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No Surprises At CFPB’s Arbitration Field Hearing

October 11, 2015 By admin Leave a Comment

Yesterday the Consumer Financial Protection Bureau (CFPB) held a public field hearing in Denver, Colo. to discuss arbitration. There were no surprises.

The field event followed the pattern of prior field hearings. It started with prepared remarks by CFPB Director Richard Cordray. A copy of the prepared remarks are located here. The opening remarks clearly outline the CFPB position and direction; mandatory arbitration provisions in consumer contracts are bad and their use should be dramatically reduced.

The opening remarks were followed by a panel discussion with consumer groups and industry representatives, then a short public comment session.

The panelists were:

Alan Kaplinsky, Partner, Ballard Spahr

Ira Rheingold, Executive Director, National Association of Consumer Advocates

Jean Sternlight, Professor of Law, University of Nevada-Las Vegas

Jose Vasquez, Attorney, Colorado Legal Services

Stephen Ware, Professor of Law, University of Kansas School of Law

John Rudy, Senior VP & Chief Lending Officer, Bellco Credit Union

Each panelist made a short opening statement, followed by a Q&A session with questions presented by members of CFPB team to each of the panelists. None of the panelists deviated far from script throughout their opening remarks or the Q&A. Sternlight, Vasquez, and Rheingold praised the CFPB efforts and the Cordray remarks, though all thought the CFPB could and should go further to completely eliminate arbitration provisions in consumer contracts under CFPB supervision.

Of the other three panelists, Rudy and Ware offered neutral commentary to tepid criticism of the CFPB position and Director Cordray’s remarks. Rudy did comment that he felt the CFPB was not looking to middle ground in attempting to resolve the issue.

On the other hand, Alan Kaplinsky was highly critical of the CFPB’s position, direction and Cordray’s opening remarks. Kaplinsky directed the group to the same CFPB Arbitration study mentioned throughout Cordray’s opening remarks and the opening statements from other panelists to support their position.

Kaplinksy pointed out that the study showed the average dollar recovery for consumers in the class action cases highlighted in the Arbitration study was $32.35. He also noted that less than 4% of consumers ever benefit from any class action settlement and conversely 96% of all potential consumer claimants do not benefit. His argument was that the consumer’s interests are not best served by class action litigation if only 4% of consumers ever receive any benefit. He did note that all lawyers involved in the class action process were making significant money.

Finally, Kaplinsky chided Director Cordray for using the term “free pass” eight separate times in his prepared remarks when discussing entities using an arbitration clause in their consumer contracts. Kaplinsky thought the term was inflammatory and misleading.

The Public Commentary Session also provided no surprises. Virtually all public comments were in opposition to arbitration provisions.

insideARM Perspective

Based upon the prepared remarks of Director Cordray and the tone of the field hearing, it would appear that the CFPB is going to use their rulemaking to drastically reduce the use of mandatory arbitration provisions in consumer contracts subject to CFPB supervision.

What is being ignored in this debate is the ultimate cost to the consumer if arbitration is eliminated and more class action litigation follows. Businesses will ultimately pass down to all consumers the costs involved defending and settling class action cases. The question is whether an average recovery of $32.35 per impacted consumer in these types of class action proceeding outweighs the class action costs that will ultimately be passed down by businesses to all consumers.

Is the CFPB protecting all consumers by suggesting the virtual elimination of these clauses?

For additional perspective, I’d suggest this outstanding article by Andy Pincus, a partner at Mayer Brown LLP in Washington, D.C. He coins a new name for the CFPB, “The Plaintiff’s Lawyer Protection Bureau.”

No Surprises At CFPB’s Arbitration Field Hearing
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Accounts Receivable Management

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CFPB Orders Indirect Auto Finance Company to Pay $48.3M in Relief and Penalties for Illegal Debt Collection Tactics

October 4, 2015 By admin Leave a Comment

The Consumer Financial Protection Bureau (CFPB) announced this afternoon an enforcement action against an indirect auto finance company and its auto title lending subsidiary for pressuring borrowers using illegal debt collection tactics. The following is the full text of the CFPB press release on the matter.

The CFPB found that Westlake Services, LLC and Wilshire Consumer Credit, LLC deceived consumers by calling under false pretenses and using phony caller ID information, falsely threatened to refer borrowers for investigation or criminal prosecution, and illegally disclosed information about debts to borrowers’ employers, friends, and family. The Bureau ordered the companies to overhaul their debt collection practices and to provide consumers $44.1 million in cash relief and balance reductions. The companies will also pay a civil penalty of $4.25 million.

