On March 29, 2017 insideARM reported that the U.S. Government Accountability Office (GAO) had sustained some of the protests that had previously been filed by those companies not selected in the last Department of Education (ED) RFP for Private Collection Agencies (PCAs).  In that article, we reported that the GAO had sustained the protests of 12 firms, denied the protests of 4 firms, and had not made a decision regarding the protests of 3 firms.

We also reported that the GAO had issued a 40+ page decision on the on the protests. However, that document was not made available to the public at that time. It was sent only to attorneys for the protesting companies under a protective order.  We reported that it was likely a version of that document would be made available to the public in 7-14 days.    

The document has now been released. A copy can be found here. 

Background 

The RFP, was originally issued on December 11, 2015, and subsequently amended four times. It sought proposals for the award of multiple contracts for the collection of defaulted student loans.

An award was to be made to the responsible offeror or offerors who submitted a proposal that conformed to the solicitation and was determined to be the “most advantageous” to the government. For the purposes of determining which proposals were the most advantageous, the agency was to consider three factors: (1) past performance; (2) management approach; and (3) small business participation. Past performance and management approach were equal in importance, and small business participation was less important than either of the other factors. 

ED received 47 timely proposals in response to the RFP. For the purpose of evaluating proposals, the agency constituted a technical evaluation committee (TEC). A separate quality control evaluator (QCE) reviewed the offerors’ quality control plans. A separate small business evaluation committee evaluated and reached consensus ratings for offerors’ small business participation plans. 

After the respective evaluation committees concluded their consensus evaluations, the contracting officer, who was also the Source Selection Authority (SSA), reviewed the evaluation results and communicated with the lower-level evaluators regarding their evaluations. In several instances, the SSA disagreed with the ratings assigned by the lower-level evaluators, and adjusted the ratings. 

The SSA initially identified 10 proposals as being among the “most advantageous” and thus proceeded to conduct responsibility determinations of those prospective awardees. She subsequently found three of the prospective awardees non-responsible, and therefore ineligible for award. Seven firms were ultimately selected. The GAO site showed a total of 47 protests (many firms filed multiple protests). 

The Decision 

As noted in our original story on this matter, the decision is over 40 pages in length. It will take some time to review and digest.  The decision provides specific examples of problems with the evaluation process in all areas. 

insideARM will report in more detail on this decision in the coming days.

WEST MONROE, La. – Coast Professional, Inc. (Coast) presented a check for $7,000 to the Louisiana Baptist Children’s Home & Family Ministries (LBCH) at Coast’s West Monroe office today. Coast’s donation is a result of Coast’s dress down for charity program in which employees donate $20 or more for the option to wear jeans and business casual attire for the month. This donation includes the employee contributions from Coast’s West Monroe, LA office and the company match of up to $1500.

The employees of Coast selected LBCH to be the recipient of the charity dress down program for the months of January, February, and March as a result of the impact that LBCH has in the local area. The employees vote bimonthly for the charity that will receive the donations raised through the dress down program for the upcoming period.

All proceeds from the event will benefit local families and help support LBCH’s mission to provide love, care, and hope in Christ to children and families in need. This includes providing residential child care and foster care, job and life skills training, pregnancy resource ministries, foster care and adoption, and orphan care.

“Coast is incredibly honored to be able to donate to local charities that make a significant positive impact within our community and establish an appreciation of charity throughout our organization,” stated Everett Stagg, CFO and Co-Chairman of the Board of Directors at Coast. He continued, “Our staff selected the Louisiana Baptist Children’s Home & Family Ministries for their efforts to create a better environment for children and families in need in the Monroe, Louisiana area. On behalf of Coast and our employees, we are proud to give this donation to the Louisiana Baptist Children’s Home & Family Ministries.”

Pictured, (From left to right): Everett Stagg, CFO / Co-Chairman of the Board at Coast Professional, Inc. presenting a check to Marc Eichelberger, Director of Communications at the Louisiana Baptist Children’s Home

About Louisiana Baptist Children’s Home & Family Ministries

Since 1899, Louisiana Baptist Children’s Home & Family Ministries has been committed to providing love, care, and hope in Christ for children and families in need. Every day, needs are met and lives are changed through Christ-centered ministries: residential child care for ages 5-17; transitional living for ages 18-21; residential family care for homeless children and mothers; Christian Women’s Job Corps with certified HiSET preparation; Granberry Counseling Centers with 12 statewide locations; mobile pregnancy care center; statewide foster care and adoption ministries; and international orphan care mission trips. More than 4,400 children, families and individuals were served in 2016. The Children’s Home receives no state or federal funding. “Where God’s Love Takes You In” banners greet children and families as they enter our Monroe campus. For more information, please visit lbch.org.

About Coast Professional, Inc.

