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Constitutional Law and Third-Party Collections: Assessing the Supreme Court’s New Ruling on Federal Debt

Constitutional Law and Third-Party Collections: Assessing the Supreme Court’s New Ruling on Federal Debt

When I was a law student, I would never have guessed the reason I needed to understand constitutional law was so I could someday explain it to nonlawyers who place collection calls.

But today, in the wake of a major legal decision, I’m here to do just that.

As readers might recall, during the waning hours of the 114th Congress—in the proverbial back room of the Senate’s Chambers—Congress passed, and President Obama signed, the Bipartisan Budget Act. Buried in this Act, between an amendment to the Federal Crop Insurance Act and a change to the Petroleum Reserve Strategy, was a quiet amendment to the Telephone Consumer Protection Act (TCPA). The amendment established an exemption from the TCPA when collecting debt owed to or guaranteed by the Federal government.

For most third-party debt collectors, the amendment was a nonevent. But for those who collected Federal government–backed student loans and other Federal government debt, it was a cash cow—until the matter of Barr, Attorney General, Et Al. V. American Association Of Political Consultants, Inc., Et Al. Certiorari To The United States Court Of Appeals For The Fourth Circuit No. 19–631 reared its ugly head.

 

SCOTUS Strikes Down the Federal TCPA Exemption

The case was argued May 6, 2020. On July 6, the United States Supreme Court affirmed in favor of the U.S. Office of the Attorney General, holding that the 2015 Federal government exemption from the TCPA was unconstitutional.

The original petitioners in the case—namely the American Association of Political Consultants and three other organizations that participate in the political system—filed a declaratory judgment action, claiming that §227(b)(1)(A)(iii) violated the First Amendment. The petitioners were basically jealous [my word] of the TCPA exemption Congress granted persons who collected debt owed to the Federal government; the petitioners wanted to make robocalls, too.

In seeking a declaratory ruling, the petitioners were hoping the district court would: 1) agree the Federal government debt exemption from the TCPA violated the free speech clause of the U.S. constitution; and 2) declare the entire prohibition against robocalling unconstitutional. As a result, the petitioners and other callers would be free to make robocalls.

Unfortunately for the petitioners, the district court did not rule as they had hoped. Rather, the court determined that although the robocall restriction with the government debt exemption was content- based and therefore in violation of the constitution, it would withstand constitutional scrutiny because the of the overarching need to collect Federal government debt.

On appeal, the Fourth Circuit vacated the judgment, agreeing that the robocall restriction with the government debt exception was a content-based speech restriction but holding that the law could not withstand strict scrutiny. The court invalidated the government debt exception, applying traditional severability principles to sever it from the robocall restriction.

In other words, by not striking the TCPA’s entire prohibition against robocalling as unconstitutional, the Fourth Circuit did not go as far as the petitioners would have liked.

Upon Certiorari, the United States Supreme Court affirmed the judgment of the Fourth Circuit.

 

What Does This Decision Mean for You?

Now that the TCPA applies to all third-party collectors equally, here are four things you should bear in mind if you collect government debt.

 

1. Stay the course and obtain consent

As required by the TCPA, you must first obtain the consumer’s consent if you:

  • Place calls or texts using an automatic telephone dialing system to a mobile phone;
  • Leave prerecorded messages on a mobile phone; or
  • Use an artificial voice to contact consumers on their mobile phone.

 

2. Federal government debt is no longer expressly exempt

If you collect on behalf of a state or local government or the Federal government, you must comply with the TCPA. This is because the TCPA applies to any Person. Person is defined as an individual, partnership, association, joint-stock company, trust, or corporation.

 

3. Governments might be able to skirt the TCPA

The TCPA’s prohibition against robocalls, robo texts, prerecorded messages, and use of an artificial voice to place calls to a mobile phone only applies to a Person as that term is defined. Federal, state, and local government bodies could possibly avoid TCPA compliance by arguing they are not a Person as defined by the Act.

 

4. TCPA restrictions on speech do not violate the free speech clause of the U.S. Constitution

At this point, the TCPA’s prohibition against robocalling, robo texting, leaving prerecorded messages, and using an artificial voice to communicate with a consumer via their mobile phone does not violate the Constitution. But we’re likely to see future legal challenges on this front.

Recently, ACA International was successful in challenging the state of Massachusetts’ COVID-19 ban on debt collection communications during the state of emergency based on free speech grounds. I would not be surprised to see a challenge to the TCPA as well as to the Fair Debt Collection Practice Act’s prohibitions on consumer communications based on free speech grounds.

