2018. 

Mark Groves is with the firm Glasser and Glasser, P.L.C. in Norfolk, Virginia. He is a past Treasurer and member of the NARCA Board of Directors. In addition, he has served as the Grievance Committee Chair, as a NARCA Conference chair, a chair of a task force to create and implement the process that would make CLE credits widely available to conference attendees, and in various capacities including Education, Advocacy, Finance and Grievance. Mark is also the co-recipient of the 2017 NARCA President’s Award for his service to the association. 

Re-Elected Board of Directors Members 

Steven A. Markoff is a principal member of the firm Markoff Law LLC in Chicago, Illinois. He concentrates his practice on creditors rights and debt collection. He represents numerous creditors including financial institutions, debt purchasers, finance companies, municipalities, medical providers, and small businesses. Steve was a co-recipient of NARCA’s 2015 President’s Award in recognition of his outstanding service to the Association. He has served as Co-Chair of the Education Committee. This is his second term as a member of the NARCA Board of Directors. 

Ronald C. Miller is with the firm Miller & Steeno, P.C. in St. Louis, Missouri. This is his third term as a Member of the NARCA Board of Directors. He is a founding member of the Missouri Creditors Bar and has been treasurer since its inception. As an active creditors advocate, he has testified before a Missouri senate committee against the reduction of post judgement interest rates and has lobbied the Missouri legislature. His involvement in NARCA includes past Chair of the Professional Standards Committee, Co-Chair of the Amicus Briefs Committee, spearheaded the drafting of the NARCA continuing legal education requirements, and played a central role in rewriting the Grievance Committee procedures.

Barbara Nilsen is with the firm Blitt & Gaines, P.C. in Wheeling, Illinois. This is her second term as a member of the NARCA Board of Directors. She has been an active participant in NARCA, serving on numerous Conference, Membership and Education committees and sub-committees.

About NARCA – The National Creditors Bar Association

NARCA – The National Creditors Bar Association is a nationwide professional trade association of over 600 creditors rights law firms and in‐house counsel of creditors.  NARCA members are committed to being professional, responsible and ethical in their practice of creditors rights law. 

Nelnet (NYSE: NNI) announced yesterday that it has entered into a definitive and binding agreement with Great Lakes Higher Education Corporation to acquire 100% of the stock of their student loan servicing company, Great Lakes Educational Loan Services, Inc. (Great Lakes).

Jeff Noordhoek, Nelnet CEO said,

“We are bringing together 90 years of industry experience, including providing outstanding service to federal and private student loan borrowers, lenders, and schools. With our combined resources, we will take an approach that features best-in-class technology systems, proven operational capabilities, and customer experience innovations, to create a superior experience that ensures all borrowers find the best repayment options for their individual circumstances. Great Lakes and Nelnet now have the opportunity to transform student loan servicing for millions of borrowers, providing a consistent and unmatched borrower experience and the best technology for student loan servicing.”

Headquartered in Madison, Wisconsin, Great Lakes and its parent affiliated group have been helping students access higher education since 1967. Today, Great Lakes has 1,800 employees. Great Lakes CEO Jeff Crosby said,

“Today is a great day for Great Lakes and our employees, and the customers we have the opportunity to serve. Great Lakes and Nelnet have been leaders in student loan servicing for decades by focusing on operational excellence and by believing we can always do more to serve our customers. Our values and teams complement each other and I am confident we will be able to do even more to improve the lives of the borrowers, lenders, and schools we serve as a part of the same team.”

In 2009, Great Lakes and Nelnet were awarded contracts to service government-owned student loans on behalf of the U.S. Department of Education. These contracts are set to expire in June 2019.

According to the company announcement, Great Lakes and Nelnet will maintain their distinct brands, servicing operations, and operational teams, with Jeff Crosby leading Great Lakes as its CEO, and each will continue to compete for new student loan volume under its respective existing contract with the Department of Education. Over time, shared services teams will integrate and support both the Great Lakes and Nelnet servicing operations.

Nelnet and Great Lakes have also been working together for almost two years to develop a new, world class servicing system for government-owned student loans through a joint venture. The servicing platform under development will utilize modern technology to effectively scale for additional volume, protect customer information, and support enhanced borrower experience initiatives. The efficiencies gained by leveraging a single platform for government-owned loans supporting millions more borrowers will give Great Lakes and Nelnet opportunities to invest in strategies to further enhance borrower experiences.

“Moving forward with the development of our state-of-the-art loan servicing platform will enable us to provide the best possible experience for borrowers as our organizations come closer together,” said Joe Popevis, president of Nelnet Diversified Solutions (NDS). NDS owns Nelnet Servicing, Nelnet’s servicing business, and will also own Great Lakes’ servicing business. “This transaction accelerates our technology integration and collaboration, leaving us in the strongest position possible to enhance the development of the new platform.”