Coast Professional, Inc. is an accounts receivable management company, dedicated to the respectful and ethical collection of higher education and government debt. Coast provides professional collection services to over 200 campus based colleges and universities, guaranty agencies, and government clients. Coast is a five time honoree on the Inc. 5000 list for American’s Fastest-Growing Private Companies provided by Inc. Magazine and in 2016, was recognized for the third consecutive year as one of the “Best Places to Work In Collections” by insideARM.com and Best Companies Group. Since 1976, Coast has worked closely with clients to increase recoveries by assisting consumers in resolving their financial obligations. Coast’s success is exemplified by exceptional recoveries, superior service, and dedication to the highest levels of compliance.

WEST MONROE, La. – Coast Professional, Inc. (Coast) presented a check for $7,000 to the Louisiana Baptist Children’s Home & Family Ministries (LBCH) at Coast’s West Monroe office today. Coast’s donation is a result of Coast’s dress down for charity program in which employees donate $20 or more for the option to wear jeans and business casual attire for the month. This donation includes the employee contributions from Coast’s West Monroe, LA office and the company match of up to $1500.

The employees of Coast selected LBCH to be the recipient of the charity dress down program for the months of January, February, and March as a result of the impact that LBCH has in the local area. The employees vote bimonthly for the charity that will receive the donations raised through the dress down program for the upcoming period.

All proceeds from the event will benefit local families and help support LBCH’s mission to provide love, care, and hope in Christ to children and families in need. This includes providing residential child care and foster care, job and life skills training, pregnancy resource ministries, foster care and adoption, and orphan care.

“Coast is incredibly honored to be able to donate to local charities that make a significant positive impact within our community and establish an appreciation of charity throughout our organization,” stated Everett Stagg, CFO and Co-Chairman of the Board of Directors at Coast. He continued, “Our staff selected the Louisiana Baptist Children’s Home & Family Ministries for their efforts to create a better environment for children and families in need in the Monroe, Louisiana area. On behalf of Coast and our employees, we are proud to give this donation to the Louisiana Baptist Children’s Home & Family Ministries.”

Pictured, (From left to right): Everett Stagg, CFO / Co-Chairman of the Board at Coast Professional, Inc. presenting a check to Marc Eichelberger, Director of Communications at the Louisiana Baptist Children’s Home

About Louisiana Baptist Children’s Home & Family Ministries

Since 1899, Louisiana Baptist Children’s Home & Family Ministries has been committed to providing love, care, and hope in Christ for children and families in need. Every day, needs are met and lives are changed through Christ-centered ministries: residential child care for ages 5-17; transitional living for ages 18-21; residential family care for homeless children and mothers; Christian Women’s Job Corps with certified HiSET preparation; Granberry Counseling Centers with 12 statewide locations; mobile pregnancy care center; statewide foster care and adoption ministries; and international orphan care mission trips. More than 4,400 children, families and individuals were served in 2016. The Children’s Home receives no state or federal funding. “Where God’s Love Takes You In” banners greet children and families as they enter our Monroe campus. For more information, please visit lbch.org.

About Coast Professional, Inc.

Coast Professional, Inc. is an accounts receivable management company, dedicated to the respectful and ethical collection of higher education and government debt. Coast provides professional collection services to over 200 campus based colleges and universities, guaranty agencies, and government clients. Coast is a five time honoree on the Inc. 5000 list for American’s Fastest-Growing Private Companies provided by Inc. Magazine and in 2016, was recognized for the third consecutive year as one of the “Best Places to Work In Collections” by insideARM.com and Best Companies Group. Since 1976, Coast has worked closely with clients to increase recoveries by assisting consumers in resolving their financial obligations. Coast’s success is exemplified by exceptional recoveries, superior service, and dedication to the highest levels of compliance.

WASHINGTON, D.C. — ACA International, the Association of Credit and Collection Professionals, is disappointed by the opening statement and testimony by Richard Cordray, director of the Consumer Financial Protection Bureau, during Wednesday’s hearing of the House Financial Services Committee. The hearing, scheduled in order to receive the semi-annual report of the CFPB to Congress, was the first appearance by Director Cordray before the committee since the inauguration of President Trump.

“We continue to be distressed at Director Cordray’s habit of insulting and mischaracterizing an entire industry of professionals and small businesses that work incredibly hard on behalf of consumers every single day. Our members and industry work collaboratively in a legal and compliant manner with millions of American consumers to resolve their justly-owed debts,” said ACA International CEO Pat Morris. “We are not, and will never be, a ‘dead-end.’ We are an essential part of the financial services cycle. We help put consumers back on their feet; and in many cases, back on the road to financial recovery and financial literacy.”

Consumers, creditors, and the economy as a whole benefit from the existence of the professional debt collection industry, which is committed to upholding the highest standards of ethical and legal practices. ACA International works diligently to ensure that its membership has the tools and information necessary to educate its workforce—emphasizing the importance of training and understanding diverse consumer needs.

In part of his opening statement before the committee, Cordray said: “Another dead-end market for consumers is debt collection…people deserve to be treated with dignity, whether or not they owe a debt.”

