Pathfinder Payment Solutions, Inc. (Pathfinder), one of the defendants in a Consumer Financial Protection Bureau (CFPB) initiated action previously described by insideARM as “chilling enforcement litigation,” has pushed back and filed a motion for Rule 11 Sanctions against the Bureau.

Editor’s Note:  Federal Rule of Civil Procedure 11 provides that a district court may sanction attorneys or parties who submit pleadings for an improper purpose or that contain frivolous arguments or arguments that have no evidentiary support. 

insideARM wrote about this case on April 8, 2015. Our earlier article can be found here.

The complaint, filed March 26, 2015, charges a host of shady “debt collection” companies with outright fraud for their efforts in attempting to get consumer to pay debts that never existed. Named in the suit are Buffalo-area companies with names including Universal Debt & Payment Solutions, LLC; Universal Debt Solutions, LLC; WNY Account Solutions, LLC; WNY Solutions Group, LLC; Check & Credit Recovery, LLC; Credit Power, LLC, collectively referred to as “The Debt Collectors” in the suit.

But the action also named a number of payment processors (including Pathfinder) and a voice broadcasting service as defendants for “enabling” the debt collectors in their scheme. Those defendants were charged with “providing substantial assistance to the Debt Collectors’ unfair or deceptive conduct.”

Per our earlier article: “The Payment Processors facilitated the Debt Collectors’ large-scale fraud by enabling the Debt Collectors to accept payment by consumers’ bank cards when the Payment Processors knew, or should have known, that the Debt Collectors were engaged in unlawful conduct,” the CFPB said. “By enabling the Debt Collectors and other persons who collect debt to accept credit and debit card payments, the Payment Processors enabled them to efficiently accept payments and convince consumers that they were credible merchants.”

On January 4, 2017 Pathfinder filed a Brief in Support of Motion for Rule 11 Sanctions Against Plaintiff. The opening salvo in the brief was:

“More than eighteen months ago, and two months after this case had been filed, Pathfinder Payment Solutions, Inc. (“Pathfinder”) informed the CFPB that the CFPB had knowingly exceeded its statutory authority, deliberately disregarded the law, consciously distorted the facts against Pathfinder in the Complaint, and should be sanctioned for this conduct. The CFPB’s case against Pathfinder has always been a farce. Discovery simply reinforced this.”

Pathfinder argues that the CFPB named the payment processors in the initial action because of a large number of chargebacks from the debt collector defendants.

However, Pathfinder argues:

“In the payment processing services industry, chargebacks are a fact of life. In the same way that a fruit farmer must deal with some worm-ridden apples, so too must a payment processor expect a reasonable amount of reversed transactions. The farmer wouldn’t abandon the production of apples based on these expected, regular losses of product. In fact, the farmer may not be concerned with such losses at all if the number of bad apples didn’t increase from prior years and the apple yield was otherwise in line with projected expectations. The CFPB’s cherry-picking view—that a high percentage rate of chargebacks in a single month for transactions by UDPS and by Credit Power (collectively, “Debt Collectors”) should have caused Pathfinder to terminate their accounts—is the sort of second-guessing regulatory tunnel vision that would bring the entire credit card processing industry to a screeching halt. The CFPB would have the farmer fell the entire orchard, return the money from selling good apples, accuse him of misconduct if he did not, and end his business to the chagrin of apple consumers.”

Per the Pathfinder brief:

The CFPB has alleged only three circumstances that it believes make Pathfinder liable for violations of the CFP Act.

1. Pathfinder should have noticed the excessively “high” chargeback rates for UDPS and Credit Power (two of the debt collectors) for isolated months.
2. Pathfinder ignored other ongoing warning signs of fraudulent activity.
3. Pathfinder should not have submitted application packages for UDPS and Credit Power for approval. 

Pathfinder further argues:

“The CFPB has submitted that Pathfinder should have been aware of the “excessive chargeback volume” of Credit Power and UDPS. The CFPB further claims that the “high rates” of chargebacks for single months for UDPS and Credit Power should have caused Pathfinder to investigate and to terminate their accounts. But the questions remain: who is entitled to define what volume of chargebacks is “high” or “excessive”? Against whose measure should Pathfinder’s conduct be marked? There are only two conceivable answers, only one of which is workable: (1) Pathfinder’s chargeback monitoring should be governed by the acceptable practices of the industry as a whole, or (2) Pathfinder is at the mercy of the CFPB to conjure an ex post standard out of thin air and at its own discretion.

Discovery in this case established that UDPS and Credit Power chargebacks were not excessive in any single month—let alone the specific months cited by the CFPB. Moreover, Pathfinder’s conduct was commensurate with every applicable industry or internal standard. By cherry-picking individual months—ones with low sale transactions counts and a few chargebacks, the CFPB mischaracterized the overall view of the risk presented by UDPS and Credit Power and keeps presenting that skewed theory to the Court. The CFPB and its Counsel should be sanctioned.

