Proposed Legislation in Numerous States Would Negatively Impact the Collection Industry

May 23, 2015 By Leave a Comment

Two weeks ago, insideARM reported on a bill that was introduced in the District of Columbia Council that would impose additional burdensome requirements on debt buyers and collectors.

In that article we suggested that these types of bills may be part of a nationwide trend. I believe we can now officially confirm that speculation.

After just cursory research insideARM has identified numerous bills introduced in various state legislatures in the past three months that – if passed – would significantly impact the debt collection industry.

The proposed legislation reviewed ranges from variations on the theme outlined in the D.C. bill to obscure provisions in a seemingly unrelated bill.

Examples include:

In Maine a bill (HP075301) was introduced to amend the Maine Fair Debt Collection Practices Act to provide greater protection to debtors with regard to collection actions by debt buyers. The bill provides that a debt buyer may not collect on a debt without providing specified information that includes the name of the original creditor and all intervening creditors, as well as the sources of added fees and interest. The information must be also be included in the complaint to initiate the cause of action to collect the debt.

The Maine bill also proposes a 3-year statute of limitations that replaces all other limitations unless the existing limitations is a shorter period.

In Oregon a similar bill (HB 2252-3) was introduced.  The proposed bill includes similar specific notice requirements and outlines additional obligations before a debt buyer may bring legal action to collect debt.

In Illinois a bill (SB1866) was introduced amending the Crime Victims Compensation Act. In that bill there are provisions restricting debt collection activity against crime victims once a crime victim provides notice to a debt collector.

What does this all mean? Well, unfortunately here are my takeaways and questions:

1)      We can continue to expect bills introduced at every level of government (City, County, State and Federal) in reaction to the negative stories we see every day about the debt collection industry.

2)      Clients and prospects are requesting – and will continue to expect – specific policies and procedures to outline how a company intends to keep up with the ever changing regulatory landscape.

3)      Does the ARM industry have the financial resources to impact proposed legislation BEFORE it becomes law?

4)      The challenge of keeping up with these potential changes is immense. Is reliance on trade association updates and industry news sites like insideARM enough?  What are the alternatives?

Proposed Legislation in Numerous States Would Negatively Impact the Collection Industry
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Credit Reporting Agencies Agree to Pay $6M to Resolve Complaints

May 23, 2015 By Leave a Comment

The nation’s three major credit bureaus (Equifax, Experian, and TransUnion) have entered into a settlement agreement with 31 states regarding consumer complaints around inaccurate credit reports.

 

The multi-state investigation was initiated in 2012. The investigation focused on consumer disputes about credit report errors, monitoring and disciplining data furnishers (providers of credit reporting information), accuracy in consumer credit reports, and the marketing of credit monitoring products to consumers who call the credit reporting agencies to dispute information on their credit report.

Under the terms of the 54 page settlement agreement, the credit reporting agencies have agreed to make a number of changes to their business practices to benefit consumers. Key provisions include:

1) Higher standards for data furnishers

  • Requires the bureaus provide the states with lists of furnishers who most often report information that consumers dispute as inaccurate.
  • Requires the bureaus and data furnishers use a better, more detailed system for sharing data

2) Limits the bureaus “direct-to-consumer” marketing

  • Prohibits the bureaus from trying to sell products to people who call them with disputes.

3) Added protections for consumers who dispute reported information

  • Requires the bureaus to establish a better escalation process
  • Requires communication between the bureaus of any “mixed” files
  • Requires the bureaus to send a consumer’s dispute supporting documents to the data furnisher
  • Requires an additional free credit report if a change is made as the result of a dispute

4) Limits on types of information that can be added to a consumer’s credit report

  • Bars the bureaus from reporting information about fines and tickets on consumers’ credit reports.
  • Prohibits reporting of medical debts for 180 days after the account reported to give consumer’s time to work out health insurance issues
  • Requires debt collectors who report information to the bureaus to provide the name of the original creditor and information about the debt before the information can be added to a consumer’s credit report.

Under the settlement, the credit reporting agencies also will pay the participating states $6 million.

The states that participated in the settlement are: Alabama, Alaska, Arizona, Arkansas, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Nebraska, Nevada, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Vermont, and Wisconsin.

In March of this year a similar settlement was reached separately with the state of New York.

Credit bureau reporting has become a high profile issue in 2015, particularly relating to medical debts. In February of this year the CFPB’s Consumer Advisory Board (CAB) meeting in Washington, DC was used as a platform to reiterate the Bureau’s focus on matters dealing with consumer credit reporting and medical debt, specifically how it is collected and appears on credit reports.