Treating consumers with respect and dignity is a bedrock principle for ACA International, and our members work tirelessly to promote professionalism throughout the industry. Debt collectors are highly regulated and seek to help rid the industry of bad actors that taint the image of the vast majority of collectors. Perhaps the testimony should be amended to read: “People deserve to be treated with dignity, whether or not they work in the credit and collection industry.”

About ACA International

ACA International (ACA), the association of credit and collection professionals, is the largest membership organization in the credit and collection industry. Founded in 1939, ACA brings together third-party collection agencies, law firms, asset buying companies, creditors and vendor affiliates, representing tens of thousands of industry professionals. ACA produces a wide variety of products, services and publications, including educational and compliance-related information; and articulates the value of the credit and collection industry to businesses, policymakers and consumers. www.acainternational.org.

On March 27, a United States District Court judge denied a request to dismiss a Fair Debt Collection Practices Act (FDCPA) case as outside the one-year statute of limitations. The judge held that the “Discovery Rule” applies and that the statute doesn’t begin to run until the plaintiff “discovers” the alleged violation, rather than from the date of occurrence of the activity that gives rise to the cause of action. 

The case is Skinner v. Midland Funding, LLC (Case No 16-4522, U.S. District Court, ND, IL). A copy of the Memorandum and Order can be found here. 

Background 

On April 21, 2016 plaintiff, Lisa Skinner, filed a two-count complaint against Midland Funding, LLC, and Midland Credit Management, Inc. (Midland) for alleged violations of the FDCPA. In her complaint Skinner alleged the following:

• She incurred a debt of $1,405.00 for goods and services on a Chase Bank consumer credit account on which she eventually defaulted.
• Chase Bank charged off her account and stopped charging interest and late fees in June 2011.
• Subsequently, Chase Bank sold the debt to defendant Midland Funding, who then assigned the debt for collection to defendant Midland Credit Management.
• From March 2014 through January 2015, Midland wrongfully charged monthly interest on the debt, which resulted in a balance of $1,589.00.
• From February 2015 through February 2016, Midland did not charge plaintiff additional interest on the debt, but continued to report the $184.00 interest previously charged to plaintiff’s account.
• That defendants had no statutory or contractual right to charge and collect interest on her debt. 

Skinner’s complaint alleged violations of 15 U.S.C §§ 1692f and 1692e of the FDCPA. She alleges that Midland attempted to collect an amount not authorized by the agreement or permitted by law, and that Midland misrepresented the amount and character of the debt and communicated false credit information to Equifax, the consumer reporting agency. 

Midland brought a motion to dismiss the complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure.  

Editor’s Note: A 12(b)(6) motion is based upon the argument that the complaint fails to state a claim upon which relief may be granted. In deciding a motion to dismiss pursuant to 12(b)(6), a district court is “required to accept as true all factual allegations in the complaint and draw all inferences in the facts alleged in the light most favorable to the plaintiff. 

The underlying basis of the motion was that plaintiff’s claims are barred by the FDCPA’s one-year statute of limitations because they arose in March 2014, two years before plaintiff filed her complaint.   

Skinner argued that she did not discover the FDCPA violations until she requested her credit reports in August 2015 and March 2016. She also contended that even if her § 1692f claim fails as outside the statute of limitations, her § 1692e claim survives because defendants reported varying balances in February 2016 and March 2016. 

Defendants countered that argument by contending that the conduct plaintiff challenges in February 2016 is identical to the March 2014 conduct and that plaintiff is improperly relying on the continuing violation doctrine.

The Court’s Opinion 

The court began its discussion by noting that recent decisions in the Northern District of Illinois have held that the discovery rule applies to the FDCPA. Midland argued that the discovery rule should not apply because Congress expressed a clear intent that the statute of limitations should run at the occurrence of the injury rather than the discovery of it. 

The Memorandum and Order was written by the Honorable Jorge L. Alonso, United State District Court Judge. Alonso wrote: 

“Dismissing a complaint as untimely at the pleading stage is an unusual step, since a complaint need not anticipate and overcome affirmative defenses, such as the statute of limitations.” Cancer Found., Inc. v. Cerberus Capital Mgmt., LP, 559 F.3d 671, 674 (7th Cir. 2009). However, “dismissal is appropriate when the plaintiff pleads himself out of court by alleging facts sufficient to establish the complaint’s tardiness.” Id. at 674-75. “As long as there is a conceivable set of facts, consistent with the complaint, that would defeat a statute-of-limitations defense, questions of timeliness are left for summary judgment, at which point the district court may determine compliance with the statute of limitations based on a more complete factual record. 

The rule that postpones the beginning of the limitations period from the date when the plaintiff is wronged to the date when he discovers he has been injured is the discovery rule of federal common law, which is read into statutes of limitations in federal-question cases in the absence of a contrary directive from Congress.” Cada v. Baxter Healthcare Corp., 920 F.2d 446, 450 (7th Cir. 1990). 

