A recent federal district court opinion highlights the potential pitfalls associated with renewals of unsatisfied default judgments. The case, Sarah Pitera v. Asset Recovery Group Inc., No. 2:22-cv-00255-TL (W.D. Wash.), serves as a reminder that judgment creditors must still tread carefully when seeking to collect on, or revive, judgments from yesteryear. Read on for more analysis.

In January 2012, Asset Recovery Group, Inc. (ARG) filed an action in Washington state court to collect on a medical debt owed by Sarah Pitera. After she was served the complaint, Pitera sent two letters to ARG’s collections counsel. The first — sent in January 2012 — disputed the debt, demanded validation, and requested documentation substantiating the debt. Unsatisfied with ARG’s response, Pitera sent a second dispute letter in February 2012, seeking the same documentation. ARG’s collections counsel responded on February 27, 2012, providing the original creditor’s name and address only and inviting Pitera to contact counsel by March 12 if she wanted to resolve the debt. “Otherwise,” the letter stated, ARG would “proceed as provided by the law.” That same day, and unbeknownst to Pitera, ARG collections counsel moved for a default judgment, which the court granted on March 5 — seven days before the deadline set forth in the February 27 letter. After contacting the original creditor, Pitera believed the debt was no longer owing. Confident that ARG could not collect on a debt that she had paid, Pitera had no further communication with ARG until February 7, 2022, when she received notice that ARG had renewed the unsatisfied 2012 default judgment.

Pitera filed suit, claiming violations of the Fair Debt Collection Practices Act (FDCPA) and the Washington Consumer Protection Act. Specifically, Pitera alleged that ARG, through counsel, failed to provide her five days’ notice of the hearing on its motion for default, despite her “appearance” in the case, which violated Washington State Superior Court Rule 55(a)(3). Pitera also alleged that the February 27 letter was deceptive because it presented an opportunity for resolution of the debt on the sameday ARG moved for default. According to Pitera, ARG collection counsel’s assertion that ARG would “proceed as provided by law” was manifestly untrue given its failure to provide notice mandated by Rule 55(a)(3).

Following removal to federal court, ARG moved to dismiss Pitera’s complaint on grounds that the action was time-barred, with no equitable tolling affording relief from the FDCPA’s one-year limitations period.

Not so fast according to Judge Tana Lin of U.S. District Court for the Western District of Washington. In a 10-page opinion issued on August 26, 2022, the court held ARG was estopped from asserting a statute of limitations defense and denied the motion to dismiss. Accepting the complaint’s allegations as true, the court found that ARG’s correspondence with Pitera occurred whilst simultaneously averring to the state court that Pitera had made no appearance demonstrated ARG’s duplicity. The court reasoned that while Pitera had not entered a formal appearance in the state action, she nonetheless “appeared” by virtue of her post-litigation dispute correspondence and, therefore, was entitled to a notice of hearing on the default motion that ARG (admittedly) failed to provide. The court also “completely reject[ed]” ARG’s argument that Pitera’s reliance on ARG’s statement that it would “proceed as provided by law” was unreasonable; “Plaintiff’s reliance on Defendant proceeding as provided by law was reasonable because Defendant’s counsel — who drafted the February 27 letter — had a legal obligation and an ethical duty of candor separate and distinct from the protections provided under the FDCPA.” That ARG obtained the judgment in 2012 but took no action for 10 years also militated in favor of finding that Pitera remained ignorant of the outstanding judgment against her.

While Pitera will eventually need to prove her allegations at trial, the district court’s decision demonstrates the importance of ensuring streamlined processes to avoid unfortunate timing hiccups that can result in an asset becoming a potential liability.

Read the Order denying the motion to dismiss here. 

TAMPA, Fla. – Sept. 26, 2022 – ProVest, an industry leader in serving legal process, announced a new compliance solution for its clients.

Clients can now follow each audit step taken on every job in the ProVest QA PDF document. Files can be exported and stored on the client’s system for easy retrieval and used as evidence to defend against any future challenge to service.

