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10 Things You Need to Know About the CARES Act and SBA Loans

10 Things You Need to Know About the CARES Act and SBA Loans

Last week on the OS blog, we shared highlights from our first COVID-19 webinar, which focused on state collection restrictions and managing FDCPA compliance during this national crisis. (You can download the free webinar recording here.)

This week’s webinar, “SBA: What You Need to Know Now,” centered on the Coronavirus Aid Relief and Economic Security (CARES) Act, its impact on Small Business Administration (SBA) lending, and what you can do to get the vital assistance you need.

Joining us this week was Taft Law Partner Kiamesha Colom, whose specialties include government lending and commercial finance. Kiamesha shared detailed information related to the three “buckets” of Title I of the CARES Act:

To date, 280,000 loans have already been approved under the CARES Act. If you plan to apply in the near future, or you’re wondering how the CARES Act impacts your existing SBA loans, the following list is a good starting point. I also encourage you to download a free recording of this week’s webinar for additional details and tips.

And, as always, be sure to consult your attorney for legal advice.

Here are 10 essential insights and tips that explain what the CARES Act offers and what it means for you.

 

1. If you currently have a 7(a) or express loan, you can defer payments up to six months.

The SBA is currently in contact with lenders and will automatically cover six months’ worth of payments (both principal interest and associated costs). If you choose to keep making payments on your loan, the SBA payments will be applied to the principal.

 

2. The cap for express loans has increased from $350,000 to $1 million.

If you need a bridge loan and a relatively quick disbursement of funds, and you plan to use the proceeds as you would for a 7(a) loan, you can now apply for an express loan of up to $1 million.

 

3. Before applying for a disaster loan, do your homework.

A disaster loan (currently a 30-year term at 3.75% interest) can be used for essentially any business need that normal business revenues would have covered. You should NOT use this type of loan for payroll, however. If you do, you’ll have to refinance your disaster loan as a PPP loan.

Take a look at the disaster business loan application in advance so you can gather supporting materials. To complete the application, you’ll need financial and tax information, schedules, liabilities, personal information, and more (you can find the filing requirements on page 3). Because all 50 states and six U.S. territories have declared emergencies due to the COVID-19 pandemic, you can simply list “COVID-19” on the application.

 

4. Eligibility for disaster loans has been expanded.

Under the CARES Act, businesses with 500 employees or fewer—including sole proprietors, independent contractors, all private nonprofits, and tribal businesses—now qualify for disaster loans.

NOTE: If you’ve ever defaulted on an SBA loan or gone bankrupt on one, you won’t be eligible. If someone with 20%+ ownership of your company has had a felony conviction within the past 7 years, you may not be eligible.

 

5. You can get up to $200,000 in disaster loan funds without the need for collateral.

The highest disaster loan amount you can get without needing a personal guarantee (collateral) has increased under the CARES Act from $25,000 to $200,000. The size of your loan will be based on the SBA’s determination of your ability to repay, and you can defer loan payments up to 12 months.

 

6. The first $10,000 of an economic disaster investment loan is yours to keep.

On the disaster loan application, there’s a box you’ll need to check to be considered for an economic disaster investment loan. If you’re approved for the latter, you’ll receive a $10,000 grant you won’t need to repay—even if you’re denied a disaster loan. If the disaster loan is approved, that $10,000 is rolled into the disaster loan.

NOTE: The SBA should issue a verdict within 21-30 days, but they might email you sooner for additional information. Make sure you respond within 5 days, or your application will be put on hold. Be sure to whitelist any email addresses that end in sba.gov.

 

7. For the Paycheck Protection Program, you must act quickly.

The PPP is a first-come, first-serve program with $100 billion in funds already allocated and $249 billion unallocated. If you need to apply, time is of the essence. Secretary Mnuchin asked Congress to approve another $200 billion for this program, but on Thursday, April 9, the Senate failed to pass additional funding for small businesses.

Currently, PPP loans (2-year term at 1% interest) have no prepayment penalty. The maximum amount you can borrow is either $10 million or 2.5 times your average monthly payroll costs for the preceding 12 months—whichever amount is lower. To calculate your loan amount, your bank might just look at your tax returns for the prior year.

NOTE: Many banks won’t consider a PPP loan without an existing business relationship or have additional eligibility requirements for borrowers (e.g., fewer than 50 employees). Your bank might also be unwilling to pay for an agent to help you complete your application. Be sure to ask these questions upfront.

 

8. If you have 500+ employees, you may still be eligible for a PPP loan.

If you don’t fit into the PPP size standard in terms of headcount, check your NIACC code (Title 13, section 121). You may meet the revenue size standard under the code of federal regulations for your industry.

NOTE: Under the CARES Act, affiliation rules still apply (with certain exemptions). If the applicant, company, owners, or managers have management control over other businesses, those other businesses are considered affiliates. If the combined total for all affiliates exceeds 500, a PPP loan may not be available.

 

9. Anticipate delays.

The SBA is working around the clock and doing its best to process loan applications and disburse funds quickly, but these are trying times. The agency is very backlogged. In a normal year, about $25 billion in loans run through the SBA. In contrast, the U.S. Dept of Treasury has asked the SBA to process 10 times that amount within 30 days.

 

10. New guidance is being issued almost daily.

As Kiamesha mentioned during the webinar, SBA officials say they’re “building the plane while also flying in it.” Guidelines surrounding the CARES Act are constantly evolving. Make sure you’re staying on top of new guidelines as they’re issued. You can find the latest updates online at U.S. Department of the Treasury: Assistance for Small Businesses.

 

Tune Into Our SBA Webinar—and Stay Tuned for More

Above is just some of what we covered in this week’s webinar, “SBA: What You Need to Know Now.” For more information about the CARES Act, additional caveats, tips for completing a borrower application, and much more, download the free webinar recording here.

For our third weekly COVID-19 webinar, “Voices from the Trenches: How Leaders Are Leading During the Crisis,” we’ll be hosting three ARM industry leaders who will discuss how they’ve retooled their operations to meet present-day challenges. We’ll be taking lots of questions, so we hope you’ll join in and be part of the discussion. Register today to save your seat or get the replay sent straight to your inbox.

 

Info and Insights You Won't Want to Miss

On the OS Blog, we aim to give you the right mix of high-level views, tactics, and tools you can use to optimize your collection operations and results. Subscribe today for a steady stream of practical, empowering content delivered to your inbox weekly.

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2020 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

Navigating the Crisis: What ARM Agencies Must Do to Stay on Course and Compliant

Navigating the Crisis: What ARM Agencies Must Do to Stay on Course and Compliant

State responses to the COVID-19 pandemic are changing fast. For all of us, it’s a very uncertain time. Now that unemployment claims have topped 6.65 million, governments are trying to lessen the financial pain for consumers already struggling to pay their debts. In many cases, the impact on third-party collection agencies has been severe.

What should you be doing to keep calm, carry on, and manage risk in these unprecedented times?

Earlier this week, I sat down with two of my Ontario Systems colleagues—Compliance Consultant Director Sara Woggerman and Senior Director of Product Engineering and Product Management Dan Womack— for our first weekly COVID-19 crisis management webinar, “Understanding ‘Inconvenient Time’ and State Restrictions During This Most Inconvenient Time.” We discussed what ARM businesses need to consider and do to successfully navigate the new legal landscape in the age of COVID-19. (You can access the full webinar recording here.)

 

State Stay-at-Home Orders: How to Operate Responsibly

State stay-at-home orders have caused enormous disruption for many ARM agencies. Our goal is to help you weather the storm by keeping you informed so you can adapt to changing circumstances in compliance with state and federal mandates.

Before we discuss how you might approach collections in the COVID-19 era, let’s talk about the operational adjustments you’ll need to make in the days and weeks ahead.

Determine whether you’re an essential business

Review the definition of financial services or financial affiliates under your state’s definition. Some states are changing their definitions after issuing a stay-at-home order or within the order itself. In the case of commercial debt, you’ll want to review the definitions of the debt and debt collector under state laws.

Identify any remote work requirements or barriers

Certain states prohibit remote collections entirely. Others allow it but impose additional requirements. Some states have temporarily waived branch licensing requirements. If you’re looking for real-time updates, Cornerstone Support’s Coronavirus guidance (for both employment matters and collection activity) is an outstanding resource.

