I recently
had the opportunity to attend the Marketplace Lending & Investment
Conference in New York City. I came away from this conference
believing this emerging market sector has tremendous potential and conveys a
lot of promise, but it is still a good distance away from delivering
on that promise.  On loan volume alone, it is a mere thimble in size when
compared to the lending volume associated with traditional lending
markets.  That may explain why it was stated by one moderator during the
conference: “the majority of marketplace lenders are not yet profitable”  – a somewhat
surprising comment given the financial benefits associated with Marketplace
lenders use of the online digital channel, typical higher non-prime lending
rates, and the operational efficiency advantages they generally gain with using
Fintech Technology.  No doubt, this emerging market has a lot of growing
pains and challenges to tackle, but one cannot help but be enamored with all of
its potential. That potential probably explains why there is so much
interest and talk about it within the credit and ARM industries. 
       

Marketplace Lending is generally described as
non-traditional lenders that leverage Fintech capabilities to engage in
offering non-prime loans to consumer via on-line.  Their main source of
funding has come primarily from private investors and private equity
firms, which has been key in terms of enabling them to quickly come to
market.  However, unless these private investment sources are extremely
large, the capital funding can quickly dry up.  As such, the Marketplace
Lending Conference was really about two concerns: 1) obtaining more capital for
loan growth, and 2) looming regulatory / compliance changes.  Both of
which are the main challenges to real growth in this market sector. 

I learned at this conference that while it was generally
believed that online lenders armed with Fintech technology pose a serious
threat to banks, and credit unions, this is not necessarily the case.  The
threat, while certainly real, should not be considered an immediate
concern.  The reason being, as previously stated, marketplace lenders have
the challenge of not being able to drive to the next level of loan growth due
to not having easy access to more lending capital.  Banks and credit
unions, as a whole, do not have this same challenge or at least not to same
degree.  Traditional lenders have a mature financial eco-system in
place to more easily obtain capital, as well as handle the multitude
of activities throughout the entire credit process – from various
funding options, all the way through to collections, recovery and debt
sales.  This gives those banks and credit unions a big leg up on
marketplace lenders, who are still attempting to develop out their own
financial eco-system.  Furthermore, instead of competing with marketplace
lenders, many banks and credit unions have been quietly investing in and or
acquiring loans from marketplace lenders as a means to drive up their own loan
volume through an alternative channel.  

With respect to developing eco-systems and platforms, the marketplace lending
sector has not yet invested a lot of time and attention on the management of
delinquent accounts or bad debt.  This is due, in part, to being more
focused on lending activities such as marketing, ramping up loan application
volume, and refining their customer onboarding process.  Also, for many of
the marketplace lenders, the number of delinquent accounts is relatively small
at this point in their portfolio growth and is not having a sufficient enough
impact on financial performance to warrant shifting more attention, expenses
and development to their backend operations.  As such, the majority of
marketplace lenders currently elect to outsource collections efforts. 
These marketplace lenders will either outsource the entire collections and
recovery effort, or do so for delinquent accounts that reach later stages of
collections, typically at sixty days past due or greater.  Generally
speaking, these marketplace lenders typically only employ one or two outsource
partners.  Therefore, agency management activities and related tools are not
necessarily complex or sophisticated.

As I left the conference, I walked away thinking that in the
not too distant future the Marketplace Lending Industry and the ARM Industry
have the potential to become the perfect partners.  Marketplace lenders
will soon start to shift more of their attention to portfolio management and
collections as it rises in relative importance towards the continued success of
their business (along with more origination volume, and more sources of
capital).   However, these lenders all are not about building out
large, costly, and difficult to manage infrastructures, or having lots of
personnel performing manual tasks.  This is true especially with
regard to collections, recovery and debt sales.  The marketplace
lenders would much rather engage in a truly strategic and close
partnership with a collection agency to leverage their expertise and
established collection services.  In particular, these lenders are
interested in working with those agencies that have invested in modern
collections platforms with the latest functionality, along with streamlined
processes, and strong compliance capabilities Most importantly,
the lenders are looking for partners whose collections culture aligns with
those of marketplace lenders (focus on customer care / customer
service). 