ProVest’s QA PDF service is offered free to clients. It fortifies the company’s best-in-class compliance by including time-date stamped photos, GPS coordinates, and other important compliance data for each file. This quality assurance benefit guarantees that firms can view their files and each verification document whenever necessary without relying on a vendor to search for or send the file. There is transparency at every step of the process.

“Our clients have multiple compliance obligations and regulatory requirements at federal and state levels. We are pleased to offer a complete compliance solution,” said ProVest Sr. Vice President Neil Heath. “Investment in compliance is an investment in the success of our clients. For more than 30 years, ProVest has worked to be at the leading edge of innovation in all aspects of our business,” Heath added. 

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If you’re collecting debt for nursing home care, you might want to double check who is responsible for payment.  Last week, in conjunction with a field hearing, the CFPB issued a new Consumer Financial Protection Circular and an Issue Spotlight on Fair Debt Collection Practices Act (FDCPA) and Fair Credit Reporting Act (FCRA) violations in connection with nursing home debt.  The CFPB also released a letter sent jointly with the Centers for Medicare & Medicaid Services (CMS) on third-party guarantees of nursing home debt.

Issue Spotlight

Motivated by concern about the increasing cost of nursing home care and the financial challenges faced by consumers in paying for such care, the report discusses efforts by nursing facilities to obtain payment from non-residents.  The Nursing Home Reform Act (NHRA) prohibits a nursing facility that participates in Medicaid or Medicare from requesting or requiring a third-party guarantee of payment as a condition of admission, expedited admission, or continued stay in the facility.  Provided a resident’s representative does not incur personal liability, the NHRA does permit a nursing facility to require a representative with legal access to a resident’s available income or resources to sign a contract to provide payment to the facility from the resident’s income or resources.  

The report finds that some nursing facilities include terms in their admission contracts that try to hold a third party financially liable for the resident’s nursing home costs and discusses different forms that such terms may take.  The report states that many third parties are unaware that there are legal restrictions on nursing home admission contracts and may also lack the resources to properly respond to a lawsuit seeking to collect a resident’s costs based on such contract terms.  As a result, courts may enter default judgments, thereby enabling debt collection firms to use wage garnishment or foreclosure to collect residents’ costs from third parties.  The report also states that nursing homes and debt collectors may also report a resident’s debts to credit reporting companies as a third party’s personal debt as a way of creating pressure on the third party to pay such debts.

The report also discusses claims made in debt collection lawsuits that a third party engaged in financial wrongdoing, such having intentionally misused, hidden, or stolen the resident’s funds.  As an example, the report references boilerplate language used in many New York lawsuits alleging that a third party had engaged in fraudulent conveyances.

Circular

The circular discusses the risk of FDCPA and FCRA violations based on debt collection and consumer reporting practices relating to debts that are invalid under the NHRA or state law analogues to the NHRA that contain similar prohibitions.  

The CFPB acknowledges that it does not enforce compliance with the NHRA and is generally not responsible for overseeing the activities of nursing facilities.  However, it warns that a debt collector, including a law firm in litigation, that represents that a third party must personally pay a nursing facility resident’s debt may violate the FDCPA prohibition on misrepresentations where the debt is based on a contract provision that is unenforceable under the NHRA or a state law analogue.  The CFPB also warns that a debt collector can violate the FDCPA prohibition on misrepresentations by making baseless allegations in a lawsuit that a third party engaged in financial wrongdoing.

With regard to FCRA liability, the CFPB warns that because it is inaccurate to report that a consumer owes a debt that is based on an illegal contract provision, a debt collector who furnishes information about nursing home debts or a consumer reporting agency (CRA) that includes such information in a consumer report can violate FCRA accuracy requirements if the debts are invalid under the NHRA or a state law analogue.  (The question of whether a CRA can be held liable for violating the FCRA’s accuracy requirements when the accuracy of a debt reported by the CRA requires a legal determination as to the debt’s validity is raised in a case currently pending before the Second Circuit.)  A furnisher or consumer reporting agency can also violate the FCRA by failing to meet its dispute obligations with respect to information related to nursing home debts. 

