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Top Attorneys in Collections Reveal Challenges

Change is in the air for the accounts receivable industry. Any changes start with the creation or modification of a law regulating the industry and trickle all the way down to how best to reconcile a single transaction between a buyer and a seller. A good attorney is one that works to influence the entire process, encouraging fair and effective ways of settling open accounts.

Collection Advisor presents the Top Attorneys in Collections. These attorneys have been nominated by their peers for efforts to improve collections through legal collections, creditor defense and legal consultation. These Top Attorneys reveal what they think is the biggest challenge for collection attorneys today and how they overcome it.

bedard johnJohn H. Bedard Jr. Bedard Law Group, P.C.

Laws and rules relating to the collection industry are changing at a rapid pace. All attorneys in the ARM space are challenged to keep up with changes in case law, regulatory activity, and legislative movement. Our office overcomes these challenges by remaining active in the industry, reading industry publications, new cases, rules, and laws, and addressing the needs of clients personally and professionally.

 

burnette lauren2Lauren M. Burnette Messer Strickler, LTD.

I think one of the biggest challenges collection attorneys face is the misconception held by too many people unfamiliar with our industry – that collecting debts through litigation is somehow not “real” litigation. Too much bad press has left this impression on too many people. I try every day to change that narrative through litigation and education.

 

coleman june2June D. Coleman Carlson & Messer, LLP

One of the biggest challenges that face attorneys is being over-regulated by state and federal governmental agencies when attorneys need to have independence to ethically and professionally represent their clients.This is even more true since attorneys are already subject to regulation by their state bars.I address this issue by working with groups like ACA and its state units to educate legislators that an attorney’s ethical obligations to his or her client cannot be regulated by consumer protection agencies or consumer attorneys.

 

grzechnik neill katieKatie Grzechnik Neill ARS National Services

The biggest challenge for attorneys in the collections industry today, especially for those defending agencies against FDCPA claims, is dealing with the hyper-technical, pie in the sky claims that plaintiffs’ counsel come up with. It’s especially frustrating when the suit is filed by a consumer who never had any real harm done to them by the use of a single word or phrase in the letter sent to them, yet courts continue to find that such consumers have standing to bring these claims. Defending such claims is expensive for agencies and the attorneys’ fees provision of the FDCPA provides no relief to agencies even if they win the lawsuit. Because of this, many agencies settle, which essentially turns into money in the plaintiffs’ counsel’s pockets. This emboldens plaintiffs’ counsel to continue the cycle since there is very little downside to them except for a loss of time. My dream is for the industry to become more proactive in these issues and to find a way to fix this disparity, which is ultimately harming consumers.

 

jackman stefanie hStephanie H. Jackman Ballard Spahr LLP

Managing all the operational, legal, and compliance requirements in today’s legal collection environment. For many of my clients, investments in automation, new technology, and experienced talent has proven essential to compete in a costeffective and compliant manner. It also is important to have strong vendor relationships to assist with efficiently outsourcing certain areas of legal compliance.

 

jackson joyJoy N. Jackson J.D. Faber & Brand, LLC

The biggest challenge for collection attorneys today and in the past has been combating our negative public image. I believe this can be overcome by acting with the highest degree of integrity, treating others with respect, and pushing ourselves to be involved in positive ways in our communities, whether it be in politics, academia, charity, etc.

 

klutho michael1Michael A. Klutho Bassford Remele

My practice is focused on defending collection attorneys and agencies when named in lawsuits brought by consumers. While our firm, Bassford Remele, does not collect consumer debts per se, our defense practice has provided a unique window into the many challenges collection professionals encounter when attempting to collect consumer accounts. In particular, a significant number of lawyers and law firms have chosen to exclusively sue collection professionals, including collection attorneys. “Kitchen sink” counterclaims (alleging very tenuous claims, at best) following service of a collection lawsuit have become a common tactic employed to avoid paying debts.This in turn forces the collection attorney to spend valuable time responding to the counterclaim/roadblock rather than securing a judgment on behalf of the creditor client. Given this potential reality, whenever possible it is best to develop a truly robust relationship with your creditor client whereby detailed procedures and channels of communication are established to streamline the production of the evidence and proof necessary to defeat the counterclaim, and successfully prosecute the collection lawsuit. Forethought in this regard is far superior to an after-the-fact, ad hoc, response when the inevitable counterclaim arises.

