protect your assets presentation slides · 6/1/2016 4 west virginia • unanswered calls not the...
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6/1/2016
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Any content included in this presentation or discussed during this session (“Content”) ispresented for educational and general reference purposes only. ACA International,either directly or indirectly through speakers, independent contractors, employees, ormembers of ACA International (collectively referred to as “ACA”), provides theContent as a courtesy to be used for informational purposes only. The Contents are notintended to serve as legal or other advice. ACA does not represent or warrant that theContent is accurate, complete, or current for any specific or particular purpose orapplication.
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STATE OF THE STATEState Law Modifications
New YorkIllinoisMaineWest VirginiaMassachusetts?
New York State
• NYS Department of Financial Services’new regulations went into effect in2015.
– Disclosure for time-barred debt.
– Itemization.
– Substantiation.
– Conflict with New York City regulations?
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Illinois
• Illinois Collection Agency Act updatedin August 2015 and subsequentlycorrected.
• Amendments effective until Jan. 1,2026.
• Licensing requirement applies tocommercial and consumer collections.
• Original creditor name and addressonly required if requested in writing.
Maine
• Requires written payment schedulesand settlement agreements to thedebtor.
• Six year statute of limitations/litigationprohibition.
• Post SOL payments do not revive.
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West Virginia
• Unanswered calls not the same asanswered calls.
• Call frequency expanded to 30 perweek from prior 10.
• Written notice of attorneyrepresentation required.
• Cap on damages.
• Eliminates venue shopping.
Connecticut
• If signed by the Governor, ConnecticutHB 5571 is effective October 1, 2016.
• Applies prospectively, not retroactively
• Expanded definition of “consumercollection agency”
• Prohibit litigation on time-barred debts.
• Require certain evidence whenlitigation is filed on consumer debt.
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Massachusetts
• Status? 4/21/2016 favorable reviewand sent to Senate Ways and MeansCommittee.
• Statute of limitations decreased to 3years?
• Collection on time-barred debtprohibited?
• Time to collect on a judgment?
• Prohibition on civil arrest warrants?
REGULATION BYCONSENT ORDER
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CFPB Consent Orders
• Chase Bank USA, N.A. (July 2015)
• Encore Capital Group (Sept. 2015)
• Portfolio Recovery Associates (Sept. 2015)
• Frederick J. Hanna & Associates (Jan. 2016)
• Citibank, N.A. (Feb. 2016)
• Pressler & Pressler (April 2016)
CFPB Director Richard CordrayRemarks from March 9, 2016
“These orders provide detailed guidance forcompliance offices across the marketplaceabout how they should regard similarpractices at their own institutions. . . .Indeed, it would be “compliancemalpractice” for executives not to takecareful bearings from the contents of theseorders about how to comply with the lawand treat consumers fairly.”
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Regulation by Consent Order
1. Identify the bad practices
2. Identify the CFPB best practices(unwritten rules)
3. Incorporate informal rules into yourCMS
4. Train your staff and implement theseinformal rules
Call Center Bad Practices
1. Collecting debt without a reasonablebasis
2. Creating urgency when collecting ontime barred debt
3. Harassing Telephone Calls
4. False or Misleading Representations
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No Reasonable Basis To Collect
• Generally relied on summary data files assole basis for its collection efforts
• Only attempted to get documents inlimited circumstances
• No document review when possesseddocuments
• Claimed account information accuratewhen had reason to believe notaccurate
Review Original Documentation 1
• Oral or written dispute of the accuracy orvalidity of debt
• Purchase agreement disclaims debt validityor accuracy or without commitment toprovide original account leveldocumentation
• Reason to question the portfolio eithercouldn’t get docs before or docs wereinconsistent with initial placement info
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Review Original Documentation 2
• Can accept payments that consumersvoluntarily provide
• Can continue to collect whenconsumers acknowledge the debtand agreed to make payments
• Can communicate with Consumerwho affirmatively contacts or requestscontact
Creating Urgency (with OOS)
• Trained collectors to create urgency– “It is important for me to establish your
intentions towards the bill or else it will betaken as your refusal to resolve”
– Account “will be forwarded for furthermanagement review”
– “Further collection activities will bedecided
• Settlement letters mailed without OOSdisclosure
