Editor’s note: Rozanne Andersen, VP & Chief Compliance Officer for Ontario Systems, has written an informative and educational series of articles on payment systems. This is the second in the series. Read the first, Electronic Payments Step One – Understand the Terminology. Others will be published as available.

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

—–

Sixty minutes into a presentation on electronic payments at a recent industry conference, an audience member’s question stops me in my tracks: They don’t understand the difference between an electronic payment authorization and an electronic signature. That’s an important piece of the puzzle, but one that requires a bit of discussion, at length. Let’s review:

An electronic payment authorization is the agreement setting forth the terms of the payment arrangement. It is electronic documentation of the terms of the payment agreement you and the consumer have entered into in connection with the debt. 

By contrast, an electronic signature is a sound, symbol or voice the consumer uses to evidence their assent to the terms of the agreement. It is in effect a representation of the consumer’s signature on the electronic authorization. The two terms are not interchangeable and the reason you need to understand their differences is because each presents unique compliance challenges.

Electronic Payment Authorization Requirements: There are only two reasons why you need to obtain the consumer’s authorization to process an electronic payment. 

The first is grounded in common sense. If your organization has nothing in hand to prove the consumer authorized you to process a credit card payment, a debit card payment or any other ACH or prepaid card payment, you will have no defense to a claim that the payment was unauthorized. Nor will you be able to defend a claim the payment was processed under false pretenses made at the hand of one of your employees seeking to steal a consumer’s identity.

The second reason is because you must. The legal, security and contractual mandates require you to do so. For example, the Federal Electronic Funds Transfer Act (EFTA) and its corresponding Regulation E mandates the authorization requirements for electronic funds transfers. The Truth in Lending Act and its corresponding Regulation Z regulates prepaid cards with credit features. The National Automated Clearing House imposes contractual obligations on payments processed using the Automated Clearing House network (ACH). The Payment Card Industry Data Security Standard (PCI-DSS) is a proprietary security standard that imposes security requirements associated with branded credit cards from major card programs like Visa, MasterCard, American Express and Discover. Together these requirements impact your ability to process electronic payments.

Electronic payment authorization requirements differ in timing, form and content depending upon the type of electronic payment. Moreover, authorizations that must be signed or similarly authenticated by the consumer in compliance with the Electronic Signatures in Global Commerce Act (E Sign Act) require the consumer to “affix” their signature to the authorization as their electronic signature.

Credit card authorizations may be documented by a voice recording and need not be signed or similarly authenticated by the consumer. If your organization does not have the ability to record the credit card authorization using voice recording technology, you may want to use a web, email or paper exchange to create evidence of the consumer’s authorization. Among any other required disclosures, be sure to include these elements in your credit card authorization:

• Confirmation of the consumer’s name or identity
• The amount of the charge
• The date of each charge
• Credit card number, expiration date and card verification data [3-4 digit number]
• Method to revoke the authorization

Single electronic funds transfers and/or single debit or single prepaid card authorizations may be documented by a voice recording and need not be signed or similarly authenticated by the consumer. If your organization does not have the ability to record the authorization using voice recording technology, you may want to use a web, email or paper exchange to create evidence of the consumer’s authorization. Among any other required disclosures, be sure to include these elements in your single debit or single prepaid card authorization:

• Confirmation of the consumer’s name or identity
• The amount of the debit
• The date the debit transaction will be processed
• Debit or prepaid card number, bank routing number, expiration date and card verification data [3-4 digit number]
• Method to revoke the authorization

All of the information required for these authorizations may be obtained and documented in writing, webpage, voice recording, IVR or email.  The consumer need not sign or similarly authenticate credit card or single debit or single prepaid card authorizations.

Preauthorized recurring electronic funds transfer payment authorizations (Pre-EFTA) require more information than credit card and single EFT payment authorizations, including: 

• Confirmation of the consumer’s name or identity
• The amount of each recurring debit payment, or a reference to the method used to determine the amount of each recurring payment
• The timing (including the start date), number, and/or frequency of each recurring payment
• The debit card number, expiration date and CSC number or the number of the account to be debited and the bank routing number
• A telephone number available to the consumer and answered during normal business hours for customer inquiries, revocations, cancellations and stop payments;
• The method by which the consumer can stop payment, revoke or cancel the authorization [See below for more detailed information about this requirement]
• Statement confirming the date of the consumer’s verbal authorization
• The consumer’s verbal, tone or click indicating their assent to the agreement to pay and their intention to sign the authorization electronically by associating a sound or words or click agreement with the authorization

Of course, the trick here is the technology you use to automate. Documenting your treatment for each type of payment is one that’s fraught with human error when carried out manually. So your next step should involve thinking about how to create appropriate records, send proper notices and comply with Electronic Signatures in Global Commerce Act – We’ll discuss that process next.

——————— 

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

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

WOODLAND HILLS, Calif. –- Account Control Technology Foundation (herein ACT Foundation), a non-profit, charitable foundation established by the founders of Account Control Technology Holdings, Inc., is now accepting applications for its annual scholarship programs, which provides $2,000 individual awards to students nationwide.