 

miller ronaldRonald C. Miller Miller and Steeno, P.C.

The biggest challenge for collection attorneys are frivolous lawsuits filed under the guise of protecting consumers when it appears that the vast majority of these lawsuits are filed only to line the pockets of consumer attorneys. Collection attorneys need to be very diligent in maintaining robust attorney meaningful review procedures to reduce the amount of errors being committed. Additionally, they need to adopt policies and procedures for every aspect of their collection practice to afford them the opportunity of claiming a bono fide error as a defense in the event a lawsuit or counterclaim is filed under the Fair Debt Collection Practices Act.

 

moore harvey1Harvey M. Moore, Esq. The Moore Law Group

I view the biggest challenge for collection attorneys today as finding systematic approaches to making workflow efficient, so that we can meet client expectations while satisfying state and federal requirements in an ever changing legal collections environment. At The Moore Law Group, we seek to have well documented processes with defined ownership and accountability, establish measureable targets and continuously create and evaluate reporting that looks back at the past and anticipates the future. In that way, we seek to keep track of what we are doing and how we can be better.

 

newburger manuel1Manuel H. (Manny) Newburger Barron & Newburger, P.C.

We have seen a great deal of painfully expensive TCPA litigation against creditors and debt collectors in the last few years. Recent case law suggests that creditors need to do a better job of building out consent to call cell phones, and both first and third-party operations need to build better dialing models.

Litigation involving credit reporting practices is also high-risk and costly to defend. ARM professionals need to be certain that they have solid compliance with statutory and regulatory requirements and that their training reaches every employee who has the capacity to trigger an FCRA claim.

 

rossman johnJohn Rossman Moss & Barnett

The biggest challenge facing collection attorneys is the constant changes in the laws and requirements for complying with the FDCPA. I am on the steering committee of the Consumer Relations Consortium, a group of more than 30 collection agencies, debt buyers and creditors that meet regularly with the regulators in Washington D.C., including the CFPB and FCC, to implement common sense rules and requirements for our industry.

 

schulz davidDavid M. Schultz Hinshaw & Culbertson LLP

I approach this question from the perspective of a defense attorney who represents collection attorneys in litigation and compliance matters. The biggest challenge that I see for collection attorneys is their ability to keep up with the FDCPA case law. For instance, how to apply the safe harbor language in Miller v. McCalla (or Avila in the 2ndCirc). Related to this is the increase in FDCPA suits against collection lawyers for conduct that occurred in collection lawsuits.

 

spiwak lisaLisa E. Spiwak Esq. Spiwak & Iezza, LLP

Laws and rules relating to the collection industry are changing at a rapid pace. All attorneys in the ARM space are challenged to keep up with changes in case law, regulatory activity, and legislative movement. Our office overcomes these challenges by remaining active in the industry, reading industry publications, new cases, rules, and laws, and addressing the needs of clients personally and professionally.

 

wade louisLouis J. (Lou) Wade McDowell Rice Smith & Buchanan P.C.

Laws and rules relating to the collection industry are changing at a rapid pace. All attorneys in the ARM space are challenged to keep up with changes in case law, regulatory activity, and legislative movement. Our office overcomes these challenges by remaining active in the industry, reading industry publications, new cases, rules, and laws, and addressing the needs of clients personally and professionally.

