RMAI Update November 2022

Breaking News:  The Federal Trade Commission announced it is extending by six months the deadline for companies to comply with some of the changes the agency implemented to strengthen the data security safeguards that financial institutions must put in place to protect their customers’ personal information. The deadline for complying with some of the updated requirements of the Safeguards Rule is now June 9, 2023.

Election Update and Ramifications:  With the Senate expected to remain in control of the Democrats, and the Republicans expected to control the House with a very slim margin, we can expect gridlock in Congress for the 2023-2024 session.  However, divided government provides an opportunity for bi-partisan proposals to pass.  RMAI will seek legislative vehicles for fair and balanced proposals impacting the accounts receivables management industry to be included.

The lame duck session (from now until January 3^rd when the new Congress is sworn in) will more assuredly see the passage of the National Defense Authorization Act and possibly a new Appropriations Bill passed.  However, due to the very slim majority in both houses of Congress, we do not anticipate controversial proposals impacting the ARM industry to be included in either bill.

Now that the 2022 mid-term elections are over, we should start to see a flurry of activity at the state legislative level. Overall, the mid-term elections were not good for the receivables management industry. The business-friendly “red wave” that was expected from Republican pickups did not materialize. In fact, one could argue there was a small “blue wave” with Democrats gaining full control of the state legislature in Michigan and Minnesota and bolstering their existing majorities in Colorado, Nevada, and Washington. When adding the two progressive Democratic gubernatorial pick-ups in Maryland and Massachusetts, it spells trouble for the industry in those states as the progressive wing of the Democratic party is not known for their business-friendly practices.

The other trend seen in the mid-term elections was the increasing size of the extremes of both the Democratic and Republican parties. Far left and far right candidates tended to do much better than moderate candidates. In fact, moderates from either party are such a dwindling faction that in most cases they exert little to no influence. So, in essence, the blue states (i.e. Democratic controlled) got bluer and the red states (i.e. Republican controlled) got redder. All this helps explain how we are down to just 11 states with divided government, an over 30 year low.

What does this mean for state legislative activity in 2023? The states to immediately be concerned about are Michigan and Minnesota as they now have a new Democratic party “political trifecta” (both houses of the legislature and the governor) and will be looking to make a statement. But with the Democratic majorities growing in liberal states, as an industry, we can expect a bumpy 2023 legislative year!

7th Circuit Finds Lack of Standing at Summary Judgment Stage; Injury Not Fairly Traceable
Foster v. PNC Bank, No. 20-1667, 2022 U.S. App. LEXIS 28873 (7th Cir. Oct. 18, 2022)

The U.S. Court of Appeals for the Seventh Circuit affirmed a trial court’s dismissal, on separate grounds, of a borrower’s FCRA claims because the borrower lacked standing. In addition, the Seventh Circuit held that the borrower’s affidavit made conclusory statements with documentary support and was therefore insufficient to defeat the lender’s motion for summary judgment.

The plaintiff borrower was a real estate developer who relied on loans to operate his real estate development business. A dispute arose between the borrower and his lender regarding a $1.1 million mortgage loan.

The borrower and lender disputed the scope of certain insurance coverage for a property, whether certain insurance coverage was sufficient to satisfy the terms of the loan, and whether timely payments for insurance premiums were made by the borrower. The lender asserted that the borrower did not comply with the terms of the loan and the lender was forced to obtain additional insurance coverage and assess the cost of the additional insurance coverage to the borrower. The borrower allegedly did not pay the increased insurance premiums and disputed that the additional insurance was required.

The lender notified various credit reporting agencies of the borrower’s late payments. The borrower disputed these payments were late and filed a formal dispute with the credit reporting agencies. The borrower alleged that based on the lender’s notification of the credit reporting agencies, the borrower’s credit score decreased and prevented him from obtaining a new loan, purchasing new property, refinancing his loans, and forced him to sell income-producing property.

