Guest Post: Supreme Court Clarifies Scope Of Whistleblower Protections Under Dodd-Frank

By: Connie E. Carrigan
February 27, 2018

On February 21, 2018, in the case of Digital Realty Trust, Inc. v. Somers, the United States Supreme Court unanimously decided that employees who raise internal complaints about possible violation of securities laws are not protected as whistleblowers under the Dodd-Frank Act.  In order to obtain protection from retaliatory measures undertaken by their employers, such complaints must be reported to the Securities and Exchange Commission (SEC). 

The Dodd-Frank Act was enacted in 2010 in an effort to protect consumers from abusive practices by financial service providers.  While the Act itself specifically limits the definition of whistleblower to only those employees who make a report of suspected securities violations to the SEC, the regulations interpreting the Act’s anti-retaliation provisions extend its protections well beyond the statute.  In reliance upon these regulations, several federal circuit courts throughout the nation adopted the expansive interpretation on the basis that it reflected Congressional intent.  This created a split in the circuits as other courts strictly applied the Act’s narrow definition of what actions constitute protected whistleblower activity.

In determining that the whistleblower protections are limited to those who report violations to the SEC and in rejecting the employee’s assertion that his report of inappropriate activity to senior management was sufficient to trigger Dodd-Frank protections when his employment was terminated, the Supreme Court distinguished such protections from those contained in the Sarbanes-Oxley Act enacted in 2002 for the purpose of regulating the financial services industry and curbing securities violations.  Both Acts forbid retaliation for reporting unlawful conduct.  However, the Sarbanes-Oxley Act contains a more expansive whistleblower protection by protecting employees who provide information to federal agencies, to Congress, or to “a person with supervisory authority over the employee.” 

Justice Ruth Bader Ginsberg, writing for the Court, reasoned that the “core objective” of Dodd-Frank was to aid the SEC’s enforcement efforts by rewarding those who report suspected violations of securities law to the SEC.  The Dodd-Frank Act unambiguously provides that a whistleblower is a person who provides “information relating to a violation of the securities laws to the [Securities and Exchange] Commission.”  Justice Ginsberg further reasoned that the Court’s narrow interpretation of the Act nevertheless accomplishes the Act’s objective of protecting whistleblowers so long as they report misconduct to the SEC and that the Act’s anti-retaliation provisions appropriately serve to protect employees, attorneys, and auditors who may be required to make disclosures that are protected under any law subject to the SEC’s jurisdiction.

The Somers decision is welcome news to employers as it limits the scope of reports which are protected by the Dodd-Frank Act to those which have been asserted directly to the SEC, thereby protecting employers from defending against retaliation claims raised by employees who have only made such complaints internally.  However, the fact that the Dodd-Frank Act incentivizes employees to report inappropriate activity to the SEC by tempting them with lucrative whistleblower awards should not be taken lightly.  The fact remains that pursuant to various federal and state whistleblower protections, employers are obligated not to retaliate against employees who disclose suspected violations of law.  A zero-tolerance policy with regard to such retaliation is recommended.  Employers should ensure that all reports of wrongdoing are taken seriously and are effectively, fairly, and consistently investigated.

 

Connie Carrigan is a partner with Smith Debnam Narron Drake Saintsing & Myers, LLP's Employment Law Group.  If you have questions about the impact of this decision or any other matter relating to employment practices, please contact Connie at ccarrigan@smithdebnamlaw.com.

Guest Post: District Court Rejects Vicarious Liability Claims under the TCPA

By Alexa Cannon

A Michigan district court recently weighed in on the availability of vicarious liability for violations of the Telephone Consumer Protection Act (the “TCPA”). In Kern v. VIP Travel Servs., the plaintiffs received several dozen telephone calls from United Shuttle Alliance Transportation Corp. (“USA”). Kern v. VIP Travel Servs., 2017 U.S. Dist. LEXIS 71139 (W.D. Mich. 2017). The calls were made over a three month span to cell phones which were registered on the national do-not-call registry. When answering the calls, plaintiffs heard an automated voice telling them, “Pack your bags! You’ve won a Disney Vacation!” Id. at *3. The voice directed the plaintiffs to press 1 to reach a representative in order to reserve a date at various vacation resorts of their choosing. After plaintiffs spoke to a representative, they were directed to a website in order to purchase the packages at a discounted rate. Plaintiffs made reservations to stay at three resorts and received emails from the resorts confirming their reservations.

Plaintiffs contended that the telephone calls made by USA violated the TCPA, and that the resorts were vicariously liable for the calls. Examining the vicarious liability of the resorts, the court first noted that “[a]n entity may be vicariously liable for TCPA violations ‘under a broad range of agency principals.”  Id. at *16.  The court then went on to examine the claims against the resorts under principles of actual authority, apparent authority, and ratification.

Actual Authority

In reviewing the plaintiffs’ claims as to actual authority, the court focused its analysis on the resorts’ rights to control the agent’s actions. Id at *17. When analyzing the facts here, the court determined there was nothing in the complaint that created a reasonable inference that the resorts had the right to control USA. The court noted that even if the resorts contracted with USA to solicit customers, this was not enough to establish that the resorts had the right to control USA. Id. at *19. The court therefore concluded there was no supporting evidence to prove that USA reasonably believed that the resorts had given it authority to make calls which violated the TCPA, thus actual authority was nonexistent.