Is Credit Bureau Reporting a Viable Tool for Healthcare Debt?

beck gordonCredit bureau reporting continues to be a tool of recovery within the ARM industry that is the subject of much debate. With the growing demand from clients across the country for the agencies to handle all aspects of their credit reporting it has become vital for agencies to know, understand and execute their processes, without error, because the consequences of the alternative can be devastating. The financial burden on the agency, the open liability and the potential for regulatory consent orders makes credit reporting a frightening proposition. On the other end of that equation, there are indeed positives. Credit reporting continues to be an effective means of recovery by boosting contacts from consumers who otherwise may not have intent to communicate with the collection agency, but the negative collection tradeline commands their attention. I have conducted many studies and, in almost every instance, internal testing has proven that reporting does increase liquidation versus the alternative. I have received feedback from multiple large agencies who have conducted similar tests and have found similar results.

The process of credit bureau reporting is defined and standard for almost every type of debt…and then there’s medical. Which begs the question, if given the opportunity to choose, should you or should you not report your medical debt to the credit reporting agencies?

As mentioned above, I think it is fair to say that the operational view would be that it boosts contacts and recoveries, while the compliance perspective would be that it encourages disputes and therefore carries the risk of litigation. Regardless of the departmental perspective, it appears that many agencies have settled into reporting delinquent debts through the credit reporting agencies. The conversation becomes more muddied when discussing the type of debts being reported. Credit cards, installment loans and others receive little discussion as those accounts have previously been reported in a “current” status, follows a timeline of declination and, when severely delinquent, reports on an individual’s credit as a charge-off by the original creditor. The frustration for consumers appears to stem from the type of accounts, such as medical, where positive history is never reported, but as soon as delinquency appears, they are adversely impacted and thus seems unfair to many consumers. The question has even been asked as to whether or not medical debt should be considered an extension of credit in the first place or is it just a “bill” and, therefore, even be able to be reported?

With all of these considerations, along comes an outlier with medical debt. We have all experienced the frustrations of non-approved medical claims, incorrect medical coding, billing for procedures that may have never taken place, disagreements about deductibles, unauthorized procedures and on and on. The consumer’s frustrations generally result in dispute after dispute. When the dispute is received, the agency has the responsibility to conduct a reasonable investigation, but with medical debt the definition of reasonable can be very broad and result in furnishers settling dispute lawsuits, impacting the organization’s bottom line.

The frustrations resulting from incorrect reporting have piqued the interest of the legislators and regulators. The previous practice was that hospitals, doctor’s offices and many other types of medical debt owed would not be reported by the “first party” owner of the debt and would only be added to the bureau as a collection by the agency. Based on the common billing problems mentioned previously, it was determined that it was unfair for consumers to not have a voice in the review of the medical bill for which they were judged to owe. In 2016, all three major credit reporting agencies implemented a rule that would not release the reporting to the consumer’s bureau for 180 days after the first reporting. There is no doubt that this was put into play to stem the overwhelming tide of disputes, complaints and lawsuits levied against the credit reporting agencies and, by default, the collection agencies. Many of these decisions were the result of the 2015 settlement agreement between the New York Attorney General with all three credit reporting agencies. It is important to note, however, that these rules were not retroactive.

The latest development in the world of healthcare reporting is the introduction of the FICO 9 score, ultimately deeming medical debt less impactful to the consumer’s overall score while completely removing any medical debt that has been paid. This development has proven huge to the recovery of medical debt as it provides positive leverage for the debt collector while bolstering the incentive for the consumer to pay the outstanding debt. While the debate will rage on as to whether or not reporting medical debt produces greater recovery opportunities or just manufactures disputes/lawsuits, it is certainly clear that if the agencies are given the right negotiating tools such as leveraging the removal of the debt for payment, it can and will be a drastic change in course for those that have decided not to report. Yes, the challenge will continue as to whether or not the consumer owes the debt in the first place, but with the pressure on the providers to provide accurate data to the bureaus and less errors reaching the agency, I think it is a fair assessment to conclude that with the proper internal investment, rock solid procedures and a solid collection strategy it will be very hard to compete with those agencies that determine reporting medical debt will be an arrow in their operational quiver.