The borrower sued the lender for various claims including violation of the federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq, by failing to investigate the dispute, and for breach of contract, breach of implied duty of good faith and fair dealing, and breach of fiduciary duty. The lender filed a counterclaim to obtain a judgment on the loan.

The trial court granted summary judgment for the lender and dismissed the borrower’s claims and the borrower appealed.

On appeal, the borrower argued the trial court erred by not properly considering the evidence in his affidavit filed in opposition to the lender’s motion for summary judgment. The Seventh Circuit noted that trial courts may find affidavits as insufficient or conclusory at the summary judgment stage without making specific findings about the litigant’s credibility. In this case, the Seventh Circuit agreed that the borrower’s affidavit lacked the substance to rebut the lender’s affidavit and cause a genuine issue of a material fact.

The borrower also argued that the trial court erred when it dismissed his FCRA claim against the lender. The Seventh Circuit affirmed the trial court’s decision to dismiss the borrower’s FCRA claim but on separate grounds. The Court of Appeals held that the borrower lacked standing to bring the FCRA claim against the lender because the borrower’s injury was not fairly traceable to the alleged violation.

The Court explained that a plaintiff must show an injury beyond just a statutory violation, and at the summary judgment stage of litigation, a plaintiff can meet this standard by establishing specific facts that show “a concrete and particularized injury that is both fairly traceable to the challenged conduct and likely redressable by a judicial decision.”

The borrower claimed his damages occurred in 2012 when the lender allegedly failed to investigate the disputes made to the credit reporting agencies, resulting in the drop in the borrower’s credit score. However, the Court noted that the alleged injury was apparently related to a decrease in his credit score in 2011, so the injury could not be fairly traced to a failure of the lender to reasonably investigate credit reporting disputes in January 2012. Thus, the Court affirmed the dismissal of the borrower’s FCRA claim for lack of standing.

The borrower also argued that the trial court erred by dismissing his breach of contract and breach of fiduciary duty claims. In support of his argument, the borrower asserted that he did not receive certain contractually required notices from the lender and was forced to sell valuable possessions for less than market value as a result.  The Court disagreed as the mortgage provided that service was effective upon mailing, and the borrower’s evidence was too speculative to support a breach of contract claim.

The Seventh Circuit affirmed the trial court’s ruling on all grounds but vacated the judgment as to the FCRA claim and remanded with instructions for the trial court to dismiss the FCRA claim on the separate ground that the borrower lacked standing because the injury was not fairly traceable to the alleged violation.

Fifth Circuit Holds CFPB’s Funding Scheme Unconstitutional; Payday Lending Rule Invalid
Cmty. Fin. Servs. Ass’n of Am. v. Consumer Fin. Prot. Bureau, No. 21-50826, 2022 U.S. App. LEXIS 29060 (5th Cir. Oct. 19, 2022)

The U.S. Court of Appeals for the Fifth Circuit held on October 19 that the federal Consumer Financial Protection Bureau’s Payday Lending Rule was invalid because it was promulgated using an unconstitutional funding scheme.

The upshot of the decision is that while the CFPB itself validly organized, the three-judge panel found that the unique method of funding the CFPB’s activities violated the U.S. Constitution’s Appropriations Clause. And so, any activity that used these ill-gotten funds “deprived the Bureau of the lawful money necessary to fulfill those responsibilities.” Because there was no other way for the CFPB to have made the Payday Lending Rule other than by using the unconstitutional funding, the rule is invalid.

The Constitution’s Appropriations Clause grants Congress exclusive control over “the federal purse,” and this control is a necessary apparatus to the checks and balances between the three branches of the federal government. The Appropriations Clause is there to check “the executive [branch] . . . from unilaterally spending funds,” and allows Congress to retain control of the purse strings. The CFPB’s funding scheme takes these purse strings away from Congress and so it is constitutionally defective, according to the opinion.