Joint Letter  

CMS, together with the Department of Health and Human Services, has issued rules implementing the NHRA and, along with DHHS, is responsible for enforcement of the NHRA.  Their joint letter discusses the potential  FDCPA and FCRA violations described in the Circular and sets forth the expectations of the CFPB and CMS for nursing facilities and their debt collectors to comply with the NHRA, FDCPA and FCRA.

None of the three new items on nursing home debt collection mention the Affordable Care Act (ACA), which the CFPB discussed in a blog post about the connection between eligibility for financial assistance under policies mandated by the ACA and medical collections.  The ACA requires nonprofit hospitals to establish financial assistance policies for consumers who are unable to pay for their medical expenses.  It also prohibits nonprofit hospitals from reporting medical debts as collections to credit reporting companies, or from selling the debt to another party, without first trying to determine whether the patient would be eligible for their financial assistance policies.  In the blog post, the CFPB suggested that nonprofit hospitals may not be providing low income consumers with the financial assistance for which they are eligible and may be reporting medical debts in violation of the ACA.  (Based on the CFPB’s position with regard to the NAHA, it seems likely that the CFPB would similarly assert that attempts to collect medical debts incurred due to hospital’s failure to provide financial assistance required by the ACA can violate the FDCPA and that the reporting of medical debts where prohibited by the ACA can violate the FCRA.)

ROCHESTER, N.Y. — Continental Service Group, Inc., dba ConServe, is a devoted community partner and helps to make the world a better place.  Through the organization’s ongoing philanthropy program, ConServe Cares, the ConServe team supports and funds the efforts of numerous agencies that strive to make a difference.  As a result of the employees’ compassion and generosity; countless lives have been touched and enriched.

In the month of August, the ConServe team along with their organization’s corporate “Matching Gift Program”, donated to Goodwill of the Finger Lakes.  “Our team of caring and committed employees takes great pride in supporting a diverse group of local and national agencies that help to make life a little easier for many people who are struggling with health and social challenges,” said George Huyler, Vice President of Human Resources at ConServe.

Goodwill of the Finger Lakes was delighted to be chosen as the August recipient of the ConServe Cares program, said Jennifer L. Boutte, Vice President of Community Engagement. “We are grateful for your continuous generosity and support in helping us advance our mission of ‘Elevating people, community, and planet for a good today and a better tomorrow.’” 

About ConServe

ConServe is a top-performing accounts receivable management service provider specializing in customized recovery solutions for their Clients. Anchored in ethics and compliance, and steadfast in their pursuit of excellence, they are a consumer-centric organization that operates as an extension of their Clients’ valued brands.  For over 37 years, they have partnered with their Clients to provide unmatched customer service while simultaneously helping them achieve their accounts receivable management goals.  Visit us online at: www.conserve-arm.com 

About Goodwill of the Finger Lakes  

Goodwill of the Finger Lakes is a local, caring, person-centered nonprofit organization who does a lot of good across the Greater Rochester community and Finger Lakes Region.  Our unique social enterprise is comprised of over 700 individuals who use their passion and expertise to find innovative solutions to address the countless barriers and social challenges that impact the lives of more than 387,000 people whom we are proud to serve annually. As you often hear us say, “We are more than a store!”  Each time you donate and/or purchase at one of our retail stores, revenue generated is reinvested in our community programs and services.  Through programs such as Goodwill Vision Enterprises (formally known as ABVI), 211/LIFE LINE, Workforce Development, and our Good Neighbor Program; we collaborate with community to maximize vision wellness, create quality employment opportunities, eliminate barriers to independence and connect people to resources they need.  Visit them online at:  https://www.goodwillfingerlakes.org/

One of the most important pieces of evidence in any case for a TCPA defendant is evidence of their policies and procedures.

Such evidence is particularly important in defeating certification–if a Plaintiff seeks to certify a class of “exceptions” to the policy there are almost certainly individualizied issues at stake–but it can also find pay dirt at the summary judgment phase.

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In Abboud v. Agentra,  2022 WL 4099740 (N.D. Tex. Sept. 7, 2022) for instance the Plaintiff sued Agentra arguing she had not consented to receive text messages.

