Last week the House of Representatives passed H.R. 1009 – OIRA Insight, Reform, and Accountability Act, 241 – 184. The Act amends title 44 of the U.S. code to require the Office of Information and Regulatory Affairs (OIRA) to review regulations developed by independent agencies like the Consumer Financial Protection Bureau (CFPB). This is currently encouraged but not required, which some see as a loophole.

Each agency will need to provide OIRA with a list of planned regulatory actions, and identify whether each action is “significant.”

A recent insideARM article about Trump’s 2-for-1 regulation rule addresses the concept of “significant” regulation. In short, an action is seemed “significant” if it is likely to have an annual effect on the economy of $100,000,000 or more, or:

• adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities;
• create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;
• materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients therein; or
• raise novel legal or policy issues arising out of legal mandates

For each significant action, OIRA would then be required to determine whether the relevant agency:

• identified and assessed the significance of the problem the regulation is designed to address;
• examined whether to modify any existing regulations or laws that create or contribute to the problem;
• assessed alternatives to direct regulation, including economic incentives to encourage desired behaviors;
• considered risks, costs and benefits, enforcement and compliance, incentives for innovation, consistency, predictability, flexibility, distributive impacts, and equity;
• used the best reasonably obtainable information;
• identified performance objectives rather than behavior or manner of compliance;
• sought comments from, assessed effects on, and harmonized regulations with the functions of state, local, and tribal governments;
• avoided conflicts with or duplication of other existing regulations;
• tailored the regulatory action to impose the least burden on society;
• drafted the regulatory action to be simple and easy to understand;
• complied with requirements under executive orders, statutes, and applicable guidance.

The review is generally required to be completed within 90 days of submission, with a few exceptions detailed. In the case of a significant regulatory action that is a notice of inquiry, advance notice of proposed rulemaking, or other preliminary regulatory action prior to a notice of proposed rulemaking, within 10 business days.

The Act also includes a directive that the OIRA Administrator shall periodically convene conferences with representatives of businesses, nongovernmental organizations, and the public to discuss regulatory issues of common concern.

This bill still needs to pass the Senate, which is possible, though some believe Republicans would be forced to obtain 60 votes to make it happen. Democrats would of course be concerned that this would strip independent agencies of the power needed to protect consumers.

insideARM Perspective

As it relates to debt collection, insideARM thinks it unlikely that rulemaking would be completely derailed, however this might inject a degree of transparency into the process that doesn’t currently exist.

Also, Industry might have to prove that debt collection rules would be deemed “significant.” Based on the estimates in the CFPB’s Outline of Proposals Under Consideration, the bureau does not see this as a $100M+ rule.

SACRAMENTO, Calif. – In recognition of the 19th Annual National Consumer Protection
Week (NCPW), held March 5–11, 2017, Receivables Management Association International (RMA) will make special efforts to educate consumers on credit and financial capability. More than 100 federal, state, and local agencies, consumer groups, and organizations participate in NCPW in a joint effort to inform consumers of their rights and provide free access to consumer-related resources. The Federal Trade Commission (FTC), Consumer Financial Protection Bureau (CFPB), and Federal Deposit Insurance Corporation (FDIC) are among the federal participants.

During NCPW this year, the association will host a consumer-resources campaign on its social media channels. Each day, RMA will post information about different consumer resources and tools available to promote financial literacy.

“The more consumers know about the credit cycle and financial capability, the more empowered they are to make good choices,” said Board President Mark Naiman. “Certified companies and individuals contribute to a healthy consumer economy, as the purchase and sale of debt helps keep credit accessible and affordable. Our members are committed to consumer protection and education,” continued Naiman. “Member companies often work with consumers to set up payment plans to ease financial burdens. All Certified company websites link to the association’s ‘Consumer Resources’ page and conspicuously display contact information for the company’s compliance officer.”

The receivables management industry supports consumer protections year-round by working with various government agencies. The industry is supervised or monitored by agencies such as the CFPB, FTC, and Federal Communications Commission, all 50 Attorneys General, and licensure laws in 33 states.

Follow RMA’s consumer-protection campaign during NCPW, March 5–11, 2017, on the association’s social media channels, including Facebook, Twitter, and LinkedIn.

About Receivables Management Association International (formerly DBA International)

Receivables Management Association International is the nonprofit trade association that represents more than 550 companies that purchase or support the purchase of performing and nonperforming receivables on the secondary market. The Receivables Management Certification Program and Code of Ethics set the global standard within the receivables industry due to its rigorous uniform industry standards of best practice which focus on the protection of the consumer.