The ACT Foundation Second-Year Scholarship Program is for current college first-year students who plan and qualify to enroll as sophomores in a four-year college or university in the fall of 2017. A total of six $2,000 scholarships will be awarded to students nationwide.

The ACT Cares Community Scholarship Program is for graduating high school seniors from specific communities who will attend a four-year college or university beginning in the fall of 2017. Applicants must be current seniors at high schools within select counties surrounding our ACT Holdings, Inc. offices, including Kern and Los Angeles counties in California; Butler, Clermont, Hamilton and Warren counties in Ohio; Dallas, Denton, Collin, Harris and Tom Green counties in Texas; Fulton, DeKalb and Augusta-Richmond counties in Georgia; Palm Beach County in Florida; Prince William County in Virginia; Montgomery County in Alabama; Peoria County in Illinois; Maricopa County in Arizona; King County in Washington and Westchester County in New York. A total of six $2,000 scholarships will be awarded.

The application deadline for both programs is June 1, 2017. The scholarship selection process will be administered independently by Scholarship Management Services. Application guidelines and past winners’ lists are available on the ACT Foundation’s website at www.accountcontrolfoundation.org.

In addition to providing information on its scholarship programs, the ACT Foundation website offers content and links to help students plan and pay for college, as well as gain tips to improve their financial wellness.

About the ACT Foundation

The Account Control Technology Foundation is a charitable organization established by Dale and Debbie Van Dellen with a stated mission “to improve the future of students and the greater community by offering financial literacy and debt management education, mentorship and support to those in need.” For more information, email marketing@accountcontrol.com or visit www.accountcontrolfoundation.org

About Account Control Technology Holdings, Inc. (ACT Holdings)

Account Control Technology Holdings, Inc. provides comprehensive business process outsourcing and financial services to diverse industries. Our companies partner with clients to help them run the “business” behind their operations so they can focus on what they do best – whether it’s serving customers, educating students, caring for patients, or keeping communities moving forward. ACT Holdings companies include Account Control Technology, Inc. and Convergent, Inc. and have 18 offices with more than 4,800 employees. For more information, visit www.accountcontrolholdings.com

The House Financial Services Committee will hold a hearing on Wednesday to discuss Rep. Jeb Hensarling’s (R-TX) new Financial Choice Act. The near-600-page Act would, if implemented, curb CFPB powers and reverse or remove some key elements of the Dodd-Frank Act.

• According to the Bill’s supporters, the Act would reform the CFPB in order to make it “benefit – rather than harm – consumers” in several ways, including by:
• Allowing the President to remove the CFPB’s Director at-will;
• Permitting courts with enhanced authority to “correct any erroneous interpretation made by the [CFPB] of its own legal authority;”
• Ensuring that the CFPB conducts a cost-benefit analysis before issuing new regulations;
• Insisting that Congress have the opportunity to approve significant CFPB regulations before they take effect; and
• Repealing the CFPB’s “standard-less authority to deny consumers access to any financial product and service it declares ‘unfair, deceptive, or abusive.’”

The hearing will take place tomorrow – Wednesday, April 26 – at 10am ET. To listen in live, click here.

Editor’s note: Rozanne Andersen, VP & Chief Compliance Officer for Ontario Systems, has written an informative and educational series of articles on payment systems. This is the first in the series. Others will be published in the coming days.

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

—–

An electronic payment is a generic term for any process by which a payment of money is made electronically, without paper. There are many forms of electronic payments and each has its own set of compliance requirements. Credit card payments, payments made using the automated clearing house (ACH), electronic check payments, transfers initiated by telephone, transfers resulting from debit card transactions, prepaid card transactions and electronic check conversions (ECK) are all examples of electronic payments. Understanding the various compliance requirements associated with each is the first step toward effectively processing compliant electronic payment transactions.

Electronic payments are governed by laws, regulations, guidance bulletins, standard setting organizations and judicial decisions:

• Electronic Fund Transfer Act (EFTA), 15 USC 1693 et seq. of 1978
• Regulation E, 12 CFR Part 1005
• Fair Debt Collection Practices Act (FDCPA), 15 U.S. Code § 1692
• Electronic Signatures in Global and National Commerce Act (E-Sign Act), 15 U.S.C. Ch. 96
• Consumer Financial Protection Bureau Guidance Bulletin Preauthorized Electronic Fund Transfers (CFPB Reg E Bulletin), Bulletin 2015-06
• Payment Card Industry (PCI) Data Security Standard, https://www.pcisecuritystandards.org/pdfs/PCI_DSS_v2_eCommerce_Guidelines.pdf
• National Automated Clearing House Association (NACHA), https://www.nacha.org/rules
• Prepaid Accounts under the Electronic Fund Transfer Act, CFPB Rules, Prepaid Accounts under the Electronic Fund Transfer Act (Regulation E) and the Truth In Lending Act (Regulation Z)  