Unlike most other federal agencies, however, the CFPB does not ask Congress for funding. Instead, it obtains its funds by making a request to the Federal Reserve, and that request may not exceed 12% of the Federal Reserve’s “total operating expenses.”

The Federal Reserve itself does not obtain funding from Congress. Instead, according to the opinion, its expenses are paid by assessments made on banking institutions and “interest on government securities that it has acquired through open market operations.” After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury, so it too is insulated from the Appropriations Clause. However, the opinion points out that because Federal Reserve must remit its excess funds to Treasury, it remains “tethered” to Treasury. And since Treasury obtains its appropriations from Congress, “checks and balances” are at work.

Because the CFPB draws its funds from the Federal Reserve’s insulated funds, the Fifth Circuit concluded it is not “tethered” to Treasury. The result, the opinion reasons, is that the CFPB is “double insulated” from Congressional control of its funding and removed from “checks and balances,” making it unique among all federal agencies. This funding scheme is contained in section 1017 of the Dodd-Frank Act which created the Bureau in 2010, and is exactly what was explained to Congress in hearings in 2011: “Congress provided the CFPB with a source of funding outside the appropriations process . . .”

Decisions in similar cases, the Court wrote, look to whether the unconstitutional provision caused compensable harm. Although the Bureau had the requisite power to create the Payday Lending Rule, it required “funding that would enable the exercise of that power.” Since the funding was derived by an unconstitutional scheme, “without its unconstitutional funding, the Bureau lacked any other means to promulgate the rule. Plaintiffs were thus harmed by the Bureau’s improper use of unappropriated funds to engage in the rulemaking at issue.”

FTC Actively Pursuing Companies with Allegedly Lax Data Security Measures
In the Matter of Drizly, LLC, a Limited Liability Company, and James Cory Rellas, individually, and as an officer of Drizly, LLC.; In the Matter of Chegg, Inc.

In a pair of recent enforcement actions, the Federal Trade Commission cracked down on companies with allegedly lax data security measures that resulted in the theft of personal information of millions of consumers.

In the first, announced October 24, 2022, the FTC alleged that an online marketplace company and its CEO “were alerted to security problems two years prior to the breach yet failed to take steps to protect consumers’ data from hackers.”

Specifically, in 2018 hackers infiltrated the company’s servers until the login information for its cloud computing account was changed.  Unfortunately, according to the FTC, the company didn’t address that breach with adequate security measures yet continued to represent to the public it had appropriate security protections.  Two years later, an employee’s account was breached, and customers’ information was stolen.

In the second action, announced October 31, 2022, the FTC alleged an education technology company suffered four security breaches since 2017 but failed to undertake adequate remediation, resulting in the exfiltration of millions of consumers’ personal information.

A number of alleged violations were common to both companies, including:

• Failing to require multifactor authentication;
• Limiting access to consumers’ personal information;
• Neglecting to monitor for security threats
• Failing to develop adequate security policies; and
• Failing to properly train employees.

Pursuant to the proposed consent orders, both companies are required to remediate these, and other issues.  Notably, the order concerning the online marketplace company extends to its CEO individually, who “will be required to implement an information security program at future companies if he moves to a business collecting consumer information from more than 25,000 individuals, and where he is a majority owner, CEO, or senior officer with information security responsibilities.”

The FTC has published a description of the first and second consent agreement packages in the Federal Register. The agreements are subject to public comment for 30 days after publication, following which the Commission will decide whether to make the proposed consent orders final.

New York DFS Assesses $4.5 Million Penalty for Violations of Cybersecurity Regs
In the Matter of EyeMed Vision Care LLC

On October 18, 2022, the Superintendent for the New York Department of Financial Services announced a consent order assessing a $4.5 million penalty against a health insurance company for violations of the DFS Cybersecurity Regulations, 23 NYCRR, Part 500.

