There isn’t a hospital anywhere in the United States that can avoid examining its financial policies, especially as they pertain to self-pay patients. Additionally, tax-exempt hospitals have to publish and comply with a financial policy written to align with state and federal regulations.

It wasn’t too far back that IRS Section 501(r) was enacted as part of the Patient Protection and Affordable Care Act, Pub. Law 111-148, 124 Stat. 119 (2010), imposing a new set of requirements applicable to charitable tax-exempt hospitals. In short, 501(r) governs the financial assistance policies, billing, and collection practices of hospitals exempt from taxation under IRC § 501(c)(3), including government hospitals with dual tax-exempt status. These regulations not only require specific policies and procedures, but also require hospital organizations to identify, correct and in many cases publicly disclose their own implementation errors in order to avoid penalties.

Half upfront for non-emergent surgical care

Against this backdrop of extra regulatory vigilance around hospital financial policies, University of New Mexico Hospital (UNMH) has drawn criticism for a new surgical policy that requires 50% up-front payment from anyone booking a “non-emergent” surgery. The policy is particularly interesting in a state like New Mexico, a state that the hospital’s own Community Impact Report acknowledges is comprised of a higher than average number of residents living at or very near near the federal poverty line.

What’s considered non-emergent here? Any surgery that is not immediately life saving is considered “elective” in UNMH’s policy, including surgical procedures needed by cancer patients and those with advanced cardiovascular disease. So we’re not talking nose jobs here. The surgery may be needed or very indicated, but if it’s non-emergent, the University of New Mexico Hospital’s policy says that all patients, including uninsured, low-income patients, must pay 50% of the total estimated costs in advance. The hospital claims that this policy has so far not reduced the total number of “elective” surgeries for its indigent patients, but community advocates are worried that the hospital’s policies are bound to have a negative effect on the health of many vulnerable patients.

Board calls for report on billing process

Earlier this summer, at the Trustee open session, community advocates (again, in a state where nearly 30% of all children live in poverty) implored the UNMH Board of Trustees to rescind the 50% upfront payment policy change and allow uninsured patients to obtain needed surgical care. Later this month, hospital administrators are due to report to the board on the hospital’s billing process and recommendations to best serve the community under the circumstances. For some, this raises the fair question of why these processes and the hospital’s revenue cycle management were not fully evaluated before the new “Finance Guidelines for Surgical Cases” took effect this spring.

While hospitals can surely opt to enact patient financial policies that heavily affect vulnerable populations to get more money in the door, others have taken a different approach. How are they doing it? By using predictive analytics to make sure patients are identified and assessed for charity care, and then offering suitable payment arrangements up front for those patients who are more solvent.

The case of UNMH raises larger systemic public health questions as well: If indigent people have to follow a complex qualification process to get charity care, will they? Do daunting processes that discourage timely treatment have a place in a world where the technology exists to quickly identify and assess a patient’s financial position and offer flexible, nondiscriminatory, extended payment options?

Cause & effect in question

UNMH’s public statements point the finger at insurance companies’ refusal to pay for surgeries that had not been pre-approved, which was resulting in last-minute cancellations of surgeries. Here there is more of an operational question at play: Why not avoid scheduling surgeries until the pre-clearance and financial counseling has taken place? Would they book a surgery with more confidence if patients were offered more robust financial services up front?

UNMH does not offer any of the newer breed of patient financing options available. Its own disclosures report that “The UNM Care program provides supplemental coverage assistance for Bernalillo County residents that have copayments and deductibles as part of health exchange or other insurance products. In addition patients may qualify for supplemental coverage under UNM Care to help to cover gaps in Medicare or Medicaid coverage.”

When a hospital’s financial assistance policy serves a state in which 38% of residents qualify for Medicaid (Medicaid expansion in NM covers adults up to 138% of the Federal Poverty Level), and a much higher-than-average number beyond that lives just above the poverty line, it’s plausible that a surgical policy that requires every patient to front 50% of surgical costs may very well attract not just the attention of community and civil rights activists, but also the interest of the IRS. The IRS’ role is to examine hospitals to ensure that the financial policy and procedural guidance set forth by 501(r) is in place.

UNMH’s current predicament may be a learning opportunity. We will be interested to see the 2018 UNMH community health needs assessment (a new one is required every three years, with the last one published in 2015), and how the hospital sees positioning itself for financial viability against those needs looking forward. The medical community at large is watching to see how a large hospital manages its requirements to establish appropriate and well-considered written policies on financial assistance, and how it handles limitations on billing and collection actions directed toward low-income patients.

