According to an announcement from the American Financial Services Association (AFSA), the trade organization has submitted a list of regulatory reforms to the Trump Administration that would provide relief to its members operating in the consumer credit industry. AFSA is the national trade association for the consumer credit industry, with 400 members that include traditional installment lenders, vehicle finance/leasing companies, consumer and commercial finance companies, mortgage lenders and servicers, payment card issuers, industrial banks and industry suppliers. 

Per the announcement, the proposal was submitted at the behest of Mark Calabria, Chief Economist for Vice President Mike Pence, and followed a White House meeting of AFSA member company executives, representatives of the administration’s Domestic Policy Council and Calabria in March. AFSA’s proposals include:

• A halt to CFPB examinations;
• Placing moratoriums on the use of disparate impact theory and the CFPB’s complaint database;
• Withdrawing compliance bulletin 2015-07 on in-person collection of consumer debt;
• Terminating the arbitration and small-dollar rulemakings;
• Withdrawing compliance bulletins 2012-03 and 2016-02 on service providers;
• Re-designating payments from the civil penalty fund;
• Ensuring the accuracy of press releases as they relate to the enforcement actions to which they pertain, and;
• A general review of CFPB procedures.

Most of the recommendations will be of interest to the ARM industry. One that may particularly resonate is the detailed description of the compliance bulletins on service providers, as most collection agencies also do business with the major credit bureaus and other vendors that are much larger than they are:

These bulletins direct banks and nonbanks to ensure that their service providers are in compliance with applicable laws. This is an improper assignation of authority. For example, a small, one-office finance company cannot oversee one of the nation’s three largest credit bureaus. In another example, it is inappropriate for a finance company to oversee a credit insurance provider – that is a job best left to state insurance regulators.

Additionally, the trade association submitted a letter to Ajit Pai, Chairman of the Federal Communications Commission (FCC) regarding reforms to modernize the Telephone Consumer Protection Act (TCPA).

Politico had reported back in February that Vice President Mike Pence had hired Mark Calabria, “a libertarian advocate of free markets,” as his chief economist. Calabria had been the director of financial regulation studies at the Cato Institute. A quote in the article from Jim Parrott, a senior adviser to former President Barack Obama’s National Economic Council, put Calabria’s appointment in perspective this way:

He gives President Donald Trump’s White House “a voice around the table that will give them their philosophical true North.”

This article previously appeared on the Venable blog, and is republished here with permission.

On the heels of the CFPB’s publication of a Special Edition of its Supervisory Highlights focused on consumer reporting, the three nationwide credit reporting agencies (CRAs) are making significant changes to how public records will be reported on credit reports. Starting July 1, civil judgments and tax liens will be excluded from credit reports unless they meet heightened data standards. Specifically, to be accepted, public records data must meet the following criteria:

1. a minimum of consumer personal identifying information (name, address, and SSN and/or date of birth) and
2. a minimum frequency of courthouse visits to obtain newly filed and updated public records of at least every 90 days.

The CRAs expect that a vast majority of public records data furnished to the CRAs will not meet these standards and therefore will be deleted from credit reports (or, for new records, will not be reported in the first place).

The CFPB’s Special Edition Supervisory Highlights, issued March 2, specifically referenced earlier exams of CRAs where examiners concluded that one or more of the CRAs lacked quality control policies and procedures to test the accuracy of the public records data furnished to them. However, the report goes on to note that in follow-up reviews, the CFPB has observed improvements in the oversight of public records providers, including by enhancing the standards for the public records data that will be accepted and by increasing the frequency and scope of audits of its third-party public records providers.

The change announced by the three CRAs is part of a larger initiative, the National Consumer Assistance Plan, which was launched in March 2015 after the three companies entered into settlement agreements with the New York Attorney General and later a group of 31 state attorneys general.

On March 27, 2016, a federal judge in Illinois dismissed a Fair Debt Collection Practices Act (FDCPA) claim involving a debt collector’s failure to report a dispute to a credit bureau where the collector learned of the dispute after initially reporting the debt to the credit bureau. The case is Gordon v. Syndicated Office Systems, LLC., (Case No. 16-4440, U.S. District Court, Northern District of Illinois, Eastern Division.)

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

Background

On April 19, 2016, Plaintiff, Crissandra Gordon filed suit under the FDCPA, 15 U.S.C. § 1692 et seq, against Defendant Syndicated Office Systems, LLC d/d/a Central Financial Control.

In her Complaint, Plaintiff alleged:

• That Defendant, a “debt collector” as the phrase is defined by the FDCPA, see 15 U.S.C. § 1692(a)(6), “began collection activities on an alleged consumer debt” attributed to Plaintiff.

  Editor’s Note: The Complaint did not allege any specific date when the Defendant “began collection activities”. Instead it states: “on a date better known to Defendant, Defendant began collection activities on an alleged consumer debt (the “Alleged Debt”) from the Plaintiff.”