Pro tips
  • Catalog your remote workers’ locations. Some states require this information.
  • Call your insurance company to find out if they need the information as well.
  • Be ready to defend against future negligence claims by having collectors attest, in writing, to the fact that they are working in a private, closed-off area of their home; are adhering to your policies and procedures; and are following your workstation expectation with regard to clean desk, password protections, etc.

 

Guidelines and Restrictions Governing Collection Activity

State guidelines and mandates related to suspension of debt vary widely, and they’re changing often. For the duration of the COVID-19 crisis, someone in your organization should be dedicated to staying on top of these changes. In addition to Cornerstone Support, insideARM, ACA International, and the Receivables Management Association International (RMAI) are great sources of COVID-19 guidance.

Consumer attorneys read the civil liability section of the Fair Debt Collection Practices Act (FDCPA) frequently, if not daily. Right now, most ARM leaders aren’t thinking long term about exposures they might be creating. But there are some things you need to do today to close gaps and prevent exposure later.

Credit reporting

You’ll need to determine how state-ordered suspension of collection activity or deferment of payments may affect consumers whose data you’re reporting. Then you’ll need to decide whether you’ll furnish any new data or accounts.

Earlier this week, the CFPB issued guidance on the Fair Credit Reporting Act (FCRA). As a result of the pandemic, the CFPB will consider the consumer reporting agency or furnisher’s individual circumstances when dispute responses are delayed beyond the 30-day guideline. As long as you’re making a good-faith effort to investigate disputes as quickly as possible, the CFPB will not cite an examination or bring an enforcement action.

Pro tip
See the Consumer Data Industry Association (CIDA) FAQ document 58 for codes collectors should use for accounts affected by a natural or declared disaster.

 

Payment processing

You’ll need to establish a policy that outlines how deferred payments will be handled. The legal risks posed by preauthorized EFTs, payment plans, checks on record, etc., will differ from payments the consumer initiated themselves via portal, phone, or IVR.

In states that have prohibited collection activity, your safest bet is to suspend any payment plans involving charging credit cards or debiting accounts until you have contacted the consumer. Understand, some agencies have taken the position that unless the state order or law specifically prohibits the collector from processing previously authorized payment arrangements, they are willing to assume the risk of noncompliance.

Interacting with consumers

The FDCPA’s inconvenient time provision is alive and well. As always, you’re prohibited from contacting consumers at a time or place affected by a natural disaster or declared state of emergency.

Many consumers have been deeply affected by COVID-19, whether they’re sick, caring for someone, in the hospital, or unemployed. I recommend asking consumers outright whether and how the crisis is affecting them so you can successfully defend an inadvertent violation of the inconvenient time provision.

It’s important not to let the use of a dialer or any sort of prerecorded message block your ability to detect consumers who are particularly hard hit by this crisis.

Pro tips
  • Stop workflows for any communications you and your legal counsel deem high risk.
  • Provide agents with scripts that account for consumers’ stress and unease. Empathy is crucial during this time.
  • If you are the middleman between consumers and a creditor and law firm, stay in close contact with the law firm so you’ll know how they’re responding to the crisis (e.g., suspending garnishment).

 

Bottom Line: Consult Your Attorney, and Proceed with Care

Language in some states’ collection restrictions leaves room for interpretation. Instead of mandating a suspension of activity, they “urge” or “encourage” certain steps. Discuss these guidelines with your attorney, and consider his or her input and your risk tolerance before making any decisions.

It’s also important to document everything you’re doing in response to this crisis including technology changes, script changes, and relocation of personnel. Keep these details well organized in a central location. Any change you make is a deviation from standard policy, so you must be prepared to show that you had reasonable procedures in place to comply with COVID-19 state mandates and existing federal law.

We are committed to helping you protect your business during this uncertain time. For more on the latest COVID-19 requirements and guidelines as well additional ARM industry information and resources, be sure to download your free recording of this week’s webinar, “Understanding ‘Inconvenient Time’ and State Restrictions During This Most Inconvenient Time.”

 

Info and Insights You Won't Want to Miss

Here on the OS Blog, we aim to give you just the right mix of high-level views, tactics, and tools you can use to optimize your collection operations and results. Subscribe today for a steady stream of practical, empowering content delivered to your inbox weekly.

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2020 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

ARM Industry Leaders, Why Aren’t You Texting?

ARM Industry Leaders, Why Aren’t You Texting?

This is the first post in a new blog series highlighting the importance of text messaging for debt collections and what ARM businesses need to stay compliant.   Text messaging for debt collections might seem like a bridge too far. But it’s entirely within reach today....

Compliant Texting for Collections: How to Draft Your Terms and Conditions

Compliant Texting for Collections: How to Draft Your Terms and Conditions

This is the third post in a new blog series highlighting the importance of text messaging for debt collections and what ARM businesses need to stay compliant.

 


In my previous post about compliant texting for ARM agencies, I outlined seven things you need to know to properly obtain consent for your text messaging program. Clearly, collectors have more to consider and contend with than do other types of businesses that engage consumers through digital channels.

 

The same is true for terms and conditions, which consumers will need to acknowledge and agree to before communicating with you by text.

 

Like any other electronic service agreement, your terms and conditions should detail precisely how consumers can:

 

  • Subscribe to your text messaging service;
  • Access keywords (i.e., words or phrases consumers can text to short codes to opt in/opt out of your service and use self-service tools);
  • Navigate your service;
  • Avoid text and data rate charges;
  • Revoke their consent;
  • Unsubscribe; and
  • Access your privacy policy.

 

But that’s not all. Since you’ll be texting for debt collection purposes, you’ll need to address a variety of issues related to the Fair Debt Collection Practices Act (FDCPA), the Telephone Consumer Protection Act (TCPA), state consumer protection laws, and other laws and regulations applicable to agency-to-consumer communications.

 

As with obtaining and managing consent, drafting your terms and conditions is not something you’ll want to undertake yourself. You’ll need to enlist a defense or compliance lawyer who understands the nuances of the FDCPA and TCPA.

 

FDCPA and TCPA Requirements

Under the FDCPA, text messages from a debt collector are communications and must include the required disclosures. Initial communications with a consumer must include the full mini-Miranda.

 

This is a communication from a debt collector. This is an attempt to collect a debt, and any information obtained will be used for that purpose.

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Communications that follow the initial communication with a consumer are called “subsequent communications.” The FDCPA requires all subsequent communications to include a statement indicating the communication is from a debt collector.

 

Most states also impose disclosure requirements on communications. A majority of states mirror the FDCPA and only require the full mini Miranda in the initial communication. However, a handful of states require that the full mini-Miranda accompany every consumer communication.

 

I discussed this in my previous post, but it bears repeating: the TCPA does NOT require three separate consents for mobile calls via auto dialer, sending prerecorded messages to mobile phones, and sending text messages. However, given that texting is so uncommon in the ARM industry and unexpected text messages won’t sit well with most consumers, you’ll probably want to get express permission to text.

 

What You’ll Need to Include for Each Type of Text Messaging Service

Whatever type of text messaging program you decide to offer, you’ll want to make clear in your terms and conditions exactly what consumers are consenting to and the types of messages they can expect.

 

Self-Serve Texts
Legally speaking, a self-serve text messaging service—one that allows consumers to access information about their accounts by texting a keyword to a short code—likely won’t be interpreted as an agency-initiated call. Even if it is deemed a call, or a contact as defined under state law, it’s a response sent solely at the consumer’s request (and therefore has the consumer’s consent).

 

For these reasons, I believe a self-service text messaging service is the best way for ARM agencies to begin with texting. If you decide to go this route, you can further reduce your legal risk by explaining in your terms and conditions that the consumer’s consent to use keywords extends to your agency-initiated text messages as well.

 

Single-Message Texts
A single-message text messaging service involves outbound texts initiated by the agency. The consumer consents to receiving these messages at the outset but does not request messages via keyword text to a short code.

