Archive for 'debt collectors'

Speech Analytics: A Way to Rein in Rogue Collectors?

Thursday, February 21st, 2013 at 5:00 am  
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Debt collection industry publication InsideARM published an interesting promotional article/opinion piece on the role that speech analytics can have in monitoring debt collector compliance and performance. Although written by the product marketing manager of the product being discussed, the rationale behind implementing the technology has merit. Essentially, speech analytics tracks all contacts between a debt collector and a consumer and can analyze those contacts for myriad factors, such as how a call to a wrong number is handled, whether or not voicemails comply with the Fair Debt Collection Practices Act, and whether or not a debt collector properly identifies himself or herself. Debt collection agencies can also use the software to increase productivity among its collectors. Although it’s difficult to say how effective the specific product is, theoretically it strikes us as a step in the right direction. After all, if 100% of calls by a company’s debt collectors are monitored and the agency has strong compliance standards, it follows that there would be very few violations of the FDCPA.

Your Rights Regarding Making Payments by Phone

Tuesday, February 19th, 2013 at 5:00 am  
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The debt collection industry publication, InsideARM, recently published some insights about the rules of the road when it comes to debt collectors accepting check payments over the phone. It’s worth reading the entire article, which can be found here, but these are the primary takeaways:

1. When you verbally tell a debt collector that he can electronically transfer funds from your checking account, it’s a one-time authorization.

2. You have to provide a written, signed authorization for the debt collector to do a recurring transfer (as in a monthly payment). A debt collector can call you each month for a verbal authorization.

3. With your authorization, a debt collector can create a paper check with your account information, and deposit that check in the bank. You can verbally give your permission for recurring withdrawals via a paper check facsimile.

4. A debt collector can make recurring credit card charges with your verbal authorization.

The Inside ARM article contains valuable information about your rights and the responsibilities of debt collection agencies. However, because some debt collection agencies get their wires crossed or simply run afoul of the law, we recommend that you never give a debt collection agency your bank account or credit card information. This includes sending a debt collection agency a personal check, since your account information is on the paper check. Instead, it’s best to mail a bank check or money order.

Student Loan Debt Collectors Haul in Bonuses

Thursday, January 24th, 2013 at 1:56 pm  
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As we’ve often discussed, student loan debt collection is big business. Debt collection agencies covet Department of Education contracts, and the government has contracts with 17 large debt collection agencies and five small debt collection agencies. But there’s something wrong with the system. The Department of Education gives each student loan debt collection agency a score, and uses those scores to award quarterly and annual bonuses to the debt collection agencies. The scoring is weighted, giving debt collection agencies that collect the most money the biggest boost (70 out of 100 points). Only ten points are awarded for high performance in administrative resolutions. The remaining 20 points are awarded for total accounts serviced.

This point system and related bonuses don’t provide incentives for debt collectors to inform consumers about the federal programs that enable borrowers to obtain deferments and forbearance (see http://www.direct.ed.gov/postpone.html), or to participate in loan consolidation or in the “Pay as You Earn” program (see http://loanconsolidation.ed.gov/).

Debt collection industry publication InsideARM published the performance scores and amounts collected by student loan debt collection agencies for the quarter ending September 30, 2012. The amounts collected are astounding:

Pioneer Credit Recovery – $48.2 million
ConServe – $44 million
Van Ru Credit Corporation – $42.3 million
FMS Investment Corp – $41.6 million
NCO Group – $40.4 million
GC Services – $40.2 million
ERS – $37.7 million
Diversified Collection Services (Performant) – $37.1 million
Premiere Credit of North America – $35.4 million
Allied Interstate – $31.5 million
Progressive Financial Services – $30.7 million
EOS CCA (Collecto) – $30.5 million
Account Control Technology – $30.4 million
Windham Professionals – $29 million
Financial Asset Management Systems – $26.4 million
CBE Group – $24.7 million
West Asset Management – $20.3 million
Coast Professional – $21.9 million
Collection Technology – $17.8 million
National Recoveries – $13.5 million
Immediate Credit Recovery – $13.5 million
Delta Management Associates – $11.8 million

Pay as You Earn Student Loan Repayment Program Starts Today

Friday, December 21st, 2012 at 2:39 pm  
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We’ve often discussed the arrangement the U.S. Department of Education has with debt collection agencies to collect on federal student loans. A new repayment program starts today, December 21, that will enable former students to bypass debt collection agencies and avoid undue financial hardship.