Credit Reporting Agencies Agree to Pay $6M to Resolve Complaints
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Jury Sends Message to Debt Buyer: Get Your Facts, And Your Process, Straight

May 16, 2015 By Leave a Comment

Last week insideARM reported on a sharp rise in first quarter earnings for PRA Group (PRAA).

On Tuesday of this week (May 12th) in a Form 8-K (Other Events) filing with the Securities and Exchange Commission PRAA reported the following:

On May 11, 2015, an unfavorable jury verdict was delivered against Portfolio Recovery Associates, LLC (the “Company”), a wholly owned subsidiary of PRA Group, Inc., in a matter pending in Jackson County, Missouri. The jury awarded Guadalupe Mejia $251,000 in compensatory damages and $82,999,000 in punitive damages for her counter-claim against the Company, alleging malicious prosecution and impermissible collection practices. Although the Company appreciates the jury’s service, it believes the verdict and magnitude of the award to be erroneous and intends to promptly request that the court set aside such an inappropriate award. Unless reduced or overturned, the verdict could have a material adverse effect on the Company’s financial condition and/or operations.

Form 8-K is a report of unscheduled material events or corporate changes at a company that could be of importance to the shareholders or the Securities and Exchange Commission. Obviously, PRAA management felt that a verdict of this amount is a material event.

This case started as a simple collection lawsuit.  Portfolio Recovery Associates, LLC brought suit against a Guadalupe Mejia on a purchased credit card debt for approximately $1100.  The Defendant (Mejia) filed a Counterclaim alleging FDCPA violations and malicious prosecution. The consumer claimed that she was not the right Guadalupe Mejia. The case proceeded for over a year before PRAA agreed to dismiss the collection action (without prejudice).  However, the counterclaim proceeded.

In reviewing the court docket it is clear that the case was vigorously pursued and defended by both parties. The numerous filings hint at contempt for the other side by both parties. A critical point in the case involved an Order striking all pleadings by PRAA, entering judgment in favor of the consumer on all counterclaims, and directing the trial to proceed solely on the issue of damages. It is that trial that produced this verdict.

The status of this case needs to be recognized.  At this point in time there is only a jury verdict.  No final judgment has been entered yet. There will be additional evidence presented on a potential attorney fees award. Further, there will likely be motions filed for a new trial or to reduce or set aside the verdict and/or other possible legal strategies.

insideARM contacted both the attorney for the consumer and a representative for PRAA to obtain comment on the verdict.

Gina Chiala, the attorney for Mejia commented: “I sincerely hope the jury’s verdict in this case acts as a wake-up call to the debt buying industry.  Consumers deserve to have their disputes taken very seriously, especially when the consumer reports he or she is being wrongfully sued.  Unfortunately, Portfolio did not take our client’s dispute seriously and our evidence showed that Portfolio had a pattern and practice for rejecting valid disputes.  This verdict would never have occurred had Portfolio simply admitted its error early on and stopped its prosecution.”

Michael McKeon of Mercury LLC, spokesperson for PRAA countered:  “This outlandish verdict defies all common sense. We hope and expect the judge will set aside this inappropriate award, and we plan to file motions to make the request formally in the very near term. Any fair reading of the facts of this case makes plain that a verdict of this size is not justice by any means, and cannot stand.”

insideARM will continue to monitor this story and provide updates as developments dictate.

Jury Sends Message to Debt Buyer: Get Your Facts, And Your Process, Straight
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Second Circuit Decision Provides Resolution on Disclosure of Tax Consequences in Settlement Offers

May 16, 2015 By Leave a Comment

The Second Circuit Court of Appeals ruled yesterday that a debt collector does not violate the FDCPA if it does not advise a consumer of the tax consequences of a settlement offer.  The case, Altman v. J.C. Christensen Associates (Docket No. 14‐2240‐cv) is very positive for the ARM industry.

The opinion is short and concise. The court made two significant points in their reasoning.

First, the specific language in the letter plainly stated the percentage saved was on “your outstanding account balance.” The fact that the debtor may then have to pay tax on the amount saved is simply not deceptive in the context of what savings are on debtor’s “outstanding account balance.”

Second, the court held that the “FDCPA does not require a debt collector to make any affirmative disclosure of potential lax consequences when collecting a debt and that requiring, as a matter of law, debt collectors to inform a debtor of such a collateral consequence of settling a pre-existing debt seems far afield from even the broad mandate of FDCPA to protect consumers from abusive debt collection practices”.