This article previously appeared on the TCPA Defense Force blog, and is republished here with permission.

Sometimes it’s hard to tell who makes life the hardest for those who use modern technology to reach their customers: the FCC, the FTC, state AGs, or the courts. Well the Eleventh Circuit Court of Appeals really threw its hat in the ring for that title with its August 10, 2017 decision against Comenity Bank. Like so many TCPA cases, this one began when—gasp—Comenity began calling a customer who was late on her bill. 

A Comenity employee reached the consumer one day and asked her if she could at least pay the monthly minimum charge. The consumer responded as follows:

Unfortunately I can’t afford to pay [my past due payment] right now. And if you guys cannot call me, like, in the morning and during the work day, because I’m working, and I can’t really be talking about these things while I’m at work. My phone’s ringing off the hook with you guys calling me. 

Five months later, the consumer told another Comenity employee to stop calling her. Comenity promptly added her to the bank’s do-not-call list, and she wasn’t called with an autodialer again. But the consumer sued Comenity anyway for all of the calls that followed the garbled conversation quoted above.

The trial court granted summary judgment to Comenity. It found that Comenity “did not know and should not have had reason to know that [the consumer] wanted no further calls,” that she did not “define or specify the parameters of the times she did not want to be called,” and that “no reasonable jury could find that [she] revoked consent to be called.” Sounds fair. But the Eleventh Circuit reversed the trial court and sent the case back for a trial.

The Birth of Partial Revocation

First, the Eleventh Circuit explicitly rejected Comenity’s argument that a consumer cannot “partially revoke” their consent under the TCPA (which doesn’t mention the concept of revocation at all, mind you). So the Eleventh Circuit has now breathed the concept of “partial revocation” into the TCPA. At least in Florida, Georgia, and Alabama—the Eleventh Circuit’s footprint—consumers can now “provide limited, i.e., restricted, consent for the receipt of automated calls.” Despite creating new law, it provided no rational contours for the scope of a “consumer’s powers.” So is “only call me on overcast Tuesday mornings when I’m not on the subway, but not feeling blue, or wearing red” an enforceable type of “partial revocation”? We’re not told. The appeals court brushed off the “logistical and technical challenges to callers”—after all, the court reasoned, you can “always decide that, if a consumer opts for partial revocation, it makes more practical and business sense to just not place any more automated calls to her.”

Next, although it called the issue “close,” the appeals court found that it was improper for the trial court to find that no reasonable jury could find that the consumer’s garbled message was a partial revocation. The appeals court noted that the “meaning of language is inherently contextual” and that “the scope of consent, like its existence, depends heavily upon implications and the interpretation of circumstances.”

Practice pointer: marketers should now add to their job posting for new call-center agents the following skills;

Advanced degrees in one, more, or all of the following disciplines:

• Linguistics
• Semiotics
• Philology
• Phenomenology
• Psychology
• Mind reading, etc.

The appeals court, amidst its reference to Carly Rae Jepsen’s Call Me Maybe, found that the consumer’s intonation of the phrases “‘the morning’ and ‘the workday’ cannot be viewed, defined, or analyzed abstractly or in isolation.” Nor, respectfully, can this new, judicially created concept of “partial revocation.”

As always, training should be a key component of your overarching TCPA compliance strategy. This case highlights the importance of training your agents to know when they should take the time to flag an account for extra attention. The Eleventh Circuit’s opinion will invariably engender more TCPA litigation, but good training will help minimize the (needless) downside.

See the full opinion here: Schweitzer v. Comenity Bank 

The intersection of behavioral psychology, classic marketing strategy and tech for the masses—including machine learning—has added tremendous value in the business world at large. We’ve long known what motivates behavior, how that translates to the purchase journey, and how to use computers to focus that intelligence. You see this kind of innovation used everywhere…except the collections industry.

Prime time for change

Some will argue that if it ain’t broke, don’t fix it. But by the numbers, the old collection agency model of sending letters, followed by dialing for dollars is more than ready for change. Partly, this is because the old model is not built around today’s tap & click consumers. The business is overdue to invest in the idea that debtors are still customers (except they haven’t paid their bills). A “payment journey” designed specifically for them is working, especially when it’s supported by machine learning.

Machine learning uses data to predict behavior, and it helps deliver custom messaging (in the right way and at the right time) in order to encourage a desired future behavior. Using machines to “learn” who debtors really are, what their position is, how they behave and what motivates them, we can determine what is most likely to encourage them pay. Machines can make it easy to develop payment terms (with limits that are coded according to issuer/lender/provider preference) that work for each customer’s unique situation. They help deploy tactics that nurture the relationship with carefully curated, compliant and turnkey communications. Machines don’t fail to protect and secure sensitive consumer information, and they don’t inadvertently blank on compliance protocols. Identifying which debts are most likely to be repaid also enables agencies to focus resources most effectively. Machine learning is allowing even small agencies to scale operations and get more done in less time.