• Defendant reported the debt to credit reporting agencies, and it appeared on Plaintiff’s credit report.
• On July 27, 2015, plaintiff sent a letter “directly” to defendant to dispute the debt.
• On October 2, 2015, plaintiff examined her credit report again and found that “Defendant had not removed the credit account nor marked it as ‘disputed by consumer.’”

Defendant moved to dismiss the case under Rule 12(b)(6) of the Federal Rules of Civil Procedure.

Editor’s Note: Under Rule 12(b)(6), a complaint may be dismissed for “failure to state a claim upon which relief can be granted.” 

Defendant argued that Plaintiff failed to state a claim for violation of section 1692e(8) because “there is no affirmative obligation under the FDCPA for a debt collector, after becoming aware of a dispute, to update the information” that it may have already reported to a credit reporting agency. 

In a short Memorandum Opinion and Order the court agreed with the Defendant: 

“The vast weight of authority is on defendant’s side. See Wilhelm v. Credico, Inc., 519 F.3d 416, 418 (8th Cir. 2008); Rogers v. Overton, Russell, Doerr & Donovan, LLP, No. 1:16-CV-00784, 2017 WL 570811, at *2-3 (N.D.N.Y. Feb. 13, 2017) (“overwhelming weight of authority” rejects “affirmative post-reporting duty to communicate a dispute that arises after the debt has been reported”); Rogers v. Virtuoso Sourcing Grp., LLC, No. 1:12-CV-01511-JMS, 2013 WL 772865, at *2-3 (S.D. Ind. Feb. 28, 2013) (citing cases for same proposition); Wells v. Deca Fin. Servs., LLC, No. 1:12-CV-01514-JMS, 2013 WL 772870, at *3 (S.D. Ind. Feb. 28, 2013) (same). In Wilhelm, the leading federal appellate court case on this issue, the Eighth Circuit reasoned as follows: 

[Plaintiff] assert[s] that § 1692e(8) imposed an affirmative duty on [debt collectors] to disclose that he had disputed the debt. He cites no case supporting this contention, and we reject it. Section 1692e generally prohibits “false, deceptive, or misleading representation.” Subsection 1692e(8) applies to the “communicating” of “credit information.” “Communication” is defined as “the conveying of information regarding a debt directly or indirectly to any person through any medium.” § 1692a(2). Reading these provisions together, as we must, the relevance of the portion of § 1692e(8) on which Wilhelm relies—“including the failure to communicate that a disputed debt is disputed”—is rooted in the basic fraud law principle that, if a debt collector elects to communicate “credit information” about a consumer, it must not omit a piece of information that is always material, namely, that the consumer has disputed a particular debt. This interpretation is confirmed by the relevant part of the Federal Trade Commission’s December 1988 Staff Commentary on the Fair Debt Collection Practices Act: 

1. Disputed debt. If a debt collector knows that a debt is disputed by the consumer . . . and reports it to a credit bureau, he must report it as disputed.
2. Post-report dispute. When a debt collector learns of a dispute after reporting the debt to a credit bureau, the dispute need not also be reported. 

519 F.3d at 418 (citing FTC Staff Commentary, 53 Fed.Reg. 50097-02, 50106 (Dec. 13, 1988)). This reasoning is persuasive, and Plaintiff has provided no compelling reason to deviate from it. 

This Court finds no reason to depart from Wilhelm and the myriad other cases that have held that a debt collector has no “continuing duty . . . to advise consumer reporting agencies that a debt has been disputed, even when the dispute occurs after the debt collector reports the debt.” See Virtuoso Sourcing Grp., 2013 WL 772865, at *3. Plaintiff makes no factual allegations against defendant other than inaction after she disputed the debt that defendant had previously reported to a credit reporting agency. Because her only factual allegations are based on an invalid legal theory, she fails to state a claim on which relief can be granted, so this Court must dismiss her complaint.” 

In a footnote to the opinion the court discussed Plaintiff’s argument that other FDCPA provisions were also violated. The court wrote: 

“Plaintiff cites a number of other provisions of the FDCPA, including 15 U.S.C. 1692d, 1692e(2), 1692e(10), and 1692f, in addition to section 1692e(8). But she makes no factual allegations of wrongdoing other than failing to “remove[] the credit account [or] mark[] it as ‘disputed by consumer,’” and section 1692e(8) is the only provision of the FDCPA that is even arguably applicable to this alleged misconduct. See Rogers v. Overton, Russell, Doerr & Donovan, LLP, No. 16cv784, 2017 WL 570811, at *2 n.1 (N.D.N.Y. Feb. 13, 2017) (describing the aforementioned provisions of the FDCPA and concluding that section 1692e(8) was the only subsection that was even “arguably applicable based on” a complaint making similar factual allegations). Plaintiff concedes as much in her response brief because she makes no specific argument based on any provision other than section 1692e(8).” 

insideARM Perspective 

Readers should note that this case was brought under the FDCPA, not the Fair Credit Reporting Act (FCRA). It was an individual FDCPA claim. It was not a regulatory action by a state or federal regulatory agency.