The Electronic Fund Transfer Act and Reg E provide the following key definitions for the processing of electronic transfers from consumer asset accounts such as a checking or savings accounts and prepaid cards. The transfers occur across the automated clearing house network. Money is electronically taken from the consumer’s bank/asset account and deposited in the payee’s bank/asset account. The CFPB’s November 2015 Guidance Bulletin further interprets the application of the EFTA and Reg E to electronic fund transfers along with numerous judicial decisions and the Federal Reserve Board’s Staff Commentary 

Electronic check conversion (ECK) transactions are transactions where a check, draft, or similar paper instrument is used as a source of information to initiate a one-time electronic fund transfer from a consumer’s account. The consumer must authorize the transfer. (12 CFR 1005.3(b) (2))

Electronic fund transfer (EFT) is a transfer of funds initiated through an electronic terminal, telephone, computer (including online banking) or magnetic tape for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit a consumer’s account. EFTs include, but are not limited to, point-of-sale (POS) transfers; automated teller machine (ATM) transfers; direct deposits or withdrawals of funds; transfers initiated by telephone; and transfers resulting from debit card transactions, whether or not initiated through an electronic terminal. (12 CFR 1005.3(b)).

General-use prepaid card is a card, code, or other device issued on a prepaid basis primarily for personal, family, or household purposes to a consumer in a specified amount, whether or not that amount may be increased or reloaded, in exchange for payment; and is redeemable upon presentation at multiple, unaffiliated merchants for goods or services, or that may be usable at automated teller machines (12 CFR 1005.20(a) (3)). See ‘‘Exclusions from gift card definition.’’ The CFPB passed new rules for prepaid account transactions in October of 2016. The new rules have staggered effective dates, October 2017 and October 2018 respectively and are presently under attack by Congress.

Preauthorized electronic fund transfer is an EFT authorized in advance to recur at substantially regular intervals (12 CFR 1005.2(k)). The person that obtains the authorization shall provide a copy to the consumer .12 CFR 1005.10(b).

Credit card payments are electronic payments but are not transfers of money. Credit card payments are regulated by the Payment Card Industry Security Standards Council, a standards setting organization. The Payment Card Industry Security Standards Council (PCI Council) was formed by the major credit card companies in September of 2006 to establish a body of security standards for the processing of credit card payments. The standards are collectively known as the Payment Card Industry Data Security Standard (PCI DSS), and these standards consist of twelve significant requirements including multiple sub-requirements which contain numerous directives against which businesses may measure their own payment card security policies, procedures and guidelines. Businesses can become accepted by the PCI Standards Council as compliant with the twelve requirements, and thus receive a compliance certification and a listing on the PCI Standards Council website. Compliance efforts and acceptance must be completed on a periodic basis.

The Fair Debt Collection Practices Act (FDCPA) only applies to third party debt collection activity and imposes certain notice requirements on debt collectors that process post-dated electronic payments. 15 USC 1692f (1) – (4).

Each of these forms of electronic payments comes with its own set of compliance requirements. Companies are well advised to confer with independent legal counsel, their electronic payment processor service provider and their software partner to discuss the advantages, disadvantages of the various types of payment types and the technology they may need to process electronic payments.

Part II of this series will cover authorization requirements for electronic payments.

_____ 

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

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

On 3 April 2017, the Colorado General Assembly held a hearing on the “sunsetting” of Colorado’s Fair Debt Collection Practices Act. At issue were six recommendations made in an October 2016 report. This report, and a prior associated hearing, were previously covered by insideARM:

• Continue the CFDCPA for 11 years, until 2028
• Define what is expected of an individual who purchases, sells, or attempts to collect on purchased debt
• Repeal the phrase “arising out of a transaction” from CFDCPA’s definition of “debt”
• Clarify that the statute of limitations in CFDCPA enforcement action is four years
• Sunset the Collection Agency Board
• Allow consumers who have a monetary judgment against a collection agency to access surety bond funds.

There have been some changes between the action items listen in that 2016 report, and the Bill Summary published on 12 April:

• SAME: Continue the CFDCPA for 11 years, until 2028
• CHANGE: Define what is expected of an individual who a collection agency that purchases, sells, or attempts to collect on purchased debt
• CHANGE: Repeal the phrase “arising out of a transaction” from CFDCPA’s definition of “debt” Clarifying that when a collection agency attempts to collect on a debt, the Act applies, by removing language from the definition of “debt”
• SAME: Clarify that the statute of limitations in CFDCPA enforcement action is four years
• SAME: Sunset the Collection Agency Board
• SAME: Allow consumers who have a monetary judgment against a collection agency to access surety bond funds.

