As expected, yesterday the U.S. House of Representatives passed the Financial CHOICE Act, which would significantly alter – among other things – the structure of the Consumer Financial Protection Bureau (CFPB). The bill passed along party lines; it is not expected to survive the Senate.

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) sponsored and has been aggressively promoting the CHOICE Act as essential to rolling back onerous regulations imposed by Dodd-Frank. He claims that Dodd-Frank has contributed to the worst economic recovery of the last 70 years.

With a tagline “growth for all, bailouts for none,” Hensarling says the Act would replace bailouts with bankruptcy, and would provide regulatory relief for small banks and credit unions. The following are the key principles of the Act:

1. Taxpayer bailouts of financial institutions must end and no company can remain too big to fail;
2. Both Wall Street and Washington must be held accountable;
3. Simplicity must replace complexity, because complexity can be gamed by the well-connected and abused by the Washington powerful;
4. Economic growth must be revitalized through competitive, transparent, and innovative capital markets;
5. Every American, regardless of their circumstances, must have the opportunity to achieve financial independence;
6. Consumers must be vigorously protected from fraud and deception as well as the loss of economic liberty; and
7. Systemic risk must be managed in a market with profit and loss

Among the Bill’s details is a restructured CFPB, including:

• Change the name of the CFPB to the “Consumer Law Enforcement Agency (CLEA),” and task it with the dual mission of consumer protection and competitive markets, with cost-benefit analyses of rules performed by a newly-formed Office of Economic Analysis.
• Restructure the agency as an Executive Branch agency with a single director removable by the President at will, and make the agency subject to Congressional oversight and the normal Congressional appropriations process.
• Eliminate the CFPB’s supervisory function and hold it responsible for enforcing the enumerated consumer protection laws.
• Remove the agency’s opaque and ill-defined “unfair, deceptive, or abusive acts and practices” (UDAAP) authority.
• Establish an independent, Senate-confirmed Inspector General.
• Eliminate the CFPB’s sweeping market-monitoring function and require the Agency obtain permission before collecting consumers’ personally identifiable information.

Hensarling says that large financial institutions have not supported the CHOICE Act. The Congressional Budget Office reports that they would be unlikely to raise enough capital to meet the bill’s requirement for substantial regulatory relief.

Reports suggest that the Act in its current form is extremely unlikely to pass the Senate, but that the Trump administration has urged lawmakers to identify adjustments that would allow it to pass. Democrats are aggressively opposed to the bill, staunchly defending the CFPB and Dodd-Frank as essential to leveling the financial playing field for average Americans.

insideARM Perspective

Certainly if the CHOICE Act became law in its current form, leadership changes at the CFPB might produce a different set of rules for the debt collection market. However we do believe that the CFPB will indeed produce debt collection rules – there is significant agreement from all sides that clarity is needed, and that clarity is unlikely to come from Congress.

Today CFPB Director Richard Cordray announced that the Bureau will be separating the “right consumer, right amount” aspect of its debt collection rulemaking in order to ensure that complexities are properly addressed by intertwining rules for both creditors and their clients. 

At its summer meeting of the Consumer Financial Protection Bureau’s (CFPB) Consumer Advisory Board, Director Cordray’s opening remarks addressed multiple topics, including:

1. Transparancy in the credit card market
2. CFPB research into credit invisibility
3. The CFPB’s mandate to collect data on the availability of credit to small business
4. Debt collection rulemaking

The final item on the list kicks off the process that the ARM industry has been waiting for since the release of last summer’s Outline of Proposals Under Consideration and Alternatives Considered for third party debt collection.

The Outline intended to address three core issues:

1. Collecting the right amount from the right consumer
2. Ensuring that consumers understand the collection process and their rights in that process
3. Ensuring that consumers are treated with dignity and respect within the debt collection process

Topics in the Outline were wide-ranging and complex, including:

• Debt substantiation
• Transfer of data from collection agency to collection agency
• Validation notice
• Litigation disclosure
• Time barred debt
• Contact frequency and voicemail messages
• Time, place, and manner of communication
• Decedent debt
• Consumer consent
• Transfer of debt
• Recordkeeping

insideARM covered the details of the proposals and industry reactions extensively (scroll to the bottom of this article for a full list of links to our coverage on this topic).

Following release of the Outline, one key theme echoed by many was the difficulty for third party collectors to adhere to the debt substantiation and data transfer requirements without simultaneous rules also applying to their creditor clients, also referred to by the Bureau as “first” parties.