Under the terms of the agreement, Nelnet will pay $150.0 million in cash for all of the outstanding stock of Great Lakes. The transaction will settle on January 1, 2018, subject to customary closing conditions, primarily the expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Great Lakes will also continue to provide technology and certain administrative support services to Great Lakes Higher Education Corporation pursuant to a guarantor services agreement.

Nelnet’s expected acquisition of Great Lakes pairs two of ED’s four primary student loan servicers; the others are Navient and FedLoan Servicing. 

insideARM Perspective

This transaction comes just a few months after U.S. Secretary of Education (ED) Betsy DeVos announced her intent to transform how the Federal Student Aid Fund (FSA) provides customer service to more than 42 million student loan borrowers, calling it “Next Generation Processing and Servicing.” As part of ED’s August announcement, Dr. A. Wayne Johnson, the new Chief Operating Officer of FSA commented: 

“The FSA Student Loan Program represents the equivalent of being the largest special purpose consumer bank in the world. To improve customer service, we will take the best ideas and capabilities available and put them to work for Americans with student loans. When FSA customers transition to the new processing and servicing environment in 2019, they will find a customer support system that is as capable as any in the private sector. The result will be a significantly better experience for students – our customers – and meaningful benefits for the American taxpayer.”

A single-platform for servicing ED’s portfolio, estimated $1.4 trillion, certainly makes sense for borrowers with multiple loans, who may currently deal with multiple servicers on different databases. It seems that the ongoing project to develop a servicing platform was a bet by Nelnet and Great Lakes that their system (known as “GreatNet“) would be just what ED would be looking for. Perhaps the closer ties between the companies were to be expected.

Augusta, Ga. —  Contract Callers, Inc. (CCI) is pleased to announce that James Williams has joined the company as Director of Call Center Operations. James is very well known within the ARM industry.

Previously with ERC, James spent more than a decade in the call center world where his contributions resulted in multiple agency of the year awards. He excels at customer satisfaction with innovative ideas for managing call center operations and utilizing creativity with new and unexpected processes to achieve client and company expectations. In his new role with CCI he will be responsible for the overall BPO, first party, and third party day-to-day operations of our call centers where he will be developing new initiatives and strategies that will ensure a competitive edge for the organization.

“I came to CCI as we have an opportunity to create a legacy in the industry that will be carried on for years. My expectations are that we grow the business through organic growth by performing on existing clients and by boarding new clients,” said James. “The call center will be a high energy, high expectations environment where the agents are always put first. We will coach train and develop until we have a staff of highly motivated, dedicated, and professional agents that put CCI’s best interest first. Through partnership with every department at CCI I want to innovate and always push forward. I never want to feel comfortable as we will always have opportunity to improve.”

CCI’s Vice President of Call Center Operations & IT, Doffie Howard, is also looking forward to James’ impact at the Company, stating, “I have worked with James for many years. He is a talented and motivational manager with a proven record of building and leading effective teams toward success. He will be instrumental in our growth as we continue to build momentum and solidify our capabilities.”

About Contract Callers

Established in 1926, CCI provides a variety of accounts receivable management and outsourcing solutions, as well as utility field services, to clients throughout the U.S. Currently, the Company employs approximately 500 employees operating out of more than a dozen offices nationwide. CCI is positioned to continue its growth in the near and long term solidifying its position as a leader in the industry.

CARROLLTON, Texas — The CMI Group (CMI) and its employees raised $11,000 during September to support relief efforts in response to Hurricane Harvey that affected Texas residents in the Gulf region. Employees made donations totaling $5,500 and CMI provided 100% matching funds to reach the $11,000 total.

This donation to the American Red Cross assists with ongoing recovery efforts for residents in hurricane-affected areas.

“I’m grateful to our employees for their participation in this effort to help those impacted by Hurricane Harvey,” said Carrie Finney, president of CMI. “It’s wonderful to see the human spirit for helping others in action.”  

About The CMI Group

Founded in 1985, CMI is a full-service receivable management firm providing leading-edge solutions to customers nationwide. Through its subsidiaries, CMI delivers innovative first-and third-party revenue cycle, accounts receivable management, and BPO solutions resulting in enhanced operational efficiency and increased revenue for its customers. Serving a multitude of industries, CMI has headquarters in Carrollton, TX, with satellite offices in Dallas and Rochester, MN. For more information, visit www.thecmigroup.com.

Yesterday the Consumer Financial Protection Bureau (CFPB) announced principles for protecting financial data that consumers choose to share with third party companies that provide services like personal financial management tools, bill payment, budgeting or fraud prevention.