The issue of disclosures of tax consequences (1099-C Disclosures) on settlement offers and verbal conversations with a consumer is confusing. Courts and client requirements are inconsistent.  This decision in the Second Circuit provides positive and clear resolution for the ARM industry…..in that circuit.

Second Circuit Decision Provides Resolution on Disclosure of Tax Consequences in Settlement Offers
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Crucial Compliance Conversations for Every Hospital CFO

May 16, 2015 By Leave a Comment

The following is an excerpt from Ontario Systems‘s latest white paper, “Seven Crucial Compliance Conversations for Every Hospital CFO.”

“Do we credit report? If so, should we stop?”

On December 11, 2014, the CFPB conducted a field hearing in Oklahoma City on medical debt collection practices and the relationship between those practices and consumer credit reporting in general. The meeting was nothing short of a crystal ball regarding the future of medical debt collection. But somehow, it is one that has gone largely unnoticed by hospitals and the debt collection industry. Let’s review some of the hearing’s most important takeaways.

7 Crucial Compliance Conversations Downloadable CoverCFPB Director Richard Cordray shared the Bureau’s position that problems with debt collection are magnified when the debt collector reports a debt as a collection trade line to the national credit reporting companies. He characterized a collection trade line as a black mark – more like a scarlet letter − on any consumer or patient’s credit report, and explained how having a reported collection item or a severe delinquency can increase that patient or consumer’s interest rate and affect his or her ability to borrow money. He further highlighted some particularly startling statistics from the CFPB’s recent study on credit reporting practices with regard to medical debt:

  • One in five consumers with a credit report has a medical collection item on his or her credit report
  • More than 1.3 billion trade lines are actively reported, and about half of the overall debt collection trade lines are from medical bills
  • Fifteen million consumers have medical debt collection items as the only collection items on their credit reports, and many of them have no other seriously delinquent accounts

It should be noted first that the Director opened the hearing reiterating how debt collection practices have long been a source of frustration for many consumers, making it clear debt collection continues to be a top source of consumer complaints to the Consumer Bureau and to its sister agency, the Federal Trade Commission.

According to Cordray, those sentiments have resulted in a major new development: He explained how as part of the CFPB’s ongoing effort to improve the nation’s credit reporting system, the Bureau will now require the largest credit reporting companies to provide it with regular, standardized accuracy reports, specifying the number of times consumers dispute information on their credit reports during a reporting period, along with furnishers with the most disputes, industries with the most disputes and furnishers with particularly high dispute rates relative to their peers. Cordray’s prepared remarks should be a wakeup call to any healthcare provider, EBO or medical debt collection agency owner. Click here to read.

You can download and read the full Ontario Systems whitepaper from our “free downloads” site.

Crucial Compliance Conversations for Every Hospital CFO
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Seven Crucial Compliance Conversations for Every Hospital CFO

May 16, 2015 By Leave a Comment

7 Crucial Compliance Conversations Downloadable CoverWith alarming frequency, patient complaints are making their way up the chain through both for-profit and nonprofit hospitals – all with the support, and in some instances, encouragement, of the Federal government.

Hospitals and their service providers are under the mistaken assumption their operations are flying below the CFPB’s radar. Unfortunately, nothing can be further from the truth.

This ebook, from Ontario Systems is intended to shed light on seven major events or changes taking place in the healthcare receivables marketplace and foster conversations from the board room to the patient financial services department about the impact these changes will have on your day-to-day processes, compliance protocols, tax status (as applicable) and reputation in the community.

The Seven Conversations:

  1. “Have any of our patients filed complaints against us on the CFPB’s new complaint portal? Has anyone responded?”
  2. “Do we credit report? If so, should we stop?”
  3. “How long do we wait before we report medical debt to credit reporting agencies? Is it at least 180 days?”
  4. “Who is working with our EBOs and thirdparty collection agencies to calculate the FAP application period and identify the approved extraordinary collection activities? Are we out of compliance as we speak?”
  5. “Who are our service providers and who is managing their compliance with consumer financial laws?”
  6. “Do we use an automatic telephone dialing system (ATDS) and how are we capturing consent to call our patients on their cell phones or communicate via text?”
  7. “Does our software provider understand our compliance needs and how does it address them?”

Download the full guide from Ontario Systems today to learn the best way to structure each of the seven conversations for the best results for your organization.

Seven Crucial Compliance Conversations for Every Hospital CFO
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Robert Bernstein Named President Of The Commercial Law League of America

May 16, 2015 By Leave a Comment

The Commercial Law League of America (CLLA) is pleased to announce that Robert S. Bernstein, of Bernstein-Burkley, P.C., in Pittsburgh, PA, will serve as its 2015-2016 Board of Governors president. This makes Bernstein the only two-term president other than the group’s founder, William Sprague, in 1896.