“There’s no excuse for lying to your customers, and today’s action will provide millions of dollars in relief for borrowers caught up in Westlake and Wilshire’s deception,” said CFPB Director Richard Cordray. “Consumers struggling to pay their bills deserve to be treated with respect, not subjected to illegal threats and deceptive phone calls. We will continue to clean up the debt collection market and root out these illegal and inexcusable practices.”

Westlake Services, LLC is an indirect auto finance company based in Los Angeles that specializes in purchasing and servicing auto loans, including many subprime and near-subprime loans. Subprime loans are made to borrowers with generally lower credit scores. Westlake purchases loans from auto dealers nationwide. Wilshire Consumer Credit, LLC, a wholly owned subsidiary of Westlake, offers auto title loans directly to consumers, largely via the Internet, and services those loans. Wilshire also purchases and services auto title loans made by others.

The CFPB found that Westlake and Wilshire deceived borrowers into thinking they were being called by repossession companies, other third parties, or even the borrowers’ own family and friends. The CFPB’s investigation found that the companies’ debt collectors used a web-based service, Skip Tracy, to place outgoing calls and choose the phone number and caller ID text that the call recipient would see. Since January 2010, Westlake and Wilshire debt collectors have used Skip Tracy to place or receive calls associated with over 137,000 loan accounts.

The Bureau also found that the companies unlawfully disclosed information about borrowers’ debts to employers, family, and friends. The companies also failed to disclose the annual percentage rate on certain loans as required by law. In some cases, the companies changed the due dates or extended the terms of loans without borrowers’ permission, causing more interest to accrue, while telling consumers that the extensions would have a positive effect. These practices violated the Fair Debt Collection Practices Act, the Truth in Lending Act, and the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act.

Illegal Debt Collection Tactics

Westlake and Wilshire used a variety of deceptive or unfair tactics in contacting borrowers about their loans. Specifically, the CFPB found that the companies:

Pretended to call from repo companies: Westlake and Wilshire altered caller ID information for outgoing calls to make it appear the calls were coming from other companies, including repossession companies. The companies’ debt collectors would then pretend during the call that they were calling from repossession companies and make explicit or implicit threats that the borrowers’ vehicles were in imminent danger of being repossessed. When Westlake and Wilshire indicated to borrowers that a third-party repossession company was calling to collect on the debt, the companies became “debt collectors” within the meaning of the Fair Debt Collection Practices Act.

Faked calls from pizza delivery services, flower shops, or family and friends: Westlake and Wilshire also altered caller ID information so that it looked like they were calling from unrelated businesses. On these calls the companies’ debt collectors would usually keep up the ruse – for instance, if the caller ID was altered to say “Flower Shop,” the debt collector would pose as an employee of a flower shop in order to trick the consumer into disclosing his location or the location of his vehicle. Westlake and Wilshire also altered caller ID information so that it looked like borrowers were receiving calls from family members and friends when the calls were actually placed by the companies’ debt collectors.

Falsely threatened to refer borrowers for investigation or criminal prosecution: From at least January 2010 until at least April 2014, Westlake and Wilshire used Skip Tracy to make it appear as though they were calling from investigation or enforcement divisions. The companies explicitly and implicitly threatened to file criminal charges against consumers even when they had not decided to refer the borrowers to criminal authorities. These tactics likely misled consumers into believing they needed to make a payment urgently to avoid an investigation.

Tricked borrowers whose vehicles had been repossessed: From at least January 2010 until at least April 2014, Westlake and Wilshire called consumers whose vehicles had already been repossessed and used Skip Tracy to make it appear the calls were coming from a party associated with the word “Storage.” During some of these calls, the companies’ debt collectors implied that the vehicles would be released if the borrowers made a partial payment on the account; however, the companies would actually only release a repossessed vehicle after a borrower paid the full amount due. As a consequence, some borrowers paid the amount agreed upon during the phone call, but their vehicles were not released.

Called consumers’ employers, friends, and family members without permission: From at least January 2010 until at least April 2014, Westlake and Wilshire called consumers’ references, employers, friends, and family members and disclosed information about their loans without the consumers’ permission. The companies’ tactics included inserting words like “Repo” or “General Investigations” into the caller ID, calling third parties, and mentioning the consumers’ names. During other calls, the companies also made statements implying that consumers were delinquent on loans or facing repossession, investigation, or criminal charges.

Paid a repo company to make collections calls to consumers: Westlake and Wilshire paid a third-party repossession company to make debt collection calls to borrowers, even when the companies had not decided to repossess the consumers’ vehicles or the companies had no reason to believe repossession was imminent. This tactic likely misled consumers into believing that they needed to make a payment urgently to avoid repossession.

