The Consumer Financial Protection Bureau (CFPB or Bureau) issued a significant Consent Order against an Oklahoma debt collection law firm yesterday. This is the third such Consent Order alleging that a law firm was not “meaningfully involved” or did not sufficiently review accounts prior to and during the collections process.

You can read the full consent order here.

Works and Lentz, Inc. and Works and Lentz of Tulsa, Inc. specialize in the collection of medical debt on behalf of hospitals, doctors and healthcare providers. According to the findings of the Consent Order the Bureau concluded that the law firm committed the following violations of the Fair Debt Collection Practices Act (FDCPA) and Regulation V of the Fair Credit Reporting Act as follows:

• Lack of Meaningful Review: Attorneys at the law firm did not review accounts before demand letters were sent to consumers;

• Lack of a Disclaimer: The law firm failed to include a “disclaimer of attorney involvement” in their demand letters;

• Collectors Stated they were Calling from a Law Firm: Non-attorney staff identified themselves as calling from the law firm even though no attorney reviewed any account before the staff made such calls;

• Falsifying Affidavits: The law firm falsified notarized affidavits of clients without verifying the truth of their client’s signature; and

• Lack of Policies and Procedures to Ensure Accuracy of Information: The law firm furnished credit information to the credit reporting agencies without any policies and procedures in place to ensure the accuracy and integrity of the information being furnished.

The law firm entered into the Consent Order without admitting or denying any of the CFPB’s findings. Further, none of the Bureau’s findings indicated that any consumer was harmed by the law firm’s conduct, including collecting from the wrong consumer or collecting for the wrong amount. The Consent Order made no finding that any consumer was wrongfully sued or that any affidavit was inaccurate on its face prior to the improper notarization. Finally, nothing in the Consent Order suggests that any information furnished to any credit reporting agency was found to be inaccurate or that any consumer disputed the inaccurate information. Nonetheless, the law firm was ordered to pay $577,135.20 in redress to “Affected Consumers” who have yet to be identified as well as a civil penalty to the Bureau in the amount of $78,000.00.

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After five years and countless Consent Orders against the ARM industry it’s easy to pass off this case as possibly another rogue firm who should have known better. The industry should not be so apathetic. There is no evidence this law firm was repeatedly sued or had been the subject of any prior investigations. A review of the CFPB complaint portal shows only 35 complaints against the law firm from November 2013 until November 2016 and in all instances the complaints were closed with explanation.

Further, there are disturbing findings in this Consent Order that should not be overlooked, including the Bureau’s clear distain for law firms who are paid on a contingency basis. It should further disturb the industry that the Bureau issued an Outline of Proposals for Debt Collection but intentionally omitted any mandate that substantiation of a debt should include a client’s “original account level documentation,” even for law firms.

Now, however, Works and Lentz are required to have and to review “original account level documentation” prior to any implicit or explicit communication that a lawsuit is likely. Remember, this is medical debt, so a written contract is highly unlikely. That staff members of the law firm are no longer permitted to identify themselves as employees of the firm is equally puzzling. Who should they say they are calling from? Such a mandate contradicts several sections of the FDCPA which requires the disclosure of a debt collector’s identity as well as their respective employer.

Works and Lentz are now required to provide a written and even oral disclaimer in instances where no attorney has reviewed an account. In some states, like New Jersey, such a disclaimer that an attorney is not acting like an attorney is a violation of the state’s Rules of Professional Conduct. Ironically in the 10^th Circuit, where Works and Lentz are located, there is no case law on this issue and no requirement that such a disclaimer is even required. Finally, who is going to make the determination that an attorney review is sufficient in order to continue with collection activity or to provide a disclaimer? If it is the CFPB, through its rulemaking, then that clearly is the regulation of the practice of law and a complete disruption of the attorney client relationship.

Must all collection law firms now follow these same rules? CFPB Director Richard Cordray has certainly eluded to this in the past. In March 2016, Director Cordray referred to consent orders as a guide “to all participants in the marketplace to avoid similar violations and make an immediate effort to correct any such improper practices,” telling the Consumer Bankers Association that any company not following the precedents set by the CFPB’s consent orders is committing “compliance malpractice.”