Innovators on the Scene

New companies are using big data to learn not just about the delinquency, but about the whole customer lifecycle. Innovative start-ups are using this information to bring the collections business online. TrueAccord, whose CEO, Ohad Samet, was recently selected to represent the ARM industry on the CFPB’s Consumer Advisory Board, is a few years into its digital collection model debut. And it’s gaining traction. Another newer player, Collectly — a collection service for healthcare providers and medical billing companies — uses aggregated machine intelligence to forecast behavior and adjust each patient’s collections journey to encourage the best outcome. According to Collectly, their recovery rate is about twice that of traditional collection agencies.

Transformation as Opportunity

Does all this spell the end of the collection call center as we’ve so far known it? From an operational perspective, making it easy to tap away debts in the middle of the night, or set up a payment plan, make changes to an existing plan, and explore other options online has the potential to transform the call center into more of a benevolent resource for the relatively few customers who prefer live contact. 

As the laws change, there is less of a learning curve for call center agents; new rulings or other changes and regulatory guidance can be easily coded into an array of materials, digital properties and outreach communications, and the customer experience is adjusted seamlessly. This can also mean less of a burden for call monitoring and compliance departments. Part of the tremendous upside is the elimination of waste and worry the industry faces today around hot-button issues like on-call identity authentication, consent, auto dialers, and dispute resolution protocols (or lack thereof). There is simply less exposure and less risk to manage with a call center that’s supportive, instead of central, to a collections operation.

The tight margins and regulatory environment of the collections business make it a great candidate for the use of machine learning to improve operational efficiency and manage risks.

What’s missing here is the regulatory framework to allow digital collections to fully scale. Privacy concerns and concern of major creditors about negative exposure prevents many from fully embracing new technologies.

We’ll keep watching this space to see whether innovation and regulation can find a reasonable place to meet.

 

Americans with health insurance are already struggling to pay their share of co-pays and deductibles in the new patient-as-payer reality. Doctors and hospitals are pressed to collect the unreimbursed portion of those patients’ bills. Low-income patients, whose bills are currently reimbursed by federal cost-sharing reductions (CSRs), are in the eye of the storm that may devastate the healthcare community and those who are paying their own way through the healthcare exchange, aka ObamaCare. Unable to pass the proposed repeal of ObamaCare in a Congress dominated by his own party, President Donald Trump is now resorting to extra-legislative tactics. He has threatened to end healthcare cost subsidies currently in place under the Affordable Care Act. Expected net result? Sicker people and unpaid hospital bills.

 

Here are 5 things to know about CSRs, which Trump has characterized as “bailouts” for insurance companies.

1. Ending CSRs is likely to cost all of us more down the line.  Withdrawing $10 billion from the healthcare economy is sure to reverberate. Premiums will rise, and the government will pay more in subsidies to offset higher premiums for low-income Americans. The Henry J. Kaiser Foundation reports that this could cost the federal government $31 billion dollars more over a decade than if CSRs remained in place.
2. More insurers will quit the marketplace and all premiums will go up. Once that happens, remaining plans that are left won’t be affordable, and people will opt for even higher deductible insurance plans and then just never fulfill the deductible. Or, they’ll leave the exchange, which will drive up the average healthcare risk, and therefore the premiums, for higher-income people who remain.
3. Hospitals will choke. CSRs are what make hospitals able to absorb the cost of caring for totally uninsured patients. CSRs also currently offset insurers’ assistance to low-income patients, bringing these patients’ out-of-pocket co-pays and deductibles within reach through plans offered under Obamacare. If insurers quit the marketplace over the end of CSRs, there will be no plans, and therefore no subsidies.
4. Some damage is already done. The policy indecision alone is already harming ObamaCare. Insurers are already bracing for the end of CSRs by announcing premium hikes that would surely force many un-subsidized users of ObamaCare to go totally uninsured in 2018. This is not good news for a self-pay crisis already in full bloom.
5. The effect on public health could be disastrous. If premiums go even higher, it’s not a stretch to imagine even insured people foregoing needed and preventive healthcare, lacking money to pay their super high deductibles and coinsurance, or seeking care and leaving doctors and hospitals with more unpaid bills. More people would seek ER care in place of routine preventive care, and that care will be more expensive, delayed and less effective—and more often unreimbursed.