According to a Federal Trade Commission announcement this
morning, a federal court has found that racecar driver Scott A. Tucker and
several corporate defendants in a Kansas City-based payday lending scheme
violated Section 5 of the FTC Act and has ordered them to pay $1.3 billion for
deceiving consumers across the country and illegally charging them undisclosed
and inflated fees.

The $1.3 billion order handed down by the U.S. District
Court for the District of Nevada represents the largest litigated judgment ever
obtained by the FTC. It stems from a complaint filed in 2012 by the agency,
which alleged that the operators of AMG Services Inc. falsely claimed they would
charge borrowers the loan amount plus a one-time finance fee. Instead, the
defendants made multiple withdrawals from consumers’ bank accounts and assessed
a new finance fee each time, without disclosing the true costs of the loan. The
judgment represents the difference between what consumers actually paid on the
loans and what they were told they would have to pay.

In her latest ruling granting the FTC’s request for summary judgment against the defendants, Chief
Judge Gloria M. Navarro found that Scott Tucker ran the operation and was
individually responsible for the unlawful conduct. The order announced today
bans Tucker and his companies, including AMG Capital Management LLC, Level 5
Motorsports LLC, Black Creek Capital Corporation, and Broadmoor Capital
Partners, from any aspect of consumer lending, and prohibits them from
conditioning the extension of credit on preauthorized electronic fund
transfers, misrepresenting material facts about any good or service, and
engaging in illegal debt collection practices.

The operation had claimed in state legal proceedings that it
was affiliated with Native American tribes, and therefore immune from legal
action, but, in an earlier decision, the district judge found otherwise.

According to the Court record, the Tucker Defendants object
to nearly all of the evidence relied upon by the FTC in its Motion for Summary
Judgment. Among the evidence relied upon was a set of emails, which Tucker
claimed “must be excluded as unauthenticated and inadmissible hearsay.” The
Court, however, found that all but one email was presumptively authentic
because they were 1) produced by a party opponent, and 2) deemed authentic per
Federal Rule of Evidence 901(b)(4) because of their distinctive
characteristics, citing Haack v. City of
Carson City, No. 3:11-CV-00353-RAM, 2012 WL 3638767, at *7 (D. Nev. Aug.
22, 2012) and Brown v. Wireless Networks, Inc., No. C 07-4301 EDL, 2008 WL
4937827, at *4 (N.D. Cal. Nov. 17, 2008), respectively.

The Court also addressed the hearsay objection, saying many
of the emails are non-hearsay as they were sent by Tucker or an employee, and
were relied on only to show that Scott Tucker was “aware that the loan repayment model was problematic and confusing
to consumers.”

The Court also mentions that some of the additional
objections raised by Tucker “…do not merit further discussion.” Although, there
is additional discussion.

One of these other objections that will be of interest to
the debt collection community was that the FTC abused its discretion under the
FTC Act by proceeding through adjudication rather than rulemaking.

In its rejection of the FTC abuse argument, the Court said, 

“The choice made between proceeding
by general rule or by individual, ad hoc litigation is one that lies primarily
in the informed discretion of the administrative agency.” S.E.C. v. Chenery
Corp., 332 U.S. 194, 203 (1947). The Ninth Circuit has clarified that where
“adjudication change[d] existing law, and ha[d] widespread application,” the
FTC “exceeded its authority by proceeding to create new law by adjudication
rather than by rulemaking.” Ford Motor Co. v. F.T.C., 673 F.2d 1008, 1010 (9th
Cir. 1981). Subsequent cases have clarified that an agency may announce new
principals during adjudication so long as “its action [does not] 1) constitute
an abuse of discretion or 2) circumvent the [Administrative Procedure Act’s]
requirements.” Union Flights, Inc. v. FAA, 957 F.2d 685, 688 (9th Cir. 1992).

Here, adjudication by the FTC is
proper. First, this litigation will not result in any changes to existing law.
It merely applies the established principles of the FTC Act to the Tucker
Defendants’ particular unfair business practices. Moreover, this action is
against a single set of defendants and involves one discrete fraudulent
practice. The Court’s instant Order does not have “widespread application.”
Further, the FTC has not abused its discretion nor attempted to circumvent the
APA. The FTC is not using this “adjudication to amend a recently amended rule,
or to bypass a pending rulemaking proceeding.” Union Flights, 957 F.2d at 688.
Similarly, the Tucker Defendants cannot claim that they relied on a former FTC
policy, or any other recognized situation constituting an abuse of discretion.
See id. Without these showings, the Tucker Defendants have not demonstrated an
abuse of discretion or an attempt to circumvent the APA.