According to a report in the Associated Press, the “Pay as You Earn” program calls for monthly payments equaling ten percent of discretionary income, and forgives loans after 20 years. While an estimated 1.6 million consumers are eligible to take advantage of the program, there are a few caveats. First, the loans must be federal loans (as opposed to private bank loans). Second, the loans must have originated after October 1, 2007 and borrowers must have received a disbursement after October 2011. For those borrowers who work in public service jobs, loan forgiveness occurs after ten years.

Federal Legislation May Put Student Loan Debt Collectors Out of Business

Wednesday, December 5th, 2012 at 5:00 am  
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When a debt collection agency is awarded a contract from the U.S. Department of Education to collect on student loan debt, it’s like hitting a gold mine. Student loan debt collection is literally a $1 billion a year business. If U.S. Rep. Tom Petri (R-WI) gets his way, though, that slice of the pie may disappear.

According to a report in Bloomberg, Petri is planning to introduce legislation that would bypass debt collectors and instead use automatic payroll deductions to recoup defaulted student loans. The amount deducted would be based upon the borrower’s income, and would avoid debt collection fees thank can add 25 percent to a person’s loan balance. The program would be administered by the Education Department and the IRS.

The legislation will seek to address the $1 trillion in outstanding student loans. Bypassing debt collection agencies is increasingly feasible, since the federal government now directly lends money to students. In addition, the bill would put a cap on the amount of interest that could be charged over the lifetime of a loan. Since the current session of Congress is coming to a close, the bill probably won’t be considered until next year.

Former Unicredit America President Ordered to Pay $522,000

Wednesday, November 14th, 2012 at 6:40 pm  
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Back in November 2010, we reported on the Pennsylvania Attorney General’s lawsuit against Unicredit America, which made a company office resemble a courtroom and then brought in unsuspecting consumers for bogus hearings. According to a report in the Erie Times-News, a Pennsylvania judged ordered Michael Covatto, the former president of Unicredit (which went out of business) to pay $522,780. The judge calculated the amount in accordance with the number of complaints received by the Pennsylvania Bureau of Consumer Protection, as well as having Covatto pay half of the costs of the Attorney General’s investigation. Ironically (since debt collectors often file lawsuits against consumers and obtain default judgments), Covatto didn’t defend himself, and the AG obtained a default judgment against him.

Voicemail Messages and Debt Collectors

Tuesday, July 3rd, 2012 at 12:46 pm  
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By Stephanie Cooper Herdman

One of the latest cases to hit the 9th Circuit area in the Fair Debt and Collection Practice arena is the case of Koby v. ARS National Services, Inc., 09-CV—780 JAH in United States District Court of California. The Koby case brought up interesting questions including (1) Can a debt collector leave a voicemail message?; (2) What information must that message contain? (3) What are the consequences for third party interception of the message? and (4) Must a mini-Miranda statement be used if the message is the initial contact with the consumer?

The Court reached an answer on three of the four questions on a Motion for Judgment on the Pleadings. The parties moved for permission to appeal to the Ninth Circuit, which the District Court granted but the Ninth Circuit denied. The remaining causes of action are currently set for a settlement conference in August 2012.

Most importantly, the Court found that the voicemail was a communication. By finding that it was a communication it triggered all subsections of 1692 that involve initial communications and Miranda warnings and letters to be sent including but not limited to 1692(e)(11), 1692(e)(14), 1692(d)(6) and 1692(g).

The Court reviewed the following voicemails:

(a) “This is Robin calling for Michael Koby, if you could please return my call at 800-440-6613. My direct extension is 3171. Please refer to your reference number as 15983225.”