Other Illegal Practices

Westlake and Wilshire also violated federal consumer financial laws in their advertising, customer relations, and account servicing practices. Specifically, the CFPB found that the companies:

Deceived borrowers about the effects of due date changes or extensions to loan terms: From at least January 2010 until at least September 2011, some Westlake collectors changed the due dates on accounts or extended loan terms without consulting consumers, or even speaking with them. The collectors would later tell the borrowers that the modified schedules would have a positive effect for them, though in fact the changes would cause the borrowers to owe additional interest over the course of the loans.

Hid the true cost of credit: Wilshire gave consumers incomplete information about the true cost of the loans it offered. Specifically, the CFPB found that Wilshire used monthly interest rates or other interest rates in advertisements for auto title loans in 2012 and 2013, without disclosing the loans’ annual percentage rate as required by law. Wilshire also prominently advertised monthly rates on one of its websites and only disclosed the annual percentage rate in small text lower on the page. And in 2014, Wilshire representatives speaking with prospective borrowers on the phone would answer questions about the cost of loans by providing monthly rates or other rates instead of the annual percentage rate.

Enforcement Action

Pursuant to the Dodd-Frank Act, the CFPB has the authority to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices or that otherwise violate federal consumer financial laws. Under the terms of the CFPB order released today, Westlake and Wilshire are required to:

Provide approximately $44.1 million in redress to victims: The companies are ordered to pay approximately $25.8 million in cash and to provide the remainder in balance reductions. Consumers are not required to take any action to receive their check or balance reduction. The companies will contact consumers directly in the coming months.

End deceptive debt collection practices: The companies must comply with the Fair Debt Collection Practices Act, the Truth in Lending Act, and the relevant sections of the Dodd-Frank Act. Specifically, among other things, the order prohibits Westlake and Wilshire from misleading consumers into believing that their debt collectors are associated with any other company or department, or that they are about to repossess consumers’ vehicles. They are also prohibited from falsely threatening to refer consumers for investigation or criminal prosecution, and from implying that they will return a repossessed vehicle if the consumer makes a partial payment.

Protect consumers’ private information: The companies are ordered to stop illegally disclosing borrowers’ loan information to third parties. They must also stop threatening to disclose such information when doing so would be unlawful.

End unlawful advertisements: The companies must evaluate all of their advertisements for compliance with the Truth in Lending Act before publication.

Give consumers truthful information about their loans: Westlake and Wilshire must not change the due dates on consumers’ loans or extend consumers’ loans without explaining to consumers the effects of those modifications and obtaining consumers’ informed consent to the changes.

Pay a $4.25 million civil penalty: Westlake and Wilshire will make a $4.25 million penalty payment to the CFPB’s Civil Penalty Fund.

The full text of the CFPB’s Consent Order is available here

CFPB Orders Indirect Auto Finance Company to Pay $48.3M in Relief and Penalties for Illegal Debt Collection Tactics
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Accounts Receivable Management

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Progress in House Towards Independent Inspector General For CFPB

October 4, 2015 By admin Leave a Comment

The U.S. House of Representatives Committee on Financial Services held a session yesterday for the markup of H.R. 957, the “Bureau of Consumer Financial Protection-Inspector General Reform Act of 2015.” The Bill is sponsored by Rep. Steve Stivers (R-OH), and would create an independent Inspector General (IG) for the Consumer Financial Protection Bureau (CFPB). Currently, the IG who oversees the CFPB also oversees the Federal Reserve. According to a comment during Tuesday’s semi-annual hearing of the same Committee with Director Cordray, this is unusual, as most federal agencies have their own IG.

Stivers argues that the current IG is stretched too thin, and is unable to provide adequate oversight. He sights delays in audits and evaluations, including – as of May 2014 – 35 delays on fifteen reports.

The ranking Democrat on the Financial Services Committee, Rep. Maxine Waters (D-CA), responded that she has no problem with the concept of an independent IG for the CFPB. While she also expressed confidence in Directory Cordray, adding that she feels he has been open and transparent, she said that she agrees with Stivers. Her concern is that she doesn’t want to see the appointment be held up in the Senate confirmation process, and that there are details – especially related to the funding stream for the position – that need to be resolved. She expressed confidence, however, that these details could be worked out.

In a rare instance of apparent bi-partisanship, Rep. Waters and Rep. Stivers appeared to be in agreement that funding independence for the CFPB IG is essential, and committed to work through the details together. The Bill passed the committee with a 56-3 vote.

insideARM Perspective

While this is just a step in a process on what seems like a mundane matter, it’s an interesting part of the broader conversation (largely bi-partisan fight) about CFPB governance and the power of the agency.

Progress in House Towards Independent Inspector General For CFPB
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Accounts Receivable Management

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7th Cir. Confirms FDCPA Is Not Enforcement Mechanism for Matters Governed by Other Federal or State Laws

October 4, 2015 By admin Leave a Comment

Charles Ochab

The U.S. Court of Appeals for the Seventh Circuit recently affirmed summary judgment in favor of a debt collector, holding among other things that the “FDCPA is not an enforcement mechanism for matters governed elsewhere by state and federal law.”