The principles cover data access, data scope and usability, control of the data and informed consent, payment authorizations, data security, transparency on data access rights, data accuracy, accountability for access and use, and disputes and resolutions for unauthorized access.

Of particular interest to the debt collection industry may be the guidelines covering control and informed consent (especially as it relates to revocation), access transparency and accuracy. Excerpted from the CFPB’s document:

Control and Informed Consent

Authorized terms of access, storage, use, and disposal are fully and effectively disclosed to the consumer, understood by the consumer, not overly broad, and consistent with the consumer’s reasonable expectations in light of the product(s) or service(s) selected by the consumer. Terms of data access include access frequency, data scope, and retention period. Consumers are not coerced into granting third-party access. Consumers understand data sharing revocation terms and can readily and simply revoke authorizations to access, use, or store data. Revocations are implemented by providers in a timely and effective manner, and at the discretion of the consumer, provide for third parties to delete personally identifiable information. (emphasis added)

I suspect that “Understood by the consumer” will be the subject of debate. Will the standard be the least sophisticated consumer? The collection industry has been battling this in the courts for years with Fair Debt Collection Practices Act claims.

Access Transparency

Consumers are informed of, or can readily ascertain, which third parties that they have authorized are accessing or using information regarding the consumers’ accounts or other consumer use of financial services. The identity and security of each such party, the data they access, their use of such data, and the frequency at which they access the data is reasonably ascertainable to the consumer throughout the period that the data are accessed, used, or stored.

As a consumer, I love this. For banks, this could have a real cost – they are likely not the ones who will receive revenue from the new services. There remains a question of where the consumer goes to see the dashboard of who they’ve permissioned data to. Housing this at the banks means that the consumer must go to multiple different wbsites to see the totality of their permissioning. But, who would own such a central access point? Who would pay for the cost to maintain it? It will be interesting to see how the business model evolves to reconcile this.

Accuracy

Consumers can expect the data they access or authorize others to access or use to be accurate and current. Consumers have reasonable means to dispute and resolve data inaccuracies, regardless of how or where inaccuracies arise.

How many times have consumers said to collectors, “I recognize the account, but I don’t owe that,” or “I don’t owe that much,” or “What’s that charge for?” and the collector doesn’t have access to the detail to answer the question? If consumers could also give access to collection agencies they trust, this could be a game changer.

insideARM wrote about this back in February 2017 when the CFPB issued its Request for Information. We highlighted the comments of the Consumer Financial Data Rights group (CFDR), an industry consortium supporting the consumer’s right to unfettered access to their financial data. The group was formed by financial service providers who stand to benefit from this type of data sharing, including Affirm, Betterment, Digit, Envestnet | Yodlee, Kabbage, Personal Capital, Varo Money, Capsilon, Earnup, Petal, Sipree, and SoFi.

The CFDR Group released this statement today,

“The CFDR group and its 35 member companies applaud the Consumer Financial Protection Bureau’s (CFPB) publication of thoughtful principles regarding a consumer’s ability to share their financial data through third-party tools that can help improve their financial lives. As a group, we have sought to bring the voice of the consumer into this debate. We are pleased that the CFPB’s principles align with the CFDR’s view: consumers – not their bank – should control their own financial data.”  

Steve Boms, VP of Government Affairs for Envestnet | Yodlee and CFDR Member said this,

“The principles published today by the Consumer Financial Protection Bureau (CFPB) enshrine core tenets that all responsible players in the financial services ecosystem should adopt: consumers should have full control of their financial data and should expect transparency and security from the entities to which they permission it. The Bureau’s release of data-sharing principles represents a huge win for consumer financial wellness.”  

The consumer protection principles are available here. 

A summary of stakeholder insights that informed the principles are available here. 

It should be noted that these principles are not binding. The Bureau’s announcement states,

“The principles do not establish binding requirements or obligations relevant to the Consumer Bureau’s exercise of its rulemaking, supervisory, or enforcement authority. In addition, they are not intended to alter, interpret, or otherwise provide guidance on existing statutes and regulations that apply in this market. Lastly, although the Consumer Bureau stands ready to facilitate constructive efforts or to take other appropriate action to protect consumers, the principles are not intended as a statement of the Consumer Bureau’s future enforcement or supervisory priorities.”

I personally use many of the services that require this type of data sharing and I will say that I appreciate the efficiency and portability they provide. So it’s nice to see things moving forward, especially in the area of transparency.

From my experience around the collection industry, however, I have observed the brick wall that people hit when it comes to information about accounts that are charged off. This data seems to be on some other server and is inaccessible other than by pony express or two cans with a string.