The main change for agencies to be aware of is that Colorado is proposing to do away with its Collection Agency Board, replacing it with a set of requirements for a single administrator. From the Bill Summary, pp 6 – 7:

• The administrator shall prepare a report accounting for the efficient discharge of all reponsibilities assigned by law and the general administration of the program on a biannual basis.
• The biannual report will address the following:
• Enforcement actions completed, and whether those actions were appealed or otherwise challenged
• The number of complaints processed and details as to outcomes and resolutions of complaints
• Changes to the program and how they relate to industry or consumer concerns
• A description of any significant legal filings (amicus briefs, summaries of new regulations, legal developments that directly impact the program/program changes, any significant matters that need to be addressed at the request of the regulatred community or public
• The report is to be published by 1 July and 31 December of each year
• The administrator shall attend meetings and conferences of interested and relevant groups and associations:
• At the invitation of the collection agency industry, one local and one national association of collection agencies or other collection agency trade association meeting
• At the invitation of the collection agency industry, one annual meeting or ohter business entity associations or groups that reporesent clients of collection agencies, debt buyers or other related trade association
• One annual meeting of a revevant consumer advocacy association
• The administrator will provide minutes from those meetings, published on the attorney general’s website and included in the biannual report
• The Administrator shall host an annual public meeting in January of each year
• The Administrator shall host an annual public meeting in July of each year

Other additions to Colorado’s Fair Debt Collection Practices Act:

• “Debt Buyers” are collection agencies per Colorado’s FDCPA
• Agencies seeking to bring legal action on a debt owned by a debt buyer will need to attach the following materials to its complaint form:
• A copy of the contract, account-holder agreement, or other wititng from the original creditor or the consumer evidencing the consumer’s agreement to the original debt. (For medical debt, a copy of a redacted itemization of charges)
• If a signed writing does not exist, a copy of the document provided to the consumer while the account was active demonstrating that the debt was incurred by the consumer. (For credit card debt, the most recent monthly statement)
• If a claim is based on an electronic transaction for which there’s nothing signed/in writing, a copy of the records created during the transaction that shows the consumer’s agreement
• A copy of the assignment or other writing establishing that the debt buyers is the owner of the debt
• If the debt as assigned/sold more than once, each assignment must be attached to establish an unbroken chain of ownership
• Plaintiffs will need to file with the court evidence that satisfies the erequrements of Rules 803(6) and 902(11)
• The original account number at charge-off
• The original creditor at charge-off
• Amount due at charge-off
• An itemization of post charge-off additions (if any)
• Date of last payment
• Date of last transaction
• Date the debt was incurred (unless this is a revolving account)
• In the absence of any of the evidence required, an affidavit does NOT satisfy the requirements.

insideARM Perspective

[article_ad]

Agencies holding paper from Colorado consumers should understand that these sunset reviews, which happen every 11 years, will never end with the sunsetting of Colorado’s own FDCPA. Colorado has made consumer protections a priority.

Additionally, agencies working with debt buyers — and debt buyers as well — will need to make sure their chains of title are absolutely clean. Compliance departments would do well to spend time reviewing the media requirements for filing suit. And while it may seem overkill, implementing those same requirements for all accounts seems the safest harbor. States share information, and what works in Colorado could become popular elsewhere.

SAN FRANCISCO, Calif. — LiveVox Inc., a leading provider of cloud contact center solutions for enterprise operations, announced that part of its executive team is joining insideARM’s (iA) Innovation Council to help advance the discussion on top challenges faced by the ARM industry’s largest players and how cloud technology is helping to solve them.

Dusty Whitesell, Chief Evangelist, LiveVox states, “There is no doubt that the change of pace is leaving many businesses scrambling. Whether it be regulatory or consumer shifts, the ARM industry must be able to evolve–and evolution takes innovation. LiveVox has been at the forefront of this innovation with our cutting-edge cloud solutions spanning TCPA risk mitigation, payment security, multichannel, analytics, and much more. I hope to share our collective insight and learn from other committee members to accelerate the innovation needed to keep the industry’s most complex players at the forefront of change.” 

The Innovation Council will help facilitate regular dialogue between industry leaders on how advancements through technology and other innovations are essential to the success of organizations that engage in debt collection (whether creditor, agency, law firm, or debt buyer). The Council operates in conjunction with the Consumer Relations Consortium (CRC), a private, limited membership group organized and run by The iA Institute for those firms that are larger market participants (LMP) and creditors, a group for forward-thinking leaders who take the position that this critical discussion should be candid and practical.

The Innovation Council will meet in Washington D.C. three times a year and participation eligibility is based on contribution:

• Primary criteria for acceptance to the Council include product innovation, thought leadership, and the level of responsibility and background of those who will participate.
• Technology providers must re-apply each year, and will be accepted based on value brought to the table.
• CRC members will vote on the top three “innovators” among the technology providers each year — these members are automatically approved for membership the next year, and will receive an “Innovators” logo they can display on marketing materials.

To learn more visit, http://www.crconsortium.org/innovation-council.

About LiveVox, Inc.

LiveVox is a leading provider of cloud contact center solutions, managing more than 6 billion interactions a year across Outbound, Inbound, Self-Service Voice, SMS and emails. Founded in 1999, LiveVox built a pure cloud platform that improves agent productivity, drives smarter operations and mitigates TCPA/CFPB compliance risks.  LiveVox is recognized for high scale operations, innovative features delivered quarterly, and its dedication to stay ahead of regulatory trends.  Clients trust LiveVox consultants for driving operational insights and business results.  LiveVox complements its powerful platform with enhanced offerings such as business intelligence, cross-agency monitoring, campaign analytics, and open APIs for integration and partnering. For more information, visit http://www.livevox.com.

