On February 7, the U.S. Court of Appeals for the Third Circuit affirmed a lower court’s decision to grant a debt collector’s (the defendant) motion for judgment. The defendant argued that its efforts to collect plaintiff’s charged-off debt via a proof of claim in a bankruptcy proceeding was not limited by, or in violation of, the Pennsylvania Consumer Discount Company Act (CDCA). The plaintiff, who obtained a loan from a third-party small-dollar lender licensed under the CDCA, defaulted on the loan and the licensed lender subsequently charged off and sold plaintiff’s debt to a company that was not licensed under the CDCA. 

After filing for bankruptcy, the plaintiff sued the defendant and alleged a FDCPA violation when the defendant filed a proof of claim during the bankruptcy proceeding to collect the outstanding balance on the charged-off loan. The plaintiff’s argument was premised on claims that the defendant could not lawfully collect the debt because the CDCA dictates that a licensee may not sell CDCA-authorized contracts to an unlicensed person or entity. As such, the plaintiff argued the proof of claim violated the FDCPA’s prohibition against “false, deceptive, or misleading” representations in connection with the collection of a debt. The 3rd Circuit disagreed.   

Relying in part on a letter from the Pennsylvania Department of Banking and Securities confirming that the CDCA does not apply to an unlicensed entity that purchases or attempts to collect on charged-off consumer loan accounts of debtors in bankruptcy, the appellate court held that “[t]he CDCA is a loan statute, not a debt collection statute,” and that “entities in the business of purchasing and collecting charged-off consumer debt are not subject to the CDCA’s regulatory scheme.” The 3rd Circuit held that selling charged-off obligations is not the same as selling the defaulted loan contract. Rather, it is selling unsecured debt, which falls outside of the CDCA’s scope. The court concluded that the CDCA’s prohibitions were inapplicable and could not be the basis for the FDCPA violation.

On February 9, 2024, the California Department of Financial Protection and Innovation (DFPI) published a proposed rule to adopt new regulations under the Debt Collection Licensing Act (DCLA). Under the DCLA, a debt collector licensee is required to pay the DFPI Commissioner its “pro rata share of all costs and expenses incurred in the administration” of the DCLA, which is calculated in part based on the licensee’s “net proceeds generated by California debtor accounts,” but the term “net proceeds” was not defined in the statute. 

The proposed rule defines “net proceeds generated by California debtor accounts” to mean “the amount retained by a debt collector from its California debt collection activity.” The proposed rule also specifies the formulas used in calculating the net proceeds depending on the party, including a debt buyer, purchaser of debt that has not been charged off or in default, third-party collector, and first-party collector.

Additionally, the proposed rule requires licensees to file an annual report with the DFPI and specifies the information required in the annual report, including (i) the number of California debtor accounts collected on in the previous year; (ii) the number of California debtor accounts in the licensee’s portfolio as of December 31 of the preceding year; and (iii) the number and dollar amount of California debtor accounts for which collection was attempted, but not successfully collected or resolved during the previous year. Comments to the proposed rule must be submitted by March 27.

STERLING, Il. — Traci Oltmans and the VeriFacts team are at it again with the annual Spinathon fundraiser in support of their local Sterling-Rock Falls Family YMCA. Now in their fifth consecutive year of participating, the donations raised will support thousands of area children through financial support for swim lessons, gym memberships, camp attendance, and other summer childcare programs and activities. 

“Our local Y does an amazing job with our youth. The money raised goes towards the scholarship programs which help send kids to summer camp and participate in activities. I just love their entire staff,” shared Traci, Director of Business Development at VeriFacts. “They are so good with the kids in our community, and I want to do a great job for them. It means a lot to me. Every kid deserves a chance to be in activities and have additional outlets outside of their home. Team VeriFacts raised the most money the last two years and I’d like to keep the tradition going. We promise to pedal our hearts out!” 

Donate Today

The Spinathon event takes place on Saturday, February 24, 2024. To support this fundraiser for your Q1 company or personal giving, click here to make an online donation. Click “new donation,” select the 2024 Annual Support Campaign and select Team VeriFacts as the campaigners.

