A Play-By-Play of the CFPB SBREFA Hearing

Compliance vs. Operations
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A Play-By-Play of the CFPB SBREFA Hearing

jarman nick 2018Since the inception of the CFPB on July 21, 2011 it has done quite a bit of talking pertaining to debt collection and debt buying. This summer the CFPB was put in a position it hasn’t been quite used to, listening. When Congress created the CFPB and its, well let’s just call “unique structure,” it forced the CFPB to comply with a provision of the Small Business Regulatory Enforcement Fairness Act (SBREFA) before issuing new rules. In theory, the SBREFA process is designed to help protect the little guys from being forced out of business by over burdensome and costly regulations by having a voice and playing a part in the process. But in reality, many believe the SBREFA process is merely a figurative box the CFPB is attempting to check off as quickly as possible to move forward with their agenda and predetermined rules. Personally, I decided to approach the entire process optimistically, with an open mind, dedicating whatever time, effort, energy, and resources needed to ensure we provided the CFPB a perspective it couldn’t ignore while proposing solutions that would help accomplish its same objectives through different means. Whether or not we truly made a difference would be determined afterward, but for the time being the process was going to get everything I had to offer.


It was June of last year when I was notified that I was selected as a finalist to serve as a Small Entity Representative (SER) for the CFPB’s Debt Collection Rule Making process. One month later on July 28 I received the formal invitation from the CFPB to serve on the panel. I was honored to have been selected to serve and represent our industry at such a critical juncture. Being at the table in the midst of the largest overhaul of debt collection rules and regulation in forty years was something for which I was certainly proud and prepared to be a part.

Each SER was permitted to select an advisor to help guide them through the process. The first phone call I made was to the most knowledgeable and well-known CFPB expert in the entire industry, John Bedard, Jr. of the Bedard Law Group in Atlanta. He graciously accepted my invitation to partner with me in the CFPB SBREFA process. We were off to the races from there.

I can sum up the entire process in one word: whirlwind. Immediately after being notified of being selected to serve on the panel we received a package containing preparation materials for the in-person meeting at the end of August along with several studies conducted by the CFPB and its narrative justifying its belief for the need of additional rules for debt collection. It was clear they believed debt collectors were excessively collecting debts that were not owed while at the same time harassing consumers. Therefore, it was important as we went through the process to debunk and invalidate their completely false and erroneous presumptions. The one roadblock we ran into is it wouldn’t be the forum to do such. The objective and directive from the CFPB was clear: how will the outline of proposals impact our organizations independently and what would the financial implications be. This is ultimately where the CFPB was able to somewhat pull a bait and switch. They knew the SERs would be compelled to protect and speak the truth, but the CFPB knew they didn’t have to listen because the objective of the SBREFA process didn’t require such.

Once we dove headfirst into the Outline of Proposals it was clear that while the CFPB focused on third parties and debt purchasers, the overwhelming majority of the proposals being put forth required first-party creditor involvement. Without first-party creditors at the table, little movement, if any, would be made. While they went back and forth with their answer, two out of three times they confirmed an additional SBREFA panel would be convened with just first-party creditors at some point. Most of the SERs for this panel explained and urged the CFPB to include first-party creditors at the present time so we could have an active and engaging discussion. However, that was not accepted. Ultimately, the final list of representatives would consist of 19 individuals made up of three debt collection attorneys, two debt purchasers, and fourteen collection agencies. At the end of the day, we had less than one month to provide feedback on an outline of proposals that was four years in the making.

Communication Galore

The first week of August we had an introductory conference call with each individual selected for the panel (several of which didn’t attend), members from the CFPB, Small Business Administration, and Office of Management and Budget from the White House. From that point on it was complete chaos. In the span of three weeks I attended dozens of conference calls organized by numerous entities, few of which any of us found productive and many of us left frustrated with the lack of organization and fundamental knowledge of the overall process. For John Bedard, Jr. and I, we were in communication multiple times per day through phone calls, emails, and texts. While I already knew he was the leading subject matter expert when it came to the CFPB and, for that matter, most any other debt collection acronym related laws, working with him for a solid month straight cemented the fact. Our approach was simple, he provided the legal aspect and considerations of the proposals while I focused on the operational and applicability. Together we put together a solid game plan that would lead us through the entire process.