The FTC reached a partial settlement with some of the other
defendants in July 2013. In January 2015, AMG Services and MNE Services Inc. agreed to pay $21
million to resolve the charges against them; and in January 2016, Red Cedar Services Inc. and SFS Inc. paid a total
of $4.4 million to resolve the case against them.

The County Board of Supervisors in Riverside, California is
renewing their contract with Delaware-based collection agency Hospital Billing
& Collection Services (HBCS). Under the new contract, HBCS will continue to
provide services for the Riverside University Medical Center (RUMC) in Moreno
Valley.

HBCS first signed to work with RUMC in November 2015, under
direction from the Riverside County Board of Supervisors to concentrate on collecting
from individuals owing $5,000 or less and older “legacy” accounts. The Banning
Patch reports that HBCS collected $7.8 million in the past year, almost
double the $4 million expected by the county. This period of success for RUMC comes
after a taxpayer-funded reorganization following years of the hospital having
multimillion-dollar deficits.

Officials at RUMC note in particular that HBCS does business
the right way, having not been the subject of a single complaint during the
course of their work with the hospital. Given their track record thus far, HBCS
will be handling more of RUMC’s accounts under the new contract.

According to the hospital, collections could potentially
total over $33 million between now and July 2017. HBCS is estimating that with
their collection fee of 6%, they could receive over $2 million from the county
over that time period. 

It is becoming increasingly clear that whatever the
specifics of the CFPB’s final debt collection rules, technology is going to be
critical to the ability to provide compliant services and remain profitable.

So I was fascinated by the announcement by IBM late last
week that the company plans to acquire Promontory Financial Group, a global risk
management and regulatory compliance consulting firm headquartered in
Washington, D.C.

On the face of it this may not seem to relate to the ARM
industry. But take another look; this is a very interesting example of
out-of-the-box innovation from other industries being applied to financial
services. Read the following all the way through. What unfolds, to me, should
be a “wow” to collectors, who depend so heavily on manual review and human
intervention.

According to the announcement,

Upon close, the capabilities of
Promontory combined with IBM’s deep industry expertise and Watson’s cognitive
capabilities will directly address the massive operational effort and manual
cost of escalating regulation and risk management requirements.

More than 20,000 new regulatory
requirements were created last year alone, and the complete catalog of
regulations is projected to exceed 300 million pages by 2020, rapidly
outstripping the capacity of humans to keep up. Today, the cost of managing the
regulatory environment represents more than 10 percent of all operational
spending of major banks, for a total of $270 billion per year.

This is a workload ideally suited
for Watson’s cognitive capabilities intended to allow financial institutions to
absorb the regulatory changes, understand their obligations, and close gaps in
systems and practices to address compliance requirements more quickly and
efficiently.

Upon close, Promontory’s
professionals will train Watson, which will learn by continuously ingesting
regulatory information as it is created and through interaction in real-world
applications.

“What Watson is doing to transform
oncology by working with the world’s leading oncologists, we will now do for
regulation, risk and compliance,” said Bridget van Kralingen, senior vice
president, IBM Industry Platforms. “Promontory’s experts are unsurpassed in
this field. They will teach Watson and Watson, in turn, will extend and enhance
their expertise…”

Promontory will begin to accelerate
IBM’s development and machine training of cognitive solutions for risk and
compliance. This includes solutions for tracking constantly changing regulatory
obligations, expectations and control requirements, as well as solutions that
address specific compliance needs, such as financial risk modeling, surveillance,
anti-money laundering (AML) and Know Your Customer (KYC).

Eugene Ludwig, Promontory’s founder and CEO said, “We
believe the future of business and regulation will be driven by the need for
advanced technology alongside deep subject-matter expertise.”

I agree. And to this end, we at The iA Institute are
in the process of forming an Innovation Council to leverage the collective imagination
of big thinkers from across – and outside – the ARM industry. The Innovation Council will work closely the Consumer Relations Consortium, also managed by The iA Institute. If you think you
can contribute, please get in touch.