[Editor’s Note: “First Party” collections typically refers to either a creditor collecting on their own debt, or an outsourced firm collecting in the name of the creditor – or owner of the debt. These collectors are viewed as an extension of the creditor, while “Third Party” collectors communicate with consumers under their own name, i.e. first parties will say, “I am calling from ABC credit card company about your account,” while third parties will say, “I am calling from CDE collection agency about your credit card account with ABC credit.”  However, creditors also sometimes have their own in-house collection departments. This category of collectors is not currently subject to the Federal Debt Collection Practices Act (FDCPA). The theory has been that, because the communications are in the name of the creditor, there is a motivation by that creditor to maintain a good relationship with the consumer as well as the company’s reputation — therefore, the potential for harassment is much lower, and market forces eliminate the need for regulation. The CFPB and consumer advocates, however, have suggested that regulation of this category is indeed needed; that who is doing the collecting is irrelevant, and that consumers require similar protections either way.]

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The Outline of Proposals described above was issued in advance of the required Small Business Regulatory Fairness Enforcement Act (SBREFA) hearing — a step that by law must be incorporated into rulemakings. Last year’s SBREFA hearing covered third party collectors only. The Bureau subsequently announced it would convene a separate panel – and issue a separate outline – to address first party rules. 

Today, Director Cordray said he had listened to the concerns and had decided that one aspect that they had intended to address with the Proposals Under Consideration — collecting the right amount from the right consumer — would be best handled by addressing first and third party rules simultaneously. He said that intertwining the rules is the only way to ensure that collectors have the right information. 

Interestingly, this really incorporates a dynamic that is slightly different than “first party” collections — it addresses the relationship between the creditor and its client, and the creditor’s responsibilities in the collection process. In any event, Cordray said that this topic, “right consumer, right amount,” will be addressed after the other two.

The Director did not mention timing, however we anticipate that the CFPB will release its latest Regulatory Agenda update at any time now (this agenda is released twice per year – in the fall and spring – but has yet to be released for spring 2017). Historically, as it relates to debt collection, the agenda releases have simply pushed the pre-rule phase out by several months. Based on today’s announcement, it seems that we may see something more specific in the coming update.

JACKSONVILLE, Fla. — Diversified Consultants Incorporated, the industry leader in Telecom and Cable satellite collections, today announced the hiring of Nick Jarman as Senior Vice President.  Nick has previously held positions with Central Credit Services and was co-owner of Delta Outsourcing Group based in St Louis MO.  In addition, Nick was a previous board member for the ACA and writes regularly for ‘Collector’ magazine. 

Gordon Beck COO of Diversified Consultants Incorporated said: “It’s very difficult for any organization to be 100% sure of the employees that they bring in. In this case however, given Nick’s previous experience, his previous results and his appetite for continuous improvement, the decision was an easy one. We feel fortunate to welcome Nick to the DCI family.”

Nick Jarman stated: “The idea of working with DCI, the penultimate collection company in its specialty, was something that I have long thought of doing. When the opportunity arose, I jumped at it. I look forward to working with all employees at DCI and to contribute in every way possible to ensure that DCI stays on the road of continuous effectiveness and continuous improvement. I am honored to be afforded this opportunity.”

As the SVP for DCI, Nick’s responsibilities will encompass all of DCI’s departments.

TARZANA, Calif. — Jonathan Neil & Associates, Inc. (JNA), one of the premier 3rd party collection agencies in the country, is proud to announce the launch of its newly designed website. The new website features a more engaging look and a streamlined user experience. Enhancements include improved functionality for desktop and mobile users, more in depth information on core Services, Industries served and added pages for a Letter from the President and Careers.

John Student, President and CEO of JNA, released a statement following the launch of their new website:

“During the past 36 years, we have experienced extraordinary growth and change at Jonathan Neil & Associates, thanks largely to our continued commitment to placing the trust of our clients above all else. The double-digit growth of our company since 1981 reflects our commitment to building trust with our clients and our ability to provide efficient and economical approaches to collections. Over the years, we have successfully achieved key milestones, made significant advancements in technology and strengthened our position as one of the leading agencies across the country. 

The success of JNA is largely due to our philosophy that ‘our business is an extension of your business’. We do not take a ‘one size fits all’ approach to collections, and every aspect of our service is customized to meet the specific requirements of our client. Our commitment to developing personalized, long term relationships with clients has resulted in higher client satisfaction, and the continued growth of our company for over three decades.

As with every successful company, JNA recognizes that our employees are our greatest asset. We hire the most knowledgeable professionals in the industry who follow best practices to attain maximum dollar recovery, while always remembering to protect the image of the companies they represent. We take pride in knowing that our management team and many of our Collection Specialists have been employed for over 20 of our 30 plus years in business. 

JNA holds the prestigious Certificate of Compliance from the Commercial Law League of America and the International Association of Commercial Collectors. We are also certified and accredited by the Commercial Collection Agencies of America.

 Today, the JNA team is focused on the future and how we can expand our services globally, forge strategic alliances with companies that provide complementary technologies, provide value added services, and deliver the highest quality service in the industry.”