He is at it again. Former regulator (and persistent Consumer Financial Protection Bureau critic) Ronald Rubin has written another in a series of articles – this one published in HousingWire – about practices the CFPB would certainly prefer to keep secret.

This time around, Rubin details the Federal Inspector General’s investigation of the CFPB oversight supervisors, their stonewalling techniques, and the reprimand the supervisors issued to cover it up – one they subsequently had to withdraw.

The article discusses, at length, the ways in which the CFPB obscured information and resisted external investigators’ requests for information, such as encouraging attorneys to:

• Summarize rather than produce original documentation;
• Construe requests as narrowly as possible;
• Telling interviewees to intentionally mis-interpret questions that might reveal CFPB shortcomings; and
• Forbidding employees to bring documents to interviews that might refresh their memories.

The next step could very well be congressional hearings, now that the House Financial Services Committee knows which documents to request from the Inspector General, Rubin adds.

You can read Rubin’s full opinion here.

You can find Ronald Rubin here.

Some of his other recent tell-all articles include:

The Tragic Downfall of the Consumer Financial Protection Bureau

Former Regulator Accuses CFPB of Targeting the Biggest Companies and Imposing “The Maximum Fines They Can Afford to Pay”

Former Regulator Points to CFPB Failure behind Wells Fargo Scandal

Former Regulator Offers Extensive and Scathing Details of Life Inside the CFPB

[article_ad] 

Yesterday, Judge Susan G. Braden, Chief Judge of the U.S. Court of Federal Claims, issued an order putting a 30-day halt to all proceedings in four separate but related lawsuits involving bid protests in the Department of Education (ED) RFP for Private Collection Agency services on government-guaranteed student loans. The judge issued the order to “maintain the status quo while the parties attempt to reach a global solution.” 

insideARM has written extensively about the RFP process, the protests and the GAO decision regarding the protests. See the March 29, 2017 article here and our April 10, 2017 article here for a summary of prior activity regarding the protests and the GAO findings. For a thorough review of the RFP process see our December 14, 2015 article.

Background  

On March 27, 2017, the Government Accountability Office (“GAO”) partially sustained several protests over a multiple-award $2.8 billion student-loan collection contract, awarded under Solicitation No. ED-FSA-16-R-0009, because ED failed to properly evaluate certain bids. 

Between March 28 and April 12, Continental Services Group, Inc. (ConServe), AccountControl Technology, Inc. (ACT), Pioneer Credit Recovery, Inc. (Pioneer), and Alltran Education, Inc. (Alltran)  (collectively “the Protestors”) filed related Bid Protests in the U.S. Court of Federal Claims, challenging ED’s decision not to award the Protestors contracts for student-debt collection services, under Solicitation No. ED-FSA-16-R-0009. Continental Services v. United States, No. 17-449; Account Control Technology v. United States, No. 17-493; Pioneer Credit Recovery v. United States, No. 17-499; Alltran Education v. United States, No. 17-517.

On March 29, 2017 the court issued a Memorandum Opinion and Temporary Restraining Order (“TRO”), to prohibit, pursuant to Rule of the U.S. Court of Federal Claims (“RCFC”) 65(d), the ED from:

1. authorizing the purported awardees to perform on the contract award under Solicitation No. ED-FSA-16-R-0009 for a period of fourteen days, i.e. until April 12; and
2. transferring work to be performed under the contract at issue in this case to other contracting vehicles to circumvent or moot this bid protest for a period of fourteen days, i.e. until April 12. Continental Services, No. 17-449. 

On April 10, the court extended the March 29 TRO until April 24. Continental Services, No. 17-449. 

On April 13, the court convened a Status Conference in Alltran, No. 17-517, during which the Government proposed a thirty-day stay of proceedings in four Bid Protests related to Solicitation No. ED-FSA-16-R-0009. The Government advised the court that the proposed stay would maintain the status quo while ED explored a global solution. On the same day, the court informed all of the parties in Continental Services, No. 17-449, Account Control Technology, No.17-493, Pioneer Credit Recovery, No. 17-499, and Alltran Education, No. 17-517 of the proposed stay. 

On April 17, the Government advised the court by email that all of the parties in Continental Services, No. 17-449, Account Control Technology, No. 17-493, Pioneer Credit, No.17-499, and Alltran, No. 17-517 agreed to the proposed stay, except intervenor-defendants Windham Professionals, Inc. (“Windham”) and Premiere Credit of North America, LLC (“Premiere”). 

Windham and Premiere argued that the court should not enjoin the ED from authorizing the awardees, under Solicitation No. ED-FSA-16-R-0009, to perform on contracts that were properly awarded. Windham and Premiere also argue that the Protestors do not have standing to seek injunctive relief, because Solicitation No. ED-FSA-16-R-0009 was an indefinite quantity procurement and the Protestors therefore were not prejudiced by the ED’s decision to award contracts to other bidders. But, Judge Braden determined: 

“The objections raised by Windham and Premiere, however, do not address the need for a stay. Instead, they attempt to re-litigate the merits of the March 29, 2017 TRO and April 10, 2017 TRO Extension.” 