Apparent Authority

The court next turned its attention to the plaintiffs’ assertion that USA had apparent authority on behalf of the resorts to make calls which violated the TCPA. Here, the court focused on whether the resorts had held USA out to third parties as possessing sufficient authority to commit the particular act in question. Id. at *19. The court ruled that there were no well-pleaded allegations to suggest the resorts gave USA access to detailed information about their vacation packages, or gave USA to authority to enter customer information into Resort’s database. The court reasoned that although USA knew the price of the vacation packages, the duty rested on the Plaintiffs to confirm their reservations because USA could not finalize the transaction. In short, the court concluded that the plaintiffs’ apparent authority argument failed because the resorts never “held out” USA as possessing sufficient authority to make the violative calls.

Ratification

Lastly, the court examined the plaintiffs’ argument that the resorts should be held vicariously liable due to their ratification of USA’s actions. The court took issue with plaintiffs’ ratification argument and noted that the complaint did not provide the court with any reasonable inference that the resorts were aware of USA’s unlawful calls. Therefore, the resorts never affirmed USA’s actions.

Rejecting the Plaintiffs’ vicarious liability argument, the court rendered a dismissal for both resorts. The opinion should be welcomed by defense counsel defending TCPA violations as it provides guidance to the extent at which vicarious liability can hold a party liable under federal common law agency principles for a TCPA violation by a third  party telemarketer.

 

About the Author.  Alexa Cannon is a rising third year law student at Campbell University and is a summer law clerk with Smith Debnam Narron Drake Saintsing & Myers, LLP.

Guest Post: CFPB Issues Request for Information Regarding Small Business Lending

By Vanessa Garrido

The CFPB has issued a Request for Information (RFI) to collect data that will shed light on how small businesses engage with financial institutions, with a particular focus on women-owned and minority-owned small businesses. Of the estimated 27.6 million small businesses in the United States, over 7 million of these businesses are minority-owned and over 8.4 million are women-owned. In order to learn more about how to encourage and promote small businesses, “it is vitally important to fill in the blanks on how small businesses are able to engage with the credit markets.”  Prepared Remarks of CFPB Director Richard Cordray at the Small Business Lending Field Hearing, CFPB (May 10, 2017),The RFI was issued pursuant to Section 1071’s business lending data collection rule under the Dodd-Frank Act which modifies the Equal Credit Opportunity Act to require financial institutions to report information concerning credit applications made by women-owned, minority-owned, and small businesses.

The purpose of the business lending data collection rule is to:

• Fill existing gaps in the general understanding of the small business lending environment;
• Identify potential fair lending concerns regarding small business, including women-owned and minority-owned small business;
• Facilitate enforcement of fair lending laws; and
• Identify the needs and opportunities for both business and community development.

In an effort to collect and report on small business lending data, the CFPB seeks comment on:

• How the lending industry defines small business and how that affects their credit application processes;
• The particular data points that financial institutions are compiling and maintaining in the ordinary course of business concerning their small business lending, the sources of information that financial institutions rely on in obtaining this data, and any challenges financial institutions foresee in collecting and reporting this data;
• How financial institutions integrate data collection into their application process;
• The ability to measure accurately the prevalence of lenders and the products they offer;
• Roles that marketplace lenders, brokers, dealers and other third parties may play in the application process for loans;
• Whether certain classes of financial institutions should be exempt from the requirement to collect and submit data on small business lending;
• Any financial products that finance small business, in addition to term loans, lines of credit, and credit card products; and
• Ways to protect the privacy of applicants and borrowers, as well as the confidentiality interest of financial institutions that are engaged in the lending process.

Comments are due on or before July 14, 2017.

 Vanessa Garrido is a rising third year law student at Wake Forest University and is clerking with Smith Debnam Narron Drake Saintsing & Myers, LLP.

Guest Post: When to Fight and When Not to Fight

By: Mark J. Dobosz
January 24, 2017

“He will win who knows when to fight and when not to fight.” 

 
Sun Tzu

The art of fighting a battle means that you must learn all there is to know about your enemy. This knowledge can only come about through careful observation, research and even when possible, conversations with factions of your foes.

While the work of understanding and gathering information on how a federal government agency (i.e. the CFPB) acts, responds and strategizes can be laborious, the ultimate end game knows where the weaknesses lay in order to advance your position. As Sun Tzu writes in “The Art of War”, “If ignorant both of your enemy and yourself, you are certain to be in peril.”

The results of the last presidential election have emboldened many an organization to quickly move and attack. While the results of this frontal attack are yet to be seen, it could be argued, “Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.” Sun Tzu

Some organizations have chosen to take the approach that gathering of information, dialogue and observing the multiple variables in the environment which may impact knowing how and when to take advantage of an agency’s weaknesses has often proven to result in some form of comprise. Thus, while a battle may have been waged, the outcome is known well in advance and the results providing a winning result.

Eventually justice and truth will prevail as the pendulum of the powers of government swing back and centers itself. Agencies which have all of the power can best be described by Lord Acton’s quote “Power tends to corrupt and absolute power corrupts absolutely.” Shining a bright light on the knowledge you have gained in your study and observation of the agency will in time reveal the absolute corruption that exists within that agency.

“Know your enemy and know yourself and you can fight a hundred battles without disaster.”

Sun Tzu


About the Author: Mark Dobosz currently serves as the Executive Director for NARCA – The National Creditors Bar Association. Mark is a one of NARCA’s speakers on many of the creditor’s rights issues impacting NARCA members. The National Creditors Bar Association (NARCA) is a trade association dedicated to creditors rights attorneys. NARCA's values are: Professional, Ethical, Responsible.

Guest Post: Why Rental Cars May Present a Serious Loophole in Privacy Policies

By Ragan Riddle
September 2, 2016

If you are charging your phone through a USB port or connecting to Bluetooth in your rental car, you may want to think twice. Last week, an FTC article highlighted the dangers of this seemingly innocent conduct, as it creates an avenue for compromising both you and your clients’ sensitive information.