While the court in this case ruled that under the FDCPA the company had no obligation to report the dispute, insideARM would suggest that conservative industry best practice in this area would be to REPORT the dispute EVEN THOUGH the company learned of the dispute AFTER initially reporting the debt. Accordingly, insideARM would suggest that all disputes be reported regardless of when received. 

The saga of the United States Department of Education (ED) RFP for Private Collection Agencies had a new development this week. Rumors were flying within the ARM industry the past two days that ED had sustained some or all of the protests that had previously been filed by those companies not selected in the last RFP.  

On January 5, 2017 insideARM reported that 11 protests had been filed as of that date. Earlier this month, in a related story, we reported that a total of 26 protests had been filed. Today the GAO website reflects a total of 47 separate protests. This does not mean that 47 companies filed protests; several companies filed more than one. 

On Monday the GAO issued a 40+ page decision on the protests.  However, that document was not made available to the general public. It was sent only to attorneys for the protesting companies, under a protective order.  It is likely a version of that document will be available to the general public in 7-14 days.   

Until the document is made available we can only speculate on the specifics.  However, the “results” of that 40+ page document were made public on the GAO website today.  It is like knowing the final score of a sporting event, but not being allowed to see the game.

The charts below depict the information provided on the GAO site as of today.

The following 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. 

The following 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 

Continental Service Group, Inc. (ConServe) has 2 protests that are still undecided and Pioneer Credit Recovery has 2 protests that are still undecided. 

Now the big question is this: What does this mean? 

Without seeing the 40+ page document from the GAO it is probably too early to tell much. insideARM will continue to monitor and report as soon as the document is made public.

Yesterday the Court of Appeals for the Seventh Circuit affirmed a lower court ruling that Portfolio Recovery Associates, LLC (PRA) violated the Fair Debt Collection Practices Act (FDCPA) by sending a letter that could be deceptive and misleading to the least sophisticated consumer. The case is Pantoja v. Portfolio Recovery Associates, LLC., (Case No.15-1567, U.S. Court of Appeals, Seventh Circuit).

A copy of the opinion can be found here.

Background 

The factual background for this case is taken from the court’s opinion.  Their slant on the facts foretells the court’s thinking on the case. 

“Back in 1993, Plaintiff Manuel Pantoja incurred a debt for a Capital One credit card that he applied for but never actually used. Nevertheless, Capital One assessed annual fees, late fees, and activation fees against Pantoja’s account. Not surprisingly, he never made any payment on the account.

Twenty years later, long after the statute of limitations had run, PRA had bought Capital One’s rights to this old debt and sent Pantoja a dunning letter trying to collect. The federal Fair Debt Col lection Practices Act (“FDCPA”) prohibits collectors of consumer debts from, among other things, using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e. This appeal concerns the practice of attempting to collect an old consumer debt that is clearly unenforceable under the applicable statute of limitations. 

The district court granted summary judgment in favor of plaintiff Pantoja on his claim under § 1692e. The court found the dunning letter was deceptive or misleading because (a) it did not tell the consumer that the defendant could not sue on this time‐barred debt and (b) it did not tell the consumer that if he made, or even just agreed to make, a partial payment on the debt, he could restart the clock on the long‐expired statute of limitations, in effect bringing a long‐dead debt back to life. Pantoja v. Portfolio Recovery Assocs., LLC, 78 F. Supp. 3d 743 (N.D. Ill. 2015). 

In April 2013, PRA sent a dunning letter to Pantoja claiming he owed $1,903.15. The letter said:

We are offering to settle this account FOR GOOD! Life happens and at times you may fall behind on your commitments. We understand and are offering you the opportunity to lock in this settlement offer with a low down payment of $60.00. If settling this account with the options that we are offering is difficult for you, give us a call.

Other payment options may be available so please call 1‐800‐772‐1413 for more information. 

Please understand, we can’t help you resolve this debt if you don’t call, our friendly representatives are waiting. Because of the age of your debt, we will not sue you for it and we will not report it to any credit reporting agency.           

The letter also proposed three “settlement offers” to choose among. The first called for a “down payment” of $60.00 and payment of an additional $511.00 within a month, with the claim that this would “save” Pantoja $1,332.15. The second option called for a down payment of $45.00 and six monthly payments of $104.00 each, to “save” Pantoja $1,234.15. The third option called for a down payment of $40.00 and twelve monthly payments of $60.00, to “save” Pantoja $1,143.15.

