5 Member Director Board to Rule CFPB if New Senate Bill Becomes Law

Voice Broadcasting Evolves to Resolve Debts
ca email banner 6 2016
Trouble viewing this email? Click here to view it online
Valor Intelligent Processing

Five Director Board to Rule CFPB if New Senate Bill Becomes Law

As President Trump considers former Rep. Randy Neugebauer, R-Texas to run the CFPB, Senators Deb Fischer, R-Nebraska; John Barrasso, R-Wyoming; and Ron Johnson, R-Wisconsin, introduced a bill in the Senate to replace the single director of the CFPB with a five-member bipartisan committee.

This new bill, the Consumer Financial Protection Board Act, could change the leadership structure of the CFPB. The proposed leadership structure of the CFPB would be a five-member board of directors. The directors would be appointed by the president and approved by the Senate.

The president would appoint one of the five members of the board to serve as chairperson of the board and the CFPB board members would serve staggered five-year terms. Board members could be removed for “inefficiency, neglect of duty, or malfeasance in office.”

The goal of the bill is to bring accountability to the bureau. The House of Representatives is also considering replacing the single CFPB director with a committee as part of the Financial CHOICE Act, a bill which would repeal and replace the Dodd-Frank Wall Street Reform Act.

The constitutionality of having one director rule the CFPB is already the subject of litigation in Court of Appeals in the D.C. circuit, the second most powerful court in the U.S. In a 2-1 decision the Court ruled the CFPB had to re-review an enforcement action it took against PHH Corporation. The Court of Appeals determined the CFPB director can not only be removed “for cause” by the president but instead could be removed “at will.” The CFPB appealed the ruling asking the Court to rehear the case with a full panel of judges.

Voice Broadcasting Evolves to Resolve Debts

Tried and true methods of contacting consumers to collect debt continue to evolve with the increasing demands of compliance. One of these many methods is the use of the voice broadcasting functionality of an interactive voice response system or IVR. Though regulators’ efforts to improve the consumer’s position in debt collection have thrown voice broadcasting a few curveballs over the years, the process has evolved with scalable cloud based solutions.

“Consistent automated contacting is the key to collecting from consumers today,” said Jeryl Smith, with IAT. “Being very careful to not call cell phones with automated dialers without express written approval, contacting consumers can still be done and be effective. There are databases that can be used to avoid calling assigned cell phones and ported phone numbers to cell phones. These accounts with known cell phones can be isolated onto campaigns for manual contacting. Databases can be maintained to identify which accounts have given permission.”

A collection manager cannot be everywhere at once so keeping tabs on all collectors can be difficult. Voice broadcasting can help manage collectors by controlling the communication. The key is to know and control the IVR settings and scripts.

“Control is key to a more compliant IVR,” said Kerry Sherman, vice president business development at TCN. “Agencies cannot control everything that their agents say or promise within the regulatory guidelines. Know what message is being delivered as outbound and inbound calls are made.”

Sherman elaborated about his visit to a healthcare finance convention. In learning of the concerns specific to the healthcare field he commented about how prepared the collection business battle tests technology for other industries. The experience brought him to the conclusion that, “debt collection is the mixed martial arts of the dialer world.”

As voice broadcasting technology has been in use for some time and by multiple industries, consumers are familiar with its use. Some consumers prefer resolving debt without human interactions in favor of a sense of privacy. Those in need of a conversation with a collection professional can also be obliged by a click away to a live agent.

smith jeryl“Most consumers are understanding when debt recovery companies make automated calls," said Smith. “Technology should provide the ability to correctly identify the called party.” The balance owing can then be disclosed, and a non-human option given to satisfy the debt through an electronic payment provider.

Not only can voice broadcasting make a consumer feel more comfortable but it can also enhance security, protecting the agency from possible mistakes. It is also is effective helping your agents complete payments.

According to Tim Schriner, “Once an agent and consumer agree on a payment – whether a PIF (paid in full), SIF (settled in full) or a payment arrangement – the agent transfers the consumer. The consumer uses the telephone keypad to enter their account information and electronically sign the payment agreement. Security increases as the agent does not hear or see the account number. Furthermore, since the consumer does not speak the account number, the risk of it being overheard is eliminated. The IVR also enables the consumer to immediately provide the electronic signature required by Reg. E for payment arrangements.”

Making the appropriate adjustments and modifications of voice broadcasting can increase chances of collection while decreasing chances of a lawsuit. These adjustments can range from call times to scrubbing cell phone numbers.

houston“Utilizing an IVR provides agencies with a cost effective and compliant avenue for consumers who are willing and able to quickly make payments without human intervention,” said R. Fred Houston, president of Columbia Ultimate now a part of Ontario Systems. “IVRs can process payments in a secure environment and provide account information and details without the need to spend the agent’s valuable time. Additionally, IVRs are programmed to always maintain compliance with disclosures and privacy, preventing any human error in dealing with consumer account information. More and more consumers are accustomed to using self-service options to manage accounts and it frees up agent time for additional accounts.”