Since joining the CLLA in 1975, Bernstein has held a number of leadership positions, including a previous term as the President of the Board of Governors in 1995-1996.  Since his initial position as Secretary of the Young Members Section in 1985, Bernstein has been active within the League’s Governance Structure and held numerous positions within the YMS and Bankruptcy Sections, on the Board of Governors and on a wide variety Committees.

“I have been an active League member for 40 years, and I am proud to now serve the prestigious, long-standing organization for a second term as president,” said Bernstein. “I plan to work closely with the other leaders of the League to strengthen our relationships with allied organizations and expand the business opportunities available to members, while continuing to provide the high level educational programs to members and the credit community.”

While fulfilling his duties as co-managing partner of Bernstein-Burkley, P.C., Bernstein represents other businesses of all sizes and types in many areas of their operation, including representation in reorganization proceedings. With more than 40 years’ experience in the legal community, Robert Bernstein, has extensive knowledge in the areas of collections, bankruptcy and business law. He has been certified as both creditors’ rights and business bankruptcy specialist by the American Board of Certification for more than 20 years – making him one of only a few attorneys to hold both certifications.

To schedule an interview Robert Bernstein regarding his CLLA presidency, or any other collections, bankruptcy or credit-related topic, contact Bernstein-Burkley, P.C. Marketing Director, Marissa Luznar, at 412-456-8113 or mluznar@bernsteinlaw.com.

About the CLLA

Since 1895, the not-for-profit Commercial Law League of America has connected experienced attorneys with credit grantors, lending institutions and other commercial credit, bankruptcy and general finance industry members through networking, education, legislative advocacy and specialized legal services. The association’s members include attorneys, collection agencies, judges, accountants, trustees, turnaround managers and other credit and finance experts. For more information on the CLLA, please visit www.CLLA.org.

Robert Bernstein Named President Of The Commercial Law League of America
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Five Percent of Recent Grads Say They’ll Never Pay Off Their Debt

May 16, 2015 By Leave a Comment

On the same day that the Consumer Financial Protection Bureau (CFPB), the Department of Education, and Department of Treasury release a joint Request for Information (RFI) about student loan servicing, the website MagnifyMoney.com has released the results of a survey of student loan borrowers about their finances.

They surveyed 1,000 adults under age 35 who graduated since 2011 and among other things, asked about their biggest regrets. One of the top three responses was not being more careful about debt and loans. These were the other responses to this question:

  • Not contributing enough to savings / retirement: 31%
  • Not learning practical finance / credit skills in school: 26%
  • Not being more careful about debt and loans: 23%
  • Not establishing credit sooner: 19%
  • Getting hit with fees: 12%
  • Missing payments: 10%
  • Other: 5%

As for the borrowers’ confidence about their loans, the study revealed that 60% believe they’ll be able to pay them off in 10 years or less, while 5% said they will ‘never’ be able to pay off all the debt.

 

Five Percent of Recent Grads Say They’ll Never Pay Off Their Debt
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CFPB Launches Public Inquiry Into Student Loan Servicing Practices

May 16, 2015 By Leave a Comment

Today the Consumer Financial Protection Bureau (CFPB) announced that it is launching a public inquiry into student loan servicing practices that can make paying back loans a stressful or harmful process for borrowers. The issues that the Bureau is seeking information on include: industry practices that create repayment challenges, hurdles for distressed borrowers, and the economic incentives that may affect the quality of service.

“Student debt stress can make borrowers feel like they are walking a tightrope where any false move in paying back a loan can cause them to fall,” said CFPB Director Richard Cordray. “Today’s inquiry seeks information on the pain points in student loan servicing that make repayment a more difficult and stressful process.”

In making the announcement Cordray referenced the following student loan “facts:

  • Over $1.2 trillion: The total volume of outstanding student loan debt
  • More than 40 million: The number of borrowers with student loan debt
  • $29,384: The average balance of a borrower graduating from college with a bachelor’s degree
  • 10 million: The number of  federal loan borrowers who had a servicing transfer between 2010 and 2013
  • $110 billion: The total volume of student loan debt in default
  • 8 million: The number of student loan borrowers in default
  • $129 billion: The total amount of federal student loan debt in forbearance
  • 4.3 million: The number of federal student loan borrowers in forbearance

The public inquiry will focus on the following:

  • Industry practices that create repayment challenges
  • Hurdles for distressed borrowers
  • Economic incentives affecting the quality of service
  • Application of consumer protections in other markets
  • Availability of information about the student loan market

The complete Request for Information (RFI) is available at: http://files.consumerfinance.gov/f/201505_cfpb-rfi-student-loan-servicing.pdf 

The 36 page RFI highlights the fact that the CFPB “is engaged in a joint effort with the Department of Education and the Department of Treasury to identify initiatives to strengthen student loan servicing.”