Gordon C. Beck III has been in the collection industry for over 20 years and President of Valor Intelligent Processing.

CFPB Argues Incorrect Debt Amount to Lawyer Violates FDCPA

hickey syeIn a recent amicus curiae brief to the U.S. Court of Appeals for the Eighth Circuit, the Consumer Financial Protection Bureau (CFPB) took the position that a debt collector violates the Fair Debt Collection Practices Act (FDCPA) when it incorrectly represents the amount of debt it is attempting to collect, regardless of whether the debt collector is communicating with a consumer or the consumer’s attorney. The CFPB’s position and the Eighth Circuit’s ruling could have far-reaching implications for the financial services industry.

The CFPB amicus brief followed a ruling by the District Court for Minnesota, which held that because the debt collector’s alleged misrepresentation was sent to the consumer’s attorney, the higher “competent attorney” standard – and not the lower “unsophisticated consumer” standard – would apply. Accordingly, the District Court reasoned, the consumer’s attorney would look into the amount of debt and make an appropriate challenge if the amount were incorrect, making the alleged misrepresentation not actionable under the FDCPA (15 U.S.C. § 1692 et seq.). On appeal, the CFPB argued that the District Court couldn’t have gotten the opinion more wrong.

Case Background

The facts of the case center around Appellant Brianna Johnson’s (Johnson) past unpaid credit card debt with Wells Fargo Bank, N.A. According to the CFPB brief, Wells Fargo stopped adding interest and charged off Johnson’s debt in 2010, allegedly waiving the right to collect interest under the Card Agreement. At that point, Johnson’s account had accrued $4,953.47 in debt.

Appellee Admiral Investments, LLC (Admiral) eventually acquired Johnson’s debt and sent her a collection letter in 2012, seeking almost $7,500 to account for interest, late and other charges. Johnson subsequently retained counsel. Admiral sent Johnson’s counsel a letter in 2015, alleging that the debt had swelled to almost $11,000. Admiral subsequently filed suit against Johnson in Minnesota state court in 2016, seeking to collect the original debt amount of $4,953.47.

On February 23, 2016, Johnson filed suit against Admiral in federal court, alleging violations of the FDCPA. Specifically, Johnson contended that the letters sent from Admiral constituted a false representation of the character, amount or legal status of her debt. Admiral subsequently filed a motion to dismiss, arguing that the claims were time-barred, that Johnson lacked standing and that her Complaint had failed to state a claim under Rule 12(b)(6).

After finding that Johnson’s claims regarding the second letter were not timebarred, the District Court held that the second letter, sent to Johnson’s attorney, was not actionable under the FDCPA because the competent lawyer standard required Johnson’s counsel to look into whether the amount asserted was correct and take action if the amount was incorrect. Because the alleged misrepresentation was “based on a legal interpretation and contained in a letter” to Johnson’s counsel, the competent attorney standard shielded Admiral from violating the FDCPA. The District Court subsequently granted the motion to dismiss; Johnson then appealed to the Eighth Circuit.

CFPB Brief

In its brief, the CFPB argues that the difference between the “unsophisticated consumer” and “competent attorney” standards has zero impact on an alleged misrepresentation regarding the amount of debt by a debt collector. As argued by the CFPB, the FDCPA has “no exception for misrepresentations” made to competent lawyers and a debt collector “cannot avoid its statutory responsibility to represent accurately the amount of a debt by shifting the burden to a consumer’s counsel to uncover the falsehood.” In other words, a misrepresentation regarding an amount of debt is still a misrepresentation, regardless of the recipient.

In support of its argument, the CFPB cited decisions in the Seventh, Tenth and Eleventh Circuits, all of which have declined to extend the “competent attorney” standard to shield debt collectors from facially false statements to consumers’ counsel. Essentially, the CFPB argued, regardless of whether the District Court applied the “competent attorney” standard or “unsophisticated consumer” standard, it reached the wrong conclusion in dismissing Johnson’s claim for violations of the FDCPA.