 

An agency-initiated text message is considered the functional and legal equivalent of a phone call and is therefore subject to the same federal and state calling time and frequency restrictions. Your terms and conditions should include the requisite consent to cover any and all agency-initiated texts (e.g., “your payment is late”; “your check or payment was returned”; “your next payment is due”).

 

Make Clear That All Forms of Texting Are Voluntary

In your terms and conditions, be sure to explain that the consumer’s decision to engage in any form of text messaging is entirely voluntary. For example:

 

The purpose of this text messaging service is to allow you to obtain information about your account by texting keywords to [Company Name]. The keywords and their definitions appear below. It is also to allow [Company Name] to send limited types of text messages to you about your account(s) as explained below under the section titled, “[Company Name] Initiated Text Messaging Service.” Participation in this text message service is voluntarily and you may revoke your consent to participate at any time.

 

Termination Process for Text Messaging

CTIA (formerly the Cellular Telephone Industry Association) is very clear in its requirements for terminating a text messaging service. The moment a consumer withdraws consent by texting STOP, STOP ALL, END, QUIT, CANCEL, UNSUBSCRIBE, or a similar word or phrase, the business must discontinue texting immediately.

 

In addition, CTIA requires businesses to send a one-time limited-purpose text confirming the consumer’s termination of ALL text communications from that text forward. But here’s the danger for third-party debt collectors: some courts have held that the final confirmation text violates the FDCPA because it comes after the consumer’s termination text.

 

To bypass this issue, you can explain in your terms and conditions that by enrolling in your text messaging service, the consumer consents to receiving a one-time text message confirming their removal from or termination of the text messaging service.

 

Start Enjoying the Benefits of Texting in 2020

Many legal issues surrounding text messaging for debt collection purposes have yet to be resolved. But don’t let that hold you back. If your terms and conditions are well developed and you’re prepared to properly obtain and manage consent, you’re a few short steps away from engaging consumers by text and improving your recovery rates.

 

Before you dive into text messaging, be sure to read our complementary eBook “Ready to Text 2.0: The Collection Professional’s Guide to Compliant Communication in 2020.” This brief guide covers all the basics: what text messaging involves, who regulates it, and how the legal/regulatory landscape is changing. Download your copy today.

 

If you’re interested in a sample terms and conditions document, send me a message.  I’ll send one your way!

 
 

 

For more insights and tips you can use to accelerate your success in the ARM market, subscribe to the OS blog. We’ll deliver high-value content straight to your inbox.

Ready to Text in 2020?

Text messaging for collections is complicated. It’s also mission critical. Our brief ARM industry texting guide, newly updated for 2020, has the insights and advice you need to get your digital communications program up and running.

Don’t get left behind. Download your copy today!

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2020 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

Are You Ready to Text?

Take charge of compliance and start texting with confidence. This free eBook (newly updated for 2020) explains how.

Compliant Texting for Collections: 7 Things You Need to Know About Consent

Compliant Texting for Collections: 7 Things You Need to Know About Consent

This is the second post in a new blog series highlighting the importance of text messaging for debt collections and what ARM businesses need to stay compliant.

 

For third-party debt collectors, texting can be a scary proposition. Overlapping requirements and restrictions, and the confusion surrounding them—not to mention the potential backlash from consumers—are enough for many ARM leaders to throw up their hands and say, “No thanks.”

Some agencies, however, have braved this new frontier and succeeded. This begs a simple question: are industry fears of texting overblown?

Previously, we outlined three reasons why adopting text messaging is essential for ARM businesses. Not only does digital communication improve collection results via personalized engagement and convenient self-service tools, but it’s also proving to be the only way to curtail the sharply rising costs associated with live agent calls, paper letters, and first-class postage.

At the heart of many ARM agencies’ compliance fears is uncertainty about how to obtain and manage consent. What constitutes proper consent, and what are the pitfalls to avoid? Here are seven things you need to know, and should discuss with legal counsel, before moving ahead with a text messaging program.

 

 

1. A Text Message Is the Functional and Legal Equivalent of a Phone Call

Text messages trigger the same legal and regulatory requirements as phone calls placed to mobile devices using an automated telephone dialing system (ATDS), prerecorded message, or artificial voice. The Telephone Consumer Protection Act (TCPA) applies to text messaging, as do the Fair Debt Collection Practices Act (FDCPA) and the requirements put forth by CTIA (formerly the Cellular Telephone Industry Association).

But not all text messages trigger state calling times and frequency restrictions.

In the case of self-service text message programs, consumers can request information about their accounts and make payments 24/7. These sorts of self-service actions are initiated by the consumer with the expectation and understanding on the part of the consumer an automated response will be provided to their self-service text request.

For example, if a consumer requests the balance on their accounts at 3:00 a.m., the consumer will immediately receive a text from the agency indicating the total balance due on all active accounts. The automated response sent by the agency’s text messaging service informing the consumer of the balance due should not be deemed a communication that must satisfy state calling times and frequency restrictions.

On the other hand, if the agency initiates a text to the consumer, any such text would trigger state calling times and frequency restrictions. For example, if the agency notifies the consumer their last payment failed, such a text would not be deemed a self-service request. It would be deemed an agency- initiated text similar to an agency initiated outbound call.

The Telephone Robocall Abuse Criminal Enforcement and Deterrence (TRACED) Act complicates matters for collectors, as it fails to address ARM industry concerns about the TCPA and punts the ball for rulemaking to the FCC.

As we await the FCC’s proposed rules, which should be published in the coming months, the U.S. Supreme Court will revisit TCPA’s federal debt collection carve-out. This decision could have big implications for TCPA compliance when it comes to collecting debts owed to the Federal government and any other type of exemption from the TCPA based on the content of the message.

 

2. Inviting and Convincing Consumers to Text Can Be Challenging

Unless an ARM agency has received consent to text from the creditor (sometimes referred to as pass-through consent), the debt collector will want to create opportunities for the consumer to subscribe to its text messaging program. These opportunities could include the live-agent talk off, the inbound IVR script, a manual text invitation using a Zortman-type voicemail message, verbiage within the text of the collection notice, and the agency’s consumer portal.

If an agency has obtained pass-through consent to text from the creditor, the agency may initiate a text message inviting the consumer to subscribe to its text message service. The caveat to relying on pass-through consent is that this does not solve the reassigned number conundrum (see below).

Apart from compliance concerns, ARM agencies must somehow convince consumers to subscribe to their text messaging service. To the average consumer, the benefits of texting with a debt collector might not be immediately clear. I recommend starting off with a self-service text messaging program that allows consumers to choose the type and frequency of messages received and manage their accounts with ease.

 

3.  The Reassigned Number Conundrum Is Real, but the Risk Is Manageable

When a consumer relinquishes their mobile number to a carrier, the carrier will reassign the number to another consumer. The law remains unsettled as to whether a text or ATDS call placed to the new consumer using a mobile number for which the calling party once had consent is a violation of the TCPA after the number is reassigned.

At least one court recognizes the conundrum, holding that the calling party is not liable for the call placed in error. In Sandoe v. Boston Sci. Corp. (Civil Action No. 18-11826-NMG, 2020 U.S. Dist. LEXIS 2800 [D. Mass. Jan. 8, 2020]), the Court granted summary judgment in favor of the defendant, ruling a calling party may reasonably rely on consent associated with a mobile number

“This Court declines to contravene the FCC’s regulation by interpreting the TCPA as requiring callers to do what the competing expert reports in this case demonstrate is either impossible, or at least highly unreliable.”

To avoid any issue over the validity of pass-through consent, debt collectors should conduct a scrub to ensure the consumer who originally granted the consent is still associated with the mobile number.

 

4. Text Consent Need Not Be Specific to Meet the Requirements of the TCPA

Under the TCPA, you do not need consumers’ specific permission to text as long as you properly obtain consent (whether verbally or in writing) to meet the minimum requirements of the TCPA. From a legal standpoint, consent to autodial, leave a prerecorded message, or use an artificial voice in an outbound communication to a mobile phone includes consent to text.

Nevertheless, most creditors and third-party collection agencies err on the side of caution by seeking express, specific consent to text—not just to avoid legal complications, but to be sensitive to consumers’ wishes. This is a smart move, especially now that service quality has become a leading differentiator in the ARM market.

