A recent blog post from the Federal Trade Commission warns consumers of the latest government imposter scam. The bottom line? They say, if the caller asks for personal information, hang up. This is really good advice if indeed the caller is a scammer. However it also puts another barrier in front of an already difficult-to-bridge conversation between a consumer and a legitimate debt collector. 

I think at least two shifts could help to untangle this situation. One is a streamlined regulatory approach. The other is based in technology.

An excerpt from the FTC blog (emphasis added):

The Office of the Inspector General (OIG) for the Department of Health and Human Services (HHS) and the FTC want you to know about a scam in which callers posing as federal employees are trying to get or verify personal information. This is a government imposter scam.

Sometimes, the caller asks you to verify your name, and then just hangs up. Other times, he or she might ask for detailed information — like the last digits of your Social Security or bank account number. Imposters might say they need this information to help you or a family member. But their real reason is to steal from you or sell your information to other crooks.

…and what should you do?

Hang up. Do not give out any personal or financial information…

These scams are real, and people should definitely be warned about them. At the same time, however, one practice in particular the FTC calls out as a “red flag” (and has done so in prior blog posts as well) is actually required by law for legitimate debt collectors. Specifically, collectors must confirm they have the right person on the phone before they share any information regarding the reason for the call, lest they risk embarrassing the consumer by disclosing the existence of a debt to a third party, like a child, a roommate, or a guest. That verification often includes a request for the last four digits of a Social Security number. This situation already leads to an extremely awkward opening conversation for all involved.

Interestingly, on the same exact day the FTC posted the blog described above, the agency also held its third FinTech forum (it was quite interesting, by the way) – this one focusing on artificial intelligence and blockchain. These technologies may just hold the future keys to that awkward introductory debt collection dance. From the FTC’s announcement on the forum: 

Artificial intelligence focuses on the capability for machines to mimic human thinking or actions, including learning and problem solving. The technology may be used, for example, to provide personalized financial services for consumers, including providing money management tools.

Blockchain technology involves a distributed digital ledger for recording transactions that can be shared widely. It first emerged as the foundation for digital currency, and it is now being explored for other consumer-focused uses including payment systems and “smart contracts.”

The half-day event is designed to bring together industry participants, consumer groups, researchers, and government representatives, to examine the ways in which these technologies are being used to offer consumers services, the potential benefits, and consumer protection implications as these technologies continue to develop.

What if the future of the ARM process existed in a combination of these technologies? 

Imagine a scenario where a consumer’s identity could be automatically confirmed when she answers the phone (how about a voice match?). And then what if we could re-imagine the FDCPA-required Mini Miranda disclosure so that it didn’t sound like you were getting arrested? 

Then imagine a process where account information would be delivered through blockchain technology. A consumer could access all of her financial records, and those records could be trusted because 1) control and maintenance responsibility by a single centralized source would be eliminated, and 2) hacking would be far less likely because a perpetrator would have to alter each and every “block” in the “chain” of information. 

With these conditions in place, wouldn’t a conversation between two human beings be more productive in getting to the bottom of 1) whether a debt is owed and 2) whether a consumer has the ability – or willingness – to pay?

I may or may not have gotten the vision quite right, but no doubt the impact of these technologies will be far reaching, likely in ways we can’t yet predict.

insideARM has written extensively about the ongoing saga of the Department of Education (ED) RFP for private collection agencies. It has been a story full of dramatic announcements, legal maneuvering, and political intrigue.  The latest chapter involves recent activity in a lawsuit filed in March, 2015. To understand its importance, it is necessary to review how that lawsuit came about.

Background 

On February 21, 2015, ED notified five contractors — Windham Professionals, GC Services, ConServe, Account Control Technology, and Financial Management Systems — that it intended to issue award-term Task Order Extensions to them for a period not to exceed a specified number of months. These letters, titled Notification of Award Term Extension and each signed by the Contracting Officer, expressly stated, “If the contract is extended pursuant to H.4, it will be accomplished via a contracting action, which will specifically identify all of the terms and conditions.”

Late Friday afternoon on February 27, 2015 ED publicly announced that it would also “wind down” its relationship with five private collection agencies on its student loan debt collection contract that ED says were providing inaccurate information to borrowers regarding rehabilitations. In a press release, ED said that a review of all 22 of its private debt collection contractors had revealed “unacceptably high rates” of misinformation regarding rehabilitations among five collection vendors: Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management.