The Government, by and through its agencies and counsel, is not above Rule 11. Not only may the CFPB and its attorneys be sanctioned, but when the law entrusts officials with prosecutorial power, those same officials are held to a high standard.  Enormous power should not be wielded with reckless abandon. But at best, the CFPB’s arguments against Pathfinder are unscrupulous; at worst, they are dishonest and cynical. The CFPB and its attorneys are sophisticated litigants. Rule 11 is designed to protect defendants from these and other abuses of power.”

insideARM Perspective 

The brief filed by Pathfinder is very readable, even for non-lawyers. insideARM suggests interested parties take the time to read through the document.

Buried in a footnote in the memorandum is this claim from Pathfinder:

“Pathfinder is not a payment processor—a basic fact the CFPB has refused to acknowledge. Pathfinder is an independent sales organization (“ISO”) and marketer of payment processing services. Exhibit 2, Merchant Services Agreement between Pathfinder and Global Payments (“Pathfinder-MSA”). The Rule 11 Motion refers to Pathfinder as a payment processor based on the allegations made by the CFPB in the Complaint.” 

What is also interesting about the motion is the timing of the request.  There has not yet been any dispositive finding from the court on the CFPB allegations.

insideARM also contacted the attorneys representing Pathfinder. John Da Grosa Smith from the Smith LLC law firm had this comment:

“The CFPB has persisted in prosecuting a case based on factual misstatements and wrongheaded legal arguments. In a Bureau plagued with criticism, this action, from the outset, has been a case study of governmental overreach and a lack of sound judgment. The CFPB and its attorneys—as all civil litigants and their counsel—are accountable for their conduct.”

insideARM will continue to monitor this case.

Today we finally get our first look at the results of the consumer survey conducted in 2014-2015 by the Consumer Financial Protection Bureau (CFPB).

The survey was originally proposed in March of 2014, when the Bureau issued a public notice and request for comment, initiated a 60-day comment period. The notice said the survey would ask consumers whether they have been contacted by debt collectors in the past, whether they recognized the debt that was being collected, and about their interactions with the debt collectors. The survey will also ask consumers about their preferences for how they would like to be contacted by debt collectors, opinions about potential regulatory interventions in debt collection markets, and about their knowledge of their legal rights regarding debt collections.

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That first public notice was followed by a re-submission and new comment period, which closed on August 22, 2014.

Industry groups, including ACA International, urged the CFPB to scrap the survey as proposed, saying “The CFPB’s justification of the need for the information request is lacking, and the proposed survey is conceptually deficient.” The group further stressed that “the proposed survey would not yield statistically sound data and therefore will not enable the CFPB to improve its understanding of the debt collection market in support of potential rule writing.”

The American Bankers Association and the Consumer Bankers Association also expressed concerns with the survey, saying the revised version “only perfunctorily responds to stakeholder comments and reflects very little change to the Survey instrument.  It fails to resolve material design and methodological shortcomings necessary to ensure that the data generated by the Survey will have practical utility for the debt collection rulemaking.”

In spite of industry objections, the Bureau moved forward with the survey.

The survey was based on a sample selected by the Bureau’s Consumer Credit Panel (CCP), which is a 1-in-48 random and deidentified sample of credit records maintained by one of th etop three nationwide credit repositories. The survey was mailed by the repository, and results were processed by a sub-contractor.

Buried within today’s lengthy remarks by Director Cordray, given at today’s hastily organized Debt Collection Event (or at least hastily announced – just a few days ago, with no detail except that there would be an announcement related to debt collection), hosted by the Attorney General of the District of Columbia, he says,

It is important to note that these same statistics also indicate that many debt collectors and creditors respect the laws governing their industry and have good practices in place. Many of the consumers who responded to our survey did not report any negative issues with those collecting debts from them. They were clearly informed about the nature of the debt, they were treated politely, and they reported no harassment or threats. This all goes to show that with the right amount of attention and effort, many debt collectors are able to fulfill their role responsibly. 

…We recognize that debt collection is part of the proper functioning of consumer credit markets. If people owe money that they borrowed on their credit card, or because they took out a student loan or received service from their telephone company, they are obligated to pay the money back, and they should do so. Responsible debt collectors that do their work with care and treat consumers with respect are a natural and even an essential part of the financial marketplace. 

Among many findings, here is what the Bureau chose to highlight:

According to the CFPB debt collection survey, about one-third of consumers – or more than 70 million Americans – were contacted by a creditor or debt collector about a debt in the previous 12 months. Consumers are most often contacted about medical and credit card debt. The CFPB survey also found that:

Over one-in-four consumers report threatening contact: Twenty-seven percent of consumers approached about debt said they felt threatened by the conduct of the creditor or collector who most recently contacted them. Debt collectors are generally prohibited from tactics that tend to harass, abuse, or oppress consumers.