The CFPB has done its job of dividing and conquering an industry that has spent small fortunes in compliance. The legal collections community has spent countless hours meeting and “talking” with the Bureau only to be told that what we do is bad, with no guidance as to what we should be doing right. We have seen colleagues reduced to roadkill for doing the job they were hired by their clients to do. Collection lawyers have been forced to put their adversary’s interest over that of their client, all in the name of consumer protection. Hanna, Pressler and now Works and Lentz are not this industry’s problem. Failure to fight the bully is.

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Joann Needleman is leader of Clark Hill’s Consumer Financial Services Regulatory & Compliance group. Joann has extensive litigation experience in state and federal courts, successfully defending creditors agains claims brought under the Fair Debt Collection Practices Act and Fair Credit Reporting Act as well as state statutes. She provides counsel, consultation and litigation services to financial institutions, law firms and debt buyers throughout the country. Joann is a former President of the Board of Directors of NARCA – the National Creditors Bar Association. She currently serves on the Consumer Financial Protection Bureau Consumer Advisory Board.

 

The ongoing saga of the Department of Education (ED) Collection RFP for Private Collection Agency work continues.  As of this morning the General Accounting Office (GAO) website reflected eleven protests filed in the matter of ED Solicitation Number: ED-FSA-16-R-0009.  The link to the GAO site can be found here. insideARM has been checking the site on a daily basis. Yesterday the site showed only the two protests filed that we reported on December 21, 2016. Today there were 9 additional filings noted. 

The eleven protests that showed up on the GAO site this morning were filed by: 

Alltran Education, Inc. (f/k/a Enterprise Recovery Systems)

Texas Guaranteed Student Loan Corporation

Van Ru Credit Corporation

Global Receivables Solutions, Inc.  (f/k/a West Asset Management)

Williams & Fudge, Inc.

Continental Service Group, Inc.

Performant Recovery, Inc. (f/k/a Diversified Collection Services)

Collection Technology, Inc.

Account Control Technology, Inc.

Pioneer Credit Recovery, Inc.

General Revenue Corporation

On December 19, 2016  insideARM wrote about the debriefing schedule for the 41 companies that were not initially selected and that requested a debriefing. In that article insideARM suggested that there would likely be a large number of protests and that the timing for filing a protest was ten days after the debriefings which were to occur which was “no later than 5:00pm EST, December 23, 2016.”

Depending upon how you count the 10-day period when considering the Christmas and New Year’s holiday, 10 days from that date could have been Tuesday, January 3^rd.  However, sources tell us that ED did not meet that December 23 debriefing deadline.  In fact, insideARM has learned that some debriefings were not received until late in the week AFTER Christmas.   Thus, it is likely that there is still time for additional protests to be filed. We will provide periodic updates as we learn of additional filings.

insideARM Perspective

As insideARM has noted in all of our coverage of this RFP, the stakes are high.  It will be very interesting to see the final number of protests filed. The results of the protests will be fascinating.

 

A recent opinion issued by the U.S. District Court for the Western District of Washington again illustrates the challenges for ARM industry companies facing Fair Debt Collection Practices Act (FDCPA) litigation – this time the case ended in a mixed result for the collection agency. The opinion in Wade v. DCS Financial, Inc. (United States District Court, W.D. Washington, Case No. 16-5398) discusses the granting in part and denial in part of a motion by defendant DCS Financial, Inc. (DCS) asking for summary judgment and sanctions in the amount of attorneys’ fees against the plaintiff.

A copy of the opinion can be found here.

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Background

On May 25, 2016, plaintiff Steaven Wade filed a complaint alleging that DCS’s debt collection efforts violated “various provisions of the FDCPA, including but not limited to 15 U.S.C. §§ 1692g, 1692d, 1692e(2), 1692e(4), 1692e(10), 1692e(11), 1692f and 1692f(6).”

DCS’s counsel replied on August 4, 2016, sending a letter to Wade’s counsel demanding the complaint be withdrawn within 21 days and warning of a filing for summary judgment to come after that 21 day period. DCS subsequently filed a motion for summary judgment on August 25, 2016. Wade and Wade’s counsel failed to respond until September 15, 2016, at that point filing “an untimely response” that “contested only part of the motion.”