The issue of
whether knowingly filing a Proof of Claim on Out-of-Statute debt is a violation
of the Fair Debt Collection Practices Act (FDCPA) has created inconsistent
answers for the ARM industry. Recently, the Supreme Court of the United States
(SCOTUS) has been asked to provide a definitive answer. In two separate cases (Owens v. LVNV Funding, LLC, Nos.
15-2044,15-2082,15-2109, 2016 WL 4207965 (7th Cir. Aug. 10, 2016) and Johnson v. Midland Funding, LLC, 823 F.3d 1334 (11th
Cir. May 24, 2016) attorneys on both sides of the issue have filed petitions
for a writ of certiorari seeking SCOTUS review.

The Owens petition was filed on August 26, 2016 and placed on the docket September 12, 2016 as Case
No. 16-315 The Johnson petition was
filed on September 16, 2016 and placed on the docket September 16, 2016 as Case
No. 16-348.

insideARM has written or published articles about
both cases in the past.

In Johnson,
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 Owens,
the Seventh Circuit joined with the
Eighth Circuit Court of Appeals in rejecting the notion that filing such Proofs
of Claims violated the FDCPA.

insideARM Perspective

This is an issue that cries out for SCOTUS
review.  The Courts of Appeals have
provided inconsistent answers. insideARM
will be monitoring the SCOTUS docket and reporting if and when the court
decides whether to review.

In the meantime, it is possible that the
Consumer Financial Protection Bureau (CFPB) could make the issue moot by
promulgating a rule on the issue.

On September 21, 2016 the Venable LLP law firm (Venable) published
a very interesting blog entitled: A Look Inside the Official CFPB Enforcement
Policies and Procedures Manual. 

The blog discusses how the Consumer Financial Protection
Bureau (CFPB) promotes its “transparency” and yet, unlike the Federal Trade
Commission (FTC) which had for years made available its Operating Manual as a
public record, the CFPB manual was nowhere to be found on it comprehensive and
user friendly website.

The manual was released in response to a Freedom of
Information Act (FOIA) request by Venable and portions of the copy made available to Venable
were redacted. The Enforcement
Policies and Procedures Manual that Venable received can be found here.

The manual is 390 pages. Per the Venable blog:

“Following sections on document
maintenance and retention policies, the manual includes a discussion of its
policies governing the conduct of investigations, litigation, remedies,
adjudicative proceedings, working with other law enforcement partners, practice
guidance, and administrative issues, as well as model forms and sample language
used in investigations and litigation by CFPB enforcement staff.

A memo written by then Enforcement
Director Richard Cordray (now Director) setting out the “enforcement
action process” also is included, which sets out the notification,
consultation, and approval policies and procedures that the Office of Enforcement
follows when taking critical action throughout the various stages of the
enforcement process.”

insideARM Perspective

The blog should be required reading for all Compliance
professionals. The 390 page manual will take weeks to fully digest. The Table of
Contents is fairly detailed allowing the reader to quickly move to desired
sections. The manual includes sample forms from everything from opening an
investigation to a sample Temporary Restraining Order. Every ARM firm should
download a copy.

Reviewing the manual when considering prior CFPB enforcement
actions connects the dots from investigation to enforcement.

The ARM industry should say a collective “thank you” to
Venable for requesting the document and making it available for download.

Stellar Recovery, Inc. is pleased to announce the
addition of Jason Kahn as Vice President, Business Development to the sales and
marketing team. He will draw upon his 19 years of sales and higher education
experience to foster client relationships in the higher education vertical.

In his last role at Delta Management Associates,
Jason’s responsibilities included establishing and sustaining client
relationships for Government, Higher Education, and lending clients throughout
New England and Mid-Atlantic Regions. In that role he successfully increased
placement of new accounts by $45 million for fiscal year 2016, producing over
$1 million in fees. Jason brings great business development experience to
Stellar, including six years with College Loan Corporation(CLC) where he
proudly served as the Director of School Relations. Jason also served as
Regional Account Manager at American Student Assistance(ASA), where his focus
was business development for ASA’s student loan processing solutions within the
northeastern region of the United States.

In addition to sales, Jason has also facilitated
higher education professional training session over the course of his career
and is Train the Trainer certified.