Receivables Management Association International provides its members with extensive networking, educational, and business development opportunities in asset classes that span numerous industries. The association continually sets the standard in the receivables management industry through its highly effective grassroots advocacy, conferences, committees, task forces, publications, webinars, teleconferences, and breaking news alerts. Founded in 1997 as Debt Buyers Association, Receivables Management Association International is headquartered in Sacramento, California.

The issue of debt collectors assessing interest on accounts was contentious and extensively litigated over the past decade.  Courts, regulators and consumer advocates are uniformly opposed to debt collectors assessing interest except in specific circumstances. The Second Circuit Court of Appeals decision in Avila in 2016 further placed a requirement on debt collectors to disclose in a validation notice when interest is accruing on an account, similar to the requirements in the Seventh Circuit. 

Avila was not, however, the end of the discussion on disclosing that interest is accruing on an account; rather, it was the beginning a new line of cases. Consumer attorneys are now filing and threatening dozens of cases (mostly in New York) asserting that if interest is not accruing on an account, the debt collector must disclose that interest is not accruing. Presently there are two reported decisions holding that a debt collector is not required to disclose when interest is not accruing, and more decisions are pending.  

In the latest episode of the Debt Collection Drill podcast, Attorneys John Rossman and Mike Poncin are joined by Attorney Dave Cherner to discuss this recent spate of lawsuits and strategies for avoiding liability. The attorneys also discuss the recent addition of Mr. Cherner to the Moss & Barnett team, and options for agencies to outsource their chief compliance officer needs.

Listen to the latest Debt Collection Drill here.

 

Last Thursday Encore Capital Group (ECPG), reported its financial results for the fourth quarter and full year ending December 31, 2016, announcing net income of $22.8 million for the quarter, after reporting a loss in the same period a year earlier. For the year, the company reported profit of $76.6 million. ECPG is an international specialty finance company with operations in eight countries that provides debt recovery solutions for consumers across a broad range of assets.

Highlights for Q4 2016

• Investment in receivable portfolios was $210 million, including $148 million in the U.S., compared to $298 million deployed overall in the same period a year ago.
• Gross collections were $397 million, compared to $417 million in the same period of the prior year.
• Total revenues were $271 million, compared to $291 million in the same period of the prior year.
• Estimated Remaining Collections (ERC) grew $129 million compared to the same period of the prior year, to $5.8 billion.

Highlights for the Full Year 2016

• Investment in receivable portfolios in 2016 was $907 million, compared to $1.02 billion in 2015. Encore deployed $562 million in the U.S., $265 million in Europe and $80 million in other geographies during 2016.
• Gross collections in 2016 were $1.69 billion, compared to $1.70 billion in 2015.
• Total revenues were $1.03 billion in 2016, compared to $1.13 billion in 2015. 

In the press release that accompanied the earnings announcement management commented on the results:

“Encore continued to see the favorable trend of lower pricing driven by higher volume in the U.S. market during the fourth quarter,” said Kenneth A. Vecchione, the Company’s President and Chief Executive Officer. “We believe the turn we’ve been seeing in the domestic industry cycle continues as supply overtakes capacity and capital availability within the marketplace. Our consumer-centric liquidation programs, combined with lower pricing, continue to drive better returns.”

The company also announced that they were exploring alternatives for their European operations:

“Today we are announcing that we are exploring an initial public offering of Cabot Credit Management, which we believe will help crystallize the value we’ve created within our European franchise. Since we purchased Cabot with our partner J.C. Flowers, we believe Cabot’s equity value has grown through operational improvement, market consolidation and expansion into other European countries. We are in the very early stages of the IPO process, but we believe that it could be completed as early as the back end of 2017,” said Vecchione.

insideARM Perspective

We have commented before that ECPG and Portfolio Recovery Associates (PRAA) quarterly reporting provides an excellent overview of the debt-buying industry. We also suggest the reports should be viewed together. (Editor’s note: PRAA reported their second quarter earnings on Tuesday, February 28th. insideARM reported on that announcement yesterday.)

As usual, the earnings conference call is always more interesting than the raw numbers. Three things stood out.