Impact

Because the unforgiving FDCPA is akin to strict liability, debt collectors and other creditors seeking to recover past due accounts need to take extra caution in calculating the proper amount of debt owed. Debt collectors would be wise to implement safeguards or engage counsel to ensure the amounts sought are not prohibited by the laws of the consumers’ respective states – i.e., interest on interest in certain states.

According to the CFPB, debt collectors and other entities should be held liable for incorrectly representing the amount in communications to both consumers and their respective counsel.

The CFPB’s position, if upheld by the Eighth Circuit (and potentially other courts), thus puts all debt collectors on notice to be cautious when dealing with a debtor’s counsel. Accidentally providing an incorrect amount to the debtor’s counsel will result in an FDCPA violation, probable litigation and a potentially heavy fine.


Sye T. Hickey, an attorney in Baker Donelson’s Nashville office, concentrates his practice in complex commercial litigation and frequently works with individual and corporate clients in disputes across multiple areas. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Exceeding Data Security Regulations

Data security is an increasingly vital component of professional collections. A large amount of data is exchanged on a regular basis, from credit reports to scrubs to sales files. Collections leaders, even those who are not technologically inclined, have found it necessary to take important steps to understand how data flows through the organization and where files are stored. It is essential that company officers continue to take on accountability when it comes to data security. After all, data is often considered, at the same time, a company’s most valuable asset and one of its greatest vulnerabilities. Proper data security serves not only the consumers’ interests, but also protects the collector on reputational, financial, and legal fronts.

Generally when we picture a data security threat, we think of outside dangers such as malware, ransomware, social engineering or phishing attacks. These threats can be mitigated with awareness and employee training, as they rely heavily on the target’s carelessness or naiveté. Everyone should be aware of these risks in order to minimize vulnerability as much as possible.

There are several data security vulnerabilities that companies have a relative amount of control over, such as inadequate employee training, complacency, lack of organizational commitment, and lack of expertise. These, and all, aspects of data security should be addressed from day one, and committed to every day thereafter.

RMA’s Certification Program requires company adoption of policies and procedures that address and mitigate these various risks, as data security is integral to any compliance management system. These policies and procedures are required to meet or exceed state and federal laws and regulations. RMA recommends receivables management companies undergo the following internal data security measures:

• The appointment of a Chief Compliance Officer, in part to ensure accountability. If a critical security control fails, it must be reported internally up the chain.

• Penetration testing for service providers on a regular basis.

• Due diligence to establish that vendors adhere to (or exceed) the same level of data security.

• An annual risk assessment and any adjustments made based on the results.

• Internal and third-party audits of the company’s entire compliance management system.

• Data back-ups that are located offnetwork.

• Establishment of a continuity plan outlining how the company will recover and mitigate damages of a potential breach.

“Confidential consumer information” includes more than just personal identifiable information such as card numbers, social security numbers, and driver’s license numbers. In fact, under the FDCPA, the existence of a debt and the status of that debt must not be disclosed to third parties unless allowed for as a permissible purpose. Those who collect medical debt should be aware that consumer healthcare information is also protected under HIPAA, such as medical conditions, prescriptions, medical procedures, and doctors. Finally, a company’s own information should also be protected under many layers of security, as a great deal of company data is confidential, including payroll, financials, background checks, employment, sales strategies and product strategies.

During the purchase and sale transaction and portfolio valuation, it is essential to demonstrate due care for protection of confidential consumer information. RMA worked closely with the Federal Trade Commission (FTC) to create best practices in the sharing of portfolio data. Best practices would necessitate:

• The buyer and seller execute a mutual Non-Disclosure Agreement (NDA) that is valid for a minimum of two years. The NDA should include the requirement to maintain cyber security liability insurance, agreed upon remedies in the event of a breach, and the methodology for the data file to be returned and/or destroyed.