He reports to Keith Jones, Chief Sales Officer

Stellar
Recovery, Inc. is located in Jacksonville, FL.  Please visit the new
mobile website at www.stellarrecoveryinc.com

A federal judge in New York has ruled
that a letter which contained an internal reference number that may have
been visible through an envelope window does not violate the Fair Debt
Collection Practices Act (FDCPA).

The case is Rodriguez v. I.C. Systems, Inc. (Case No. 14-CV-06558, United
States District Court, Eastern District of New York). A copy of the Judge’s
Memorandum and Order can be found here.

Background

Plaintiff Wendy
Torres Rodriguez brought an action pursuant to 15 U.S.C. § 1692f(8) of the
FDCPA. Defendant, I.C. Systems, Inc. (ICS) sent a letter dated January 4, 2014 (the Letter) to plaintiff seeking to collect on a debt that was assigned to it
by Con Edison, plaintiff’s original creditor. The Letter contained an ICS
Reference Number (ICS Reference Number), which is a unique internal reference
number ICS assigns to each account it receives from a creditor. The number does
not have any significance to anyone outside of ICS. Located above plaintiff’s
name and address on the Letter is a string of numbers, 64140020-1-19/0510, which
includes the ICS Reference Number. The ICS Reference Number has no relation to
any of plaintiff’s personal identifying information. Plaintiff alleged that the
ICS Reference Number, her name, and address were visible through the glassine
window of the envelope (the Envelope) when she received the Letter.

On November 6,
2014 plaintiff filed the Complaint. ICS filed its answer on February 9, 2015,
and served interrogatories and document requests on May 21, 2015, but plaintiff
failed to respond timely. Plaintiff served her unverified interrogatory
responses that attached a copy of the Letter on July 17, 2015, and provided a
verification for her interrogatory responses on August 18, 2015. Plaintiff,
however, did not appear for her noticed deposition nor did she respond
to defendant’s document demands which sought, among other things, a full and
complete copy of the Letter and a copy of the Envelope in which the Letter
arrived. ICS also requested that plaintiff produce the original Letter and the
original Envelope, but plaintiff did not do so. The parties filed a
joint status report to the court on September 2, 2015, in which plaintiff’s
counsel confirmed that the Envelope was no longer available.

On November 16, 2015, ICS filed a motion for summary
judgment. 

Editor’s Note:  A motion for summary judgment is based
upon a claim by one party (or, in some cases, both parties) that contends that
all necessary factual issues are settled or so one-sided they need not be
tried. The summary judgment is appropriate when the court determines there
no factual issues remaining to be tried, and therefore a cause of action or all
causes of action in a complaint can be decided upon certain facts without
trial.

ICS argued that it was entitled to summary judgment because
(1) plaintiff’s claim fails as a matter of law because without the original
Envelope, plaintiff cannot establish what, if any, identifying information was
visible and (2) even if the ICS Reference Number was visible, the ICS Reference
Number does not reveal any identifying information about plaintiff and
therefore it falls within the benign language exception to § 1692f(8) of the
FDCPA that has been recognized and applied in the Second Circuit.

The Court’s Decision

The Honorable Judge Kiyo A. Matsumoto presided over the case
and issued the Memorandum and Order referenced above granting the ICS motion
for Summary Judgment.

Judge Matsumoto wrote:

“The court finds that plaintiff
cannot prove her case because she cannot produce the Envelope giving rise to
her claims. Even construing all evidence in favor of the non-moving plaintiff,
and assuming the ICS Reference Number was visible through the Envelope, the
court finds that the exposure of the ICS Reference Number, a string of random
digits, does not violate § 1692f(8) of the FDCPA.

Courts have recognized a “benign
exception” to § 1692f(8) of the FDCPA which allows bill collectors to include
language and symbols on their mailings, including internal reference numbers,
as long as the language and symbols are not indicative of the party’s status as
a debtor and do not reveal other private information about the party.

The series of numbers and letters
is indecipherable to anyone, sophisticated or not, and its significance only
becomes apparent when the letter is opened. 
The ICS Reference Number does not contain any specific information
indicating that plaintiff is a debtor. The ICS Reference Number is meaningless
to anyone outside of ICS, including the least sophisticated consumer, and
plaintiff has not shown that the ICS Reference Number is any different from the
identifiers used on junk mail.