CFPB Director Cordray remarked,

“Today, the Bureau released its consumer protection principles for the consumer-authorized data-sharing market. These principles express our vision for realizing an innovative market that gives consumers protection and value.”

In response to consumer demand, innovation like this is making its way to nearly every industry. But not debt collection.

Currently, in most cases, once an account is charged off, limited data about the account moves onto a different system, and pre-charge off data is no longer accessible to the consumer — or to the debt collector. This causes significant confusion (exactly what do I owe, and what is it for?), frustration (what do you mean you can’t tell me… and now I have to wait with this issue hanging over my head?), and often a very awkward interaction between the consumer and collector. The lack of transparency hurts all parties. 

The good news here is that these principles begin to set expectations for institutions to honor their customers’ preference to access their financial data in ways they view as beneficial.

If this activity helps to establish precedent for things like informed consent, perhaps it will lead to the ability to allow information about past due debts to be shared in ways that are similar to those used for active accounts.

On October 4, 2017, a federal judge in Washington denied a debt collector’s motion to dismiss for failure to state a claim in a proposed putative class action case that alleged defendant’s lack of disclosure on time-barred debts violated the Federal Debt Collection Practices Act (FDCPA), 1692 et seq.  The case is Bereket v. Portfolio Recovery Associates, LLC, et al. (Case No. 17-cv-0812, U.S.D.C., Western District of Washington).  

The court issued a Memorandum Decision and Order, a copy of which can be found here. 

Background 

Six years after the last payment/activity on the debt referenced in the letter, defendant sent a settlement letter to plaintiff offering a number of different payment options. The letter stated, “The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it.” In the Complaint, plaintiff alleged that this letter violated the FDCPA as “Defendant fails to inform the Plaintiff that should he choose one of the payment plans offered it may re-start the statute of limitations, which may expose the Plaintiff to future litigation for this debt.” 

Defendant brought a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief may be granted. 

The Court’s Order 

The court denied defendant’s motion to dismiss.

The court briefly addressed several arguments defendant made in its motion to dismiss, but focused the majority of its analysis on defendant’s argument that, as a matter of law, it did not violate the FDCPA by failing to advise plaintiff of the potential legal consequences of partial payment. The defendant offered two primary arguments in support of its position: 

1. It had no duty to advise plaintiff of the possible legal consequences of his actions.
2. Under Washington law, partial payments would not have restarted the statute of limitations. 

The court rejected both arguments. With respect to defendant’s first argument, the court emphasized a recent summary from a decision in the Eastern District of California that the Federal Trade Commission and Consumer Financial Protection Bureau encouraged any collection of time-barred debt to inform a consumer of the consequences of partial payment, in addition to disclosing that a collector cannot sue to collect the debt. 

Regarding the defendant’s second argument, the court confirmed that based on the facts of the case, a partial payment on the debt could open the plaintiff to litigation whereas no payment would not. Based on its review of state law, the court heavily relied on the Seventh Circuit’s decision in Pantoja v. Portfolio Recovery Assocs, LLC, 852 F.3d 679 (7^th Cir. 2017). (See insideARM’s previous analysis regarding the Pantoja case) and concluded that plaintiff had sufficiently asserted that defendant’s failure to alert the consumer that a partial payment may restart the applicable statute of limitations violated the FDCPA. 

insideARM Perspective 

Collection of time-barred debt continues to be a heavily litigated issue.  While not universal, there is a growing consensus of case law that an Out-of-Stat disclosure should inform a consumer that a debt cannot be sued on and mention the consequences of making a partial payment or written acknowledgement. The Consumer Financial Protection Bureau also has collection of time-barred debt as a priority issue, and we suspect will attempt to address this issue in it notice of proposed rulemaking. 

insideARM maintains a free FDCPA resources page to provide the ARM community a destination for timely and topical information on the Fair Debt Collection Practices Act (FDCPA). The cornerstone of the page is a chart of significant FDCPA cases (kept up to date thanks to Joann Needleman of Clark Hill). Where insideARM has already published a story on the case, we provide a link. That chart contains several prior cases involving letter language on Out-of-Stat debt.

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 Kim Roberts for generously offering her time to provide her 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.

What’s your name, organization & position? 

Michael Bumann, Founder & CEO, Red Dot Management, LLC 

How long have you worked there?

I founded Red Dot Management, LLC in 2015 to offer healthcare financing solutions for motor vehicle accident accounts to national hospital systems, Accountable Care Organizations (ACOs), and large practice groups. There was a need in the provider community for better access to financing so they could fully monetize their Third Party Liability/Medical Lien accounts receivable.  

At some point, we realized it made sense to build a larger platform so we could scale the operation to acquire larger portfolios of accounts but still offer a high level of service.

How long have you worked in the revenue cycle field?