In his opening remarks on the conference call, Kenneth A. Vecchione, ECPG President and Chief Executive Officer discussed pricing and supply:

“At the beginning of last year, you may recall that pricing was stable although elevated at 2015 levels and supply was projected to remain flat or grow modestly year-over-year. As we approach mid-year, industry sentiment began to change course, as pricing declined and supply improved. Toward the end of 2016, we could point to industry growth of greater than 15% with corresponding 15% declines in pricing. These pricing and supply dynamics give confidence to projected higher returns in 2017. Reflecting on this past year and looking forward to the future, we believe industry volume will continue to improve as issuers have indicated in their recent earnings commentary that delinquencies and charge-offs are expected to rise.”

Management also touched briefly on the subject of legal collections as the issue was raised during the Q3 2016 conference call. During the third quarter call the company discussed the prior delays in obtaining necessary documentation for suit.  In the February 28^th call, Jonathan Clark, ECPG EVP & CFO commented: 

“Encore’s collections declined in the US primarily a result of the delays we’ve been experiencing and legal collections mentioned a quarter ago. Although we had encountered delays for Q3 of 2016 in both collections and expenses, we have now ramped back up to a more typical legal collections runway. We remain confident that the majority of the legal collections delayed in 2016 will be shifted into 2017 with no material impact to revenue.”

During the call one of the analysts asked about changes to the Telephone Consumer Protection Act (TCPA). The question was answered by Greg Call, ECPG SVP, General Counsel, and Corporate Secretary. Call commented:

“There haven’t been changes to the TCPA itself, but what you do have is you’ve got the FCC being the agency that’s been assigned to interpret the TCPA, and in years past that agency has created a lot of confusion around how that should be interpreted. With the change in administrations, we’re also seeing a change in the power structure in the Commission that oversees the interpretation of the TCPA and it’s definitely a shift that is biased more towards interpretations that we think are more reasonable.”

Yesterday PRA Group (PRAA) released it Q4 and full year financial results for 2016, and hosted a conference call for investors. The news was not good.  For the fourth quarter the company reported a net loss of $17.6 million (per share of $0.38) versus earnings per diluted share of $0.86 in the fourth quarter of 2015. For the full year, the company reported diluted earnings per share of $1.83 compared to $3.47 for the full year 2015. 

PRAA is one of the largest purchasers of defaulted receivables worldwide.

Fourth Quarter 2016 Highlights

• Cash collections of $348. million, currency adjusted cash collections of $55.0 million, versus $369. million in the prior year period.
• Total revenues for the quarter of $ 155.3.0 million, included finance receivables income net of principal amortization and net allowance charges versus $230.2 million in the prior year period.
• Principal amortization included a net allowance charge of $62.5 million recorded against certain pools of finance receivables in the quarter, compared with a net allowance charge of $11.5 million recorded in the prior year period.
• Net loss was $17.6 million in the fourth quarter, compared with net income of $41.0 million in the prior year period.
• $199.8 million in investments.
• Estimated remaining collections of $5.05 billion. 

Full Year 2016 Highlights

• Cash collections of $1.5 billion. 
• Total revenues of $830.6 million. 
• Principal amortization of finance receivables for the full year of 2016 was $746.9, including a net allowance charge of $98.5 million compared with $674.4 million, including a net allowance charge of $29.4 million in 2015.
• For the full year of 2016, net income was $85.1 million, compared with $167.9 million in 2015. 
• $947.3 million in investments.

Per the press release that accompanied the earnings announcement:

While our fourth quarter GAAP earnings reflect a non-cash allowance charge, our economic performance remained solid and we made substantial progress resolving operational and regulatory challenges.  PRA Group spent much of 2016 preparing for, and to the extent possible, attempting to influence, a number of evolving forces that we believe could ultimately be beneficial to our shareholders,” said Steve Fredrickson, chairman and chief executive officer, PRA Group.  “Relief from the antiquated interpretation of the Telephone Consumer Protection Act (TCPA), potential increases in domestic supply of nonperforming loans, the prospect of consolidating competition in Europe, and possible clarification of collection regulations are several of these potential tailwinds.  We stand ready and waiting to capitalize on any of these events and are excited about what the future holds for PRA Group.” 