While individuals connect their devices to rental cars to charge their phones, make calls, listen to music, or use their GPS systems, what these individuals fail to consider is that many cars automatically store this information. If the information is not cleared by the renter or the rental car company, anyone who subsequently rents that car has access to this data. Call and message logs, location coordinates, and contact information then remains long after the rental car is returned.


This can be problematic on two fronts: for rental car companies providing the service and for individuals employed by companies with rigorous privacy standards who compromise this personal information simply by connecting their smart phone to the car.


Rental car companies should consider including a disclosure provision that is given to the customer with the initial pre-rental paperwork. After the rental is returned, these companies should have a policy requiring the information is cleared from the system before the car is rented to anyone else. Failure to address this privacy implication can have unintended compliance consequences as privacy becomes an increasingly prevalent focus for regulatory agencies.


For companies handling sensitive information, however, it is equally important to have a provision within the companies’ existing privacy standards that details appropriate protocol for connecting employee devices to rental cars. As the FTC, CFPB, and other regulatory organizations continue to focus on privacy standards for sensitive consumer information, taking action against those who fail to do so, companies would be remiss to ignore this obvious but often unrecognized privacy loophole.

The FTC article and its mirror article for consumers recommend, among other things, disabling automatic settings that sync electronic devices to rental cars or avoiding connecting mobile devices altogether. While wise, it is unlikely that this will solve the privacy loophole in its entirety.

Though no official action has been taken concerning this issue, it is unlikely that this will refrain from becoming a pressing area for concern and investigation in the future. Recognizing this loophole now may help entities avoid unanticipated privacy issues and impending regulatory action.

About the Author: Ragan Riddle is a summer law clerk with Smith Debnam Narron Drake Saintsing & Myers and a third year law student at Elon University's School of Law

 

Guest Post: An Unanticipated Regulator of the Future – Credit Averse Millennials

By Mark J. Dobosz
August 22, 2016

A recent New York Times article by Nathaniel Popper reported the following, “Data from the Federal Reserve indicates that the percentage of Americans under 35 who hold credit card debt has fallen to its lowest levels since 1989…” Popper goes on to say, “Their reluctance could have lasting repercussions for millennials, as well as for the financial system and the economy.”  Just when you think all you had were government regulatory rules and regulations that may impact your bottom line, along comes the sleeper regulator of a generation of consumers with an aversion to credit and its risks.

Diversification in the profit centers of your practice has hopefully been part of your business plan in the years following the economic crash of 2008-2009.  Professional firms in all industries saw a new “normal” come to life and creditors rights attorneys and their firms were no exception. Preparing for a future that would need to include litigating collections from a diverse portfolio of creditor sources  (credit card, medical, bankruptcy, student loan, subrogation, commercial – just to name a few) became more and more pragmatic as the years of the recession marched forward.

In the article, Popper also comments, “But more recent data has also suggested that millennials are using credit cards less than people of a similar age did in the past – and they are taking on fewer auto loans and mortgage loans than people of a similar age did before the financial crisis.” One might easily dismiss this and think that they will need to buy homes and cars on relatively soon and so the equilibrium will balance itself. Not so the research reflects as Popper points out,  “ ‘It will probably take them longer to get access to credit,” said Gregory Elliehausen, an economist at the Federal Reserve specializing in consumer finance. “In the meantime their behavior and some of their habits will already have been formed.” ‘

So what does this mean for you and your firm in 2016 and beyond?

When was the last time you reviewed you business plan for your practice and your firm? Have you recently assessed your portfolio risks from a P/L standpoint? Have you projected out what would happen if you lost a significant concentration of your client portfolio? And if so, have you developed an action plan, or more importantly, are you in the process of making the necessary changes?
In addition to practicing a noble profession, never lose sight of the fact that you are an entrepreneur, a small business owner and masters of your fate.  Vigilance in the shifting sands of a credit-based economy has never been more important.

“I don’t want to go out and buy, buy, buy, even though that’s what society wants me to do.” …. “I want to save and invest for the long term.”
 Jason Towner – 32-year old private equity professional with no credit cards

As quoted in “Loaded with Debt, Young Americans Avoid Taking on More”
by Nathan Popper in the New York Times.

About the Author: Mark Dobosz currently serves as the Executive Director for NARCA – The National Creditors Bar Association. Mark is a one of NARCA’s speakers on many of the creditor’s rights issues impacting NARCA members. The National Creditors Bar Association (NARCA) is a trade association dedicated to creditors rights attorneys. NARCA's values are: Professional, Ethical, Responsible.

Guest Post: Personal Finance = Personal Responsibility

By: Mark Dobosz
August 3, 2016

A columnist in a major newspaper today suggested that limiting consumer choices in some cases might be good. That curbing access to credit may be good. And last but not least – suggested that some people need protection from bad financial practices – and their own bad decisions.

In her September 2015 article  “When the Government Tells Poor People How to Live” author Alana Semuels writes,

Is this the role government ought to be playing in people’s lives? John Stuart Mill condemned such efforts, writing, ‘The only purpose for which power may be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others. His own good, either physical or moral, is not a sufficient warrant.’ People may make bad choices, Mill and others argue. But that’s one of the costs of a free society. And it’s not as though government intervention is risk-free: The government may make even worse decisions on people’s behalf. Or, when it treats them like children, why expect that they will ever act like adults?

It would appear that the movement to protect consumers from financial bad practices to expand to personal bad decisions has gained headway from many organizations including regulatory agencies in the financial services sector.