The regulations apply to a “covered entity,” defined as “any Person operating under or required to operate under a license, registration, charter, certificate, permit, accreditation or similar authorization under the Banking Law, the Insurance Law or the Financial Services Law.”

In this case, a phishing attack likely allowed unauthorized access to 6 years’ worth of consumers’ non-public information.  According to DFS, the company failed to:

1. implement multi-factor authentication (§ 500.12);
2. limit user access privileges (§ 500.07);
3. implement sufficient data retention and disposal processes (§ 500.13); and
4. conduct an adequate risk assessment (§ 500.09).

In addition to the monetary penalty, the company is required conduct a comprehensive risk assessment, to include: a) reasonable necessary changes to address material issues identified in the assessment; b) plans for revisions of controls to respond to technological developments and evolving threats; and c) plans for updating or creating additional written policies and procedures.

Donate with Your Membership Renewal
Membership renewals are here and what better time than now to donate to RMAI’s Legislative Fund. As you renew your membership, please take note of the suggested voluntary donation on your invoice. Every donation to our Legislative Fund is appreciated and greatly helps us to continue the fight for the receivables management industry, so feel free to donate a different amount than suggested.

If you’ve already paid your membership dues but would like to contribute, you can do so by donating here. We will add your company name to our list of Legislative Fund contributors on the RMAI website and in RMAI publications and invite you to the Legislative Fund Reception at the 2023 Annual Conference. Click here to see a list of current contributors on the right-side bar.

Donate an Item for the Annual Conference Silent Auction
RMAI is collecting donations for 2023 Annual Conference Silent Auction. Whether you are a regular donor or a first-time donor that wants to participate in the silent auction, please complete the Donor Form to add your item to our Auction Catalog.

More highlights about the auction will be coming throughout the remainder of 2022, so please head to our 2023 Annual Conference Silent Auction website for more details.

Upcoming Monthly Webinars – Free for Members
Register now for our December 1st webinar, Data Security as an Element of Vendor Management with Gerardino DiPopolo from Pressler, Felt & Warshaw and Kim Phan from Troutman Pepper. The focus of this webinar will be on the legal and operational aspects companies should consider to ensure proper vendor management amidst the various data security changes and requirements.

Recorded Webinars – Free for Members*
If you missed our November 10th monthly webinar, you can still watch the recording: The Nuances of Collecting/Litigating Fintech Installment Loans and Expansion of the Fintech Lending Market for Underbanked Consumers

If you missed our November 16th webinar, the recording will be available soon: The New D.C. Collection Law – Big Changes, Big Issues

*Most recorded webinars are free for members, with some exceptions.

Chief Compliance Officer Webinar Series (CCO Series)
RMAI recently completed its six-part webinar series, which focused on updates and changes in the compliance world since the implementation of Regulation F with topics covering credit reporting, letters, communication restrictions, vendor oversight, text messaging and payments.

Register for the entire recorded CCO Webinar Series: $299 for members or for Individual Webinars: $64 per webinar for members

Click here for more information on our live and recorded webinars.  Contact Shannon Parod at [email protected] or (916) 482-2590 with any questions.

Congratulations to our new and renewed Certified Receivables Compliance Professionals (CRCP) and renewed Certified Receivables Businesses (CRB)!

CRCP – New
Jacqueline Cuevas, Cuevas Jones, LLC
Susan Namm, SAM Inc., Solutions for Account Management
Tawon Outing, Oliphant United, LLC
Shantal Pascal, First Credit Services, Inc.

CRCP – Renewals
Clifton Gibson, Spire Recovery Solutions
Sondra Jurica, LTD Financial Services
Russell London, London & London
Amber Russo, Kino Financial
Mitch Williamson, Barron & Newburger, P.C.

CRB – Renewals
Absolute Resolutions Corp.
Frontline Asset Strategies
Stenger & Stenger
Troy Capital, LLC

Affiliate Members Can Become a Certified Business
Did you know that RMAI’s Receivables Management Certification Program is not just for debt buyers, collection agencies and collection law firms? Affiliate member companies also have the opportunity to become certified through our Certified Receivables Vendor (CRV) certification.