 

5. CTIA—the Mobile Industry Standard for Short Code Text Messaging—Requires More Than the TCPA

CTIA (formerly the Cellular Telephone Industry Association) is the self-regulatory body governing the use of short code text messages. The CTIA’s consent-to-text requirements are more stringent than the TCPA’s.

Unlike the TCPA, which recognizes a consumer’s verbal permission to text, the CTIA requires consumers to affirmatively subscribe to or join a text message program. Consumers can do so by replying to a text message inviting them to participate or by initiating a text message to a short code using a keyword such as YES, ENROLL, or SUBSCRIBE.

Although the CTIA’s guidelines for text messaging consumers do not establish a private right of action,  operating outside of them could lead major carriers to block your text messages.

 

6. Prior Express Consent Gives Third-Party Collectors the Green Light to Text First

If you have received pass-through consent to text from the creditor, or the consumer provides their consent to text verbally, you are permitted to send a text message to that consumer’s mobile number inviting the consumer to agree to terms and conditions and opt into your text messaging program by way of a text message response.

 

7. Invitations to Text Should Be Transparent—with No Strings Attached

CTIA comes down hard on what it considers unfair practices—not just the failure to properly obtain consent, but also unreasonable claims and demands.

For example, carriers prohibit the use of the word “free” in describing a standard messaging rate texting campaign. Any messages a consumer receives from a business may trigger text and data charges for which the consumer must pay.

CTIA also prohibits a business from requiring a consumer’s consent as a condition of an opportunity—e.g., a settlement or type of payment. If you’re going to offer consumers the option to text, you must offer it as a service without demanding anything in return.

Clarity and transparency are key to a compliant, successful text messaging program. Make sure your invitation to text is worded in a simple, straightforward way, with no inflammatory language (intentional or not). This will help ensure consumers understand exactly what they’re consenting to—and help you avoid service failures, legal problems, and lost opportunities to collect.

 

Learn More About Compliant Texting for Collections

To successfully make the leap to digital communications, you’ll need to focus your efforts in three areas: 1) applicable laws, regulations, and industry standards; 2) consumer expectations for service; and 3) day-to-day compliance management.

I’ve outlined what you need to get started in our complementary eBook “Ready to Text 2.0: The Collection Professional’s Guide to Compliant Communication in 2020.” In it, you’ll learn why texting is important, what recent legal decisions mean for collectors, and how to mitigate your legal risks and serve consumers well.

If you missed my recent webinar “Game-Changing TCPA Cases & the TRACED Act: The Bottom Line for Collectors,” I encourage you to download the recording today so you can better understand how these laws intersect and the steps you should take to protect your business.

 

Don’t miss the other blog posts in this series:

 

For more insights and tips you can use to accelerate your success in the ARM market, subscribe to the OS blog. We’ll deliver high-value content straight to your inbox.

Ready to Text in 2020?

Text messaging for collections is complicated. It’s also mission critical. Our brief ARM industry texting guide, newly updated for 2020, has the insights and advice you need to get your digital communications program up and running.

Don’t get left behind. Download your copy today!

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2020 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

Are You Ready to Text?

Take charge of compliance and start texting with confidence. This free eBook (newly updated for 2020) explains how.

ARM Industry Leaders, Why Aren’t You Texting?

ARM Industry Leaders, Why Aren’t You Texting?

This is the first post in a new blog series highlighting the importance of text messaging for debt collections and what ARM businesses need to stay compliant.   Text messaging for debt collections might seem like a bridge too far. But it’s entirely within reach today....

RMAI Recap: Top 4 ARM Industry Topics and Key Takeaways

RMAI Recap: Top 4 ARM Industry Topics and Key Takeaways

If the Receivables Management Association International’s (RMAI) 2020 annual conference was any gauge of the accounts receivable management (ARM) industry’s future, I would say business is in for another good run. More than 1,300 debt buyers, first- and third-party collectors, government officials, and service providers descended on Las Vegas for what I believe was the best education conference I’ve attended in years.

Session attendance was so strong, presentations were often made to standing room–only crowds, and the Exhibit Hall was no exception.

Over the course of the four-day event, certain themes dominated the conversation: digital consumer communications; diversity, inclusion, and ADA compliance; the CFPB’s new rules for debt collection; and new legal theories plaintiffs’ attorneys are formulating in the name of consumer protection.

Let’s dive into each of these RMAI themes one by one.

 

Digital Communications

One-way and two-way text messaging, along with email communications and the use of secure URL links, are coming of age for debt collectors. Yet E-Sign consent remains a challenging topic both conceptually and technically for the industry as a whole.

To properly obtain a consumer’s consent to substitute the digital delivery of a legally required disclosure or legally required written document (such as a validation notice or post-dated payment reminder), a collector must require the consumer to demonstrate their ability to send and receive the information at the mobile number or the email address they choose for this purpose. E-Sign consent is not valid until the demonstration is complete.

 

Diversity, Inclusion, and ADA Compliance

Three years ago, these topics would not have been included in a session agenda for an ARM industry conference. Today, they’re among the industry’s hottest topics.

First- and third-party collectors employ over 130,000 people of diverse backgrounds. Understanding how to manage individuals who vary by age, socioeconomic status, race, gender, and religious beliefs has become critically important to organizational success. By including people from diverse groups in the decision-making process—from the front line all the way to the C suite—companies can positively impact their employee retention rates, brand reputation, and profitability.

ARM businesses should be equally focused on meeting the needs of diverse consumers—including those with disabilities. The Americans with Disabilities Act (ADA) has traditionally applied to brick-and-mortar businesses, but the 9th Circuit made the ADA come alive for the ARM industry in the matter of Domino’s Pizza LLC v. Robles.

Domino’s argued that companies were not required under the law to make their websites and mobile apps fully accessible so long as they offered customers with disabilities other options for accessing the goods and services, such as a telephone hotline.

The 9th Circuit disagreed. The Court held the ADA applies to a company’s website and mobile app as well as any brick-and-mortar presence it may have. In the Court’s opinion, the ADA “applies to the services of a place of public accommodation, not services in a place of public accommodation” (emphasis added).

 

CFPB’s New Rules for Debt Collection

The RMAI conference buzzed with the unofficial announcement that the Consumer Financial Protection Bureau (CFPB) will be publishing its final rules for debt collection in Q2 or Q3 of 2020. The new rules will take effect one year after the date of publication in the Federal Register.

If the CFPB is true to its “word,” albeit unofficial, this means agencies will have months, not years, to adapt—i.e., update their policies and procedures, reengineer their software applications, modify creditor-client contracts, embrace technology to communicate digitally, and incorporate artificial intelligence in their contact management workflow.

Attendees also learned the CFPB plans to publish a new rule for out-of-statute debt. In its notice of proposed rulemaking for debt collection, the CFPB reserved the right to study issues pertaining to the collection of out-of-statute debt. After many months of research, the CFPB has identified disclosure requirements for the collection of out-of-statute debt. The new rule for out-of-statute debt collection, once final, will be included in the comprehensive final rules for debt collection.

 

New Legal Theories and Claims

One of the required courses for RMAI certification is the ever-popular Hot Topics session presented by a panel of RMAI-certified attorneys. This year’s Hot Topics included an explanation of a new claims attacking the validity of a judgment on the grounds:

  • The judgment was obtained by an unlicensed debt buyer;
  • An incorrect interest rate was applied to the judgment total; or
  • The underlying debt was not valid, and the original service of process was insufficient.

Other hot topics included a discussion of the difference between convenience fees charged by agencies and convenience fees charged by third-party processors as well as issues relating to credit reporting and trade line deletion practices.

 

Final Thoughts

Throughout the conference, Solutions by Text did a fantastic job updating the attendees with information about the networking events and providing them with access to PowerPoint decks and materials for the sessions.

For additional information about the RMAI conference or any of the topics mentioned above, visit https://rmaintl.org/.

 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2020 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

Ready to Text in 2020?

Text messaging for collections is complicated. It’s also mission critical. Our brief ARM industry texting guide, newly updated for 2020, has the insights and advice you need to get your digital communications program up and running.

Don’t get left behind.

Download your copy today!