Contact:

John Student President & CEO
18321 Ventura Boulevard, Suite 1000
Tarzana, CA 91356
Direct (818) 668-2525
www.jnacollect.com

insideARM is proud to announce the 2017 Best Call Centers to Work For winners. This survey and award program is designed to celebrate excellence among call center work environments in customer care, collections, and outsourcing. 

We established the program in 2008 as the Best Places to Work in Collections. Now in our 10^th year of the program – and as the lines between collections, care, and outsourcing are blurring – we felt it was time to expand the tent. We re-named the program Best Call Centers to Work For, and expanded the eligibility beyond just collection firms. 

To be considered for participation, companies had to fulfill the following eligibility requirements:

• Be a for-profit or not-for-profit business or government entity;
• Be a publicly or privately held business;
• Must be in business a minimum of 1 year;
• Must have U.S. call center operations with at least 15 employees, providing either customer care, outsourced services, collections, or online chat services. Only employees working in the United States are eligible to be surveyed.
• Separate call center locations were asked to apply separately. 

As always, the program is administered by Best Companies Group, which conducts over 40 local, national and industry “Best Places” programs each year. insideARM was not involved in reviewing submissions or determination of awards. 

Companies from across the U.S. entered the rigorous two-part survey process to determine the Best Call Centers to Work For. The first part consisted of evaluating each nominated company’s workplace policies, practices, philosophy, systems and demographics. The second part consisted of an employee survey to measure the employee experience. The combined scores determined the top companies and the final ranking. 

This year, 29 companies met the standard to be selected. The Best Call Centers to Work For list is divided into three size categories: Small (15-49 employees), Medium (50-149 employees) and Large (150+ employees). 

All of us at insideARM applaud the winners on this great accomplishment. This is a rigorous process – it is NOT a pay to play contest. We encourage all call centers who meet the criteria to participate next year. Winning is a great badge of honor. However even those who don’t make the list get something extremely valuable – a blueprint for how they can improve – for virtually no cost.

To view the rankings by size category, and profiles on all of the winners, visit https://www.insidearm.com/best-call-centers/bcctwf-2017/

The following are this year’s winners, in alphabetical order:

Account Management Resources, LLC

American Profit Recovery, Inc.

Americollect, Inc.

A.R.M. Solutions, Inc.

Associated Credit Services, Inc.

Conrad Credit Corporation

ConServe – Fairport

Diversified Consultants Incorporated

Eastern Revenue, Inc.

Eltman Law, P.C.

First Credit Services, Inc.

GB Collects

Healthcare Receivables Group

Hilton Grand Vacations, Grand Vacations Services

Hunter Warfield

InvestiNet, LLC

Investment Retrievers, Inc.

KeyBridge Medical Revenue Care

NetTel USA

Professional Account Services, Inc.

Professional Finance Company, Inc.

Protocol Financial Service, LLC

Sentry Credit

State Collection Service, Inc.

Team Recovery, Inc.

The CCS Companies

Todd, Bremer & Lawson

United Credit Service, Inc.

Williams & Fudge, Inc.

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On May 16, 2016, in an order granting a defendant’s motion for judgment on the pleading a federal judge in Florida ruled that a debt collector’s letter on a time-barred account did not violate multiple provisions of the Fair Debt Collection Practices Act (FDCPA). The case is Valle v. First National Collection Bureau, Inc. (Case No. 16-62751, U.S.D.C, Southern District of Florida.)

A copy of the order can be found here. 

Background 

On October 10, 2016, Defendant, First National Collection Bureau, Inc. (FNCB,) sent the Plaintiff a collection letter in an attempt to collect a consumer debt on an account owned by LVNV Funding LLC. The Plaintiff alleged that she defaulted on the debt more than five years ago and has made no payment toward the debt since defaulting, and therefore any legal action to collect the debt is time-barred. The Plaintiff also alleged that the collection letter violated a variety of provisions of the FDCPA. The Plaintiff sought statutory and actual damages, an injunction prohibiting FNCB from engaging in further collection activities directed at the Plaintiff, and costs and reasonable attorneys’ fees. 

The Defendant did not dispute that the Plaintiff was the object of collection activity arising from consumer debt, or that the Defendant qualifies as a debt collector under the FDCPA. The parties’ dispute concerns whether the Defendant engaged in an act or omission prohibited by the FDCPA.

The matter was before the Court on the Defendant’s Motion for Judgment on the Pleadings.

Alleged Violation of § 1692g(a) of the FDCPA 

15 U.S.C. § 1692g(a) states that, “[w]ithin five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication. . .send the consumer a written notice containing – 

(1) the amount of the debt;

(2) the name of the creditor to whom the debt is owed;

(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;

(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and (5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.” 