Requirements:

1) Self-Audit Compliance with Standards
Complete a self-audit to ensure compliance with the seven (7) core standards (General Vendor Certification). Companies that are brokers need to ensure compliance with an additional six (6) standards.

2) Complete Pre-Certification Audit
Schedule a pre-certification audit to be completed prior to submitting the CRV application. RMAI has many Authorized Audit Providers to conduct the audit.

3) Submit CRV Application
After your company’s self-audit and pre-certification audit are completed, complete the CRV application and submit it to RMAI along with proof of E&O & Cyber Insurance (Standard 104).

4) Plan for Full Compliance Audit
At the midway point of the three-year certification term (16^th & 20^th month), RMAI notifies CRVs that a full compliance audit will be due within five months. Future audits will continue every three years thereafter.

CRV Pricing:
General Vendor Certification (Series 100): $900 + $100 first-time administration fee
Broker Vendor Certification (Series 100 & Series 200): $1,800 + $100 first-time administration fee

Below is a list of the CRV standards  with which companies need to comply. Please refer to Appendix B of the Governance Document for more information on what is required for each standard.

CORE VENDOR STANDARDS (Series 100)	BROKER VENDOR STANDARDS (Series 200)
Chief Compliance Officer (101)	Broker Agreements (201)
Criminal Background Checks (102)	Multiple Listings (202)
Employee Training Programs (103)	Due Diligence (203)
Insurance (104)	Misrepresentation of Accounts (204)
Data Security (105)	Purchase/Sale Agreement Requirements (205)
Website & Publication (106)	Title (206)
Vendor Management (107)

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View all certified businesses and vendors.
View all certified individuals.
View educational requirements for certified individuals.

For questions about certification, contact RMAI at (916) 482-2462 or email [email protected].

RMAI’s leadership cultivates relationships within the receivables management industry to expand business opportunities for members.

RMAI 2023 Annual Conference | February 6-9, 2023

Please note, the RMAI offices will be closed November 24th and 25th, in observance of the Thanksgiving holiday.

Thank you to our November 2021 – November 10,  2022 Legislative Fund Contributors!

Diamond $25,000

Cavalry Investments, LLC

Crown Asset Management, LLC

Financial Recovery Services, Inc.

First Financial Portfolio Services, LLC (FFAM360)

Midland Credit Management

Portfolio Recovery Associates, LLC

Resurgent Holdings, LLC

Titanium $15,000

National Credit Adjusters, LLC

Platinum $10,000

Blitt and Gaines, P.C.

Cascade Capital, LLC

InvestiNet, LLC

Second Round, LP

Unifund CCR LLC

Gold $7,500

Miller and Steeno, P.C.

Pressler, Felt and Warshaw, LLP

Rausch Sturm, LLP

Superlative RM

Silver $5,000

AscensionPoint Recovery Services, LLC

CKS Financial

Corporate Advisory Solutions, LLC

Digital Recognition Network

FMA Alliance, Ltd

Halsted Financial Services, LLC

Klima, Peters, & Daly, P.A.

Pharus Funding, LLC

Provana, LLC

Spring Oaks Capital, LLC

T&I Enterprises, LLC

Tromberg, Morris & Poulin, PLLC

Velo Law Office

Bronze $2,500

Absolute Resolutions Corp.

Couch Lambert

DebtNext Software, LLC

Ragan & Ragan

RAzOR Capital, LLC

Resurgence Capital, LLC

Security Credit Services, LLC

Stillman Law Office

Weltman, Weinberg & Reis Co., L.P.A.

Brass $1,000

Action Collection Agencies, Inc.

Aldridge Pite Haan, LLP

Andreu, Palma, Lavin & Solis, PLLC

Arbeit

Barron & Newburger, P.C.