As for the CFPB, it held three separate conference calls during that month. It was initially stated the calls were strictly informational to prepare SERs for the in-person meeting and ensure logistic and technical questions were answered beforehand in order to make the in-person meeting as productive as possible. That shifted quickly as the CFPB switched from providing information to inquiring about numerous aspects of the industry that hadn’t been addressed earlier. As a matter of fact, once the SERs were told how the in-person meeting would go and for what we needed to prepare, we received an email from the CFPB with 17 additional pages of questions. Some of the questions were the same but many new ones ultimately threw a curveball to everyone with less than two weeks before go time. It was back to the drawing board making sure we added all the additional questions and subsequent answers to our prep work and ensured we had answers, questions, and solutions for each.

The Meeting

Finally, in late August it was go time for the in-person meeting. While 17 SERs showed up in person, two attended via phone. There were several representatives from the CFPB along with a couple others from the Small Business Administration and Office of Management and Budget. The meeting was led by John Mc- Namara of the CFPB who did a great job of leading the discussion, sticking to the agenda and keeping everyone on point. As each topic was put on the screen, all SERs were then allowed to comment. The regulators remained quiet for the most part. But on some occasions they were inquisitive and asked followup questions to learn more about a particular topic. Those from the SBA and OMB were much less interested and as a matter of fact, one member of the SBA spent more time drawing a caricature picture than they did paying attention to the dialogue going back and forth. At the end of the daylong meeting we were greeted by Director Richard Cordray, followed by his deputy assistant, who came in and greeted the SERs to say a few words as he mingled with the group for a few minutes.

After the meeting, we had a little over a week to put our research, verbal remarks, analysis and comments into our formal written remarks to be submitted for public record. I went into the process encouraged and hopeful. As we await the CFPB’s final report to the SBA I remain as such. While I’m not naive to believe this process would not have happened if it were not required by Congress, I remain cautiously optimistic the time, effort, energy and resources invested in the entire process by the industry’s brightest will be of value to the CFPB, SBA and OMB. I am confident the debt collection and debt buying industry was extremely well-represented and showcased just how great our industry is, how important what we do is, and why it is in the best interest of consumers and collectors alike that the CFPB be open-minded and considerate in their rulemaking process.

Nick Jarman is the owner of RightAway Consulting & Coaching. Jarman served the last three years on the Board of Directors for ACA International and is the past President of the Missouri Collectors Association.

Strengthening Collection Litigation

An ideal world would be accompanied by an end to hunger, no traffic and everyone paying their bills. Unfortunately, the world is not ideal. This means consumers and businesses will attempt to evade their responsibility to a creditor or merchant. The fact that the world is not ideal is the reason attorneys and collection law firms must be at the top of their game to restore balance to our economic system.

One such law firm is Messer Strickler, Ltd, this issue’s law firm spotlight. Collection Advisor talked to Messer Strickler shareholder Nicole M. Strickler about today’s legal collection environment and received insight on what regulators are currently focused on and costly pitfalls into which she thinks collection agencies and law firms must stop falling.

strickler nicoleWhy did you become an attorney and what brought you to collections?

As an undergraduate business major in college, I knew I wanted to work in the corporate world. However, I wanted to find a career that fit both my personality and my interests. The law is interesting because it is a constantly evolving creature subject to different interpretations. In my opinion, practice in the law truly gives one the opportunity to change the way people see the world and each other. And, in all honesty, the advocacy and analysis required in litigation has always been a matter of deep interest. I fell into the legal credit and collection industry by chance. As I canvased job opportunities in the corporate world after law school, I came across an opportunity with a law firm that was beginning a growing collection practice. From there, I honed my skills to help develop the firm into a formidable member of the credit and collection industry.

What kinds of collection law do you practice and do you see any trends in the particular branches of collections?

Our major clients include not only first-party originators, creditors and debt buyers but also other law firms, attorneys and collection agencies. They operate in a wide variety of industries, including consumer loans, medical accounts, credit cards, and utility accounts. On the collection end, I see a renewed interest in first-party, as opposed to third-party, work. On the litigation defense and compliance-counseling end, I see an increased focus on statute of limitations issues as well as documentation of chain of title.

messerstriclerWhat was a particularly interesting case and what knowledge did you take away that you think is very important?