I’ve been involved in the Third Party Liability (motor vehicle accident/medical lien) industry since 2003. I worked in the legal industry in the Denver area when Colorado switched its automobile liability insurance laws from a PIP to a Tort system. Once that switch was made, there existed a vacuum as medical providers had to adapt to a new marketplace process for securing payment for third party claims. I was one of the first to step into this space and start providing solutions.

Essentially, we take a complex, long-term receivable whose resolution (i.e. collection) is tied to an underlying motor vehicle accident and monetize it by acquiring it from the hospital (or servicing it on their behalf, though we prefer to acquire). While this patient segment only accounts for ~3% of a hospital’s gross billing, it’s ~$10 billion per year in receivables.  

These complex receivables require a very specialized work force, well beyond that of an in-house employee and usually that of most vendors, as well as patience.  They take 24-36 months, on average, to resolve. In addition, something we offer that makes us unique is we never seek recovery directly from the patient.  Our recovery is entirely on the underlying claim.  We bolster that unique recovery approach by being able to acquire a hospital’s entire portfolio of related accounts.  We don’t cherry pick; we buy everything, the good, the bad, the ugly!

Simply put, we create immediate and constant liquidity for a complex, and difficult-to-resolve receivable that is a small part of overall billing, but can equate to substantial revenue. We do this without exposing patients to negative collection efforts.  

How did you land in the world of revenue cycle?

It was a case of “right place, right time” being on the frontline of an industry born in Colorado. It was exciting to be in at the beginning as an entire market was created. It’s an industry with many moving pieces, and to help create the original roadmap was exciting.

I was working in the personal injury legal industry, first on behalf of insurance defense law firms, then for law firms that represented injured plaintiffs. It was quickly evident that the medical providers and facilities needed guidance in navigating this new market.  To answer that need, I formed my first company in 2003 to create several multi-disciplinary clinics that focused solely on providing medical lien-based treatment to patients injured in motor vehicle accidents.  Today, Red Dot Management provides a financial platform for national hospital systems, Accountable Care Organizations (ACOs), and large practice groups with the financial capacity to onboard acquisitions in the range of $1 million to $100 million of gross filed charges.  

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

There are two ways to answer this question: First, I really couldn’t limit my “thank you” to just one person. When I think back on my career and all the twists and turns navigated in a new and growing industry, the number of people who helped me along the way is huge.

My second thank you is reserved for all those who told me I couldn’t make a business in this environment work; that the asset class was too complicated, required too much coordination; that everything had to be built from scratch (data analytics had to be built, web-based document management systems, even our CRM had to be custom built). To these people I owe my biggest thanks because nothing motivates me more than being told I can’t do something.  

What does your typical day at work look like?

I tend to rise early and enjoy a good cup of coffee or three. I’ll spend a little time reading something I’m interested in, take our dog for a short hike, and depending on where I am in the world, I’ll start in on responding to emails and returning phone calls.

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Once the first round of emails are out of the way, I move on to whatever is the most pressing item on my agenda (I like to eat any “frogs” early in the day).  My duties are usually broken down into two broad categories:  Red Dot Management related business and my Firefighting/EMS charity work and collaboration efforts with groups and agencies here and in Central America.  I find this creates a nice work/passion balance.

The middle of the day, unless I’m in a deal of some kind, is time set aside for one or more of my children (we have 4 ranging in ages from 5 to 11).  We spend an hour or two involved in some outside activity (jet skiing Lake Tahoe is a Summer favorite, grabbing a few runs on the slopes in Winter, skateboarding and bike riding in the Summer; tacking on a trip to our favorite ice cream shop remains a year-round request).

After we return from whatever excursion we had that day, I tackle whatever is next. I build in a lot of flexibility in my schedule for things that come up; I’m not one to tightly schedule every minute.

Evenings are set aside for the family. Dinner together is important to us. Once the kids are set for bed, I’m tying up loose ends from the day.  I tend to send more emails in the evenings.  This is also the time when I do most of my forward thinking research. Whether it’s identifying a better way to encrypt PHI via document file transfers, or implementing the updated cervical spine assessment protocol for a training in Mexico, evenings are when I’m most creative. 

Can you think of something great you’ve learned about this business you’d really like to pass along?

This is an example of an industry that can flourish by creating win-win scenarios. By providing liquidity for a complicated, and uncertain asset class, the benefits are many. For those who provide medical care and treatment to a vulnerable patient segment, we provide certainty in the form of liquidity. The potential burden on society in the form of additional cost absorption in government payor programs (Medicaid and Medicare) is avoided; and people injured in an accident can continue to access needed healthcare even if they are without health insurance or have the means to pay for their care. It feels very good being part of a business that earns returns by helping so many people and organizations.