Such a tough environment means technology will need to continue pressing forward and evolving. Only with an effective collection process will collection professionals be able to harness voice broadcasting power and continue to thrive.

Compliance Tips Courtesy of the CFPB

ciskey debra jWhile we await official rules related to debt collection from the Consumer Financial Protection Bureau, we are expected by the CFPB to conform to the debt collection-applicable requirements it places upon defendants in its enforcement actions. Director Cordray and CFPB staffers in the Enforcement division have made their position regarding this expectation quite clear.

This review of 2016 enforcement actions provides compliance expectations as expressed by the CFPB in the enforcement actions related to debt collection announced in 2016. Each tip references back to the applicable enforcement action and page number in the action. All can be found at www.consumerfinance. gov under the Policy & Compliance tab.

The following consent agreements were reviewed in development of this information:

• Navy Federal Credit Union, 10/11/2016 (NFCU)

• Pressler & Pressler, LLP, 4/25/2016 (PP)

• Solomon & Solomon, P.C., 2/23/2016 (SS)

• Fredrick J. Hanna & Associates, P.C., 1/16/16) (H)

Controls/Policies and Procedures

• Maintain adequate compliance controls related to debt collection communications. (NFCU 18)

• Maintain appropriate procedures for monitoring consumer debt collection communications and take corrective action where appropriate to ensure compliance with applicable Federal consumer financial laws. (NFCU 19)

• Conduct annual compliance audits and report to the Board or appropriate Board committee and all appropriate managers to ensure policies and procedures are in compliance with applicable Federal consumer financial laws. (NFCU 19)

• Maintain policies and procedures requiring compliance with applicable ethical and procedural requirements for the submission of truthful and accurate evidence in connection with a collection suit. (P& P 17)

• Implement effective controls to review and approve standardized court pleading templates that comply with applicable laws, rules, and court procedures. Document such processes in writing, and make available to employees. (P & P 17)


• Provide adequate training to staff regarding debt collection communication. (NFCU 18)

• Document training activities and review and update training programs at least annually. (NFCU 19)

Debt Collection Practices

• Do not misrepresent, expressly or impliedly:

- your legal authority or intention to take legal action against a consumer,

- garnish a consumer’s wages,

- contact a consumer’s commanding officer or employer concerning a consumer’s debt,

- that a consumer can repair his or her credit reputation by contacting you,

- that you issue a credit rating,

- that a consumer’s decision to settle or pay a debt will result in repairing or improving the consumer’s credit history,

- that the consumer’s delinquency or default will make it difficult or impossible for the consumer to obtain additional credit from other creditors. (NFCU 16, 17)

• Do not disclose a consumer’s debt to a third party. (NFCU 16)

Collection Litigation Activities

Do not threaten or initiate collection suits without the following in your possession: (P& P 12, 13, 14) (H 6)

• Original account-level documentation reflecting the consumer’s name, last four digits of the account number associated with the debt at the time of charge-off.

• The claimed amount, excluding any post charge-off payments unless claimed amount is higher than the charge off balance, in which case you must possess original account level documentation reflecting the charge off balance and explanation of how the claimed amount was calculated and why such increase is authorized by the agreement creating the debt or permitted by law.

• If suing under a breach of contract theory, the applicable contractual terms and conditions.

• A chronological listing of the names of all prior owners of the debt and date of each transfer of ownership of the debt beginning with the name of the creditor at the time of chargeoff, if initiating a collection suit on behalf of a debt buyer.

• Properly authenticated copy of each bill of sale or other document evidencing the transfer of ownership of the debt at the time of charge-off to each successive owner, including the debt buyer on whose behalf respondents initiate a collection suit, including a specific reference to the particular debt being collected upon.

• Either a document signed by the consumer evidencing the opening of the account forming the basis for the debt, or original account-level documentation reflecting a purchase, payment or actual use by the consumer.

Attorney whose name appears on the complaint must: (P& P 14, 15) (H 8, 9)

• Be able to demonstrate having reviewed original accountlevel documentation, the bill of sale (if the account is a purchased debt), document evidencing the opening of the account or actual use by the consumer.

• Confirm that the statute of limitations has not run on the account, it is not subject to a current bankruptcy proceeding nor is discharged in bankruptcy.

• Confirm the consumer’s correct identity and current address, the location of the consumer’s real property if the action is to enforce an interest in real property to determine the appropriate venue for a collection suit.