Absent binding precedent that the discovery rule does not apply to the FDCPA, the Court is persuaded by the reasoning of other courts in this district and applies the discovery rule in this case. While the complaint itself does not explicitly allege when plaintiff first learned of the inaccurate debt reporting, a credit report from TransUnion (attached to the complaint as Exhibit E) run in August 2015 or later, indicates a debt of $1,589.00 (the $1,405.00 initial debt plus the disputed $184.00 in interest). Accordingly, the Court finds that this exhibit supports an inference that plaintiff did not discover the improper credit reporting until August 2015 and may be able to establish a defense to the statute of limitations. For purposes of the motion to dismiss, the Court finds that plaintiff’s complaint, filed in April 2016, is timely.” 

For the reasons set forth above, defendants Midland Funding, LLC and Midland Credit Management’s motion to dismiss is denied.” 

insideARM Perspective 

The key language of Judge Alonso’s order is this: “For purposes of the motion to dismiss, the Court finds that plaintiff’s complaint, filed in April 2016, is timely. As long as there is a conceivable set of facts, consistent with the complaint, that would defeat a statute-of-limitations defense, questions of timeliness are left for summary judgment, at which point the district court may determine compliance with the statute of limitations based on a more complete factual record.” 

This decision may be different as more facts are presented to the court. However, what would likely remain consistent is Judge Alonso’s opinion that the discovery rule applies to FDCPA cases. If that is the case, Midland will need to present evidence that the plaintiff “discovered” the alleged violation more than one year prior to the filing of the suit to prevail on the statute of limitations defense. 

The other key issue to be decided in this is whether Midland did, as alleged, “wrongfully charge interest” on the debt.

Today Consumer Financial Protection Bureau (CFPB) Director Richard Cordray testified before the U.S. House Financial Services Committee. Following brief prepared remarks, Committee Chairman Jeb Hensarling (R-TX) went on the attack, first quoting from a December 21, 2016 National Review article written by attorney Ron Rubin, a former employee of both the CFPB and the House Financial Services Committee.

Hensarling cited that the “unwritten policy was ‘never give them what they ask for,’” and other allegations from the article, and asked whether any of it is true. Cordray responded that he was familiar with the article, that it contained only hearsay, and that he couldn’t respond. Hensarling then got more specific, asking whether he was aware of any Inspector General inquiry into the CFPB’s handling of Congressional inquiry. Cordray said he didn’t know.  Hensarling asked whether Cordray had seen a report from the Inspector General. Cordray: “I’ve gotten dozens of reports. I don’t know what you are referring to. I’d be happy to look into it.” Hensarling: “If necessary, we will subpoena the report.” Cordray: “If you showed me the report and I could refresh myself…” Hensarling: “I’m hoping you can show me a report.” Cordray: “I don’t know. Is it a published report?” This is about as far as that went.

He then moved on to attempt to establish that there is cause for the President to remove Cordray from his office for cause by raising the issue that he has engaged in discretionary rulemakings (such as arbitration and pre-paid card arbitration) while there is still required rulemaking that remains outstanding (such as small business lending).

Rep. Waters (D-NY) then suggested that Director Cordray ignore the entire National Review article, and that she believes he has moved as quickly as possible on the 1071 issue. She then tee’d up the opportunity for Cordray to recount how the bureau uncovered the Wells Fargo problem (laying groundwork for what would be an extremely contentious exchange between Rep. Wagner (R-MO) and Cordray regarding who should really get the credit for exposing the Wells Fargo scandal. She concluded by saying the LA Times accused the CFPB of being “asleep at the wheel.”

Rep. Luetkemeyer (R-MO) then raised the issue of the CFPB’s proposed rule to impose a gag order on companies under investigation, suggesting that it amounts to elimination of due process and is unconstitutional. Cordray responded that they had received Luetkemeyer’s memo on the topic, that he believes they’ve raised legitimate concerns, that they plan to ‘go back to the drawing board on this,’ and that he is confident they will be pleased with a revised proposal.

He then moved to the small dollar lending rule, saying it is so punitive that it will close many businesses, and will deny access to small dollar loans to many consumers who have no other options. He cited the example of “Nick,” who needed a loan to fix his truck, and asked Cordray directly what his solution would be for this. Cordray responded that 14 states have no payday lenders, so tens of millions of American’s seem to be getting by just fine without it. Luetkemeyer said, “No, they are still there. They are just going offshore to borrow the money and those loans are unregulated.”

Other Democrats proceeded to show support for Cordray and the work of the CFPB, while Republicans vigorously attacked him on the issues above, as well as others such as treating rural communities the same as urban ones, even though consumers’ financial options differ greatly; the fact that companies are bullied into accepting consent orders, and that press releases mischaracterize companies’ admission of wrong-doing, and the fact that – even though Cordray’s term ends in July 2018 – he has already served more than 5 years, Congress’s intended term, and isn’t it the right thing to do to step down now (Rep Duffy, R-WI, suggested that would likely be more palatable to Cordray than a messy public hearing about harassment, discrimination, etc. to prove cause for removal).

As of the time this post was finished, nobody had brought up debt collection (except Cordray, briefly, in his prepared remarks).