Bayview Solutions, LLC

Butler & Associates, P.A.

Call Center Services International

CCMR3

Cedar Holdings International, Inc. DBA Cedar Financial

Commerical Credit Group IOnc

Commercial Funding Inc.

Complete Credit Solutions, Inc.

Cornerstone Support, Inc.

D & A Services, LLC

Dobberstein Law Firm, LLC

Equabli

EverChain, LLC

FLOCK Specialty Finance

Gordon, Aylworth & Tami, P.C.

Guglielmo & Associates, PLLC

Harvest Strategy Group, Inc.

Hunt & Henriques

Investment Retrievers, Inc.

Jefferson Capital Systems, LLC

Kino Financial Co., LLC

Kota Business Solutions, LLC

Levy & Associates, LLC

Lockhart, Morris & Montgomery, Inc.

Maxwell & Graves Solutions, LLC

Metacorp, LLC

Portnoy Schneck, LLC

Quall Cardot, LLP

Quantum3 Group, LLC

Simmonds & Narita, LLC

SimpleCertifiedMail.com

Slovin & Associates

The Cadle Company

Tobin & Marohn

US Mortgage Resolution, LLC

Velocity Portoflio Group, Inc.

Venable LLP

VeriFacts, Inc.

Vertican Technologies, Inc.

Other

Accelerated Data Systems

Alliance Data

Alliance Credit Services, Inc.

Arko Consulting LLC

ARM Compliance Business Solutions

Atlas Acquisitions

Attunely Inc.

Autovest, LLC

Ballard Spahr, LLP

Business and Professional Collection Service, Inc.

Capio

Client Services Incorporated

CMS Services

Coastal Law Firm. APLC

Complete Credit Solutions, Inc.

Comtronic Systems, LLC

Conficio Capital, Inc.

Converging Capital, LLC

Convoke, Inc.

Credit Control, LLC

Credit Corp Solutions, Inc.

CSS Impact!

David Reid

Debt Recovery Solutions, LLC

Delev & Associates, LLC

Dyck-O’Neal, Inc.

Dynamic Recovery Solutions

Experian

First American Acceptance Co., LLC

First Solutions Debt Management, LLC

FMS, Inc.

G. Reynolds Sims & Associates, P.C.

Gaskell & Giovannini, LLC

Genesis Recovery Services

Goldberg and Oriel

Interim Capital Group, Inc.

International Debt Buying Consultants, LLC

Jormandy

Keith D. Weiner & Associates Co., LPA

Kelly Knepper -Stephens

Kirschenbaum & Phillips, P.C.

Lockhart, Morris & Montgomery, Inc.

Malone Frost Martin PLLC

MauriceWutscher LLP

Monarch Recovery Management, Inc.

National Debt Holdings, LLC

Nationwide Recovery Systems

Nelson & Kennard

PCI Group Inc.

Phin Solutions, LLC

Poser Investments, Inc.

Premier Forty Financial, LLC

Premium Asset Recovery Corp (PARC)

Pro Forma Inc

Provana, LLC

ProVest LLC

Red Target, LLC dba SCJ Financial Services

Repay

Resource Management Services, Inc.

RevSpring

Robinson, Hoover & Fudge, PLLC

SAM, Inc. – Solutions for Account Management

Scott & Associates, PC

Sentry Credit, Inc.

Sonnek & Goldblatt, Ltd.

State Collection Services, Inc.

Stone, Higgs & Drexler

Stone Creek Financial Inc.

Suttell & Hammer

Synchrony Financial

Tate & Kirlin

Techno Brain BPO ITES Limited

The Oakes Law Firm, LLC

TransUnion

Troy Capital, LLC

United Acquisitions, LLC

USASF Servicing

Vargo & Janson, P.C.

Velocity Portfolio Group, Inc.

Venable LLP

VoApps

Zenarate, Inc