The Court granted the motion for summary judgment in favor of DCS on October 26, 2016.

On November 3, 2016, DCS filed the instant motion requesting sanctions in the amount of reasonable attorneys’ fees for defending against Wade’s action, which was met by another “untimely response” by Wade on November 16, 2016. DCS replied on that same day, November 16, 2016.

Opinion

Judge Benjamin H. Settle began discussion of the case by noting the Federal Rules of Civil Procedure’s guidelines for cases like this:

“Rule 11(b) of the Federal Rules of Civil Procedure requires that in all representations to the court an attorney conduct ‘an inquiry reasonable under the circumstances.’ If, after notice and a reasonable opportunity to respond, the court determines that Rule 11(b) has been violated, the court may impose an appropriate sanction on any attorney, law firm, or party that violated the rule or is responsible for the violation.”

The Court held that in this case, “at least some of Wade’s claims were frivolous.”

Judge Settle specifically highlights the fact that Wade failed to contest DCS’s motion for summary judgment, noting that although “this failure alone does not show that Wade’s claim was frivolous, DCS’s attorney sent Wade’s attorney a draft motion specifically detailing how the claim was frivolous in light of the facts of this case,” yet “Wade forced DCS to file the motion and failed to respond to the relevant portion of the motion.” This action, in the Court’s view, served to “not only needlessly increase the costs of litigation but also show a failure to adequately investigate the claim before filing the complaint.”

Based on the above, the Court granted DCS’s motion for summary judgment.

Despite ruling in favor of DCS with respect to summary judgment, Judge Settle notes that “DCS has failed to show that Wade’s claim was not well founded,” and that “the Court is unable to conclude that a reasonable attorney would refrain from filing this claim or contesting it on a dispositive motion.”

Considering the facts of the case, the Court does not find fault in Wade’s conduct, but in the conduct of Wade’s counsel for failing to respond to multiple motions in a timely fashion.

Regarding DCS’s request for a sanction in the amount of reasonable attorneys’ fees, the Court “concludes that half of the requested fee is reasonable and warranted,” and that an amount of $2535 “shall be payable by Wade’s attorney because she is responsible for the violation.”

insideARM Perspective

The case is again highlighting the financial burden for firms defending themselves against apparently frivolous FDCPA litigation, and the incredibly difficult challenge of getting a court to award attorneys’ fees in full after successfully defending a case.

This case should be read in conjunction with several recent cases covered by insideARM, including:

• Anderson v. Portfolio Recovery Associates, LLC
• Hamburger v. Northland Group, Inc.

As we have observed in previous cases, good luck convincing a judge to award attorneys’ fees in full. The threshold is high.

The New York State Department of Financial Services (NYDFS) has issued revised proposed Cybersecurity Requirements for Financial Services companies that are Covered Entities. The regulation, which insideARM originally reported about in September 2016, will be effective March 1, 2017.

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DFS announced last week that it carefully considered all comments submitted regarding the proposed regulation during the 45-day comment period which ended on November 14, 2016. The latest draft incorporates suggestions that were deemed appropriate, and is now subject to a final 30-day comment period, which will end on January 27, 2017.

You can see the rules here.

Per the announcement from the Department,

It is critical for all regulated institutions that have not yet done so to move swiftly and urgently to adopt a cybersecurity program and for all regulated entities to be subject to minimum standards with respect to their programs. The number of cyber events has been steadily increasing and estimates of potential risk to our financial services industry are stark. Adoption of the program outlined in these regulations is a priority for New York State.

The wide-ranging requirements are detailed specifically in the published rules. Of note are certain exemptions, effective dates, and transition period:

Section 500.19 Exemptions.

(a) Limited Exemption. Each Covered Entity with:

• fewer than 10 employees including any independent contractors, or
• less than $5,000,000 in gross annual revenue in each of the last three fiscal years, or
• less than $10,000,000 in year-end total assets, calculated in accordance with generally accepted accounting principles, including assets of all Affiliates,

…shall be exempt from the requirements of Sections 500.04, 500.05, 500.06, 500.08, 500.10, 500.12, 500.14, 500.15, and 500.16 of this Part.