A lawsuit was immediately filed in the Federal Court of Claims based on, inter alia, ED’s proposed issuance of award-term extensions under H.4 to the competitors. The four named plaintiffs in the lawsuit were Coast Professional (Coast), Enterprise Recovery Systems (ERS), National Recoveries (NRI), and Pioneer Credit Recovery (Pioneer). Intervening in the lawsuit as interested parties were the five aforementioned companies that received extensions: Financial Management Systems, Account Control Technology, Continental Service Group (ConServe), Windham Professionals, and GC Services.

The Court of Federal Claims dismissed the complaints. Pioneer and ERS separately appealed the decision for lack of jurisdiction.

(Editor’s note: In October 2014 ED had awarded contracts to Coast Professional and National Recoveries under the small business set-aside on its Default Collection Services contract and private collection agency (PCA) program, and both have been receiving placements under that new contract award.)

The Court of Federal Claims had concluded that these proposed new Task Orders (for the award-term extensions) should not be considered “the award of a contract” and thus were not eligible for a protest.

On July 14, 2016 we reported that Pioneer and ERS had won their appeal of a denied protest over their contracts not being extended in March, 2015. The appellate court saw things differently from the Court of Federal Claims and ruled that extension task orders awarded to five other companies counted as “new contracts” that could be challenged in bid protests. The appellate court sent the case back to the Court of Federal claims.

Meanwhile, on December 20, 2016 insideARM wrote that ED had awarded new unrestricted contracts under ED Solicitation Number: ED-FSA-16-R-0009 to:

• Financial Management Systems
• GC Services
• Premiere Credit of North America
• The CBE Group
• Transworld Systems
• Value Recovery Holding
• Windham Professionals

In response to the December 20 awards there were 26 separate protests filed with the Government Accounting Office (GAO). Those protests are all still pending.

Current Activity 

Now, back to that 2015 lawsuit. On February 24, 2017 ED filed a Motion to Dismiss the 2015 lawsuit. But the motion is unusual. ED is asking the court to dismiss the lawsuit as moot because they have agreed to take “corrective” or “remedial action” with regard to the earlier decision not to issue contract extensions to the four named plaintiffs. ED has agreed that the contracting officer will reevaluate the four plaintiffs for an award term extension.  Specifically, ED will reevaluate the companies in accordance with the terms of the 2009 task orders, including clause H.4, as if EE had not previously declined to issue the plaintiffs award term extensions. 

Per ED’s motion: 

“In sum, plaintiffs will be reevaluated for the award term extensions in accordance with the terms of the 2009 task orders, the 2015 focused review will not be considered as part of the reevaluation, and any award term extensions received by the plaintiffs will be governed by the same material terms as the award term extensions that were issued to the intervenors in 2015.” 

insideARM Perspective 

What does all of this mean? It is another mystery to solve. 

As noted above, NRI and Coast were awarded small business contracts in 2014. However, both companies were looking to be awarded contracts in the unrestricted category.  Still, both companies have been receiving placements.  What could a reevaluation of those two firms mean? What remedy is appropriate for them?

On the other hand, ERS and Pioneer not only did not receive contract extensions back in March of 2015, they were also not selected in the December, 2016 award. Neither has received a placement since March of 2015. 

What happens if ED, after reevaluating ERS and Pioneer, decides to issue award term extensions to one or both? Would they then join the seven unrestricted firms awarded contracts in December 2016 and begin to receive placements?

Also, what does this mean for the 26 protests that were filed in response to the December 2016 awards? ERS and Pioneer both also protested those awards. Would this potentially put ERS and Pioneer into some type of special status for their protests?

Only the Department of Education can create this type of puzzle. insideARM will continue to monitor and report.

Last week members of both parties in Congress revived a bill that would make it harder to offshore call centers. The U.S. Call Center and Consumer Protection Act would establish a list of companies that move call center work out of the country. The bill requires that businesses with at least 50 call center employees notify the Department of Labor at least 120 days before relocating outside of the United States. Those in violation would be subject to a civil penalty of up to $10,000 per day.