Three-in-four consumers report that debt collectors did not honor a request to cease contact: About 40 percent of consumers contacted about a debt in collection said they asked at least one debt collector or creditor to stop contacting them. Of these consumers, three-in-four said the debt collector did not honor the request to cease contact attempts.

More than half of consumers report incorrect contact for at least one debt: Fifty-three percent of consumers contacted about a debt in the year prior said at least one collection effort was mistaken in some way. These consumers reported that the creditor or collector sought the incorrect amount, that the debt was not owed, or that the person owing the debt was a family member.

Over one-third of consumers report being contacted at inconvenient times: Thirty six percent of consumers contacted about a debt in collection said that the creditor or collector who most recently contacted them called between 9 p.m. and 8 a.m. Debt collectors generally cannot call at times they know to be inconvenient unless the consumer specifically agrees to it.

Nearly 40 percent of consumers report that a debt collector attempted contact four or more times per week: Thirty seven percent of consumers contacted about a debt in collection report that the most recent creditor or collector to contact them usually did so four or more times in a week. About 20 percent of consumers approached by debt collectors reported contact attempts by debt collectors usually four to seven times per week. Another 17 percent said a creditor or debt collector tried contacting them eight or more times per week.

One-in-seven consumers contacted about a debt report being sued: Fifteen percent of consumers contacted about a debt in collection over the prior year report being sued. The share ranges from 6 percent sued among those contacted about a single debt to 35 percent sued among consumers contacted about five or more debts. About 75 percent of those sued do not go to the court hearing, which generally makes them responsible for the debt.

Also released today is a web page to highlight personal stories of consumers about their experiences with debt collection, as well as a study about a segment of the debt sales market.

Finally, Cordray noted in his remarks that,

We believe these findings will help policymakers and the public understand more about this important marketplace. Going forward, the results of our survey will inform the Consumer Bureau’s approach to overseeing the debt collection industry. 

insideARM Perspective

There is a lot here. The negative perspective on the industry is presented much more dramatically than the positive.  But that is hardly surprising.  That was not the purpose for the survey or this announcment.  For future reference, the CFPB web page to highlight personal stories of consumers about their debt collection experiences practically begs for negative stories only.  The legitimate players in the industry often get letters, emails and phone calls commenting on the professionalism displayed by their representatives. But, it seems clear that the CFPB is not interested aasking for or highlighting those stories.

We will dig into the details of the Consumer Experiences Survey and Debt Sales reports and provide further perspective in the coming days. What we will say now is that debt collection is a complicated market. It is not surprising that many of the experiences would be negative; the whole concept of being contacted about a debt is negative.

Also, given that the majority (72%) of consumers are contacted about two or even more than five debts in the same timeframe, it can often be difficult to know who exactly has contacted you when or how many times. Sometimes the behavior of one caller is attributed to the behavior of another. So rulemaking that would be effective in stopping bad behavior is not a straightforward task. Will players who don’t follow the rules ever follow any rules?

Stay tuned for more.

 

In a recent opinion issued by the U.S. District Court for the Western District of Pennsylvania in Hartman v. Medicredit, Inc. (United States District Court, W.D. Pennsylvania, Case No. 15-1596), Chief United States Magistrate Judge Maureen P. Kelly rejected an argument brought by the defendant relying on Spokeo v. Robbins, (136 S.Ct. 1540 (2016) (Spokeo) suggesting that an alleged violation of the Fair Debt Collection Practices Act (FDCPA) did not create a “concrete injury” to give standing to the Plaintiff.Judge Kelly recommended that defendant Medicredit’s Motion to Dismiss a case about violating the Fair Debt FDCPA by sending collection letters that exposed personal identifying information be denied.

A copy of the opinion can be found here.

Background

On December 7, 2015, plaintiff Melissa Hartman filed a complaint against Medicredit, alleging the following with respect to collection efforts for two “UPP University of Pittsburgh Phys” debts:

“Medicredit mailed two collection letters to Hartman in an attempt to collect the debts. On the outside of the letters, above Plaintiff’s name, was a number, identified in the letters as the consumer number for Plaintiff. It is a violation of 15 U.S.C. § 1692f(8) for a debt collector to use any language or symbol on an envelope when communicating with a consumer through the mail.”

The instant Motion to Dismiss and Brief in support were filed on October 20, 2016, and Hartman filed her Response Memorandum of Law in opposition on December 5, 2016.

Opinion

Judge Kelly began her review of the case by noting that the Motion to Dismiss is a factual challenge under Rule 12(b)(1):

“In reviewing a factual attack, the court may consider evidence outside the pleadings and no presumptive truthfulness attaches to plaintiff’s allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.”

Medicredit cited the Spokeo case to argue that “Plaintiff lacks standing to maintain an action in federal court because the statutory violation upon which her claim relies cannot alone constitute an injury in fact and Plaintiff has failed to adduce evidence of other harm.”