Sterling-Rock Falls Family YMCA

The Sterling-Rock Falls Family YMCA believes “that all kids deserve the opportunity to discover who they are and what they can achieve. That’s why, through the YMCA, children are taking a greater interest in learning; making smarter life choices; and cultivating the values, skills and relationships that lead to positive behaviors, the pursuit of education and goals.” 

As a nonprofit, the Y works to deliver positive change through its presence and partnerships. By connecting people of all ages and backgrounds to bridge the gaps in community needs, the Y mobilizes local communities through programs that build healthy spirit, mind and body for all. 

A Community-Oriented Company

VeriFacts is firmly rooted within its community and takes great responsibility and commitment to giving back. VeriFacts is proud to have a team that works hard and also plays hard. They love opportunities to donate their time, energy, and financial resources to both local and national charitable organizations. For more on VeriFacts’ community involvement, visit vfacts.com. 

About VeriFacts

VeriFacts, LLC is the top employment location and verification service for the receivables management industry. Having been in business for over 30 years, they are committed to offering guaranteed customer location and employment verification services to creditors across the nation. The VeriFacts brand has become synonymous with high-quality service and a positive customer experience. Over the years, their services have expanded into residential location information, data verification, and unique data aggregation. VeriFacts is proud to be a Certified Women-Owned Business by the WBENC.

The American Fintech Council (AFC), a trade group whose members include providers of earned wage access (EWA) products, has sent a letter to Director Chopra urging the CFPB to take steps towards development of a “pragmatic regulatory approach” for regulating EWA products. 

In its letter, AFC discusses the “patchwork approach” to regulating EWA products that is emerging at the state level.  While expressing its approval of the “bespoke regulatory framework for EWA” in Nevada and Missouri, AFC states that it “disagrees with the approach of shoehorning EWA products into existing lending laws, pursued by other states.”  (The California Department of Financial Protection and Innovation (DFPI) has issued a proposal that would require providers of income-based advances such as EWA products to register with or obtain a license from the DFPI and comply with the fee and interest rate limits of the California Financing Law (CFL)).  AFC indicates that regardless of the approach taken by states, “pragmatic federal engagement on this matter is necessary.”

AFC observes that the CFPB has to date “opted to pursue less comprehensive or binding guidance with regards to EWA,” citing to the CFPB’s November 2020 Advisory Opinion (AO), and that it initially agreed with this approach “as it allowed the industry to develop responsible options that fit the demands of consumers, without significant limitations to their business models.”  AFC states that it now believes a “more substantive regulatory endeavor, such as a formal rulemaking” is necessary in light of market and state developments since the CFPB issued the AO.  While expressing its preference for notice and comment rulemaking by the CFPB, AFC states that it “remains open to understanding and supporting the regulatory tool that will ultimately serve consumers and responsible industry participants best.”  AFC asks the CFPB “to convene a meeting with relevant stakeholders” to facilitate a discussion regarding regulatory approach.

In the November 2020 AO, the CFPB addressed whether an EWA program with the characteristics set forth in the AO was covered by Regulation Z.  Such characteristics included the absence of any requirement by the provider for an employee to pay any charges or fees in connection with the transactions associated with the EWA program and no assessment by the provider of the credit risk of individual employees.  The AO set forth the Bureau’s legal analysis on which it based its conclusion that the EWA program did not involve the offering or extension of “credit” within the scope of Regulation Z.  In the AO, the Bureau indicated that there may be EWA programs with nominal processing fees that nonetheless do not involve the offering or extension of “credit” under Regulation Z and advised that providers of such programs could request clarification about a specific fee structure by applying for an approval under the Compliance Assistance Sandbox Policy.  (The CFPB announced in September 2022 that it was rescinding the Compliance Assistance Sandbox Policy.)