A copy of the opinion is available at: Link to Opinion.

The plaintiff failed to pay his credit card and a law firm specializing in debt collection sued to collect the balance in state court. In response to the creditor’s motion for summary judgment, the card holder invoked the arbitration provision in the credit card agreement.

The state court denied the creditor’s motion for summary judgment and stayed the case for 30 days to allow the card holder to commence arbitration. The order also provided that if this was not done, the stay would be dissolved automatically.

The deadline passed without arbitration being commenced, in part because the American Arbitration Association declined to accept the case because the creditor had previously failed to comply with its policies governing consumer claims. The creditor then filed a second motion for summary judgment, to which the debtor responded with a motion to dismiss or continue the stay. The state court denied the motion to dismiss, but enlarged the time to arbitrate by three months.

In the interim, the debtor sued the creditor’s law firm in federal district court, arguing that the second motion for summary judgment, filed after the debtor had elected to proceed with arbitration, was an unfair or unconscionable means of attempting to collect the debt in violation of the FDCPA, 15 U.S.C. § 1692f.

In addition, the debtor argued that the law firm violated 15 U.S.C. § 1692e by supposedly misrepresenting the amount of interest in the state court complaint as 10.65% instead of the 13.9% reflected in a later statement the debtor received.

The district court granted summary judgment in the debt collector’s favor and the debtor appealed.

On appeal, the Seventh Circuit noted that, under 15 U.S.C. § 1692f, “[a] debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.” The Court noted that while “the statute does not define the phrase ‘unfair or unconscionable,’ and we have called the phrase ‘as vague as they come,’ … the statute provides a list of eight illustrative violations.”

State Judicial Proceedings Outside Scope of § 1692f

The Seventh Circuit further noted that subsection 1692f(6) was the most relevant to the case at bar, which prohibits “taking or threatening to take any nonjudicial action to effect dispossession or disablement of property,” which implies “that state judicial proceedings are outside the scope of § 1692f.”

The Seventh Circuit held that “[i]f state judicial proceedings are outside the scope of§ 1692f, then [plaintiff] does not have a leg to stand on.” Although the Court thus expressed doubt “that a state court motion for summary judgment — filed to collect an overdue credit card debt — could qualify as an unfair or unconscionable act under the FDCPA,” it decided to “look to the facts of this particular case before we pass judgment on [plaintiff’s] claim.”

The Seventh Circuit disagreed that filing the second motion for summary judgment after the debtor had elected arbitration violated § 1692f of the FDCPA, reasoning the “FDCPA is not an enforcement mechanism for matters governed elsewhere by state and federal law.”

The Court pointed out that the debtor “seeks to transform the FDCPA into an enforcement mechanism for the arbitration provision in his credit card agreement,” and that it had previously rejected such an approach in its decision in Beler v. Blatt, Hasenmiller, Leibsker & Moore, LLC, 480 F.3d 470 (7th Circuit 2007).

In Beler, the plaintiff alleged that a debt collector law firm violated § 1692f of the FDCPA by trying to levy on Social Security benefits, which are exempt from execution or attachment under federal and state laws. The Court denied the claim because “both the federal and state laws implicated provided remedies for violations.”

Collector Acted Consistently with State Court Order

Finding that the debt collector acted consistently with the state court order setting a time limit to initiate arbitration, the Court concluded that filing the second motion for summary judgment was not “an unfair or unconscionable means of attempting to collect a debt under § 1692f.”

Turning to the interest rate claim, the Court rejected the debtor’s “either-or” argument that “either (1) [the debt collector] misrepresented the interest rate when it alleged 10.65% in its complaint, in violation of 15 U.S.C. § 1692e; or (2) [the debt collector] attempted to collect a debt not authorized by the agreement, in violation of 15 U.S.C. § 1692f(1).”

The Court noted that the debtor offered no evidence that the debt collector misrepresented the interest rate or attempted to collect a debt not authorized by the agreement in response to the debt collector’s motion for summary judgment. Accordingly, the Court found that “the district court properly granted summary judgment in favor of [the debt collector].”

The Seventh Circuit also rejected the debtor’s final argument that, by assuming the card issuer’s reduction of the interest rate from 13.9% to 10.65% was proper, the district court improperly drew an adverse inference against the non-moving party, reasoning that the card issuer was not a party to the lawsuit and that the inquiry at hand was the representations and collection efforts of the debt collector.

Because the debtor failed to raise a triable issue that the law firm “either misrepresented the interest rate or attempted to collect an amount not authorized by the agreement with [the card issuer],” the district court’s judgment was affirmed.