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.

Receivables Industry Leaders Share COVID-19 Strategies, Successes, and Lessons Learned

Receivables Industry Leaders Share COVID-19 Strategies, Successes, and Lessons Learned

This week, Ontario Systems hosted its third weekly COVID-19 webinar for third-party collectors, “Voices from the Trenches: How Leaders Are Leading During the Crisis.” I had the pleasure of speaking with three agency executives who shared their experiences and perspectives on a variety of operational concerns related to COVID-19.
Joining us on the panel were:

 

Like all of us, these leaders and their organizations were forced to adapt quickly to COVID-19—not to mention a shifting legal landscape that’s been particularly challenging for the receivables industry.

 

How have these leaders managed to successfully navigate the COVID-19 crisis? Here are some notable excerpts from our conversation, in the panelists’ own words.

 

A Study in Contrasts: 30 Days Ago vs. Today

David White, Performant

Generally speaking, our business was not remote. We were close to 100%  brick and mortar. The clients we partner with didn’t have a desire to maintain remote workers.

 

So fast forward to the pandemic: we’re 95% remote in our capabilities today. We’re very lucky to have client partners that have moved very quickly with us to migrate our operations to remote capacity. We’re very excited to be where we are today, and I think we’ve adapted pretty well to the situation.

 

Laura Jensen, ARC

Over the past couple of years, we’ve worked towards having our staff going remote. So our transition was fairly easy. We have about 95% of our staff currently working remote. We have some essential services in our office—payment, posting mail, HR, and some IT support.

 

We had a mixed experience [with companies we outsource to]. Some of our servicers had intended to offload calling to a remote site in the Philippines, and the Philippines went on lockdown before the U.S. So that pandemic plan didn’t bear out. This has definitely challenged a lot of people’s business continuity plans.

 

Tim Haag, State Collection Service

We’ve been working with remote staff, both admin and reps, for about four or five years now. So we had some experience—obviously not to where we’re at today, but we had roughly 80 people working remotely prior to COVID-19. Now, I would say 85-90% of our staff [of nearly 500 people] is remote. I’m so proud to say all that’s working well.

 

When communicating with consumers, the big thing is scripting. We got on that right away, started changing scripting, making less outbound calls, less texting. And I think the main thing is we continue to listen to the consumer and do what’s right to solve problems.

 

Meeting the Challenge of Managing Remote Workers

David White, Performant

We had individuals on the admin side and management side who were working remote, but to transition our entire staff remotely meant we had to adapt them pretty significantly to meet our clients’ requirements. We’ve got some clients at the government level that have very high expectations for data security.

 

Think about all the different digital assistants around your house—your Alexa, your Google, your smartwatch, your phone. When we’re working and we’re in range of those types of digital assistants, how do we ensure our customers’ data are not being picked up? How do we not have risk and exposure? We had to adapt policy and procedure wise.

 

Tim Haag, State Collection Service

We utilize speech analytics. We’re monitoring in a live version, so all the supervisors know exactly what’s taking place on all those calls as they’re happening. We also have the use of Artiva Magnify™, so we can jump in and listen into calls, coach calls, text messages to the representatives, or ultimately take over the call.

 

Prior to COVID-19, for those who did get a chance to work from home, we expected them to have a 5% improvement in productivity, If they didn’t do that, they were asked to come back into the office until that productivity came back. As time goes on, as people get more comfortable working from home, we hope to see that productivity increase with all the rest of the staff.

 

Engaging Consumers and Patients Suffering Hardships

Laura Jensen, ARC

We’ve consistently pushed our servicers to honor hardship policies and make sure their hardship policies are adjusted to the extent they need to be for people who are ill or out of work for COVID-19.

 

David White, Performant

It’s about trying to find the right payment plan for these individuals. That may mean pushing out those payment plans for a period, it may be extensions, it may be reductions in what those payoffs may be. Most of our clients have been very, very willing to work with us as it relates to finding the right solution for consumers.

 

Tim Haag, State Collection Service

Consumers, when we do reach out to them, are very thankful that we’re offering up solutions right away. “Hey, I see you’re on a payment plan. Do you need to defer this plan for the next 60 days?” They’re kind of surprised, like, “Wait—you’re on my side. You’re here to help. I really appreciate your reaching out.”