In January 2022, then CFPB Acting General Counsel (and now General Counsel) Seth Frotman indicated that due to “repeated reports of confusion” caused by the AO, he planned to recommend to Director Chopra “that the CFPB consider how to provide greater clarity on these types of issues.”  While acknowledging that the AO had left open the possibility that an EWA product with nominal processing fees might not be “credit” under Regulation Z, Mr. Frotman suggested that possibility was remote.  More specifically, he noted that the CFPB had expressly limited the AO’s application to EWA programs meeting all of the characteristics set forth in the AO and stated that “products that include the payment of any fee, voluntary or not, are excluded from the scope of the advisory opinion and may well be TILA credit.”  Mr. Frotman also noted that the AO does not speak to whether EWA products would be “credit” under federal laws other than the TILA, such as the CFPA or the ECOA, or under state law.  Mr. Frotman’s comments were made in a letter responding to a letter sent to him by consumer advocacy groups regarding proposed New Jersey legislation on EWA products. 

In December 2023, the CFPB sent a letter to the DFPI commenting on the DFPI’s EWA proposal which would clarify that income-based advances are “loans” under the CFL.  The CFPB noted that the DFPI’s proposed treatment of income-based advances as “loans” is similar to how “credit” and “finance charges” are treated under the Truth in Lending Act and Regulation Z.  The CFPB indicated that it plans to issue further guidance “to provide greater clarity concerning the application of the Truth in Lending Act in this market,” that products “that do not fit within [the very narrow scope of the CFPB’s previous advisory opinion] are not excluded from existing laws,” and that it supports efforts to subject income-based advance products “to rigorous oversight for the full scope of existing state and federal consumer protection and lending laws.”

As federal student loan repayments resume after a three-year pause due to the COVID-19 pandemic, the Consumer Financial Protection Bureau (CFPB) published an Issue Spotlight on student borrowers’ experiences, using consumer complaints to identify emerging problems.

Key concerns include long hold times and abandoned calls. Borrowers often wait on hold for over an hour, and many give up without receiving assistance. Average call wait times have risen from 12 minutes in August 2023 to over 70 minutes in October 2023, resulting in about half of all calls being abandoned in October 2023, more than double August 2023’s rate of 17%.

There are also significant delays in processing income-driven repayment plan applications. As of late October, servicers reported over 1.25 million pending applications, with more than 450,000 pending for over 30 days. Processing times vary, with some servicers taking five times longer than others, putting borrowers at risk of making higher payments than they can afford.

Inaccurate and untimely billing statements are another issue. Errors include premature due dates before the end of the payment pause, inflated monthly payment amounts due to outdated poverty guidelines, and incorrect calculations for new income-driven repayment plans. These mistakes can cause confusion and further strain servicers’ resources as borrowers contact them to resolve these errors.

In the press release that accompanied the release of the Issue Spotlight, CFPB Director Rohit Chopra warned that “if student loan companies are cutting corners or sidestepping the law, it could pose serious risks to individuals and the economy.”

PETALUMA, Calif. — The Cascade365 Family of Companies is excited to announce that Saket Sahoo has been appointed Chief Operating Officer (“COO”) of Cascade Receivables Management, LLC (“CRM”). As COO, Mr. Sahoo will oversee CRM’s operations and information technology teams while leading mission-critical initiatives for CRM and its affiliate companies, such as diversifying and growing revenue, implementing key technologies and efficiencies, and cultivating CRM’s workforce offshore.

Mr. Sahoo’s wealth of experience spans two decades and multiple continents. He previously worked for Global Growth, a private investment firm with portfolio companies in the ARM and RCM sectors. During his time there, Mr. Sahoo led M&A activity and designed and implemented strategic growth strategies, while also contributing at the individual portfolio company level. 

Mr. Sahoo most recently served as COO of Affinity Global and as Vice President of CBV Collection Services, Ltd., both Canadian ARM companies operating under the Global Growth umbrella. Prior to Global Growth, Mr. Sahoo was an EVP at Astra Global and a Director at Arrow Financial Services (a Sallie Mae Company). Mr. Sahoo is also a strategic Partner in Connect BPS, an offshore call center business located in South Africa.

Mr. Sahoo possesses a strong track record of driving growth while fostering innovation and maintaining robust profit margins. Throughout his career, he has consistently remained at the forefront of technological advancements and effectively harnessed them to drive transformative change across industries. He holds a Bachelor of Engineering degree in Electronics from D.Y. Patil University and lives in Toronto Canada.