The announcement also mentions a lawsuit against PRAA that insideARM wrote about on May 15, 2015. In that article we noted:

“On May 11, 2015, an unfavorable jury verdict was delivered against Portfolio Recovery Associates, LLC a wholly owned subsidiary of PRA Group, Inc., in a matter pending in Jackson County, Missouri. The jury awarded Guadalupe Mejia $251,000 in compensatory damages and $82,999,000 in punitive damages for her counter-claim against the Company, alleging malicious prosecution and impermissible collection practices.” (Emphasis added)

Per yesterday’s press release:

“Operating expenses include an accrual to reflect the fact that the company has reached an agreement in principle with the opposing party in the Mejia case.”

The amount of the settlement was not disclosed in the earnings announcement, nor was the settlement discussed in the conference call. 

insideARM Perspective

insideARM suggests that parties interested in PRAA also review the quarterly earnings announcement for Encore Capital Group (ECPG) to get a broader picture of the debt buying industry. ECPG reported earnings last week. insideARM will write about the ECPG quarterly earnings report tomorrow.

As usual, the earnings conference call provided more interesting information and perspective than the press release and written reports.

One of the more notable discussion items involved staffing levels.  Kevin Stevenson, current President of PRAA, commented:

“In Q2 and Q3, we told you in our effort to optimize staff activity, we allowed attrition to reduce staffing levels too far. And the situation led to a detrimental impact on US core collections.

At the same time, adjusting for a few exceptional transactions, we’ve purchased a record or near record number of accounts in each 2014, 2015, and 2016. We’re confident in our hiring plan and are executing on that plan every day.

As we said many times, it’s more difficult and time-consuming to increase our staffing levels that it is to decrease them. So this effort may take us a few quarters to complete. We continue to strive for efficiency, but remember, are overall goal as it relates to hiring and expenses is profitability, not to drive to a targeted expense ratio or productivity ratio. We’ve made significant progress and have hired over 350 net new collectors in the US. We now have a little over 1700 FTE or full-time equivalent at the end of January.”

Rightsizing staff to inventory is always a challenge at any ARM company.  This was a candid admission that, for some period of time, the company did not have adequate staff to maximize recoveries on their inventory.

Management also provided their optimistic thoughts on potential regulatory changes. Fredrickson commented:

“With the appointment of the new Chairman of the SCC, we believe there’s an increased likelihood that will be able to join Europe and the rest of the world to use technology to contact our customers cut with a large portion of the US portion being cell phone owners, our inability to use modern technology to aid productivity has been a headwind for years.

If we were able to contact customers more efficiently, we would expect to see an immediate increase in our collections since we would simply be able to contact more of our customers. It’s our long-held belief that we need the ability to speak easily and efficiently to our customers in order to help them resolve their debt and the FCCs past interpretation of the TCPA hinders that opportunity. The impact of such a change to be significantly beneficial.”

(Also of note was that the company announced that Stevenson would become CEO in May of this year. Current CEO Steve Fredrickson will be transitioning to a new role as Executive Chairman of the Board.)

Certainly many hope that PRAA management’s outlook is correct. The industry needs either a positive decision in the ACA International v. FCC case or a “re-do” from the FCC of their July, 2015 Rulemaking.

PRAA management was also cautiously optimistic about domestic supply, but not counting on various larger issuers returning to the practice of selling. While the core business has been impacted by availability of debt to buy, the company’s insolvency business has been dramatically impacted by decreased supply in the space, as many issuers have suspended selling that segment.  Revenue from the domestic insolvency business in the fourth quarter of 2016 was approximately $53 million, compared to revenue of approximately $74 million for the same quarter in 2015.

This latest announcement and conference call had a very different tone from prior quarters. A $17.6 million loss and a $62 million impairment charge were both unchartered territory for PRAA.

This article previously appeared on Ballard Spahr’s Consumer Financial Services Legal Alerts and is republished here with permission.

A collection letter potentially violated the Fair Debt Collection Practices Act (FDCPA) because a box that the plaintiff could check to indicate that she disputed the validity of the debt was accompanied by a statement that a reason for the dispute was required, a federal magistrate judge ruled.

The decision serves as a reminder of the risks that a debt collector takes when designing collection letters that vary from the content of the validation notice required by the FDCPA, notwithstanding the similarity of the collector’s form to the model validation notice that the Consumer Financial Protection Bureau (CFPB) included with its Small Business Regulatory Enforcement Fairness Act (SBREFA) proposal.