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Establish OOS Procedures
• Include OOS notification on letters sentto OOS accounts
• Include OOS disclosure on calls (notmore than one time)
• Carefully review your scripts forurgency language-no statements thatinterferes with, detracts from,contradicts or undermines the OOSdisclosure
Harassing Telephone Calls
• Excessive calls (more than 20 times intwo days)
• Calling outside of FDCPA limits
• Representing to consumer that canavoid calls prior to 9AM throughconsent to call cell phone on ATDS
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Establish Call Procedures
• Assume that it is inconvenient tocontact before 8AM or after 9PMeither by zip or area code whichever ismost restrictive
• Set up a process to obtain consent tocall cell phones that does not involverepresentations that must consent orelse will call early in AM
False or Misleading Statements
• Attorney reviewed when no review
• Lawsuit filed when not filed
• Lawsuit may be filed if do not pay whenattorney has not reviewed
• Using “litigation department” to collect,when no attorney has reviewed and nostatement on letter to say no attorneyreviewed
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Pre-litigation Collection Procedures• Eliminate pre-litigation demand letters unless
attorney has reviewed and approved forlaw suit
• Provide consumer with following BEFORElegal collection:
– Name of creditor at time of charge-off (includingname at time consumer did business)
– Charge-off balance
– Breakdown of amount over charge-off balance
– Statement that will provide documentation ifrequested
Communicating Dispute Procedures
• Create procedures to notify accountowner, collection agency, creditreporting agencies, collection firms ofa dispute
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PaymentProcessing
Electronic banking, alsoknown as electronic fundtransfer (EFT), uses computerand electronic technology inplace of checks and otherpaper transactions.
Electronic Funds Transfer Act
• What is an “EFTA”?
– “any transaction initiated through anelectronic terminal, telephone, computer,or magnetic tape for the purpose ofordering, instructing, or authorizing afinancial institution to debit or credit aconsumer’s account.”
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Why Does the EFTA Matter?
• Consumers may recover the sum of (1)actual damages (2) up to anadditional $1,000, (3) the costs of acivil action, and (4) reasonableattorney fees. The law also givesconsumers class action remedies up tothe lesser of $500,000 or 1% of the networth of the violator.
EFT
• NO– Transactions originated by credit card or
check, draft, or similar paper instrumentsare not electronic funds transfers.
• YES– Transactions initiated through electronic
terminals, telephones, or computers whichdebit or credit a consumer’s checking orsavings account are electronic fundstransfers.
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Most Common EFTs on theCollection Floor
• Examples of EFTs
– Providing Checking/Savings Account InfoOver the Phone or Internet
– Providing Debit Card Info Over the Phoneor Internet
What about “e-Checks”?
An eCheck (or electronic check) is anelectronic version of a paper check usedto make payments online or by phone.
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PADDS
• A company may create a pre-authorizeddemand draft (PADD), or check by phone, ifauthorized by the consumer. See U.C.C. § 3-402(a). With a PADD, the consumer authorizesthe company to create a physical check withthe consumer’s account information and thecompany must be able to prove that itreceived authorization from the consumer.Proof of authorization for a PADD may beestablished via audio recordings of thetelephone communication with theconsumer.
Electronic Check Conversions(“ECK”)
• In ECK transactions, a consumerprovides a check to a merchant orother payee which is then used as asource of information to initiate a one-time EFT from the consumer’s account.The payee electronically captures therouting, account and serial numbersfrom the check and initiates the one-time debit of the consumer’s account.
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EFTA Requirements
• Depends on the number of, andconsistency of, the transactions
One-Time Payments
• A consumer authorizes a one-time EFTwhere the consumer receives notice thatthe transaction will be processed as anEFT and completes the transaction. Themodel notice that should be given to theconsumer is: “When you provide a checkas payment, you authorize us either touse information from your check to makea one-time electronic fund transfer fromyour account or to process the paymentas a check transaction.”
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Reocurring Payments
• Authorized “only by a writing signed orsimilarly authenticated by theconsumer.”
• Not just any writing, but a writing whichis either signed or similarlyauthenticated.
• The Act further requires the recipient ofthe authorization to provide a copy ofit to the consumer.