Attorney must not submit deceptive affidavits in which:

• Affiant misrepresents personal knowledge of the validity, truth, or accuracy of the character, amount of legal status of any debt. (P& P 14, 15) (H 10)

• Affiant misrepresents an affidavit has been notarized. (P& P 14, 15) • Attorney knows the affidavit contains an inaccurate statement. (P& P 14, 15)

• Misrepresents the affiant’s review of any original accountlevel documentation or other documentation that would support the debt that is the subject of the collection suit. (P& P 14, 15) (H 10)

• Misrepresents the date of execution of any affidavit, sworn statement certification of proof, or declaration. (S& S 8)

• Misrepresents the amount of the debt. (S& S 8)

• Misrepresents the fact that the debt is supported by competent or reliable evidence. (S& S 8)

• Misrepresents any material fact to consumers. (S& S 8)

Debra Ciskey is the Compliance Officer at Wakefield & Associates. Inc. She is a member of the board of directors and a certified instructor for ACA International.

Thinking About Buying Some Debt?

strausser harryIn the very early 1990s I was actively working in my family’s collection firm in central Pennsylvania. We were experiencing some respectable growth with medical clients in our regional market. There was always conversation about where we could secure more business and continual searches for that golden apple client that could change our operation dramatically. We were fortunate to have some good, respectable competitors in our market that were also friends from the industry. On occasion a fly by night firm would surface and their actions would concern all of us. Dad used to proclaim, “That firm is so bad, they couldn’t buy a client in our area!” Then, the debt purchase industry emerged, and they could do just that!

My Dad came from a financial background working in finance companies early on and was contacted by a close friend about the emerging debt purchase market. He decided to get on board with the concept and by 1992 we transitioned his firm into a 100% debt buying/servicing entity. He was active in that market until he passed away in 2009.

I often encounter agency owners that ask, “How does debt purchase work?” and “How can I get involved in buying debt today?” By the early 2000s the debt buying market exploded. Hundreds of millions of dollars worth of deals were being transacted. It was a huge wave and many rode that wave to much financial prosperity. Now, after the economic crisis of 2008 and entry of the CFPB, the market is a virtual shell of what it once was. But there are still some opportunities. The biggest change in culture has been the prohibition of the resale of many portfolios on a state basis, which was the primary culture.

Here is how you might get involved today:

Partner with a Buyer

There are still opportunities where large debt buyers partner with regional firms to collect their investments on a contingency basis. If you plan to enter this tier of the market be prepared to be audited by the buyer as they are under pressure to conform to CFPB mandates and must assure the regulators that standards their partner upholds are the same standards as their parent organizations.

Reach Out to a Debt Broker

The number of debt brokers has reduced substantially, but there are still regional deals being shifted from sellers to buyers via these industry players. Fresh accounts are harder to find but if you engage with a broker they can assess your areas of expertise and keep a watchful eye out for opportunities. There are currently huge portfolios of judgment accounts available that remain from the earlier days of robust purchasing.

Approach Your Contingency Clients

One of the safest and most successful ways to enter the market is to approach one of your current clients about buying their receivables. A common opportunity arises when a doctor you have represented for years decides to retire. They are often interested in just liquidating their accounts. If you have worked with them for some time you know the recovery metrics on the accounts and may actually already have the data in your system. You can also secure these deals pretty economically as the dollar figures may not be huge and the pricing can be in the 1 to 3 cents on the dollar range. We were recently approached by a doctor who was retiring. He was a client for only one year. We bought his receivables for the past four years, about $300,000 worth of accounts for 1 cent or $3,000. They even boxed up all of the patient statements for us!

Become Educated

Learn as much about the mechanics of the debt purchase process as possible before embarking on a purchase. Reach out to DBA International Inc., the association of debt buyers. They have much to offer and produce an annual conference in Las Vegas each February. You can access them at www.dbainternational.org.

Benchmark with Colleagues

There is a good chance you know an agency owner in your market that has made a purchase or two. Reach out to them about their experiences, both the good and the bad.

Most agencies I encounter in my travels are looking for new streams of business as they navigate the tough competitive nature of our industry. Buying debt, although a longstanding practice, might be a new opportunity for your organization. Like Dad used to say, “If you can’t land a client the traditional way, maybe you can buy the business!”

We encourage our readers to submit a “best practice” idea for inclusion in this column. Until next time, I’m in a collection office near you!

Harry A. Strausser III is the President of Interact Training and Development. He can be reached at harrystrausser@gmail.com.

subscribebutton v2
 jan feb 2017
Hi, just a reminder that you're receiving this monthly email edition because of your professional status.

Please Unsubscribe if you are no longer in the profession or simply do not wish to receive this email edition.

Don't forget to add josh@collectionadvisor.cpataxmag.net to your address book so we'll be sure to land in your inbox next issue.