In Mikolajczyk v. Universal Fidelity, LP, filed in a Wisconsin federal district court, U.S. Magistrate Judge William E. Duffin denied the defendant’s motion to dismiss, concluding that the plaintiff had stated a claim that the defendant had violated FDCPA Sections 1692e and 1692g. Section 1692e prohibits a debt collector from using any “false, deceptive, or misleading representation or means in connection with the collection of any debt.” Section 1692g requires a debt collector to send a written “validation notice” to a consumer within five days of the collector’s initial collection attempt and specifies what information the notice must contain. Such information includes “a statement that if the consumer notifies the debt collector in writing within the thirty-day period [after receipt of the notice] that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector.”

In addition to the validation notice required by Section 1692g, the defendant’s initial collection letter to the plaintiff included a box that she could check to indicate, “I am disputing the validity of this debt,” and that was followed by the language, “Reason for Dispute (required):” and four blank lines on which a reason could be written. Citing case authority holding that the FDCPA does not require a consumer to provide a reason for disputing a debt to trigger the right to obtain verification, Magistrate Judge Duffin concluded that because the defendant’s letter told the plaintiff she had to provide a reason, she had stated a claim under Section 1692e that the defendant used a “false, deceptive, or misleading representation or means” to collect the debt.

The court rejected the defendant’s argument that the plaintiff had not adequately alleged that the statement requiring her to provide a reason was materially misleading. Magistrate Judge Duffin observed that if a consumer lacked a reason for wishing to dispute a debt, or was unclear whether her reason was relevant or sufficient, “being told that she must provide a reason may dissuade her from exercising her unfettered right under the FDCPA to dispute the debt.” He also concluded that, although she had not disputed that the letter contained the required validation notice, the plaintiff had nevertheless stated a claim that the letter violated Section 1692g based on her allegation that the rights outlined in the notice were overshadowed by the letter’s contradictory or inconsistent statement that she was required to provide a reason for her dispute.

The defendant’s inclusion of a check box and space for the plaintiff to indicate the reason for her dispute is similar to the approach taken by the CFPB in designing a model validation notice. The model notice was included as an appendix to the outline of the debt collection rule proposals issued by the CFPB in August 2016 in preparation for convening a small business review panel under SBREFA. The CFPB’s model notice contains a “tear-off” to appear on the bottom of the notice on which the consumer could respond to the question, “How do you want to respond to this notice?” by marking one or more check boxes to select from the following options:

• “I want to dispute the debt because I think:”
• “I want you to send me the name and address of the original creditor.”
• “I enclosed this amount: $_____”

A consumer selecting the dispute option could then choose from various types of reasons for the dispute by marking a check box, such as, “This is not my debt” or “The amount is wrong.”

The CFPB’s model notice does not state that it is optional for a consumer to indicate a reason for a dispute, nor does it expressly state that a consumer is required to indicate a reason. However, the notice’s design could readily lead a consumer to believe that a reason must be provided. In explaining its rationale for prompting the consumer to indicate a reason, the CFPB stated its belief that by using this approach, “debt collectors would experience less uncertainty about the basis for many disputes, allowing collectors to respond more efficiently to them.”

ACA international has released a new white paper, “An Overview of the Analytical Flaws and Methodological Shortcomings of the CFPB’s Survey of Consumer Experiences with Debt Collection,” written in response to the CFPB’s recent survey report on consumer experiences with debt collection.

In the paper, ACA argues that although the CFPB touts its consumer experience survey data as the “first comprehensive and nationally representative data,” the report, related press release, and remarks from Director Cordray highlight key findings that are primarily focused on the most negative results of the consumer survey, unfairly represent debt collection as a predatory industry, and are generally presented without critical explanatory context.
 
Some key findings include:

• The overall sample of individuals with experience with the debt collection industry represented in the CFPB survey is remarkably small. Of the 2,132 survey respondents, only 682 individuals (32%) report being contacted by a debt collector. Despite this, the CFPB continually couches its findings in relation to all American consumers with debt collection experience.
   
• Rather than report its findings with any degree of statistical certainty, the CFPB describes the survey report as a “descriptive” exercise to “highlight patterns that may be of policy interest” and “to sketch, from consumers’ perspectives, the broad experience of debt collection.” The CFPB further cautions that this descriptive sketch “does not present standard errors or statements about the statistical significance of the differences” across groups.
   
• The presentation of data lacks clarity and lends itself to overestimating the prevalence of certain findings. By focusing almost entirely on percentages throughout the report, coupled with a near-total absence of raw numbers or sample sizes for individual questions, the CFPB offers only limited context for interpreting responses or situating them within the larger sample.
   