In looking at the equation of Personal Finance = Personal Responsibility, a great definition has been proposed by Clay Skurdal – a 30+ year veteran of the financial services industry. He proposes that there are 6 characteristics of those who take personal responsibility for their finances.

1.  “Have a spending plan, or budget, is nothing more than a written plan detailing income and expenses before they occur. Having a plan in place shows diligence;
2. Saving money is a priority - Saving, by definition, is spending less than you make.
3. They recognize the difference between “needs” and “wants - You’ll be amazed how much you can save by cutting out “want”.
4. They refuse to borrow money - if you already struggle to pay your mortgage each month and keep the lights on, the last thing you need is another monthly payment obligation. If you can’t afford to save toward this, then you can’t afford the monthly payment that would result from taking out a loan either.
5. They don’t wait for friends, family, the government, or others to rescue them - don’t make the mistake of expecting these sources of income to make up for a lack of financial planning.
6. They are givers - Givers are the happiest, most fulfilled people in the world. Giving of your time, money, effort, and energy takes the focus off of your own problems. You need to get your focus off your problems from time to time, for your own sanity’s sake. Those who are constantly worried about their money, or their lack of it, have difficulty focusing on anything else. It makes them not as productive at work, for example, which can cost them a raise or even their job.”

It would be beneficial if we paused and took a step back from proposals to enact regulations and laws protecting people from their own bad decisions. We cannot assume that these people want saving or merely want to escape their rightful personal responsibility for their decisions.

In a country of 318 million people, more than 75% of Americans responsibly deal with their finances. (Regulators estimate roughly 70 million Americans are contacted by debt collectors each year. 2016 Consumer Financial Protection Bureau -CFPB estimate) As any teacher might tell you, setting rules for the small minority of the class can often have unintended consequences for thee majority of the students in the class who are not the challenge.

"In the long run, we shape our lives, and we shape ourselves. The process never ends until we die. And the choices we make are ultimately our own responsibility.”

Eleanor Roosevelt

 About the Author: Mark Dobosz currently serves as the Executive Director for NARCA – The National Creditors Bar Association. Mark is a one of NARCA’s speakers on many of the creditor’s rights issues impacting NARCA members. The National Creditors Bar Association (NARCA) is a trade association dedicated to creditors rights attorneys. NARCA's values are: Professional, Ethical, Responsible.

Guest Post: Seventh Circuit Holds Debt Collectors “Are No Different than Any Other Plaintiff”

By: Emily Jeske


On May 18, 2016, the Seventh Circuit ruled in St. John v. CACH, LLC, Nos. 14-2760, 14-3724, & 15-1101, 2016 U.S. App. LEXIS 9117 (7th Cir. 2016), that debt collectors do not have to intend to go to trial when filing complaints in order to comply with the Fair Debt Collection Practices Act (“FDCPA”). Section 1692e(5) of the FDCPA states that “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt,” and “[t]he threat to take any action that cannot legally be taken or that is not intended to be taken” is a violation of the act.


In St. John, individual consumers sued debt collection companies for violations of the FDCPA, claiming that the companies filed lawsuits with “no intention of going to trial.” Id. at *2. The companies initially filed suit to recover on credit card accounts held by the consumers, but ultimately dismissed their actions voluntarily. Id. The consumers then asserted that this voluntary dismissal prior to trial violated Section 1692e(5)’s prohibition against “[t]he threat to take any action that…is not intended to be taken.”


The Seventh Circuit disagreed and held that the consumers did not show that the companies “did not intend to keep their supposed threat of going to trial,” nor that the companies ever threatened to go to trial in the first place. Id. at *6. The court pointed out that there was no allegation (nor proof) that the companies planned or intended to go to trial; rather, the consumers merely claimed that the companies “implicitly communicated an intention to go to trial simply by filing the complaints.” Id. at *5. Ultimately, this argument was insufficient to support the consumers’ allegations and constitute a violation of the FDCPA.


In reaching its decision, the Seventh Circuit noted that “debt collectors who sue to recover a debt are no different from any other plaintiff.” Id. at *7–8. This reasoning in itself was helpful for the financial services industry because consumers and their attorneys often argue that debt collectors should essentially be held to a higher standard when they engage in litigation. Now, though—at least in the Seventh Circuit—debt collectors in the industry will not be held liable under the FDCPA “just for filing a complaint.” Id. at *8. They can “weigh the anticipated costs of trial against the potential benefits when considering how far to advance the litigation,” just like any plaintiff in any legal action. Id. Because “litigation is inherently a process,” parties may come to a resolution that is more efficient and practical than taking a case all the way through trial. Id. at *7.


In fact, the court noted, settlements and pre-trial dismissals may benefit defendants in debt collection actions as well. Id. n.2. A collector may be willing to settle a case for much less than the consumer owes to avoid the time, cost, and uncertainty of trial. Id. In St. John, there was no contention that the consumers didn’t owe the money; they did not deny that they owed the debts or claim that the debts weren’t legally enforceable. Id. at *5. Avoiding a trial may have actually benefited the consumers who brought suit.


The court also discussed the true scope and purpose of the FDCPA. Although the FDCPA was created to protect consumers from deceptive or unfair practices by debt collectors, it does not punish them for “engaging in a customary cost-benefit analysis when conducting litigation.” Id. at *8. To force debt collectors—unlike any other plaintiff—to see their cases all the way to trial would extend far beyond the requirements of Section 1692e(5).