• The seller encrypt appropriate data fields.

• Files be transferred via a secured transmission methodology and be password protected. Data files and passwords should be sent via different communication vehicles.

• A seller that transfers data with personally identifiable information to maintain a pre- and post-sale file transfer log.

While data security encompasses a broad range of measures, the application of these measures is not as abstract as one may think. Chief Compliance Officers are encouraged to undergo enhanced training on data security, not only to maintain the company’s compliance management system, but also to provide checks and balances with the IT department. No one individual should have unrestricted access to “the keys to the kingdom”. Collections employees should be hired only after passing a background check, and employees should be regularly trained on the importance of the data they are entrusted with, as well as best practices to maintain data security.


Mark Naiman is President/CEO of Absolute Resolutions Corp., and currently serves as President on the Board of Directors for Receivables Management Association.

Jan Stieger, CAE, serves as Executive Director of Receivables Management Association, the trade association representing nearly 550 member organizations in the accounts receivable industry.

Debt Buyers are Not Debt Collectors for FDCPA

On June 12, 2017, the United States Supreme Court issued an opinion resolving a circuit court split as to whether a company that collects debts that it purchased for its own account would fall within the statutory definition of “debt collector” under the Fair Debt Collection Practices Act (the “Act”). Henson v. Santander Consumer USA Inc., 582 U.S. ___ (2017).

According to the complaint, CitiFinancial Auto loaned money to petitioners seeking to buy cars; that petitioners defaulted on those loans; that respondent Santander Consumer USA Inc. (Santander) then purchased the defaulted loans from CitiFinancial; and Santander sought to collect in ways petitioners believe troublesome under the Act. The district court and the Fourth Circuit Court of Appeals held that Santander did not qualify as a debt collector under the Act.

The question before the Court was whether the purchaser of a debt, who later attempts to collect the debt for itself falls within the definition of “debt collector” under the Act. The Act defines the term “debt collector” to “embrace anyone who ‘regularly collects or attempts to collect … debts owed or due … another.’” (citing 15 U.S.C. §1692a(6)). Both parties agreed that, generally, thirdparty collection agents qualify as “debt collectors,” while, those who originate the loans themselves do not. Therefore, the issue for the Court was “how to classify individuals and entities who regularly purchase debts originated by someone else and then seek to collect those debts for their own account.” Petitioners argued that the word “owed” under the statutory definition of “debt collector” is a past participle of the verb “to owe,” and this suggests that the statute’s definition of debt collector captures anyone who regularly seeks to collect debts previously “owed … another.” The Court rejected this argument, walking through the term’s ordinary meaning, the statutory phrase which the word “owed” appears, and the larger statutory landscape of the term “owed” (referring to a present (not past) debt relationship). The Court further rejected petitioner’s argument regarding the statutory language to “obtain” a debt within the Act, as the term “obtain” can refer to taking possession of a piece of property without also taking ownership. Similarly, petitioner’s assertion that certain of the Act’s exclusions implied Santander was a debt collector was also rejected by the Court because Santander is not barred from qualifying as a creditor under the Act’s plain terms. Petitioner’s final argument was premised on policy. Specifically, petitioner argued that Congress never had the chance at the time of the Act’s passage to consider what should be done about those in the business of purchasing defaulted debt and, if Congress had known this new industry would blossom, Congress would have judged defaulted debt purchasers more like independent debt collectors. Based upon the speculation required in such an argument and because the Court’s job was “to apply, not amend, the work of the People’s representatives,” the Court rejected this argument as well.

The Court unanimously held that such a company would not fall within the statutory definition of “debt collector” under the Act. The Santander opinion holds that a company may collect debts that it purchased for its own account without triggering the statutory definition of a “debt collector” under the FDCPA.


Brian Mitchell is a partner and Clark Donat is an associate in Bracewell LLP’s litigation practice in Dallas. He can be reached at brian.mitchell@ bracewell.com. Clark Donat can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..