7th Cir. Confirms FDCPA Is Not Enforcement Mechanism for Matters Governed by Other Federal or State Laws
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Accounts Receivable Management

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Participation Cuts Both Ways; Another Take On “Meaningful Involvement”

October 4, 2015 By admin Leave a Comment

Mark Dobosz

The FTC-CFPB Debt Collection Dialogue this week in Dallas discussed many areas of the debt collection process. One topic that was particularly interesting came out during the afternoon’s second panel dialogue.

The panel brought up the issue of default judgments and improving the engagement of consumers in the process of resolving legitimate debt obligations. Since the FTC’s document “Repairing the Broken System” came out five years ago, industry representatives have shared a number of initiatives for increased communications with consumers to address concerns expressed in that report regarding consumer involvement.

Both regulators and industry representatives on the panel acknowledged that consumer involvement in court proceedings continues to be an issue despite all of the efforts to improve the process. It was evident from the comments that increased utilization of empirical research would be key to solving a challenge in an environment where a plethora of anecdotes exist.

Chris Koegel of the FTC recommended that a collaborative (industry and consumer advocates), comprehensive, and detailed study of the issue of the lack of consumer engagement be undertaken immediately. He additionally reinforced that rushing into solutions that do not base themselves on any existing or future research, and that do not otherwise shed light on the behavioral or practical reasons for the challenge, is misguided.

This recommendation is one that should be considered when applying labels to describe the perceived or real challenges for the creditor or the consumer in the debt collection process.

One example is how participation is defined, or not defined, for all parties. If a term will be used to define participation in the debt collection process, it should equally apply to not only the creditor but also to the consumer. In any relationship, contractual or otherwise, the responsibility to be “meaningfully involved” is not a one-sided equation. And if that premise is accepted, which I believe reasonable people would agree it should, then defining it needs to have a defensible background and basis upon which to use the term in defining acceptable behavior among both parties.

To Mr. Koegel’s point, addressing a challenging issue that does not have a clear cut definition requires both current and developing research to create a usable framework.

As Ben Golub, Assistant Professor of Economics at Harvard University, summarizes, “….when evidence is non-rigorously collected and there’s not a lot of it — we call the evidence anecdotal. (“I was walking around and it seemed that ladies out walking seem to be wearing red today.”) Such evidence has two features which make it relatively unappealing for scientific analysis. First, there’s not a lot of it, which makes precise inference difficult. Second, it has selection issues: whatever made it available or noticeable to the observer may be biasing the inferences drawn from it. In our example, red is a noticeable color, so unless you carefully documented all the ladies you saw, your generalization might be biased by that.” Quora July 2011

Regulators, in their collaboration with industry and consumer advocates, can benefit from the insights of the great work being done in sociology, psychology, and economics to create policy and regulations that truly improve the debt collection process and create a “level-playing” field for all. We can’t have an effective credit ecosystem unless both sides participate.

Participation Cuts Both Ways; Another Take On “Meaningful Involvement”
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Accounts Receivable Management

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Suze Orman on Today Advises Against Income-Based Student Loan Repayment Plans

September 27, 2015 By admin Leave a Comment

Earlier this week I was watching the Today Show (no comments, please), which included a segment with Suze Orman, the personal finance guru. She was there to promote her financial literacy course, and took a question from a young woman in the crowd. The woman said she is 25, recently graduated from college with $40,000 in student loan debt, and has just signed up for the income-based repayment program. She asked Suze whether this was the right thing to do. Without hesitation, Suze said unfortunately it was not the right thing to do. Her explanation was that the difference in what she should be paying (likely about $400/month) versus what she is probably now paying (likely about $150/month) gets shifted to the back end of the loan, and when the amount is forgiven years from now, she’s going to have a big tax bill.

I thought this was interesting, given how fervently the Department of Education has pushed this option. Was this the right advice? Do you agree? Click the image to watch the segment (the young woman’s question to Suze begins at 3:35).

Suze Orman on Today Advises Against Income-Based Student Loan Repayment Plans
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Accounts Receivable Management

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CFPB to Hold Field Hearing on Arbitration; Announcement Expected

September 27, 2015 By admin Leave a Comment

The Consumer Financial Protection Bureau (CFPB) announced a field hearing in Denver, Colo., on October 7^th at 11am MDT. The hearing will focus on arbitration and will include comments from CFPB director Richard Cordray as well as from consumer groups, industry representatives and the public. No specific location has been announced.

The event is open to the public but requires an RSVP. Anyone who wants to go to the event should email cfpb.events@cfpb.gov with your full name and organizational affiliation.

insideARM Perpective

As we have come to learn, the CFPB tends to schedule field hearings when they have major announcements to make.