The offers added: “Once the full settlement payment is received your account will be considered settled in full.” The second page of the letter cautioned: “We are not obligated to renew this offer.” See Evory v. RJM Acquisitions Funding L.L.C., 505 F.3d 769, 776 (7th Cir. 2007) (stating that this sentence, word-for‐word, would protect consumers from false impressions concerning collectors’ supposedly “one‐time” settlement offers).” 

The Court’s Opinion 

The court noted that its principal focus was on the following language in the dunning letter: “Because of the age of your debt, we will not sue you for it and we will not report it to any credit reporting agency.” 

As noted above, the district court had granted summary judgment for Pantoja on his claim under the FDCPA. The lower court offered two independent reasons: 

• The first was that the dunning letter failed to warn Pantoja that if he accepted any of the settlement offers, whether by making a partial payment or even by just agreeing to make a payment, he would lose the protection of the statute of limitations.
• The second is that the letter deceptively said that PRA had chosen not to sue Pantoja, rather than saying that the debt was so old that PRA could not sue him for the alleged debt. 

The three-judge panel at the court of appeals agreed with the lower court’s analysis. 

Per the opinion:

“We agree with the district court’s two reasons for finding that the dunning letter here was deceptive. First, the letter does not even hint, let alone make clear to the recipient, that if he makes a partial payment or even just a promise to make a partial payment, he risks loss of the otherwise ironclad protection of the statute of limitations. Second, the letter did not make clear to the recipient that the law prohibits the collector from suing to collect this old debt. Either is sufficient reason to affirm summary judgment for the plaintiff.

We begin with the danger that a debtor who accepts the offered terms of settlement will, by doing so, waive his otherwise absolute defense under the statute of limitations. Only the rarest consumer‐debtor will recognize this danger.

Whatever the precise scope of the Illinois law on restarting the statute of limitations clock with a partial payment or new promise to pay, either step would have put Pantoja in a much worse legal position than he would have been in before taking the step. 

We believe the FDCPA prohibits a debt collector from luring debtors away from the shelter of the statute of limitations without providing an unambiguous warning that an unsophisticated consumer would understand.

The second reason we agree with the district court that PRA’s letter is deceptive and misleading is that it gives the impression that PRA has only chosen not to sue, not that it is legally barred from doing so. Defendant points out, though, that its letter to Pantoja does not threaten a lawsuit, and it even says that PRA “will not sue you for it.” 

As the district noted, this carefully worded sentence was taken from a 2012 consent decree between the Federal Trade Commission and another debt collector. Where that other collector knew the statute of limitations had expired, the decree required collection letters to say: “The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it.” McMahon v. LVNV Funding, LLC, 2012 WL 2597933, at *2 (N.D. Ill. July 5, 2012), rev’d on other grounds, 744 F.3d 1010 (7th Cir. 2014); see also 78 Fed. Reg. at 67,876 n.240 (quoting consent decree). 

As the district court also noted, PRA omitted the first sentence from the consent decree about the law limiting how long you can be sued for a debt. It opted instead to include only the vaguer “Because of the age of your debt we will not sue you for it ….” The reader is left to wonder whether PRA has chosen to go easy on this old debt out of the goodness of its heart, or perhaps because it might be difficult to prove the debt, or perhaps for some other reason. 

We are not sure that the only reasonable way to read defendant’s letter is the district court’s reading, that the letter would confuse all unsophisticated consumers, but we are confident that it is one reasonable way to read it. Closer to the heart of the issue, this letter is an example of careful and deliberate ambiguity. (Recall how it adopts part of the language from another debt collector’s consent decree.) 

The carefully crafted language, chosen to obscure from the debtor that the law prohibits the collector from suing to collect this debt or even from threatening to do so, is the sort of misleading tactic the FDCPA prohibits. The only reason to use such carefully ambiguous language is the expectation that at least some unsophisticated debtors will misunderstand and will choose to pay on the ancient, time‐barred debts because they fear the consequences of not doing so. 

The judgment of the district court is AFFIRMED.” 

insideARM Perspective

This is case is another in the long line of FDCPA cases involving Out-of-Stat debt. 

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

This is the second time this week where insideARM has written a story on a case where the defendant collector attempted to rely on language from a prior consent decree.  However, in that case, as in this one, the defendant only pulled a portion of the language from the prior consent decree. See our story on Pittman v. Jefferson Capital Systems, LLC, et.al. here.  

Finally, as we have written before — and will probably write again in the future – collecting on Out-of-Stat debt continues to be challenging on many fronts.

On March 24, 2017, the Maryland Court of Appeals held that a debt buyer waived its right to arbitrate a consumer’s class action lawsuit, alleging that an unlicensed debt buyer violated Maryland law when it obtained a small claims collection judgment against the consumer in 2009 (Cain v. Midland Funding, LLC, No. 45, Sept. Term 2016, Filed March 24, 2017). 