(b) “Hey, John, uh, it’s Mike Mazzouli with ARS National. Umm, there appears to be some papers here in my office, uh, John at this point your [sic] involved. Call me soon as you can. My direct number and my direct extension is 800-440-6613. I’m at extension 3697. Thank you.

(c) “This is Brian Cooper. This call is for Mike Simmons, I need you to return this call as soon as you get this message 877-333-3880 extension 2571.”

The Court ruled that both A and B were communications under the Act and violations of the FDCPA. The keys to why these two were ruled communications were mentions by the caller of reference numbers and papers in the office, therefore, the mentioning of the debt itself. The Court ruled that C was not a communication since it did not indicate a debt but that it may be misleading and fail to identify the debt collector, which would still lead to a FDCPA violation if proven.

In short, it appears that a debt collector must identify him or herself and give a mini-Miranda and process the five-day letter whether it is a live call or voicemail. There is no indication by the Court what would happen if there were third party interception of the voicemail calls. The Court does call to attention the two seminal cases on interception of Foti 424F.Supp.2d at 659 and Berg v Merchants Assn. Collection Div., 586 F.Supp.2d 1336, 1344 (S.D. Florida) 2008. These two cases state that nothing in the Constitution guarantees a debt collector the right to leave a message on a consumer’s voicemail.

Stephanie Cooper Herdman is of counsel to Lemberg & Associates in Nevada.

Sen. Al Franken to Hold Hearing on Patient Privacy

Tuesday, May 29th, 2012 at 6:23 pm  
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There has been tremendous fallout from accusations that Accretive Health positioned debt collectors in hospitals, perhaps dissuading patients from seeking emergency care until they paid past due bills. Senator Al Franken (D-MN) is holding a hearing on Wednesday, May 30, entitled, “Ensuring Patients’ Access to Care and Privacy: Are Federal Laws Protection Patients?”

The hearing, which will be held at 10:00 a.m. in Room 15 of the Minnesota Capitol in St. Paul, is free and open to the public. It will consist of four panels, and presenters include the Minnesota Attorney General, a representative of Accretive Health, two consumers, and patient advocates. Additional details can be found at http://www.franken.senate.gov/?p=hot_topic&id=2089.

Frank Introduces Fair Debt Collection Practices Clarification Act of 2012

Friday, May 25th, 2012 at 5:30 am  
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U.S. Congressman Barney Frank (D-MA) recently introduced H.R. 5794, the “Fair Debt Collection Practices Clarification Act of 2012.” The bill is almost identical to H.R. 4101, which Frank introduced at the end of February. The bill would exempt debt collectors from liability when leaving voicemail messages for consumers, providing the debt collector follows rules specified by the Consumer Financial Protection Bureau. It specifies that the CFPB would have six months to finalize regulations, which would be required to include the content or text of a permissible message and language asserting the right of the consumer to cease communication with a debt collector.

Seemingly, the only difference between H.R. 4101 and H.R. 5794 is that the latter includes a sentence that appears to give the CFPB the sole authority in exempting debt collectors from liability arising out of leaving voicemail messages. Rep. Frank hasn’t spoken publicly about the bill, but given that he was one of the architects of the Wall Street Reform Act (also known as the Dodd-Frank Act) that created the CFPB, and given that he is giving up his House seat in this year’s election, one could conclude that the bill is a means of consolidating or broadening the CFPB’s authority.

Debt Collectors Plead Guilty to $10 Million Fraud

Thursday, May 17th, 2012 at 5:00 am  
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According to a press release issued by the U.S. Attorney for the District of Connecticut, two executives of the Oxford Collection Agency have pleaded guilty to a $10 million fraud scheme. Chairman Richard Pinto and his son, CEO Peter Pinto, allegedly diverted funds from their collection efforts instead of remitting the money to their clients, which included Washington Mutual Bank, Dell Financial Services, and Cogent Communications. The pair also allegedly submitted falsified financial statements to Webster Bank, from which they’d secured a $6 million line of credit. In addition, they sought and received investments and allegedly funneled some of those investments into their personal accounts.

A number of agencies are involved in the investigation, including the FBI, the IRS, and the Special Inspector General for the Troubled Asset Relief Program.

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