ARM Industry Leaders, Why Aren’t You Texting?

ARM Industry Leaders, Why Aren’t You Texting?

This is the first post in a new blog series highlighting the importance of text messaging for debt collections and what ARM businesses need to stay compliant.   Text messaging for debt collections might seem like a bridge too far. But it’s entirely within reach today....

ARM Industry Leaders, Why Aren’t You Texting?

ARM Industry Leaders, Why Aren’t You Texting?

This is the first post in a new blog series highlighting the importance of text messaging for debt collections and what ARM businesses need to stay compliant.

 


Text messaging for debt collections might seem like a bridge too far. But it’s entirely within reach today.

 

Maybe you haven’t made the leap because you’re uncomfortable with the idea of going digital. You aren’t sure how to avoid the pitfalls (of which there are many). You’re hoping that at some point, texting will become less of a compliance risk.

 

Let’s face it. If you’re waiting for just the right moment to start texting, you never will—to the ongoing detriment of your business.

 

Communication technologies continue to advance at lightning speed and change the way businesses and consumers interact. Relying solely on letters and phone calls to reach consumers is no way to operate, much less get ahead in the marketplace. In fact, playing it safe may be the greatest threat to your business long term.

 

Still wavering on the idea of texting consumers? Here’s why you need to act, and act soon.

 
 

3 Reasons Why Text Messaging Is Essential for Collections and ARM Industry Success

To achieve breakout success in 2020, you need an omnichannel communications strategy that includes text messaging. The benefits of going digital, and the downsides of ignoring these channels, are too great to ignore.

 

1. The World Has Gone Mobile

In 2017, according to CTIA (formerly the Cellular Telecommunications and Internet Association), Americans used 16.7 trillion megabytes of data. That’s 40 times the volume of traffic in 2010. In just one year (2017–2018), mobile data usage in the U.S. increased by 82%.

 

CTIA’s 2018 report reflects not only a growing shift to 5G and surge in data-only devices including connected cars and wearables, but also the widespread use of text messaging as a preferred method of communication. In 2018, 2 trillion text messages were exchanged—the equivalent of 63,000 per second. Of those 2 trillion text messages, 95% were opened within a few minutes of receipt.

 

There’s no pretending these trends aren’t relevant to the ARM industry. Texting is, far and away, the best way to reach consumers and engage them effectively.

 

2. Texting Offers Unparalleled Advantages

Not only is text messaging more cost effective than other types of communication, but it can help improve efficiency by offering consumers a convenient way to manage their accounts and make payments without having to interact with a person. This frees collection teams to pursue higher priority accounts as needed, helping boost revenue recovery across the board.

 
 

“You’re in trouble with a credit card. You’re behind, and the company keeps chasing you with letters and calls, which you stopped trying to deal with weeks back. It’s 89 days in of the 90-day window before things go to a deeper level of seriousness.

 

And then you get a text, which you answer. And before long, you have come to an arrangement with the finance company you were too stressed out/ashamed/embarrassed to call back.”

 

Contactcenterworld.com

 
 

Quality of engagement matters, too. By offering consumers a channel they want and getting their permission to communicate via text, you can provide a positive experience that exceeds their expectations and leave them more inclined to work with you on outstanding debts.

 

Almost immediately, you’ll be operating at less cost and improving your collection results through better customer service. As a result, you’ll become “stickier” to your existing clients and a force to be reckoned with in your industry.

 

3. Texting Technology Can Simplify Compliance Management

Texting for debt collections is complicated. Your program will be subject to CTIA requirements, the Fair Debt Collection Practices Act (FDCPA), the Telephone Consumer Protection Act (TCPA), and other applicable laws. You’ll need to draft your terms and conditions, consider opt-in/opt-out requirements, and manage consent with the utmost precision.

 

Believe it or not, this is all very manageable—even day to day, on an ongoing basis.

 

Your first step is to determine how your program will satisfy your business needs and strategies as well as all legal and industry requirements that apply. Sounds daunting, but a good legal partner and an automated, compliance-minded text messaging platform—technology that’s readily available today—are all you need to minimize your risks, reduce your operating burdens, and position your business for accelerated growth.

 
 

If You Plan to Text, You Won’t Want to Miss These RMAI Sessions

If you’ll be traveling to Las Vegas next week for RMAI, I hope you’ll join Ontario Systems Chief Compliance Officer Rozanne Andersen for these two sessions. She and her fellow panelists will tackle digital communications in more detail and share some important insights and practical tips you can use to get started with texting. (You can find brief session descriptions and panelist bios on the RMAI 2020 Agenda page.)

 

  • The New World Order—Communicating with Consumers via Email and Text—What You Need to Know (with Mike Cantrell, Solutions By Text): Wednesday, February 5, 3:00–3:50 p.m., Juniper 2
  • Current Issues in Receivables Management (with Tomio Narita, Simmonds & Narita LLP, and Jackson Walker, Resurgent Capital Services): Thursday, February 6, 9:00–10:50 a.m., Juniper 2

 

In the meantime, be sure to read our newly revised and updated eBook, Ready to Text 2.0: The Collection Professional’s Guide to Compliant Communication in 2020. You’ll learn the basics of text messaging, how to navigate compliance issues, and what recent landmark decisions could mean for you.

 
 

Don’t miss the other blog posts in this series:

 

For more insights and tips you can use to accelerate your success in the ARM market, subscribe to the OS blog. We’ll deliver high-value content straight to your inbox.

 

 

Ready to Text in 2020?

Text messaging for collections is complicated. It’s also mission critical. Our brief ARM industry texting guide, newly updated for 2020, has the insights and advice you need to get your digital communications program up and running.

 

Don’t get left behind. Download your copy today!

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2020 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

ARM Industry Leaders, Why Aren’t You Texting?

ARM Industry Leaders, Why Aren’t You Texting?

This is the first post in a new blog series highlighting the importance of text messaging for debt collections and what ARM businesses need to stay compliant.   Text messaging for debt collections might seem like a bridge too far. But it’s entirely within reach today....

What the TRACED Act Means for Third-Party Collectors—and 5 Tips for Protecting Your Business

What the TRACED Act Means for Third-Party Collectors—and 5 Tips for Protecting Your Business

During the waning hours of the first session of the 116th Congress, robocall practices were attacked with lightning speed in the form of the Pallone-Thune Telephone Robocall Abuse Criminal Enforcement and Deterrence (TRACED) Act. Sponsored by South Dakota Republican Senator John Thune and New Jersey Democratic Congressman Frank Pallone, this bipartisan bill was signed into law by President Trump on December 30, 2019.
 
Arguably hidden behind its stated purpose, which was to modify sections of the Telephone Consumer Protection Act at 47 U.S.C. § 227 (TCPA), the TRACED Act is essentially a codified directive to the Federal Communications Commission (FCC) to enact rulemaking on a number of issues relating to robocalls. This was a very formal way for Congress to push the sticky business of reforming the TCPA to the chief regulator of the communications industry, the FCC.
 
For all practical purposes, the TRACED Act is a win for both consumers and the telecommunications industry. But it represents a devastating loss for third-party debt collectors.
 
 

ARM Industry Concerns Left Unaddressed

Since 2005, the accounts receivable management (ARM) industry has fervently lobbied Representatives and Senators on both sides of the aisle for amendments to the TCPA. During this time, the industry also advocated before the FCC for modifications to the agency’s 2003 TCPA regulations.
 
The ARM industry’s proposed changes sought clarification of the following issues: 
 
  • Consent requirements to use an auto dialer, prerecorded message, or artificial voice when contacting a consumer using their cellular number;
  • Revocation of consent requirements to use an auto dialer, prerecorded message, or artificial voice when contacting a consumer using their cellular number;
  • The definition of an automatic telephone dialing system (ATDS) and its alter ego, a manual contact system; and
  • Transferability of consent when a carrier reassigns a mobile number from one person to another. 
 
Unfortunately, not one of the amendments offered by the ARM industry was included in last year’s landmark legislation.
 
Notwithstanding this defeat, third-party debt collectors as well as organizations or businesses that call consumers need to understand the TRACED Act and how it may impact them. This is not because their calls should be placed in the same category as robocalls launched by bad actors, but because in its zeal to stomp out robocalls from the bad actors, Congress included legitimate calls in its regulatory web.
 