Accordingly, the court finds as a
matter of law that the FDCPA was not violated even if the ICS Reference Number
was displayed on the Envelope. Therefore, defendant’s motion for summary
judgment is granted.”

Judge Matsumoto then addressed a request by ICS for an award
of attorney’s fees for successfully defending the case.  The Judge wrote:

“Defendant’s requests for
attorneys’ fees is denied, although plaintiff’s failure to retain the Envelope,
a material piece of evidence giving rise to her claim, presents a close case.
Plaintiff’s counsel is advised that he should not commence actions if he lacks
evidence to prove his clients’ claim.”

insideARM Perspective

This case is another in a long string of “Envelope Cases.”  See the insideARM FDCPA Resources page in our Compliance Portal to review our
FDCPA Caselaw chart. In that chart you will find several other cases discussing
envelopes, visible account numbers, and bar codes. The takeaway should be that
the issue is far from settled.  There are
opinions on both sides of this argument. 
One should not read this single case and come to a conclusion on a
course of conduct regarding what items may be visible on an envelope. 

The case also demonstrates the difficulty of a prevailing
defendant being awarded attorney’s fees in an FDCPA matter.  In this case the plaintiff was unable to
produce the material piece of evidence that gave rise to the lawsuit. Yet, the
Judge denied the request, calling it a “close case” for an award of attorney’s
fees.  Seeking attorney’s fees is an
uphill battle.

Earlier this week the Consumer Financial Protection Bureau (CFPB) took action against online lender Flurish, Inc., doing business as LendUp, for failing to deliver the promised benefits of its products. As a result, the company must provide more than 50,000 consumers with approximately $1.83 million in refunds, and pay a civil penalty of $1.8 million to the CFPB. The San Francisco based company began offering single-payment loans and installments loans in 2012, and operates in 24 states.

The full text of the CFPB’s consent order is available here. 

According to the Bureau’s announcement,

“LendUp pitched itself as a consumer-friendly, tech-savvy alternative to traditional payday loans, but it did not pay enough attention to the consumer financial laws,” said CFPB Director Richard Cordray. “The CFPB supports innovation in the fintech space, but start-ups are just like established companies in that they must treat consumers fairly and comply with the law.”

Specifically, the CFPB found that the company:

• Misled consumers about graduating to lower-priced loans: Many of the benefits the company advertised as available to consumers who moved up the LendUp Ladder were not actually available. Despite the fact that LendUp advertised all of its loans nationwide, loans at the higher levels were not available outside of California for most of the company’s existence. Therefore, borrowers outside of California were not eligible to move up the “LendUp Ladder” and obtain lower-priced loans and other benefits.

• Hid the true cost of credit: LendUp gave some consumers inaccurate information about the true cost of the loans offered. The company used banner ads on Facebook and other Internet search results that included “slider bars” allowing consumers to view various loan amounts and repayment terms, but it did not disclose the annual percentage rate as required by law.

• Reversed pricing without consumer knowledge: With one particular loan product, borrowers had the option to select an earlier repayment date. Borrowers who selected an earlier repayment date received a discount on the origination fee. But if a borrower later extended the repayment date, the company would reverse the discount given at origination. The company did not disclose this and, in three states, the company’s loan agreement specifically stated that it would not charge any fees to extend the repayment period. In addition, if a borrower defaulted, any discount received at origination was reversed and added to the amount sent to collections.

• Understated the annual percentage rate: LendUp offered services that allowed consumers, for a fee, to obtain their loan proceeds more quickly. The company passed along the fee to a third party, but LendUp also retained a portion of the fee from loans made between May 2013 and March 2016. In many instances, these retained fees should have been included in the annual percentage rate calculation; because they were not, the company inaccurately disclosed the finance charges. 

• Failed to report credit information: Although the company began making loans in 2012 and advertised its loans as credit building opportunities, the company did not furnish any information about any loans to credit reporting companies until at least February 2014. Before April 2015, LendUp also failed to have any written policies and procedures about the accuracy and integrity of information furnished to consumer reporting agencies.