Originally introduced in the House in 2015 as H.R. 2909, the bill was reintroduced in February 2016 as S.2593 in the Senate and H.R. 4604 in the House of Representatives. This latest action last week represents the third try.

According to the bill, the Labor Department would be required to make public a list of all employers that relocate call centers. Those on the list would be ineligible for federal grants or federal guaranteed loans for five years after being added to the list (with a few exceptions related primarily to national security). Companies can get off the list by moving a center back into the U.S.

Additionally, businesses that make outbound calls or receive inbound calls from consumers must require their agents to disclose their physical location at the beginning of each call – unless the agent is located within the U.S. Upon request, customers must have the ability to be transferred to an agent who is physically located in the United States.

The bill exempts any communication: (1) initiated by a consumer if the consumer knows or reasonably should know that the employee or agent is located outside the United States, or (2) related to the provision of emergency services.

If passed, the bill would give the Federal Trade Commission enforcement authority.

According to an article in Computerworld, Communications Workers of America (CWA) estimates that there are 3 million domestic call center jobs, but about 200,000 (7%) of those moved offshore between 2008-2014. A livemint article estimates the number at 2.5 million, with 54,000 in Houston, Texas.

insideARM Perspective

Offshoring is certainly a strategy employed by a number of the larger ARM firms in the United States, as well as creditors servicing and collecting on their own behalf. The trend has been to handle more first-party than third-party work overseas, though, because of the sensitivity required by post-charge-off collections.

While public funding may not be a factor for most ARM firms, the need to tell consumers the location of a call center employee would add one more disclosure to an already awkward call containing a string of required disclosures.

Also, the prospect of being on a public list that will likely receive a wave of media attention may be more than many would like to handle.

On a related note, at the June 5-7 insideARM First Party Summit, there will be a session entitled: “Will ‘Make America Great Again’ Bring Call Center/Customer Service Jobs Back to the United States?”  Speakers will provide insight into the issue.  Early bird pricing for the Summit ends March 31, 2017.

 

On February 7, 2017 Congressman Bob Goodlatte (R-Va.) introduced a Bill in the House of Representatives entitled the “Fairness in Class Action Litigation Act of 2017,” H.R. 985, (The Act). Goodlatte is chair of the House Judiciary Committee. Co-Sponsors of the bill are Congressmen Pete Sessions (R-TX) and Glenn Grothman (R-WI)

This week, the House of Representatives will begin debating the bill. A copy of the proposed Act can be found here.  If passed, the Act could significantly change the procedures governing class actions in federal court. 

A similar bill died in the Senate last year.  

The stated purposes of the Act are to: 

• assure fair and prompt recoveries for class members and multidistrict litigation (MDL) plaintiffs with legitimate claims;
• diminish abuses in class action and mass tort litigation that are undermining the integrity of the U.S. legal system; and
• restore the intent of the framers of the United States Constitution by ensuring Federal court consideration of interstate controversies of national importance consistent with diversity jurisdiction principles. 

The key provisions of the Act are: 

• mandating heightened class certification requirements;
• placing additional obligations on class counsel’s receipt of attorneys’ fees;
• creating procedural restrictions on class plaintiffs and counsel, including in multidistrict litigations (MDLs); and
• providing parties with a new right to appeal class certification decisions. 

insideARM Perspective

This bill is sure to be controversial. It didn’t take sophisticated research to find dozens of articles that have already been written and published on the subject. As expected, the articles are on both sides of the argument.

For example: 

1. The Leadership Conference on Civil and Human Rights, whose website describes the organization as “The nation’s premiere civil and human rights coalition” has already posted a form advocacy letter for interested parties to use when contacting representatives and encouraging them to oppose the legislation.
2. Today, The Hill ran an article entitled “Fix Class Action Lawsuits,” by Lisa Rickard, Opinion Contributor. Rickard notes, “Today, it is lawyers, not consumers, who are the main beneficiaries of class actions.” She provides several examples of cases she believes are abuses of class actions and mass tort proceedings, and are a huge problem for our federal court system, for consumers, and for businesses. She concludes, “Enacting the Fairness in Class Action Litigation Act of 2017 would be a critical step toward correcting those abuses.” Editor’s Note: Ms. Rickard is president of the U.S. Chamber Institute for Legal Reform.
3. The National Law Journal has published an article entitled, “Why Class Action Reform Bill Isn’t as Bad as It Seems.” In that post a name familiar to many in the ARM industry, Jay Edelman of Chicago’s Edelson PC, is quoted extensively. Mr. Edelman is a prominent plaintiff’s attorney in the class action world. Oddly enough, Mr. Edelman believes the Act could be a “huge boon to the defense bar.” 