Amounts that Vary
• If the amount varies from EFT to EFT,written notice of the amount and dateof the EFT must be sent at least tendays prior to the transfer.
• Treat scheduled EFTs as post-datedchecks and send the written noticerequired by the FDCPA, advising of theintent to submit the transfer.
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Compliance Solutions
• Mail a Copy– A simple solution is to send the consumer two copies of a
written authorization in the mail requesting one to besigned and returned. However, this solution is not consumerfriendly, is costly, and creates burdensome delay forconsumers with immediate needs to resolve their debt.
• Use a Web Site– A second more convenient and less costly solution may be
to direct consumers to a web site where they can create a“writing,” which contains their “authorization,” which theycan “sign or similarly authenticate” electronically andretain copies for themselves. Technologically savvy debtcollectors are exploring more sophisticated methods ofobtaining proper consent via e-mail, text message, andtelephone.
Compliance Solutions
• IVR• Route phone requests for multiple payments from a checking
account through an IVR. The IVR program would allow theconsumer to verify his or her identity, request payment termsand confirm the request with a series of telephone pad keystrokes.
• A signature obtained via IVR, which is a phone technologythat allows a computer to detect voice and touch tonesduring a normal phone call, can also meet the definition of anelectronic signature under the E-Sign Act if set up properly.
• For example, the consumer must be given appropriatedisclosures and must be allowed to enter a response thatindicates consent associated with the record containing theinformation which the consumer must certify. Accordingly, IVRwould meet the signature requirement rules so long as itotherwise meets the requirements of the rule and the recordkeeping requirements under the E-Sign Act.
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Wait, What is E-Sign?
The E-Sign Act allows the use of electronic recordsto satisfy any statute, regulation, or rule of lawrequiring that such information be provided inwriting, if the consumer has affirmatively consentedto such use and has not withdrawn such consent.
An electronic signature is “an electronic sound,symbol, or process, attached to or logicallyassociated with a contract or other record andexecuted or adopted by a person with the intent tosign the record.”18 An electronic record is “acontract or other record created, generated, sent,communicated, received, or stored by electronicmeans.”
E-Sign Requirements
• Certain Consumer Disclosures
– E.g. describe procedures necessary towithdraw consent.
• Record Retention
– E.g. copies of the relevant disclosures,notices used.
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What Does the CFPB say?
• Regulation E does not prohibit companiesfrom obtaining signed, written authorizationsfrom consumers over the phone if the E-SignAct requirements for electronic records andsignatures are met.
• Full Bulletin Available HERE:http://files.consumerfinance.gov/f/201511_cfpb_compliance-bulletin-2015-06-requirements-for-consumer-authorizations-for-preauthorized-electronic-fund-transfers.pdf
Common Compliance Issue
• What if the Consumer Inaccurately Statesthat the Payment is Credit, But Really, It’sDebit?– The Federal Reserve Board has, however,
provided a safe harbor if such an error resultsfrom an unintentional, bona fide error,notwithstanding the maintenance ofprocedures adapted to avoid such an error.Accordingly, your company should requirethat telephone representatives specificallyask the consumer, on a recorded line, if thecard is a debit or credit card and this requestshould set be forth in a written procedure.
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Recent SupremeCourt Cases
Campbell-Ewald v. Gomez
Spokeo v. Robins
Sheriff v. Gillie
Campbell-Ewald v. Gomez
• United States Supreme Court case.
• Decided on January 20, 2016.
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Campbell-Ewald v. Gomez
Background:
• Campbell-Ewald was a nationwideadvertising and marketing company.
• As part of an advertising campaign forthe NAVY, sent text message toGomez.
• Subsequently, Gomez filed suit alleginghe never consented to receive thesetext messages.
Campbell-Ewald v. Gomez
Offer of Proof:
• Prior to class certification, Campbell-Ewald submitted an offer of judgmentto Gomez.
• “Offer of Judgment” = Full satisfactionof Plaintiff’s claim.
• Gomez rejected.
• Campbell-Ewald filed a motion todismiss for lack of jurisdiction.
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Campbell-Ewald v. Gomez
Supreme Court:
• Held Gomez’s claim not mooted byrejected offer of judgment.
• “Under basic principles of contractlaw, Campbell’s settlement bid andRule 68 offer of judgment, oncerejected, had no continuing efficacy.”