The Plaintiff claims that the collection letter violated § 1692g(a) by failing to adequately inform the Plaintiff of these rights, as well as how to exercise these rights. 

However, the court disagreed stating: 

“Accordingly, since the collection letter set forth all of the information required to be provided by 15 U.S.C. § 1692g(a), and neither the Complaint nor the Plaintiff’s briefing identify any specific information that was missing or misleading, the Court grants the Defendant judgment on the pleadings with respect to the Plaintiff’s allegation that the collection letter violated § 1692g(a).” 

Alleged Violation of 15 U.S.C. § 1692f(8) 

15 U.S.C. § 1692f prohibits debt collectors from using “unfair or unconscionable means to collect or attempt to collect any debt,” and subsection (8) specifically prohibits the use of “any language or symbol, other than the debt collector’s address, on any envelope when communicating with a consumer by use of the mails. . .except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business.” 

The Plaintiff alleged that the collection letter violated this provision because the envelope used to mail the collection letter displayed a bar code through the transparent window of the envelope. 

Again, the court agreed with the defendant. The court wrote: 

“The bar code displayed through the window of the envelope does not implicate or identify the Plaintiff as a debtor in any way, nor has the Plaintiff alleged that the bar code identified her as a debtor. In light of the legislative history indicating that § 1692f(8) was intended to be limited to symbols indicating that the contents of the envelope pertain to debt collection, the Court does not find that the mere visibility of a bar code on an envelope containing a collection letter violates § 1692f(8). Accordingly, the Court grants the Defendant judgment on the pleadings with respect to the Plaintiff’s allegations that the Defendant violated 15 U.S.C. § 1692f(8).” 

Alleged Violation of 15 U.S.C. § 1692e(2)(A) 

15 U.S.C. § 1692e(2)(A) prohibits a debt collector from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt,” including the false representation of “the character, amount, or legal status of any debt.” 

The Plaintiff alleges that the collection letter violated this prohibition because it failed to sufficiently inform the Plaintiff that the debt was “absolutely time-barred,” and failed to “adequately disclose the impact making a payment would have, to wit, that making a payment would revive the Consumer Debt, thus making it legally enforceable. 

The collection letter stated, in relevant part: 

The law limits how long you can be sued on a debt. Because of the age of your debt, LVNV Funding LLC will not sue you for it, and LVNV Funding LLC will not report it to any credit reporting agency. In many circumstances, you can renew the debt and start the time period for the filing of a lawsuit against you if you take specific actions such as making certain payment on the debt or making a written promise to pay. You should determine the effect of any actions you take with respect to this debt. 

Again, the court agreed with the defendant, writing: 

“The collection letter specifically stated that FNCB would not sue the Plaintiff because of the age of the debt. The collection letter also specifically disclosed that payment of the debt or a promise to pay the debt could re-start the statute of limitations. Even from the perspective of the least sophisticated consumer, the Defendant did not misrepresent the legal status of the debt. Therefore, the Court grants the Defendant judgment on the pleadings with respect to the Plaintiff’s allegation that the letter violated 15 U.S.C. § 1692e(2)(A).” 

Alleged Violations of 15 U.S.C. § 1692e(10) 

15 U.S.C. § 1692e(10) prohibits “[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.” 

The Plaintiff alleges that the Defendant’s use of the language “will not sue you” was misleading because it implied that the Defendant chose not to sue the Plaintiff when, in reality, the Defendant could not sue the Plaintiff as a matter of law because of the age of the debt. 

The court disagreed, writing:

“The Court disagrees. The phrase with which the Plaintiff takes issue must be read in the proper context. The relevant paragraph states in full: “The law limits how long you can be sued on a debt. Because of the age of your debt, LVNV Funding LLC will not sue you for it, and LVNV Funding LLC will not report it to any credit reporting agency.” Thus, the Defendant informed the Plaintiff that there are legal limits to how long she could be sued for the debt, and then stated that “Because of the age of your debt,” she would not be sued. Read in the context of the entire paragraph, the phrase “will not sue you” is not false or deceptive, even from the perspective of the least sophisticated consumer.” 

insideARM Perspective 

On March 27, 2017 insideARM wrote about another case involving this debt collector and the same letter. See that article here.  The case discussed in that earlier article was from United States District Court in Indiana. As noted above, the case discussed today was from the Southern District of Florida.  The two cases and stories should be read together. 

Here is classic situation where a debt collector now has two different courts deciding the same issue, but with opposite results. 

insideARM contacted FNCB for comment.  Issa Moe, General Counsel and Chief Compliance Officer, responded: 

“We are thrilled with the Court’s decision, particularly as it pertains to the disclosure regarding the time-barred nature of the debt at issue and the impact of certain actions, such as payments, on the statute of limitations.  FNCB takes great care to ensure that every word in its letters is clear and unambiguous to the consumer.  The out-of-statute disclosure challenged in this lawsuit is no exception.  The disclosure is the product of thoughtful analysis by industry leaders of prior judicial decisions and regulatory guidance.  Despite an inconsistent decision regarding a similar disclosure in an Indiana federal court, FNCB intends to stand behind its disclosures.  We hope this decision paves the way for other agencies to do the same.”  