 

Summary of the TRACED Act’s Key Provisions

As outlined by Contact Center Compliance DNC.com, the main provisions of the TRACED Act are as follows:
 
  • Stopping Robocalls — The TRACED Act directs the FCC to take final action on its June 2019 Declaratory Ruling on Advanced Methods to Target and Eliminate Unlawful Robocalls.
  • SHAKEN/STIR — Service providers are required to implement SHAKEN/STIR, or Signature-based Handling of Asserted Information Using toKENs (SHAKEN) and the Secure Telephone Identity Revisited (STIR). These are authentication protocols for digitally validating a phone call as it passes through the complex web of telecom networks, allowing phone providers to verify that the call is actually coming from the party that appears to be placing the call.
  • Monetary Penalties — The FCC is authorized to assess penalties of up to $10,000 per call for violation with intent.
  • Statute of Limitations — The statute of limitations for a general violation is one year, while the statute of limitations for violation with intent is four years.
  • Protections from Spoofed Calls — The TRACED Act instructs the FCC to enact a rulemaking to “help protect a subscriber from receiving unwanted calls or text messages from a caller using an unauthenticated number.”
  • Report on Reassigned Number Database — Within a year of the date of enactment, the FCC must give a report to Congress on its progress in implementing its proposed official database of reassigned phone numbers.
  • Protection from One-Ring Scams — The FCC is required to “initiate a proceeding to protect called parties from one-ring scams.”
 
Each of these provisions requires careful analysis. The SHAKEN/STIR requirements alone present challenging call authentication protocols that will be fleshed out by the FCC over the next months and years and enacted in the form of new rules.
 
It would behoove members of the ARM industry to study any proposed rules published by the FCC and to file comments. For in the end, any violation of the TRACED Act could trigger a penalty as high as $10,000 per violation. Whether SHAKEN or STIRred, that’s one costly martini.
 
 

5 Things You Must Do to Mitigate Your Risks

We at Ontario Systems have closely monitored the robocall movement for several years. We’ve participated in work groups on behalf of various industries, advocated before the FCC, and monitored the TRACED Act legislation as it moved through both chambers of Congress. We’ve also conferred with our clients about their concerns with the TRACED Act.
 
Based on what we know, here’s what we recommend. If you communicate with consumers—whether you’re a third-party debt collector, credit issuer, healthcare provider, or Federal, State, or local government—you should seek the advice of independent legal counsel to determine exactly how the TRACED Act may impact your communications with consumers.
 
You should also consider the following next steps and ongoing practices: 
 
  1. Enhance consent and revocation of consent documentation per consumer and per number.
  2. Establish a process to pull reports on caller ID display on all outbound calls.
  3. Ensure outbound calls are made using numbers associated with the proper company.
  4. Monitor and analyze fraud and scam scores assigned by carriers to your outbound calls.
  5. Ensure all outbound calls comply with state, Federal, and client call restrictions.
 
For additional information about the TRACED Act and other contact/compliance management issues, visit Ontariosystems.com or reach out to me at Rozanne.andersen@ontariosystems.com.
 
 
 
 
 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2020 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

Ready to Text in 2020?

Text messaging for collections is complicated. It’s also mission critical. Our brief ARM industry texting guide, newly updated for 2020, has the insights and advice you need to get your digital communications program up and running.

 

Don’t get left behind. Download your copy today!

ARM Industry Leaders, Why Aren’t You Texting?

ARM Industry Leaders, Why Aren’t You Texting?

This is the first post in a new blog series highlighting the importance of text messaging for debt collections and what ARM businesses need to stay compliant.   Text messaging for debt collections might seem like a bridge too far. But it’s entirely within reach today....

ARM Insights for 2020: Top 5 New Year’s Resolutions for Greater Collections Success

ARM Insights for 2020: Top 5 New Year’s Resolutions for Greater Collections Success

At the close of each year, I’m routinely asked to share new year’s predictions for the accounts receivable management (ARM) industry. Several publication editors have already asked me for my thoughts on what lies ahead in 2020.

 

This year, however, I’m steering clear of the predictions game.

 

With a Presidential election in sight, more than an average amount of chaos in Washington, and a stock market that seems impervious to political winds, I’m inclined to reflect upon what we do know rather than try to predict the unknowable.

 

One thing we know for sure: 2019 was a landmark year for the ARM industry.

 

  • The Consumer Financial Protection Bureau (CFPB) finally published its long-awaited proposed new rules for ARM debt collection.
  • With California as a cornerstone, privacy legislation swept the country.
  • Robo call practices were attacked with lightning speed by both houses of Congress (TRACED Act).
  • The credit and collection industry finally embraced digital communication technologies.
Big changes are underway, and the ARM industry is growing more complex by the day. Yet despite increasing regulatory limits and uncertainty, ARM decision makers have unprecedented opportunities to operate and compete more effectively.

 

The extent of your gains in 2020 and beyond will be determined by how well your business balances compliance, customer service, and operational efficiency. As you reflect on past wins and losses, consider these 2020 resolutions as the means to a more successful year.

 

Resolution #1: Read These Three Publications (and the Fourth if You Credit Report)

I highly recommend you set aside time to read these publications. They won’t change your life, but they may change how you approach your business.

 

  • The State of Third-Party Collections 2019: Challenges, Trends and Innovations (TransUnion) – This TransUnion Report (Copyright 2019, Transunion LLC) is the best in its class, and something that’s all too rare: an accurate, well-designed study about the third-party collections industry. Topics include relevant industry trends, collection operations and related outcomes, tools and technology, and consumer communications.  >>> Download the State of Collections 2019

 

  • CFPB Supervisory Highlights, Issue No. 18 (Winter 2019) and Supervisory Highlights, Issue No. 19 (Summer 2019) – In these reports, the CFPB shares its findings in the areas of UDAAPs, debt collection, credit reporting, and other markets subject to its supervision completed between December 2018 and March 2019 (Winter 2019) and between June 2018 and November 19 (Summer 2019). Understanding how the credit and collection industry’s chief regulator is interpreting and enforcing the law and directing remediations is a great way for you to learn what to stop doing and what you should start doing to improve your operations.  >>> Download Winter 2019 Supervisory Highlights   >>> Download Summer 2019 Supervisory Highlights

 

  • CFPB Supervisory Highlights, Consumer Reporting Special Edition (Aug 2, 2019) – Topics include the Fair Credit Reporting Act, supervision, credit reports and scores, identity theft and fraud, debt collection, banking, and financial service providers. In this special edition of CFPB Highlights, the CFPB focuses on the numerous root issues plaguing consumers and data furnishers alike.  >>> Download Supervisory Highlights Consumer Reporting Special Edition

 

Resolution #2: Reduce Your Head Count

According to the Transunion Report, the number of people employed by firms in the third-party collections industry is steadily declining. In 2007, these firms employed over 141,000 people; by 2016, that number had dropped to around 120,000.

 

While this contraction is partly the result of mergers, acquisitions, and firms exiting the market, it’s primarily driven by increasing adoption of automation and other efficiencies within existing firms. Inbound and outbound communication strategies, coupled with the use of self-service options for consumers, are already helping ARM businesses streamline operations, transition to a 24/7 service model, and increase profitability per full time equivalent.

 

The role of automation, and the extent of its use, will only grow in 2020. Firms that aren’t running lean risk getting left behind. This is one resolution you can’t afford to let slide.

 

Resolution #3: Move Up the Food Chain, and Walk Away from Out-of-Statute Debt

If you’re not collecting pre-charge-off debt, you’re behind the industry curve. More than two out of five collectors (42%) report that their company collects on pre-charged-off debt, and that number will likely continue to rise. Not only will this service increase the stickiness between your creditor clients and your firm, but if done properly, it will also allow you to sidestep the requirements of the Fair Debt Collection Practices Act.

 

if you’re collecting out of-statute debt, you’re playing with fire. It’s time to walk away for good. The CFPB plans to issue new rules for the collection of out-of-statute debt sometime in Q1 of 2020, and litigation over the verbiage required in collection notices as a condition of collecting out-of-statute debt remains strong.