The consumer’s class action suit was premised on an earlier Maryland ruling holding that a 2007 Amendment to Maryland law required “passive” debt buyers to obtain a collection agency to file collection lawsuits and that a judgment debtor could maintain a separate action to void the judgment and collect damages as a result of the unlicensed activity. 

Earlier, the debt buyer (Midland) obtained a trial court order compelling arbitration based on the terms of the credit card agreement entered into between the original creditor (Citibank) and the consumer that allowed either party to submit its claims to binding arbitration.  However, Citibank’s contract included an exception permitting the parties to proceed directly to litigation in a small claims court.  Midland did just that, suing Mr. Cain in 2009 for his debt in the District Court of Maryland.  

The Court held that the question of waiver of the arbitration provision was one to be decided by state law. The Court examined the language of the small claims exception and held that Midland’s decision to file suit in the small claims court, as permitted by the agreement, operated as a waiver of their right to later arbitrate Mr. Cain’s subsequent suit.  The Court applied the waiver principle because the collection suit and the subsequent collateral attack on that judgment were deemed “related” actions. Therefore, when Midland elected to sue it gave up its right to arbitrate this related suit.  

This case now returns to the trial court to consider the class action claims seeking a declaratory judgment voiding the judgments and return of monies paid pursuant to the small claims judgment.     

MUNCIE, Ind. – Ontario Systems, a leading software provider to the healthcare revenue cycle management (RCM), accounts receivable management (ARM) and government (GOV) markets, has announced a new partnership with Pronto Computing to provide automated self-pay discovery scrubs to its healthcare customers. Driven by the Artiva HCx™ solution from Ontario Systems, the new partnership will help medical providers give patients a single comprehensive financial experience, while fulfilling missions with increased revenue, reduced cost to collect, and improved patient satisfaction. By integrating key partners like Pronto Computing, the Ontario Systems HCx solution will enable those providers to benefit from missing insurance identification, with increases in reimbursement and efficiency along with reduced bad debt expense.

“By embedding self-pay discovery into the process with the Artiva HCx solution, providers see a 3% average identification rate of insurance on previously self-pay identified accounts,” says Shawn Yates, Ontario Systems Director of Healthcare Product Management. “These accounts typically move to bad debt creating poor patient relations and inflated bad debt expense. By identifying these accounts in an automated revenue cycle process, providers realize big labor savings, freeing up their account representatives’ time to focus on more strategic revenue cycle opportunities. By partnering with Pronto Computing, our customers can focus their business office staffs’ efforts on the most important accounts that need attention instead of working accounts that already have available insurance to file.”

Pronto Computing focuses on automating the healthcare revenue cycle process by empowering clients with an innovative and robust payer connection portfolio, used to scrub self-pay accounts for missing insurance. This streamlines workflow and creates unprecedented efficiencies through automation, using a combination of proprietary sources, 270/271 HIPAA transactions and web scraping to identify found Medicaid, Medicare, and commercial coverage, and eliminate manual intervention.

“We are excited to partner with Ontario Systems and bring Pronto’s eligibility services to customers using the Artiva HCx solution,” says Robert Nolan, Pronto Computing Co-Founder. “We are impressed with how thoughtfully Ontario Systems integrated our product within Artiva HCx technology. Pronto’s eligibility services together with the Artiva HCx solution will enable providers to find the right insurance for patients, resulting in increased net revenue, decreased costs associated with manual insurance processing, as well as decreased write offs to bad debt.”

“Our customers excel at deploying innovative solutions to healthcare’s biggest and most common financial challenges,” says Ontario Systems Senior Director of Business Development, Steve Scibetta. “That’s why we continue to partner with market leaders like Pronto who enable us to enhance our technology in a way that brings new fuel to healthcare provider missions across the country.”

About Pronto Computing

Pronto is more than just a technology services firm; they are process re-engineering partners. Our revenue cycle consulting experience provides a holistic view of the revenue cycle, including the importance of workflow efficiency, productivity measurement and key performance reporting. Pronto aligns with you throughout the implementation process and provides consulting services, ensuring that the organization’s outcomes are measurable and objectives are achieved. Pronto is currently working with several providers across the country in varied health care segments. Additionally, third party outsourcing vendors are utilizing our technology to improve the financial performance of their clients. Pronto is focused on delivering a combination of low-cost technology, increased quality, and utmost efficiency to its clients.

About Ontario Systems

Ontario Systems, LLC is a leading provider of revenue recovery software and solutions to the revenue cycle management (RCM), accounts receivable management (ARM), and government markets.  Established in 1980 and headquartered in Muncie, Ind., Ontario Systems also has a location in Vancouver, Wash., and employees in 27 states. Ontario Systems offers a full portfolio of software, services and business process expertise, including product brands such as Artiva RM™, Artiva HCx™, Contact Savvy®, and RevQ. Ontario Systems customers include five of the 15 largest hospital networks who actively manage over $40 billion in receivables collectively, as well as eight of the 10 largest ARM companies and more than one hundred state and municipal governments in the U.S. 