“I’m excited about both the organic and inorganic growth opportunities ahead of us at Cascade365, with sustainability and innovation being key drivers, as we navigate through challenging economic and regulatory climates”, stated Saket Sahoo.

“I am excited to have Saket on team Cascade365”, said Lee Brockett, CEO of the Cascade365 Family of Companies.  “His unique experience and history of success, as both entrepreneur and institutional operator in three different continents, will help fuel Cascade365’s growth without sacrificing operational integrity or customer experience.”

About The Cascade365 Family of Companies 

Cascade365 is a brand identity representing a family of companies focused on the responsible liquidation of accounts receivable. Headquartered in the San Francisco Bay area, the Cascade365 Family of Companies are recognized leaders in the accounts receivable management, revenue cycle and specialty finance industries. Cascade365’s suite of products and services include AR Purchase and Finance, Master Servicing, Third Party Collections, and Revenue Cycle Optimization. The Cascade365 Family of Companies believes in promoting financial accountability while treating consumers and patients in a fair, dignified, and lawful manner. For more information, please contact Jeffery Howell, Director of National Sales at 707-244-2298 or via email at jhowell@cascade365.com.

The line between first-party and third-party collections can be fuzzy, and consumer attorneys regularly claim first-party collections are subject to the Fair Debt Collection Practices Act (FDCPA). Recently, a court in the Northern District of Illinois found in favor of a first-party debt collector and provided some clarity around how to draw the distinction.

In Mladenov v. R1 RCM Inc., 21-cv-1509 (N.D. Ill. Jan 22, 2024) a consumer brought suit against a debt collection agency for letters sent that allegedly did not comply with FDCPA requirements. The debt in question stemmed from medical services rendered by a hospital following a car accident. The agency sent two statements to the consumer informing them of the debt that was owed; the second was sent after the consumer’s attorney asked the agency to cease all communications. Each letter included some language typically found in third-party debt collection letters.  

The consumer paid the debt after the second statement but subsequently filed a lawsuit claiming the debt collector violated the FDCPA. The debt collector defended the suit by claiming the debt was not in default when assigned by its client, and therefore, the FDCPA did not apply. The consumer responded by claiming the cumulative effect of the letters reasonably led him to believe that the collection agency was attempting to collect a defaulted debt. 

The Court agreed with the debt collector and held the FDCPA did not apply to it or the letters it sent. 

In analyzing the issues, the Court pointed out that whether a debt collector is a first-party or third-party collector is a factual determination to be made on a case-by-case basis. The court rejected the consumer’s assertion that the cumulative effect of the letters should be considered. Instead, the court focused on the status of the debt and noted that the contractual agreement between the debtor, creditor, and agency should be used to help establish whether the debt was in default. 

In reaching its conclusion , the court reviewed the agreement between the debt collector and its client and found that pursuant to that contractual language,  the debt collector “acts as an extension of [its client] in servicing and billing patient accounts[,]” and “performs ‘early out’ services through which it resolves ‘balances on unpaid accounts prior to the time that the account is deemed delinquent.’” The debt collector also serves its client by coordinating collections on debt that has defaulted with third-party agencies. Further, at no point did the debt collector or its client treat this debt as in default. Therefore, in the court’s opinion, the contract and undisputed facts showed that the debt collector was only performing precollections for its client and thus was not a “debt collector” under the FDCPA.

Read the full opinion here. 

insideARM Perspective

For those performing first-party collection services for their clients, or thinking about doing so, this case highlights the importance of the contractual language establishing the first-party, early-out, or pre-collect relationship. In this case, the contract between the debt collector and its client was clear: the debt collector was “acting as an extension” of its client. This phrase and the surrounding language in the contract painted a clear picture for the court and allowed the debt collector to end the lawsuit without the need for a trial. Reading between the lines, had this language been omitted from the contract, or been too broad or otherwise unclear, we might have seen a different result.