Certainly, my most colorful cases are the result of interesting defendants. I had a case not too long ago where the debtor staunchly maintained that he had no recollection of the account and claimed identity theft. Strangely though, he refused to file a police report or complete an affidavit concerning the theft. Instead, he filed an FDCPA claim against my client. In turn, we subpoenaed the original service provider, which showed a woman with the same last name as the patient on the account. After some digging, we located her, deposed her, and discovered the debtor had incurred the debt for his daughter. She even provided evidence she had paid the debtor back for the money loaned. Needless to say, the debtor’s defense did not go as expected.

What are some metrics that should be tracked? What performance issues should an agency or law firm look out for?

It depends. Obviously, if you are in legal collections you can track things like service rates, post-judgment success and type of post-judgment success; what works better in your jurisdiction than say another jurisdiction. What are the most dangerous pitfalls in legal collections and how do you avoid them? One of the most dangerous pitfalls in legal collections is the lack of solid written policies and procedures. Taking the time to consult with outside counsel to develop the right policies, along with pushing staff to implement them in practice is key.

What is a technological update you think collection law firms and collection agencies need to make?

Privacy and security of debtor personal information is on the minds of both regulators and clients. Agencies need to develop processes and procedures designed to safeguard this information from both external and internal threats.

What are some particular processes or areas where agencies are most vulnerable?

Anywhere you have human interaction with information. It depends on your firm or business. At the same time, anytime you have people involved there’s always going to be room for error. That’s why it is important to look at the PCI standards and other laws that regulate information and payment processing to make sure you have processes and procedures in place to safeguard the information.

My personal opinion is it’s not so much about hacks but information should be secure in the transfer from your client to you and back including communication. There are internal issues as well, such as making sure you are hiring the right people so there is no risk of someone taking any information, particularly payment information or consumer information that could cause problems.

What is a recent occurrence in collections you feel will influence the industry? How?

Certainly recent consent orders concerning large collection law firms are in the process of changing the way collection law firms process and litigate their files. Many firms are using these consent orders as a policy road map for the future.

What is something every collection manager should be doing to help enforce compliance?

To ensure compliance, every collection manager must assist in accountability. The use of compliance incentives on the floor helps to drive home the fact that the world of collections is not just a numbers game.

What do you think is the easiest thing a collection agency could do to avoid being sued?

Collection agencies should make sure outside counsel reviews their letters. And, by outside counsel, I mean one with actual industry and preferably defense experience. This is crucial because you want guidance from someone who has been through the trenches and recognizes where the litigation trends are headed.

What are common missteps collection agencies have made in their letters?

I think it is things as simple as identifying the original creditor to things like including language in the letter that would constitute overshadowing of the validation notice. In the legal collections context sometimes I see statements that may give the consumer an impression that the case’s litigation process is a little further along than it actually is which could potentially be misleading.

What is your greatest achievement thus far in your career?

A recent win in the Seventh Circuit Court of Appeals sticks out. Being named one of the most influential women in credit and collections for 2016 comes in as a close second.

Describe your win in the Seventh Circuit Court of Appeals.

That one was an interesting one because it dealt with the intent a collection attorney must have when filing a case. That was something we fought. There was almost what I would call a scourge of cases that argued that collection attorneys couldn’t file lawsuits without the intent to take that lawsuit to trial. It doesn’t recognize the practicalities of any type of litigation. That was a particularly interesting case and I think it was pretty valuable to a lot of collection attorneys in the industry. At least in the seventh circuit it kind of put a stop to that theory. I’ve seen it elsewhere as well.

pisaDo you have any tips for attorneys/collection professionals who find themselves in such a situation?

Do your research. Make sure you are familiar with the procedure because appellate courts are very strict when it comes to the rules. What do you like to do in your free time? When I have free time, I love to travel. I am an explorer, so I love the opportunity to take time with my family and discover new places. One of my favorite trips was Costa Rica, which was interesting. I’ve always been a fan of Italy. I have been there a few times; wonderful food, wonderful people. I’ve been to Amsterdam, which was interesting with all the canals.

What inspired you to travel?

It probably comes from when I grew up. My mom was a flight attendant for a long time at United Airlines and so we traveled as a family often. I’m sure that probably had something to do with it. I really enjoy exploring new cultures and new things and it just fits well with my personality.

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.

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