• For areas of particular importance to the debt collection industry, the CFPB survey asked consumers about their experience without defining the legal regulations that govern some interactions. For example, the report notes that disputes are not specifically defined and “consumers’ perspectives on whether they had disputed a debt may differ from the definition of dispute used by a given creditor or collector or what may constitute disputes pursuant to the FCRA and FDCPA.”
   
• Many of the findings highlighted in the CFPB’s press release rely on the presentation of a percentage that obscures the total number of responses for a given question. For example, the CFPB reports that “three-in-four consumers report that debt collectors did not honor a request to cease contact.” A more accurate description of this finding would note that the 75% of consumers who reported continued contact after a request to cease communication are a subset of the 42% who requested contact to cease; this 42% is itself a subset of the 32% of the total sample that have been contacted about a debt in collection. Thus, the “three-in-four consumers” actually represents roughly 215 of the 2,132 consumers surveyed, or only 10% overall.
   
• In differentiating the experience of consumers when interacting with creditors versus third-party debt collectors, the CFPB relies on a faulty measurement to support its claims. While the CFPB notes that “consumers reported more favorable experiences with creditors than debt collectors along many of the dimensions surveyed,” the CFPB acknowledges the possibility of consumer confusion, pointing out that “it may also be that consumers do not perceive regular billing statements sent by creditors as collection efforts even if the statement includes a delinquent balance.” As such, the CFPB appears to be making a fundamentally flawed distinction between creditors and third-party debt collectors.

The white paper also notes that the survey was not designed to distinguish between the different types of participants in the varied debt collection market,

Although each type of market participant is distinguishable from the others and unique, the survey ultimately used by the CFPB did not allow for responses that separate the different types of market participants. As such, the conclusions drawn from the responses cannot reasonably support effective and nuanced rulemaking that is needed to properly regulate the debt collection market. Furthermore, the survey is devoid of any mention of, or specific questions regarding, several areas that would be informative to the CFPB as it considers rulemaking for the debt collection industry.

For example, there are no questions that mention or relate to the proposed survey participant’s use of information, advice or services of credit repair organizations or high-volume consumer attorneys. Likewise, there is no mention of for-profit or not-for-profit credit counseling agencies. Importantly, in the “Disputing a debt in collection” section of the survey, there are no questions relating to the level of specificity provided by the survey participant when disputing the debt, whether the survey participant provided information or documentation relevant to the dispute to the debt collector, or whether a third-party submitted the dispute on the survey participants behalf. As such, the survey results fail to include important data that is necessary to support evidence-based rulemaking for the debt collection market.

The paper concludes that the data obtained by the CFPB through the consumer survey is “insufficient at best and fundamentally flawed at worst — therefore the survey data cannot be used as the basis to properly inform the Bureau’s debt collection rulemaking efforts.”

insideARM Perspective

ACA International did a nice job analyzing the CFPB’s survey report without the benefit of the raw data, which the Bureau has not made available. The results of the survey as reported were certainly not a surprise to those in the industry. 

The CFPB FinEx group, which provides resources for finanical educators, held a webinar last week regarding its consumer survey, as well as other self-help tools related to debt collection that it provides to consumers. During this webinar the group played two video testimonials of consumers expressing appreciation for the help they received from the CFPB. Like the survey, these videos left the impression that all interactions with debt collectors are negative ones. 

Debt collectors often say they receive many letters and comments of thanks from consumers for providing financial education or in some way assisting them in working their way out of difficult financial situations. During the Q&A period of the webinar one person asked whether any positive stories had been submitted by consumers, or whether the Bureau was only soliciting negative encounters. The response was that they did receive some positive stories. However, in order for those stories to make it to the public stage, they reach out to get permission from the consumers, and the ones they showed were the only ones for which permission was granted.

One of the webinar leaders, Leslie Parish (from the CFPB’s Research & Markets team), acknowledged that there was indeed a “flip side” to data reported from the Bureaus’s survey. For instance, she said that while one in four respondents said they felt threatened; that means that 75% said the collector gave accurate information and treated them fairly.  

 

This article previously appeared on JD Supra Business Advisor and is republished here with the permission of the author.