WOODLAND HILLS, Calif. – Account Control Technology Holdings, Inc. (ACT Holdings), a national leader in delivering debt recovery and business process outsourcing solutions, is proud to announce the hire of Maureen Burke as Chief Financial Officer (CFO). Burke’s career spans more than 25 years of comprehensive business and financial services experience, including the last 17 years in CFO and major financial project leadership positions. She will report to the company’s CEO, Tracey Carpentier. 

“Burke is an excellent addition to our executive leadership team, and I’m excited to have her as our new CFO,” said ACT Holdings CEO Tracey Carpentier. “Burke’s broad business and financial experience and knowledge will be invaluable as we continue to extend and execute our business plan and strategic initiatives.” 

Before joining ACT Holdings, Burke held CFO and major financial project management positions at large global companies, including Tatum (a Randstad company), Wilsonart, LLC, Gap, Inc., Sears Holdings Corporation, and Renessen LLC. She also served as Vice President of Finance for Monsanto/NutraSweet. Burke has also worked within Merrill Lynch, developing investment strategies and comprehensive financial plans for individuals and companies. 

“Joining ACT Holdings at such an exciting time is an honor.” said Burke. “It is a great opportunity to be able to work for a company that’s been on the Inc. 5000 list for the past 10 years and has a philanthropic focus. I’m excited to work with the rest of the ACT Holdings executive team, to develop and execute business growth strategies to enhance further ACT Holdings’ industry leadership position.” 

Burke has an MBA from DePaul University and an undergraduate degree from Mundelein College (Loyola University Chicago). She also volunteers at Pacific Community Ventures, providing start-ups with direction and tools for financial planning. 

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.

On Friday, March 24, 2017 a federal Judge in New Jersey dismissed a putative Fair Debt Collection Practices Act (FDCPA) class action against a debt collector over allegedly improper letters dealing with unpaid E-ZPass tolls and associated penalties. 

In the putative class action, Plaintiff Thomas E. St. Pierre (Plaintiff) alleged that defendant Retrieval-Masters Creditors Bureau, Inc. (Defendant) violated the FDCPA, (15 U.S.C. § 1692, et seq.), because Defendant, a debt collector, mailed Plaintiff, and other similarly situated debtors, envelopes with glassine windows through which their account number and other personal information was visible.

Fortunately for the Defendant, the court ruled that such obligations do not constitute a “debt” under the FDCPA and as a result there was no FDCPA violation. The case is St. Pierre v. Retrieval-Masters Creditors Bureau, Inc., (Case No. 15-2596, U.S. District Court, District of New Jersey). 

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

Background 

The allegations in the Complaint were straightforward. 

Plaintiff alleged that he contracted with New Jersey E-ZPass (E-ZPass) to participate in its electronic toll payment program (the Agreement), which allows tolls to be collected from an E-ZPass account through an electronic transponder. Plaintiff also alleged that, pursuant to the Agreement, he was required to maintain a prepaid balance, and, at the moment he passed through a lane accepting the electronic payment, E-ZPass would automatically deduct the required toll charge from his account balance. When he passed through a lane with insufficient funds in his account, he was subject to penalties for nonpayment of the toll. 

Plaintiff claims that Defendant sent him a collection letter, dated November 11, 2013, attempting to recover $60.06, which “constituted a combination of unpaid tolls and associated penalties….” In that letter, Defendant advised Plaintiff that, because he had not “maintained a sufficient prepaid balance,” E-ZPass revoked his privileges and assigned the unpaid obligation to Defendant for collection. Defendant also warned Plaintiff that the continued use of the New Jersey E-ZPass tag would result in toll evasion violations and administrative fees.” 

Nearly seven months later, Defendant sent him another collection letter, dated June 16, 2014, attempting to recover “the amount of $1,200.75, which represented a combination of unpaid tolls and associated penalties.” 

Plaintiff did not challenge the validity of the underlying obligation to pay outstanding tolls and penalties. In his single-count Amended Complaint, Plaintiff asserted that Defendant violated § 1692f(8) of the FDCPA “by sending E-ZPass collection letters to Plaintiff and members of the putative Class in envelopes with glassine windows through which their account numbers were made visible.” 

Defendant moved to dismiss the Complaint Under Rule 12(b)(6) of the Federal Rules of Civil Procedure.

Editor’s Note: Under rule 12(b)(6), a complaint may be dismissed for “failure to state a claim upon which relief can be granted.” 

Defendant argued that the Complaint should be dismissed because Plaintiff failed to allege a concrete harm sufficient to establish Article III standing under Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016). In the alternative, Defendant contended that the obligation it sought to recover – the delinquent toll charges and penalties – is not a “debt” as defined by the FDCPA. 