The ARM industry is no stranger to class action litigation. Whether it be Fair Debt Collection Practices Act (FDCPA) claims, Telephone Consumer Protection Act (TCPA) claims, Wage and Hour claims, or claims based upon any number of state laws.

A cursory review of either the our FDCPA Caselaw Chart or our TCPA Caselaw Chart will provide all of the evidence needed to show that the class action system needs reform. The cost to businesses in relation to the actual benefit to consumers is out of balance.

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). This page is generously supported by TransUnion. See the page here or find it in our main navigation bar from any page on insideARM. 

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 published a story on the case, we provide a link. Case information and analysis is provided by Joann Needleman, a Clark Hill attorney and leader of the firm’s Consumer Financial Services Regulatory & Compliance Group.

For February, 2017 ten new cases have been added to the chart.  As always, there were both positive and negative outcomes.  Some of the more interesting and important cases were:

Madden v. Midland Funding LLC

This case has been closely watched and written about for some time. insideARM alone has written about the case three separate times: on May 26, 2015, April 1, 2016, and June 27, 2016. We will be writing about the latest chapter next week. 

The key issue in this case is whether a purchaser/assignee of an account (Midland) from a national bank, was permitted to charge the interest rate that was previously agreed by the cardholder to in the account agreement. 

In this last activity from February 27, 2017, on remand back from the Second Circuit, the District Court determined that the FDCPA claims raised by plaintiff would move forward and granted plaintiff’s request for class action certification. 

Hinderstein v. Advanced Call Center Technologies 

insideARM wrote about this case on March 8, 2017.  It is a positive decision for the industry.  Plaintiff had sued the defendant claiming a FDCPA violation under Section 1692d of the FDCPA.  The alleged “harassing” activity was 49 calls in 18 days.  The court ruled that the activity did not give rise to a FDCPA claim. 

Mikolajczyk v. Universal Fidelity, LP

insideARM published an article on this case on March 1, 2017. In short, a collection letter that included a “check box” to dispute was found to potentially be a FDCPA violation. What is interesting is that the Consumer Financial Protection Bureau (CFPB) included with its Small Business Regulatory Enforcement Fairness Act (SBREFA) proposal a concept for a very similar type “check box.” 

Palmer v. Enhanced Recovery Co. LLC 

insideARM wrote about the Palmer case on February 14, 2017. In this case a plaintiff had sued the defendant, settled the case, signed a settlement agreement, and yet still tried to sue the defendant a second time on the exact same facts. The District Court ruled that the plaintiff would not have a second bite of the same apple.

These four cases are just a sampling of the updates for February.  See the chart for summaries of the other six cases. insideARM thanks Joann Needleman and the Clark Hill law firm for their thorough and timely case summaries.

This article previously appeared on the Global Growth Advisors Blog, and is republished here with the permission of the author.

Tax incentives awarded by the government are generally used for economic development purposes to achieve two main goals: creating jobs and growing the tax base within a target jurisdiction.  Some incentive programs across the country are similar in nature, but every state, county and city has their own approach and unique programs. 

Navigating the incentives negotiation process can be time-consuming for a CEO or CFO, especially given the fact that they have a company to run in between negotiations.  A finance executive who had worked with public economic development agencies recently complained to me about the many government layers he had to work through, including a local chamber of commerce, the city government, the county government, a regional partnership and the state.  For someone who does not specialize in working with these agencies, the pure bureaucracy can seem daunting and it can create missteps.  Here are three examples of common mistakes and solutions for negotiating your incentive package:

1.  Knowing who should be involved in the process

This is an example of a company whose CFO had historically negotiated their own incentives packages.  At one point he had negotiated a $350,000 package on a $4 million expansion project and asked me to verify whether they had secured a maximized package.  Up to that point, he had worked with their county and state, with minimal state participation.  It is critical to engage all organizations with a stake in the project, as I was able to identify private agencies willing to assist with infrastructure and utility grants specifically tailored to expansion projects within their county.