The increase in patient financial responsibility for health care costs in the past ten years has outpaced consumer growth in wages. This escalation of out-of-pocket costs represents a major revenue cycle challenge for health care providers. We anticipate the reforms to Obamacare will likely increase this challenge. President Trump and Senator Rand Paul have advocated significantly expanding health savings accounts to reduce costs by shifting the control of health care costs from employers to consumers. Kellyanne Conway, an advisor to President Trump, has said she expects Medicaid will be turned into a block grant program, meaning the open-ended funding states currently receive from the federal government will be replaced with restricted federal funding for states to implement Medicaid as each state chooses. In addition, many Congressional Republicans have indicated they want to repeal both the employer and individual mandates, which may result in more people remaining uninsured without paying a penalty. These objectives will significantly increase the self-pay population.

Employ Strategic Claims Management to Increase Reimbursement

The strategic management of accident claims is an increasingly important means to increase reimbursement. For example, providers do not need to accept Medicaid’s negotiated rate when there is a payment source other than the beneficiary. A provider who does not bill Medicaid may choose to forego the certainty of a Medicaid payment and instead pursue the possibility of a significantly increased recovery under a state’s medical lien law. Evanston Hospital v. Hauck, 1 F. 3d 540 (7^th Cir. 1993); Robinett v. Shelby Cty. Healthcare Corp., 2017 BL 28965, E.D. Ark., No. 3:16-cv-188, 1/31/17.

A provider has a similar election with Medicare. If the liability carrier has not made or cannot reasonably be expected to make payment to a provider within the 120 day Medicare prompt payment period, the provider has two choices: 1) bill Medicare after no fault insurance is denied or exhausted; or 2) not bill Medicare and seek recovery under a state’s medical lien law. Compliance rules require proper billing of the claims. Substitute billing (billing the liability insurer after the provider billed Medicaid or Medicare) and double billing (billing both the liability insurer and Medicaid or Medicare) is prohibited.

Patient access and registration departments need to understand what information is needed from the patient to allow the provider to investigate alternative sources of payment and to properly coordinate the billing of no-fault, group, COBRA, liability, workers’ compensation and government payers. Strategic management of claims will increase reimbursements at the higher liability insurance rates and help off-set the compromised cash flow associated with an expanding self-pay population.

Last week Wells Fargo agreed to two separate Telephone Consumer Protection Act (TCPA) Class Action Settlements. Both cases were filed in federal court in Georgia.  The first was Prather v. Wells Fargo Bank, N.A. (Case No. 15-cv–04231, N.D. GA). The second was Luster v. Wells Fargo Dealer Services, Inc. et. al. (Case No. 15-cv-01058, N.D. GA). 

Prather v. Wells Fargo Bank, N.A.

In the Prather Case Wells Fargo (Wells) will pay over $2 million to approximately 446,000 consumers to settle a suit brought by student loan borrowers who say they Wells called them using automatic telephone dialing systems (ATDS) without prior express consent.

Wells denied the material allegations in Plaintiffs’ complaint, disputed that Wells made any calls using an ATDS without prior express consent, contended that the claims of Plaintiffs and the other members of the class are not amenable to class certification, and denied that Plaintiffs and the members of the class are entitled to damages.

Nevertheless, after lengthy, good faith, contentious, arm’s-length negotiations, with the assistance of a mediator, Plaintiffs obtained Wells Fargo’s agreement to resolve this matter on a class-wide basis for an all-cash settlement totaling over $2 million.

The class includes all wireless phone customers who received a student-loan-related call from Wells between April 21, 2011, and Dec. 19, 2015, made with automated technology or artificial or prerecorded voice technology.

The settlement will be distributed on a pro rata basis, with each class member expected to receive somewhere between $20 and $60. Prior to the final fairness hearing in this matter, the named plaintiffs will ask the Court for an incentive award not to exceed $15,000, and Plaintiffs’ counsel will ask the Court for an award of attorneys’ fees not to exceed 30% of the settlement fund.

A copy of the memorandum in support of Plaintiff’s unopposed motion for preliminary approval of the settlement can be found here.  

Luster v. Wells Fargo Dealer Services, Inc. et. al.

In the Luster case the plaintiff claimed that Wells had made autodialed calls to his cell phone number for the past four years, trying to collect debts apparently owed by two people he didn’t know. He claimed that he had never given Wells any type of permission to call his cell phone.

As in the Prather case, Wells denied the material allegations in the complaint, disputed that it made any calls using an ATDS without consent, contended that the claims of Plaintiff and the other members of the class are not amenable to class certification and denied that Mr. Luster and the members of the class are entitled to damages.