There’s no question that CSRs have helped reduce uncompensated patient costs. President Trump’s threat to end them as part of his plan to let “ObamaCare implode” would add a significant financial burden to hospitals and doctors already struggling to reconcile their focus on care with a need to provide patient financial services.

Last Friday afternoon the Department of Education (ED) filed a “Status Report” in the United States Court of Federal Claims. The report was required per the August 2, 2017 Sua Sponte Order issued by Judge Susan G. Braden. insideARM wrote about that order on August 3, 2017. 

Editor’s Note: “Sua Sponte” is a Latin term used to indicate that a court has taken action without prompting or motion from either party.

In our August 3^rd article insideARM commented that portions of Judge Braden’s order were puzzling.  We noted that the order contained the following: 

“On August 1, 2017, however, the Department of Education announced that it was no longer seeking to select a single student loan servicer and would be pursuing a new proposal that would award separate contracts to one or more companies. Once again, the Department of Justice has failed to inform the court of these developments. 

Since the date of the Government’s proposed action is only twenty-three days away, the court orders the Government to provide the court and the parties a status report in the above captioned case no later than the close of business on August 4, 2017.”

We then commented: 

“What is puzzling about this Order is the fact that the cancelled servicing solicitation is separate and distinct from the ED RFP for PCA services. It would seem to this writer that one has nothing to do with the other.” 

A significant portion of the status report filed on August 4^th politely informs and educates the court on the difference between the ED solicitation for loan serving and the ED solicitation for private collection agencies: 

“We also address in this report the attachments to the Court’s Orders dated May 31, 2017 and August 2, 2017, to clarify how the solicitation for Federal student loan management services described in those attachments is unrelated to the single procurement for private collection agency services for student loans that are in default that is pending before the Court. To assist the Court, we file with this status report the accompanying Declarations of William Leith, Chief Business Operations Officer, Federal Student Aid, and Dr. Patrick Bradfield, Head of the Contracting Activity, Federal Student Aid.” 

What is more interesting, however, is the fact the status report also provides a look at the current state of events in the ED RFP “Do Over” originally proposed by ED on May 19, 2017 and subsequently revised by ED on May 25, 2017. See insideARM article dated May 30, 2017.  While the status report is only 6 pages, it provides information about the “Do Over” that was not public knowledge prior to the filing. 

The most interesting items were: 

• “As of the date of this status report, Education has completed a review of more than half of the 37 proposals it has received under the corrective action.” 

Prior to the filing of this document, insideARM was unaware of the total number of responses to the “Do Over.” June 15, 2017 was the deadline for filing a response. Thus, we can infer that it took ED approximately seven weeks to review the “more than half” of the 37 proposals. 

• “The agency is striving to complete the reevaluation by August 25, 2017, but there are various contingencies that may cause Education to require more time to complete its corrective action.” 

The report then describes the “various contingencies.” 

“First, there remains an active protest of the corrective action that is pending before the Court in Automated Collection Services, Inc. v. United States, Ct. No. 17-765C.  Mindful of the August 25, 2017 projected completion date for the corrective action, the parties agreed to an expedited briefing schedule. The protest is now fully briefed and awaiting the Court’s decision, which could affect Education’s ability to meet the projected completion date. 

In addition, Education is entering into a critical phase of the reevaluation that potentially could cause it to require additional time. In addition to preparing an administrative record and conducting various internal reviews, Education may decide to establish a competitive range and conduct discussions, which could consume an additional few weeks. Id. After Education identifies prospective awardees, the contracting officer will need to determine their responsibility, which may require communications with some offerors and the negotiation of subcontractor agreements. 

This corrective action is a top priority of Federal Student Aid, and it is working diligently to complete the corrective action by the August 25 target date. If Education concludes that it will not meet this target date, it will promptly advise the Department of Justice, and we will immediately so advise the Court.” 

insideARM was aware of, but has not previously written about, the above referenced ACSI litigation. The reason was because the complaint was not available to the general public. However, based upon items recently filed we now have some insight into that litigation.  

On July 19, 2017 ACSI filed: Plaintiff’s Memorandum in Support of its Motion for Judgment on the Administrative Record. 

On August 3, 2017 ACSI filed: Plaintiff’s Response and Reply to Defendant’s and Intervenor-Defendants’ Cross-Motions for Judgment on the Administrative Record. 

A review of those documents indicates that the ACSI litigation centers around the validity of ED’s May 25, 2017 revisions to the May 19, 2017 “notice of corrective action” (aka the “Do Over”). Specifically, ACSI argues that the May 25 revisions should not be allowed. 