FAIRFIELD, N.J. – Vertican Technologies, a global leader in the legal collections software industry, proudly announces the launch of its rebranded company website. This milestone tops off their recent corporate identity rebranding which introduced new product logos, streamlining their look, and creating a cohesive visual brand across all their platforms. 

The revamped website reflects Vertican’s enduring legacy and forward-thinking approach in the ever-evolving landscape of the collections industry. With a fresh design and enhanced user experience, the new vertican.com seamlessly integrates access to company news and information empowering clients with robust solutions to navigate the complexities of legal recoveries.

“As we settle into the new year, our rebranded website is a testament to Vertican’s dedication to modernization while providing unparalleled solutions in the receivables technology space,” said Isaac Goldman, Chief Executive Officer. “This is not merely a cosmetic change; it’s a reflection of our commitment to innovation, improving people’s lives, and advancing into the next exciting chapter of our journey.”

Vertican has been serving the legal collections arena for three generations, maintaining continuous ownership and a reputation for visionary innovation. This latest move in their corporate rebranding demonstrates the company’s commitment to scaling ahead in a dynamic business landscape and delivering exceptional products, value, professional services, and client support.

Visit the rebranded website at vertican.com and experience how the Vertican suite of products has provided the legal collections industry with the most powerful, evolutionary, and revolutionary technology for more than four decades.

About Vertican Technologies

For more than 40 years, Vertican Technologies has been the receivables industry leader providing best-in-class technology, making operations more efficient, compliant, and profitable. As the pioneer in developing data standards, Vertican continues to advocate for universal data standards which will increase productivity and reduce errors in the legal collection industry. Vertican’s team of subject matter experts and innovators build comprehensive software packages that automate and streamline the collections cycle. Solutions include: vExchange®, Q-LawE, Collection-Master, vMedia, and legacy YGC Data Standard licensing. Visit www.vertican.com to learn more.

In a blog post published January 29, 2024 titled “The CFPB’s enforcement work in 2023 and what lies ahead,” the CFPB discussed its 2023 enforcement activity and highlighted its plans to expand its enforcement capacity in 2024.

The CFPB indicated that in 2023, it filed 29 enforcement actions and resolved through final orders 6 previously-filed lawsuits.  Orders in these matters required the respondents to pay approximately $3.07 billion in consumer redress and approximately $498 million in civil money penalties.  The CFPB’s blog post includes brief descriptions of key 2023 enforcement actions.  (Our blog posts about several of these matters can be found here, here, here, here, and here.)

The CFPB also highlighted its plans to significantly expand its enforcement capacity in 2024.  The additional staff members that the CFPB plans to hire include enforcement attorneys as well as non-attorneys such as analysts, paralegals, e-litigation support specialists, and economists.  The new staff members will be located in the CFPB’s Washington, D.C. headquarters and in its San Francisco, New York, Chicago, and Atlanta regional offices.  The CFPB also promoted an information session that it held yesterday for potential applicants to learn more about the Office of Enforcement’s work and job opportunities.

Effective skip tracing
strategies have evolved alongside changing regulatory requirements and
technological advances. Today, debt collectors can access robust data sources in
real-time to power automated prioritization and collection strategies.

For example, an alert indicating
a consumer opened a new account or is using a new phone number could send them
to the top of your queue. You can then contact via phone or text message with a
link to your self-service portal to request that they start a payment plan.

Verifying and continuously
monitoring consumers’ contact information is important when building automated systems
for collections.  The same capabilities can also increase your
right-party contact (RPC) rates with live agents, emails, and physical letters,
which is important, especially when resources are constrained.

What skip tracing solutions can help?

A comprehensive skip tracing strategy
goes beyond increasing right-party contact rates. While having the most
up-to-date contact information is important, you also need tools that can help
you prioritize accounts.

We recommend:

• Phone Number ID^™ — Scrub and score phone numbers
  based on the likelihood that the number belongs to the account holder at the
  beginning of the debt cycle.
• TrueTrace^™ — Find new phone numbers with scores based
  on quality.
• Email append — Validate and scrub email addresses; find the
  latest ones to attach to accounts.
• Collection Triggers^℠ — Passively
  monitor accounts for new contact information and changes that indicate a
  consumer is now able to make a payment.