This field hearing will be particularly interesting to attorneys and credit grantors, for two reasons. If arbitration is limited, this may provide attorneys with more opportunities to file law suits. For credit grantors, the arbitration process has historically been less expensive than traditional litigation. Arbitration provisions were also used to limit class action lawsuits.

Chase and others used arbitration extensively until things erupted with the 2009 National Arbitration Forum (NAF)/Axiant LLC scandal. In the wake of a lawsuit and multiple law enforcement investigations, NAF was forced out of the debt arbitration business.

On March 10, 2015, the CFPB published a study, which it called “the most thorough empirical research in the space,” that was critical of arbitration clauses as a consumer tool for disputes with lenders and servicers. Many industry observers, as well as some academics, were – in turn – critical of the CFPB study. In August, Jason Scott Johnston and Todd Zywicki published a report which argued that the CFPB’s methodology and conclusions were flawed.

They conclude that,

Public policy in the United States has long supported the use of arbitration and other means of dispute resolution as an alternative to litigation. Indeed, broad regulatory action by the CFPB that might nullify or discourage consumer arbitration could preempt what has become quite precise judicial supervision and fine-tuning of consumer arbitration clauses. Such ex post judicial supervision seems already to have changed that way that companies such as AT&T draft arbitration clauses, leading to arbitration procedures that are cheap and easy for consumers to pursue and that offer consumers large payments (in AT&T’s case, $10,000) when the consumer wins. Consumer arbitration is only in its infancy. It has tremendous promise. The CFPB’s Report provides no evidence for this promise to be aborted by expansive new CFPB regulation.

insideARM will monitor the September 29 hearing and report on any developments.

CFPB to Hold Field Hearing on Arbitration; Announcement Expected
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Accounts Receivable Management

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Three Ways Data Offers Businesses the Ultimate Insurance Policy

September 27, 2015 By admin Leave a Comment

We’ve all heard of car insurance, home insurance, renter’s insurance, health and dental insurance, business insurance, malpractice insurance and yes, even pet insurance! But how about data insurance?

Our customers have stated that 15-20 percent of a collection agency’s bottom-line goes toward the cost of compliance. Here’s something new to think about: If you currently count data as a cost of compliance, it’s time to reframe that mental model. In fact, data is an investment and functions like insurance against what you’re doing to stay compliant. When it comes to reducing the cost of compliance, you want to invest in the best data out there because high-quality data ensures that, in the end, you are able to reach more of the right people the first time, and collect more debt.

True, data companies don’t actually provide you with an ‘insurance policy’ in the typical terms, but by taking advantage of all that data has to offer, and using that information as a part of your daily collection process, you may be able to avoid the real enemies that are attacking your bottom line, consumer complaints and lawsuits.

Let’s look at some of the most common consumer law suits in the credit and collections industry that may have been avoided with the help of data:

Bankruptcy Data: McMahon v Ryan [964 So.2d 198,200 (Fla. 5^th DCA 2007)]. Shows that even a creditor who is not listed on the creditor’s matrix is bound by the bankruptcy’s automatic stay.
Cell Phone Data: In the August 2014 TCPA Settlement, Capital One and three collection agencies agreed to pay $75.5 Million to end a consolidated class action lawsuit alleging that the companies used an automated dialer to call customers’ cell phones without consent. [In re Capital One Telephone Consumer Protection Act Litigation MDL No. 2416, Master Docket No.; 1:12cv-1006 (N.D. Ill.)]
Active Military Data: In the recent $60 Million settlement with Sallie Mae (Now Navient), the complaint alleged that Sallie Mae did not properly provide members of the military the six percent interest rate cap, and that they also violated the SCRA by improperly obtaining default judgments against servicemembers. [Case 1:14-cv-00600-UNA, US District Court, District of Delaware]

So, what can you do to protect your business? Below are three datasets that can help to offer “insurance” in your daily processes.

Bankruptcy

Bankruptcy data is near and dear to my heart; with over 30 years of experience in the credit and collections industry, and half of those working closely with the Banko product, I have a lot of experience with bankruptcy data and have talked to hundreds of customers about using bankruptcy data in their daily workflow.

To me, this one is a “no-brainer.” If you can quickly identify those consumers who have filed for bankruptcy and remove them from your calling queue and general collection queue and either return these accounts to your creditor client or move them to a special handling queue to avoid contacting the consumer, then why wouldn’t you?

I can’t tell you how many times I’ve heard a customer tell me “we wait until we get a paper notice in the mail or until the consumer tells us on the phone that they have filed for bankruptcy.” However by the time you get the notice in the mail, especially if it goes initially to your client and not to you, it may be weeks until you see the notice, and by then you may have already violated the Bankruptcy Automatic Stay. If you wait for the customer to tell you on the phone – then you HAVE already violated the Bankruptcy Automatic Stay by contacting the consumer. Consumers are getting more and more educated to collection rules/laws, and some are even trying to bait collectors into doing or saying something wrong. Bankrupt accounts are easy ones to remove from your collections queue to help avoid these costly calls.