Agentra brought summary judgment arguing that it had a routine practice of popping a screen to its agents to remind them to inform callers that they would receive transactional text messages as part of a sign up flow. In response, the Plaintiff argued that the Court could not accept that evidence but the Court disagreed:

Abboud provides no caselaw supporting her argument that Agentra can’t win summary judgment based on the type of evidence it provided. Actually, the caselaw teaches the opposite. Like other kinds of competent summary-judgment evidence, “routine practice evidence” can achieve summary judgment when the other party fails to rebut it with counter-evidence.

That’s a good reminder for all the TCPA defendants out there–always consider leading with your policies. If the Plaintiff fails to introduce evidence that the policy was not followed then you win outright. Even if the Plaintiff introduces such evidence, it generally only highlights an individual issue thwarting certification.

Read the Order on Summary Judgment here. 

TREVOSE, Pa.– NCB Management Services, Inc., recently announced the hiring of Stephanie Schenking as VP of Portfolio Acquisitions.  Stephanie joins NCB with more than twenty years’ experience working in the financial services industry. She has a proven track record building strategic partnership, enhancing the customers’ experience and driving superior results. Most recently, Stephanie served as Agency Relationship Manager at Crown Asset Management, where she created excitement with transparency among agencies that led their drive to compete.  As a result of Stephanie’s ability to lead and motivate, overall Agency engagement and performance improved during her tenure.  Stephanie has previously worked for Unifund and Fidelity Investments in a variety of leadership roles including Sales, Service, and Compliance.  She currently holds her CCCO with ACA International and her CRCP with RMAI. Stephanie earned her BS in Finance from the University of Dayton and is a regular attendee at industry conferences and educational events.  

“I am excited that Stephanie is joining our team”, stated Charlie Bonner, Chief Acquisitions Officer. “Stephanie is an industry leader who will play an integral part in NCB’s growth in the Account Receivables Market”

Schenking stated, “It’s an exciting time for growth and innovation in the rapidly changing environment of Receivables Management.  I look forward to the opportunities both professionally and personally at NCB, a company that has established itself as a leader in the industry”

About NCB Management Services

NCB Management Services, Inc. was established in 1994 and is headquartered in Trevose, PA with satellite offices in Jacksonville, FL, Sioux Falls, SD, and Lincoln, NE. NCB is a well-respected Debt Buyer of Unsecured Consumer Credit Products and an admired, well-recognized Accounts Receivable Management (ARM) industry leader. NCB is a customer-centric, regulatory compliant organization with a robust infrastructure, who has blended many years of ARM experience with the latest in new information systems and communication technology. NCB has developed a reputation as consistently being a valued business partner and performer in a wide variety of applications. Providing superior customer interaction and achieving maximum results, while protecting our client’s valued reputation, are among our highest priorities.

After analyzing public feedback, as well as information gathered from the five providers of Buy Now, Pay Later (BNPL) products, the Consumer Financial Protection Bureau (CFPB) issued a report, making it clear that the CFPB plans to increase regulation of the BNPL industry.

A form of credit that allows a consumer to split a retail transaction into smaller, interest-free installments and repay over time, the typical BNPL structure divides a $50 to $1,000 purchase into four equal installments. While BNPL credit is interest-free, providers make money by charging fees to both sellers and consumers who don’t pay on time. Launched in the mid-2010s as an alternative form of short-term credit for online retail purchases, BNPL loan usage increased ten-fold during the pandemic.

Among other takeaways from the report, the CFPB found:

• The financial and operational benefits of the interest-free, accessible at your fingertips product over legacy credit products are real and sizeable. According to the CFPB, however, those same benefits may lead to two forms of borrower overextension: loan stacking (the risk of overconsumption from BNPL usage at multiple concurrent lenders) and sustained usage (the risk of long-term BNPL usage causing stress on borrowers’ ability to meet other, non-BNPL financial obligations).

• Consumer reporting companies have been slow to develop credit reporting protocols with respect to BNPL. Mortgage and auto lenders have raised concerns that the growth of BNPL with no associated credit reporting makes it more challenging to know whether a borrower can afford a mortgage or auto loan.

• Credit performance is deteriorating on BNPL loans. In 2020, 2.9% of borrowers “charged off” a BNPL loan, while that number jumped to 3.8% in 2021. Public filings show this upward trend continuing through the first half of 2022.