Democrats offered the chance to showcase his efforts. Republicans didn’t give Cordray much chance to get a word in edgewise. Whatever side you are on, one must admit, it was no doubt a stressful day for the Director.

Last Friday a three judge panel for the United States Court of Appeals, District of Columbia Circuit, issued a ruling that “the FCC’s 2006 Solicited Fax Rule is . . . unlawful to the extent that it requires opt-out notices on solicited faxes.” The case is Bais Yaakov of Spring Valley v. FCC, Case No. 14-1234 U.S. Court of Appeals D.C. Cir.)

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

The case involved the Junk Fax Prevention Act of 2005, the Federal Communications Commission’s (FCC) 2006 Order requiring opt-out notices on solicited faxes, a 2008 lawsuit against Anda, Inc. (Anda) for allegedly failing to comply with the opt-out notice requirement for solicited faxes, Anda’s 2010 petition to the FCC, and the FCC’s 2014 Order affirming its position on regulation of solicited faxes. 

Background

The Junk Fax Prevention Act generally prohibits the use of “any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement.” The Act defines “unsolicited advertisement” as “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person’s prior express invitation or permission, in writing or otherwise.” 

In 2006, the FCC issued a rule governing solicited faxes. (Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991; Junk Fax Prevention Act of 2005).  The FCC’s 2006 Order required that companies include an opt-out notice in all solicited faxes. Thus, the 2006 Rule requires a sender of a fax advertisement to include an opt-out notice on the advertisement, even when the advertisement is sent to a recipient from whom the sender “obtained permission.” 

In 2010, Anda sought a declaratory ruling from the FCC clarifying that the Act does not require an opt-out notice on solicited fax advertisements – that is, those that are sent with the recipient’s prior express permission. 

In response to Anda’s petition, the FCC adhered to its interpretation of the Act as providing the FCC with the authority to require opt-out notices on solicited faxes as well as unsolicited faxes (although the FCC said it would waive application of the rule to businesses that sent solicited faxes before April 30, 2015). Commissioner Pai and Commissioner O’Rielly dissented in relevant part. See 2014 Order. 

The Court’s Opinion 

Per the court’s opinion:

“In this case, businesses that send solicited fax advertisements contend that the FCC’s new rule exceeds the FCC’s authority under the Act. The question is whether the Act’s requirement that businesses include an opt-out notice on unsolicited fax advertisements authorizes the FCC to require businesses to include an opt-out notice on solicited fax advertisements. 

Anda is a company that sells generic drugs. As part of its business, Anda faxes advertisements to small pharmacies. Anda’s fax advertisements convey pricing information and weekly specials to the pharmacies. Many pharmacies have given permission to Anda for Anda to send those faxes. 

In 2008, Anda had been sued in a class action in Missouri state court for alleged violations of the FCC’s Solicited Fax Rule. Many of the plaintiff pharmacies in that case admitted that they had expressly given permission to Anda for Anda to send fax advertisements to the plaintiffs. But those plaintiffs nevertheless sought over $150 million in damages from Anda because Anda’s fax advertisements allegedly did not include opt-out notices that complied with the 2006 Rule’s requirements. 

Let that soak in for a minute: Anda was potentially on the hook for $150 million for failing to include opt-out notices on faxes that the recipients had given Anda permission to send.” (Emphasis added by insideARM)

The text of the Act does not grant the FCC authority to require opt-out notices on solicited faxes. We hold that the FCC’s 2006 Solicited Fax Rule is unlawful to the extent that it requires opt-out notices on solicited faxes. The FCC’s Order in this case interpreted and applied that 2006 Rule. We vacate that Order and remand for further proceedings.” 

After the court issued its ruling FCC Chairman (then Commissioner) Pai issued a statement entitled “On the Latest D.C. Circuit Rebuke of FCC Overreach.” In his statement, Chairman Pai commented: 

“Today’s decision by the D.C. Circuit highlights the importance of the FCC adhering to the rule of law. I dissented from the FCC decision that the court has now overturned because, as I stated at the time, the agency’s approach to interpreting the law reflected ‘convoluted gymnastics.’ The court has now agreed that the FCC acted unlawfully. Going forward, the Commission will strive to follow the law and exercise only the authority that has been granted to us by Congress.” 

FCC Commissioner Michael O’Rielly also issued a statement. O’Rielly stated: 

“The D.C. Circuit decision overturning the Anda Order reconfirms the proper and appropriate reading of the law.  It also signals that the court is willing to call the Commission to task for inappropriately creating authority not provided by Congress.  I can only hope this view will be applied elsewhere, such as in the court’s other case involving TCPA overreach.” 

insideARM Perspective 

Readers of this article might question the applicability of this case involving junk faxes to the TCPA litigation that is rampant throughout the ARM industry. The answer can be seen in the two statements above. The ARM industry is well aware of FCC rulings on issues that are seen as outside the scope of the TCPA. The ARM industry is also well aware of the type of litigation exposure that the court highlighted in its opinion. 