Cell Phones

The largest growing single regulation-based lawsuit class in the past few years has been TCPA suits. Although we are all hoping for changes to the TCPA, or at least clarification on certain parts of it, for now, we need to abide by the Act as it stands today. With close to 40% of consumers communicating via cell phone only (no landline in the home), it’s more important than ever to know what type of a phone you are dialing.

Two of the biggest complaints relating to the TCPA are:

1) Calling/texting cell phones using a predictive dialer or leaving an automated message on a cell phone.

2) Calling the wrong person on a cell phone (you have permission to call Consumer A on his cell phone, but then he changes his phone number and his old number is assigned to Consumer B who you inadvertently call thinking it is still Consumer A’s number).

By scrubbing all of your new placements to get a flag for cell phones, you can quickly remove those numbers known to be cell phones and move them to a manual dial queue. Similarly, if you have cell numbers that you already have express consent to call via dialer by the cell phone owner, it’s a good idea to regularly check to make sure that cell phone number still belongs to your consumer.

Because of porting and more and more consumers going to a cell phone only (either porting landline to cell or removing landline entirely), it’s a good idea to scrub your phone numbers for a cell phone flag at least monthly.

Active Military

With the recent Sallie Mae (CFPB, FDIC and DOJ Investigation) and Freedom Furniture and Electronics and Military Credit Services settlements (CFPB investigation), the Servicemembers Civil Relief Act (“SCRA”) has been called to the forefront in collections and lending.

While some of the relief afforded to military members via the SCRA has to be proactively requested by the military member, there are still many activities regularly performed by collections that should not be performed on military members, whether or not they have asked for relief, such as repossession, garnishment and foreclosure. Additionally, even though it’s not required under the SCRA, Sallie Mae is now required to proactively scrub their account to look for active military members; something we should all take to heart.

By proactively scrubbing your new placements for active military personnel, you can either flag those accounts or move them to your special handling queue so that collectors know that they are calling on a person, or the family of a person who is on active military status. While you are still allowed to collect on these consumers, you should do so with care.

The collections industry is an important component to the economy. Without it mortgages would be more expensive, credit would be harder to obtain and Interest rates would skyrocket. With the increased oversight by the CFPB, and increased consumer awareness about collections, collection agencies are eagerly adopting business practices that make them better businesses for the long run. High-quality data is an insurance policy against the real threats that you battle every day and are a way to reach more people to drive profitability.

Contact LexisNexis today to find out how we can help insure your company has the best data for the changing landscape of collections. 866-528-0780 or visit lexisnexis.com/risk/receivables-management.

Three Ways Data Offers Businesses the Ultimate Insurance Policy
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Five-Time Donors Eastern Revenue and American Profit Recovery Make it Six for Veterans

September 27, 2015 By admin Leave a Comment

Collingswood, NJ – As they have done in prior years, two ARM industry firms have generously donated to ARMing Heroes again this year, supporting its sixth annual No Debts for Vets Charity Fundraising Drive, which runs from September 11^th through Veterans Day, November 11^th every year. The collection industry’s charity for military veterans is pleased to put the spotlight on Eastern Revenue, Inc. (www.easternrevenue.com), headquartered in Wayne, PA, and American Profit Recovery (www.americanprofit.net), with offices in Massachusetts, Michigan, and North Carolina. Both companies and their employees have donated to the organization for each of the last five years and have once again chosen to support the charity’s efforts in 2015.

Eastern Revenue President Kyle Shanahan commented, “I feel that it’s our duty to join together as an industry to support and protect our veterans who have sacrificed so much to protect all of us. Donating to ARMing Heroes is one small way we can do our part, one small way to make a difference, and we’re happy to do so. All of us at Eastern are proud to support such an honorable cause again this year.”

Jeff DiMatteo, President of American Profit Recovery, had this to say. “Helping our veterans with various issues regarding debt, as well as providing them ample opportunities for meaningful employment after their duty to our country, are values that all of us at American Profit Recovery embrace. We try hard to be different here, and this is one example where a collection agency can make a true difference in the lives of those who protected us without question. It is an honor to support such a worthy mission year after year.”

Last year, donors contributed the largest amount of funds raised since the organization’s inception in 2009. As a result, nearly four dozen grants were awarded to struggling military vets and their families, most of which were disbursed to the creditors of grant recipients at the end of the year, just in time for the holidays.