Campbell-Ewald v. Gomez
…But, Does Decision Go Further?• “…[w]hen the settlement offer Campbell
extended to Gomez expired, Gomezremained empty handed; his TCPAcomplaint…stood wholly unsatisfied.Because Gomez’s individual claim wasnot made moot by the expiredsettlement offer, that claim would retainvitality during the time involved indetermining whether the case couldproceed on behalf of a class.”
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Campbell-Ewald v. Gomez
• “We need not, and do not, nowdecide whether the result would bedifferent if a defendant deposits the fullamount of the plaintiff’s individualclaim in an account payable to theplaintiff, and the court then entersjudgment for the plaintiff in thatamount.”
Post-Campbell
Leyse v. Lifetime (Southern District of New York):
• Offer of Judgment by Lifetime.
• Not accepted by Leyse.
• Court declined broad interpretation thatCampbell seemed to allude to.
• “But once the defendant has furnished fullrelief, there is no basis for the plaintiff to objectto the entry of judgment in its favor.”
• Court accepted offer of judgment upondeposit of sum with clerk of court.
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Spokeo v. Robins
• United States Supreme Court case.
• Decided on May 16, 2016.
Spokeo v. Robins
Facts:• Spokeo operates a website site that allows users
to search for information about others.• The search engine was used for a variety of
reasons including by employers for backgroundchecks.
• Robins alleges that information for him onSpokeo’s website was incorrect, and brought aFCRA claim (Note: For purposes of this decision,the Court assumed the FCRA applied).
• Robins never alleged that he was the one whovisited the website or viewed his information.
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Spokeo v. Robins
Standing:
• Spokeo moved to dismiss Robins caseon the grounds that he had sufferedno “injury in fact” from the allegedincorrect information.
• “Standing” – Fundamentalrequirement to bring suit….”Injured”party must show there is a “live” and“then existing” controversy.
Spokeo v. Robins
Supreme Court:• Remanded case down to 9th Circuit:
– Wanted 9th Circuit to differentiate between issuesof “concreteness” (injury actually exists) and“particularization” (affect plaintiff in a particularway….Not just a “general harm” suffered by alarge group).
• “…Robins cannot satisfy the demands ofArticle III by alleging a bare proceduralviolation.”
• “It is difficult to imagine how the disseminationof an incorrect zip code, without more, couldwork any concrete harm.”
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Sheriff v. Gillie
• United States Supreme Court case.
• Decided May 16, 2016.
Sheriff v. Gillie
Facts:• Ohio law allows the Attorney General to
appoint private debt collectors (referred to as“special counsel” under the law) to collectdebts owed to the State on the State’s behalf.
• The special counsel are required to use stateletterhead when contacting debtors,indicating that the party collecting the debt isdoing so on behalf of the state.
• Gillie received one of these letters and filed aclass action against Sheriff (the attorney whosent her the letter).
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Sheriff v. Gillie
Alleged FDCPA Violation:
• Gillie alleged that a private law firmsending a letter on Ohio’s behalf onAttorney General letterhead was a“deceptive and misleading means toattempt to collect consumers debts” inviolation of 1692e.
Sheriff v. Gillie
Supreme Court:• Unanimous decision that, while debt collectors
under the FDCPA, sending collection notices onAttorney General letterhead is not misleading.
• Court notes that since the letter’s statement that“We write to you as special counsel to the AG” isaccurate, “it would make scant sense to rank asunlawful use of a letterhead conveying the verysame message…”
• Rejects idea that sending collection notice onAttorney General letterhead raised “the specterof consumer confusion” and “the risk ofintimidation.”
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Sheriff v. Gillie
Quote Reiterating Purpose of FDCPA:
• “1692e bars debt collectors fromdeceiving or misleading consumers; itdoes not protect consumers fromfearing the actual consequences oftheir debts.”
Effect of Decisions
• Campbell-Ewald v. Gomez:- Potentially removes an effective tool indefending FDCPA and TCPA claim (thoughsee Leyse v. Lifetime).
• Spokeo v. Robins:- Effect on Federal Court jurisdiction.
• Sheriff v. Gillie:- Unique case, but broader discussions ofFDCPA underpinnings useful.
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