 

Keeping Remote Teams Connected and Energized

Tim Haag, State Collection Service

For a supervisor to communicate with their representatives or the agents, we utilize Microsoft Teams. So now we’re doing team meetings and individual one-on-ones using that platform.

 

We’ve also been using a gamification system for about two or three years. This helps keep the  excitement piece that exists inside the office, we’re still able to do that, and they can track their stats. So they can still have friendly competition. We’ve been throwing some extra carrots out there, and that’s been a lot of fun.

 

David White, Performant

We’ve got a very cool intranet that we utilize. The intranet allows us to do a ton of different posts on a daily basis of updates, shout outs to individuals, our CEO posts, articles once a week of feedback, what’s going on in the business, the industry—what we’re doing on all those different types of things.

 

Also, as part of this intranet, we can do group discussion boards that work very well. So we’ve got email, we’ve got chat, but this group discussion board is for when we have situations that come up that someone’s like, “Okay, is this unique? I’ve talked to this person, this is what was said, how do we handle this?”

 

Managing Compliance and Client Communications

David White, Performant

Our general counsel manages the process for us. We’ve got a moving document that’s living and breathing based on all the changes coming out of COVID-19, so that document is reviewed on a regular cadence in leadership meetings. Originally, we were meeting daily, but now we’re doing it every other day—a pandemic team call with the key stakeholders within our company.

 

We’ll cover all the changes that happened in the previous 24 hours. We’ll communicate what direction clients have provided us relating to that. Then we’ll typically provide guidance to our account management team, sales, and business development team about where we stand with this and the changes we’re making. And then we’ll say, “Convey this to the client and let them know what we’re going to be doing on our side, and see if that lines up with their expectations.”

 

Tim Haag, State Collection Service

You would actually think that [healthcare providers] aren’t worried about the day-to-day collections environment, but now they are, because there’s nobody in hospitals right now, and they’ve cancelled all surgeries. So their revenue is going down. Cash is extremely important to them right now. So we’re getting more of their attention.

 

We put together right away a COVID-19 response team. We meet every morning . . . for about 30 minutes to talk about communication that we’re going to send to our clients. We actually came up with a new procedure for our compliance change management process. That goes to our general counsel, and from there, he makes the change. When all this settles, we can go back and make sure all those changes were back to normal.

 

Lessons Learned

Laura Jensen, ARC

The biggest lesson I’ve taken away is management related: show up every day, show up for your staff, show up for your company. For me to do that, it’s getting up and having a positive attitude. It’s getting ready and being present. There’s a lot of chaos, and everybody’s scrambling and nobody knows what to do, but show up. Be present. Be a leader.

 

My second [lesson] is, always have your best staff. I have the best staff, and I trust my staff implicitly. I think that has been a huge help in getting through this.

 

Tim Haag, State Collection Service

I think continuing that communication with [employees]—”Hey, guys, it’s going to be alright; we’re going to get through this”—it means a lot. And I have been focused more not on the day-to-day things now, but let’s see what happens after this. So let’s not worry about tomorrow, but let’s start thinking about next month, six months from now, a year from now, and how we can come out on top.

 

David White, Performant

In a limited time, we’ve had to be remote. Hopefully our clients are understanding that this is an opportunity for the long haul, not just through the COVID-19 situation—that after we get through this, there’s an opportunity for us to adapt our workforce and adapt our offerings. I’m not advocating for 100% remote, but some flex opportunity for us to be effective.

 

Catch Up on Previous Discussions, and Join Us Next Week

Our past COVID-19 weekly webinars were full of valuable insights and tips related to compliance management and business continuity. You can find detailed summaries with links to the webinar replays in these recent blog posts:

 

You can also listen to this week’s webinar, “Voices from the Trenches: How Leaders Are Leading During the Crisis,” in its entirety. Click here to download the recording.
Be sure to register for next week’s COVID-19 crisis management webinar, “Product-Centric Solutions for COVID-19 Challenges.” We’ll explain how the Ontario Systems solutions you currently have in place can help smooth the transition to normal operations as we emerge from this crisis. It’s a critical (and welcome) discussion you won’t want to miss.

 

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.

A Challenge for ARM Leaders: Finding Opportunities in the Chaos

A Challenge for ARM Leaders: Finding Opportunities in the Chaos

Since President Trump declared a national emergency due to COVID-19, ARM leaders across the country have been forced into a minefield of swift decisions to continue operating, meet client requirements, and stay compliant with state restrictions. The last five weeks have undoubtedly been a whirlwind of chaos in these unchartered waters.