So what’s the lesson I’ve learned from founding companies in this industry?  Be in a business that helps people.  The rest flows from that principle.

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

Well, I’m more of a book person over TV shows (though Denis Leary’s 6 seasons of “Rescue Me” was genius), I tend more towards adventure documentaries. The movie “The Secret Life of Walter Mitty” is a favorite, as is the soundtrack.

If you weren’t in your current career, what else would you most love to do for work?

Firefighting and EMS. No doubt. I’ve been a Firefighter/EMT since 2004 and have a real passion for this work.  Our NGO is a continuation of this passion and a culmination of my experience and relationships helping to bring modern rescue techniques and equipment to developing countries.

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

I can tell you with certainty that in the TPL/Medical Lien space there exists a need for more collaboration and network building.  Ours is a fragmented, though growing industry. With most companies being very regionally focused (most companies are small and in only one major metropolitan area), and only able to offer limited account servicing capabilities.  

We’ve been working on breaking down these barriers in a variety of ways. One of those ways is with our partner platform created to form partnerships with servicing companies. Our industry research shows there exists a need for servicing companies of all sizes to have a “buy partner” so they can offer account acquisition options to their clients (without losing their revenue stream).

In addition to creating worthwhile cross-sector relationships, continuing to educate hospitals and practice groups that there exists another option beyond servicing these accounts either in-house or through a less specialized vendor (such as a non-specialized billing company) is another area we are addressing.

On Friday the Federal Trade Commission (FTC), along with 11 states and the District of Columbia, announced “Operation Game of Loans,” the first coordinated federal-state law enforcement initiative targeting deceptive student loan debt relief scams. This nationwide crackdown encompasses 36 actions by the FTC and state attorneys general against scammers alleged to have used deception and false promises of relief to take more than $95 million in illegal upfront fees from American consumers over a number of years.

According to the announcement by the FTC, Operation Game of Loans includes seven FTC actions: five new cases, one new judgment in favor of the FTC, and a preliminary injunction entered in a case filed earlier this year. The agency alleges that the defendants in these actions charged consumers illegal upfront fees, falsely promised to help reduce or forgive student loan debt burdens, and pretended to be affiliated with the government or loan servicers, in violation of the FTC’s Telemarketing Sales Rule and the FTC Act. Operation Game of Loans also includes law enforcement actions by Colorado, Florida, Illinois, Kansas, Maryland, North Carolina, North Dakota, Oregon, Pennsylvania, Texas, Washington, and the District of Columbia. 

The following are the actions described in the FTC’s announcement:

Five New FTC Actions Halt Scams

The FTC recently filed five new cases against 30 defendants as part of Operation Game of Loans. In each action, the FTC obtained temporary restraining orders (TROs) that halted the scams and froze defendants’ assets.