Judge Braden then discussed her decision to stay the proceedings for 30 days:

“The court has determined that the proposed stay properly would maintain the status quo while the parties attempt to reach a global solution. Accordingly, the stay will preserve judicial resources without prejudicing the interest of any of the parties. For this reason, all proceedings in Continental Services, No. 17-449, Account Control Technology, No. 17-493, Pioneer Credit, No. 17-499, and Alltran, No. 17-517 are stayed for thirty days, i.e. until Friday, May 19, 2017. See Cherokee Nation of Oklahoma v. United States, 124 F.3d 1413, 1416 (Fed. Cir. 1997) (“The power of a federal trial court to stay its proceedings . . . is beyond question. This power springs from the inherent authority of every court to control the disposition of its cases. When and how to stay proceedings is within the sound discretion of the trial court.” (internal citations omitted)). On May 19, 2017, the parties will file a Joint Status Report and the court will convene a Status Conference thereafter at the earliest date convenient to all the parties. 

Under the Rules of the United States Court of Federal Claims, a TRO “expires at the time after entry—not to exceed 14 days—that the court sets, unless before that time the court, for good cause, extends it for a like period or the adverse party consents to a longer extension.” RCFC 65(b)(2). For this reason, on April 24, 2017, the court will extend the April 10, 2017 TRO until May 8, 2017. On May 8, 2017, the court will extend the TRO until May 22, 2017.

IT IS SO ORDERED.” 

insideARM Perspective 

So, the ED RFP remains a riddle.  In this matter, it is hard to separate fact from fiction. There are rumors swirling every day among the companies that would like to have the ED contract. What could possibly be a “global solution” with so many competing interests? 

Why would a “global solution” be difficult?  It is also hard to tell the “players” without a scorecard. In an effort to allow our readers to better understand who everyone is and where everyone stands, follow this below: 

Seven Companies received the ED contract award on December 9, 2016

1. Financial Management Systems Investment Corp
2. GC Services Limited Partnership
3. Premiere Credit of North America, LLC
4. The CBE Group, Inc.
5. Transworld Systems Inc.
6. Value Recovery Holding, LLC
7. Windham Professionals, Inc.

GAO Decision on Protests on March 27, 2017 

12 companies had their protests sustained:

1. Allied Interstate, Inc. (Iqor)
2. Automated Collection Services, Inc.
3. Collection Technology, Inc.
4. Collecto, Inc., dba EOS CCA
5. Delta Management Associates, Inc.
6. Gatestone & Co. International, Inc.
7. General Revenue Corporation
8. Performant Recovery, Inc.
9. Progressive Financial Services, Inc.
10. Texas Guaranteed Student Loan Corp
11. Van Ru Credit Corporation
12. Williams & Fudge, Inc. 

4 companies had protests denied:

1. Account Control Technology (2 of 3 protests denied, 1 not decided)
2. Alltran Education Inc. (formerly ERS) – 3 protests denied
3. Global Receivables Solutions, Inc. – 2 protests denied
4. Sutherland Global Services – 3 protests denied 

Two companies had no decision from GAO on their protest:

1. Continental Service Group, Inc. (ConServe)
2. Pioneer Credit Recovery 

4 companies filed lawsuits with the Court of Federal Claims 

1. Continental Service Group, Inc. (ConServe)
2. Alltran Education Inc. (formerly ERS)
3. Account Control Technology
4. Pioneer Credit Recovery 

Two companies had previously won an appeal of a denied protest over their contracts not being extended by ED in 2015.  But, no decision has been rendered in a request by ED to dismiss the lawsuit as moot because they have agreed to take “corrective” or “remedial action” with regard to the earlier decision not to issue contract extensions to the plaintiffs. 

1. Alltran Education Inc. (formerly ERS)
2. Pioneer Credit Recovery 

Oh, and let’s not forget the 11 small business that were selected by ED in October of 2014 under the small business set-aside on its Default Collection Services contract and private collection agency (PCA) program. These companies had been receiving placements from ED until the aforementioned TRO was issued.

The small business collectors are:

1. Action Financial Services
2. Bass & Associates
3. Central Research
4. Coast Professional
5. Credit Adjustments
6. FH Cann & Associates
7. Immediate Credit Recovery
8. National Credit Services, Inc.
9. National Recoveries
10. Professional Bureau of Collections of Maryland
11. Reliant Capital Solutions

On March 23, a federal judge in Illinois granted a debt collector’s motion for summary judgment when the court determined that the debt collector had established all three elements of the bona fide error defense under § 1692k(c) of the Fair Debt Collection Practices Act (FDCPA).

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. 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 case is Washington v. Convergent Outsourcing, Inc., (Case No. 15-c-7043, U.S. District Court, ND. IL, Eastern Division). A copy of the court’s Memorandum Opinion and Order can be found here. 