But as I speak to leaders, I’m beginning to detect a sense of calm as companies see their response plan settling into a new operational rhythm.

As the ARM industry operates under this new normal and prepares for a wave of increasing delinquencies, we have a unique opportunity to take a step back, evaluate our business as a whole, and ask ourselves, “What should our business look like post COVID-19?”

How You Care for Your Employees Today Will Follow You Post COVID-19

Because the ARM industry relies predominantly on human capital, its employee base is often at risk during times of crisis such as the Great Recession and the global pandemic we’re facing now. Even without a crisis, employee attrition has long plagued the ARM industry.

I believe now is a good time to take meaningful steps to address this issue.

We are working through a pivotal moment in our history, which will likely be defined by the contrast between pre and post COVID-19. Your future job applicants will be interested in understanding how you responded to this pandemic and how you plan to protect your employees in the event of future pandemics.

It’s critical that you determine now how you’ll handle staffing decisions in the coming days and long after COVID-19 recedes. Here are a few things you’ll want to consider.

If debt collection activity has decreased, identify ways you can repurpose your systems and employees.

Most ARM companies could easily convert their businesses into any call center operation. Start by reaching out to your existing clients and offering them customer care services, and then put your sales team to work on new opportunities. Don’t be afraid to think outside the box; whatever new opportunities come your way will help you diversify and strengthen your business.

This is a great time to invest in your employees’ education and professional growth.

There are opportunities across the ARM industry and beyond that offer free training on a multitude of subjects. In addition, industry conferences are transitioning to virtual conferences, which gives you an opportunity to expose more employees to the collaboration and thought leadership these events support.

If you must reduce staff, think about ways to continue supporting them as you work through rebuilding your company.

I’m inspired to see companies that have furloughed or laid off workers opt to continue paying for their health benefits. At a minimum, consider providing personal recommendation letters and referrals as well as guidance on industry training opportunities and certification programs that may help the recently unemployed further their careers.

Defining Your Company’s “New Normal” May Be the Difference Between Surviving and Thriving

As ARM companies settle into their new routine—i.e., leading a mostly remote staff—leadership teams are asking, “How do we return to ‘normal’?”

My question for you is, what constitutes “normal”? Should you go back to the way things were pre COVID-19? I question whether creditors will even let their third-party service providers return to business as usual.

If you’re in a position to lead your company to the next level, I have a few thoughts about where you might focus during this chaotic situation to build a stronger company from a business continuity standpoint. A great first step would be to expand your company culture by embracing a hybrid approach of working from home and providing more self-service options for consumers.

Conquer your fear and embrace digital channels

The ARM industry has been talking about text messaging for several years, but adoption is still limited. Establishing a compliant and effective text messaging program begins with obtaining TCPA consent and express consent to text as well as E-SIGN consent if you’re going to send out legally required written disclosures.

This is where companies often lose heart, because they don’t see easy options to obtain the consent needed to feel comfortable with this communication method.

The truth is, digital communications can actually be simpler from a compliance management standpoint—and more essential to business—than many ARM leaders believe.

The COVID-19 pandemic has put 80% of Americans under stay-at-home orders, which presents a unique opportunity to engage consumers and learn about their communication preferences. Capturing the required consent for email and text messaging communications in the future helps the consumer as their situation changes. It also sets your company up for more effective communication channels as stay-at-home orders begin being lifted.

Introduce or expand self-service options

Take this time to evaluate how effective your consumer-facing website is for your business. Is it merely a storefront, or does it help drive consumer engagement and payments?

Your website allows you to connect with consumers 24/7—and, as a result, optimize your collection efforts. As you consider consumer demands for convenience and look ahead to the post COVID-19 era, I recommend integrating your website with a consumer portal where consumers can manage their account, make payments, request information, file a dispute, or send a complaint.

Lean into work-from-home arrangements

Fostering a work-from-home culture has been traditionally difficult across the ARM market. But as the pandemic risk heightened, financial service providers were thrust into embracing it quickly. As you evaluate your business structure moving forward, you may want to consider implementing a long-term work-from-home environment.

It’s widely understood that work flexibility is a top priority among millennials and the upcoming generation Z. The best way to appeal to these job seekers, and retain them long term, may be to offer a work-from-home option. Having a work-from-home structure can also help your business weather future disaster or emergency declarations more easily.