Is there a lesson to be learned from these two cases? I go back to my comment in the March 27, 2017 article:

“Collecting on Out-of-Stat debt continues to be a potential landmine for collectors. “

The road sign should read: “Proceed with Extreme Caution.”

On May 18, 2017, a federal judge in Missouri denied joint motions for summary judgment on the issue of whether a letter that “did not state that interest was accruing”, violated the Fair Debt Collection Practices Act (FDCPA). The case is Mygatt v. Medicredit, Inc. (Case No. 15-1947, U.S. D.C., Eastern District of Missouri). 

A copy of the court’s memorandum and order can be found here.   

Background 

Plaintiff Timberly Mygatt incurred debt as a result of medical treatment she received at Missouri Delta Medical Center (MDMC). Medicredit, Inc. (Medicredit) sent at least two collection letters to Mygatt in an attempt to collect the debt owed to MDMC. 

Medicredit mailed Mygatt a letter, dated December 24, 2014, listing a balance due of $300.23. Medicredit’s December 24, 2014 letter did not disclose that the “Balance Due” of $300.23 would increase after the date of the letter. 

Medicredit mailed Mygatt a letter, dated April 25, 2015, listing a balance due of $308.20. Medicredit’s April 25, 2015 letter did not disclose that the “Balance Due” would increase after the date of the letter. As of April 25, 2015, Medicredit was assessing 9% interest per annum on Mygatt’s debt. 

Mygatt alleges that on October 23, 2015, she called Medicredit and was informed that the balance due was $319.44. Mygatt claims she was told that the amount from Medicredit’s April 25, 2015 letter had increased because Medicredit was assessing interest on Plaintiffs MDMC debt. Every dollar of interest that accrued on the MDMC debt occurred after the accounts were placed with Medicredit for collections.

Both parties filed motions for summary judgment.

Editor’s Note: A motion for summary judgment is based upon a claim by one party (or, in some cases, both parties) that contends that all necessary factual issues are settled or so one-sided they need not be tried. The summary judgment is appropriate when the court determines there no factual issues remaining to be tried, and therefore a cause of action or all causes of action in a complaint can be decided upon certain facts without trial. 

The Court’s Memorandum and Order 

Mygatt argued that she is entitled to partial summary judgment with respect to Medicredit’s liability under 15 U.S.C. §1692e(2)(A). See 15 U.S.C. §1692e(2)(A) (“A debt collector may not use any false, deceptive, or misleading representation or means in connection. Mygatt argued that the contents of Medicredit’s December 24, 2014 and April 25, 2015 letters, along with the October 2015 collection call, violate the FDCPA because they informed Mygatt that she had a single “Balance Due” on a medical debt, but with the collection of any debt, Medicredit subsequently assessed and attempted to collect interest beyond the static balance amount listed in the letter. 

Medicredit argued that it did not violate the FDCPA by failing to disclose the accrual of interest in its letters. Medicredit also argued that it is not liable under the FDCPA for failing to specify in its letters that interest was accruing because Mygatt had conceded and admitted that interest was accruing on her debt with Medicredit. 

The Court’s Decision   

As noted above, the judge in this case, the Honorable Ronnie L. White, U.S. District Court Judge, denied both motions for summary judgment. This means the matter will proceed.  

As to the plaintiff’s motion, Judge White wrote: 

“Mygatt maintains that the FDCPA requires debt collectors, when they notify consumers of their account balance, to disclose that the balance may increase due to interest and fees. See Avila v. Riexinger & Assocs., LLC, 817 F.3d 72, 76 (2d Cir. 2016) (“Because the statement of an amount due, without notice that the amount is already increasing due to accruing interest or other charges, can mislead the least sophisticated consumer into believing that payment of the amount stated will clear her account, we hold that the FDCP A requires debt collectors, when they notify consumers of their account balance, to disclose that the balance may increase due to interest and fees .”) (vacating dismissal of the plaintiffs’ claims on this ground). 

Medicredit takes the position that a debt collector is not required by the FDCPA to state that interest is accruing on debt. Medicredit argues that whether a debt collector is required by the FDCPA to state that interest is accruing is a matter that must be evaluated on a case-by-case basis. Medicredit contends that, as a bare minimum, a fact question exists on the issue that precludes summary judgment in favor of Mygatt. 