(b) An employee, agent, representative or designee of a Covered Entity, who is itself a Covered Entity, is exempt from this Part and need not develop its own cybersecurity program to the extent that the employee, agent, representative or designee is covered by the cybersecurity program of the Covered Entity.

(c) A Covered Entity that does not directly or indirectly operate, maintain, utilize or control any Information Systems, and that does not, and is not required to, directly or indirectly control, own, access, generate, receive or possess Nonpublic Information shall be exempt from the requirements of Sections 500.02, 500.03, 500.04, 500.05, 500.06, 500.07, 500.08, 500.10, 500.12, 500.14, 500.15, and 500.16 of this Part.

(d) A Covered Entity that qualifies for an exemption pursuant to this section shall file a Notice of Exemption in such form set forth as Appendix B. (emphasis added)

(e) In the event that a Covered Entity, as of its most recent fiscal year end, ceases to qualify for an exemption, such Covered Entity shall have 180 days from such fiscal year end to comply with all applicable requirements of this Part.

Effective Date.

This Part will be effective March 1, 2017. Covered Entities will be required to annually prepare and submit to the superintendent a Certification of Compliance with New York State Department of Financial Services Cybersecurity Regulations under section 500.17(b) commencing February 15, 2018.

Section 500.22 Transitional Periods.

(a) Transitional Period. Covered Entities shall have 180 days from the effective date of this Part to comply with the requirements set forth in this Part, except as otherwise specified.

(b) The following provisions shall include additional transitional periods. Covered Entities shall have:

(1) One year from the effective date of this Part to comply with the requirements of sections 500.04(b), 500.05, 500.09, 500.12, and 500.14(a)(2) of this Part.

(2) Eighteen months from the effective date of this Part to comply with the requirements of sections 500.06, 500.08, 500.13, 500.14 (a)(1) and 500.15 of this Part.

(3) Two years from the effective date of this Part to comply with the requirements of section 500.11 of this Part.

insideARM Perspective

Cybersecurity is clearly going to be an area that gets increasing attention in 2017, in one way or another, for firms of any size. Note that Sections 500.9 and 500.11 are not included in the exemption above. This means that all Covered Entities are responsible to conduct a periodic Risk Assessment, and to have a Third Party Service Provider Security Policy.

Collection agencies that do work for the Federal Government are already subject to rigorous requirements. These requirements are for those doing business in New York. No doubt other states will follow. 

 

ZEELAND, Mich. – Receivables Management Partners (RMP) is proud to announce that its Zeeland, Michigan team – Allied Business Services – has been named one of the Best and Brightest Companies To Work For by the National Association for Business Resources (NABR).

NABR has been conducting the competition for over 20 years, and has identified numerous best Human Resource practices. Winners were assessed by an independent research firm which reviewed a number of key measures of these, including: employee enrichment, engagement and retention, employee education and development, communication and shared vision, diversity and inclusion, work-life balance, community initiatives, strategic company performance, and compensation among others.

The Best and Brightest Companies to Work For competition identifies and honors organizations that display a commitment to excellence in operations and employee enrichment that lead to increased productivity and financial performance. The competition scores businesses based on regional data of company performance and a set standard across the nation. This national program celebrates those companies that are making better business, creating richer lives, and building a stronger community as a whole.

The mission at RMP is provide the highest quality accounts receivables management services through an industry best standard of professionalism while preserving the dignity and integrity of all members of the community. The vision of its leadership and staff is to do the right thing 100% of the time, and to do their part to make the world in which they live and work a better place. The national Best and Brightest recognition is an embodiment of that mission, and illustrates the organization’s commitment to helping its employees grow both professionally and personally.

“We are extremely proud of Allied Business Services, and of the entire RMP organization for this recognition,” said RMP COO Steve Gayheart. “We view this award as a reflection of our commitment to do the right thing 100% of the time, not just for our clients and their patients, but also for our employees. Our team is our organization’s greatest asset and their compassion and commitment is unparalleled in our industry.”

Jennifer Kluge, President and CEO of NABR, stated “Profitability and stability is essential for business in today’s economic climate. Companies that recognize that their employees are key to their success achieve staying power. Our 2016 winners create their human resource standards to ensure employee satisfaction and they set standards for every business to aspire toward.”