There may be grants or other incentives available to certain areas of a state for which a project may qualify.  I was able to identify a state infrastructure program that by statute could only be accessed by four counties within the state, which did not include the county where this project would take place.  The program would have allowed the company to access a $300,000 grant to upgrade and extend their rail lines on site.  By working with the state legislative representative, the statute was amended to include their county, along with several others.

By inviting private agencies to the negotiating table and increasing state participation, the company ultimately accepted an incentives package worth $1.4 million, which created more than 100 local jobs and a significant boost to the local tax rolls.  Ultimately it was a win/win for all parties involved.

2.  Understanding the economic impact of the project

This is an area where different jurisdictions have an individual approach to incentives.  Many companies disclose their capital investment and job creation projections in the first year of operation.  However, in many parts of the country, the government will be interested in the economic impact for the next three years.

A separate problem arises for companies who are projecting additional growth on the back end of that three-year period or beyond.  Therefore, it is important to know what the state and municipality is willing to include in the project scope.  There was a company in the southeast who was planning a $25 million capital investment project over three years, along with an additional $50 million in years four and five.  This state would only look ahead three years, but from completing a previous project in the state I knew they could make an exception for an additional two years under certain circumstances.  The result was a much larger incentive package where the final two years would be performance-based, meaning if the company did not meet their growth plans in the final two years they would not be penalized. 

3.  Meeting documentation and compliance requirements

Due to the multiple government layers with most projects, compliance requirements can be multi-layered as well.  Each state, county and city can have their own documentation requirements.  It is great to be offered a $5 million incentive package for a project, but failing to provide proper documentation in a timely manner can prevent you from ever receiving those funds.  An oversight or missed deadline can result in a loss of hundreds of thousands of dollars, if not millions.

As an example, a company received incentives from multiple government agencies and each agency required quarterly documentation for up to four years.  However, each agency’s quarterly deadline fell on a different date, creating multiple filing deadlines every quarter.  To ensure the company did not miss a deadline, I provided a detailed Outlook calendar with reminder alerts, which was sent to the company’s representatives.  Each time a reminder notification is sent, I pre-fill as much of the paperwork as possible and send it to the company representative in advance of the deadline.  This streamlines the compliance process for the company and they are able to capture all of the incentives they were originally offered.

Incentives are a powerful tool, creating win/win scenarios for both the company and the government.  As with any business negotiation, negotiating incentives is a combination of art and science.  Avoiding common mistakes and knowing how different programs work across the country can lead to differences of six and even seven figures.  In the end, that certainly affects the project’s ROI and it could even be the difference in whether the project is initially successful and sustainable.

Renée Rosenheck contributed to this article.  Kris Phillips and Renée Rosenheck are co-founders and Principals of Global Growth Advisors LLC, a professional firm that negotiates and maximizes incentives packages for companies investing in the United States. 

insideARM perspective:

Historically, many ARM companies have not considered seeking government incentives when building call centers or expanding existing call centers when ramping up for new projects, but many should. This article provides addresses common mistakes made when negotiating incentives. On a related topic, the new administration has promised to return jobs to the United States.

Like what you read? Get more on this subject at the First Party Summit, June 5-7 in Frisco, TX. We’re hosting a session featuring industry experts discussing: Will “Make America Great Again” Convince Companies to move Call Center/Customer Care Work Back to the U.S.?

This article was co-authored by Allyson B. Baker and Joseph Leonard Robbins. It originally appeared on Venable.com and is republished here with permission.

In a putative nationwide consumer class action against an online marketplace lender and its bank partner, Bethune v. LendingClub Corp., et al., a federal judge in the Southern District of New York recently granted defendants’ motion to compel arbitration and bar class action litigation.

Plaintiff, a New York resident, alleged that he received a private consumer loan from LendingClub Corporation (LendingClub) in June 2015 at 29.97% interest, in excess of New York’s 16% usury limit. He filed his class action lawsuit on behalf of similarly situated New Yorkers, as well as all U.S. persons or entities who received loans from defendants at interest rates in excess of their state’s usury limit.

The Complaint alleged that LendingClub used a “sham” bank partnership with WebBank – which is chartered in Utah where there is no usury law – to evade the usury limits of borrowers’ home states. Specifically, plaintiff alleged that LendingClub performed traditional lending functions, including solicitation and loan underwriting, but then caused WebBank to fund the loans, only to transfer them to LendingClub two days later.