The Court holds that Mygatt has failed to establish that she is entitled to summary judgment as a matter of law for her claim under 15 U.S.C. § 1692e(2)(A). As an initial matter, the Court notes that the case law from this district cited by Mygatt were all denials of motions to dismiss and have little value in determining a violation as a matter of law. Likewise, district courts have refused to identify a bright line rule of liability. Rather, the district courts evaluated the facts of the cases and refused to dismiss the FDCPA claims on those facts. 

Moreover, the fact that the Eighth Circuit has yet to address whether a debt collector must disclose that interest is accruing on a debt bolsters this Court’s decision to refrain from deciding this issue as a matter of law. Finding that the evidence before the Court is disputed and not amenable to disposition as a matter of law, the Court denies Mygatt’s Motion for Summary Judgment.” 

As to Defendant’s motion, Judge White wrote: 

“Medicredit states that omitting to disclose the accrual of interest in a collection letter is not a violation of the FDCPA. Medicredit acknowledges that several, recent district court cases have held that a debt collector may violate the FDCPA by sending a written demand for payment without specifying interest accruing on the debt. however, notes that the May Court stated that “it would be highly improvident for this Court to establish a bright line rule that a debt collector assessing interest without specifying so in its collection letters is, as a matter of law, liable for violating Sections 1692g(a)(l) and 1692e(2)(A) of the FDCPA. That inquiry, both in these proceedings, and in future cases, will necessarily turn on the particular facts of the case.” 

Medicredit argues that it is not liable under the FDCPA for failing to specify in its letters that interest was accruing because Mygatt has conceded and admitted that interest was accruing on her debt with Medicredit. 

The Court denies Medicredit’s Motion for Summary Judgment. As previously discussed, whether there was a violation of the FDCP A is largely an issue of fact that is not generally amenable to summary judgment. The Court holds that various factual disputes preclude entry of summary judgment. 

The Court finds, without holding, that a reasonable person could find that the balance provided to Mygatt, which did not state that interest was accruing, was confusing. The Court defers to a factfinder to determine whether Medicredit violated the FDCPA.” 

insideARM Perspective 

This decision is not a dispositive outcome in this case. The court merely denied both motions for summary judgment. As a result, this case will continue to either a settlement or a trial where the trial judge or jury will decide whether there was an FDCPA violation.  The case highlights the issue regarding failure to mention whether or not an account is continuing to accrue interest. 

As noted yesterday in our article on Taylor v. Financial Recovery Services, Inc. (Case No. 15-4685, U.S.D.C Southern District of New York), these two decisions should be read together.  The facts in this case are clearly distinguishable from the facts in the Taylor matter. Here, the debt was collector was, in fact, continuing to accrue interest on the account. In Taylor, the debt collector was not accruing interest.

This article was authored by Jonathan Pompan, Daniel Blynn, and Christopher Boone. It was previously posted on Venable.com and is re-published here with permission.

Debt collectors and telemarketers often face TCPA allegations – meritorious or not. For debt collectors, this is true even though debt collection calls are subject only to the “prior express consent” standard rather than the more strict, “prior express written consent” standard, applicable to other prerecorded calls to mobile phones. However, telemarketers and debt collectors alike have begun to use ringless voicemail technology to leave voicemail messages on phones without placing a traditional call.

The big question then is whether straight to voicemail constitutes a call for TCPA purposes, and, according to a recent FCC Public Notice, industry participants may soon receive an answer.

Earlier this year, All About the Message LLC (AATM) filed a petition for a declaratory ruling before the Federal Communications Commission (FCC), requesting that the FCC issue a rule that would declare that delivering a voice message directly to a consumer’s voicemail box does not constitute a “call” that is subject to the Telephone Consumer Protection Act’s (TCPA) general prohibition against the use of auto-dialers or pre-recorded voice messages (absent appropriate consent). AATM’s petition follows a similar FCC petition filed by VoAPPs, Inc. on July 31, 2014. There, VoAPPs argued that leaving a voice message directly in the consumer’s mailbox does not constitute a “call” subject to the TCPA, because such a message does not cause the type of disruption that the TCPA was enacted to curtail. The FCC has not yet resolved VoAPPs’ 2014 petition.

If the FCC declares that ringless voicemail technology is not a “call” under the TCPA, it may open a new marketing avenue for creative telemarketers. The FCC has issued a Public Notice seeking comments by May 18, 2017. This, of course, would also benefit debt collectors looking to minimize TCPA risk, as most courts have determined that debt-collection calls made to cellular telephones using an automatic telephone dialing system or a prerecorded voice violate the TCPA if the called party has not provided their “prior express consent” to receiving such calls.

Last August, the FCC published new rules exempting autodialed calls “made solely to collect a debt owed to or guaranteed by the United States” from the Telephone Consumer Protection Act’s prior express consent requirement. This exemption, however, does not apply if the debt is not owed to or guaranteed by the United States.