• A1 DocPrep, Inc.: In an action filed in the U.S. District Court for the Central District of California, the FTC charged that Los Angeles-based A1 DocPrep took at least $6 million from consumers through unlawful student loan debt relief and mortgage assistance relief schemes. According to the complaint, the defendants claimed to be from the Department of Education, and promised to reduce borrowers’ monthly payments or forgive their loans. The FTC also alleges the defendants targeted distressed homeowners, making false promises to consumers that they would provide mortgage relief and prevent foreclosure. Rather than helping consumers, A1 DocPrep’s CEO, defendant Homan Ardalan, spent hundreds of thousands of consumers’ dollars on cars, jewelry, nightclubs, and restaurants, according to the FTC. The Court entered a TRO on September 28, 2017. Additional defendants named in the complaint are Stream Lined Marketing, d/b/a Project Uplift Students and Project Uplift America, and Bloom Law Group PC, d/b/a/ Home Shield Network and Keep Your Home USA.
• American Student Loan Consolidators (ASLC): In an action filed in the U.S. District Court for the Southern District of Florida, the FTC charged that ASLC, d/b/a ASLC Processing, and BBND Marketing, LLC, d/b/a United Processing Center, United SL Processing, and United Student Loan Processing, and principals Daniel Upbin and Patrick O’Deady bilked student loan borrowers out of at least $11 million by falsely promising loan forgiveness, lowered monthly payments, and reduced interest rates. The FTC alleges that the Deerfield Beach, Florida operation pretended to be affiliated with the Department of Education and loan servicers. The defendants also tricked consumers into believing that illegal upfront fees, typically up to $799, were being used to pay off student loans. The court entered a TRO on September 26, 2017.
• Alliance Document Preparation: In an action filed in the U.S. District Court for the Central District of California, the FTC charged that Los Angeles-based Alliance Document Preparation, d/b/a EZ Doc Preps, Grads Aid, and First Document Aid, took more than $20 million from consumers by charging illegal upfront fees of up to $1,000. The defendants deceptively marketed their purported services primarily on social media platforms like Facebook. The court entered a TRO on September 28, 2017.
• Student Debt Doctor (SDD): In an action filed in the U.S. District Court for the Southern District of Florida, the FTC charged that Fort Lauderdale-based SDD and its owner, Gary Brent White, Jr., collected at least $7 million from consumers struggling to pay student loan debt. According to the complaint, the defendants charged illegal upfront fees of $750 or more. Using social media, e-mail, and telemarketing, SDD promoted its services across the United States, in English and Spanish. SDD falsely promised consumers loan forgiveness often in as little as five years or less, and told consumers not to communicate with their loan servicers. The defendants also fabricated income, unemployment status, and family size information on relief applications in order to qualify borrowers for eliminated or reduced monthly payments. The court entered a TRO on October 3, 2017.
• Student Debt Relief Group (SDRG): In an action filed in the U.S. District Court for the Central District of California, the FTC charged that Los Angeles-based M&T Financial Group and American Counseling Center Corp., d/b/a Student Debt Relief Group, SDRG, StuDebt, Student Loan Relief Counselors, SLRC, and Capital Advocates, and principal Salar Tahour bilked at least $7.3 million from consumers struggling to repay their student loans. According to the complaint, the defendants falsely claimed to be affiliated with the Department of Education, deceived consumers into paying up to $1,000 in illegal upfront fees to enter them into free government programs, and charged consumers monthly fees they claimed would be credited toward their student loans. In reality, the FTC alleged, defendants pocketed consumers’ money and responded to mounting consumer complaints by changing their name rather than their business practices. The FTC also asserts that the defendants deceived consumers into providing them with Social Security numbers and Federal Student Aid identification information, allowing the defendants to hijack consumers’ accounts while cutting them off from their loan servicers and the Department of Education. The court entered a TRO on September 19, 2017, and a stipulated preliminary injunction on October 10, 2017.

Two New FTC Law Enforcement Developments

Operation Game of Loans also includes two pending FTC actions against 11 additional student loan debt relief scammers, in which federal courts recently entered significant orders.

• Student Aid Center: On August 31, 2017, the U.S. District Court for the Southern District of Florida granted summary judgment against defendant Ramiro Fernandez-Moris in a joint action filed by the FTC and the State of Florida. The Court found that defendants’ unlawful student loan debt relief enterprise took more than $35 million from student loan borrowers by enticing consumers to sign up for services using misleading and false claims. In particular, Student Aid Center misled consumers to believe that they could receive loan forgiveness or modification if they paid unlawful upfront fees, and tricked consumers into thinking the operation was involved in the approval process. Motions for default judgment against two other defendants are pending before the Court, and the proposed final orders against all three defendants are subject to final Court approval.
• Strategic Student Solutions: On May 26, 2017, the U.S. District Court for the Southern District of Florida entered a stipulated preliminary injunction in the FTC’s case against Strategic Student Solutions, freezing defendants’ assets, halting the organization’s student loan debt relief operation, and appointing a receiver to control the business for the remainder of the litigation. The FTC alleged that the defendants took more than $11 million from consumers by falsely promising to reduce or eliminate their student loan debt and offering them non-existent credit repair services.

The FTC notes that it files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The cases will be decided by the court.

In an effort to help consumers avoid scams, the FTC offers this advice: 

Consumers should remember that only scammers promise fast loan forgiveness, and that scammers often pretend to be affiliated with the government. And consumers should never pay an upfront fee for help, and should not share their FSA ID—a username and password used to log in to U.S. Department of Education websites—with anyone. 

Consumers can apply for loan deferments, forbearance, repayment and forgiveness or discharge programs directly through the U.S. Department of Education or their loan servicer at no cost; these programs do not require the assistance of a third-party company or payment of application fees. For federal student loan repayment options, visit StudentAid.gov/repay. For private student loans, contact the loan servicer directly.

insideARM Perspective 

This announcement comes during the same week as a suit filed by the Consumer Financial Protection Bureau (CFPB) against another network of alleged debt relief scams. insideARM wrote about that action today as well, and offered our perspective.

It is worth adding in the context of this action (as it relates to student loans) a reference to the May 2017 court-ordered preliminary injunction that effectively prohibited the Department of Education from placing any accounts with any private collection agencies. In addition to the harm that this continuing injunction has caused to all stakeholders, it is undoubtedly causing a new layer of confusion for consumers, possibly making it even more likely that they would fall for a scam that promises assistance with their past due student loans. 

Finally, as a writer, I can’t help but note the grammatical faux pas in the screenshot provided by the FTC of a sample deceptive student aid relief ad that reads, “We Have Streamed Lined the Process!”