Judge Kelly cited Kaymark v. Udren Law Offices, P.C. () and Sullivan v. Allied Interstate, LLC () to assert that the FDCPA gives debtors the “statutory right to be free from harmful debt-collection practices and that a violation of the FDCPA constitutes a concrete injury and satisfies Article III’s injury-in-fact requirement. “

With respect to this specific case, Judge Kelly noted the following:

“In the instant case, Plaintiff alleges a violation of the FDCPA – specifically, conduct by Medicredit that is identified in the FDCPA as an ‘unfair practice.’ 15 U.S.C. § 1692f(8). Plaintiff has a statutory right to be free from such conduct and the alleged violation of that right constitutes a concrete injury. Thus, she has standing to pursue this action in federal court.

Given this, the Court recommends that Medicredit’s Motion to Dismiss be denied.”

insideARM Perspective

This is a negative opinion for the ARM industry. It continues a trend of inconsistent opinions on what the Spokeo case means to the ARM industry and FDCPA cases.   On August 15, 2016 attorney David Kleber, from the Bedard Law Group, wrote this article for insideARM discussing the various Spokeo interpretations in the area of TCPA case. The same discussion may very well hold true for FDCPA cases.

The case did not get into the merits of the alleged violation concerning the disclosure on the envelope. However, that issue has also presented inconsistent opinions.  To view some examples of the inconsistent decisions insideARM encourages readers to view our FDCPA resource page here. The FDCPA case law grid on that pages highlights important cases for the ARM industry.

 

Trends and predictions for 2017 in the commercial credit, collection and related industries will be marked by uncertainty and continued speculation regarding a new President and administration assuming the White House come January 20, according to International Association of Commercial Collection Agency (IACC) experts. Members of the IACC also anticipate some trends that began in 2016 will continue to have effect into 2017.

“As a whole, I believe that 2017 will be a close repeat of 2016 until a direction of the new administration becomes more apparent and how it will affect the domestic and global economy.” — Bryan Rafferty, Vice President of Commercial Collection Agency of NY  

According to Rafferty, this uncertainty will affect global business which will, in turn, directly affect US businesses and the commercial collection agency sector.

“I believe that creditors will be cautious in extending credit during the first year of the new President’s term to see what his agenda is and how it will affect the economy,” Rafferty continued, further suggesting that creditors’ goals will be to protect what they have while mitigating risk if something adverse occurs with the economy.

“The incoming President suggested a stance of deregulation in the financial sector during his campaign,” Rafferty continued. “This could dramatically affect the collection agency world.”

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Richard Kramer, senior vice president of Enterprise Sales, Altus Global Trade Solutions, believes that if the U.S. and global economies continue to improve, the credit environment will in turn improve and drive increases in commercial transactions, which should drive placements up with improved yields. 

“Repatriation of funds back to the U.S. will create more investment domestically,” Kramer commented.

Kramer further stated that commercial agencies that can drive cost reductions through process efficiencies versus simple labor arbitrage will be better positioned against those that operate off the client system, because many U.S. companies will be reluctant to send work outside the country.

Kramer hopes that government deregulation of the financial sector will impact the collection agency compliance landscape and the government will also back off on many of the compliance regulations previously imposed.

“That likely won’t be seen until 2018 or later,” Kramer explained. “But with less restrictive lending practices, there will be more consumer and commercial lending, which will create additional transactions that will require collection.” 

With regard to the new administration’s effect on the global and domestic economy, Kramer feels good about the domestic economy, but remains speculative about the global situation. “I see a more favorable corporate tax environment domestically, but Trump’s protectionist position on leveling the field with trade agreements like NAFTA will create challenges for Mexico,” he said. “It will also be interesting to see how China responds.”

Fred Milligan, a branch manager with Altus Global Trade Solutions, concurs. “I think China wants the Yen to be the new U.S. dollar,” he commented. “We seem to have an incoming president who is doing the opposite of the current administration and leaning more to Russia and away from China. China has so much trade with the U.S.; at some point we need to make a stand with what China is doing.”

“If Trump’s infrastructure spending plan is approved, it will help improve job growth and there will be pressure to keep jobs in the U.S., forcing many companies to re-think their near-shore and off-shore strategies,” Kramer continued.

“If the Trump presidency continues to focus on keeping jobs in the U.S. and builds momentum over time, this could result in a reduction of companies that utilize international third party outsourcing.” — Ed Morvant, SVP Client Services for Altus Global Trade Solutions 

“In general, I think the new administration will have a positive effect on the economy based on what we’ve seen with the stock market hitting record high numbers,” continued Morvant, “but that could be offset by interest rate increases over time.”

Milligan agrees that the new administration could have a positive effect on the economy. “I like that we elected a businessman,” he explained. “I hope we can increase GNP and grow the business sector by lowering taxes. More small business growth can only mean good things for our industry.”