After mediation, Wells Fargo Dealer Services Inc. and its parent company, Wells Fargo Bank N.A., agreed to a $15.7 million settlement that would compensate 3.38 million members of the proposed class. That class would include anyone with a cell phone number to which Wells Fargo Dealer Services made a collection call about an auto retail installment sale contract with an ATDS from April 2011 to March 2016.

If approved, the class members would receive $4.65 each, according to the motion. At the fairness hearing the named plaintiffs will ask for an incentive award not above $20,000 and Plaintiff’s counsel will ask for attorneys’ fees that would be capped at 30 percent of the settlement fund, or about $4,722,000.

A copy of the memorandum in support of Plaintiff’s unopposed motion for preliminary approval of the settlement can be found here.  

insideARM Perspective 

In June of last year insideARM wrote about a Wells/TCPA settlement for $16.3 million in the matter of Markos v. Well Fargo Bank, N.A. (Case No. 1:15-cv-01156, ND GA). The calls at issue in that case were all non-emergency, debt-collection calls and texts made in connection with Home Equity Loans and Residential Mortgage Loans. 

In August of last year insideARM wrote about another Wells/TCPA settlement for $30 million in the matter of Cross v. Wells Fargo Bank, N.A. (Case No 1:15-cv-01270, N.D. GA).  The calls at issue in that case were calls to cellular telephone numbers regarding overdrafts of consumers’ deposit accounts without prior express consent. 

One would hope that these two settlements would be the end of TCPA issues and exposure for Wells.  But, perhaps not. The four settlements mentioned above cover student loans, automobile loans, home equity/residential home mortgages, and deposit accounts. Wells has other product lines that haven’t been included in these settlements.

 

RightAway, LLC. is pleased to announce the 2017 Debt Collection Forum (DCF) (www.DCF2017.com) is being held April 17- 19, 2017 at the Opryland Resort and Convention Center in Nashville, TN.  The Debt Collection Forum is a forum for debt collectors by debt collectors.  DCF focuses on providing great content at an affordable price-point ($575) to allow organizations to send multiple attendees while encouraging active participation.  

 

This forum is intended for debt collection professionals who are:

• First and Third Party Debt Collectors
• Collection Managers
• Compliance Professionals
• Trainers
• Senior Level Executives

The DCF is about solution driven sessions, not sponsor driven sessions.  The speakers are in the trenches experts who live it, breath it, and work it every day.  Attendees will learn operational, compliance, and training strategies which have a proven track record of success.  Attendees will also understand how to efficiently and effectively manage the resources they are provided with and apply state of the art technology solutions at the Technology Showcase.  

 

Attendees at the 2017 DCF will specifically learn:

• The latest on the CFPB and TCPA under the Trump administration
• How to fight back against frivolous complaints and lawsuits
• How to develop managers into leaders
• The state of the state with communications with consumers
• To create a CFPB compliant employee incentive plan
• Create the company culture you’ve always wanted
• Collecting debt through the eyes of the consumer
• How to collect from a consumer without ever talking to them
• Best practices from across the industry
• and so much more…

To learn more and to register for the 2017 Debt Collection Forum, visit www.DCF2017.com.  Registration is filing up quickly as well as the room block at the Gaylord Opryland Resort & Convention Center.  

 

About RightAway, LLC

The RightAway Leadership program focuses on getting individuals from where they are to where they need to be. Our thought-provoking and creative process inspires individuals to maximize their personal and professional potential. We interact with a person creatively in a way that energizes them to achieve extraordinary results with their desired objective in mind. We identify the important goals and priorities unique to each individual and strategize about how to reach them while learning to overcome obstacles that rise up along the journey.  The RightAway Leadership program consists of Nick’s five Road Signs to Success; Mindset, Purpose, Caring, Communication, and Courage. 

The RightAway Consulting provides consulting services to the credit and collection industry with a focus on debt collection agencies, creditors, debt purchasers, and vendors. Our consulting services are focused on two avenues; staying ahead of the curve and turning difficult circumstances into positive experiences. The RightAway LLC separates our consulting services into seven lanes of emphasis which consist of Compliance, Collections, Employee Development, Business Development, Client Experience, Information Technology, and Public Relations. We pride ourselves on getting organizations to obtain maximum output with minimum input that increases efficiency, effectiveness, and profitability.

Contact Info:

Nick Jarman

Phone: (636) 233-9779

Email: nick.jarman@therightaway.com

Web: www.TheRightAway.com and www.DCF2017.com