About RMP

Receivables Management Partners (RMP) is a financial services firm that enables leading healthcare providers to focus on patients instead of payments. The company proudly serves over 200 hospitals and more than 30,000 physicians nationwide. For more information, please visit ReceiveMoreRMP.com.  

This article was co-authored by Joann Needleman and Beth Slaby, of ClarkHill.

In what is sure to be the hot topic for 2017, the Federal District Court in Kansas has set the stage for even more confusion when it comes to disclosure of a payment on a time-barred debt. 

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The two cases, Smothers v. Midland Credit Mgmt and Boedicker v. Midland Credit Mgmt were decided within 24 hours of the other pursuant to Motions for Summary Judgment. Both matters involved the identical demand letter and, in both instances, there was no dispute that the debts were past the statutes of limitation. The Defendant, Midland, also put into the record its express policy not to sue on any matter that was past the applicable statute of limitations.

The Smothers court held that the failure to provide a disclosure that payment would revive the debt was confusing to the consumer and thus violated the Fair Debt Collection Practices Act (“FDCPA”). The Boedicker court found the exact opposite, concluding that a debt collector had no such duty to make such a disclosure.

Both letters offered payment options in large, bold font in the center of the page, including an option to make monthly payments as low as $50. Both letters made the following statements: “put the debt behind [you]” and receive “peace of mind.”  At the bottom, in smaller font, both letters also contained the following time-barred debt disclosure: 

“The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it. If you do not pay the debt, we may continue to report it to the credit reporting agencies as unpaid. 

*If you pay your full balance, we will report your account as Paid in Full.  If you pay less than your full balance, we will report your account as Paid in Full for less than the full balance.” 

The question raised in both cases was whether Midland’s time-barred debt disclosure, taken in context with the rest of the letter, listing the benefits of payment, constituted a misrepresentation and thus a violation of the FDCPA.

In Smothers, the Court found that, under the “least sophisticated consumer” test, the letter, by listing the “benefits” of paying stale debt – while omitting the concurrent risks of paying the debt – was in fact misleading. 

The Court stated that, while Midland may have a policy not to sue, there was nothing preventing them from selling the debt to someone who could. “Defendant’s promise not to sue does not impact the legal effect of making a partial payment because the revival of a statute of limitation is statutory – not a decision made by a debt collector.” The Court found that, while Smothers may indeed receive some of the benefits listed, by making a payment she exposed herself in Kansas to a lawsuit on the previously-stale debt by another debt collector.

In Boedicker, the District Court found that since the letter lacked any use of the term “settlement” and contained “far more than a hint regarding the statute of limitations,” there was no such threat of litigation and thus no confusion upon the consumer. 

It is interesting to note that both courts examined the Federal Trade Commission’s (FTC) 2012 Consent Order with Asset Acceptance, along with the Consumer Financial Protection Bureau’s (CFPB) recent Outline of Proposal for Debt Collection to highlight the fact that, in both instances, each agency did not mandate or propose a revival disclosure. In Smothers, the Court found that a lack of a revival disclosure in the Asset case was probably the result of a compromise by the FTC, while at the same time chastising the CFPB for not recommending such a disclosure.  In Boedicker, the Court found the lack of a revival disclosure by either agency as persuasive and thus such a disclosure is not otherwise mandated upon any debt collector.

So what is a debt collector to do?

Several years ago it was suggested that after McMahon and Buchanan “settlements were dead.” The fixation by many courts as well as the FTC and CFPB on not only the word “settlement” but the intent of same is so troubling. It will only be a matter of time when the use of the word “resolve” or “payment options” will take on hyper-sensitive meanings and inferences, especially upon the “least sophisticated consumer.” For those consumer-friendly courts who buy into the tortured logic of the CFPB and FTC, any attempt to resolve a legitimately-owed debt, despite its age, will be met with much scrutiny, no matter what words are used.  

Editor’s Note: insideARM offices were closed from December 23, 2016 through January 2, 2017 and we did not publish our newsletter. During that timeframe there was a flurry of activity in the PHH Corporation v. Consumer Financial Protection Bureau case. Barbara Mishkin of the Ballard Spahr law firm has covered the case extensively. The following articles previously appeared on Ballard Spahr’s CFPB Monitor and are re-published here in chronological order with permission.