Spokeo Argument 

The 23 page opinion was issue by the Honorable Freda L. Wolfson, United States District Court Judge. Judge Wolfson devoted nine pages to the Spokeo Article III standing issue.  Wolfson reviewed the various FDCPA Spokeo cases in the Third Circuit. Wolfson ultimately determined that Plaintiff did, in fact, have Article III standing to bring this claim. Wolfson wrote: 

“Accordingly, because the FDCPA unambiguously grants Plaintiff a statutory right to be free from the disclosure of private information that could expose his status as an alleged debtor, and that the right to privacy is an interest that has long been recognized at law, the Court concludes that Plaintiff has adequately alleged the concreteness requirement under Article III.” 

The Tolls and Penalties do not constitute a “debt” under the FDCPA Argument  

The court then moved to the Defendant’s argument that since tolls and penalties do not constitute a “debt” under the FDCPA, there can be no FDCPA violation in this case. 

Wolfson wrote: 

“In order to state a claim under the FDCPA, “a plaintiff must prove that (1) [he] is a consumer, (2) the defendant is a debt collector, (3) the defendant’s challenged practice involves an attempt to collect a ‘debt’ as the Act defines it, and (4) the defendant has violated a provision of the FDCPA in attempting to collect the debt.” Here, Defendant argues that the delinquent tolls and penalties are not “debts” under the FDCPA, and, as a result, the Court must determine whether those particular obligations fall within the purview of the Act – an issue that only a few federal courts throughout the country have previously addressed. 

“Debt” is defined as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes….” 15 U.S.C. § 1692a(5). Although Congress has not defined the term “transaction,” the Third Circuit has explained that the “debt” must arise out of a pre-existing relationship in which a debtor voluntarily elects to avail himself of either consumer goods or services.”

Wolfson likened tolls to taxes and referenced the case of Staub v. Harris, 626 F.2d 275, 278 (3d Cir. 1980) which held that that taxes were not a “debt” under the FDCPA. 

“Thus, the obligation to pay tolls does not arise from a transaction that is “primarily for personal, family, or household purposes. Under the FDCPA, an obligation is not a “debt” if that obligation arises out of the operation of law, as opposed to a consensual consumer “transaction. “

The Plaintiff’s argument was that the amount in issue, while originating from unpaid tolls and penalties, was now part of a consumer transaction between himself EZ-Pass and that the Agreement is the source of his obligation to pay the unpaid tolls and penalties. 

Judge Wolfson disagreed. Portions from Wolfson’s opinion:

“This Court respectfully disagrees with their conclusion that, when a person contracts with an electronic toll collection provider, the arrangement somehow changes or alters the underlying source of the obligation to pay those tolls and penalties. 

Here, Plaintiff’s obligation to pay the outstanding tolls and penalties did not arise out of the Agreement between Plaintiff and E-ZPass; instead, it is clear that New Jersey state law is the source of the obligation at issue. When any individual opts to travel on the New Jersey Turnpike or the Garden State Parkway, state law establishes the obligation to pay the tolls, which are prescribed by the New Jersey Turnpike Authority. 

For the reasons set forth above, Defendant’s motion to dismiss the Amended Complaint is GRANTED.” 

insideARM Perspective 

This is an interesting case and should be reviewed and considered by any firm collecting tolls or other similar fees. 

Even though the defendant was successful in the motion to dismiss, readers should note the potential exposure had the case not been dismissed for the reasons stated.  The better lesson to be taken from the case is to be aware of the multitude of prior “envelope cases” and the risks associated with use of envelopes that disclose and account numbers or other identifying information.  

With assistance from Joann Needleman of ClarkHill, insideARM maintains a free FDCPA resources page to provide the ARM community a destination for timely and topical information on the Fair Debt Collection Practices Act (FDCPA). The cornerstone of the page is a chart of significant FDCPA cases. Click on the link in the chart for the complete text of the decision. Where insideARM has already published a story on the case, we provide a link. That chart contains several prior “envelope cases.”

Last week the Consumer Financial Protection Bureau released its annual report to Congress on the Fair Debt Collection Practices Act (FDCPA), as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

In this fortieth anniversary of the enactment of the FDCPA by Congress, the CFPB reviews its actions as the first federal agency to have the authority to supervise non-depository institutions, including debt collectors, in the same manner that banks have long been examined.