In our May 30, 2017 article on the revisions, we wrote: “Though ED notes it is a “minor change to the prior plan,” this document outlines a significant change to their initial corrective action plan.”  

The revision was described:

“The corrective action set forth in the (original) notice did not permit offerors to revise small business participation plans. After further review, and considering the time that has passed since the original solicitation and the desire to receive up-to-date small business participation plans that are consistent with the other elements of the revised proposals, ED has decided to amend the notice and to allow offerors to submit revised small business participation plans, if they so choose.” 

As noted above, ACSI objects to the revisions. Per the ACSI pleadings:

“Less than a week after announcing its initial planned corrective action, however, the Agency abruptly reversed course and announced an amendment to the corrective action to allow offerors to submit revised small business participation plans. ACSI’s protest challenges that expansion as overly broad.” 

insideARM Perspective

The twists and turns continue for this RFP. The ACSI litigation adds a new element to the complexity of the case. 

Unless Judge Braden issues several orders in the related cases, that August 25, 2017 date for Notice of Awards is looking more and more doubtful.

This article previously appeared on Ballard Spahr’s CFPB Monitor and is re-published here with permission.

In a 7-4 en banc decision, the U.S. Court of Appeals for the Seventh Circuit ruled that the bona fide error defense in the Fair Debt Collection Practices Act (FDCPA) did not protect a debt collector who complied with then-controlling Seventh Circuit precedent—which was subsequently overruled by that court.

The FDCPA provides that a debt collector suing to collect a consumer debt must file the lawsuit in the “judicial district or similar entity” where the contract was signed or where the debtor resides. A Seventh Circuit panel ruled in 1996 that the Circuit Court of Cook County, Illinois—which consists of multiple municipal districts—was a single “judicial district” for purposes of the FDCPA’s venue provision. In December 2013, the debt collector defendant in Olivia v. Blatt, Hasenmiller, Liebsker & Moore LLC filed a collection lawsuit in the First Municipal District of the Circuit Court of Cook County against the debtor, who resided in the Fifth Municipal District.

In July 2014, while the collection lawsuit was still pending, the Seventh Circuit issued an en banc decision in another case in which it overruled the panel’s 1996 decision and held that a “judicial district or similar entity” for purposes of the FDCPA venue provision is “the smallest geographic area that is relevant for determining venue in the court system in which the case is filed.” The en banc court also held that its decision applied retroactively.

Although the debt collector’s choice of venue for its 2013 lawsuit complied with the 1996 panel decision, it did not comply with the subsequently enacted rule retroactively applied by the en banc court (which would have required the lawsuit to be filed in the Fifth Municipal District). After the debt collector dismissed the lawsuit to comply with the new rule, the debtor filed a complaint in federal court alleging that the defendant was retroactively liable under the FDCPA for filing suit in the wrong venue.

In vacating the district court’s grant of summary judgment for the defendant on the grounds that it was protected by the FDCPA’s bona fide error defense, the Seventh Circuit concluded that the U.S. Supreme Court’s 2010 decision in Jerman v. Carlisle, McNellie, Rini, Kramer &Ulrich LPA did not allow the defense to protect any “mistake of law” regardless of how understandable or reasonable it might have been. According to the majority, even though the defendant was relying “on admittedly substantial precedent,” its conduct reflected a mistake in the law because “[t]he fact that different sets of lawyers, including those with judicial commissions, made a legal error does not make it less a legal error.”

The dissenting judges disagreed with the majority’s characterization of the debt collector’s choice of venue as a “mistake of law.” In their view, the 1996 panel decision represented the controlling law and the debt collector had correctly interpreted the FDCPA’s venue provision in accordance with the controlling law at the time of its conduct. According to the dissent, “[i]t is not a mistake of law to follow controlling law, even when that law is later overruled.” The dissent characterized the majority’s ruling—which “punishes [the debt collector] for doing exactly what the controlling law explicitly authorized [the debt collector] to do at the time it did it”—as an “almost surreal inversion of law and logic” that “is not only inconsistent with the FDCPA’s bona fide error defense; it is inconsistent with the judicial function and the rule of law.”

Attorneys in Ballard Spahr’s Consumer Financial Services Group regularly advise clients on compliance with the FDCPA and state debt collection laws and defend clients in FDCPA lawsuits and enforcement matters. The group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance.

Last Thursday Encore Capital Group (ECPG) reported financial results for the quarter ending June 30, 2017, announcing net income of $20.3 million for the quarter, as compared to $29.6 million in the same period a year ago. ECPG is an international specialty finance company with operations in eight countries that provides debt recovery solutions for consumers across a broad range of assets. 