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December 27, 2016

PHH and United States respond to CFPB’s petition for rehearing en banc; PHH seeks leave to file supplemental response

PHH and the United States have filed responses with the D.C. Circuit to the CFPB’s petition for rehearing en banc.  The D.C. Circuit invited the Solicitor General to file a response expressing the views of the United States and entered an order requiring both PHH and the SG to file their responses by December 22.

In PHH, the D.C. Circuit ruled that that the CFPB’s single-director-removable-only-for-cause structure violates the U.S. Constitution’s separation of powers.  To remedy the constitutional defect, it severed the removal-only-for-cause provision from the Dodd-Frank Act so that the President “now has the power to supervise and direct the Director of the CFPB, and may remove the Director at will at any time.”  It also rejected the CFPB’s interpretation of RESPA, which departed from HUD’s prior interpretation, to prohibit captive mortgage re-insurance arrangements such as the one at issue in PHH.  The court also held that even if the CFPB’s interpretation was correct, the CFPB’s attempt to retroactively apply its new interpretation violated due process.

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In its petition, the CFPB argued that the panel’s constitutionality ruling conflicts with U.S. Supreme Court precedent and should therefore be reconsidered by the court sitting en banc.  It also argued that panel’s RESPA ruling should be reviewed by the court sitting en banc but observed that the panel’s retroactivity holding “is perhaps not worthy of en banc review on its own.”  The CFPB also did not seek en banc reconsideration of the panel’s ruling that CFPB administrative enforcement actions are subject to the same statute of limitations as would apply to a CFPB lawsuit filed in court.

In its response, PHH asserts that the panel’s constitutionality ruling is fully consistent with Supreme Court precedent “and more than two centuries of separation-of-powers jurisprudence.”  As a result, PHH contends the panel’s “correct application of settled constitutional principles warrants no further review.”  PHH argues that further review of the panel’s RESPA interpretation is also not warranted because it “is plainly correct irrespective of the separation-of-powers ruling, and it presents no conflicting authority.” 

PHH asserts that “[o]n the contrary, the CFPB would ask the en banc Court to create a circuit split with every other court to have considered the proper scope of RESPA.” (emphasis supplied.)  In addition, PHH contends that the panel’s retroactivity holding “provides another independent basis for vacating the $109 million penalty against PHH.”

The United States, in its response filed by the Department of Justice, does not address the D.C. Circuit’s RESPA rulings and instead “addresses only the panel’s separation-of-powers holding.”  The United States argues that “the panel’s approach to resolving [the CFPB’s] constitutionality departs from the approach the Supreme Court has applied in resolving such separation-of-powers questions.”  According to the United States, the panel’s opinion was “premised on its view that an agency with a single head poses a greater threat to individual liberty than an agency headed by a multi-member body that exercises the same powers.”  The United States contends that, under relevant Supreme Court precedent, the proper inquiry is whether a removal restriction is an “impermissible intrusion on Presidential power or on the functioning of the Executive Branch,” and although a removal restriction’s effect on individual liberty “may shed light on whether it constitutes [such] an impermissible intrusion…the possible impact on individual liberty has not been an independent inquiry.”

PHH has filed a motion for leave to file a supplemental response to the petition for rehearing en banc.  In the motion, PHH asserts that “the United States [in its response] argues that this Court should grant the CFPB’s petition for rehearing en banc on several grounds that were not pressed in the CFPB’s petition, and with which PHH strongly disagrees.”  Further asserting that “[t]he United States government has now had two rounds of briefing and taken two separate positions in this Court in support of rehearing,” PHH seeks an opportunity to be heard “on the United States’ newly expressed views.”

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December 28, 2016

CFPB opposes PHH’s motion for leave to file supplemental response to petition for rehearing en banc

The CFPB has opposed the motion filed by PHH for leave to file a supplemental response to the CFPB’s petition for rehearing en banc.  On December 22, PHH and the United States filed responses to the CFPB’s petition with the D.C. Circuit.  The D.C. Circuit had invited the Solicitor General to file a response expressing the views of the United States.