Similar type issues were raised in ACA International v. Federal Communications Commission. They are:

• The FCC’s redefinition of an ATDS, including its treatment of “capacity”
• The FCC’s treatment of “prior express consent” 

It should be noted that the ACA International case is also in the Court of Appeals for the District of Columbia. We will see whether this panel’s analysis and Chairman Pai and Commissioner O’Rielly thoughts on this case carry forward to the ACA International case.

Two recent reported cases from United States district courts remind the ARM industry that Fair Debt Collection Practices Act (FDCPA) litigation over letters is still alive and flourishing.  

Neither involved a dispositive decision; in both cases the defendants had moved the court to dismiss the litigation under Federal Rule 12(b)(6) of the Federal Rules of Civil Procedure.  In both cases the court denied the request. The cases — and costs of defense — continue.

Editor’s Note: A 12(b)(6) motion is based upon the argument that the complaint fails to state a claim upon which relief may be granted. In deciding a motion to dismiss pursuant to 12(b)(6), a district court is “required to accept as true all factual allegations in the complaint and draw all inferences in the facts alleged in the light most favorable to the plaintiff. 

Pollak v. Firstsource Advantage, LLC

The first case is Pollak v. Firstsource Advantage, LLC (Case No. 15-6046, U.S. District Court for the District of New Jersey, March 16, 2017).

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

In Pollak, Firstsource Advantage, LLC (Firstsource) was functioning as a third-party debt collector for its client, American Express. On October 15, 2014, defendant sent plaintiff a letter on its letterhead.  That letter requested that plaintiff send the total amount due on the account to Firstsource at 205 Bryant Woods South, Amherst, New York 14228, and invited plaintiff to call Firstsource at 1-877-420-5095 to discuss various payment options. The letter also included: “This is a communication from a debt collector. This is an attempt to collect a debt and any information will be used for that purpose.” 

Several months later, plaintiff received two additional letters relating to the account (the Settlement Offer Letters). The Settlement Offer Letters “each offered the plaintiff to resolve his account for sixty percent (60%) of his balance” but stated, “In order to accept this offer, please call American Express at 1-877-443-0144.”

Both Settlement Offer Letters are on American Express letterhead, “display the distinctive square shaped American Express logo, and even displayed an encircled ‘R’ to denote the use of a registered trademark” on both the letters themselves and the detachable payment stubs. The Settlement Offer Letters were also signed “Sincerely, American Express Global Collections.” 

Plaintiff alleged that the “numerous and explicit references to ‘American Express’ are meant to instill in the recipient that the Settlement Offer Letters were actually created and sent by the alleged original creditor, American Express.” However, plaintiff alleged the Settlement Offer Letters were, in fact, “sent by defendant, a third-party debt collector, who sent the Settlement Offer Letters as American Express in an effort to evade compliance with state and federal debt collection laws.” Unlike the October letter, the Settlement Offer Letters do not bear Firstsource’s name, nor do they state they are being sent by a debt collector and that any information obtained would be used for purposes of attempting to collect a debt. 

Finally, plaintiff alleged that, when calling the phone number identified in the Settlement Offer Letters, “1-877-443-0144, the plaintiff and any other caller are greeted by an individual identifying themselves as a representative of American Express.” However, plaintiff alleges, “upon information and belief, individuals . . . calling the phone number of 1-877-443-0144 are in fact speaking to representatives and employees of the Defendant, and those employees have no employment or affiliation with American Express.” Plaintiff also claims his “counsel called American Express directly, and American Express advised that the phone number of 1-877-443-0144 actually belonged to Defendant.” 

The crux of plaintiff’s complaint was that Firstsource violated various provisions of the FDCPA, including: Section 1692e (making any “false, deceptive, or misleading representation”); Section 1692e(9) (“use or distribution of any written communication . . . which creates a false impression as to its source, authorization, or approval”); Section 1692e(10) (“use of any false representation or deceptive means to collect or attempt to collect any debt”); Section 1692e(14) (“use of any business, company, or organization name other than the true name of the debt collector’s business, company, or organization”); and Section1692e(11) by failing to disclose that each communication was an attempt to collect a debt by a debt collector and that any information would be used for that purpose. 

In denying Firstsource’s motion to dismiss the court wrote: 

“Accepting plaintiff’s allegations as true, the Court finds these alleged misrepresentations and omissions would be likely to deceive or mislead the least sophisticated debtor. Accordingly, Firstsource’s Motion to Dismiss is DENIED.” 

Cuenca v. Harris & Harris, Ltd

The second case is Cuenca v. Harris & Harris, Ltd (Case No. 16-05385, U.S. District Court, Northern District of Illinois, March 31, 2017).

A copy of the court’s Memorandum and Order in this case can be found here.   

In Cuenca the facts are very simple. Harris & Harris, Ltd (Harris) sent a letter to Cuenca which stated, in part: 

“If this debt is not paid, our client(s) may exercise their various options to enforce collection. At this point, the choice is still yours… please respond accordingly.” 