Highlights for Q2 2017

• Investment in receivable portfolios was $246 million, including $132 million in the U.S., compared to $233 million deployed overall in the same period a year ago.
• Gross collections grew 3% to $446 million, compared to $434 million in the same period of the prior year.
• Total revenues were $291 million, compared to $289 million in the same period of the prior year.
• Estimated Remaining Collections (ERC) grew $719 million compared to the same period of the prior year, to $6.26 billion.
• Total operating expenses increased 6% to $210 million, compared to $198 million in the same period of the prior year, reflecting higher legal collections spending in the United States. Adjusted operating expenses increased 12% to $180 million, compared to $160 million in the same period of the prior year.
• Available capacity under Encore’s domestic revolving credit facility, subject to borrowing base and applicable debt covenants, was $263 million as of June 30, 2017.

ECPG President and Chief Executive Officer Ashish Masih commented on the quarter:

“The second quarter for Encore was a period of solid financial and operational performance. The domestic debt market continues to grow in supply and provides for a favorable purchasing environment. Liquidation improvement initiatives are delivering sustained improved collections performance in the U.S. and in Europe over a wide array of vintages, allowing us to record better returns and increase expectations for future collections. Also in Europe, we had a strong quarter of portfolio purchasing and the IPO process for our subsidiary Cabot Credit Management remains on track.”

insideARM Perspective 

Whenever we write about quarterly earnings announcements for ECPG we note that ECPG and Portfolio Recovery Associates (PRAA) quarterly reporting provides an excellent overview of the debt-buying industry. We also suggest the reports should be viewed together.

(Editor’s note: PRAA is scheduled to report their second quarter earnings on Tuesday, August 8th. insideARM will report on that announcement shortly.) 

In yesterday earnings call, a few items stood out:

1) Domestic supply and pricing 

Masih stated:

“In the second quarter, the U.S. market continued to exhibit favorable purchasing dynamics. Recent financial results from large credit card issuers indicate that delinquency and net charge-off rates continue to rise, while loan loss provisions continue to build, suggesting a continuation of the increases in supply we have been reporting for the last several quarters. Pricing in the second quarter remained favorable and we continue to stay committed to our disciplined pricing strategy.”

insideARM suspects that PRAA will be singing from the same songbook on this issue next week.

2) CFPB Rulemaking

When commenting on Consumer Financial Protection Bureau rulemaking activities, Masih said:

“As you may remember, the CFPB issued its advance notice of proposed rulemaking back in November of 2013, to which Encore submitted comments. Although this process has taken a long time, the CFPB has now announced that it will take the next step by issuing the notice of proposed rulemaking in September. These rules which could become effective sometime in 2018 are expected to address debt collectors and debt buyers, communications practices as well as consumer disclosures. As we have said before, if you view the finalization of new rules for our industry to be a positive step for all market participants who are capable of and willing to invest in robust, compliant operations.”

Later during the Q&A session of the call another analyst was asking for additional follow-up on CFPB rulemaking and asked:

“…….is it your belief that once the rules do get implemented, it should improve your competitive positioning to the extent that third-party agencies and other buyers have effectively been a little bit advantaged relative to you because they haven’t been playing by the same rules that you agreed to in the consent orders?

To which Masih replied:

“You’re absolutely right, it should. I mean, it will raise the bar to the standards we’ve been adhering to for the last 2 years. And it will improve the industry, it will raise the standard for everyone. And they will need to start doing it well in advance. I mean, the specifics come out in a couple of months, so you’re absolutely right.”

insideARM would suspect that many reputable ARM companies and smaller debt buyers would take offense to any subtle implication that somehow Encore and PRAA are the only companies in the space that are as compliant as they are today. Reputable ARM companies have reviewed and studied all CFPB activity and modified policies and procedures accordingly.

3) Large issuers that are not currently selling

During the earnings call, management was asked by one of the outside analysts to comment on any anticipated/potential change in behavior from the large issuers that are currently not selling accounts. Masih spoke for the Encore team:

“We have not seen any actual issuers come back to the market. We continue to have conversations with most players in the industry and we watch. We run our business as if they are not back. And the volumes have continued to grow in terms of the face amount available, in terms of dollars deployed over the last several years, and will continue to grow as the outstandings and the loss rates of the issuers who sell are growing, as you can see from their calls. So we run our business as if they are not coming back, but we are very well prepared in case they do. And we actually feel that over time, as loss rates will grow, their books are growing, they will see debt sales as another channel and tool to manage their losses. And over time, I expect that, that may happen. And when they come back, we are well positioned. As you heard from us in the past, we’re able to expand capacity fairly rapidly across the globe and in a very cost-efficient manner as well, and that differentiates us from others. So when they do come back, we’ll be able to react and respond to the market very, very quickly.”

insideARM believes that this is an issue with no definite answer today. Issuers that are not currently selling made the decision not to do so for reasons we are not privy to. We believe that Encore management responsibly answered this question.