In its motion for leave to file a supplemental response, PHH asserts that “the United States [in its response] argues that this Court should grant the CFPB’s petition for rehearing en banc on several grounds that were not pressed in the CFPB’s petition, and with which PHH strongly disagrees.”  Further asserting that “[t]he United States government has now had two rounds of briefing and taken two separate positions in this Court in support of rehearing,” PHH seeks an opportunity to be heard “on the United States’ newly expressed views.”

The CFPB’s opposition filed in the D.C. Circuit states only that the CFPB opposes PHH’s motion and that if PHH “wants an opportunity to present additional arguments to this Court, they may do so if this Court grants rehearing en banc and seeks additional briefing.”

—– 

December 29, 2016

PHH replies to CFPB’s opposition to PHH’s motion for leave to file supplemental response

PHH has filed a reply to the CFPB’s opposition to PHH’s motion for leave to file a supplemental response to the CFPB’s petition for rehearing en banc.  On December 22, PHH and the United States filed responses to the CFPB’s petition with the D.C. Circuit.  The D.C. Circuit had invited the Solicitor General to file a response expressing the views of the United States.

In its motion for leave to file a supplemental response, PHH asserts that “the United States [in its response] argues that this Court should grant the CFPB’s petition for rehearing en banc on several grounds that were not pressed in the CFPB’s petition, and with which PHH strongly disagrees.”  Further asserting that “[t]he United States government has now had two rounds of briefing and taken two separate positions in this Court in support of rehearing,” PHH seeks an opportunity to be heard “on the United States’ newly expressed views.”  In its opposition to the motion, the CFPB states only that it opposes PHH’s motion and that if PHH “wants an opportunity to present additional arguments to this Court, they may do so if this Court grants rehearing en banc and seeks additional briefing.”

In its reply, PHH describes the CFPB’s opposition as “completely nonresponsive to PHH’s basis for seeking a supplemental response.”  It states that “the CFPB does not dispute or even address” PHH’s point that it has not had a chance to respond to the United States’ response and “[i]nstead it offers a non sequitur: that if rehearing is granted, PHH will have a chance to brief the merits.”  PHH asserts “[t]hat is always true—and has nothing to do with whether PHH has had a fair opportunity to respond to the arguments for rehearing. It has not.”

 

ST. LOUIS, Mo. – Delta Outsource Group, Inc., a leader in the account receivables management industry is proud to announce that Michael Lages has joined the organization as the President and Chief Financial Officer.

Mr. Lages has 20 plus years of collections and management experience, having managed a credit and collection staff in four locations across the United States. In addition to Mr. Lages strong ARM industry knowledge, he brings a wealth of knowledge and experience in the Financial and Accounts Receivable business acumen. Mr. Lages was responsible for all North American billing, collections and accounting for a global manufacturer, of nearly a half a billion dollars in receivables.

Delta Outsource Group, Inc. CEO Jim Peacock commented on the addition, “We are very excited about Mr. Lages joining our organization.  Michael’s unique background of ARM industry experience, coupled with his impressive financial background make Mr. Lages the perfect fit for our organization.”

About Delta Outsource Group, Inc.

Delta Outsource Group, Inc. provides innovative, quality and cost effective receivables management solutions built on a foundation of integrity, transparency, and accountability. We offer a diverse selection of call center solutions from first party and customer care programs, to post charge off recovery and legal programs. Delta Outsource Group, Inc. employs a highly experienced and motivated workforce empowered to deliver superior results by incorporating innovative technology with intelligent analytics.

 

On December 28, 2016 the CFPB filed an amicus brief with the U.S. Supreme Court in support of the individual consumer in the case of Midland Funding, LLC v. Aleida Johnson, a decision from the Eleventh Circuit that determined Midland’s filing of an accurate proof of claim in the consumer’s bankruptcy case on a time-barred debt violated the Fair Debt Collection Practices Act (FDCPA). insideARM wrote about the case on May 25, 2016 and wrote about the Supreme Court granting Certiorari on October 12, 2016.

Background

The case involves a dispute between Aleida Johnson and Midland Funding, LLC. Midland filed a proof of claim in a Chapter 13 Bankruptcy proceeding on an account of Johnson’s that was outside the applicable statute of limitations. Attorneys on both sides of the case had filed petitions for a writ of certiorari seeking SCOTUS review.