Matthew Soban, sales manager for Altus, agrees that ultimately, the outlook for the economy is bright, but encourages patience and warns that, initially, there could be a downfall in certain sectors that will have to work from behind.

2016 Trends Spill Over into 2017

According to Rafferty, several 2016 trends – creditors centralizing to shared service centers, slow economic growth, and smaller commercial collection agencies disappearing or merging – will continue into 2017.

“We have seen some large creditor companies consolidate internal resources, obtaining growth through acquisition in order to increase market share and profitability,” he observed.

According to Rafferty, with the number of agencies being reduced due to acquisition and closure, there are opportunities for third party growth due to less competition.

“For companies that can operate effectively under the current regulatory/compliance driven environment, there will be a lot of opportunity to gain market share through acquisition, business development, and competitive scorecard wins,” explained Kramer. “Clients are looking to reduce the number of agencies they use in order to make compliance oversight and vendor management easier, exemplified by the Department of Education award and the trend in financial services awards.”

“If the increased volume trend continues,” explained John Meehan, New Jersey branch manager, Altus Global Trade Solutions, further, “of course less competition will mean more business. As our competition decreases, I see competitive pressure into larger clients. Companies will ultimately fail if their revenue is too heavily weighted on too few clients. Organic growth seems pretty obvious with more clients as well as more services to sell them.”

Meehan sees a potential hidden growth opportunity in client retention, with continued focus on performance, oversight, and client-facing services. “Avoiding attrition, coupled with some SEO optimization and brand recognition should keep us growing our current opportunities, as well as acquiring new clientele in a shrinking market.”    

Another continuing trend is the increase in creditors issuing RFPs to identify suitable collection agencies to work with. Kramer believes it will be critical for agencies to respond by developing a strong web and marketing presence as many creditors continue to do more preliminary research to determine who to engage.

“Additionally, there will be an even greater need to engage professional resources to ensure that the content and appearance are professional and stand out from the competition,” Kramer concluded.

Debt collection is clearly one of the most heavily regulated industries in the United States.  Federal, State and local regulators place onerous, duplicative and often confusing requirements on companies seeking to collect debts.  Further, when collection agencies comply with the myriad of laws, many face lawsuits from consumer attorneys claiming that the attempts at compliance somehow violate the law.  

In the this episode of the Debt Collection Drill, Attorney John Rossman and Mike Poncin discuss two recent, reported decisions where one collection agency – Financial Recovery Services, Inc. — successfully defeated claims that its plain compliance with State and Federal regulations somehow violated the FDCPA. 

Brian Bowers, the President of Financial Recovery Services, Inc., commented on one of these recent FDCPA victories by his company: 

Financial Recovery Services was delighted to obtain the successful decision on the motion to dismiss in the Everett case in the Southern District of Indiana.  Over the years, we have grown weary of the frivolous nature of such cases and we decided to take a stand several years ago and fight more of these ridiculous cases that are brought against our industry.  Too often these cases are driven by the aggressive pursuit of consumer plaintiff attorney’s fees and not by what is fair, reasonable, and just for society in general.  In the past several years, we have successfully disposed of over 23% of cases filed against us by either winning them with motions to dismiss or motions for summary judgment.  We are proud to have taken a stand for everyone in the industry and we hope that we see more organizations take a stand against the frivolous nature of some of these types of cases.

Listen to the episode here

 

SACRAMENTO, Calif. – As of January 1, 2017, DBA International’s Receivables Management Certification Program (RMCP) has been expanded to certify businesses that facilitate the sale of receivables. A broker that meets fourteen specific standards of best practice will be eligible to earn the new “Certified Receivables Broker” (CRB) designation.

“The certification of brokers will help protect creditors, purchasers, and most importantly consumers by ensuring high standards are utilized to preserve the integrity of the purchase transaction and related documents,” said Todd Lansky, DBA International Board President. “Similar to other industries, brokers play an integral role in facilitating the sale of sensitive information between the parties to a transaction. Leaving this vital component outside of the certification program would counter what DBA has achieved in the development of a single compliance footprint for receivables.”

Similar to the existing “Certified Professional Receivables Company” designation for creditors, debt buying companies, law firms, and collection agencies, the CRB designation was designed to exceed the requirements of state and federal law. Among the standards are requirements concerning compliance, criminal background checks, insurance, data security, vendor management, broker agreements, transactional due diligence, and establishing buyer and seller prerequisites.

In addition to broker certification, the revised RMCP includes other enhancements to existing program requirements, the most notable being the establishment of a “Meaningful Attorney Involvement” standard for certified law firms. 

To ensure that DBA member companies fulfill Certification Program requirements, companies are monitored through limited and full compliance audits performed by independent third party auditors, as well as through a structured self-compliance audit process.