 

Resolution #4: Watch the Expense Column, and Invest in Your Future

Sometimes, watching your expenses does not mean spending less. Rather, for third-party debt collectors, watching expenses means making sure you are spending money today on line items that prepare you for tomorrow.

 

If you Google the phrase “consumer delinquency rates,” you will see that consumer delinquency rates have remained at or slightly above pre-2008 Great Recession rates. Yet consumer debt is growing to worrisome levels. If history is any indicator, the credit bubble will burst yet again. You’ll want to be prepared.
“Ben Mohr, senior research analyst of fixed income at investment consultant Marquette Associates, calculated that total U.S. consumer debt hit $14 trillion in the first quarter of 2019, surpassing the roughly $13 trillion of leverage accumulated in credit cards, auto loans and mortgages and other debt back in 2008, when those souring loans and securities pegged to them helped to send global markets into a tailspin.” – Mark DeCambre, MarketWatch
There’s a clear message here for third-party debt collectors: prepare for a pending boon in the collection industry market, and start building the technology and compliance infrastructure needed to handle the increase in assignments.

 

The Transunion report reveals the following breakdown in tools and technology agencies are investing in today:

 

  • Manual skip tracing (80%)
  • Collection management software (77%)
  • Online payment portal (72%)
  • Toll-free number (63%)
  • Call recording (63%)
  • Letter vendor (57%)
  • Batch skip tracing (52%)
  • Consumer data (45%)
  • Compliance software (35%)
  • Predictive dialer (31%)
  • Interactive voice response (IVR) (21%)
  • Speech analytics (17%)
  • Other (7%)

 

ARM, collections, collection agencies

 

Resolution #5: Accept, Understand, and Embrace Real Time Payments (RTPs)

Waiting for an electronic funds transfer to clear or an ACH batch to upload and process overnight is, plainly and simply, old school. Fortunately, these scenarios may soon be relegated to the past.

 

For a number of years now, I’ve had the privilege of sharing breaking compliance stories within the collection industry. Today, I’m happy to be the first to announce this breaking story: the Federal Reserve and the National Automated Clearing House Association are well on their way to rolling out Real Time Payments (RTPs) in the U.S.

 

Real-time payment systems offer an instant, 24/7, interbank electronic funds transfer service that can be initiated through a variety of channels: smart phones, tablets, digital wallets, and the web.

 

Here’s how RTPs work. A low-value real-time payment request is initiated, enabling an interbank account-to-account payment fund transfer and secure transaction posting with immediate notification features. Posting funds are made immediately available—and by immediate, I mean within 30 minutes.

 

The introduction of RTPs in U.S. credit and collection markets will be a game changer. Make sure you’re prepared by learning all you can now and making the switch when the time comes.

 

Make 2020 a Year of Ambitious Goals and Even Greater Results

Exciting times lie ahead for the ARM debt collection industry. Even with rampant litigation raging through the consumer attorney bar, opportunities for thoughtful, resilient, nimble players (first- and third-party collection agencies, debt purchasers, and collection firms) abound.

 

At the heart of every success story in this industry is an eye toward a more efficient, profitable future and recognition of what it takes to get there: a dynamic technology infrastructure built on top of a robust compliance management system. With these strengths, you can operate efficiently, serve customers well, minimize daily compliance concerns, and become indispensable to your clients.

 

We’ve developed a roadmap of sorts to help ARM decision makers eliminate barriers to business success and accelerate their revenue and market gains. Read The ARM Ecosystem: Advancing Beyond Integration,” our free eBook, and you’ll learn how simple the process can be.

 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2020 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

Are You Ready to Text?

Take charge of compliance and start texting with confidence. This free eBook explains how.

ARM Industry Leaders, Why Aren’t You Texting?

ARM Industry Leaders, Why Aren’t You Texting?

This is the first post in a new blog series highlighting the importance of text messaging for debt collections and what ARM businesses need to stay compliant.   Text messaging for debt collections might seem like a bridge too far. But it’s entirely within reach today....

Why Ransomware Is Serious Business (and How to Minimize the Threat)

Why Ransomware Is Serious Business (and How to Minimize the Threat)

Everywhere you look these days, it’s in the headlines: another healthcare network, business, or government entity has suffered a debilitating ransomware attack. What used to be a curiosity is now a raging epidemic that shows no signs of slowing—and no sector is immune. By 2021, ransomware damages could cost the world $20 billion (57 times more than in 2015).
 
Even worse, cybercriminals are shifting their strategy. Not only are they demanding larger sums of money—from a few thousand dollars to upwards of $50,000 in just the past few years—but they’re increasingly targeting small and midsize businesses, which may be less sophisticated on the IT front and more willing to pay.
 
I recently sat down with Steve Lodin, senior director of cybersecurity operations/corporate security at Sallie Mae, to discuss this growing threat. We also offered advice for organizations looking to harden their defenses and prepare to respond in the event of an attack.
 
Here are a few highlights from our webinar, “Be Smart, Take Charge: What You Need to Know About Cybersecurity and Ransomware Prevention, Detection, and Response” (you can access the free webinar here).
 
 

How Does Ransomware Work?

Ransomware is malicious code that’s designed to encrypt files on an infected system or storage device to prevent the owner of the data from accessing it. Cybercriminals demand a ransom in return for a decryption key.
 
Ransomware can infiltrate in various ways. Among the most common are phishing emails containing embedded links and innocent-looking email attachments. Email attachments don’t have to contain ransomware code; once opened or downloaded, they can simply run additional code that instructs the host system to download ransomware code from a website.
 
Think about what this means. Among tens, hundreds, or thousands of employees, it takes just one person, one email, one visit to a malicious website. Once that ransomware code finds a vulnerability in the host environment, it can take over in short order.
 
Now, here’s the really bad news: paying these criminals doesn’t always bring data back. In fact, according to a 2017 study, only 26% of businesses that paid a ransom in 2017 received a decryption key. (Of those organizations that paid, 73% were attacked again.)
 
 

How Can You Protect Your Business and Limit the Fallout?

Every organization needs a three-pronged approach to effectively address the ransomware threat: prevention, detection, and response. You’ll want to begin with proactive measures that lessen your odds of a successful attack and limit your vulnerabilities when ransomware strikes.
 
 
SYSTEMS
  • Limit access to your systems, including local admin access (the principle of least privileges).
  • Ensure your system is patched, along with third-party apps like Adobe and Flash.
  • Secure the system with antivirus, anti-malware, and email security services that block known threats; implement tools that scan incoming emails or flag employee activity on known malicious websites.
  • Invest in good data backups.
  • Evaluate and monitor connections with third-party vendors. Allow access only as required for them to provide services, and only on network segments they need.
 
PEOPLE
  • Instruct employees to report suspected phishing emails.
  • Communicate with employees about current ransomware threats.
  • Test employees periodically with sample phishing emails and unfamiliar attachments to maintain awareness.
 
PLANNING
  • Create an incident response plan, ideally involving IT, legal counsel, internal and client communications, and forensic analysis; test and refine it regularly based on newly identified weaknesses and threats.
  • Invest in cybersecurity insurance, with a full understanding of what’s covered in the event of an attack.
  • Make sure vendor contracts include language requiring vendors to notify you within a short period of time of any attack on their systems. Know how to shut down connectivity quickly in case of attack.
  • Enhance your tech stack. An incident response manager tool will allow you to see how/where you’ve been compromised, act fast, and minimize the impact of a ransomware attack; a file integrity management solution can tell you whether any changes made were authorized by your existing change management system.
  • Make sure you have access to enough Bitcoin in case paying ransom is your only option; you might want to establish a Bitcoin account expressly for this purpose.
 
EMERGENCY RESPONSE
  • Check with law enforcement to determine your odds of recovering data. Depending on the type of ransomware deployed, you might be able to get a decryption key from the FBI’s database.
  • Perform a system analysis to determine what communications went outbound and what specific actions were taken on the system. These details will help you determine what gaps in your security stack need fixing.
 

Want to Learn More About Ransomware Preparedness?