The Complaint also demanded a jury trial. Defendants, however, moved to compel arbitration and bar the class claims based on an arbitration provision and class action waiver in plaintiff’s loan contracts with LendingClub and WebBank. Plaintiff could have opted out of the arbitration provision within 30 days after accepting the agreement, but he did not exercise that right.

Rather, in court he argued that the arbitration provision was “unconscionable” because it sought to enforce the laws of Utah (not New York, plaintiff’s state of residence), and to evade the usury protections available under New York law. Ultimately, Judge Naomi Reice Buchwald concluded that because plaintiff was really challenging the choice-of-law provision for the entire contract (rather than the arbitration provision in particular), an arbitrator (not the Court) must determine the validity of the contract and arbitrability of the dispute. The Court further enforced the contract’s class action waiver providing that “no arbitration shall proceed on a class, representative, or collective basis.”

Bethune is important for two main reasons. First, it demonstrates that arbitration clauses remain a powerful tool to avoid public litigation and potentially reduce litigation costs. Second, it illustrates the impact that the CFPB’s proposed arbitration rule will have if finalized and if it withstands legal and legislative challenges.

Under the proposed rule, lenders will not be able to rely on borrowers’ failure to exercise an arbitration opt-out provision, as defendants did in Bethune. That is because the proposed rule prohibits lenders from using arbitration clauses to bar consumers from filing or participating in class actions.

The comment period on the proposed arbitration rule closed on August 22, 2016. If the rule is finalized, compliance will be required within 211 days of final publication. However, it is unclear when, or even if, the CFPB will finalize the rule for various reasons, including resolution of CFPB v. PHH Corp. which is pending en banc review before the D.C. Circuit. In addition, the Congressional Review Act may allow Congressional Republicans to nullify a final arbitration rule, and prevent reissuance unless authorized by a newly enacted law.

Regardless of whether the CFPB’s proposed arbitration rule is ultimately finalized, lenders must remain mindful of what consumer arbitration clauses cannot do: protect against government enforcement actions. Two recent matters involving “true lender” allegations like Bethune are illustrative.

The Georgia Attorney General announced this month a $40 million settlement with online payday lender CashCall, Inc. and affiliated parties. The Attorney General had alleged that defendants charged Georgians unlawfully high interest rates, and that the true lender was not entitled to tribal immunity from state law prohibitions on usurious lending. In another matter, the Pennsylvania Attorney General recently defeated the motion to dismiss and bank preemption defense of online payday lender Think Finance, Inc. SeeCommonwealth of Pennsylvania v. Think Finance, Inc. (E.D.Pa.). The court held that the Attorney General sufficiently alleged that Think Finance, Inc., and not its bank partner, was the “true lender.”

Online lenders and bank partners must take care to structure their relationships with regard for “true lender” enforcement risk. See here for more analysis on “true lender” issues and stay tuned for additional coverage of the CFPB’s proposed arbitration rule.

On February 27, 2017, a United States district court judge in California issued Findings of Fact and Conclusions of Law in a bench trial that found no FDCPA violation by a debt collector who had made 49 call attempts to a consumer in 18 days.  

The case is Hinderstein v. Advanced Call Center Technologies, (Case No. 15-10017, U.S. District Court, Central District of California.) A copy of the Finding of Fact and Conclusions of Law can be found here.

Background

Plaintiff, Robert Hinderstein, had a GAP-branded credit card, issued by Synchrony Financial (Synchrony).  In or around early 2015, plaintiff was delinquent on his GAP credit card and maintained an outstanding balance of approximately $2,202.00.

On April 3, 2015, Synchrony placed plaintiff’s credit card account with defendant for collections. Defendant engages in the collection of debts on behalf of creditors, including Synchrony.

On the same date, defendant mailed plaintiff a Debt Validation Notice to the address provided for plaintiff by Synchrony. This was the only written communication between the parties prior to the commencement of this action.

Thereafter, defendant attempted to place telephone calls to plaintiff for the purpose of collecting plaintiff’s debt on behalf of Synchrony. From April 23, 2015 through May 10, 2015, defendant called plaintiff at least 49 times.