You can access the new version RMCP by clicking here.

HUNT VALLEY, Md. — In preparation to service it’s new sub-contract with a successful awardee of The Department of Education delinquent student loan contract (ED), Access Receivables announced today that industry veteran Jack Clark has become an investor and member of the Board of Directors of Access Receivables Management. 

Access was recently chosen to be a sub-contractor to a highly distinguished large contractor for the new unrestricted ED contract.  Tom Gillespie, President of Access stated, “Jack Clark has a long knowledge and history of the Education contract and previously led sales efforts for companies like General Revenue Corporation, Van Ru Credit and National Enterprise Systems (NES).  Mr. Clarke is considered  to be one of a handful of BDO’s who have the experience and expertise in developing  significant program solutions for major credit grantors in the education and banking marketplace.  Since 2013 he has been instrumental in developing new contacts for us within our industry as well as within the credit granting community.”  

Debbie Gillespie, Access CEO added, “As a small business and certified WBE, we are excited about our new opportunities within the Federal Government space as well as the continued success we are seeing in our core business.  Jack provides a level of experience and expertise that adds tremendous value to our executive team and provides fresh insight into our goal setting and execution.”  

Skip Foster, Executive Vice-President and COO added, “I have worked with Jack Clark for over 30 years and am proud to say he has been associated with this company since 2013.” 

About Access Receivables

Access Receivables is a leader in providing innovative solutions in first-party and third party debt collection solutions to large enterprise companies, institutions and state, county and The Federal Government nationwide.  Established in 1999, Access has grown organically over 17 years to become a name synonymous with compliance.  It’s “Nice People Collect More™ approach and innovative self-service virtual agent  has paved the way for developing new ways of offering a kinder and more compliant approach to debt collection, debtor education and a more positive experience for the debtor. Access Receivables was the first company to announce a complete and total makeover of its operational approach in 2011 (Nice People Collect More™).  It combines its’ patented Virtual Agent Collector with a debtor education website, (www.whycreditmatters.net) and a more consultative approach.  This approach has resulted in higher recoveries for Access clients and fewer complaints.  Access is an accredited BBB member and maintains an “A” rating.  

If you would like more information about this topic, please contact Tom Gillespie at 443-578-4520 or email at tgillespie@access-receivables.com.

The Professional Women in the Call Centers and Collections Industry (PWCI) is an organization that has been around for 12 years. However, as the ARM industry changed dramatically over the past 10 years, many of the women in leadership positions moved into other industries. After renewed interest, PWCI founder Victoria Edwards has decided to re-launch the organization in 2017 with new direction.

Ms. Edwards has recruited a group of industry veterans, both male and female, to bring a new perspective to PWCI. insideARM President, Tim Bauer, has agreed to be on the PWCI Board of Advisors in 2017. Other industry veterans on the Board of Advisors include:

• Victoria Edwards – Account Executive Extraordinaire, LiveVox
• Lynne Fisher – SVP, Recovery Operations, Synchrony Financial
• Alexandra Siotos – Sr. Director, Experian Global Consulting Practice-North America
• Kacey Rask – Vice President, National List of Attorneys
• DeAnna Busby-Rast – EVP – Business Development, DCM Services, LLC
• John Gillard – EVP – Bank Product & Service, UMB Bank, N.A.

The new and improved web site for PWCI is: www.pwci-network.com.

Today’s article is the first in a series on the activities, goals, and benefits of membership in PWCI.

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Mentoring.  We hear that word all the time. There are so many questions around mentoring. My trusty dictionary defines “mentoring” as: “a relationship in which a more experienced or more knowledgeable person helps to guide a less experienced or less knowledgeable person.”  When do I need a mentor? Where do I find a mentor? Is it a formal relationship? How long do I use a mentor? 

insideARM asked two of the leaders of the Professional Women in Call Centers Collections to talk about this amorphous, but important topic.

Victoria Edwards, LiveVox

“The collections industry is a career choice that many of us have stumbled into.  For many reasons, we then choose to stay in this industry because it is always changing, always interesting; and there is so much to learn.   Since there aren’t any college courses or majors on this type of industry (as far as I am aware), it is important that we learn from each other.  One of the best ways to learn about our industry, our field of choice, whether you are new or a seasoned veteran, is to partner with someone to exchange information.  Reach out to your network to learn.  When someone reaches out to you, pay it forward, and have a strong dialogue.  Many women who network through PWCI have developed strong relationships that have evolved into something more – mentoring. 

I have personally benefitted from mentoring relationships my entire professional career.  I have been both a mentee and a mentor.  Both roles were very important to me at the time.  I have been a mentee since I first decided to establish a clear career path with increasing responsibilities.  I needed guidance to help me understand my strengths, opportunities, and options in my career.  I was fortunate I found a strong mentor and I still maintain contact with him.  I was grateful for what that did for me and my career. I knew that I needed to pay it forward.  I have offered to be a mentor formally, as well as informally and I have also benefitted in both relationships. 