Part “A” of the RFI is a narrative/primer on the Student Loan Market and a general overview of the myriad problems experienced by consumers when repaying student debt.

Part “B” of the RFI lists the specific areas of inquiry and is divided into 3 sections.

1)      General practices in the student loan servicing industry, including practices for borrowers in distress

2)      Applicability of consumer protections from other consumer financial products such as credit cards and mortgages

3)      Availability of data about student loan performance and borrower characteristics during repayment

Cordray will make the announcement the focal point of his prepared remarks at today’s Field Hearing on Student Loans held in Milwaukee, WI.

The deadline for submitting comments is July 13, 2015. 

Finally, as part of today’s announcement the CFPB is also re-launching an enhanced version of its Repay Student Debt online tool to help borrowers figure out their options for affordable repayment.

 

CFPB Launches Public Inquiry Into Student Loan Servicing Practices
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TCPA Roundup: As Big Data Grows, So Does Scale of TCPA Violations

May 16, 2015 By Leave a Comment

As big data grows, so does the scale of TCPA violations, and with that the settlements; one of the largest in TCPA history was in the news last week.

In a California district court, attorneys who guided consumers in suing a bank for a $32 million settlement were denied a bid to increase their fees to $8 million.

The settlement was the largest TCPA deal to be approved at the time, settling the case in which the plaintiffs claimed they had received automated phone calls from the defendants without their consent. However, this past July saw a $75.5 million settlement granted preliminary approval in another case involving a financial institution and two other defendants accused of “cold calling” cellphones.

The plaintiffs, whose fees were reduced to $2.4 million at the time of the settlement, were “disappointed,” as they told legal news publication Law360, following the court’s denial of their motion for increased compensation. Plaintiffs’ attorneys argued that their litigation strategy saved the class millions of dollars. They are considering an appeal.

FCC Issues Citations

On May 4, the Federal Communications Commission issued citations to three companies it alleged were engaged in robocalling. The companies were accused by the FCC of using auto dialers to call cellphones with prerecorded messages without obtaining the prior consent of the called party. (In the Matter of Call-Em-All LLC, EB-TCD-12-00002355), (In the Matter of Ifonoclast Inc. d/b/a Phonevite, EB-TCD-12-00002528), (In the Matter of M.J. Ross Group Inc. d/b/a PoliticalRobocalls.com, EB-TCD-12-00004353).

In November 2012, one of the defendant’s call records revealed 3,500 unsolicited calls regarding political campaigns, and another company made close to 300 unprompted calls between September 2012 and March 2013. According to the FCC, if the companies fail to comply to cease calling without prior consent, they may be subject to heavy fines of up to $16,000 per call. The companies each have 30 days to respond to the FCC’s citations.

Cruise Line Suits Consolidated

Robocalls and text messages advertising free cruises sent to consumers’ cellphones by one cruise line triggered TCPA law suits by four separate plaintiffs. Last week the plaintiffs asked the U.S. Judicial Panel on Multidistrict Litigation to merge their cases in Florida.

The plaintiff’s attorneys claim consolidation will prevent inconsistencies in pre-trial rulings and duplicative discovery. The four cases are currently filed in the Central District of California, the Southern District of Florida, the District of New Jersey, and the Northern District of Illinois. Although the cases are filed in different states, they all have the same basic allegations, and would logically consolidate in Florida, where the company is headquartered and the district is the least busy.

Faxing Prompts Class Actions

Earlier this month, a wholesale retailer was faced with two proposed class actions regarding unsolicited advertisements faxed to consumers. A company  is suing the retailer over faxes it alleges it received inviting the company to join the business’s membership club. The company alleges the retailer violated the TCPA by failing to include an “opt-out notice” in its faxes and costing the plaintiffs monetary damage though the use of their paper, ink, toner, and lawsuit costs.

In a Missouri class action involving companies who also received the faxes, a law firm alleges that the retailer tampered with their fax machine in efforts to send the ad, not only violating the TCPA but the Missouri Computer Tampering Act. The firm represents multiple Missouri companies who received faxes between April 10, 2011, and April 10, 2015.

TCPA Roundup: As Big Data Grows, So Does Scale of TCPA Violations
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