TAMPA, Fla. — ProVest LLC (“ProVest”), the nation’s largest process serving company, announced today the purchase of J.J.L. Process Corp (“JJL”). Building upon 25+ years of success supporting the mortgage default servicing industry, ProVest has been expanding rapidly in the credit collections industry. By acquiring one of the largest companies in this market, ProVest has both strengthened its presence and proven its commitment to growth in this area. 

Scott Levine, JJL’s Owner and President, will become the President of ProVest Litigation Services dba JJL Process and have responsibility for the combined company’s credit collections operation.  ProVest will keep the current locations of JJL’s offices as well as the management team and operational structure. 

“I am really excited about this union and feel that ProVest has certain managerial abilities and additional resources that can only be of benefit to our clients along with their vast expertise in service of process” says JJL Owner and President Scott Levine.

“We are very excited to have this successful team join our organization.  The acquisition will enhance our geographic presence and allow us to benefit from JJL’s extensive experience in the credit collection industry.  Together we will bring industry leading customer service, compliance, processes, and systems to the market that will allow us to reach an expanding client base” says ProVest CEO Jim Ward.    

ProVest’s financial and organizational strengths will pair well with the already successful JJL business, bringing the company to the next level.  The combined nationwide operation will have 26 offices across the United States.  Please contact Joel Rosenthal at 561-312-7602 or joel.rosenthal@jjlprocess.com for more information.  As a Vice President of Business Development, Joel will lead the collection industry sales and business development team. 

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About ProVest

Headquartered in Tampa, FL, ProVest is one of the nation’s largest legal support services firms, with offices in 12 locations, providing nationwide service of process and related services to many of the country’s most notable law firms and financial institutions. Our passion is to meet client, legal and regulatory requirements while focusing on the highest level of quality, speed and accuracy. ProVest adheres to the highest compliance standards and is proud to maintain SOC 2 Type II certification. ProVest’s services include service of process, skip trace, loss mitigation, mortgage borrower location, military search, document retrieval, death certificates and heir and probate searches.

About JJL Process

Incorporated in 2004 and based in Greenacres, Fla., JJL Process is a process serving agency specializing in serving collection papers particularly for high-case volume litigators.  JJL firsts in the process serving industry include: GPS/time/date-stamped photo app, 100% internal audit of all server attempts, FDCPA sensitivity training of all servers and staff, full-time compliance counsel, SSAE-16/SOC-1 certification and full compliance with the Process Serving Standards Summit standards.  JJL services include service of process, skip trace, court document management/retrieval, e-filing and sheriff management.

If you missed the news at the beginning of summer, the CFPB is planning to do another round of consumer surveys related to debt collection. Titled, “Debt Collection Quantitative Disclosure Testing,” this time, to gather information regarding the effectiveness of disclosures.

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The Bureau issued a comment request in early June; the period for comments closed on Friday. The materials posted describe the survey, its methodology, and its use. Some, but not all, of the proposed survey questions and supporting documents are included.

As of the end of the day, there were six comments posted…well, really four: from the American Financial Services Association (AFSA), from CUNA, from one professor who is against the survey, and one professor who is for the survey. A fifth appears to be a spam posting, and the sixth appears to be a comment for something else, mistakenly submitted within this topic. I suspect a few more may appear on the page in the coming days as they are processed.

Those who opposed the survey – including American Bankers Association, whose submission is not yet public on the Federal Register but was linked from the association’s website – did so primarily because the proposal itself did not contain enough information to provide meaningful comment.

The comments by AFSA, however, took me back a bit. The gist of their submission was that – just so long as the survey relates only to third party collectors — they are pretty much fine with it.

“AFSA commends the CFPB for keeping research on third-party debt collectors and creditors separate.”

The association says the biggest problem they see with the CFPB’s approach to debt collection is that it treats collectors and creditors the same way. They suggest this is not appropriate because of the difference in motivation to treat customers with respect.

“Creditors are motivated to maintain the customer relationship. They originate, service, and collect a customer’s account. Creditors benefit from a strong relationship with customers built on transparency and trust which helps to maintain a loyal customer base, as well as attract new customers. A free flow of information between creditors and customers keeps the customers informed and out of default.  