Background 

Sometime during or before 2013, Washington opened a consumer account with Comcast. On December 5, 2013, Comcast referred an unpaid bill of $1,001 associated with Washington’s account to Convergent Outsourcing, Inc. (Convergent) for collection. In October 2014, Convergent reported an unpaid balance of $1,001 on Washington’s account to various credit reporting bureaus, including Experian, Equifax, and TransUnion. 

Around the same time, Washington met with legal aid attorneys to address potential concerns that she had with her credit report. Upon reviewing her credit report, Washington told her attorneys that she did not believe the debt Convergent had reported was accurate, because she did not recall owing any balance on her Comcast account. Accordingly, on October 17, 2014, Washington’s attorneys sent Convergent a letter stating that the amount reported on the debt was not accurate. 

After Convergent received this letter, one of its employees updated Washington’s account to reflect the letter’s contents per company policy. However, while updating the account, Convergent’s employee made an error: the employee updated Washington’s account by marking it with the code “3ACA” instead of “3DSP.”  “3ACA” denotes that a consumer is represented by an attorney, whereas “3DSP” denotes that a consumer is represented by an attorney and disputes the debt in her account. Convergent acknowledges that Washington disputed her debt and that her account should therefore have been marked with the code “3DSP.” 

On March 30, 2015, Comcast informed Convergent that Comcast would no longer be including “equipment charges” in account balances placed with Convergent for collection. Comcast also informed Convergent that all such charges would be removed from existing accounts no later than April 30, 2015. Accordingly, on April 19, 2015, Comcast removed a $680 equipment charge from Washington’s account, leaving a balance of about $321.

Later that month, Convergent communicated the updated balance amount of $321 to Experian, Equifax, and TransUnion. However, it did not, at that time, also communicate to the bureaus that the account was disputed. 

If Convergent’s employee had properly coded Washington’s account with “3DSP” rather than “3ACA,” then the information communicated to Experian, Equifax, and TransUnion in April 2015 would have reflected that Washington disputed the debt.

The Court’s Decision

The motion was heard by the Honorable Judge John Z. Lee.  Lee authored the Opinion.

Failure to Communicate Disputed Status of a Debt

Washington claims that Convergent violated 15 U.S.C. § 1692e(8) of the FDCPA by failing to inform Experian, Equifax, and TransUnion that Washington disputed her debt when Convergent reported the debt in April 2015. That section prohibits debt collectors from “[c]ommunicating . . . to any person information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.”

Judge Lee wrote:

“Under § 1692k(c) of the FDCPA, a debt collector is not liable for a violation of the FDCPA where the violation (1) was not intentional, (2) resulted from a bona fide error, and (3) occurred notwithstanding the maintenance of procedures reasonably adapted to avoid such a violation. In an FDCPA case, a debt collector is entitled to summary judgment in its favor when the undisputed evidence satisfies all three elements of the bona fide error defense. 

In this case, the undisputed evidence shows that Convergent has established the bona fide error defense.

First, Convergent asserts that its failure to report Plaintiff’s account as disputed was not intentional. It supports this assertion with a sworn declaration from its Executive Vice President of Operations, as well as with ample circumstantial evidence. 

For example, Convergent has set up an internal coding system to ensure that disputes are reflected in consumers’ accounts. Under this system, once an account is marked as disputed, all information reported to credit reporting bureaus is automatically updated to reflect the dispute. In addition, Convergent trains its employees regarding the policies governing its coding system, and it regularly performs compliance audits and tests employees on their understanding of these policies. Employees who deviate from Convergent’s policies are subject to discipline, up to and including termination. Taken together, this evidence is sufficient to establish that Convergent had no intention of violating the FDCPA by failing to report Washington’s debt as disputed.

Second, Convergent’s alleged FDCPA violation resulted from a bona fide error. An error is considered bona fide if it is a genuine mistake made in good faith, rather than a contrived mistake. Mere clerical mistakes qualify as bona fide errors. Here, Convergent’s failure to communicate the disputed status of Washington’s debt resulted from a textbook example of a clerical mistake: the Convergent employee who processed the letter from Washington’s attorneys manually updated Washington’s account with the incorrect code—“3ACA,” rather than “3DSP.” If the employee had not made this mistake, then the debt in Washington’s account would have been marked as disputed when Convergent subsequently reported it to Experian, Equifax, and TransUnion in April 2015. 

Third, Convergent has established that it maintained policies and procedures reasonably adapted to avoid the FDCPA violation at issue. As described above, Convergent developed procedures under which its employees systematically marked accounts as disputed whenever consumers raised disputes. Convergent’s employees were trained and tested on these procedures, and Convergent performed regular audits to ensure adherence to the procedures. As far as the evidence shows, these procedures were reasonably and proportionally tailored to ensure that Convergent communicated the disputed status of any disputed debts that it reported to third parties. And there is no indication that clerical mistakes like the one made in this case are a systematic problem that undermines the effectiveness of Convergent’s procedures. 