All telephone calls from defendant to plaintiff were placed between 8:00 a.m. and 9:00 p.m., pacific standard time, to his cellular telephone. Defendant never placed more than five telephone calls to plaintiff in a single day and allowed at least 90 minutes to elapse between each telephone call that it placed to plaintiff. Defendant never intentionally left voicemails for plaintiff.

The first and only call from defendant that plaintiff answered was placed on May 10, 2015 at approximately 11:05 a.m., pacific time. During this call, plaintiff advised defendant’s agent that he was going through a divorce and that he did not have any money to pay the outstanding debt. He asked for defendant to stop calling. Prior to that date and that call, plaintiff never asked defendant to stop calling him and following this conversation, defendant made no further telephone calls to plaintiff.

On December 31, 2015, plaintiff filed this action, alleging violations of the Fair Debt Collection Practices Act (FDCPA) and the Rosenthal Fair Debt Collection Practices Act (RFDCPA).

The parties agreed to waive a jury trial and consented to proceed before the Magistrate Judge. On December 30, 2016, the parties filed cross-motions for summary judgment. After reviewing the cross-motions for summary judgment, the Court held a telephonic status conference on January 30, 2017, during which the parties clarified and mutually agreed that they desired a bench trial on the papers. 

The Judge’s Findings

The Honorable David T. Bristow, United States Magistrate Judge authored the Findings of Fact and Conclusions of Law. Judge Bristow found:

“Section 1692d of the FDCPA prohibits debt collectors from engaging “in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.” 15 U.S.C. § 1692d. The statute includes a non-exhaustive list of conduct that constitutes harassment, oppression, or abuse, including “[c]ausing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.” 15 U.S.C. § 1692d(5). 

Although the Ninth Circuit has not addressed the required proof of intent to annoy, abuse, or harass under Section 1692d(5), district courts generally agree that intent may be inferred from circumstantial evidence, such as the nature, pattern, and frequency of the debt collection calls. However, there appears to be some disagreement as to the specific nature, pattern, and volume of calls that are sufficient to demonstrate a violation of Section 1692d(5). Based on a survey of cases addressing FDCPA liability, it appears that, absent egregious conduct or an intent to annoy, abuse, or harass a debtor, merely calling a debtor repeatedly, even multiple times in a single day, does not violate the FDCPA.

Here, plaintiff contends that defendant violated the FDCPA by repeatedly and continuously calling him approximately 49 times in a 18-day period. Although the number of calls does seem relatively high, plaintiff has not adduced evidence of egregious conduct on the part of defendant. All calls were made between 8:00 a.m. and 9:00 p.m., defendant allowed at least 90 minutes to elapse between each call, made no more than five calls in a single day, and did not call plaintiff’s work, family, or friends.

The evidence establishes that plaintiff answered only one of defendant’s telephone calls, a telephone call on May 10, 2015. Until that date, defendant never left any messages for plaintiff. During the May 10, 2015 telephone call, plaintiff acknowledged the debt and asked defendant to cease calling. Plaintiff does not contend that defendant threatened him, or otherwise made any improper statements during this telephone call. Defendant complied with plaintiff’s request and immediately ceased calling him. At no time prior to this telephone conversation did plaintiff notify defendant that he felt harassed or requested that defendant stop calling.

Based on the facts and circumstances in this case, the Court concludes that defendant’s conduct did not constitute harassment, oppression, or abuse in violation of the FDCPA.”

insideARM Perspective

Judge Bristow’s Findings are thoughtful and common sense. In this case there was clearly no intent to harass or annoy the plaintiff. Though the defendant called 49 times in 18 days, the defendant never left a voice message and stopped calling immediately after requested to do so by the plaintiff.

It is interesting to note in the Findings the Judge took judicial notice of other, similar FDCPA lawsuit filed by the plaintiff. Judge Bristow wrote:

“According to two other lawsuits filed by plaintiff in the Central District of California, plaintiff claims that at least two other debt collectors also were calling him during this time period attempting to collect debts owed by plaintiff.” 

It is unclear whether that fact impacted the judge’s decision. Though Bristow mentions the other debt collectors briefly when he wrote:

“Indeed, at least two other debt collectors were calling plaintiff during this same time period. Thus, it was not merely defendant that was causing plaintiff’s telephone to ring.”