The St. John ruling may create a continuum on which debt collection actions are enforceable. Complaints must be filed in good faith with some basis for verifying the legitimacy of debts owed; however, a debt collector is not required to go to trial in order to show that the debt is valid or risk running afoul of the FDCPA. Id. at *5, 8. The Act was not established to effectively bar debt collectors from recourse simply because it is not in the collector’s best interest to go to trial, “even when its claim is unquestionably legitimate, and even when no other recourse is left.” Id. at *8. Debt collectors, as long as their actions are in good faith, can have the same array of litigation options as any other plaintiff.

 

About the Author: Emily Jeske is a summer law clerk with Smith Debnam Narron Drake Saintsing & Myers, LLP and a rising 3L at Wake Forest University's School of Law.

 

Guest Post: CFPB Penalizes Another Collection Law Firm

BY: Jerry T. Myers
April 26, 2016

On April 25, 2016 the Consumer Financial Protection Bureau (CFPB) issued its latest consent order against a law firm that specializes in consumer debt collection. The April 25 order is against Pressler & Pressler, a New Jersey law firm. A similar consent order was issued on December 28, 2015 against Frederick J. Hanna & Associates, a Georgia law firm. In both orders, the CFPB highlighted what it deems to be unfair and deceptive practices undertaken by the firms to collect consumer debts. 

The focus in both of the consent orders is on the collection activity the law firms performed on behalf of their clients who purchase defaulted consumer debts. The CFPB claimed in both situations that the debt purchasers and the law firms attempted to collect debts without first making a sufficient review of loan documents and account statements to confirm that the debts were actually owed. This failure to review, in the estimation of the CFPB, led the law firms to attempt collection of debts that were not owed. In response, the CFPB assessed a $3.1 penalty against the Hanna firm and a $1 million penalty against the Pressler firm.

During the review periods, both the Hanna and Pressler law firms initiated litigation on thousands of consumer accounts each month. Both firms relied heavily on staff to review account data and to perform the necessary scrubs to eliminate bankrupt or deceased accounts and to confirm consumer addresses. The CFPB asserted in both enforcement actions that the firms’ attorneys were not meaningfully involved in reviewing accounts before initiating litigation. The CFPB found this lack of meaningful attorney involvement to violate both the Fair Debt Collection Practices Act and the Dodd Frank Act.

  

Both of the consent orders specify the activities which must be undertaken by the firms’ attorneys to demonstrate that they are meaningfully involved in the cases they file. The firms must:

• Have in their possession, before sending a demand letter or making a collection call, a charge-off statement, and if the case is based on a breach of contract, either account statements from the creditor indicating actual use of the account or a copy of the account/loan agreement signed by the consumer. If the account is owned by a debt buyer, the attorney must also have evidence of the chain of title to the account. 
• Before filing suit, the attorney of record for the case must log into the consumer’s account in the firm’s case management system, creating a record showing the attorney’s review of the account. In addition to reviewing the account level documentation, the attorney must also confirm that the case is being filed within the statute of limitations, that the consumer has not filed bankruptcy, that the consumer’s address has been confirmed using a historically reliable and accurate source, and that the case is being filed in a proper venue.

Additionally, both consent orders prohibit the attorneys’ use of any affidavits supplied by their clients which the attorney knows or should know may be defective. Examples of defective affidavits include those in which the affiant falsely claims personal knowledge of the character, amount, or legal status of a debt; those in which the affiant falsely claims to have performed account level document review; and those affidavits which were not actually executed in the presence of a notary.

As with the Hanna order, the Pressler consent order is only binding on the Pressler law firm. It contains guidance, however, for all law firms who collect consumer debt. Aspects of this consent order will also likely appear in the debt collection rules expected soon from the CFPB.

The Pressler consent order confirms two key directives from the CFPB’s consent order in the Hanna case. First, collection law firms must be familiar with their clients’ processes for executing affidavits. Second, they must be able to demonstrate that their attorneys are actually involved in the review of documents used in support of litigation.

Both orders also require that attorneys retain final approval and ultimate oversight of all processes followed by their staff. Attorneys must also have final approval for all letter and pleading templates used by the firm in prosecuting their cases. While attorneys do not have to personally perform every step involved in the prosecution of their cases, these two consent orders make it clear that they must be involved in the key decisions arising in their cases.

ABOUT THE AUTHOR:
Jerry Myers is the managing partner of the Smith Debnam law firm in Raleigh, NC. Jerry is certified by the American Board of Certification as a Specialist in the field of Creditors Rights law. Jerry is a past President of the Commercial Law League of America and was the first President of the North Carolina Creditors Bar Association. Jerry has practiced in the Creditors Rights arena for 30 years.

Guest Post: 100% Data Certainty and Proxy Methodology

April 8, 2016

By: Mark Dobosz

 

As reported in an April 8, 2016 article in Auto Finance SubPrime News, Senator Tom Cotton (R-AR), at the Senate Banking Committee’s CFPB hearing on April 7, 2016, took direct aim at CFPB Director Richard Cordray. He pressed the Director with questions about “…how the CFPB determined the amount of consumers harmed by auto financer’s Ally’s practices and how these borrowers would be able to secure restitution from the pool of $80 million included in Ally’s settlement with the bureau.”

The article continued:

Cotton asked, “Did the Department of Justice recommend that you had to opt-in under penalty?’ “We worked with the Justice Department,” Cordray replied “This is routinely required on federal forms,” Cotton retorted.” “We’re not doing something different than the Department of Justice in this case. We’re working together. We’re on the same page,” Cordray said. Cotton then questioned, “Did you personally decline the Department of Justice’s recommendation that a penalty of perjury would be attached to such a statement?” Cordray retorted, “I don’t believe I did. I’d be happy to have my staff follow up with you.