As a list of recent TCPA actions demonstrates, this area deserves attention and requires careful navigation.

ATLANTA, Ga. – Atlanta-based FLOCK Specialty Finance (“FLOCK” or the “Company”), a provider of capital to buyers of non-performing debt and subprime consumer lenders, announced an expansion of its traditional financing alternatives by offering a solution with little or no back-end profit sharing.

FLOCK’s VP of Business Development, Greg Paulo, explained: “We are responding to the needs of our customers and today’s market trends.  It has always been FLOCK’s goal to be responsive to the market by  providing Fast, Flexible and Fair financing solutions to the non-performing debt buying and sub-prime consumer lending markets.  Some of our prospects and customers have asked for an alternative structure to our traditional model.”

With a lower advance rate against the portfolio purchase price, FLOCK’s enhanced structure will offer clients a reduced profit split with FLOCK in the residual (i.e., back-end) stage of the portfolio liquidation.   By giving clients more options, the new structure allows more flexibility in managing the key financing aspects of a portfolio acquisition, including payment terms, fees and profit sharing.   The structure will remain a joint venture arrangement preserving FLOCK’s use of a special purpose vehicle entity as the funding vehicle, with the debt purchaser as the controlling party.

Michael Flock, Chairman and CEO of FLOCK, stated, “This structural change is critical to the ongoing growth of FLOCK.  By offering a solution with lower back-end profit, our range of financing products will appeal to a larger market segment, allowing us to expand our client base, accelerate deployments and beat the competition.”

In December 2016, FLOCK closed on a new senior line of credit from a syndicate of four commercial banks.  FLOCK also completed a significant mezzanine capital raise in the first quarter of 2017.  With these new lines of capital together, FLOCK has doubled its total available capital creating new flexibility and capacity for customers.  With this new capital and new financing solution, FLOCK expects to grow its deployment opportunities significantly during the second half of 2017.  

About FLOCK Specialty Finance

FLOCK is dedicated to alternative investing in a variety of specialty finance segments. FLOCK’s mission is to provide clients with capital and expertise for the purchase of both charged off debt portfolios as well as for the financing of subprime consumer obligations.  FLOCK believes its funding is” More Than a Transaction”. FLOCK’s proprietary financing structure provides growth-minded clients with a competitive advantage in multiple classes.  Founded in 2007, FLOCK is headquartered in Atlanta, GA.

For additional information, please call: 770-644-0850 or visit: www.flockfinance.com

On May 18, 2017 a federal judge in New York ruled that a debt collector did not, as a matter of law, violate the Fair Debt Collection Practices Act (FDCPA) because its letter to the consumer “did not specifically state that interest or fees had stopped accruing on the account.” The case is Taylor v. Financial Recovery Services, Inc. (Case No. 15-4685, U.S.D.C Southern District of New York). A copy of the court’s opinion and order can be found here. 

Background 

In 2010 plaintiff Christine Taylor opened a credit card account, which she used to buy personal and household items. After she defaulted on her credit card payments in 2015, the balance due on her credit card statement increased each month due to interest and fees. 

In March 2016, the First National Bank of Omaha, which owned Taylor’s credit card debt, referred her account to Financial Recovery Services, Inc. (FRS) for collection. FRS sent Taylor three letters approximately one month apart regarding her credit card debt. None of the letters refers to interest or fees. 

FRS’s first letter to Taylor, dated March 8, 2016, states the amount $599.98 six times on the one-page document. The upper right hand corner contains information about the debt, including “AMOUNT DUE AS OF CHARGE-OFF: $599.98” and “BALANCE DUE: $599.98.”

The second and third letters, dated April 12 and May 10, 2016, respectively, each state the amount $599.98 multiple times. Like the first letter, both again say in the upper right corner “BALANCE DUE: $599.98.” The letter elaborates, “This settlement may have tax consequences. Please consult your tax advisor.” 

Plaintiff Christina Klein obtained a credit card from Barclays Bank (“Barclays”), which she used to make purchases for personal or household use. Around the beginning of 2014, she defaulted on her payments to Barclays. Klein attests that every month that she did not make a full payment, interest and late fees were added to the balance on her Barclays credit card statement. 

In October 2015, Barclays referred Klein’s account to FRS for collection. FRS sent Klein four letters, approximately one month apart regarding her credit card debt. None of the letters refers to interest or fees. 

FRS’s first letter to Klein, dated October 2, 2015, states in the upper right corner, “AMOUNT DUE AS OF CHARGE OFF: $3171.12” and “BALANCE DUE: $3171.12.” FRS also sent Klein letters in November 2015, December 2015 and January 2016. These subsequent letters state in the upper right corner “BALANCE DUE: $3171.12.”