• Provide approximately $1.83 million in redress to victims: The company is ordered to pay about $1.83 million to over 50,000 consumers. Consumers are not required to take any action. The company will contact consumers in the coming months about their refunds.

• End deceptive loan practices: LendUp must stop misrepresenting the benefits of borrowing from the company, including what loan products are available to consumers and whether the loans will be reported to credit reporting companies. The company must also stop mispresenting what fees are charged, and it must include the correct finance charge and annual percentage rate in its disclosures.

• End unlawful advertisements: The company must regularly review all of its marketing material to ensure it is not misleading consumers.

• Ensure accuracy of pricing: The company must regularly test annual percentage rate calculations and disclosures to ensure it complies with the Truth in Lending Act.

• Pay a $1.8 million civil penalty: LendUp will pay $1.8 million to the CFPB’s Civil Penalty Fund.

The CFPB investigation was conducted in coordination with the California Department of Business Oversight, which today announced a separate settlement with LendUp.

Under the terms of the CFPB order released today, LendUp is required to:

insideARM Perspective

While this is not specifically a debt collection action, there is reference to the fact that discounts were reversed and added to the account as it was moved to collection. Should elements of the CFPB’s outline of proposed debt collection rules come to pass, this detail would have to be clearly listed on the validation notice.

What is also interesting here is whether this is the type of complaint a collection agency would start to receive, and would be responsible for identifying as a “warning sign.” Also in the outline of proposed rules is the concept that agencies would be required to review the information obtained from the debt owner to look for warning signs that may raise questions as to the adequacy or accuracy of the information with respect to a particular consumer or with respect to the entire portfolio in general. (emphasis added)

Many of the proposals in the outline require creditors and collectors to be aligned in ways they have not been before, and in some cases, even begin to turn the tables on who is supposed to be monitoring whom.

insideARM maintains a
free TCPA
resources page to provide the ARM
community a destination for timely and topical information on the Telephone
Consumer Protection Act of 1991 (“TCPA”). This page is generously supported by LexisNexis. See the page here or find it in our main navigation bar from any page on
insideARM. 

The cornerstone of the page
is a chart of significant TCPA cases. Click on the link in the chart for
the complete text of the decision. Where insideARM has already published a
story on the case, we provide a link. Case information and analysis is
provided by the Bedard Law Group.

TCPA cases in
August 2016 brought both positive and negative outcomes for the ARM industry

Romero v.
Department Stores National Bank

 

The gist: The plaintiff
alleged that the defendant called her hundreds of times using an automated
dialing telephone system about a delinquent credit card bill. The District
Court for the Southern District of California dismissed the plaintiff’s TCPA
claims due to a lack of standing.

 

Lee v.
LoanDepot.com

 

The gist: The
defendant placed a number of calls to the plaintiff instead of calling a
customer, when they had no consent to call the plaintiff. The District Court of
Kansas ruled that the plaintiff was entitled to some damages, but declined the
plaintiff’s request to treble the amount of damages awarded.

 

A.D. v. Credit One
Bank

 

The gist: The plaintiff
alleged that the defendant called her repeatedly on her cell phone without her
consent using an automated dialer in order to collect on a debt she did not
owe. The District Court for the Northern District of Illinois denied the
plaintiff’s motion for class certification and the defendant’s motion to
dismiss the case, while granting the defendant’s motion to compel arbitration
and stay the proceedings.

 

Aranda v. Caribbean
Cruise Line, Inc.

 

The gist: Plaintiffs
allege that the defendant placed millions of calls to consumers who did not
consent to receive them. The District Court for the Northern District of
Illinois denied the defendant’s motion to decertify the classes in the case.

 

Hewlett v.
Consolidated World Travel

 

The gist: The
plaintiff alleged that the defendant called the plaintiff’s cell phone “nearly
daily” without her consent using an automatic telephone dialing system, and
continued to call after she requested for the calls to stop. The District Court
for the Eastern District of California denied the defendant’s motion to dismiss
the case.

 

Drozdowski v.
Citibank, Inc.

 

The gist: The
plaintiffs allege the defendant called their cell phone number without their
consent using automated dialing equipment. In this case, however, the defendant
was calling about a legitimate debt owed by the plaintiffs. The District Court
for the Western District of Tennessee granted the defendant’s motion to compel
arbitration in the case.