The research methodology to determine those who suffered disparate impact continues to be suspect from a variety of sources and researchers in light of the fact that the veracity of the data continues to remain questionable.

In a panel at the ABA’s Business Law Section Spring Meeting this week, “Is Fair Lending Enforcement Fair For All”, panelists addressed various viewpoints for why the actions are or are not properly addressing discrimination. The discussion included views on the USSC decision on the FHA’s Inclusive Communities, as well as a lively debate centered on the CFPB’s research methodology to determine discrimination.

Reasonable citizens and consumers observing these recent CFPB actions may be concerned that the federal government might not apply fair standards for all citizens equally. Furthermore, a reasonable person might surmise that if the government is going to utilize research to award financial remuneration to individuals based on race, they should use methods which can specifically, effectively and efficiently identify those impacted individuals.


While $80 million to 325,000 yet to be identified specific minority individuals by the CFPB makes great headlines – the average $246.16 payment per person – should be guaranteed by the Bureau to be 100% accurate and not containing any fraudulency through opt-in clauses for penalty of perjury by recipients seeking remuneration.

Accurate methodology matters when claims of discrimination and disparate impact are asserted.

 

About the Author: Mark Dobosz currently serves as the Executive Director for NARCA – The National Creditors Bar Association. Mark is a one of NARCA’s speakers on many of the creditor’s rights issues impacting NARCA members. The National Creditors Bar Association (NARCA) is a trade association dedicated to creditors rights attorneys. NARCA's values are: Professional, Ethical, Responsible.

Guest Post: The Little Engine that CAN Make a Difference

By: Mark Dobosz

March 8, 2016"It would seem that legislative canon that purports to better regulate those institutions deemed 'too big to fail' is unwittingly creating a class of banks that may be 'too small to succeed.'" 

                M&T CEO Bob Wilmers in his latest annual letter to shareholders.

I personally would credit the genesis of the phrase “too small to succeed” to Immediate Past-President of the National Creditors Bar Association, Joann Needleman, as she frequently spoke and continues to speak on the increasing costs of regulation and the impact on the creditors rights attorney firms and the industry. It is a welcoming sight to see that our fellow colleagues on the small banking side are also joining in with a loud call to rein in federal regulations to stem the tide of putting small and medium sized businesses and firms “out of business”.

Bob Wilmers went on to say in his letter, "We have witnessed, through the rise of nonbank players, a subtle but steady shift in which regional banks are playing an ever-diminished role in the financial leadership of the communities and small towns of America that they have traditionally served so well," Wilmers went on to say 

"Such is the collateral damage of far-reaching regulation inspired by the misdeeds of a few."

                                                         M&T CEO Bob Wilmers

 A recent blog article I wrote applauded the federal government for going after a “bad actor” in the debt collection industry. This was a prime example of how enforcement of existing laws and regulations can truly clean up the landscape and focus on the “misdeeds of a few”. We truly don’t need more regulation to expel the bad players, we need to, as Harvey Moore, President of the National Creditors Bar Association, reminds us – “Enforce and execute the existing laws and regulations we already have on the books”.
 
“Today we face a turning point,” Wilmers said. “Will we continue to look for villains to punish or will we take steps that will enable banks to serve again as agents of an expanding prosperity?”
 
The cooperation between industry groups and the regulatory bodies, which enforce laws to eliminate those who consciously harm consumers through deceptive practices, is a mutual goal we want to continue to pursue together. If we force too many “good players” out because of increasingly costly regulations – small banks or small creditors rights attorney firms – to become “too small to succeed”, then we risk causing consumers more harm than good.

About the Author:  Mark Dobosz currently serves as the Executive Director for NARCA – The National Creditors Bar Association. Mark is a one of NARCA’s speakers on many of the creditors rights issues impacting NARCA members. The National Creditors Bar Association (NARCA) is a trade association dedicated to creditors rights attorneys. NARCA's values are: Professional, Ethical, Responsible

Guest Post: Labels Require Introspection

By: Mark Dobosz
February 25, 2016

…we are not your enemy….

 CFPB Director Richard Cordray in a February 23, 2016 address to the National Credit Union Association

One of Merriam Webster’s definitions of the word enemy is as follows:

enemy - noun en·e·my \ˈe-nə-mē\: one that is antagonistic to another; especially: one seeking to injure, overthrow, or confound an opponent

In a day and age when communication is vitally important in any relationship - personal, professional, business or other - recognition by all parties that the other parties’ opinions and intents are sincere and genuine, is integral to successful interactions.

Industries and government regulatory agencies have been communicating for decades in attempting to meet the needs of both consumers and business alike – financial services being no exception. Through several Administrations and Congresses the pendulum has swung back and forth with some common ground of moderation always being found. Both have been alternately perceived allies and enemies. 

As the Washington chasm and divide has increased after the world economic collapse, sincere and genuine communication seems to have taken a back seat in the financial services regulatory environment. “Confounding an opponent” seems to have become a more acceptable one-sided way of building relationships. This method of relationship building is often promoted as portraying one side an “enemy” and the other a “friend and ally.”

In the past five years, The National Creditors Bar Association (NARCA) has been offering genuine and sincere communication with regulatory agencies, such as the CFPB, in order to proactively reduce or eliminate the opportunity for either side to be confounded – perceptually or in reality. Participation in roundtables, panels, inter-organizational meetings, presentations at conferences, volunteer member involvement on Advisory Boards all speak to the desire by NARCA to be a friend and an ally in the same way the regulatory agencies desire to be perceived.