• BNPL lenders often collect a consumer’s data, as well as deploy models, product features, and marketing campaigns based on that data, to increase the likelihood of incremental sales. The CFPB claims that in addition to the general data harvesting risks, BNPL lenders’ use of consumer data for revenue-generating purposes can potentially increase overextension risks by engendering repeat usage.

Director Chopra also released prepared remarks on the report, acknowledging both the advantages and disadvantages of this new product. “Since taking office, I have directed our staff to identify ways to invite more competition into markets for consumer financial products and services. Buy Now, Pay Later firms are challenging existing players and offering new options to retailers and borrowers.” Director Chopra noted, however, that “[m]any Buy Now, Pay Later lenders are not offering the same clear set of dispute protections that credit card issuers have long been required to offer, which is creating chaos for some consumers when they return their merchandise or encounter other difficulties. Many Buy Now, Pay Later lenders do not offer clear and comparable disclosures of the terms of the loan like other lenders.”

The report and prepared remarks state actions the CFPB intends to take as a follow up to the report. These includes:

• Identifying potential interpretive guidance or rules to issue to ensure that BNPL firms adhere to many of the baseline protections that Congress has already established for credit cards.

• Identifying data surveillance practices that may need to be curtailed — specifically, examining some of the types of demographic, transactional, and behavioral data collected for uses outside of the lending transaction, including for the purpose of sponsored ad placements, sharing with merchants, and developing user-specific discounting practices.

• Identifying options for appropriate and accurate credit reporting on these products.

• Ensuring that BNPL companies are subjected to appropriate supervisory examinations, just like credit card companies.

• Ensuring that the CFPB and the Federal Reserve System methodology used to estimate household debt burden reflects the reality of today’s market.

Director Chopra’s statement noted that “the report prepared by the CFPB staff does not seek to determine whether the rise of the Buy Now, Pay Later market is a positive or negative development. I believe that Buy Now, Pay Later can grow and serve consumers well if we can collectively address some of the gaps I’ve just outlined. If Buy Now, Pay Later lenders incorporate the protections and protocols that we observe in other financial products, this would go a long way to ensure that there is healthy competition where consumers have a baseline level of protections.”

The CFPB’s report denotes the latest action taken to reign in the burgeoning BNPL industry. As we posted here, here, and here, in November 2021, the House Financial Services Committee’s Task Force on Financial Technology held a “Buy Now, Pay More Later? Investigating Risks and Benefits of BNPL and Other Emerging Fintech Cash Flow Products” hearing. For the hearing, the task force invited both consumer advocates and industry tradespeople to address concerns that these products are designed in such a way that the disclosure requirements under the Truth in Lending Act and other credit laws may not apply. Next, in December 2021, the CFPB ordered five BNPL companies to answer a series of questions about the products. In January 2022, the CFPB then issued a notice and request for comment related to the products. In response, the Consumer Bankers Association sent a letter to the CFPB in March 2022, encouraging regulation of the industry.

According to Director Chopra, “As BNPL products continue to grow in popularity and the industry continues to add products and services to meet consumer need, a measured approach to regulation will be necessary to preserve market options and to protect consumers’ interests.”

CHICAGO, Ill. and MOUNTAIN VIEW, Calilf.– Halsted Financial Services places a high value on conversations its agents have with consumers. To maximize that value, Halsted has partnered with Prodigal to utilize Prodigal’s ProNotes solution to humanize each conversation and provide additional context for its agents both before and during calls.  

Prodigal’s ProNotes solution offers agents the ability to easily view 100 percent coverage of previous call notes. By enabling each agent with ProNotes, Halsted’s agents can enter any customer conversation equipped with the full breadth of previous conversations. ProNotes also keeps the conversation focused on the customer exclusively since the agent doesn’t have to hunt around for important context. 

Through those conversations, Halsted can keep track of trends in compliments or complaints. Utilizing ProNotes has provided insight into how consumers feel. With Prodigal’s ProVoice and ProNotes, Halsted is able to learn from the positives and negatives and gain insights about consumers’ sentiments and how its agents can continue to improve.