If this post left you with more questions than you had before, you’ll want to tune into our recent webinar, “Be Smart, Take Charge: What You Need to Know About Cybersecurity and Ransomware Prevention, Detection, and Response.” You’ll learn more details about the ransomware threat and come away with more resources and specific tips you can use to better secure your systems and develop a thorough, effective response plan.
 
Don’t wait till ransomware strikes to understand what you’re up against and fortify your business. Access the free recording here, and start taking steps to minimize the threat.
 
 
 
 
 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2019 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

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How to Use Email and Text for Collections Without Getting Burned (Part 2)

How to Use Email and Text for Collections Without Getting Burned (Part 2)

 
If you read part 1 of this two-part blog series or listened to part 1 of our AccountsRecovery.net webinar “Email Is Hot, Texting Is Hotter: Don’t Be the First to Get Burned,” you might have found some of our comments surprising. Perhaps you left with more questions than you’d had going in. Or you wonder how in the world communicating compliantly via email and text—consistently, day in and day out—is even possible.
 
I understand completely. There’s no shortage of legal requirements and practical issues to wade through, and there’s a lot riding on your communication practices.
 
That’s why I’m here today with part 2. It’s based on my continuing discussion with David Kaminski, chair of the Consumer Financial Services Law Practice at Carlson & Messer LLP in Los Angeles. (Part 2 of the AccountsRecovery.net webinar is available here.)
 
Let’s dive straight into some of the webinar highlights.
 
 

Work Email Addresses and Mobile Numbers: Are They Safe to Use?

If a consumer provides you with a work email address or mobile number, you should tread carefully. These channels may not be fully under the consumer’s control. If the consumer ends his or her employment, he or she could miss important communications. If a current or previous employer monitors or accesses email or text messages, you run the risk of third-party disclosure.
 
Here’s what David and I recommend:
 
  • Always ask consumers for personal contact information. Your best bet, legally speaking, is to minimize the number of work accounts your organization uses for collection-related communications.
  • Get consumers to agree to notify you if their employment status changes. If your terms and conditions are detailed enough, and the consumer assumes responsibility for keeping you informed, you’ll have done your part to ensure the integrity of the collections process. This will afford a good measure of protection in the event of a legal claim.
 
“So if that consumer had given you consent . . . but now you’ve added in the additional wrinkle of the fact that the person has left the office. She’s no longer there, but they’re monitoring her email. They open the email, and therefore the company gets the . . . analytic results saying, ‘I sent my 1692g notice.’ [ . . . ] Did she receive the notice, or did she not?” – David Kaminski
 
 

Text Messages: Navigating Carrier Demands, Consumer Expectations, and the Law

The Cellular Telephone and Internet Association (CTIA) is a self-regulatory body that represents mobile service providers and other industry organizations. The CTIA has its own messaging principles and best practices, but they’re not legally binding. You can’t be sued for violating them.
 
Still, it’s important to comply with CTIA guidelines so you know your texting practices align with carrier and consumer expectations.
 
  • Use simple, straightforward language. Consumers must fully understand anything they’re signing up to receive. Opt-in mechanisms must be clear, and when consumers unsubscribe, they must receive an acknowledgement of the action.
  • Be careful with abbreviations. Acronyms can’t spell out inflammatory words (I’d call this one a no-brainer).
  • Terms and conditions are essential. By getting a consumer to agree to terms and conditions upfront, you can effectively nullify gaps and inconsistencies between CTIA and Fair Debt Collection Practices Act (FDCPA) requirements.
 

E-Sign: How It Applies, and How to Comply

A consumer’s E-Sign consent gives debt collectors permission to substitute electronic delivery for snail mail delivery of legally required written documents. You don’t need E-Sign consent to email or text a consumer everyday collection-related communications such as paid-in-full statements, responses to balance inquiries, payment receipts, etc.
 
However, you DO need to obtain a consumer’s E-Sign consent before you may deliver legally required written documents and disclosures to the consumer electronically. Examples of legally required written documents and disclosures include post-dated payment reminders, validation notices not provided in initial consumer communications, and copies of Reg E recurring electronic funds transfer authorizations.
 
FACT: Obtaining E-Sign consent is a two-step process.
First, you must inform the consumer of his or her rights. There are several ways to inform consumers of their E-Sign rights:
 
  • During a recorded conversation with the consumer;
  • In an email;
  • In a text message;
  • In a writing;
  • On a website. 
 
Second, you must ask the consumer to demonstrate his or her ability to access the email address or use the mobile number he or she provided you for E-Sign purposes to receive legally required notices and disclosures.
 
The consumer can demonstrate his or her ability by: 1) sending you a text message or keyword using the mobile number they provided you for E-Sign; or 2) replying to an email or text message you sent to the email address or mobile number they provided you in connection with their E-Sign consent.
 
E-Sign consent takes effect only after the consumer has consented to using a particular channel (email or text) AND has demonstrated he or she can use that particular email address or mobile number.
 
FACT: An initial communication that includes the 1692g validation notice DOES NOT trigger the E-Sign requirement.
This is because there is no writing requirement in play for the initial communication. Section 1692g of the Fair Debt Collection Practices Act (FDCPA) makes clear you only need to “send” the consumer the validation notice [in writing] if you DID NOT provide it in the first communication (e.g., in the body of an email or verbally in a phone call) or if the consumer has already paid the debt.
 
Since E-Sign consent is required only for notices and disclosures that must be provided to the consumer in writing as a matter of law, it does not apply to the validation notice provided in the first communication.
 
FACT: A communication subsequent to the initial communication with the consumer DOES trigger the E-Sign requirement.
This is because the FDCPA imposes a writing requirement on a validation notice if it’s provided in a communication subsequent to the initial communication.
 
For example, if your first communication with the consumer was a text or phone call and you did not include the 1692g validation notice in that communication, you must send the consumer the validation notice within five days of that communication. In this context, the word “send” means by first class or certified mail with return receipt requested.
 
If you would prefer to email or text the written validation notice to the consumer, you may substitute the U.S. Postal Service mail delivery method with a digital delivery method if you first obtain the consumer’s E-Sign consent to do so.
 
Just remember: if you have an initial communication with the consumer that did not include the validation notice, you would be legally required to obtain E-Sign consent within the five-day window and electronically deliver the validation notice or link to the validation notice within the same five-day window.
 
If you fail to obtain the E-Sign consent, the validation notice is not opened, or the link to the validation notice in the email is not clicked within the five days of that initial communication, you must send the validation notice to the consumer using first class U.S Postal Service mail delivery.
 
TIP: To obtain proper E-Sign consent, provide detailed information and terms and ask for a response.
To obtain E-Sign consent properly, you’ll need to specify, among other things, the scope of consent (e.g., all active accounts now and in the future), the option to withdraw at any time, hardware and software requirements, whether any fees apply, instructions for obtaining paper disclosures, how to update contact information, and how to reach an agent.
 
When you send disclosures and terms, request a response (for example, “text YES”) so you can confirm the validity of the email address or mobile number and lock down the consumer’s formal consent.
 
TIP: Always confirm receipt of legally required documents.
There is no mailbox rule for electronic communications. Once you hit “send,” be sure to verify receipt via analytics. You can ask consumers to verify receipt themselves, but having indisputable proof on your end is essential legal protection for your business. Remember to verify open rates of emails as well as any links you use to provide information to the consumer.
 
“Revocation is that word that I think is so important in this whole context . . . . Anytime someone withdraws consent, whether you believe they did that in the proper manner . . . once that’s communicated, the best and safest course to minimize your risk is to honor that and comply with it.” – David Kaminski
 

Recommended Reading From Our Resource Library

Email and text may seem daunting, but you can implement an omnichannel communications strategy with confidence. It’s easier than you think, especially with compliance-minded tech that streamlines collection operations while safeguarding your business by helping prevent noncompliant communications.
 
If you’re eager to distinguish your service and strengthen your market position via consumer-friendly electronic communications, here are a few resources we recommend for further reading:
 
 
 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2019 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

Info and Insights You Won't Want to Miss

Here on the OS Blog, we aim to give you just the right mix of high-level views, tactics, and tools you can use to optimize your collection operations and results. Subscribe today for a steady stream of practical, empowering content delivered to your inbox weekly.