On May 19, 2016, Cuenca filed this lawsuit alleging that Harris’s letter violated the FDCPA by falsely threatening to sue her. Cuenca’s complaint alleged that “Cuenca believed that Harris’s client intended to sue her. However, Harris’s client does not sue consumers for medical debts.” 

Harris moved to dismiss under Rule 12(b)(6) on the grounds that the statement was not a threat to sue (and therefore could not be false). 

From the court’s Memorandum and Order: 

“The FDCPA prohibits a debt collector from making a “threat to take any action that cannot legally be taken or that is not intended to be taken.” FDCPA claims are judged by the “objective unsophisticated consumer standard.” An unsophisticated consumer “may tend to read collection letters literally, [but] he does not interpret them in a bizarre or idiosyncratic fashion.” Whether a collection letter is confusing is generally a question of fact; dismissal as a matter of law is appropriate only where “it is apparent from a reading of the letter that not even a significant fraction of the population would be misled by it.” 

Harris argued that the language in its letter was not a threat of litigation. 

The court determined: 

“It is not, however, necessary to resolve the question of whether the dunning letter sent to Cuenca constitutes a “threat” of litigation. That frames the inquiry too narrowly. Rather, the relevant issue is whether, threat or not, Harris’s statement would likely mislead an objective unsophisticated consumer about the possibility that Harris’s client would sue her to collect the debt.

At this stage of the litigation, Cuenca need only state a plausible claim. The Court finds that the statement that a debt holder “may exercise their various options to enforce collection” could plausibly be interpreted by an unsophisticated consumer as a threat of potential litigation.”

insideARM Perspective

It is important to remember that both of these cases are still pending. In neither case has there been any final determination that the letters in question violated the FDCPA. The standard for deciding a motion to dismiss under Rule 12(b)(6) is much different than the standard to ultimately decide the case. But, the two cases also show the risk and litigation expense involved in FDCPA cases involving letters. 

insideARM contacted David Schultz from the law firm of Hinshaw & Culbertson LLP regarding the Cuenca case. Mr Schultz represents Harris & Harris, Ltd. Schultz commented,

“We respect the judge and the decision. However, the ruling only denied a motion to dismiss. It did so using the fairly low standard of whether the claim was “plausible.”  It did not endorse the theory. We look forward to prevailing on the merits.” 

insideARM will continue to monitor both cases and will report on future developments. 

As the price of healthcare rises and the reach of its coverage erodes, legislation around balance billing—the process by which patients receive higher-than-expected bills from healthcare providers, often due to having unknowingly received out-of-network care—has become a bellwether in state capitols across the U.S.

States Have Solidified Core Issues

So far, five states have enacted laws to protect against or prohibit balance billing practices, including Illinois, California, Connecticut, Florida and New York. The most recent batch of successful state legislation has managed to boil the issues down to some combination of:

1. Limiting charges for care delivered out of network (CA AB1305, CT SB433, FL HB221, UT SB216)
2. Increasing network transparency and patient disclosures of potential costs (CT SB433, FL HB221, FL HB1175, GA SB302, MN HF3142, TXSB425)
3. Analyzing the potential parameters for balance billing (GA SR974)
4. Establishing processes to resolve billing disputes between patients, doctors, and hospitals (FL HB221, TX SB481)

Failure has not Weakened Lawmakers’ Resolve

At least to some extent, the blueprint of passed state legislation on balance billing is inspiring other states to introduce similar bills, or at least commit to further exploring the issue. Persistence and willingness to compromise has been key to getting bills signed into effective laws. Even in states where bills die in committee, expire without a vote in session, or fail to gain traction for other reasons, Senators and Representatives appear committed to negotiating, re-examining and re-submitting draft bills to improve chances of success. The reasons are several and powerful:  vocal, voting, media-savvy constituents have aired a steady stream of viral, emotionally fraught pleas (often on social media) for relief on the issue, insurance companies are supportive of these bills for their own reasons, and the bills themselves generally have bi-partisan support from everyone, save the physician lobby.

No doubt, it will take persistence to sort out the sticking points that have caused some state bills to fail or “time out.” These have mainly centered on how, exactly, to create a clear formula and methodology for cost-sharing. Beyond that, most people on both sides of the aisle do agree that there is a need for more transparency, some set of parameters around balance billing, a means of dispute resolution, and more research on the problem and viable, equitable solutions that do not economically debilitate consumers, doctors, hospitals and insurance companies.

States to Watch in 2017

Arizona — SB1441

In instances where it was unclear whether a medical provider was in-network, patients would be able to appeal surprise bills through the Department of Insurance, which would set up a phone conference involving the doctor, insurance company and the patient, with the objective of arriving at a mutually agreed upon settlement.  

Georgia — HB71, SB8

Both bills would protect Georgia consumers from surprise out-of-network medical bills, and would require better transparency, stopping short of requiring hospitals to disclose which doctors on the patient journey would be considered in-network.  HB 71 passed out of the House Insurance Committee but did not receive a vote from the full House before the Crossover Day deadline. SB 8 passed the full Senate.  A substitute to SB 8 passed out of the House Insurance Committee and passed out of the House Rules Committee on March 22nd. SB 8 did not receive a vote from the full House before the end of the Legislative Session.  Instead, House Resolution 745 passed.  This resolution creates a study committee that will convene to examine the issue of unexpected out-of-network medical bills in the 2017 off-session.