The Question Presented

Per the amicus brief the CFPB notes the question presented on appeal is: “Whether a creditor violates the FDCPA, (15 U.S.C. 1692 et seq.), by filing an accurate proof of claim in a bankruptcy proceeding for an unextinguished time-barred debt that the creditor knows is judicially unenforceable.”

Before the Johnson case was taken up by SCOTUS, the Eleventh Circuit Court of Appeals determined that filing a bankruptcy court proof of claim on a time-barred account was an FDCPA violation.

In a similar case, Owens v. LVNV Funding, LLC, the Seventh Circuit joined with the Eighth Circuit Court of Appeals in rejecting the notion that filing such proofs of claim violated the FDCPA.

In its brief, the CFPB argues that the FDCPA prohibits a debt collector from filing a proof of claim in a bankruptcy for a debt that the debt collector knows is time-barred. Per their brief:

“Contrary to petitioner’s (Midland) argument, the Code does not authorize the filing of a proof of claim for a debt that the creditor knows is unenforceable under applicable law. The Code directs that a claim for a time-barred debt should be disallowed. A creditor that knowingly files such a claim is subject to sanctions under Federal Rule of Bankruptcy Procedure 9011, and potentially to other remedies for bankruptcy abuse. The fact that the Code contains other mechanisms designed to prevent such claims from actually being paid does not alter that conclusion.”

The CFPB also argued that because a debt collector implicitly represents that it has a good faith basis to believe its claim is enforceable in bankruptcy when it files a proof of claim, the filing is misleading and unfair in violation of the FDCPA when the collector knows the claim is time-barred and therefore unenforceable in bankruptcy. Per the brief:

“When a debt collector knows that a claim is time-barred and therefore unenforceable in bankruptcy, the filing of a proof of claim is misleading and unfair, in violation of the FDCPA.”

insideARM Perspective

Our perspective on this issue has not changed since our October, 12, 2016 article. SCOTUS agreeing to review this case is a good development; the issue needs resolution.

An eventual ruling from SCOTUS should provide clarity to the ARM industry and consumers alike.  The CFPB position on the issue is not surprising.

 

SOUTHGATE, Mich. — Renkim Corporation is pleased to announce substantial changes to the organization that include new management, new board appointees and perhaps most significantly, a significant expansion of the employee-owned corporate structure. Renkim is now 100% employee-owned though the ESOP, employee stock ownership plan.

“Restructuring to 100% ESOP is a positive shift that benefits the corporation and our employees,” says Cliff Stephens, newly-appointed Renkim President and COO. “The ESOP structure promotes and cultivates a culture of employment longevity, accountability and a profound sense of pride in the workplace. It also serves as a significant benefit to recruit the best and brightest to Renkim. This is a milestone moment for Renkim.”

The company has also made a series of new executive team and Board of Directors appointments. Cliff Stephens, President and COO along with Lewis Doot, newly-appointed Vice President of Finance and Chief Financial Officer will report directly to the Board of Directors. Rob Augg will lead client growth initiatives in his new role of Vice President of Business Development and Marketing.

Outside board appointees include Chairman Richard Duffy, Tim Jochim, and David Sass.

“These appointees bring fresh thinking, talent and expertise to Renkim,” adds Stephens. “They have  already demonstrated their impact by expanding the Renkim employee stock ownership plan and reorganizing the company. Our executive team and our new board are making strategic and intentional decisions that positions us well for significant growth.”

Michael D. Gibson of Kerr Russell serves as outside counsel and Tracy Woolsley of Horizon Bank will continue to serve as the ESOP Trustee responsible for managing ESOP assets, satisfying fiduciary responsibilities, and selecting new board members.

About Renkim Corporation

Headquartered in Southgate, MI, Renkim is one of the nation’s leaders in handling financial and mission-critical documents for credit, collection, healthcare, insurance, automotive and utility companies located throughout North America. Founded in 1982, Renkim’s120 employees manage more than 65 million print and electronic mailings each month, and is full-service certified by the United States Postal Service. 100% Employee Owned.