NARCA has been, and continues to be, committed to providing the information, data, experience and understanding to a conversation that can be beneficial for all in the credit ecosystem. Creditors rights attorneys seek to collaboratively work on developing the fairest set of rules and regulations for consumers and for business – a level playing field. But this can only happen when open and honest discussion occurs together and the definitions of the relationship communicated to the public is equal. As the rules and regulations are promulgated, and not in a unilateral confounding way, then and only then will both consumers, creditors and small business be the beneficiaries. 

Not all players are enemies and bad players – on either side of the fence or aisle. This is a chance to bridge the divide that has paralyzed the federal government decision-making process in some small way.

Maybe 2016 can be a year when we reduce the numbers of perceived enemies in our world and focus more on the real enemies.“Know thy enemy and you may find that they are not your enemy after all.”

Colin Wright

About the Author:  Mark Dobosz currently serves as the Executive Director for NARCA – The National Creditors Bar Association. Mark is a one of NARCA’s speakers on many of the creditors rights issues impacting NARCA members. The National Creditors Bar Association (NARCA) is a trade association dedicated to creditors rights attorneys. NARCA's values are: Professional, Ethical, Responsible

Guest Post: 1928 Louisiana Bankers Association Code of Ethics and NARCA - The National Creditors Bar Association – Timely and Relevant

By:  Mark Dobosz

Robert Taylor in his January 15, 2016 article in American Banker Magazine (Banks Can Use 'Code of Ethics' to Strengthen Public Trust) points out

…an advantage of developing an ethics code is that, unlike bank regulatory policy that must be adjusted constantly depending on the jurisdiction and interpretation, ethical standards are basically timeless. In fact, the Code of Ethics crafted by community bankers at the 1928 convention of the Louisiana Bankers Association is still relevant today.” He adds, “None of us can escape the inevitable ethical dilemma. But having high expectations for your bank’s culture, and your own ethical behavior, is its own reward. It will also help restore public confidence in this profession.

                                       

Since 1993 – NARCA, The National Creditors Bar Association has had as a foundational cornerstone of all its members  - The NARCA Code of Professional Conduct and Ethics. All NARCA member firms are committed to fairness in the collection process for everyone. In addition to local, state, and federal laws and State Bar Association licensing and certification, attorney members are required to adhere to the Code.

While the debt collection industry has had its share of “bad players” who have tarnished the industry. Creditors rights attorneys, in particular members of NARCA – The National Creditors Bar Association, represent the highest and finest examples of ethics in practice.

 The CFPB continually reminds the financial services and debt collection sector that “self-policing” is integral to providing consumers with the confidence and knowledge that the industry is operating in an ethical manner in their interactions with individuals. NARCA demonstrates this process by also utilizing a Grievance Process for its members and clients with a forum in which to investigate and sanction (where necessary) violations of their Code of Ethics.

 Additionally, the fundamental regulation of creditors rights attorneys by the state bar associations, judiciary, state legislatures and attorneys general has a foundational layer of ethical oversight, which if violated, could lead to the loss of an attorney’s license to practice law. A consequence not possible through any other regulatory body at the federal level.

The 1928 Louisiana Bankers Association Code of Ethics may be a historical reference among banks that saw “self-policing as very important to their profession. The 1993, the NARCA – The National Creditors Bar Association Code of Professional Conduct and Ethics stands as a hallmark and legal profession example for creditors rights attorneys. Timely and a strong example of “self policing”? Yes, one which consumers should take comfort in during these times.

 

About the Author:  Mark Dobosz currently serves as the Executive Director for NARCA – The National Creditors Bar Association. Mark is a one of NARCA’s speakers on many of the creditors rights issues impacting NARCA members. 

The National Creditors Bar Association (NARCA) is a trade association dedicated to creditors rights attorneys. NARCA's values are: Professional, Ethical, Responsible

Guest Post: Technology, Automation and the Coming of Age – Can the CFPB and the Credit and Financial Services Sectors Partner?

By: Mark Dobosz

January 21, 2016

Public-Private partnerships have often proven to be some of the best examples of meeting the needs of a variety of infrastructures the US economy and its consumers. An article by Andrew Deye in the June 2015 Kennedy School Review indicates that “In a September 2014 report, Moody’s Investors Service stated, ‘the United States has the potential to become the largest P3 market in the world, given the sheer size of its infrastructure’.”

                            

The data centers of our regulatory agencies are a key infrastructure to consumer information and deserve no less than one that can be best built for the 21^st century through a Public Private Partnership (P3).

                                                                                          

According to KPMG’s independent audit report of the CFPB, released on January 13, 2016,  
 

The bureau can be more effective in its mission where trust exists between consumers and the agency that works to protect them... The current process for maintaining the inventory of these data sets is manually intensive. In an effort to improve transparency, the CFPB’s Chief Data Office is transitioning from this manual process of tracking these data sets to an automated tool…The CFPB’s chief data office is in the process of transitioning the manual process to the use of an automated tool.

 KPMG’s findings on the CFPB’s privacy policies and procedures

The CFPB has been highly emphatic in requiring the financial services and the debt collection industry to increase compliance by establishing and maintaining systems and procedures to ensure consumer data privacy in all transactions.  All of which have utilized “automated” systems that have proven to be effective and efficient in the credit ecosystem. Millions have been spent by the industry to meet these demands in the past 5-7 years. The National Creditors Bar Association (NARCA) members report a 300%+ increase in compliance costs from 2011-2014.