Ohio — SB284

The bill would require hospitals to provide two written notices to insured individuals, clarifying whether the hospital or physician is an in-network provider, and estimating any potential out-of-network fees for the scheduled service. It would also require informed consent from the individual seeking services from an out-of-network hospital or provider at least 24 hours in advance of the service. Absent consent, the bill would prohibit providers from charging more than what that individual would have paid had the provider been in-network. In emergencies, patients could not be charged more than the in-network cost of a service.

Oklahoma — HB 2216

This bill, which aims to lessen surprise medical bills, passed out of the Oklahoma House of Representatives with a unanimous vote of 93 to 0. The bill requires a non-contracted provider to give a health plan enrollee notice, a good-faith estimate of charges and a disclosure that the provider will either accept the assignment of benefits for the plan’s allowed amount or balance-bill the enrollee. Patients will be able to request a different provider who is covered by insurance. In emergencies, hospitals must notify patients of the network status of treating medical personnel as soon as s/he is stable. The bill is now with the OK Senate for consideration.

Oregon — HB 2339

If passed, this legislation would would require insurers to reimburse non-participating providers at a “reasonable and customary” rate, and would prohibit health care provider or participating health care facility from balance billing a patient covered by health benefit plan or health care service contract for services provided at participating health care facility.

Pennsylvania — SB1158

The Emergency Medical and Health Care Services Surprise Billing Prevention Act, which recently died in the Banking & Insurance Committee, would have altogether removed the patient from billing disputes, and required insurers and healthcare providers to settle involuntary out-of-network bills through arbitration.  Sponsoring senators intend to re-introduce the bill in future sessions.

Rhode Island — HB5012

Although it died in committee, this bill is slated for re-vamp and re-introduction. Had it passed, the so-called Craven Bill would have required the establishment of a dispute resolution for bills for emergency care, and surprise medical bills for out-of-network service.

Texas — SB507

This bill would require clear notices on balance bills to explain to patients their eligibility for mediation. Bills from all types of out-of-network providers treating patients at in-network hospitals and other facilities would be eligible for state mediation, including bills from freestanding emergency rooms.

Utah — HB395
The original intent of this bill was to address balance billing in the emergency room setting. Had it passed, it would have used a national benchmark for typical charges to limit what hospitals and doctors can charge. Right now, that difference is unlimited. There are plans to shortly re-introduce a modified version of this bill in the Utah House of Representatives.

insideARM Perspective

Whether these proposed bills ultimately become law in their current form or not, the work of trial and error is well under way. It’s clear that most state law makers will need to grapple with balance billing and its related issues, whether it’s in this legislative session or the next.

SAN FRANCISCO, Calif. – LiveVox Inc., a leading provider of cloud contact center solutions for enterprise operations, announces the addition of integrated, intelligent email capabilities into its platform with the release of LiveVox Intelligent Email. LiveVox will demonstrate the innovative key features and benefits provided by this platform enhancement during an April 13^th webinar. Technology leaders and financial services industry experts will walk participants through real world examples of how the integrated email capability is being leveraged in today’s contact centers to optimize contact attempts and deliver multi-channel campaigns with improved ROI. 

Expanding Channel Options Delivers Improved ROI

On the importance of delivering innovative methods to reach the consumer while managing compliance regulations, Dusty Whitesell, Chief Evangelist states, “Using email in an intelligent fashion, by leveraging key data to provide campaign attribution, drives highly effective and productive multi-channel campaigns. The ability to access and utilize this data across communication channels enables contact centers to deliver dramatically improved results.  I’m excited to share how this expansion of our platform will enable higher campaign ROIs for our clients.” To learn more about LiveVox’s integrated email solution, read our latest blog post on the subject. 

Contact center leaders are optimizing their contact campaigns and improving campaign performance by turning to integrated email. Attend the webinar to learn how. 

About the event:

• EVENT: Leveraging Intelligent Email in Campaigns
• REGISTER HERE
• DATE/TIME: Thursday, April 13th, 2017 at 10am PT/ 1pm ET
• PANELISTS:
  • Boris Grinshpun, Director, Product Management, LiveVox, Inc.
  • Anthony Warden, VP, Loan Resolutions, Texas Dow Employees Credit Union
  • Dusty Whitesell, Chief Evangelist, LiveVox, Inc. 

About LiveVox, Inc.

LiveVox is a leading provider of cloud contact center solutions for enterprise operations. The LiveVox multi-channel platform provides risk mitigation tools, such as Four Clouds, that simultaneously addresses key compliance concerns while optimizing performance efficiencies.  LiveVox Intelligent Email system is another example of how LiveVox is providing contact centers with a competitive advantage in a changing regulatory environment through innovation. To learn more, contact us at info@livevox.com.