The plaintiffs sued FRS under the FDCPA alleging that FRS violated 15 U.S.C. § 1692e, alleging that the letters were misleading as to whether or not each Plaintiff’s debt was accruing interest or fees. Count Two then claimed that the letter sent to Taylor violated 15 U.S.C. § 1692e, § 1692e(2)(A), § 1692e(5) and § 1692e(10) based on the sentence, “This settlement may have tax consequences,” alleging that it gives the misimpression that FRS would report the settlement to the IRS. The parties cross-move for summary judgment on both counts.

Editor’s Note: A motion for summary judgment is based upon a claim by one party (or, in some cases, both parties) that contends that all necessary factual issues are settled or so one-sided they need not be tried. The summary judgment is appropriate when the court determines there no factual issues remaining to be tried, and therefore a cause of action or all causes of action in a complaint can be decided upon certain facts without trial. 

The Court’s Opinion 

Count One — Lack of Statements Regarding Interest 

The court granted Summary judgment is granted in favor of FRS on Count One “because the letters’ failure to state that interest or fees had stopped accruing does not violate § 1692e as a matter of law.” 

In discussing this issue the court wrote (citations omitted) : 

“Pursuant to § 1692e, “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” Whether a collection letter violates § 1692e “is determined from the perspective of the objective ‘least sophisticated consumer.” The “least sophisticated consumer” is a “naïve” and “credulous” person who possesses a “rudimentary amount of information about the world and a willingness to read a collection notice with some care.” “Under this standard, a collection notice can be misleading if it is open to more than one reasonable interpretation, at least one of which is inaccurate.” 

FDCPA protection, however, “does not extend to every bizarre or idiosyncratic interpretation of a collection notice[,] and courts should apply the standard in a manner that protects debt collectors against liability for unreasonable misinterpretations of collection notices.” 

Because the least sophisticated consumer standard requires an objective inquiry, it “may be applied as a matter of law and thus is an appropriate issue for disposition on a motion for summary judgment.”

The collection notices are not false, misleading or deceptive as a matter of law. First, Plaintiffs have failed to adduce evidence that the amount stated as due from each Plaintiff is factually inaccurate. The evidence shows that, at the time the debts were referred to collections, Plaintiffs owed $599.98 and $3171.12 respectively and that these amounts remained unchanged during the period the letters at issue were sent. 

Second, the statements of the amount due are not misleading or deceptive. By their terms, the letters neither state nor imply that interest or fees are accruing. Similarly, each successive letter states the same amount due as the prior letter. If anything, the letters imply that interest was not accruing. This is not a situation where the consumer was invited to call to obtain the most current balance, which might suggest that interest was accruing.

Only a consumer in search of an ambiguity, and not the least sophisticated consumer relevant here, would interpret the letters to mean that interest was accruing. Because the letters are not susceptible to more than one reasonable interpretation on the subject of interest or the amount due, they are not false, deceptive or misleading in this regard.” 

Count Two — Statements Regarding Tax Consequences 

The court also ruled that “FRS’s statement in the Taylor letters that the “settlement” for less than the balance due “may have tax consequences” does not violate § 1692e as a matter of law.” 

On this issue the court wrote (citations omitted): 

“First, as Plaintiffs concede, the statement accurately states the law; a settlement would constitute a discharge of indebtedness, which the tax payer may be required to report regardless of amount, and which may result in taxable income. 

Second, courts that have addressed identical language to that in FRS’s letters have found the statement to be accurate, and held it to be otherwise non-actionable under § 1692e.” 

insideARM Perspective 

insideARM contacted FRS and the attorney that handled this case for comment. John Rossman, Attorney at Law with Moss & Barnett, provided the following reaction:

“These cases are being filed en masse in New York – similar to the wave of lawsuits on the envelope issue after the Douglass case a few years ago – and Taylor is the first definitive decision on the issue.  The decision follows a common sense approach and reading of the Avila decision.  The Plaintiffs appealed the ruling in Taylor to the Second Circuit Court of Appeals and we expect that the appellate court will affirm this ruling while we anticipate all of the other pending cases on this issue will likely be stayed.” 

This is a very positive result that may stem the tide referenced by Mr. Rossman.

insideARM has previously written about other cases involving the FRS and the statement regarding tax consequences. See our article on the Remington case here and our article on the Everett case here. Also, insideARM published a podcast on the issue recently. Click here to listen to the podcast.  

Finally, while this is a positive result for the ARM industry, tomorrow we will be publishing an article on another case from Missouri where the court did not grant summary judgment on the interest accrual issue. That case is Mygatt v. Medicredit, Inc. (Case No. 15-1947, US. D.C., Eastern District of Missouri).  In that case the court ruled that the matter was not clear as a matter of law and “defers to a factfinder to determine whether Medicredit violated the FDCP A.” 

However, Mygatt has some distinguishing facts.  Still the cases and stories should be considered together.