ARMing Heroes relies on the generosity of ARM industry companies across the country to make this grant program possible. Interested companies can get involved by signing up to hold a drive here. Once you register, you can download the Employee Fund Drive Starter Kit which outlines in four easy steps what is needed to announce, manage, and complete a successful employee drive. Additionally, any company that holds a drive and donates to the charity will receive Donor Dog Tags to commemorate their support of military veterans. Stories of past grant recipients remind us all how rewarding this program can be.

The charity’s flagship No Debts for Vets Charity Fundraising Drive started on September 11^th and continues through Veterans Day, November 11^th. Tax-deductible donations are being accepted online at www.armingheroes.org and via mail to PO Box 353, Collingswood, NJ 08108, payable to ARMing Heroes. Pledges may be made to info@armingheroes.org.

About Eastern Revenue, Inc.

Headquartered in Pennsylvania, Eastern Revenue, Inc. was founded in 1989 and offers ethical collection services across multiple industries including healthcare, telecom, utility, and water.

About American Profit Recovery

American Profit Recovery was founded in 2004 and has three locations across the country. They offer profit solutions for a wide variety of industries including banking, medical, dental, lawn care, and many others.

About ARMing Heroes

ARMing Heroes was founded and began operating in March, 2009. The organization’s mission is to serve the needs of U.S. military veterans, including their spouse and children. ARMing Heroes fills a charitable niche by linking people identified with employment, credit, and financial counseling needs with the accounts receivable management industry, an industry uniquely poised to help in these areas. Persons interested in volunteering their time and others interested in applying for benefits or pledging other forms of support are encouraged to contact the organization at www.armingheroes.org.

What Can I Do Right Now to Help?

Visit www.armingheroes.org and donate now.
Make ARMing Heroes your designated charity through the AmazonSmile program.
Like the ARMing Heroes page and post this article to your page on Facebook.
Tweet about this article on Twitter.
Join our group on LinkedIn, the ARMing Heroes Veterans Charity Supporter / Assistance Center.
Forward this article via email to your key contacts.
Print this article and fax it to your local congressional office and ask them to post our website on theirs as a resource for vets.

Five-Time Donors Eastern Revenue and American Profit Recovery Make it Six for Veterans
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What’s Keeping Compliance Professionals Awake? UDAAP, Entrenched Behaviors

September 27, 2015 By admin Leave a Comment

Mike Bevel,
insideARM/CPF

Debt industry compliance professionals in both the Columbus, Ohio, region; and the Atlanta, Georgia, region, met this past week in regional discussion groups to talk, as peers, about issues each person is facing in an industry defined more by flux than by clarity.

These meetings, hosted by The Compliance Professionals Forum, (and made possible by the generous underwriting of TransUnion, Ontario Systems, and Cornerstone Support) were structured and facilitated conversations that allowed those in compliance roles within their agencies to talk through issues, ask questions of others in the room in similar situations, and share practices in an open setting. Since the meetings were only open to compliance professionals, there were no regulators taking notes, and no one judging anyone’s practices. (Well, there was one point when the topic of call frequency came up, and the group sort of collectively gasped, but the whole room was in on the ribbing and it was all good-natured.)

Of prime interest to both groups, and where each spent considerable time, was in talking about the challenges entrenched collector behavior causes any agency and the frustrations around what, specifically, counts as a UDAAP: an Unfair, Deceptive, and Abusive Practice.

What everyone could agree on: almost anything a collector says or does on a phone call or an agency says in a letter can fall under UDAAP. And this highlighted the specific pain-point faced by everyone in compliance: how can an agency effectively write scripts, train collectors, and implement comprehensive policies and procedures when faced with the broadly over-whelming grab-bag that a UDAAP violation is pulled from.

Mention online payment options in your initial letter? That can probably be seen as overshadowing and would likely be a UDAAP violation. Answering consumer questions about credit reporting or litigation in the wrong way (and by the way, it’s a thin line between the right and wrong way often)? That might earn you a “D for Deceptive” even if your intent was anything but. Is your agency currently offering to settle debts for less than the full amount? How are you settling? Unless every single account is offered the very same settlement plan, you might have just earned a double: a U (for Unfair) and a D (for Deceptive). And hearkening back to the issue around call frequency: too many times a day can be considered Abusive.

Those interested in participating in conversations of this kind have a couple of options:

1) Consider a membership in the The Compliance Professionals Forum. Your annual membership gets you a seat on monthly peer group calls where you’ll get the chance to pick the brains of 15-20 compliance professionals, in addition to free compliance resources and webinars.

2) Keep your eye out for our list of Destination Cities for 2016. If we’re in a town near you, your compliance team is absolutely invited.

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Accounts Receivable Management

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Illegal Debt Collection Tactics

Other Illegal Practices

Enforcement Action

State Judicial Proceedings Outside Scope of § 1692f

Collector Acted Consistently with State Court Order

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