The experience of implementing secure data automation of consumer financial and personal information is an asset that is currently underutilized by the CFPB. A Public Private Partnership (P3) between industry and the regulatory agency would bring to market the exact types of automation and systems that the regulatory agency has been requiring industry to implement in their financial services and credit ecosystem operations in the past few years. Why offer consumers two standards and systems of data privacy and security protection when a standardized system that is recognized as best in class could be built through a P3 and provide consumers with the confidence that both government and the private sector are on the same page.

As Deye concludes in his article, at a conceptual level, the primary drivers of infrastructure P3s—new sources of capital, cost savings, risk transfer, and accountability—remain strong. Government officials at all levels (federal, state, and local) continue to operate in an environment of constrained financial resources and citizen expectations for efficient and timely operations.”

If I-595, the Port of Baltimore and the Long Beach Courthouse (all recent successful P3 projects) can provide citizens with safe, secure and efficient infrastructure, then a CFPB-Financial Services P3 should be pursued to provide US consumers with the same level of benefits. This P3 could be a “coming of age” in the regulator’s history.

About the Author:  Mark Dobosz currently serves as the Executive Director for NARCA – The National Creditors Bar Association. Mark is a one of NARCA’s speakers on many of the creditors rights issues impacting NARCA members. 

The National Creditors Bar Association (NARCA) is a trade association dedicated to creditors rights attorneys. NARCA's values are: Professional, Ethical, Responsible

Guest Post: Our Government Online – Have The Risks of Online Advertising for Consumers Been Fully Considered?

By: Mark Dobosz

January 15, 2016

In a March 2014 Forbes Magazine article, “5 reasons your Business Should Use Google Ad Words” author John Rampton states, “By using the right keywords for your target audience, you’re already ahead because you’re reaching people who have an interest in your product or service.”

So why would a government regulator feel the need to drum up more business for a service that is clearly and readily available to consumers? Is there not enough interest they (the consumer) have in utilizing the service?  And has the government regulator fully calculated and balanced the risks and hazards of the online advertising environment based on solid research?

An online posting today by Ballard Spahr (“CFPB Using Google Ads To Solicit Consumer Complaints”) points out the following  - “In an effort to publicize its online complaint system and bring in more complaints, the CFPB is now soliciting complaints through Internet advertising.”

In May 2014, the Permanent Subcommittee on Investigations of the U.S. Senate

Homeland Security and Governmental Affairs Committee issued a report – “Online Advertising and Hidden Hazards to Consumer Security and Data Privacy.”

The Sub-Committee’s report cited the following:

“Although consumers are becoming increasingly vigilant about safeguarding the information they share on the Internet, many are less informed about the plethora of information created about them by online companies as they travel the Internet. A consumer may be aware; for example, that a search engine provider may use the search terms the consumer enters in order to select an advertisement targeted to his interests. Consumers are less aware, however, of the true scale of the data being collected about their online activity. A visit to an online news site may trigger interactions with hundreds of other parties that may be collecting information on the consumer as he travels the web. The Subcommittee found, for example, a trip to a popular tabloid news website triggered a user interaction with some 352 other web servers as well. Many of those interactions were benign; some of those third parties, however, may have been using cookies or other technology to compile data on the consumer. The sheer volume of such activity makes it difficult for even the most vigilant consumer to control the data being collected or protect against its malicious use.

Furthermore, the growth of online advertising has brought with it a rise in cybercriminals attempting to seek out and exploit weaknesses in the ecosystem and locate new potential victims. Many consumers are unaware that mainstream websites are becoming frequent avenues for cybercriminals seeking to infect a consumer’s computer with advertisement based malware, or “malvertising.” Some estimates state that malvertising has increased over 200% in 2013 to over 209,000 incidents generating over 12.4 billion malicious ad impressions.4 According to a recent study by the security firm Symantec, more than half of Internet website publishers have suffered a malware attack through a malicious advertisement. The Subcommittee seeks to highlight this specific aspect of online security. The Internet as a whole, as well as all the consumers who visit mainstream websites, is vulnerable to the growing number of malware attacks through online advertising. While there are many other significant vulnerabilities on the Internet, malware attacks delivered through online advertising are a real and growing problem.”

ONLINE ADVERTISING AND HIDDEN HAZARDS TO CONSUMER SECURITY AND DATA PRIVACY REPORT- May 2014

Permanent Subcommittee on Investigations of the U.S. Senate

Homeland Security and Governmental Affairs Committee

 

All of us know that maintaining effective information security programs — and overseeing cyber security – especially among supervised federal regulators (i.e. the CFPB) who routinely handle personal information of consumers is paramount to their role and integrity of purpose. 


However, it is public knowledge from reports released in October 2015 by the CFPB’s’ inspector general, that cyber security remains one of the agencies top management challenges.


Protecting consumers is the ultimate goal of all players in the credit ecosystem – industry and regulators. Nether side can’t afford to not be hyper-vigilant in protecting consumer data in the world of cyberspace crime through online interactions.
 
Industry has already been tasked with multiple requirements to insure protection and confidentiality at an extremely high cost – while simultaneously being limited in their communication and data collection methods.
 
Federal regulators should be held to the same standards and methods of protection of consumer data.  Engaging in practices like online advertising that have been proven to present great risks to consumers – without further in-depth research and the costly prevention systems can be irresponsible. Agencies that have been cited for having challenges to managing their cyber security programs should take note.
 
An ecosystem only functions optimally when all the components are operating in unison and sync with each other.
 

About the Author:  Mark Dobosz currently serves as the Executive Director for NARCA – The National Creditors Bar Association. Mark is a one of NARCA’s speakers on many of the creditors rights issues impacting NARCA members. 

The National Creditors Bar Association (NARCA) is a trade association dedicated to creditors rights attorneys. NARCA's values are: Professional, Ethical, Responsible