On the other hand, debt collectors have not cultivated a relationship with a customer. They collect accounts that are usually in default at the time they receive them, and from customers with whom they have no prior or ongoing relationship because debt collectors collect on behalf of others or they buy customers’ debts from others. Debt collectors have little incentive to maintain or improve customer satisfaction since their customers cannot “vote with their feet” and choose different debt collectors to collect their accounts. Indeed, Congress passed the Fair Debt Collection Practices Act (FDCPA) in 1977 to protect customers from debt collectors: ‘Unlike creditors, who generally are restrained by the desire to protect their goodwill when collecting past due accounts, independent collectors are likely to have no future contact with the consumer and often are unconcerned with the consumer’s opinion of them.'”

I’d like to comment on these comments.

While the first paragraph is true, there are some creditors (scammers) who create business models based on deceit – or that push the envelope of what is fair to consumers – in the same way that there are some collectors (scammers) who behave badly.

The first three sentences of the second paragraph are also factually accurate. Yes, by definition, (third party) debt collectors have not cultivated a relationship with a customer when they first receive a consumer’s account. However, the statement that “debt collectors have little incentive to maintain or improve customer satisfaction…” is not only inaccurate today, but ironically has evolved largely along with the attitude of the creditors. In today’s world, “customer experience” is as front and center for reputable debt collectors as it is for creditors.

Yes, as it has been well established by many, including regulators and consumer groups, there are criminal posing as collectors who set up shop with the intent to profit by deceiving consumers. But the majority of debt collectors, who are in business to stay in business, be a part of their community, maintain a good reputation, provide jobs, etc., have every incentive to maintain or improve customer satisfaction. If they don’t their clients – the creditors — will fire them.

Remember – in the case of third party collectors — collectors work for creditors. Creditors select their vendors, and they can (and do) change them with little notice. They dictate what offers can be made to consumers. They dictate whether a consumer may be sued on an account. They determine whether accounts are pulled back from one collector and sent to another… or another. They also decide whether to sell the accounts to a debt buyer. And if the creditor indeed cares so much about their relationship with a consumer, it is on them to select a buyer carefully.

The way I see it, this is a partnership. Effective and respectful debt collection depends on creditors and collectors sharing information efficiently and working together to resolve issues. The largest group of complaints to the CFPB is about “attempts to collect a debt not owed.” So, outside of an all-out scam (by a scammer), where would this information come from? The creditor. The one who wants to protect their relationship with the customer.

Everyone should want rules that protect consumers, and are practical and workable for all parties. If they aren’t, legitimate operators will be forced out of business under the weight of compliance costs, and more accounts will end up in the hands of those who don’t care so much about breaking the rules.

TREVOSE, Pa. — NCB Management Services, Inc. today announced that Ralph Liberio has been appointed President and Chief Executive Officer of NCB Management Services, Inc.

Liberio succeeds Marcelo Aita who is stepping down to become a Board Advisor to the company and provide assistance through the transition. “We want to thank Marcelo for his dedication and significant contributions to NCB and all its stakeholders over the years,” said Brett Silver, Chairman and co-founder. “During his tenure, under the leadership of the executive team and the hard work of all NCB employees, we have had significant accomplishments over nearly a decade.”

As NCB’s Chief Operating Officer for the past four years Liberio has been a key member of the executive team. In his new capacity, Liberio will report directly to NCB’s Board of Directors. “Ralph has been with us since the beginning and is a well-known and respected industry executive,” said Rick Silver, co-founder and Director. “As NCB’s COO for the past four years, Ralph has been responsible for many facets of our business. We believe his experience and intimate knowledge of our business and industry makes him more than qualified for his new role.”

Liberio stated, “I look forward to working closely with the Board and continue Marcelo’s strategic vision to operate a diversified and highly compliant organization by delivering superior service to our business partners.” NCB is uniquely positioned in the collection industry with a balanced business model that combines the fee-based revenue consistency from its servicing client base with the investment returns of its debt buying business. NCB has developed a reputation as a valued business partner by many of the nation’s leading financial services companies.

About NCB Management Services, Inc.

NCB Management Services, Inc., established in 1994, is headquartered in the Philadelphia area with satellite offices in Jacksonville, FL and Sioux Falls, SD. NCB is a recognized Accounts Receivable Management (ARM) industry leader as well as a nationally respected debt buyer. The company is partially owned by its employees through an Employee Stock Ownership Plan (ESOP). The NCB ESOP is a company-funded defined contribution retirement plan established in 2014 for the benefit of NCB employees.