For all the foregoing reasons, the undisputed evidence shows that Convergent has established all three elements of the bona fide error defense under § 1692k(c). Convergent is thus entitled to summary judgment in its favor.” 

insideARM Perspective 

This is a case that all ARM companies should study. Policies and procedures matter. Documentation of policies and procedures matters.  Training matters.  Convergent did an excellent job of presenting to Judge Lee that it had met all 3 elements of the Bona Fide Error defense. 

insideARM contacted Convergent for a comment on the case.  Tim Collins, Convergent General Counsel, responded: 

“I have never been a fan of the bona fide error defense mainly because of the costs involved and the low probability of success. Our outside counsel, Charity Olson, from Charity A. Olson, PC, convinced me to give it a try in this case because of the strength of the facts. This was clearly a case of human error and the reason for the Bona Fide Error defense. Interestingly, the work that we have done in response to the creation of the CFPB helped us win this case. This included all the policy and procedure writing and reviews along with the training of our employees. Without these efforts, we may have seen a different outcome.  This win also wouldn’t have happened if it weren’t for the partnership we have with Charity and her willingness to honestly tell us how it is. My hope is this case helps others in deciding when to use the bona fide error defense and in winning the good fight.”

COSTA MESA, Calif. ― Getting debt collection right is about more than money. It’s about knowing the difference between a customer who has simply forgotten to make a payment or someone dealing with a financial hardship. Knowing the difference is important so lenders can provide the individualized customer experience consumers expect when they pay bills, secure a new loan online or deal with collections. 

Debt collections processes have remained static over the years. The industry-standard has been to follow the risk relying on standalone solutions that weren’t able to manage the entire life cycle. As the lending landscape has evolved, with many new and existing choices to access credit, complexity and costs have evolved as well. Collections costs have grown significantly. According to Federal Reserve, consumers accounted for $29.3 billion in charged-off credit card debt in 2016, a 15 percent increase over 2015. Lenders are trying to adapt to these market changes while managing against potential increases in delinquencies.

Experian^® has launched two solutions, eResolve™, and PowerCurve^®Collections, to give consumers an easier way to resolve their debt and to streamline the management process for businesses. eResolve is the first self-service platform to help consumers negotiate and resolve past due obligations while PowerCurve Collections brings together data, decisions, and the collections workflow in a single, unified system. 

“We have to move debt collections into the modern age,” said Craig Boundy, chief executive officer, Experian North America. “Using our data and analytics, lenders can uncover the best way to personalize the collections process to improve the customer experience and simplify debt management. The advanced, data-driven decisioning we offer can prepare lenders against rising delinquencies, while increasing the long-term value of their customers.” 

Helping consumers ease the debt process

eResolve is the first self-service platform that acts as a virtual negotiator for consumers to resolve their debt obligations. Through digital mediums, lenders can offer consumers options for payments, payment dates and the ability to negotiate terms without interacting with a collector. This tailored approach helps eliminate aggressive collections tactics so lenders can build trust through convenience. It also reduces lender costs, increases returns and improves the overall consumer experience while elevating the collections process into the modern age. 

Making the process of debt collection easier for businesses

PowerCurve Collections gives lenders an end-to-end debt management process with insights to inform their actions. Every contact with a customer is an opportunity to strengthen the relationship, and PowerCurve Collections can drive decisions like how often to contact customers and the most effective way – and times – to reach them. The best action could be a high-touch outreach or an automated effort that connects customers to a virtual platform to negotiate their debt. Sometimes doing nothing is the right approach, and understanding which customers are most likely to pay on their own is critical to that decision. PowerCurve Collections can handle these actions easily using a cost-effective collections process that focuses on customer satisfaction. 

“Banks are faced with managing multiple collections systems … and want to consolidate these systems into one integrated system. The cost to service a delinquent loan was eight times the cost of servicing a performing loan,” said Craig Focardi, principal executive advisor at CEB, now part of Gartner. “Client interaction is expected to increase across collections, loss mitigation, and foreclosure processes which leads to more costly interactions. Failure to provide better service may result in a loss of customer lifetime value. When successful, loan collections helps retain customers to extend the customer lifecycle and cross-sell additional products.” 

These new solutions complement the existing suite of Experian’s origination and customer management solutions that refine debt management and improve collections performance.

About Experian

Experian^® is the world’s leading global information services company. During life’s big moments — from buying a home or a car to sending a child to college, to growing a business by connecting with new customers — we empower consumers and our clients to manage their data with confidence. We help individuals to take financial control and access financial services, businesses to make smarter decisions and thrive, lenders to lend more responsibly, and organizations to prevent identity fraud and crime. 

We have 17,000 people operating across 37 countries and every day we’re investing in new technologies, talented people and innovation to help all our clients maximize every opportunity. We are listed on the London Stock Exchange (EXPN) and are a constituent of the FTSE 100 Index. Learn more at www.experianplc.com or visit our global content hub at our global news blog for the latest news and insights from the company.  

Experian and the Experian marks used herein are trademarks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the property of their respective owners.