This is a positive decision for the ARM industry.

ROCKVILLE, Md. — insideARM is proud to announce that industry veteran Paul Brennan has joined our staff as Senior Vice President of Strategy. The appointment continues our commitment to growth through a deep understanding of the challenges faced by our clients and members.   

Paul previously held senior executive roles including CEO, Executive Vice President, and Chief Strategy Officer at firms including Plaza Associates, United Recovery Systems, and First Credit Services. His 35 years’ experience give him the ability to speak with professionals at all levels within both creditor and agency organizations, and help bake their needs into our product and service strategy.

Brennan commented, “insideARM has had a strong presence in our industry, providing information and insight on many subjects. My goal is to work with the team to expand and enhance the offerings and grow the membership base. I am honored to be a part of such a talented group.” 

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Stephanie Eidelman, CEO of the iA Institute and insideARM added, “We couldn’t be more pleased to have Paul join the team. We know each other well, he knows the industry inside and out, and we know he will be able to make an impact on day one.” 

Tim Bauer, president of the iA Institute and insideARM said, “Paul is someone I have known for years. He always had the reputation of being a great operations talent.  He is also someone who focused on doing work in a compliant manner. He is a great fit for what we want to do here.”

About the iA Institute

The iA Institute is a media company that specializes in providing context, insight, and practical information to the complex debt industry. With its long history as an innovator, the company has grown from simply being a publisher of a daily e-newsletter to an organization that influences the industry at the highest level. Our initiatives bring a range of stakeholders to the table in a candid environment to inform, to build a culture of compliance, to address industry challenges, and to make profitable connections. 

In addition to publishing insideARM, the iA Institute runs the Compliance Professionals Forum (a membership organization that provides practical support for day-to-day compliance challenges), and manages the Consumer Relations Consortium (an extremely active group of 30+ “larger market participants” who discuss evolving practices, and regularly engage with consumer advocates and regulators to affect industry rulemaking). Our newest initiative is the Innovation Council.

This article previously appeared on the CFPB Monitor, a Ballard Spahr publication, and is republished here with the permission of the author.

The United States, at the Solicitor General’s request, has filed an “unopposed motion” with the D.C. Circuit for leave to file an amicus brief in PHH by March 17, 2017.  The motion states that both PHH and the CFPB have consented to the motion.

The D.C. Circuit’s order granting the CFPB’s petition for rehearing en banc requires amicus briefs supporting PHH to be filed by March 10 and amicus briefs supporting the CFPB to be filed by March 31.  (PHH must file its opening brief by March 10 and the CFPB must respond by March 31.)  In asking for leave to file its amicus brief by March 17, the United States appears to be signaling that its brief will support PHH rather than the CFPB.

In December 2016, at the D.C. Circuit’s invitation, the United States filed a response to the CFPB’s petition for rehearing en banc expressing the views of the United States.  The response, which supported the CFPB’s motion, did not address the D.C. Circuit’s RESPA rulings and instead addressed only the panel’s constitutional separation-of-powers holding.  The United States argued that the panel’s holding was based on an incorrect application of U.S. Supreme Court precedent.

Since the Department of Justice is now headed by Republican Attorney General Jeff Sessions, the amicus brief to be filed by the United States can be expected to support PHH’s position that the CFPB’s single-director-removable-only-for-cause structure is unconstitutional.  Should the United States also address PHH’s RESPA arguments in its amicus brief, it is also likely to support PHH’s position that the CFPB’s RESPA interpretation was incorrect.

Indeed, in addition to requesting a March 17 date for filing its amicus brief, the following statements made by the United States in its unopposed motion also appear to signal its intention to support PHH: “As this Court recognized in calling for the views of the United States on the question whether rehearing should be granted, the views of the United States on matters involving the President’s removal power are not always congruent with the views of independent agencies. An earlier filing date would make it exceedingly difficult to engage in the necessary consultation with the government.  A March 17 filing by the United States would provide the Bureau adequate time to address, in the Bureau’s own filing on March 31, points made in the Department of Justice’s filing.”

Editor’s Note: This article is the latest in a series of well written articles by Ms. Mishkin on the PHH case.  For the complete discussion see prior articles published on the dates noted:

February 14, 2017

February 1, 2017

January 4, 2017