As you work through managing your remote employees’ productivity and compliance, take this time to document what works and what doesn’t so you can begin mapping out a work-from-home plan for your business. It’s entirely possible that the post COVID-19 business world may look less like beautiful brick-and-mortar buildings, and more like small offices for essential onsite employees and virtual meetings with mostly remote staff.

When The Crisis Ends, Be Ready to Accelerate Your Success

As you begin the journey of discovering what’s next for your business, I encourage you to use this turning point to push past your comfort zone. Look for new ways to incentivize your employees, and establish new markets to serve. Streamline your processes and communicate more effectively with consumers.

Take these steps now, and you’ll be able to hit the ground running in the post COVID-19 era.

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.

ARM Leaders, Your Compliance Management System Will Soon Face its Ultimate Test

ARM Leaders, Your Compliance Management System Will Soon Face its Ultimate Test

Since the Dodd-Frank Act was passed, you’ve no doubt worked tirelessly to build a comprehensive compliance management system (CMS) that meets the Consumer Financial Protection Bureau’s (CFPB) expectations and those of your clients. Regardless of whether your CMS has been tested by a third-party risk assessment, a CFPB examination, or consumer litigation, I think it’s fair to say none of us could have predicted a global pandemic that would put CMS’s to the ultimate test.

As I write this, there are several bills circulating in Congress that could have big implications for the ARM industry. Almost daily, states across the nation are imposing their own rules in response to the COVID-19 pandemic. In nearly every conversation I have with ARM leaders, I can sense the anxiety.

But here’s the good news. The fallout from the 2008 financial crisis handed us a new regulatory body that has indirectly prepared the ARM industry for this unprecedented event. You just need to make sure that as you transition more of your staff to remote work, your compliance controls follow.

5 Keys to Managing Compliance in the COVID-19 Era

Boards of directors and executive leaders across the industry have been thrust into a sea of new operational and compliance challenges they might not have contemplated. Decisions are often made through the lens of quick risk analysis and business continuity.

However, as you weigh the business impact of your operational response to COVID-19, you must also evaluate the associated compliance risks. You need to be proactive in mitigating consumer harm risks to avoid another windfall of regulatory actions and litigation. Here are five ways your CMS can help you mitigate those risks.

1. Track all compliance metrics closely, and COVID-19 metrics separately.

Board of Director and/or executive reporting has likely increased since the beginning of the pandemic. In your meeting agendas and minutes, be sure to document compliance metrics including but not limited to:

  • Complaint trends
  • Dispute trends
  • Call monitoring trends
  • Compliance audit trends
  • New state restrictions
  • Federal regulatory changes
  • Emerging risks due to the COVID-19 impact
  • Audit results
  • Testing results of new workflows

I would encourage you to separate COVID-19 related metrics from your typical reporting to help adequately analyze and respond to the compliance risks related to this specific crisis.

2. Test all workflow changes before implementing them widely.

Leadership may be eager to change systemic workflows in response to client, state, or other restrictions imposed during this fluid situation. When these changes are made, don’t skip the critical step of testing. The unintentional consequences of any one change could cause your company greater harm in the long run.

3. Be sensitive to consumers’ personal hardships.

As consumers face income loss or uncertainty, experience COVID-19 personally, or care for someone else, ARM companies may see an increase in consumer complaints. It’s important that you evaluate your response to these complaints to ensure that they are handled with empathetic care.

4. Ensure remote agents are adequately managed and supported.

With a significant portion of the industry working from home, your compliance monitoring tools should be evaluated to ensure you’re getting a meaningful picture of what your agents are hearing and how they’re responding to consumers.

Practical steps you might take include:

  • Changing up your word/phrase search in your speech analytics tool
  • Manually reviewing more calls
  • Increasing live call reviews utilizing the whisper feature
  • Providing immediate feedback to agents

In addition to stepping up call monitoring and coaching, you’ll want to ensure proper status changes, notations, and updates are being made in accordance with your policies and procedures.

5. Shore up your auditing controls.

Changes in your employees’ work location may also put a strain on your auditing controls. It’s more important than ever to have those controls in place for incoming consumer communications, payment processing, call frequency, credit reporting, and dispute response management as well as any new systemic processes put in place as part of your COVID-19 response.

In These Challenging Times, Stay Focused on Your Future

COVID-19 is not the first pandemic our nation has experienced, nor will it be the last. As you work to address current challenges and concerns, consider how changes you’re making today related to policies, procedures, and training can help you build the foundation for a stronger, more successful business long term.

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.

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.

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...

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.

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.

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.

 

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.

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!