Among the highlights from the report:

• The CFPB brought 10 new public enforcement actions involving debt collections in 2016, and continued litigation in three other cases that had been filed previously. In the cases that were concluded during 2016, $39 million was paid in restitution for consumers and $20 million was paid in civil penalties.
  • February 23, 2016 – Citibank, N.A.
  • February 23, 2016 – Citibank, N.A. et al.
  • February 23, 2016 – Solomon & Solomon
  • February 23, 2016 – Faloni & Associates
  • April 25, 2016 – Pressler & Pressler, LLP, Sheldon H. Pressler and Gerard J. Felt
  • April 25, 2016 – New Century Financial Services
  • Septemeber 26, 2016 – TMX Finance LLC
  • October 11, 2016 – Navy Federal Credit Union
  • November 2, 2016 – CFPB, et al. v. MacKinnon, et al. (complaint filed)
  • December 16, 2016 – Moneytree
• The CFPB filed amicus curiae briefs in two appellate court FDCPA actions (Arias v. Gutman, Mintz, Baker & Sonnenfeldt, PC and Bock v. Pressler & Pressler, LLP), and assisted the Solicitor General’s office in preparing two amicus briefs that were filed in the Supreme Court in cases implicating the FDCPA (Sherriff v. Gillie and Midland Funding, LLC v. Johnson). All four cases are still pending.
• The Federal Trade Commission (FTC), which shares enforcement responsibility for the FDCPA, brought or resolved 12 debt collection cases in 2016, including a focus on phantom debt collection and a sweep on unlawful text messages and emails as a means of collecting debt.
• In July 2016 the Bureau released an Outline of Proposals Under Consideration for debt collection, and convened a SBREFA panel to obtain input on how those proposals would affect small businesses.
• In January 2017 the Bureau released two studies on the debt collection market: a white paper about the Online Debt Sales market, and a report on Consumer Experiences with Debt Collection, based on the Bureau’s Survey of Consumer Views on Debt.
• Ongoing activities in supervision, complaint collection, and consumer education continued. No significant milestones were reported.

The report provides industry estimates including share of collections by business model (contingency, debt purchase, etc.) as well as a breakdown by industry breakdown (data provided by IBIS World, December 2016).

As to the outlook for the debt collection industry, the report states,

Consumer debt has continued to increase since 2013 and is approaching its 2008 peak. However, growth in consumer debt has been fueled primarily by increases in non-housing debt. In 2016 alone, credit card debt rose $46 billion, or 6.3%, student debt increased by $78 billion, or 6.3%, and auto debt rose by $93 billion, or 8.7%. Delinquency rates remain relatively stable, although they have not returned to their pre-crisis levels. However, the combination of these levels of debt and an economic downturn could lead to a substantial increase in the amount of delinquent and ultimately charged-off accounts.

Regarding consumer complaints, the Bureau reports that debt collection continues to be the most complained about product in the Consumer Response system. The report also shows that the most common issue continues to be “continued attempts to collect a debt that the consumer states is not owed.” However, complaints about “disclosures (or) verification of debt” increased by 36%.

Issues with disclosures or providing information sufficient to verify the debt was the second-most common issue selected by consumers in their complaints (see line 2 in Table 1). If a collector is covered by the FDCPA, the law requires collectors within five days of that communication to provide consumers with a written notice informing them, among other things, of their right to dispute debts.

Some consumers, however, complain that debt collectors do not provide this notice (23%). Most consumers who complain about the dispute process raise the concern that when they exercise their rights to dispute debts, collectors do not provide them with documentation that consumers believe collectors need to verify the debt (69%). The complaints related to disputed debts also reveal confusion on the part of consumers as to when and how they can dispute a debt.22 Other consumers report that the company did not disclose that the communication was an attempt to collect a debt (7%).

On the other hand, complaints about communication tactics decreased 11% from 2015, and complaints about collectors taking or threatening illegal action dropped by 16% from 2015. Together, these categories represented 15% of complaints in 2016.

The Bureau reports that 82% of debt collection complaints were either “closed with explanation” or “closed with non-monetary relief.”

Supervisory activity in 2016 uncovered the following issues within “one or more collectors”:

• Miscoding of accounts unsuitable for sale by debt sellers
• Unlawful convenience or collection fees
• False representations
• Communication with third parties 

insideARM Perspective

It is interesting that this report was released with no fanfare, and no announcement. It just appeared. With that said, there is nothing new here. The report is simply a recap of activities that were well reported about in 2016 and the first few months of 2017.

Worth noting are the trends in consumer complaints, and the fact that most continuing issues are related to the ability for creditors and collectors to share information – with each other, and with consumers. While there will likely always be a certain number of complaints related to communication tactics, these are in the minority; the vast majority relate to disputes. It is no wonder that the Bureau is considering first party rulemaking along with third party.

Also worth noting is the comparatively small effort made by the CFPB at public education. The report points the fact that as of January 2017, debt collection was one of the two most-viewed categories in Ask CFPB. The report does not mention how many views there were in total. Beyond that, the CFPB points to the five sample letters posted in 2013 for consumers to use in communicating with debt collectors and states that they’ve been downloaded over 389,800 times since tracking began in June 2014 (again, “I need more information about this debt” and “I do not owe this debt” are the most popular by far).

The balance of the report focusing on consumer outreach and education relates to Federal Trade Commission activity.