Let’s take a closer look at each.

Phone Number ID™

This robust contact-management
process can help you maintain RPC rates and meet compliance requirements. Phone Number ID verifies consumers’ phone
information in real-time, including:

• Subscriber name
• Carrier
• Line type
• Activation date
• Whether the number was moved from a landline

With connections to over 5,000
carrier exchanges, there’s a 97-percent hit rate. If the carriers don’t have a
name associated with that number, Experian will attempt to identify the owner
using its proprietary databases before sending you a complete profile.

Use Phone Number ID to monitor
your accounts and serve as a quality scrub. You can choose which categories to
monitor and receive daily updates if there’s a change.

Phone Number ID also delivers a
match score (0 to 99) based on the likelihood the phone number belongs to the
correct owner.  This score can help you
optimize your outbound communication and stay compliant.

For example, even if you have
the right phone number, at best you might achieve a RPC 15 to 20 percent of the
time. A high score might tell you that it’s worth continuing to reach out until
the consumer answers.

On the other hand, a low score
might indicate it’s a bad number. You might try it once or twice, but then send
it to skip tracing and move on if you don’t make contact. Additionally, you
might want to avoid texting numbers that were recently moved or have a low
score to reduce the risk of Telephone Consumer Protection Act (TCPA) violations.

READ: A Digital Debt Collection Future: Maximizing Collections and Staying Compliant

TrueTrace^™ and
TrueTrace Live^™

TrueTrace and TrueTrace Live are
Experian’s most powerful locating solutions and a follow-up solution to Phone
Number ID. We’ve seen TrueTrace achieve a 10-percent lift in RPC rates compared
to competing products.

The improvement comes from
Experian’s proprietary matching process and access to multiple high-quality
data sources that are frequently updated:

• Experian’s consumer credit file
• Clarity Services alternative and payday lending
  bureau
• Experian® RentBureau® property management data
• Directory assistance data
• Public data sources

You can use TrueTrace to filter the results based on the
quality of the phone number and the phone type. For example, some collectors
use TrueTrace specifically to find high-quality mobile numbers — competing
products might deliver every number regardless of its quality or type.

Email append

Email append is similar to skip
tracing for phone numbers. We can validate email addresses that collectors have
in their accounts to determine if the address:

• Is deliverable
• Has easily correctable typos
• Is a work email address

You can then scrub your accounts to filter out email
addresses that you shouldn’t use. Experian also has access to approximately two
billion email addresses that are regularly evaluated for permissions. We can
help you find and append new emails to accounts to improve digital outreach
strategies.

READ: What To Know When Adding Email to Collections

Collection Triggers℠

Collection Triggers is a flexible monitoring tool
that can alert you to predictive changes in consumers’ credit profiles and enables
a data-driven approach to prioritization.

For example, the daily report
could highlight consumers who applied for, or opened, new credit accounts or
consumers who settled or brought other accounts current. These changes can
indicate a consumer’s finances are on the rebound, allowing you to prioritize those
who are more likely and able to make a payment.

You can choose from nearly 100
triggers to monitor, including changes to a consumer’s phone number, address,
and employer.

While consumers rarely update
their contact information with Experian directly, we receive new information through
furnished trades and inquiries. Passively monitoring for these changes allows
you to avoid having to repeatedly skip trace older accounts and minimize lost
time.

TIP SHEET: Strengthening Your Debt Collection Strategy

Why partner with Experian?

Experian has worked with
collection agencies and debt buyers for years to understand their challenges
and develop effective solutions. We’ve gone from skip tracing solutions that
relied on physically mailing collectors updated reports to monitoring and
verifying information on millions of consumers in real time.

Today, we see debt collectors
and agencies leverage Phone Number ID, TrueTrace, Email append and Collection
Triggers to create effective and compliant skip tracing strategies. These
affordable tools are easy to integrate with existing collection systems. And
the results allow organizations to optimize and scale operations without expanding
their workforce.

Learn more
about Experian’s Skip Tracing Solutions.