According to Halsted founder Pran Navanandan, “Over the course of our partnership with Prodigal, we’ve gained a sense for what makes a great conversation for both our agents and our consumers. Now, we can learn from the most successful and positive workflows and talk tracks and add those into Prodigal’s real-time actions tool, ProAssist. ProAssist helps our agents stay completely engaged in the conversation and lets them follow the best path to consumer happiness, which helps us deliver those superior experiences to every individual.” 

By focusing on the individual, Halsted can ensure they are treating everyone they speak with as a person who has something to contribute, not an account.  By partnering with Prodigal, Halsted aimed to learn as much as they could about the consumer experience. It’s a great goal to have; it means we’ll always evolve to match their needs. And that’s exactly what improving customer experience requires.

About Halsted

Halsted Financial Services is the expert in omnichannel collections. Headquartered just north of Chicago, with near-shore and off-shore captive sites, Halsted uses proprietary, state-of-the-art technology to run a single platform, omnichannel solution. At Halsted, voice, email, SMS, digital marketing, web chat, and a dynamic payment portal are wholly integrated into one system that updates events in real-time, giving consumers the flexibility to communicate with us when convenient for them and in the manner with which they are most comfortable. This leads to great customer experiences. Halsted has developed a reputation as a trusted business partner that achieves results while protecting the valued reputation of its clients. 

To learn more, visit halstedfinancial.com

About Prodigal

Prodigal is a cloud-based Consumer Finance Intelligence solution that analyzes agent and customer conversations to enhance profits, experience, and compliance. Agencies, healthcare providers, and lenders depend on Prodigal to unlock insights that drive win-win financial outcomes. With decades of industry and data science expertise, Prodigal is ready to work with clients to optimize operations and quality assurance. Nearly one in five U.S. borrowers have already engaged with Prodigal during more than 200 million interactions.

Headquartered in Mountain View, California, Prodigal’s global team is on a mission to build the intelligence layer that powers Consumer Finance. With the backing of domain experts, technology leaders, and top investors, including Accel, Menlo Ventures, and Y-Combinator, Prodigal is poised to become the next iconic vertical SaaS company. To learn more, visit www.ProdigalTech.com or follow @ProdigalTech.

St. Paul, Minn. — IC System hosted its annual Charity Golf Tournament at Tanners Brook Golf Course in Forest Lake, Minnesota, on Friday, July 15. Now in its 24th year, the event brought IC System employees, vendors, and business associates together for a day of course games and friendly competition for a good cause. This year, the tournament broke its record for charitable donations.

Every year, IC System tries to out-perform the previous year’s contributions. The 2022 tournament established a new precedent, raising over $30,300 for several charities. Over the last 24 years that IC System has held this event, its golfers have helped raise about $180,000 for worthy causes.

The 2022 charities consisted of four of IC System’s longtime causes. A Soldier’s Child Foundation helps the children of fallen military personnel. Feed My Starving Children packages and distributes food to children in need in over 70 countries worldwide. The American Cancer Society is a nationwide organization committed to ending cancer. Last but not least, The Ronald McDonald House supports various programs that directly improve the health and well-being of children.

IC System donates to these charities all year round, but the annual Golf Tournament is the biggest single contributing event.

Besides golf, players had other ways to raise funds for these worthy causes. Every few holes featured a pay-to-play course game that helped raise funds for each charity. Players could Chip for Charity, participate in the Bag Toss Challenge, or compete in the Minute to Win It cup contest.

“We had an amazing tournament,” said Rocky Bzdok, IC System’s Compliance Assurance Specialist and one of the tournament’s organizers. “We were very fortunate to have good weather, generous players and sponsors, and a great time golfing. IC System is proud to support this event, which truly impacts the organizations that support our communities. Of course, we could not do this without all the support we get from our vendors and employees.”

About IC System

IC System is one of the largest receivables management companies in the United States. In business since 1938, IC System is a family-owned, privately held accounts receivable management firm in its third generation of family ownership. IC System provides customized debt recovery solutions for healthcare, dental, small business, government, utilities, financial services, and telecommunications industries on a nationwide scale. Follow IC System on Twitter at @icsystem or on Linkedin.