When I formed the Professional Women in Call Centers and Collections, one of the many benefits included the opportunity for experienced professional women in our industry to meet each other and learn from each other.   Many informal mentoring relationships were formed, which were tremendously impactful.  Meet Kacey Rask, a PWCI leader, who is sharing with us her experiences of being mentored and how it has reached beyond her career at the National List of Attorneys, but into her community as well. 

Kacey Rask, National List of Attorneys

 

Mentoring has been an essential piece to my comfort level and growth in an unknown industry.  I entered the credit and collection industry six years ago without even knowing this industry existed.  Being in customer service and business development, your career is based on building relationships and connections in the industry. 

I was blessed to be under the wing of Beverly Unrath at my current company; who happened to be the NARCA PWCI Chapter chair.  She encouraged me to enlist in their mentoring program; though I had hesitation and angst. 

I was assigned a mentor within a week of requesting one; a woman who had been in the industry longer than I had been alive.  She helped me understand the industry on many levels, was an ear when I needed to vent or needed a compass to guide me, and she’s still a part of my career, six years later.  I am proud to say that I’ve had the pleasure of having three additional mentors within the industry within the last six years, and even searched for mentors within my community.  I value mentoring so much that I not only take advantage of it, but I have also instilled a mentoring program in the volunteer work that I do in my community by mentoring young girls.  Whether you are a mentor or a mentee, it’s an amazing opportunity for personal and professional growth while helping create long lasting relationships for years. 

In a recent opinion issued by the U.S. District Court for the Southern District of Indiana in Everett v. Financial Recovery Services, Inc. (United States District Court, S.D. Indiana, Case No. 16-01806), Judge Jane Magnus-Stinson granted a Joint Motion to Dismiss by collection agency Financial Recovery Services, Inc. (FRS) and its client, LVNV Funding, LLC (LVNV), for failure to state a claim under the Fair Debt Collection Practices Act (FDCPA). Plaintiff had alleged that the defendants had violated the FDCA because of a misleading communication regarding potential tax consequences.

A copy of the opinion can be found here.

Background

In 2014, plaintiff Valerie Everett defaulted on payments for her Citibank credit card. Citibank charged off the debt, which was purchased by LVNV. Afterward, LVNV hired FRS to collect from Everett.

FRS sent a letter to the plaintiff on March 3, 2016, offering several options for settling the debt. After the options for settlement were listed, FRS included this statement: “This settlement may have tax consequences. Please consult your tax advisor.”

Everett filed suit on July 6, 2016, claiming the following:

“Ms. Everett alleges that Defendants violated 15 U.S.C. §§ 1692d, 1692e, and 1692f by ‘invoking the possibility of tax consequences in the March 3, 2016 collection communication.’ She alleges that the Internal Revenue Code did not require Defendants to report cancellation of debt because ‘the largest amount Defendants proposed to forgive was $399.87, well below the $600.00 reporting requirement.’ She alleges that Defendants ‘needlessly and falsely invoking the possibility of tax consequences had the natural effect of harassing [her].’

Ms. Everett also alleges that ‘Defendants intended to elevate [her] concern over and response to the collection communication, increasing the likelihood of payment on the subject consumer debt.’ She alleges that Defendants breached their ‘duty not to make false and misleading statements to consumers they seek payment from.’ She alleges that she ‘has been harmed and suffered damages as a result of Defendants’ false and deceptive actions.’”

The plaintiff sought actual and statutory damages in addition to attorneys’ fees and costs. The defendants moved to dismiss the complaint for a lack of standing and a failure to state a claim under the FDCPA.

Opinion

Judge Magnus-Stinson began discussion of the case by noting the burden of proof is on the plaintiff to show that standing exists with respect to the claims made in the complaint. The defendants claim that in this case, the plaintiff failed to demonstrate any concrete harm or injury as a consequence of the letter. Everett responded to this argument by claiming otherwise:

“Ms. Everett argues that she ‘is a medically fragile individual’ who suffers from several mental disorders, takes lithium daily, and is unable to work. She asserts that upon reading the Letter – and specifically the statement that a settlement may have tax consequences – she ‘became distressed because she believed the IRS would become involved,’ and her medical conditions were ‘exacerbated.’ She argues that she has standing to assert her claims because she suffered an injury in fact, which was concrete and particularized, and the injury was not hypothetical.”

In response, the defendant argued that Everett’s above claims did not appear in the complaint, and that the claims of attorneys’ fees and costs and “the threat of concrete harm” are “too vague to confer standing.”

Citing Spokeo v. Robins, 136 S. Ct. 1540 (2016), Judge Magnus-Stinson says “the Court will only consider whether the allegations in the Complaint itself confer standing” and “will not consider Ms. Everett’s allegations in her response brief that the Letter exacerbated her medical conditions.”