Late yesterday afternoon, Chief Judge Susan Braden issued an order directing the Department of Education (ED) to file another report on the status of the RFP for Private Collection Agency (PCA) Services “Do Over.” insideARM last reported on this matter on September 18, 2017.  Judge Braden has set a new deadline of October 20, 2017 for ED to file another status report.

A copy of Judge Braden’s order can be found here. 

In our September 18, 2017 article, we reported on the status report filed by ED on September 14, 2017. In that report ED wrote:

Status of Corrective Action 

In a notice filed on August 24, 2017, we informed the Court that ED’s evaluation teams have completed their review of all proposals, and that evaluation reports were being prepared and should be finalized within the next few weeks. ECF No. 184 (Defendant’s Notice of the Status of Corrective Action dated August 24, 2017). Evaluation reports are now being finalized, with an expected completion date of September 18, 2017. Once the reports are finalized, ED’s Source Selection Authority will perform an integrated assessment to identify the proposal(s) deemed to be most advantageous to the Government, followed by a responsibility determination of each apparently successful offeror. Once a new source selection determination has been made, ED will announce any new award or awards, and/or the termination of previously-awarded contracts, as appropriate. 

As stated in our August 4, 2017 and August 24, 2017 status reports, this corrective action is a top priority of Federal Student Aid, and ED is working diligently to complete the corrective action. Defendant respectfully requests that it be allowed to file a status report on October 5, 2017, informing the Court of the status of the corrective action. (Emphasis added by insideARM) 

October 5, 2017 came and went without another filing by ED. No explanation was given for the missed deadline. The ARM industry waited for a new report. Judge Braden waited for a new report. A week passed – still no status report. Judge Braden’s order directs ED to act. We will now wait until the October 20, 2017 deadline unless ED acts sooner. 

While there has been no activity since the last status report in the lawsuit before Judge Braden, there has been some activity in the appeal to the United States Court of Appeals for the Federal Circuit involving Judge Braden’s preliminary injunction. In addition to the dispute regarding the preliminary injunction, the appeal pits PCAs against each other on certain specific issues. 

On September 25, 2017 Continental Service Group, Inc. (ConServe) filed a brief regarding a request by another ARM company to intervene in the appeal. A copy of that brief can be found here. It is mentioned here, if for no other reason, because the brief contains an excellent summary (Pages 4-9) of the student loan debt recovery program from 2009 to the present. 

insideARM Perspective 

The entire situation borders on the absurd. The preliminary injunction issued by Judge Braden on May 31, 2017 has completely halted ED’s ability to place defaulted student loans to ANY PCA. The injunction has caused harm to consumers and to companies and individuals in ARM space who have worked in this area. 

In our August 24, 2017 article about the Consumer Financial Protection Bureau (CFPB) filing an Amicus Curiae Brief in support of the Department of Education (ED), we discussed the harm to consumers. We quoted a passage from the CFPB brief that discussed the 2016 Annual Report of the CFPB Student Loan Ombudsman: 

“To be sure, as the trial court observed, the 2016 Ombudsman Report recommended reforms to the process for collecting and restructuring federal student loan debt. But as that process is currently structured, debt collectors are the primary contact for borrowers seeking information about how to rehabilitate, consolidate, or otherwise manage their federal student-loan debt. Debt collectors are also the primary contact for borrowers seeking to make any payment toward defaulted federal student loan debt — debt which continues to accrue interest daily when in default. By preventing Education from assigning debt collectors to loans in default, and thus impeding or preventing borrowers from managing their federal student loan debt, the preliminary injunction leaves some borrowers worse off — potentially interfering with access to important consumer protections and preventing some borrowers from making payments toward accruing interest charges — while doing nothing to advance the reforms proposed by the Ombudsman.” 

We have not spent much time discussing the harm being caused to ARM companies and their employees. insideARM believes that the injunction and corresponding lack of placements has caused layoffs of hundreds of individuals who had previously worked for companies that had been working student loan accounts from ED. Without new placements companies cannot afford to retain staff.  Indeed, it is possible that one or more companies that previously handled this work may not be able to survive much longer. 

Additionally, when and if placements resume, ARM companies will need to recruit, hire and train new employees to handle an influx of new placements. In light of the backlog of accounts since May 31, 2017, placements are likely be larger than normal. That will put an additional strain on PCA resources. Companies may be able to re-hire former employees. But many will have found new jobs and/or new careers. It will take time for new employees to be completely trained; there is a myriad of intricate rules regarding student loan collections. 

Editor’s Note: See here for a link to an insideARM page that provides a history of our ED-related articles. The page is automatically updated as new stories are written.