However, the Court said that the plaintiff did have Article III standing, because “Ms. Everett has sufficiently demonstrated that she suffered a particularized and concrete injury when she received the Letter.”

After finding that Everett had standing, Judge Magnus-Stinson considered the other arguments raised by the defendants:

• Failure to State a Claim Under § 1692e: the Motion to Dismiss is granted because the letter “would not plausibly deceive or mislead even the unsophisticated consumer.”
• Failure to State a Claim Under § 1692d: the Motion to Dismiss is granted because “defendants’ statement did not threaten or harass Ms. Everett because it is a true and accurate statement” and because “the Court cannot construe the statute to find a cause of action based on the Tax Consequences Language at issue here.”
• Failure to State a Claim Under § 1692f: the Motion to Dismiss is granted because “the Court will not construe § 1692f so broadly as to find a cause of action for ‘unfair or unconscionable’ conduct when the Tax Consequences Language is an accurate statement of the tax code, and especially when a consumer may be unaware – as appears to be the case here – that the discharged amount of indebtedness may be considered gross income by the IRS.”

In short, the Court ruled that the plaintiff failed to state a viable claim under the FDCPA, and that the defendants’ Joint Motion to Dismiss was granted and that the plaintiff’s claims were dismissed with prejudice.

insideARM Perspective

InsideARM contacted Brian Bowers, President of FRS to ask for comment on the case. Bowers provided the following:

“We decided to make a stand on these types of cases that clearly misrepresent the facts and in this case we were pleased with the stance of the court. Our organization researched the ‘Tax Consequences Language’ topic thoroughly prior to the inclusion of the language on the letters and the fact that the court agreed with our position on the language is an illustration of the effectiveness of the due diligence process in our organization. I hope others in the industry can use this ruling as a guideline and I commend those that choose to fight for what is right and just in our industry.”

insideARM congratulates FRS and Bowers for their successful defense of this case and the positive result for the industry.

That said, cases involving 1099(c) disclosures have led to mixed results in the recent past. Examples of similar cases covered recently by insideARM which led to a negative result include the following:

• Foster v. AllianceOne Receivables Management, LLC
• Velez v. Enhanced Recovery Company, LLC

In today’s Debt Collection Drill, attorneys John Rossman and Michael Poncin provide greater insight into the Everett case. insideARM recommends listening to that podcast for their always interesting analysis.

The Federal Trade Commission announced yesterday that it has charged a Kansas man and his companies with selling portfolios of fake payday loan debts that debt collectors used to get people to pay on debts they did not owe. At the FTC’s request, a federal court halted the operation pending litigation.

According to the FTC, Joel Jerome Tucker, SQ Capital LLC, JT Holdings Inc. and HPD LLC sold lists of fake loans supposedly made by a phony lender, “Castle Peak,” or by an online loan provider known as “500FastCash.” The listings had the social security and bank account numbers of people who supposedly owed money. Debt buyers and collection agencies subsequently used this information to persuade people that the debts were real and/or to get them to pay the fake debts.

The FTC alleges that the defendants listed loans the named lenders did not make, and falsely claimed that purported borrowers had failed to repay debts they never owed. It also alleges that the defendants did not have the authority to sell debts of the lenders they named. The complaint alleges that these practices provided the means for deceptive statements, and were unfair, in violation of the FTC Act.

To add credibility to the fake 500FastCash payday loans, Joel Tucker invoked the name of his brother, racecar driver and payday loan vendor Scott A Tucker. In 2012, the FTC brought an action against Scott Tucker and others engaged in payday lending under various names, including “500FastCash.” In October 2016, a federal court ruled that Scott Tucker must pay $1.3 billion for deceiving and illegally charging consumers undisclosed and inflated fees. In 2015, a co-defendant in that case, 500FastCash trademark owner Red Cedar Services Inc.agreed to pay $2.2 million and cancel consumer loans to settle FTC charges that it illegally charged consumers undisclosed and inflated fees.

The FTC previously brought actions against two collectors that used Joel Tucker’s fake loan portfolios: Delaware Solutions, whose defendants were banned from the debt collection business in a settlement with the FTC and the New York Attorney General’s office, and Stark Law LLC.

After this complaint was filed against Joel Tucker and his companies, the court granted the FTC’s request for a preliminary injunction that prohibits the defendants from selling fake debt. The FTC seeks to permanently end the unlawful practice.

The Commission vote authorizing the staff to file the complaint was 3-0. It was filed in the U.S. District Court for the District of Kansas.

insideARM Perspective

insideARM vigorously supports actions against crooks whose business model is based on fraud and deception. If the allegations in this case are proven to be true, Tucker should be banned from the industry. Scams involving debt buying and collection – which have been so easy to perpetrate – have made it extremely challenging for consumers and legitimate companies to communicate. This is bad for everyone.